Open banking system still a distant dream for Thailand

Hence, it added, government and regulatory bodies should put in place an open banking infrastructure as well as legislation governing data sharing and security to unlock the sector’s potential and strengthen Thailand’s data-driven financial ecosystem.

Vilaiporn Taweelappontong, consulting lead partner and financial services leader for PwC Thailand, said the global financial services industry is developing open banking technology that allows third-party providers (TPPs) such as tech firms, fintech players and other banks to access the financial information of banking customers through open Application Programming Interfaces (APIs).

This shift would make it easy for customers to access financial offerings with personalized services in real-time. Banks and financial institutions can add new revenue streams from innovative financial products and services by partnering up with non-banks such as technology firms and fintech players. All of this will help to accelerate digitalisation, save costs and add more flexibility to operations.

Even so, developing open banking in Thailand still faces many challenges.

“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,” Vilaiporn said.

Currently, most Thai banks are investing in API development portals and other internal capabilities to share technology within affiliated companies, joint ventures or trading partners, Vilaiporn said. But the accessibility of data remains limited.

“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,” she said.

 

Loopholes in development

Over the last couple of years, open banking has been revolutionising the global financial services sector. But many countries are still in different stages of adoption, Vilaiporn said.

Many Thai banks are reluctant to share customer data with entities they see as business competitors, and so far, there are no extensive regulations and incentives to convince them to start doing so, she said.

“The open banking revolution has greatly challenged the traditional financial ecosystem in every aspect because banks have to allow third-party providers to access the financial information of their customers.

“However, many banks today still worry about the security of letting other TPPs access their customer data. They are also concerned about competing in an already fierce market, losing business to new entrants such as fintech. And it’s more difficult to manage customer relationships when transactions at the counters of physical banks are diminishing fast,” Vilaiporn said.

A successful push to fully embrace open banking in Thailand would require efforts from all parties along with government incentives to foster collaboration. This would include tightening the regulatory framework and preparing data-security infrastructure in the event of an attack that could cause irreparable damage to the financial services system, she said.

 

Customers at the heart of open banking

Technological advances and changing consumer behaviour have prompted financial institutions and banks to focus on improving the customer experience to retain existing customers and attract new ones.

Asian banking customers who are frustrated with their traditional banks are shifting to virtual banking, according to “Beyond Digital: Data-Driven Strategies to Grow, Scale and Profit”, a report by PwC and Oracle.

These end-customers demand a single platform that integrates financial and non-financial services, allowing them to transition from one channel to another seamlessly. Such market trends underline the need for banks to adopt open banking solutions to accelerate data-based innovation and interoperability, it said.

“The development of open banking will provide a better customer experience from bringing together all the offerings that people want from different providers to a single platform, be it transferring money, checking balances or paying for goods and services.

“Customers can wire money at bank A, pay a bill via app B or apply for a loan via app C, all of which can be done through the same interface without switching in and out of so many apps or platforms. By giving them greater control of their data, it also means they get to have access to an array of services from third parties more easily,” the report said.