Open Banking In Thailand: A New Era of Finance

Thailand is on a steady path of embracing Open Banking, yet still faces unique challenges in its journey. In this article we take a look at Thailand's progress, the challenges that lay ahead and why resistance to innovation could stifle the growth of incumbent banks.

In recent years, Open Banking has emerged as a transformative force in the global financial services sector. By leveraging Application Programming Interfaces (APIs), Open Banking facilitates a more interconnected and user-centric financial ecosystem.

Open Banking promises to empower consumers with the ability to conveniently and securely transfer their data across different service providers, leading to more personalised services and better financial management tools. For banks and financial institutions, it opens up new avenues for revenue through innovative financial products and services by partnering with non-banks such as technology firms and fintech players.

Thailand is on a steady path of embracing this innovation, yet still faces unique challenges in its journey towards a fully Open Banking environment. In this article we take a look at Thailand’s progress, the challenges that lay ahead, and why resistance to innovation could stifle the growth of incumbent banks.

Open Banking Development in Thailand

An early example of the digitisation of Thailand’s financial infrastructure, which laid the groundwork for potential future developments in Open Banking, is the widely adopted PromptPay system, an infrastructure solution regulated by the Bank of Thailand (BoT), and developed by National ITMX (NITMX) and Vocalink, a Mastercard company.

The system, rolled out in 2017, enables users to link their bank accounts to their mobile number or identification card number, facilitating instant peer-to-peer transfers and enabling users to make payments through various channels, including mobile banking apps and e-wallets. PromptPay led to a dramatic reduction in the country’s reliance on its physical banking infrastructure (1).

Due to its domestic success, the Bank of Thailand (BOT) has broadened the scope of PromptPay to encompass additional ASEAN nations within the framework of the ASEAN Payment Connectivity initiative. The applications for cross-border payments encompass a range of services, including cross-border QR payments and fund transfers, executed in real-time at comparatively modest fees (2).

Following this development, major Thai banks began taking strides towards facilitating Open Banking. In early 2019, Siam Commercial Bank (SCB) launched an open API to empower software developers and enterprises to create new services that seamlessly integrate with their banking operations. The developer portal includes simulator applications, providing developers with a sandbox environment for immediate testing of their applications, ensuring robust performance before deployment.

There are several other banks also providing API services. For example, Kasikornbank offers a range of APIs for third-party developers, covering services such as QR payment, bill payment, slip verification, inward remittance, corporate fund transfer and KGP — an end-to-end merchant payment platform. Krungsri Bank has an API portal that offers businesses services for account information enquiries and funds transfer, initiation, retry and enquiry; and Bangkok Bank provides API services for daily and historical foreign exchange rates, daily and historical fund prices, interest rates and branch location services.

Despite these API developments, Thai banks have tended to focus on developing API portals for internal use and affiliated companies, with limited data accessibility for broader third-party integration. In this regard, Thailand is missing a key component of Open Banking, and that is Embedded Finance.


The Push Towards Embedded Finance

Open Banking refers to the practice of financial institutions sharing consumer-permissioned data with third parties, like fintechs, through APIs. This model promotes a bi-directional flow of information, enabling a secure exchange of banking data and encouraging innovation in financial services.

Embedded Finance, on the other hand, involves the integration of financial services into non-financial platforms. Businesses not primarily in the financial industry can offer financial services by partnering with financial institutions. This approach allows for a seamless financial experience within everyday apps and platforms, enhancing convenience for consumers.

In order for Thailand’s Open Banking landscape to evolve, the government and regulatory bodies have been urged to establish a regulatory framework that addresses data interconnectivity, usage and security, so that non-financial businesses – and their consumers – can reap greater benefit from digital banking via Embedded Finance.

Indeed, back in March 2021, Vilaiporn Taweelappontong, Consulting Lead Partner and Financial Services Leader for PwC Thailand noted,

“It could take at least 10 years for the financial sector in Thailand to fully embrace open banking simply because it still has a lot more to do both in terms of getting the infrastructure ready and building user confidence. If we want to take further steps to fully adopt open banking, the government and regulators must put in place a regulatory framework concerning interconnectivity, usage and data security while also building awareness among the population around the safety of sharing financial data.” (3)

Despite a slow start,  numerous interesting developments are in the pipeline. For example, Gulf Energy Development recently revealed it was partnering with telecom operator Advanced Info Service (AIS) on a venture to jointly invest in a virtual bank, which will serve both existing and new customers (4).

In addition, the Japanese super app, LINE, plans to offer social banking services in Thailand. With 50 million users, and already boasting the successful LINE Pay digital wallet, LINE and Visa plan to develop experiences based on blockchain technology that enables business-to-business, international and alternative currency transactions (5).


Open Banking for Consumer Empowerment

In the few years following Taweelappontong’s prediction, the tech-finance landscape has changed considerably, most notably with action by the Bank of Thailand (BOT). In February 2024, following a period of public consultation on “Open Banking Data for Consumer Empowerment”, the BOT held a meeting to discuss key recommendations based on stakeholders’ feedback and to outline next steps for implementing open banking policies in Thailand.

All stakeholders expressed support for the principles and objectives proposed by the BOT, advocating for a mechanism that enables consumers to share their data for their benefit while allowing service providers efficient access to data and key infrastructure.

The outcomes of the meeting included:

  1. Recognition of the benefits of Open Banking data, particularly in facilitating loan application, evaluation and monitoring, as well as financial account aggregation and related services.
  2. Emphasis on the need for clear operational procedures, including criteria for enforcement and oversight of data providers and consumers and the development of open standards for data sharing.
  3. Consideration of various dimensions, such as costs and benefits for participating institutions, data security, governance and adoption promotion efforts.

During the subsequent panel discussion, distinguished representatives from various sectors highlighted the importance and potential benefits of Open Banking data. They emphasised its role in empowering consumers, adopting innovation and addressing common pain points faced by service providers. Suggestions were offered to drive open banking in a sustainable manner, including hackathons for exploring new services, consumer data protection measures, leveraging untapped public sector data and striking a balance between benefits and costs.

To move forward, the BOT will use the input and feedback from the meeting to inform further discussions with stakeholders. Policy direction on Open Banking will be announced soon, and steering committees and working groups comprising representatives from relevant sectors will be established to collectively drive and implement Thailand’s Open Banking journey (6).


Challenges Ahead

Despite making headway, there are a number of challenges that Thailand faces going forward:

1. Consumer Awareness and Trust

Many Thai consumers are still unfamiliar with Open Banking and may be hesitant to share their financial data with third-party providers. Building trust and awareness will be crucial for wider adoption.

Banks can take the lead by launching educational campaigns that demystify open banking in clear, concise language, highlighting the benefits for consumers such as improved financial management tools and access to digital services. Conducting pilot programs with a limited user base will help banks gather valuable feedback to refine offerings before rolling them out in full.

Third-party providers also play a significant role in building trust. Clearly articulating the user benefits of their Open Banking-powered services is paramount. This could involve offering personalised financial solutions, streamlined bill payments or more competitive loan options.

Furthermore, banks and fintechs must develop user-friendly interfaces that empower consumers to understand and manage their data sharing with confidence.

2. Data Security and Privacy

There will naturally be concerns over how customer data will be secured and used by third-party providers. Therefore, a robust regulatory framework needs to be established to ensure strong data protection measures are in place.

This framework should clearly define how customer data can be collected, used and stored by third-party providers. It should also mandate robust security protocols to prevent unauthorised access and data breaches. Additionally, the framework should grant consumers clear rights to access, with granular control that enables users to rectify and delete their data upon request.

3. Standardisation and Interoperability

The lack of standardised APIs and data formats presents a significant obstacle to Open Banking adoption. This inconsistency creates hurdles for both financial institutions and third-party providers, hindering their ability to connect and exchange information efficiently.

By ensuring all participants speak the same “data language,” connections will become smoother, reducing development costs and expediting innovation within the Open Banking ecosystem.

Standardisation and interoperability also strengthens consumer rights related to payment services, establishing clearer information about fees and charges and easier complaint handling procedures. It also leads to increased security, more competition and the potential for greater innovation in financial services.

This all, however, requires a collaborative effort. Industry stakeholders, including banks, fintech companies and regulatory bodies, should work together to establish clear and consistent API standards and data formats. This collaboration may result in an agreed regional standard, or the following of an existing international framework such as the Payment Services Directive 2 (PSD2).

PSD2 is a European regulation established in January 2016 that aims to create a more secure, open and competitive landscape for online payments across Europe through Strong Customer Authentication (SCA) and increased consumer rights. PSD2 forces banks to provide access to customer account information to third-party providers, with the customer’s consent. This allows for the development of innovative financial products and services (7).

Or, like Hong Kong, Thailand may opt for a bespoke regulatory approach. In July 2018, the Hong Kong Monetary Authority (HKMA) introduced an Open API Framework for its banking sector. This framework outlines a four-stage plan for banks to implement Open APIs. Initially, banks will share basic information on products and services. As the process progresses, they’ll move towards sharing transactional data and eventually enable initiation of payments through these APIs.

However, unlike the European approach (PSD2), where open access is mandated, the HKMA framework allows banks more control. While they are required to develop APIs, they have the discretion to choose which third-party providers (TPPs) can access them. This means banks can collaborate with specific TPPs they deem suitable (8).

4. Legacy Infrastructure

Many Thai banks have outdated IT infrastructure that is likely incompatible with Open Banking standards. Upgrading these systems can be expensive and time-consuming. However, partnering with third-party Open Finance technology companies can help overcome this challenge.

Leveraging expertise and pre-built solutions: Open Finance tech companies specialise in building and maintaining modern infrastructure specifically designed for Open Banking. Partnering with such companies would enable Thai banks to tap into this expertise and utilise pre-built solutions for data aggregation, API development and security protocols, thus saving significant time and expense in developing everything in-house with outdated systems.

Phased implementation and cost optimisation:

Open Finance tech firms can help banks implement Open Banking in phases. This allows banks to prioritise functionalities and gradually integrate Open Banking features without overwhelming their existing infrastructure. This phased approach reduces upfront costs and allows for adjustments as needed.

Cloud-based solutions:

Many Open Finance tech companies, such as Brankas, operating in Southeast Asia, offer cloud-based solutions for Open Banking. This eliminates the need for Thai banks to invest in expensive hardware upgrades. Cloud solutions are also more scalable and flexible, allowing banks to adapt to changing needs and data volumes.

By partnering with Open Finance tech companies, Thai banks can free up their IT resources to focus on their core competencies, such as customer service, risk management, and product development. This allows them to optimise their internal resources and drive innovation in other areas.


Resistance from Incumbent Banks

There is likely to be resistance to Open Banking from some incumbent banks who may feel that this innovation poses a threat to their traditional business models. However, innovation is no longer an option, given that digital-savvy generations are increasingly comfortable with virtual banks and digital payment services.

Digital services offer a frictionless, mobile-centric experience that resonates with younger demographics. By clinging to traditional models, incumbent banks risk losing these customers to more innovative competitors.

By embracing Open Banking, incumbent banks can position themselves at the forefront of this change, collaborating with fintech companies to develop new and exciting financial solutions. Those who resist miss out on these collaborative opportunities for growth can expect to experience the following:

  • Erosion of brand loyalty: Customers demand convenience, personalisation and access to a wider range of financial products and services. If incumbent banks fail to adapt to these expectations, their brand loyalty will erode.
  • Reduced profitability: Open Banking can unlock new revenue streams for banks. By partnering with third-party providers, banks can offer a wider range of financial products and services, reaching new customer segments and generating additional income. Resistance to these opportunities will see growth stagnate.
  • Increased operational costs: Traditional banking models often rely on manual processes and legacy infrastructure. Open Banking, with its emphasis on automation and data sharing, can streamline operations and reduce costs. Banks that resist open banking may struggle to maintain efficiency as the industry evolves.


In Conclusion

Open Banking is indeed changing the financial services landscape in Thailand, offering a glimpse into a future where finance is more accessible, personalised and integrated into our daily lives.  And while it may seem tempting to criticise what often appears to be a slow progression towards Open Banking and digital finance such as virtual banking, it’s crucial to recognise the multifaceted challenges inherent in this transition.

One of the foremost considerations is ensuring widespread understanding and acceptance of the technology among the general populace. Without sufficient education and readiness, there’s a risk of alienating individuals from the banking system or inadvertently excluding the unbanked and digitally-challenged segments of society. Moreover, moving too swiftly could pose significant risks, particularly concerning data security.

Rushed implementation may heighten the likelihood of data leaks or breaches, not only jeopardising consumer trust but also compromising Thailand’s overall security. Hence, while the pace of advancement may seem tentative, it’s imperative that Thailand proceeds cautiously, balancing the need for innovation with the imperative of safeguarding both its citizens and its national interests.


Thinking about implementing Open Banking or Embedded Finance related workflows?

Don’t miss out on the opportunity to gain valuable insights and strategic intelligence to propel your business forward. Download our exclusive “State of Open Banking in Southeast Asia” white paper now.

Whether you’re a fintech startup, financial institution, technology provider, or industry stakeholder, this white paper is your essential guide to understanding the intricacies of Open Banking in the Southeast Asian market. Gain a competitive edge, drive innovation, and unlock new opportunities for growth in the digital economy.

+ Download your copy here

Share the Article:

We use cookies and similar technologies to understand how you interact with our website and improve your browsing experience. By using this website, you agree to our use of cookies. Learn more.