Thailand’s National E-payment Master Plan (NEMP) is a five-pillar approach that aims to transform Thailand into a mostly cashless society through the launch of new digital and online payment options. The strategy, under development since 2014, has made major strides after the government launched the first pillar, known as PromptPay, in early 2017.
Interbank transfers are offered at a fraction of the price previously charged by Thai banks. The voluntary scheme has already attracted millions of users, prompting the private sector to follow suit with its own digital payment offerings. Although the banking sector’s feebased income could be negatively impacted by the new system, the effect should be temporary, as improvements to efficiency are forecast to create significant cost savings. On the public side, increased digitisation will facilitate more efficient and effective tax revenue collection, as well as assist subsidy distribution.
E-payments and online banking have become increasingly popular for consumers in recent years. The Bank of Thailand (BOT) reported that the total volume of e-payment transactions in the country rose by 13.3% to hit BT2.59bn ($73m) in 2014, while internet and mobile transaction volumes rose by 51.6% to hit BT451.4m ($12.7m).
The value of banking transactions conducted through internet banking rose by 25.4% to BT21.82trn ($614.7bn) during the first nine months of 2016, compared to BT17.4trn ($490.2bn) during the first nine months of 2015. Mobile banking transaction values also recorded impressive growth, rising by 95.8% to BT3.72trn ($104.8bn) between January and September 2016, against BT1.9trn ($53.5bn) Q1 to Q3 in 2015.
Although cash remains the dominant medium for retail transactions in the country, use of non-cash and digital payments has risen significantly in recent years. According to BOT data, the volume of mobile banking transactions rose by 73% between 2010 and 2015, while the volume of internet banking, e-money and debit card transactions rose by 27%, 32% and 33%, respectively, over the course of that same period.
Despite these strong growth trends, room for investment and improvement remains: although e-payment usage rose from an average of 35 times per person per year in 2014 to 39 in 2015, consumers in Malaysia, South Korea and Singapore made e-payments an average of 71, 369 and 698 times per person, respectively, in 2015.
Aphinant Klewpatinond, CEO and president of Kiatnakin Phatra Financial Group, told OBG, “In the past Thai banks have invested too much into their physical networks, an issue which is more evident now that financial technology is increasingly prominent in the sector. This represents a turning point, and those with the best rationalisation plans will emerge as the winners.”
As highlighted by the 2012-16 Payment Systems Roadmap, the BOT has spent years developing Thailand’s e-payment systems in a bid to transform the country into a cashless economy; in turn this would improve banking and payments efficiency, reduce the number of unbanked citizens, and improve data and tax revenue collection.
The BOT’s E-payment Working Committee focused on seven projects in 2015: QR/2D code guideline development and promotion, a mobile payments project, development of a real-time interbank e-payment system, electronic bill presentation and payment promotion, a centralised payment gateway project to establish links between the different service providers, a protective fraud monitoring network, and a shared electronic data capture (EDC) programme.
In December 2015 Cabinet approved the country’s newest e-payment strategy, NEMP, comprising five priority areas: Any ID, later re-named PromptPay; expansion of POS terminals to improve EDC activities; a programme which sends e-payment transaction data to the Department of Revenue; a digital subsidisation programme enabling cash transfers to low-income earners; and a campaign to incentivise use of e-payments. The first two – EDC alongside point-of-sale (POS) expansion, and PromptPay – directly support the government’s rising emphasis on digitising payments and reducing cash use, PromptPay by offering low-cost interbank transfers using a digital system, and the EDC programme by increasing the number of POS terminals from 357,986 in 2015 to 2.3m. In December 2015 the Ministry of Finance (MoF) announced that PromptPay’s launch was expected during the first half of 2016.
Although initially delayed due to technical issues, PromptPay was officially launched in January 2017 as an interbank mobile payment system that enables money transfers to be made online at lower rates than conventional banks had previously offered. Customers can access the voluntary service by registering their mobile phone or national ID numbers, and subscriptions are limited to one per person.
Under the PromptPay system transactions valued at less than BT5000 ($140) are free of charge, transfers between BT5001 ($140) and BT30,000 ($845) are charged BT2 ($0.06), and transfers between BT30,001 ($845) and BT100,000 ($2820) are charged BT5 ($0.14). Transfers worth more than BT100,000 ($2820) are charged a BT10 ($0.28) fee. This is a significant reduction from previous rates, which ranged from BT25 ($0.70) to BT35 ($0.99) depending on the transaction amount. In June 2016 local media reported that 15 Thai commercial banks and four state-run banks would allow people to register for the PromptPay service beginning in July. Although registration is voluntary, 20m Thais had registered to use PromptPay as of early 2017, up from 12m in September 2016, indicating significant pent-up demand for e-payment services in the market despite ongoing concerns about cybersecurity. The Thai Bankers’ Association (TBA) projects registration will rise to 30m by 2018 as new business-to-business services are launched, out of 40m total bank accounts.
Impact On Sector
The system’s launch comes at a challenging time for commercial banks – low lending growth and rising levels of non-performing loans kept profit growth at just 2% among the country’s four largest banks in 2016 – and significant fee reduction could temporarily affect fee-based income for the sector.
The benefits of shifting money transfer services online outweigh the near-term impact on revenues, according to the TBA, which reported in January 2017 that commercial banks could save up to BT77bn ($2.2bn) over the next 10 years as operational efficiency improves and cash use is reduced.
According to TBA chairman Predee Daochai, this amount will exceed any revenue losses from the reduction in money transfer fees by an estimated BT20bn ($560.4m). Fees for money transfers and payments account for an estimated 2.5% of industry revenues, of which about half will be affected by the rise of PromptPay. Banks’ fee income is forecast to fall by 5% at most, according to UOB Kay Hian Securities.
Banks Follow Suit
Recognising the benefits of expanding e-payment platforms and services, several major commercial banks have moved to increase their investment in digital infrastructure.
In January 2017 Siam Commercial Bank (SCB) announced it will invest between BT30bn ($845.1m) and BT40bn ($1.1bn) in technology infrastructure over the next three years, with a focus on younger clients, affluent Thais, and small and medium-sized enterprises. The bank’s tech investment had already doubled in 2016 to 15% of profits, against 6% to 7% in 2015.
Bank of Ayudhya (Krungsri) reported in February 2017 that its new mobile application U Choose – which provides real-time credit balances, spending updates and card usage alerts – was expected to reduce call centre operating costs by 30%, while card spending is forecast to rise by between 5% and 10% per card as the number of subscribers to the platform rise from an anticipated 1m in 2017 to 2m in 2018. Krungsri holds the largest market share of credit card users with 3.8m users out of the total 24m issued in the country.
Kasikornbank (KB ank), which has operated an online payments system through its K-Mobile platform since September 2015, is also moving to expand offerings in a bid to maintain its leading 40% market share of digital banking. In April 2016 the bank revealed plans to invest BT5bn ($140.9m) to develop its IT capabilities. In November of the same year it partnered with IBM to develop new blockchain services.
In February 2017 KB ank was one of six Thai banks which began offering Samsung Pay mobile payments services for Android smartphones, joining Krungsri, Citibank, Krung Thai Bank, Bangkok Bank and SCB.
EDC expansion is gathering momentum, even though the government has not yet reached its target of 2.3m EDC/POS terminals, with existing supply remaining highly concentrated in Bangkok’s central business, retail and tourism districts.
However, in February 2017 the MoF announced its plans to install 550,000 new EDC/POS terminals across the country by 2018, with installations to begin in March. Two consortia, both made up of Thai bank partnerships, are currently in the running for the contract.
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