FinTech Revolutionizing Finance: The Digital Banking Transformation in Thailand

While the term FinTech might be unfamiliar to some, its deep integration into modern life surpasses what most might realize. Many use FinTech apps on their smartphones daily without fully recognizing their presence. There is a wealth of information about FinTech and digital banking awaiting exploration in this article.

Table of contents

• Understanding FinTech Beyond a Bank Application
• The History of FinTech
• Types of FinTech
• Major Benefits from FinTech Consumers and Businesses
• The Future of FinTech Trends

Understanding FinTech Beyond a Bank Application

FinTech, formed from the combination of 'financial' and 'technology,' drives the creation of innovative financial products and services, to assist consumers in effectively managing their finances.

FinTech in Thailand has seen remarkable growth due to initiatives by financial institutions and startups, courtesy of the ongoing digital transformation in this digital age.

Is FinTech just a banking app? Not entirely. Bank applications are part of the broad financial technology landscape available today. Let’s explore FinTech's history to understand its journey before further exploration.

The History of FinTech

To provide comprehensive insight into FinTech's history and evolution, we reference a study by Douglas Arner, Janos Barberis, and Ross Buckley from the University of Hong Kong Faculty of Law, titled "The Evolution of FinTech: A New Post-Crisis Paradigm?" published in 2015.

• FinTech 1.0 Laying the Foundation (1886-1967)

From 1886 to 1967, FinTech 1.0 marked the genesis. The USA laid cable lines across the Atlantic Ocean for the first time, pioneering electronic money transfer via telegraph and Morse code. This later became the standard protocol for finance and banking systems worldwide.

In 1950, the inception of the first credit card by Diner's Club diminished the necessity of carrying cash. Then, in 1958, American Express rolled out commercial credit cards, now widely used across the globe.

• FinTech 2.0 The Age of Banking (1967-2008)

This period saw the transition from analog to digital finance and banking systems. In 1967, Barclays, a British universal bank, introduced the first ATM to the world, marking a significant step in the FinTech 2.0 era. Additionally, the introduction of SWIFT in 1973 served as a protocol for cross-border transactions, still in use today.

Between 1980 and 2018, multiple new financial technologies emerged for financial institutions, notably mainframe computers, online banking, and e-commerce technologies. The early 21st century saw a shift to digital platforms for internal systems and interaction with customers.

• FinTech 3.0 Startup Revolution (2008-2014)

The global financial crisis in 2008 altered consumers' views on financial systems and banking, leading to the birth of Bitcoin in 2009, introducing the concept of cryptocurrency. The increase in always-connected smartphone usage also facilitated the rapid growth of FinTech. As a result, TechFin companies started offering financial services or products through mobile devices and web applications, including Google Wallet (2011) and Apple Pay (2014), among others.

• FinTech 3.5 Globalization (2014-2017)

The spread of FinTech from the Western world to other regions characterized the FinTech 3.5 era. This resulted in a transformation of financial technology and banking systems worldwide.

A significant contributing factor to the exponential growth of FinTech in this era was the widespread access to internet connectivity in populous countries like China, India, and other developing nations in Southeast Asia. This prompted financial institutions and FinTech startups to create modern financial solutions more rapidly than before.

• FinTech 4.0 The Shift in Technology (2018-Present)

Blockchain has emerged as a leading force propelling FinTech towards the future. Due to its competitive operational cost and simplicity, blockchain enhances consumer trust by providing a user-friendly digital experience at a minimal cost.

Machine learning and AI are pivotal in the evolution of FinTech. It's increasingly common to observe FinTech startups leveraging these tools to analyze data and personalize proposals, services, and promotions that precisely suit individual consumers.

Types of FinTech

Let's explore the types of FinTech available in the market and how they assist with financial tasks. You've likely interacted with at least one of these.

• Mobile Banking Application

This is perhaps the most commonly used form of FinTech. With mobile banking apps, users can effortlessly make transactions without visiting a physical branch, including money transfers, credit card applications, account statement issuance, and more. 

At present, several Thai banks have developed their new apps with a focus on delivering the best user experience, notably ttb touch and the introduction of new SCB TechX features.

• Digital Payment

Paotung, 2C2P, TrueMoney wallet, Omise, and Stripe are FinTech services providing e-wallets and payment gateways. These platforms facilitate quick payments for both consumers and businesses.

• Online Loan

Online loans offer an alternative lending method for consumers and SMEs to apply for loans without visiting a physical bank branch. Algorithms assess financial credibility, granting loans more efficiently. 

For example, SoFi, an online loan platform with a total value of 4.58 billion US dollars, offers various financial services, including student loan refinancing, mortgage solutions, and credit cards.

• Robo-Adviser: Investment AI

Those interested in mutual funds, gold investments, or other assets may be familiar with Jitta. It's an AI investment consultancy that helps individuals interested in investing. The platform uses AI to recommend investment plans and manage investment portfolios, offering lower fees compared to human financial consultants.

• Crowdfunding

Crowdfunding platforms gather funds from private investors to support SMEs, startups, or businesses in need of loans. They serve different purposes based on their type: equity-based, debt-based, reward-based, and donation-based.

Thailand's Siam Validus, a crowdfunding project between SCG and Validus from Singapore, aids small investors who wish to support local SMEs.

• Blockchain and Cryptocurrency

Blockchain and cryptocurrency are continually evolving FinTech adopted globally, with notable examples such as Bitcoin and Ethereum. Blockchain ensures secure and transparent decentralized transactions, while digital currency serves as a means of payment and, in some cases, as an investment.

• InsurTech (Insurance Technology)

InsurTech caters to the insurance industry. A multitude of companies personalize insurance plans and assess risks more accurately implementing this technology.

In Thailand, Roojai and Sunday leverage InsurTech to analyze insureds, calculate premiums, and assess vehicle conditions for car insurance plans. Users can report accidents directly through their apps.

• RegTech (Regulatory Technology)

RegTech aids financial institutions in complying with regulations, reporting solutions, and practicing law-abiding procedures such as anti-money laundering.

• Personal Finance Management

Apps and platforms in this sector assist in personal financial management, featuring budget planning, expense monitoring, and financial planning. Notable apps include Wallet Story, MeTang, and Money Diary among many others. 

Major Benefits from FinTech for Consumers and Businesses

FinTech provides a variety of benefits for banks, startups, investors, and consumers alike:

• Reduce Operational Cost

By offering online channels and applications, FinTech helps financial institutions reduce operational costs while lowering fees for consumers.

• Quick Access and Service for Consumers

Consumers can access a range of financial products and services conveniently without needing to visit a physical branch. With FinTech, customers can access various financial products and services with ease. Now, individuals can effortlessly apply for a loan and upload required documents from the comfort of their living room.

• Opportunity to Gain More Profits 

FinTech uses AI and machine learning to personalize products and services, increasing the likelihood of consumer engagement and conversion.

• Alternative Methods to Generate Wealth

Since the introduction of crowdfunding and robo-advisers by financial institutions and FinTech startups, private sectors now have opportunities and channels to invest in stocks, mutual funds, bonds, debentures, and real estate more easily than ever. AI technology can also help minimize risks by offering personalized recommendations.

• Minimize Risks and Enhance Consumer Trust

In the present day, cyberattacks and online fraud have grown more sophisticated. AI and machine learning play a pivotal role in analyzing extensive data to pinpoint vulnerabilities in systems, guaranteeing robust security measures for safeguarding banking systems, client data, and applications.

The Future of FinTech Trends

FinTech's evolution will continually adapt to new technology and consumer needs, driving financial institutions and startups to innovate with new products and services for the market.

AI and machine learning will potentially analyze vast data sets more effectively in the near future, benefiting both creators and consumers.

For blockchain and digital currency, DeFi (decentralized finance) is anticipated to become increasingly pertinent for users. It won't replace present banking systems but will serve as an alternative access to digital financial solutions. Additionally, it's an effective method for banks to reduce operational costs and reallocate resources for developing new financial solutions.

Lastly, ESG investing or sustainable investment combines conventional and philanthropy investment to generate profit while strictly adhering to environmental, social, and corporate governance principles, aiming for long-term sustainability.

Turn Your FinTech Ideas into Digital Products

Now, we’re confident that you understand how FinTech could be beneficial for both providers and consumers in this digital age. The key to successfully creating a new FinTech platform lies in understanding the consumers' needs and pain points, and how to solve or improve upon them.

Seven Peaks and Morphosis are prepared to assist you with digital transformation, UX research, UI/UX design, and digital marketing to turn your ideas into tangible digital products. Consult with us here.