In a speech
at the Bangkok FinTech Fair 2018, the governor of the Bank of Thailand (BOT),
Dr Veerathai Santiprabhob, outlined BOT’s policy direction on Fintech
development. He emphasised three key imperatives for formulating financial
sector policy for Thailand and the region as a whole: productivity, immunity,
and inclusivity.
Productivity
Boosting productivity has become critical due to the structural
transformation of an ageing workforce in the region and the pressure to boost
business competitiveness in the face of new competitors arising from an
expanding global workforce and emergence of large e-business platforms. Moreover,
Fintech firms are disrupting the long-standing banking value chain.
In this area, Fintech can enhance efficiency in financial
services and lower their cost and improve ease of doing business, thereby
raising economic productivity.
New electronic payment ecosystems can enable more efficient
transfer of funds and significantly lower transaction costs for customers.
Adoption of fintech platforms will allow banks to shift to less costly and more
efficient digital services from the current brick-and-mortar model.
Dr Santiprabhob also highlighted the scope for efficiency
improvement in lending processes through usage of transactional data from
e-commerce and new payment platforms and change in business model from collateral-based
lending to information-based lending.
He added, “Meanwhile, blockchain has advanced technology
behind many aspects of the financial services, especially back-office
operations and fund transfers.”
Immunity
“Amidst the fallout from the Global Financial Crisis of
2008, where unconventional monetary policies flushed global financial market
with excess liquidity, we are now entering the cycle where major central banks
have started normalizing their monetary policies. Along the normalization path,
one should expect to see market corrections and volatile asset prices,” said Dr
Santiprabhob.
US trade protectionism (and possible retaliatory measures
from other countries), global warming, geopolitical risks and cyber threats
also present causes for concern.
Here, fintech can help banks and businesses improve their
risk management. Banks can use data from new payment ecosystem and digital
transactions to better analyse business conditions and make more accurate
forecast of customers’ credit demand and credit risks.
Additionally, emergence of new data could unlock new hedging
products, especially in the insurance industry. Technologies like artificial
intelligence, biometrics, and blockchains can help safeguard financial
information, improve identity verification, and reduce the number and magnitude
of financial frauds.
Inclusivity
Income and wealth inequality is a pressing social and
economic issue in Thailand and many countries in the region. Ignoring these
issues can threaten long-term social and economic stability, increasing social
polarisation, resulting in political gridlocks.
At the moment, the Thai public is facing low long-term
savings and high household debts, with Thailand’s household debt to GDP ratio
amongst the highest in the region. Many households lack access to efficient and
low-cost financial services for deposit, payment, insurance or loan products.
Fintech can play a key role in improving financial access of
customers, especially those who have been underserved by the current financial
system. For instance, online access and smartphone applications are providing
new channels to reach customers. Fintech innovations can offer a range of
options and solutions to meet varying requirements of individuals.
Fintech applications can also help with cross-border
transactions for small businesses and enable fast and cheap remittance
transfers for immigrant workers.
Moreover, information-based lending can help small
businesses without adequate collateral gain access to fairly priced funding. SMEs
account for over 80 percent of total employment in Thailand and they currently have
limited access to finance due to lack of financial management skills and
collateral.
Thai public is facing big hurdles of low long-term savings and
high household debts, with Thailand having household debt to GDP ratio amongst
the highest in the region. Many households lack access to efficient and
low-cost financial services, be it the deposit, payment, insurance or loan
products. These people need to be better served by our financial system to be
able to unlock their potential, improve standard of living, and ensure their
financial security as they age.
Ongoing initiatives
Dr Santiprabhob lauded several Fintech-related developments
and initiatives taking place in Thailand and around the region.
These include real-time and low cost cross-border money
transfer and remittance platforms, biometric
verifications for e-KYC to facilitate remote access to financial services, machine
learning using alternative data such as social media for credit scoring and real-time
invoice financing through common supply chain platform.
He also talked about the standardized QR Code for
e-payments, which has reached nearly 1 million merchants within six months
after exiting from the Bank of Thailand’s Regulatory Sandbox. Last year, BOT permitted
eight banks to offer QR code payment services through PromptPay system.
The PromptPay system itself is another important Fintech
initiative in Thailand. PromptPay is an interbank mobile payments system and it
was launched
in January 2017. It enables mobile fund transfers, using only mobile number or
Citizen ID number of the recipient. The system has facilitated electronic
payments for over 39 million registered IDs in Thailand.
Dr Santiprabhob concluded, “To attain the overall
improvement in productivity, immunity, and inclusivity, the Bank of Thailand is
committed to supporting adoption of financial technology by financial
institutions and promoting fintech innovation while ensuring that key risks can
be contained.”
