Transforming Thailand into a Cashless Society

Transforming Thailand into a Cashless Society
As consumers rapidly accept digitalisation and the government works to transform Thailand into a cashless society.

BANGKOK – This year marked a sea change as consumers in Thailand became more accepting of digitalisation, especially regarding purchasing behaviour. From pre-purchase activities through to post-purchase consumption, evaluation and disposal activities, digitalisation affected all those behaviours.

Opinion leaders and brand influencers also affected many people’s decisions to buy.

It is not hard to observe the current trend of consumer behaviour: people fixated on tiny electronic gadgets or making transactions via mobile phones. Digitalisation has been ingrained into our livelihood.

What kind of changes can we expect next year in terms of consumer behaviour as technology continues to make its presence felt across the globe?

Wave of Digital Transactions

As consumers rapidly accept digitalisation and the government works to transform Thailand into a cashless society, banks in 2018 will continue to move more products and services to online and mobile banking platforms in an effort to claim a larger customer base through first-mover advantage.

Even though banking transactions via branches and ATMs are still rising, the pace of their growth is relatively low compared with mobile banking transactions.

Predee Daochai, president of Kasikornbank (KBank), said the bank’s transactions at brick-and-mortar branches and ATMs have not changed much in terms of both value and volume.

The traditional channels are still essential for some customers, but their growth rate is insignificant, he said.

“ATMs transactions are around five times higher than branch transactions, while mobile banking transactions are far higher than those at ATMs. This reflects a change in consumer behaviour in line with technology development,” said Mr Predee.

KBank, the country’s fourth-biggest lender by assets, is the largest mobile banking service provider with 8 million users. Its online transactions hit a new high at 150,000 per minute at the end of October from 100,000 earlier. Normally, banking transactions peak at the end of every month.

Local banks this year embraced a range of digital payment schemes, ranging from PromptPay, an online money transfer under the national e-payment initiative, to quick response (QR) code payment, which is expected to gain a footing next year.

PromptPay is gaining traction but needs more time for consumer awareness. At the end of October, PromptPay had 36 million registrants with 200 billion baht (US$6.13 billion) in money transfer value, rising from 32 million registrants with 120 billion baht (US$3.68 billion) worth of transactions in July, said the Bank of Thailand.

For QR code payment, the central bank on November 13 allowed trial services for five banks to exit the regulatory sandbox to commercially roll out the new technology across the country.

Apart from adopting digital banking technology, banks are revamping their physical branch network — permanently closing low-transaction branches and opening new ones in busy markets such as department stores, while turning their tellers into financial advisers.

Some 160 physical branches of the country’s four largest banks by assets — Bangkok Bank, Krungthai Bank, Siam Commercial Bank (SCB) and KBank — were closed, reducing the number to 4,490 at the end of October from 4,650 at the end of 2016.

SCB, the country’s second-largest lender by assets, set a clear-cut policy to apply four models to its branch network: SCB Express, a fully automated banking service; SCB Business Center, focusing on small and medium-sized enterprise (SME) customers; SCB Investment Center, offering wealth management service; and SCB Service Centre.

SCB has added two branches this year for a total of 1,172, but the number is down from 1,209 in 2015.

Moreover, SCB plans to integrate lifestyle features related to payments into its SCB Easy app to draw more users. For example, the bank is collaborating with lifestyle app Wongnai to provide search and pay features for dining, while users can also make donations through SCB Easy.

TMB Bank is also moving towards digital banking by launching 15 pilot digital banking branches, with services including online queues, e-brochures and video conferencing for investment advice.

But unlike SCB Express, TMB’s digital branches still have employees to provide traditional services and show customers how to use the digital services.

Digital innovations such as robotics and artificial intelligence (AI) will have a greater influence on investors’ behaviour, with future investment poised to centre on the use of AI for data analytics and investment decisions.

Smith Banomyong, chief executive of SCB Asset Management (SCBAM), said AI has influenced the work processes of all industries and demand for AI will increase in the future. This development will come in three phases, he said.

The first two phases of AI invasion revolve around helping humans to calculate numerical figures and using computers for file storage.

The third phase of AI usage is associated with securities investment technology. It matches and sends trading orders, and can analyse targeted stocks in a portfolio and select those projected to have the highest returns based on acceptable risks.

SCBAM believes the AI trend will affect all industries, including the investment market. It is working to develop an AI programme focused on stock selection, and is convinced after two years of research its AI programme can generate higher average annual returns than the five per cent offered by the Stock Exchange of Thailand index.

The asset management firm launched its first AI fund earlier this month, attracting investment worth over 1 billion baht (US$306 million).

Mr Smith said AI funds will have more success if they can beat the targeted return generated through back testing. Other securities brokers and asset management companies are also studying this investment model to develop proprietary versions.

Digital Transformation

Some predict 2018 will be the year of a digital transformation for the Thai telecom and media sectors as the variety of over-the-top (OTT) services and Internet of Things (IoT) platforms grow.

Although many consumers have been using OTT services on a daily basis for years, and IoT platforms have become daily facilitators for specific groups of consumers this year, both are projected to become more widespread in 2018.

OTT refers to the digital applications or services operated on internet networks and are not based on the traditional network, such as mobile VoIP applications, mobile instant messaging, online video, television and online music.

OTT has increasingly become a threat to incumbent telecom operators because it provides a service on operators’ networks without sharing any revenue with network owners. These operators spend a significant amount annually for network expansion.

The OTT TV model including on-demand programming has changed TV viewing patterns, affecting the TV industry’s advertising and raising questions about the future of the market.

The country’s IoT development is poised to leap forward after the telecom regulator approved on November 8 the final draft of utilisation of the 920-925 megahertz band for IoT services.

The move creates a spectrum standard for machine-to-machine connectivity and responds to the application of new technologies, the increasing utilisation of IoT devices, and could improve the efficiency of every sector in the country.

The IMC Institute believes the move by the National Broadcasting and Telecommunications Commission (NBTC) will make the cost of internet connectivity cheaper, enabling the government’s vision of a digital society.

NBTC vice-chairman Settapong Malisuwan said OTT, IoT and the 4G/5G network will create a new digital convergence of products and services. He predicted there will be new popular businesses related to big data analytics through the 4G/5G network and IoT platform.

Traditional broadcasters and telecom operators likely face heavy disruption in 2018. They need to improve or alter their business models to serve digital changes in consumer behaviour.

Cyber Purchase

The arrival of JD.com partnering with Central Group as well as the anticipated footprint of Amazon.com in domestic territory next year will intensify competition among e-commerce behemoths as they bid to retain customers.

This was the first year online shopping ranked among the top five purposes on the Thailand Internet User survey. The country’s online retail business is expected to grow from US$2.9 billion (95 billion baht) in 2016 to US$11.1 billion in 2025, while brands and e-commerce providers shift to an omni-channel strategy rather than adopting a pure online or brick-and-mortar strategy.

The rise of the middle class has made Thailand a top e-commerce market in Asean, with average spending per purchase of over 1,000 baht (US$30.66). The Indonesian e-commerce market has a larger population, but the average spending per purchase is only 450 baht (US$13.80).

In addition, the rise of new logistics providers, particularly Line Man, Lalamove and Kerry Express, have helped serve demand for product and food delivery, offering faster service with competitive pricing.

Social e-commerce has also gained in popularity as Thailand has 48 million Facebook users and over 11 million Instagram users. Facebook Thailand found Thais’ purchases on its site in the fourth quarter were 70 per cent higher than the rest of the year, with the majority of buyers being Millennials.

Thailand is one of 24 countries where Facebook chose to launch Facebook Marketplace, a feature helping buyers discover new online products easier and help merchants reach nearby target buyers.

Another consumer trend expected in 2018 is netizens buying foreign products, especially those made in China, for low prices or cheap shipping fees, which should attract Thais to import more overseas products.

Lazada Thailand, owned by Alibaba, has already introduced the soft launch of its Taobao Collection, which imports Chinese products from merchants in Alibaba’s Taobao for Thai consumers.

More Chinese products are expected to flood Thailand’s online marketplaces, posing a challenge to domestic brands and products.

Social Media Booking

Prachoom Tantiprasertsuk, vice-president of sales at Dusit International, said the tourism industry has already seen how social media platforms like Facebook, Instagram, Twitter and Pinterest have vastly changed the way guests interact with hotels, airlines and travel agencies.

The new platforms push the growth of meta-search engines such as Trivago, TripAdvisor and Skyscanner, driving down prices and changing the face of online booking. The rise of the sharing economy, exemplified by services like Uber and Airbnb, has further diversified what consumers expect from the tourism industry.

“Thanks to technology, the industry is in a constant state of flux, and the lines of service will only continue to blur as technology and AI become more advanced,” Ms Prachoom said.

“Every company in the industry must constantly innovate to meet consumer preferences while simultaneously maintaining impeccable brand standards. We must develop creative solutions that incorporate modern technology to create even greater experiences that will allow the industry to prosper.”

She said social media is all about offering added value for guests and customers.

“Travel and tourism operators now use their online presence to not only tell their brand stories and offer promotions, but also engage people through useful information, games, competitions, and user-generated content. It’s all about building trust. Without it, you cannot convert browsers into buyers,” said Ms Prachoom.

Meanwhile, one-price discount stores and luxury brands remain hot trends in Thailand’s retail market next year.

The two appeal to different customer groups — lower-income and upper-income earners, said Chatrchai Tuongratanaphan, executive director of the Thai Retailers Association.

With fashion and technology rapidly changing, a product’s life cycle will become shorter and people will have less brand loyalty, he said.

Mr Chatrchai said one-price lifestyle stores, a retail sector that has grown sharply in Thailand in recent years, will continue to grow next year.

Apart from Daiso, Miniso and Just Buy, discount lifestyle store Don Quijote from Japan is due to debut in Bangkok on Ekamai Soi 5 in the fourth quarter of next year.

There are over 200 one-price lifestyle stores in the Thai market.

Car-sharing

While the government wants to promote electric vehicle production among its automotive industry in the coming decades, car-sharing is expected to be a new trend for motorists that will lead to a decline in car ownership.

Car-sharing is the new model for short-term car rental, calculated by hours instead of days or months. It is normally available via mobile application, so each driver can book cars anytime while car-sharing operators provide parking spots across cites, eliminating the need for round trips.

Car-sharing is a popular mode of city transport in metropolitan locations in the US, Europe, Australia, and parts of Asia because of increasing population density and well-organised public transport.

In Thailand, some startup firms launched the car-sharing model a few years ago, such as Haupcar and Drivemate, but they have yet to find a footing in the market.

Siam Commercial Bank Economic Intelligence Center (SCBEIC) reports car-sharing operators still face many limitations in Bangkok, as public transport needs to be improved and expanded. The Thai urban population is increasing, potentially increasing the market for car-sharing.

“Most city dwellers still prefer to own cars,” said the SCBEIC analysis. “Moreover, car parking spots in the central business district are insufficient to support the car-sharing model.”

The country’s public transport regulations have not supported car-sharing as the cost of a taxi fare is cheaper than the cost of car-sharing, at 10-20 baht (US$0.30-US$0.60) for 30 minutes or 10 kilometres of driving, said SCBEIC.

There are three types of car-sharing: a carpool, where car owners are hired as a taxi such as with Uber or GrabCar; peer-to-peer, where car owners rent their vehicles out for short-term renters; and business-to-consumer, where corporate firms rent cars to their registered members via a website or mobile app, such as Zipcar.

SCBEIC cited research from the Transportation Sustainability Research Center and the Car Sharing Association that B2C car-sharing had global growth of 39 per cent annually. The industry has 6 million members worldwide, expected to reach 26 million by 2020.

Asia-Pacific had the most members from 2012-2015 at 2.3 million, while Europe and North America had 2.2 million and 1.6 million, respectively. About 100,000 cars are now available for the car-sharing model.

Millennials, are children that were born from 1980 to 2000

Millennials, or those born from 1980 to 2000, are more familiar with public transport than the older Generation X and Baby Boomers, making Millennials more open to ride-sharing than owning personal cars, said SCBEIC.

In Bangkok, the population of millennials represents 30 per cent of the total.

Haupcar has a fleet of 30 cars, available at 30 parking spots in universities, Bangkok’s mass transit stations and condominiums.

Tanawat Vichaiwatanapanich, co-founder of Haupcar, said car-sharing could reduce the amount of cars in metropolitan areas, citing research by Intelligent Energy Europe (IEE) that found car-sharing combined with alternative transport modes offers more resource-efficient transport than car ownership.

“The IEE study said one shared car could replace up to eight private cars. There are up to 5 million cars in Bangkok, and if only 10 per cent of motorists turn to car-sharing, we could reduce roughly 4 million cars from our roads,” Mr Tanawat said.

 

Read the original article at Bangkok Post

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