The bank of Thailand has issued guidelines in order to prepare for the future expansion of digital money
The Bank of Thailand is developing the country’s financial ecosystem by balancing financial stability and technology development to carry the financial sector into the digital era. Previously the central bank paid attention mainly to maintaining financial stability to build up a strong foundation for the local financial sector.
As digital technology has been developing rapidly and disrupting traditional financial services, all related parties, including the BoT, need to adjust in line with the change said governor Sethaput Suthiwartnarueput. As a regulator, the central bank needs to support financial institutions to develop new innovative financial services and products to better respond to consumers’ and businesses’ demands in accordance with the digital age.
The BoT will also open all types of financial institutions including banks, non-banks and FinTech companies to do business and grow businesses under the central bank’s fair treatment. At the same time, the regulator needs to supervise them to prevent financial risk in the digital era. Amid fast changing digital technology and the entry of new players in the financial market, the BoT would balance more between financial stability and the digital technology development of financial institutions.
The central bank would also increase flexibility of financial system supervision, Mr Sethaput said. For the financial stability, the regulator will pay more attention to financial institutions’ resiliency to handle risks. The local financial system has been developing digital infrastructure positively, in particular via the payment platform PromptPay with 60 million registrants, and transactions per day rising to 85 billion baht.
Mr Sethaput said that the digital banking development would also allow consumers and businesses to access financial services more easily and support economic expansion in the longer term. Speaking at a separate event, Chayawadee Chai-Anant, the BoT’s senior director for the economic and policy department, said the central bank assesses that the Thai economy would gradually recover after bottoming out in the third quarter this year. The central bank forecast GDP growth rate for 2022 would be 3.9%, picking up from its predicted 0.7% in 2021.
Economic expansion for next year will mainly stem from domestic consumption, hence the central bank has forecast the growth of domestic consumption at 3.4% this year and 5.7% next year. The government’s latest announcement to relax containment measures of Covid-19 and the country’s reopening plan on Nov 1st would support domestic consumption next year, Ms Chayawadee added.
At the same time, the central bank will monitor the government’s implementation of economic stimulus packages in the fourth quarter to see how it contributes to economic activities and domestic consumption. The development of the digital baht or CBDC will also be one of the infrastructures for our financial system in the future to provide more options for citizens and businesses to access secure digital currency, reduce transaction costs, and open up opportunities for a wide range of service provider types that can be used to develop more innovations and also have digital infrastructures that the BoT has pushed forward, such as digital ID under the NDID platform.
This is used to verify an individual’s identity for transactions in the business, banking, and government sectors. It is gratifying that nearly 2 million customers have signed up for the NDID. In the future, the BoT will work with the Electronic Transactions Development Agency to push for more widespread use of digital ID, as well as promote the development of digital ID for juristic persons in the next phase.
An open environment will be created to provide a competitive environment for innovation from all types of players, it will improve the rules to not hinder both the adaptation of the existing players and the market entry of the new players, and supervision is proportional to the risk of the entrepreneur or risk proportionality.
This includes improving the BoT’s regulatory sandbox to be more flexible, accepting more innovations for new players, and expanding cooperation with other regulators so that innovative operators can take the test. This reduces the burden of entrepreneurs having to deal with multiple regulators. Then there is open data, which is the development of a large, interconnected database for the circulation of information, which is the direction that all countries are moving towards.
In Thailand’s financial sector, data linking between financial service providers will increase efficiency and accuracy in policy-making, risk management and product development that meets customer needs.
Finally, it is inevitable to mention the risks that come with developing technology, both cyber threats and scams, with the increasing number and variety of forms, the BoT continues to focus on upgrading financial operators’ ability to prevent and cope with cyber threats according to international standards as well as educating people and service users on how to protect themselves.