Interview: Teeranun Srihong
What strategy is the Thai banking sector adopting to keep the growing market of high-net-worth individuals banking domestically?
TEERANUN SRIHONG: Both high-net-worth customers and upper-middle-income customers are rapidly growing segments for the domestic banking system. Thai high-net-worth customers have been engaging in private banking for quite some time, but Thai banks have not been able to service them adequately, so they have been using banks in Singapore and elsewhere.
However, the domestic system has been moving forward on this in recent years, as these types of customers have special requirements for which Thai banks are now offering services. Examples include products such as status cards, for which clients must have a certain level of assets, that offer benefits such as lounges, activities and networking opportunities. On a deeper level, we recognise the need to expand into services such as portfolio planning and overseas investment management. We need to increase the domestic capacity to offer wealth management advice, provide sound economic points of view and conduct portfolio planning rather than simply being a facilitator of transactions. Another sizeable sub-segment of this market is large family businesses, which typically have huge administrative burdens on their assets. Domestic banks are now ramping up capacity to provide these services, as part of the drive to keep these high-net-worth individuals banking domestically.
Further to this, there is the opportunity to attract high-net-worth individuals from neighbouring countries, who exist in abundance. When we opened our first office in Yangon, for example, we very quickly noticed large inflows of Burmese deposits, funds and insurance sales to our central Bangkok branches, with many Burmese clients moving their assets from Singapore to Thailand. As Thai banks increase their regional presence, this market is there to be unlocked.
For upper-middle-income customers, the strategy is similar to what is being offered to high-net-worth customers, but with a slightly different focus. These are customers who want to ensure they have enough money for retirement or for their families’ education. Thai financial services staff are increasingly being trained to engage in simple, fixed-target portfolio management whereby, through a combination of mutual funds, deposits and bond investments, clients can enhance yield by 6-7% annually. Providing increasingly sophisticated services is the key to capitalising on these growing markets.
What steps are being taken to increase financing for small and medium-sized enterprises (SMEs) to help them to navigate the economic slowdown?
SRIHONG: Of course, when global demand is easing, banks are very cautious when lending. The willingness to lend to SMEs is still there, but banks face the need to tighten credit policies to avoid worsening asset quality. What Thai SMEs need at the moment is structural reform. Thai SMEs currently operate as singular, small entities, but what needs to be in place, and what domestic banks are helping to facilitate, is a proper ecosystem whereby SMEs can operate as networks with stronger links and with structures that can absorb economic impacts.
A second factor to consider is how SMEs can access different types of financing. SMEs to date have been far too reliant on banks, which inherently have limited risk-taking capabilities. There are other types of investors far more willing to take greater risks, whether it is through avenues such as venture capital, private equity or crowdfunding. Crowdfunding, for example, has huge potential and remains an untapped area for Thailand. With this, of course, comes the need for institutional frameworks to ensure that the interests of all sides are being adequately protected, but the country is definitely moving forward in this direction.
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