No clarity yet on payment platform, the heart of the digital wallet scheme

SUNDAY, JULY 28, 2024

Central bank has concerns regarding the development and operation of the bOpen Loop payment system

The government is set to launch the 450-billion-baht digital wallet scheme, with registration opening for the first group – those having smartphones – on August 1. 

The registration system via the “Tang Rat” application is ready, and citizens can verify their identity through the KYC (Know Your Customer) system. 

Under the scheme, Thai citizens 16 years old and above, earning less than 840,000 per annum and having less bank deposits less than 500,000 baht, will receive a one-time 10,000 baht digital handout. 

Despite the readiness of the registration system, public interest is focused on the payment platform, the core of the digital wallet project. The policy committee for the digital wallet scheme has assigned the Digital Government Development Agency (DGA) and the Ministry of Digital Economy and Society to develop and operate this system. 

It will manage payment, clearing, and settlement between citizens' and merchants' accounts at accepting banks through Open Loop.

The Open Loop payment system will allow transactions with other banks and payment providers. It will also handle face-to-face transactions and cash withdrawals, ensuring all transactions comply with the project's terms and legal regulations, and monitoring for fraud.

Payment platform pricing

The Cabinet has approved a budget of 95 million baht for the payment platform. As of July 12, the DGA website announced the reference price of 94,905,250.47 baht. The budget includes:

System development: 77,355,000 baht
Cloud service rental: 17,458,250.43 baht
Operational costs: 65,000 baht

Warning on payment system readiness

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput had twice earlier expressed concerns regarding the payment system and the Open Loop payment system for the digital wallet project. His first warning was sent to the main digital wallet committee back in April. The governor emphasised that the digital wallet project was complex and must support a large number of users, requiring an efficient, stable, and secure system to avoid systemic risks.

As the agency responsible for the stability of the national payment system, the BOT has expressed the following ideas regarding the development and operation of the digital wallet payment system:

Utilise existing payment infrastructure: The BOT believes it is advisable to use the current payment infrastructure, such as the PromptPay system and Thai QR Payment, to avoid redundancy, reduce development costs, and maximise the benefits of existing payment infrastructure.

Clear system architecture and planning: Due to the multi-dimensional complexities and the open-loop nature of the system, which requires integration with various providers, it is crucial to establish a clear system architecture and comprehensive development and testing plans. This will help prevent systemic risks that could affect the stability of the national payment system, according to the BOT. Consideration should be given to security standards, system and data reliability, service continuity, transaction data access management, strict cybersecurity measures, and standardised identity verification processes for citizens and merchants.

Knowledgeable and experienced developers: The system developers must have substantial knowledge and experience in developing payment systems, especially Open-Loop systems, according to the BOT. The system must align with the aforementioned standards and be completed within a limited timeframe. For instance, commercial bank teams have needed many payment system experts and more than a year of continuous development.

Capable system operators: The system operators must be able to manage a large user base continuously without interruptions and quickly address any immediate issues to ensure uninterrupted transactions. Any deviations from the project’s terms could lead to transaction cancellations and the revocation of rights from numerous citizens and merchants. In case of a cyber-attack or data breach, the system must be able to promptly halt and resolve the incident.

Notify the BOT in advance

During the Digital Wallet Board meeting on July 15, which was chaired by the prime minister, Sethaput had sent a letter, emphasising the importance of preparing and testing the integration of the payment platform with citizen and merchant systems on schedule.

Before the service launch, the BOT must be notified 15 days in advance. Connecting the payment platform to the mobile application represents a significant IT change, potentially impacting customers and services broadly. The BOT will review risk assessments and test results and may request additional information to verify connections with related systems. Additional conditions may be set, particularly if the Open Loop system impacts overall payment system stability.

The BOT also highlighted the need for relevant agencies to explain risk mitigation mechanisms against leaks or fraud at various stages. There should be close monitoring measures to ensure a robust process that prevents issues like unauthorised transactions and discount sales between citizens and merchants.

The payment system is a crucial aspect of the digital wallet scheme, and it remains to be seen if the system development will meet the government's fourth-quarter timeline. Achieving this will allow citizens to use the digital currency to stimulate the economy as intended by the government.