Thailand is due to roll out a national digital-payment system that levies much smaller transaction fees than the nation’s banks. Yet lenders expect the network to help rather than hinder them financially.
Commercial banks could save some 77bn baht ($2.18bn) in the next 10 years as the so-called PromptPay service curbs the use of cash, according to Thai Bankers’ Association chairman Predee Daochai. That will exceed the revenue loss from money transfers and payments by 20bn baht, he said.
“The revenue loss impact will not be significant,” Predee, also a president of Kasikornbank Pcl, said on Tuesday in written responses to questions. Over 30mn registrations for PromptPay are expected by the end of 2017, he added.
Thailand plans to unfurl the network this quarter after a delay to fix glitches. Modernising the national payment system is seen as one way of helping to lift the economy out of a period of subdued growth. Asian neighbours including India and Singapore are also promoting cashless transactions to boost efficiency and curb illicit financial flows.
“As the country is moving towards a digital economy, e-payment is an imperative,” Predee said in separate responses. “Members of the association worked together to introduce a fee scheme for PromptPay which is very low compared to existing services.”
PromptPay transfers of less than 5,000 baht are free, with the levy for the biggest transactions capped at 10 baht. In contrast, inter-bank fund transfers of up to 100,000 baht cost between 25 baht and 120 baht at Kasikornbank.
“PromptPay will put a lot of pressure on banks’ fee income in the early period of implementation,” said Thananchai Jittanoon, an analyst at UOB Kay Hian Securities (Thailand) Pcl in Bangkok. “It may cut banks’ fee income by about 5%. But in the long term, lower cash transactions will benefit most banks with falling costs of transportation and insurance.”
The fall in fees and costs may offset each other, though the uptake of PromptPay will take time as the network’s delay has affected people’s confidence in it, Thananchai said.
Sluggish economic growth, nonperforming loans and more recently the risk to fees from PromptPay are among challenges for Thai banks.
The SET Banking index has declined about 21% in the past two years, compared with a 0.3% drop in the benchmark SET index. The banking index climbed 1.6% on Wednesday to the highest level since August last year, while the overall stock market rose 0.4%.
PromptPay has some similarities to India’s Unified Payments Interface, as both are government backed. But the UPI cashless payment platform has struggled to gain traction, with just 2mn registered users as of early December last year. There are about 20mn registrations for PromptPay so far, according to the Thai Bankers’ Association, in a country with a 68mn population.
PromptPay was meant to have been implemented at the end of October, but the start date was pushed back to allow for more testing. The Bank of Thailand and commercial banks are working on the roll out.
Users will be able to transfer funds using mobile phone or national identification numbers linked to bank accounts. Consumers, businesses and the government are expected to use the network.
The value of transactions via mobile and Internet banking in Thailand rose by more than a quarter to 3.2tn baht in the six months through September 2016, the latest data from the Bank of Thailand show. But cash remains the dominant medium for transactions compared with nations such as South Korea, the U.K. or Sweden, according to a central bank presentation.
Fees for money transfers and payments account for about 2.5% of Thai banking industry revenue, and half of this will be affected by PromptPay, Predee said. He expects registrations to climb as the service goes live.
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