Fintech Pressure Spurs Top Thai Bank to Create New Platform

(Bloomberg) -- Kasikornbank Pcl, Thailand’s largest bank by revenue, plans to introduce a new digital-payments platform by the end of 2017 to counter threats to fee income from rival transaction networks.

The goal is faster, easier and lower-cost online banking transactions, according to Kattiya Indaravijaya, one of four presidents at the Bangkok-based company. Kasikornbank is in talks with overseas financial-technology companies to develop the payments platform, she said. The lender already has an existing, separate collaboration with Ant Financial’s Alipay, she added.

“There are a lot of parties talking to us right now,” Kattiya, 51, said in an interview at her office in Bangkok on Thursday. "We can partner with fintechs. We have them provide a product to us and we provide it to the customer. There’s an opportunity for us to provide the service to the customer at a lower price."

Kasikornbank and competitors including Siam Commercial Bank Pcl are boosting investments in digital-banking systems as fintech upstarts disrupt the lenders’ established business models. Ascend Money Co., a payments and online-lending venture between Charoen Pokphand Group and Ant Financial, provides an example of the challenge as it prepares to embark on a $100 million expansion in Southeast Asia.

Siam Commercial Bank plans to spend about $1.1 billion over the next three years to build technology infrastructure to ramp up digital banking services and platforms.

“The battle in online financial services will be much more fierce as banks step up investment, and with the entry of several new players,” said Warut Siwasariyanon, head of research at Asia Wealth Securities Co. in Bangkok. “Digital-banking platforms will be the major infrastructure for domestic banks to maintain their competitiveness.”

The value of transactions via mobile and Internet banking in Thailand rose by more than a quarter to 3.2 trillion baht ($91 billion) in the six months through September 2016, data from the Bank of Thailand show. 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.

Kasikornbank dropped 0.8 percent as of 10:13 a.m. in Bangkok. The shares have gained 11 percent this year compared with the SET Index’s 2.9 percent advance.

Thailand last month unfurled a government-backed national digital-payment system that levies much smaller transaction fees than the nation’s banks. The so-called PromptPay service may put pressure on lenders’ fee income in the short term, according to UOB Kay Hian Securities (Thailand) Pcl.

The risk from PromptPay depends partly on uptake, which is likely to be gradual, said Kattiya, who was appointed the first female president of the 71-year-old bank in January 2016.

"Banking is now facing new challenges," Kattiya said. "We have to think about a new strategy to be relevant to our customers when their behavior changes."

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net. To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Sunil Jagtiani, Russell Ward