Blockchain and crowdfunding contribute to evolutions in online brokerage market in Thailand

Since the emergence of financial technology ( fintech) in the early 2010s, various terms – such as Bitcoin, initial coin offering, blockchain and crowd-funding – have entered the vernacular. The trends and technologies these words represent have influenced nearly every aspect of the economy.

Market Shift

Most people in financial services realise change is happening more quickly than ever before. In retail brokerage, investor behaviour has shifted from placing trading orders by phone to sending orders via smartphones. The trading volume of retail investors represented 40% of total market turnover in March 2018, and approximately 89% of investors conducted their trades online.

Lower online trading fees, the affordable price of devices and the lower cost of high-speed internet access are the main drivers of growth in the number of online investors. All securities firms offer free-of-charge decision support tools, including technical charts, fundamental stock analysis platforms and real-time alerts via mobile devices. Short-term traders in Thailand can easily find news and research papers via social media and messaging apps.

While steep competition benefits investors, securities firms are suffering from lower revenue and higher costs of investing in upgrading technology and skills. As technology disrupts the traditional business model, most firms are trying to upgrade investment consultants to wealth advisors who provide financial planning and collect fees from both recommendations and assets under management.

Projections

Thailand does not perform as well as some of its neighbours in South-east Asia in terms of digital technology adoption. To address this discrepancy the Fintech Draft Act has undergone public hearings and was in the revision process in mid-2018. The Bank of Thailand and the Securities and Exchange Commission (SEC) are fully supporting the draft of the Fintech Act. The act would not only allow established businesses and fintech start-ups to fully capitalise on financial innovations, but also promote an extensive digital economy.

The draft act focuses on four core areas: building confidence in the execution of electronic transactions to encourage the public to view them as legitimately as normal transactions; facilitating businesses’ access to necessary information under possession of governmental agencies for the benefit of due diligence and know-your-client assessments; supporting electronic identity verification; and allowing businesses to access the anonymised data that governmental agencies possess for the development of financial products and services.

After the Fintech Law comes into effect, the growth of online investors in the country is expected to accelerate, reaching 2m by 2020. The number of start-ups should also increase at a faster pace with support from the government and private sector. From the regulatory side, the Bank of Thailand and SEC are working to support fintech. In May 2018 the Stock Exchange of Thailand (SET) launched its “LiVE” platform at live-mkt.com, making it the first local crowdfunding platform. The site uses blockchain technology with the goal of growing start-ups, as well as small and medium-sized enterprises.

Digital Transformation

If players in the brokerage business accept change and adopt technology fast enough, crowdfunding and blockchain can serve as useful development tools. A similarly dramatic shift occurred in 1991, when SET implemented the Automated System for The Stock Exchange of Thailand, which meant brokers were no longer needed on the same trading floor.

Digital transformation will allow firms to deliver greater value to customers. Companies may have to revamp their business model or focus on investment in fintech to catch up with the trend, focusing on constantly becoming better, faster and cheaper.

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The Report: Thailand 2018

Capital Markets chapter from The Report: Thailand 2018

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