A new landscape in the Thai financial sector to support the digital economy and sustainable growth

           “New landscape in the Thai financial sector” is the policy of the Bank of Thailand (BOT) to support the digital economy and sustainable growth based on a balance between innovation support and risk management. This ensures flexibility and adaptability to rapid changing situations.

          The goals are to enable the financial sector to use technology in the development of innovations and financial services that meet the needs of service users in a thorough and fair manner, as well as to improve the ability of business and household sectors to adapt to the digital financial economy and deal with environmental risks in a sustainable manner. This includes the improvement of the ability to deal with important risks and new forms of risk in a timely manner in order to reduce the effects on the economic and financial systems and consumers in general.

The three main directions of actions are as follows:

1. Opportunities for the financial sector to utilize technology and information under the “3 Open” principles.

          1)  Open Competition: Give player the opportunity to compete by allowing banks to offer Virtual Bank and expanding the scope or increasing flexibility for existing players;

          2)  Open Infrastructure: Give players more equitable access to infrastructure, such as payment system, the use of Retail CBDC, and a risk guarantee mechanism accommodating a wide range of funding needs;

          3)  Open Data: Enable data utilization by developing a mechanism that makes it more convenient for users to transmit their data from service provider to other service providers under the Open Banking policy, and the mechanism can connect the financial sector database with other sources for financial service analysis and development purposes.

2. Sustainable transition to the new world can be achieved through two phases:

          1)  Encourage the financial sector to actively assess environmental risks in business operations and support business sector adaptation during the transition period, without causing widespread negative impacts;

          2)  Help the household sector to survive and adapt to the new world by upgrading the promotion of digital financial skills, as well as helping them prevent and solve debt problems. For example, supervising a retail loan according to the debtor’s ability to repay in order to prevent over-indebtedness, and developing a comprehensive debt relief mechanism for people who are facing insolvency.

3. Resiliency-focused supervision of new forms of risk, taking into account the balance between the roles of the BOT in promoting innovation and supervising risks that will affect the stability of the economic and financial system can be achieved through these three measures:

          1)  Supervision of service providers according to the nature of risks and complexity of financial services;

          2)  Review of the requirements to remove obstacles and unnecessary costs for service providers;

          3)  Supervision of service providers to keep up with important new risks, such as risks of new technology adoption in the financial sector and supervision of non-banks with a greater role.

          The new landscape will enable the financial sector to effectively utilize technology in the development of financial services and management of risks in a timely manner, and will help when dealing with the unexpected and the impact of environmental risks. This will result in services that meet the needs of users with fair protection, greater knowledge, and readiness of households to adapt to the digital world, and that provide appropriate access to financial services without over-indebtedness. In addition, it also results in incentives and sufficient funding for the business sector to ensure a smooth transition to a digital and green economy.

          The BOT is in the process of hearing opinions on the preparation of “New financial landscape” in February 2023, which will be used in the determination of criteria and requirements.