New digital banking era is nigh

Thailand’s financial sector is prepared to enter an era of fully digital banking services thanks to the country’s favourable ecosystem, according to the central bank.

Ronadol Numnonda, deputy governor for financial institutions stability at the Bank of Thailand, said consumers, banks, regulators and infrastructure are all ready to enter this new paradigm of financial services.

He cited the National Statistical Office’s report on the ownership and use of ICT in households in 2020, which found internet users rose from 47.5% of the country’s population or 29.8 million in 2016, to 77.8% or 49.7 million in 2020.

Thais owned a total of 116 million mobile phone numbers as of the end of 2020, according to the Telecommunication Numbering Management Bureau of the National Broadcasting and Telecommunications Commission.

Bank of Thailand governor Sethaput Suthiwartnarueput recently said there has been a dramatic change in the country’s financial landscape over the past decade, brought about by digital technology. He made the remark during an online seminar focused on the future of the financial system, hosted by the Nation Group.

Mr Sethaput said the country has around 75 million mobile bank accounts, an exponential leap from 500,000 only 10 years ago.

Online money transfers have surged to 9.6 billion transactions per year from just 95 million in 2011, he said.

Mr Ronadol said local financial institutions have decelerated expansion of their branch networks and are focusing more on providing online service, with an aim to axe branch operation costs.

Banks have invested more in technology, hired more IT staff and developed new innovative services, reflecting their readiness to usher in their organisations to a fully digital financial era, he said.


On the regulatory side, the central bank has continued to issue new and flexible rules to keep up with technological advancement and support financial institutions maximising the benefits of technology to develop new services. One example is the central bank’s issuance of guidelines for the use of biometric technology and blockchain in financial services, said Mr Ronadol.

The Bank of Thailand also worked closely with state and private organisations to lay the groundwork for digital financial services, he said.

The central bank has also been studying licences for digital banks, a tool meant to enhance financial inclusion and keep pace with consumer needs, said Mr Ronadol.

The central bank recently disclosed it is scheduled to test its Retail Central Bank Digital Currency in the second quarter of 2022, allowing all related parties to participate in the testing process. The bank believes the digital currency has the potential to become the foundation of Thailand’s future financial infrastructure.

However, he said some areas still require further development, such as wider promotion of digital financial literacy among Thais.


According to cloud computing and virtualisation tech company VMware Inc, Thai consumers embraced digital financial services rapidly, but to achieve long-term success, local firms must build more robust and secure foundations to overcome key gaps in digital experiences and trust.

The recent “VMware Digital Frontiers 3.0 Study” found Thai consumers are more appreciative of the value of digital products and services as of 2020, with 80% of respondents stating digital engagement with financial organisations has freed up their time to focus on other priorities. Thailand leads all other Southeast Asian countries surveyed, namely the Philippines (62%), Malaysia (60%), Indonesia (57%) and Singapore (55%).

The multi-country study conducted from November to December 2020 surveyed the behaviours, preferences and attitudes towards digital services and experiences of 1,000 consumers per market in Southeast Asia, the US, the UK, Germany and France.

With 72% of Thai consumers surveyed preferring to engage with their banks via apps rather than visiting a branch in person, growth-oriented financial services firms need to step up their transformation efforts to deliver superior digital experiences that Thai consumers now expect, said VMware.

Consumers in Thailand show a willingness to embrace next-generation technologies, with 74% of those surveyed expressing trust in facial recognition technologies and 81% at ease with 5G.

When it comes to technologies of the future, some consumers are optimistic about the impact on their digital experiences, with 44% believing 5G can make banks more efficient and enable them to do things like process applications and credit checks faster.

Yet Thai consumers will not compromise when it comes to security as 83% of respondents consider security the No.1 priority when choosing a financial services provider.

Some 63% of Thai consumers surveyed feel concerned organisations are tracking and recording what they are doing on their devices, the highest among countries surveyed in Southeast Asia, namely Malaysia (58%), Singapore (57%), the Philippines (56%) and Indonesia (51%).


Ekpawin Sukanan, country manager at VMware Thailand, said digital disruption is challenging the roles of traditional banks. He called for the old guard to pivot their business models to compete with nimble, new digital banking entrants.

“From a technology standpoint, the majority of established financial institutions run on legacy core banking systems and infrastructure that may stifle that innovation. Amid a digital-first environment today, financial services firms need to make sure they modernise their core banking systems and applications to build, run and manage modern apps in a seamless and secure fashion across any cloud,” Mr Ekpawin said.

In addition to adopting the right technology, businesses also need to make sure they earn the trust of their customers by building a zero-trust and intrinsic security approach to their services, he said. The zero-trust model involves building a dynamic, modern security architecture that creates trust on a much broader and deeper basis than traditional security measures.

The increasing sophistication of cyber-attacks means businesses need to leverage a multi-layered approach that provides a holistic model to manage risks across all apps, clouds and devices, and proactively monitors for threats, Mr Ekpawin said.

He said the customer battleground for financial services has moved online, with 85% of Thai consumers embracing contactless payments, according to the recent VMware study.


With this trend, businesses will need to tap into modern apps and next-generation technologies to keep pace with the increasing digital needs of consumers focused on delivering the right experience, with 64% of those surveyed saying they would switch to another brand if the digital experience did not live up to their expectations, said Mr Ekpawin.

Application and infrastructure modernisation is an important piece of the puzzle for banks and financial firms to enhance their competitiveness. Solutions such as artificial intelligence-based analytics, machine learning and blockchain should be leveraged to introduce new capabilities to engage with Thailand’s digital users, providing tailored and personalised product recommendations based on existing data, he said.

“The need to improve customer service and speed time-to-market is only becoming more important for firms to stay ahead of the digital curve. At their core, businesses need to leverage the agility of cloud to satisfy digitally ready consumers in Thailand and make the end-to-end customer experience seamless — from viewing their finances to making instant payments and applying for loans with one tap,” said Mr Ekpawin.

Guru Venkatachalam, vice-president and chief technology officer for Asia-Pacific and Japan at VMware, said banking is increasingly reliant on technology.

Mr Venkatachalam said while existing banks have built strong processes over the years to protect customer data and enhance privacy safeguards, some of the emerging non-financial players entering this space do not have the same level of experience.

He said some aspects have to be addressed as digitalisation becomes even more pervasive, including safeguarding customer data and data privacy.

Mr Venkatachalam said trust is the primary currency of banks and is critical to the functioning of the financial system. Customers who have entrusted their personal and confidential data to financial institutions have an expectation it will be protected. Banks need to layer their security within the technology they use, allowing them to be resilient and withstand increasingly sophisticated cyber-attacks, he said.

Another concern is service availability, said Mr Venkatachalam. Finance is now like a utility, given the increasing popularity of cashless payment options during the pandemic.

Consumers now expect seamless access to financial services across devices, meaning having a resilient system is a basic requirement.