KEY POINTS
- Integrating the payment system could thrust Thailand to the global stage: Aditya Group Thailand’s CEO
- Thailand’s central bank has been promoting an innovative digital transformation in finance
- The ASEAN’s push for a regional payments system is also targeted at reducing U.S. dollar dependence
The Association of Southeast Asian Nations (ASEAN) is getting closer to a regional cross-border payments system that features QR codes or e-wallets. With the Bank of Thailand (BOT) joining the project, Thailand may also be one step closer to its target of becoming a regional fintech hub.
The 10-member bloc announced the initiative late in July, saying the central banks of Thailand, Philippines, Singapore, Malaysia and Indonesia were collaborating “to make cross-border payments in ASEAN faster, cheaper, more transparent, and more inclusive.” The project is currently centered on QR code use, but e-wallets are expected to be integrated into the system in the future.
Indonesia and Thailand have tested a QR code-based payments system among Indonesian tourists in Thailand that resulted in 14,555 transactions amounting to Rp 8.54 billion (approximately $546,767). Thai tourists in Indonesia logged 492 transactions that amounted to Rp 114 million (approximately $7,419).
Ande Aditya, founder and CEO of management consulting firm Aditya Group Thailand, told International Business Times that the a regional cross-border payments system “holds tremendous promise for Thailand’s rapidly evolving fintech space.”
The integration of a digital regional payments system into Thailand’s financial technology sector “could catalyze the development of cutting-edge solutions and payment platforms, attracting investments and talent while propelling Thailand onto the global fintech stage,” he said.
Thailand’s financial system has been undergoing a transformation amid technological developments in recent years. The central bank laid out three key targets for Thailand’s financial landscape: digital transition, sustainable management and resilience amid potential risks.
In particular, the BOT said a digital-centric strategy for the finance sector was one that presented open competition, open infrastructure and open data, which is aligned with the ASEAN’s cross-border payments initiative.
A regional payments system in the ASEAN is expected to have a huge positive impact on small businesses and the unbanked population. “In Thailand, where these segments form a significant portion of the population, the ability to engage in seamless cross-border transactions could be transformational,” said Aditya, who is also a startup specialist.
Up to 63% of Thailand’s adult population is either unbanked or underbanked, as per a May 2022 report by Australian financial services company Macquarie Group. There were approximately 3.13 million small and medium-sized enterprises (SMEs) in Thailand in 2020. Majority of the SMEs at the time were micro enterprises.
The Thai central bank has committed to promoting and encouraging fintech adoption among financial service providers across the country. It held its Digital Finance Conference 2023 (BDFC) Sept. 14-15 in a bid to promote innovations in the finance industry and also “show the potentials of Thailand’s financial systems in fast shifting towards digital finance.”
With the central bank’s commitment to a digital transition and the ASEAN’s work in pushing for a regional payments system, Aditya is expecting improved inclusion, more seamless transactions and more affordable options for small businesses. “This system has the potential to level the playing field,” and drive the region toward a “more equitable society.”
In addition to offering potential ease of access for unbanked Thai communities and SMEs, the ASEAN said a regional cross-border payments system will make member nations “no longer dependent on the value of the U.S. dollar.”
During the 42nd ASEAN Summit in May, the bloc agreed to increase local currency transactions among each other and committed to improved regional payment connectivity.
The ASEAN’s push for more independence from the U.S. dollar stems from concerns regarding the role of the currency in sanctions from Washington, observers said.
During this year’s summit in Jakarta, ASEAN leaders said in a Declaration that they commit to ensuring finance ministers and central bank governors from each member nation promote local currency use across the region, advance and implement “regional payment connectivity” and encourage cooperation on digital assets.
