‘BOT faces digital challenge’

THE BANK of Thailand will highlight the potential impacts of financial technology (fintech) on the country’s banking eco-system in its new three-year strategic plan which will be announced today, BOT Governor Veerathai Santiprabhob said.

“There will be many new players [in the banking system due to the advent of new technology]. These are potential game-changers since they will be able to do cross-border transactions. Bitcoin and the technology behind it, blockchain, are one example,” he said during a Nation TV Timeline interview with Suthichai Yoon, chief adviser to the editorial board of Nation Multimedia Group.

Fintech is a new category of business using computer software to provide financial services, especially start-ups aimed at disrupting existing financial systems with innovative products. Examples include mobile payment solutions and peer-to-peer lending.

Due to its significant impacts on the financial system around the world, fintech is seen as a crucial factor that will affect the regulatory framework and governance of banks and financial institutions in Thailand in coming years. As a result, the central bank needs to closely monitor fintech developments and prepare measures to cope with the impacts of new financial technology.

In this context, Veerathai said Thailand would soon have a new payment legislation in place. The proposed legislation has already been approved by the Cabinet and is awaiting enactment by the National Legislative Assembly.

The governor said the use of more electronic or e-payment methods is also crucial to the competitiveness of the Thai economy since it will reduce transaction cost while boosting good governance.

E-payment can also be used by the government to provide welfare to low-income groups more efficiently and with transparency.

Banking sources said the implications of fintech are expected to be in-depth and wide-ranging, affecting the competitiveness of commercial banks and other financial institutions that will be facing new forms of competition. For example, mobile payment services have emerged and can be provided by non-bank entities, but there have been no specific regulations yet.

In addition, peer-to-peer lending services have gained popularity in foreign countries and could evolve into new competitors for traditional bank lenders.

Dr Veerathai said the central bank’s strategic plan is now shortened to three years instead of five years to correspond to the terms of BOT’s directors.

Meanwhile, the governor said Thailand’s gross domestic product growth is projected to be 3.5 per cent this year with major macro-economic challenges including the low agricultural prices and drought, rising household debts, and global as well as Chinese economic slowdown.

As a major market for Thai products, accounting for 10 per cent of Thailand’s overall exports and a major source of foreign tourists totalling more than 7 million last year, China plays a crucial role in the Thai economy.

The governor said China should be able to manage its economic transition from the previous double-digit growth rates to the new normal of 6-7 per cent per annum.

Regarding Thailand, he said the country should not be satisfied with the 3-4 per cent growth rate. He said the preferred “new normal” for Thailand should be an annual growth rate of 4-5 per cent.

He said the country needs broad-based economic restructuring, education, energy, and state enterprise reforms, among others to achieve higher growth rate that reflects its full potential.

Due to Thailand’s ageing society, he said the country should turn its focus to more linkages with neighbouring countries, especially Cambodia, Laos, Myanmar and Vietnam, which have much younger populations with a higher growth rate of consumption.

Thailand should also focus on design, quality control, and other high value-added aspects of the economy to stay competitive, the governor said.