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Connecting Thailand: The Journey of a Payment Revolution

Over the past few years, many crucial developments have taken place in the Thai payments landscape to keep pace with new technology and customers’ needs. In particular, the enhancements to the country’s payment systems infrastructure have broadened public access to financial services with more efficiency and lower cost. These are key contributors to a more than 40 percent growth in e-Payment transactions in 2018 compared to the previous year.

The Bank of Thailand’s (BOT) significant infrastructure payment enhancements include:

1. PromptPay: This real-time retail fund transfer system has enabled faster and more convenient instant payments, providing funds transfer among individuals, businesses, and government agencies by using easy-to-remember IDs (i.e. citizen ID, mobile phone numbers, corporate ID, or e-Wallet ID) as proxies of traditional bank account numbers. This open infrastructure was initially launched in late 2016 to serve for government welfare disbursement and was gradually extended to facilitate funds transfer services between individuals and juristic persons, and also other overlay services such as e-Donation, cross-bank bill payment, and PayAlert.
   
   PromptPay has gained popularity over time, given that 48.2 million IDs have been registered in the system (as of May 2019). The daily average volume was 5.3 million transactions and daily average value reached 28.2 billion THB in the first quarter of this year.
   
   
2. Interoperable QR Code for Payments: The development of an interoperable QR Code for payments creates interoperability among banks and non-bank payment service providers. The adoption of the interoperable QR Code for payments, known as Thai QR Payment, has allowed merchants to accept payments directly into their bank accounts instead of using cash or a high-cost Electronic Data Capture Machine (EDC).
   
   Thai QR Payment is convenient and cost-effective for retailers such as restaurants, small market vendors, and public transportation services, including taxis, motorcycle taxis, express boats, and sky trains, and has helped expand the coverage of e-Payment points of sale. In Thailand, Thai QR Payment has reached more than 3 million merchants (on-line and off-line) within one year, 2018. Additionally, the interoperable QR Code for payments can be employed as one of the accelerators to advance cross-border payments and remittances in the near future.

In addition to the infrastructure enhancements to broaden financial access, the BOT has continually strengthened the oversight and supervision of payment systems and services in order to ensure efficiency and security, as well as service continuity and consumer protection.

In this regard, the BOT in collaboration with the Ministry of Finance enacted the Payment Systems Act 2017 (B.E. 2560), which came into force on 16 April 2018, aiming to promote the unity of payment legislation, reduce redundancy of laws and regulations, ensure finality of payment, and provide an ecosystem in support of innovative payments services and consumer protection.

The Fourth Payment Systems Roadmap

To constantly drive the innovation and set strategic directions for payment systems development for the payment landscape in Thailand for the next three years (2019-2021), the BOT has formulated the fourth Payment Systems Roadmap (2019-2021). The Roadmap is not only a continued plan following the third Roadmap, but more importantly a development framework that incorporates new technologies and innovations to increase payment systems efficiency and to be in line with the industry’s needs and international standards.

The fourth Roadmap aims at building a supportive ecosystem that drives innovative and digital payments to become the most preferable choice for all users. Moreover, it supports the operation of e-Commerce and e-Business in Thailand with safe and sound payment systems and appropriate consumer protection.

This vision is driven by five key pillars as follows:

1. Interoperable Infrastructure: develop open, reliable, and resilient infrastructures that comply with international standards (i.e. ISO 20022) to support innovation as well as cross-border connectivity.
2. Innovation: drive the development of innovative digital payment services including cross-border payment services that meet users’ needs.
3. Inclusion: drive digital payments in the private and public sectors, as well as promote digital payments and technology literacy of target groups to improve access and adoption rate of digital payments.
4. Immunity: ensure payment systems stability by adopting international cyber security standards and having a sound risk management framework, as well as responsive and proactive supervision and a consumer protection framework.
5. Information: leverage technologies and analytical tools to support policy making, supervision and financial innovations, as well as enhance data integration to make the most of payment data utilization.

Additionally, BOT has recognized the importance of cross-border payment connectivity to support free flows of goods, services, and investments, and to facilitate movement of skilled labor and business visitors. We have put this issue in our Fourth Payment System Roadmap with the aim to encourage interoperability of payment systems in ASEAN, especially through the interoperable QR Payments and innovative remittances. The intended outcome is to achieve the increasing volume and value in digital payment usages in the areas of tourism, cross-border trades, and worker remittances among ASEAN countries.

ASEAN Payment Connectivity

The Bank of Thailand together with the ASEAN central banks and financial institutions organized events to showcase ASEAN Payment Connectivity during the ASEAN Central Bank Governors’ Meeting on 4 April 2019, in Chiang Rai, Thailand.

ASEAN central bank governors presided over the events, whereby regional financial institutions showcased various initiatives on cross-border payment linkages and financial innovations. The ASEAN economic linkages will be strengthened further by adoption of financial technology to expand payment connectivity, especially to facilitate trade, investment, and service flows within our region.

The collaborations are among banks, non-banks, and international payment companies to develop cross-border payment services using modern technologies, ranging from interoperable QR codes, blockchain technology, application programming interfaces (APIs), and international card networks. These new services can serve the needs of different customer segments; improve the efficiency of the regional financial system; facilitate business transactions and international trades; reduce the cost of service providers and customers; and enhance financial inclusion for a broad range of the ASEAN population.

The events featured MOU signing ceremonies to foster collaboration between central banks and showcases of payment services and innovations across seven ASEAN countries.

The details of the respective MOUs are as follows:

Central banks in ASEAN, including the BOT, have worked together to support the development of financial technologies. Central banks can play an important role as facilitators and catalysts to encourage collaboration among service providers to promote payment connectivity using innovative technologies. One key enabler is the interoperability of financial infrastructure and standards, which will facilitate more efficient cross-border payment linkages and encourage further innovations.

The showcases displayed at the ASEAN event are good examples of collaborative efforts on cross-border payment and financial linkages among central banks, banks, and non-bank institutions within ASEAN. Payment connectivity will be an area where we will see continuing progress to deepen ASEAN economic ties and strengthen our financial integration.

In addition, the BOT has also worked with other ASEAN central banks to share information on the development and oversight of payment systems. The related regulations have been reviewed to facilitate cross-border payments and encourage consistency among member countries’ supervisory frameworks on payment systems, as well as to provide consumers with secure and accessible payment channels at proper costs. Joint efforts and collaboration among stakeholders in the industry, both public and private sectors, banks and non-banks, are the significant key to successfully drive cross-border payments.

All in all, the ultimate benefit from having interconnected payment systems in ASEAN is to raise the standard of living for ASEAN people, support economic activities among countries, and prepare ASEAN’s readiness to have payment connectivity with other regions in the global community.

For more information on ASEAN Payment Connectivity showcases, please see the press release.

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