Banking in Thailand – A digital pathway to avoid ‘fragile’ revenues
By Tathagata Kandar
…evolving customer habits have left 30% of [Thai] bank revenues ‘fragile’…
The banking sector in Thailand is a highly competitive one. While in the other countries in Asia Pacific, consolidation has either already happened or are in the verge of happening, in Thailand someone is always at your heels. With the ASEAN Banking Integration Framework opening up the market, foreign stronger banks are adding to the competition, even though the effect has till now been minimal.
Looking at the chart above, it is clearly indicative of how competitive the current scenario in Thailand is. So, there is an inherent and urgent need to differentiate yourself from the competition. “But how do you do that with financial products which are already commoditized?” – that’s the million baht question. The only way you are going to differentiate yourself is to provide your customers with what they need, when and where they need it – highly contextual offers wrapped in digital experience.
The digital elephant in the room
Thailand has always been at par with the rest of East Asia when it came to their banking practices and readiness.
Source: The Global Competitiveness Report 2016–2017, World Economic Forum
So, it should not come as a surprise that almost all the banks in Thailand are thinking of digitalization in some shape or form. Planned investments in digital technology has gone up over the last 2 years even though results are yet to be seen. Most of the investments seem to have gone into digital channels. As mentioned above, the differentiator for banks comes in the form of the digital experience they are able to provide for their clients. So channels are important but more important are the underlying offers to be provided. Most of the banks are now struggling to put together the underlying structure to enable those channels with context-specific offers.
Source: McKinsey Asia Personal Financial Services Survey
Customer stickiness is a direct factor of the number of products that the customer avails. In the more mature markets, that is the only differentiator which is playing in the favour of the banks. The product penetration in these markets are very high and the banks have achieved this by offering extremely context specific products – based on a number of parameters which are highly dynamic and can include the location of the customer or the point in the life cycle of the customer – be it a person or a company.
Source: McKinsey Digital Banking in ASEAN
A June 2015 study by Accenture found that although Thai banks have intensified their focus on digital banking, most still consider it to be a customer access channel, rather than aiming to provide comprehensive services like deposits, withdrawals and lending. According to the report, evolving customer habits have left 30% of bank revenues “fragile”, meaning banks should increase customer transactions through expansion of convenient digital offerings to shore up revenues.
So how can we go about offering digital products which are also context specific and catering to the needs of the customer? There is a definite need for a system which can sit in the middle of the banking ecosystem and enable the organization to gain unique insights on the value it provides to the ecosystem. The ecosystem is not only the customers and would include partners and suppliers as well. These insights can progressively be based on each micro-activity and this is where banks become perfectly dynamic and contextual for their customers. This brings me to my conclusion that the final step in true digitalization would be to understand the extent of value exchange at each and every touch-point within your ecosystem. However, for starters, getting a middle-office system which can speak to upstream and downstream systems and still give you the flexibility to react to your market, would be the way to start your digitalization journey.