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Thailand 2017 | FINANCE | FOCUS: FINTECH

In an exclusive interview given to The Business Year in June 2016, Rapee Sucharitakul, the Secretary General of the Securities and Exchange Commission (SEC), explained that there was a “tsunami" headed for Thailand's financial sector—and its name is FinTech.

In recent years, Thailand's banking industry has become increasingly saturated as growing competition from local lenders and notable entrances from regional players, such as Japan's Bank of Mitsubishi or Malaysia's CIMB, have slowly but surely eaten through market share. Furthermore, the recent integration of the ASEAN Economic Community (AEC) has also presented domestic powerhouses like Bangkok Bank or Siam Commercial Bank (SCB) with the opportunity to expand their services into the region, and particularly the 170 million-strong CLMV countries.

Given these trends, financial institutions have been forced to think innovatively and utilize the endless possibilities brought about by the digital boom in order to maintain their footing in the local market, and consider spreading their wings into the neighborhood.

Enter financial technology firms, or FinTech firms, which were once considered disrupters to the industry due to their tech-savvy, start-up nature. Today, banks across Thailand, and Asia for that matter, are recognizing their potential to propel the use of digital solutions for everyday financial services. On a global level, investment in FinTech ventures has surged in recent years, growing by 75% YoY in 2015 to USD22.3 billion, according to consultancy firm Accenture. Interestingly, however, a bulk of these investments are increasingly headed toward the Asia Pacific region, which saw the highest growth level in 2015, hitting USD4.3 billion, or 19% of total investments.

Admittedly, this is largely due to FinTech's rapid evolution in China and India, with USD2 billion and USD1.6 billion respectively; however, Accenture's Thailand Managing Director, Nontawat Poomchusri, told TBY he felt Thailand could be next to experience this growth phase. Poomchusri explained major banks in the Kingdom were now directly investing in local FinTech firms in a bid to innovate and digitalize banking solutions for their customers.

This notion was also confirmed by Kobsak Duangdee, Secretary General of the Thai Bankers' Association, an organization that represents 15 of Thailand's biggest lenders. He told TBY: “One of our initiatives in our five year plan is digital banking, and we are working closely with the government for this. This would help digitalize SMEs, promote more online banking, and support e-commerce and e-government, payment procedures both nationally and internationally, and other banking practices." Specifically, through its collaboration with FinTech players, TBA will look to develop next-generation payment infrastructure in Thailand, with the target of seeing up to 60% of transactions become cashless, and for electronic payments to account for up to 70% of all purchases, by 2020. In 2016 these figures stood at just over 25% and 30%, respectively, which suggests the FinTech revolution is still at its dawn.

Nonetheless, with such strong will from all sides to embrace the trend, logically, the only major stumbling bloc remains the regulators i.e. the financial bodies responsible for ensuring the industry remains safe, secure, and effective, despite the introduction of game-changing technologies. According to Accenture's Poomchusri, it is crucial for regulators to begin adjusting to the trend, or else the spotlight of FinTech investment could begin to shine elsewhere, causing a slowdown in the entire industry. Furthermore, he argues that while it is not necessary for the bodies to start relaxing existing regulations, new frameworks had to be created to best understand and implement this new age of banking.

As for the regulators themselves, they believe the pace of change should come with the demand for FinTech by the consumer (society), and not the industry, making it somewhat less predictable as to when it will begin to take shape. As explained by the SEC's Sucharitakul: “The key issue depends on the sophistication and the uptake of people. FinTech is like an approaching tsunami that is coming fast, but no one knows exactly when and how it will hit. Its growth, though, will not be linear."