Interest and involvement in fintech, or financial technology, often begins in emerging markets, where specific conditions make it particularly appealing.
In these regions, limited infrastructure, combined with rapid tech adoption, provides fertile ground for fintech innovation. Fintech solutions can address gaps in financial services and promote financial inclusion, creating opportunities to transform emerging markets into hubs for adoption and innovation.
According to the latest report by Wing Vasiksiri (WV) and Ravenry, titled “Revolutionizing Transactions: Exploring the Thai Fintech Landscape and the Evolution of its Payments Sector,” it argues that Thailand is home to a thriving fintech sector, propelled by the growth initiated by the Covid-19 pandemic.
The following are seven key takeaways from the report:
94% of Thailand has adopted cashless payments
Thailand’s cashless payment adoption rate of 94% in 2021 pays testament to the progress of the country’s overarching fintech landscape.
This shift has been driven primarily by both the public and private sector, aiming to establish a robust cashless ecosystem while discouraging the use of physical currency.
Managing physical cash can be cumbersome and poses a significant financial burden, with substantial expenses incurred in handling cash. This has led to more individuals opting for cashless payment methods to meet their daily needs. In Thailand, cashless payments are most commonly used for bill payments, convenience store transactions, and supermarket purchases.
The impact of this transition has driven an increase in the total value of non-paper-based transactions in Thailand to USD 5.2 billion in 2020, with a projected CAGR of 32% over the next five years, reaching approximately USD 21 billion in 2025.
TrueMoney and Rabbit LINE Pay hold over 75% of the electronic money market share
Thailand’s fintech sector features a mix of local, regional, and global players competing for market share, each with distinct focuses.
Local and regional players lead the sector by capitalizing on and leveraging the user bases of their strategic partners. On the other hand, global players have carved out a niche in providing payment gateway services.
For instance, TrueMoney, initially part of Thailand’s largest telecommunications company, has developed a robust app tailored to the rapidly growing smartphone penetration rate in the country.
In contrast, Rabbit LINE Pay has achieved success by tapping into the extensive user base of the messaging app LINE. Combined with the widely-used Rabbit transit card in Bangkok, Rabbit LINE Pay has secured a significant market share.
PromptPay increased the volume of digital payments by 10.4% per year
Thailand’s payment landscape underwent a significant transformation with the introduction of PromptPay, a system enabling individuals to transfer money through digital channels using their citizen ID, mobile phone number, or bank account details.
Since its launch in February 2018, PromptPay has offered zero fees for transactions under THB 5,000 (USD 151). In contrast, banks typically impose a THB 25 (USD 0.75) fee for facilitating such transactions.
The popularity of the fee-free PromptPay option has resulted in slower growth and declining profits for banks. This shift has prompted banks to reassess their strategies and adapt to the evolving financial landscape.
To stay competitive, banks are now embracing digital transformation by offering comprehensive banking-as-a-service solutions, including convenient mobile banking apps for customers.
Thai consumers prefer mobile payments over card payments
The payment landscape in Thailand is undergoing a significant transformation, with 70% of Thai consumers favoring mobile payments over card payments. This increasing preference for mobile payments aligns with a growing interest in QR codes as a preferred payment method, marking a substantial 52% penetration rate in 2021.
While electronic money is on the rise, consumer favorability for mobile payments is now evenly split between QR codes and mobile contactless payments. One driving factor behind the surge in electronic money’s popularity is the allure of attractive incentives. These incentives have played a crucial role in motivating users to adopt electronic money as their preferred payment method, contributing to its widespread use in the Thai market.
However, there’s a potential drawback as an overreliance on incentives may limit the use cases for electronic money when the appeal of financial perks diminishes. Providers are now exploring long-term strategies to penetrate specific market segments, allowing them to address unique user needs and tailor their offerings accordingly.
QR codes facilitate cross-border transactions
In alignment with other Southeast Asian nations, Thailand has actively pursued QR code payment interoperability. Collaborating with countries like Japan, Cambodia, Vietnam, and Singapore, Thailand aims to enhance connectivity across borders. This initiative not only simplifies cross-border transactions but also establishes a clearer and more transparent revenue model.
Traditionally, in correspondent banking, the conventional approach involved banks setting up accounts in various countries to facilitate cross-border payments. Although effective, this method posed challenges, tying up significant funds and requiring substantial administrative resources. Additionally, payments to destinations lacking a direct banking connection had to navigate a complex network of intermediary banks, known as correspondent banks, adding time and cost to transactions.
The use of QR codes for cross-border payment transactions streamlines the entire process, reducing costs. This transition is complemented by the integration of data-driven insights, empowering businesses and financial institutions to make informed decisions and optimize their operations.
Cross-border payments not only streamline processes but also unlock new opportunities for B2B transactions and international expansion. This is crucial for the growth and resilience of businesses in an increasingly interconnected world.
Thailand to approve 30 virtual bank licenses in mid-2024
This Bank of Thailand-led initiative aims to open up the banking sector to new players, fostering growth and innovation. To acquire the license, entities must meet two main requirements: having THB 5 billion (USD 151 million) of registered capital on the commencement day and being a 100% digital bank, without any branded ATMs or cash deposit machines.
A notable development is the joint application submitted by industry giants Alipay and TrueMoney. However, the stringent THB 5 billion capital requirement may pose a potential obstacle for smaller startups seeking a license.
While the licensing process is ongoing, the announcement of approved licensees is expected in mid-2024. Subsequently, a one-year grace period will allow selected banks to refine their operations and prepare for an official launch in 2025.
Farmer loans an enticing opportunity to explore
In 2022, Thailand experienced a 0.8% increase in GDP growth, primarily driven by the agricultural sector. However, this sector grapples with fundamental issues like debt and poverty, compelling Thai farmers to encourage succeeding generations to seek better job opportunities for increased income.
To address these issues, providing loans for agricultural tools has emerged as a promising solution, given the widespread financial needs among farmers and their commendable track record of loan repayment. Despite agriculture being a significant employment sector in Thailand, financial obstacles persist.
Challenges in green financing, such as perceived risks, uncertainty about project viability, and a lack of success stories, have impeded progress. Indonesian startups like Amartha and TaniFund are addressing these issues by implementing transparent know-your-customer (KYC) processes for investors, obtaining local government licenses, and involving multiple peer granters to enhance lender security.
The prospect of offering loans to farmers for tools holds significant potential due to the considerable demand for financial assistance in the farming community and their demonstrated history of responsible loan repayment.