DIGITAL disruption in the financial industry has forced Thailand’s fifth-largest commercial bank by assets – Bank of Ayudhya, which is branded as Krungsri – to consider new services to cope with an increasingly complex global financial ecosystem, for which it has revamped its e-business organisation accordingly.
“New financial technology is coming [to play a bigger role in the financial industry], and we [risk] not catching up with it,” Thakorn Piyapan, head of Krungsri Consumer Group, said during a recent interview with The Nation.
Like its peers, Krungsri has been shaken by the pace of development of fintech (financial technology), a disruption of financial-transaction technology that is connected to smartphones and involves a rapidly growing number of start-ups focusing on applied fintech.
It has therefore decided to shift its business focus to digital banking, for which the bank has restructured its e-business unit.
Fintech is related to new ways of conducting financial transactions such as payments, money transfers, fundraising and asset management via an information-technology revolution and the rapid development of mobile phones and mobile applications.
According to a report by Accenture, the level of investment in fintech business globally surged from US$930 million in 2008 to $12 billion (Bt422 billion) last year.
Thakorn said that previously, Krungsri had talked solely about its six flagship lending products – finance for cars, motorcycle finance, First Choice, personal loans, credit cards and mortgages – when considering expansion abroad in neighbouring countries such as Cambodia, Laos, Myanmar and Vietnam (CLMV).
The bank felt it was able, therefore, initially to apply the business models used in Thailand for these six products to those nearby markets.
“The point is that banks and financial institutions are looking for technology to help reduce their operating costs, as it is not comfortable for banks to manage their costs amid very low interest rates,” he said.
In Myanmar, the government has recently enacted a law on banking allowing peer-to-peer money transfers – that is, such transfers no longer have to be conducted via banks – as well as supporting all players, he said, while in Cambodia, mobile loading was now allowed for microfinance.
“We think there is no need to open a bank branch in these markets … However, the bank is looking for any business model that suits each country,” he explained.
“At present, the bank perhaps is not limited to just the six flagship products as planned earlier, if we pursue business expansion in the CLMV market, as the fintech environment is increasingly permitted in these countries,” Thakorn said.
Japan-based UMFG MUFG (Mitsubishi UFJ Financial Group), the bank’s parent, is investing in the fintech field, he added. He speculated there might even be no need for any bank branches, automated teller machines or manpower in the future, if virtual transactions became the preferred means of doing banking business for most people and entities.
However, the consumer-banking chief expressed concern about money transfers when using fintech as money could be transferred to any form of receiver, such as bitcoin, which could present difficulties in terms of tracing and checking such transactions.
Currently, almost all banks use the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, which is a system for money transfer among banks under which any transactions can be checked back.
Meanwhile, unlike other banks, Krungsri’s credit-card business operates as a separate entity, as opposed to an in-house unit, making it harder to deliver messages to all 23,000 staff at the bank and “for them to see the same direction” he said.
Under the bank’s new structure, Thakorn is also head of its digital banking and innovation unit, which will focus on new technology and fintech start-ups.
In addition, one of his missions is to fix its organisational culture.
“Now we have a project, and we will seek approval from the Bank of Thailand to use the new technology throughout our network, to offer our clients [the choice of] not having to go to any of our branches, and to be able to open any Krungsri bank account [remotely],” he said.
“The [government’s] PromptPay or ‘Any ID’, which is a system of money transfers using any bank-account number to tie up with a person’s ID or mobile-phone number, will help shopping online to boom, but it is possible it will have an impact on banks’ normal business,” he said.
Thakorn said Krungsri’s overall results for the first half of this year had been on target. Non-performing loans for credit cards stood at 1.4 per cent at the end of the period, while NPLs for personal loans were 3.4 per cent.