Seven Peaks Insights

Financial Inclusion: Thailand’s Efforts to Expand Financial Access

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Financial inclusion is a term commonly associated with FinTech, reflecting efforts to address the global issue of financial inequality, including within Thailand. It goes beyond being a mere buzzword; according to Macquarie's 2022 data, 63% of Thailand's adult population falls into the unbanked or underbanked category. This demographic is often linked to individuals with low income or small to medium-sized businesses operating outside the formal banking system.

In this article, we will delve into the concept of financial inclusion and explore how it can contribute to improving the financial well-being of individuals in Thai society and globally in the future.


What is Financial Inclusion and How Does It Relate to FinTech?

Financial inclusion, as defined by the World Bank, refers to individuals and businesses having access to useful and affordable financial products and services that cater to their needs. This encompasses transactions, payments, savings, investments, insurance, and more. The key is to deliver financial products responsibly and sustainably, ensuring that individuals can conveniently access them on an equal footing regardless of their distance or financial status.

Financial inclusion and FinTech are closely intertwined. FinTech provides technological solutions that address the challenges faced by populations with limited access to traditional financial services. It facilitates their access to new and better financial services, helping them overcome issues such as being trapped in informal debt or facing uncertainty about how to invest their limited resources for the future, among other challenges.


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FinTech Sectors Ensuring Financial Inclusion Growth

Below are four FinTech sectors that concurrently contribute to improving financial inclusion in Thailand and globally:

  • Mobile Banking

Mobile banking plays a crucial role in advancing financial inclusion by enabling individuals to conduct banking transactions and access various financial services using smartphones. Mobile device penetration has surpassed that of individual banking accounts, so it has become a vital tool – particularly for those who are geographically distant or find it inconvenient to visit bank branches. Through mobile banking, individuals can easily open accounts, transfer money, access credit, and manage personal finance, saving both time and expenses, as long as they have a mobile device connected to the internet.

According to the Bank of Thailand, as of August 2023, the number of mobile banking users in Thailand has reached 103,999,550 accounts, with a monthly transaction volume of 2,574,520 transactions and an estimated value of 5.74 trillion Baht. The majority of these transactions involve fund transfers and payments.

  • Digital Payment

Digital payments are considered a crucial FinTech solution that facilitates easier access to financial services for underserved populations in Thailand. According to the Global Findex database of the World Bank, approximately 70% of low and middle-income adults in the country had bank accounts for various transactions in 2021. However, traditional banking access remains limited in these regions due to factors such as geographical remoteness, insufficient infrastructure, and limited financial literacy, especially among those residing in remote areas.

Digital payment solutions have been closing this divide, with 46% of low to middle-income adults witnessing a rise in digital payments in 2021, up from just 34% in 2017.

Several factors have contributed to the growth in digital payment usage. The widespread use of smartphones across all demographics and the availability of diverse FinTech services stimulate consumer interest in trying new financial products. These solutions make it easier and more secure to collect, pay, and transfer money. They not only enhance access to financial services and reduce dependency on cash, but also contribute to continuous economic expansion, particularly in regions with limited financial access.

  • Peer-to-Peer (P2P) Lending 

P2P lending services, accessible through online platforms on mobile phones, have revolutionized the loan process for individuals and SME businesses. These platforms, such as FINNIX in Thailand, play a crucial role in providing financial services to those in emerging economies who might face challenges meeting the stringent conditions set by traditional banks.

In the case of FINNIX, the platform offers digital lending services, including nano-finance and personal loans, without the need for collateral or guarantors. Moreover, these loans come with reduced principal and interest rates, making financial services more accessible to a broader audience.

FINNIX exemplifies a positive contribution to financial inclusion, particularly through initiatives like the "Debt Slave" campaign. This campaign aims to protect borrowers outside the formal system from falling prey to exploitative financial practices. Utilizing platforms like YouTube and a chatbot service named "Loans or Lies," FINNIX educates individuals about the dangers of dealing with online loan sharks. Additionally, the provision of three e-books offers knowledge on recognizing unethical borrowing practices and dealing with fraudulent money transfers.

  • InsurTech

Traditionally, obtaining insurance, whether it be life, health, accident, or car insurance, involved engaging with insurance agents. However, the landscape has evolved, and now individuals can effortlessly purchase various insurance products through mobile apps or websites with just a few clicks. This transformative phenomenon is referred to as "InsurTech," a sector within FinTech dedicated to facilitating consumer access to insurance products while enhancing service efficiency and reducing operational costs.

In Thailand, the trend of InsurTech is on a continuous upward trajectory. Statista projects that the number of smartphone users in Thailand will reach approximately 58 million people by 2023, constituting almost 84% of the total population. This aligns with the observable growth in the InsurTech sector, evidenced by the increasing number of insured individuals each year. Take Roojai as an illustrative example of InsurTech in Thailand:

Roojai: An online car insurance platform that distinguishes itself through a tailored insurance application process designed to meet the unique needs of Thai customers. Leveraging technology, Roojai analyzes supporting data for insurance approval, resulting in competitive insurance premiums compared to traditional counterparts. Additionally, the platform allows insured customers to easily claim or report accidents through the app, simplifying the entire process.


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Financial Inclusion in Thailand

Financial inclusion remains a critical factor in addressing the issue of informal debt in Thai society. According to data revealed by the Economic and Business Forecasting Center in 2023, 80.2% of household debts in Thailand are within the formal financial system, while 19.8% are informal, amounting to 559,408 Baht per household (roughly USD 16,000).

P2P lending or universal lending steps in to assist individuals with limited financial standing, making it easier for them to access low-interest loan sources instead of resorting to high-interest informal lending. This is the root cause of the longstanding wealth disparity in Thailand, leaving many Thais financially insecure and exposed to potential risks arising from informal debt.

FinTech further aids Thais in accessing financial products more than ever before. Currently, 95.6% of Thais have bank accounts, and 92% conduct transactions through digital payment methods, compared to other Asia-Pacific countries average at 82.1% and 78.1%, respectively.


Coverage and Safety

The Bank of Thailand (BoT) is actively addressing the financial inclusion gap by expanding access to financial services. The approach involves regulating various types of FinTech businesses by requiring them to obtain licenses, categorized into five types:

  1. E-Money License: Allows the operation of electronic money services.
  2. Payment Facilitator License (PF): Permits businesses to provide services supporting cardholders.
  3. Payment Agent License (PA): Authorizes businesses to receive electronic payments.
  4. Fund Transfer License: Grants the license for businesses offering electronic fund transfer services.
  5. Regulatory Sandbox: A license for providing electronic payment services that incorporate new technologies within a limited scope.

Any organization or FinTech startup wishing to introduce innovative financial and banking solutions to the Thai public must obtain a license from the Bank of Thailand. This measure is in place to ensure the security of service to users and to regulate all aspects related to the financial system according to the long-term strategy outlined by the BoT.


Get Your Digital Product Ready

The FinTech market in Thailand continues to present ample opportunities for the development of digital products aimed at addressing problems of financial inclusion. If you are interested in creating FinTech solutions that align seamlessly with the needs of the Thai population, you can consult with us now.