Interviewed By Foo Boon Ping
Senior executives in business, technology, operations and channels from two of the leading financial institutions and a technology company in Thailand shared their perspectives on the challenges and issues impacting digital adoption and transformation in the industry.
At the Finance Thailand 2021 virtual dialogue, bankers and decision makers talked about how the digitalisation of the consumer business is bringing unique customer experience through creating ecosystem on social media and e-commerce platforms.
Supaneewan Chutrakul executive vice president of Kasikornbank, Rottapron Ekabutr, head of consumer digital solutions division of Bank of Ayudhya (Krungsri Simple) and Dariusz Trocyszyn, consulting manager for Southeast Asia at Comarch discussed how Thai financial institutions are leveraging digital developments and ecosystem platforms to create new capabilities to serve customers.
They also debated how financial institutions (FIs) can better take on emerging technology trends such as artificial intelligence (AI), big data and data analytics, migration to cloud, open banking and leveraging 5G capabilities to deliver competitive customer experience.
Chutrakul described the bank strategy on collaborating with partners ecosystem to bring better customer experience between the platforms. Ekabutr highlighted that banks are still in the initial stage of adopting cloud technology and the challenge for them is how to speed up their transformation. Trocyszyn said that customer behaviour is changing and banks need to adapt and understand the digitalisation journey in order to be competitive.
The following key points were discussed:
Below is the edited transcript of the dialogue:
Foo Boon Ping (FBP): Good afternoon, ladies and gentlemen. Welcome to Finance Thailand 2021. We're looking forward to our leadership dialogue on scaling digital in the competitive hyper connected Thai market. Like much of Asia, and Southeast Asia in particular, Thailand has embraced the digital economy in a big way, especially amid the current pandemic. It has a sophisticated telecommunications infrastructure to begin with, one of the best in the region in fact, boasting high fixed and mobile broadband speeds, according to the Speed Test Global Index.
Wilson Chia (WC): Thailand’s digital investment in information and communication technology, especially the rollout of the 5G amid the pandemic is further transforming the economy, enabling businesses to leverage new and exciting ways of connecting with customers. Thai consumers today account for one of the highest mobile penetration, social media usage, internet banking accesses and cryptocurrency ownership in the world.
The Digital Economy Promotion Agency reported that its digital economy grew by more than 10% in 2020, to reach $20.6 billion, gross merchandise volume totalled $18 billion and the digital economy is projected to more than double to $53 billion by 2025. The digitisation of the Thai financial services sector has been aggressively supported by the Bank of Thailand. The central bank introduced the PromptPay real-time retail payment and the National Digital Identity system as part of its payment system roadmap. Now in its fourth stage, the roadmap has facilitated the creation of customer-centric ecosystems and platforms supported by digital payments.
In 2020, the number of registered PromptPay users surpassed 50 million, with a daily transaction volume of more than $2.5 billion. Incumbent banks, non-financial service players and fintechs have responded to this growth by building more mobile apps and open application programming interface (API)-enabled banking platforms to embed digital payment and finance into the e-customer journey and user experience. Rapid adoption of digital payments has accelerated the launch of digital currencies, as the government tries to raise back some control over the money supplies as well as further facilitate the digitisation of payment systems.
FBP: In today's dialogue, we want to discuss how Thai financial institutions are leveraging these developments to create new capabilities to serve your customers, especially the consumers and small businesses who do not traditionally get the best treatment from the industry players. We want to make this discussion as practical as possible and focus on your different perspectives. What you are doing and the challenges that you face and how you have overcome them. We hope that this discussion will offer some clear insights on; One, building the next generation of digital banks and developing unique experiences. Two, delivering frictionless customer journey through cloud-based infrastructure, and Three, overcoming SME financing challenges and gaps to sustain business and economic recovery.
Before I introduce our panel guests, I would like to give a shout out to the Thai Bankers Association, which have annually - when we're doing this event, supported this event so well. We thank all the participants who have come to join this event through the association. Let me introduce our esteemed guest panellists. First, we have Supaneewan Chutrakul, the executive vice president of integrated channels and business solutions and division head at Kasikornbank; Rottapron Ekabutr, head of consumer digital solutions division at Bank of Ayudhya; and finally, Dariusz P. Trocyszyn, the consulting manager at Comarch.
WC: The financial services industry in Thailand has remained resilient amid the pandemic, supporting economic recovery and preserving livelihood. Timely initiatives taken by the government and the Bank of Thailand with the support of the financial industry have provided much needed debt relief and financial support to consumers and in particular small businesses. Given the scenario, like all the other neighbouring countries, the financial industry in Thailand is likely to have this agenda to address such as remaining resilient, building long-term value for the organisation, and embarking on digital transformation and cloud. This is not a one-time journey, it is a continuous journey given the development of technology that is moving so fast, as well as addressing of cybersecurity, and finally, the subject of environment, social and governance (ESG) challenges.
But today, we will focus on the digital transformation journey given the time constraints of the Thai financial industry and how it is keeping in step with technologies. Trends such as artificial intelligence (AI), big data and data analytics, migration to the cloud, open banking, leveraging 5G capabilities, which Boon Ping mentioned about Thai adopting 5G initiatives, to deliver competitive customer experience.
The industry has experienced rapid shift towards contactless transactions, partnerships with non-traditional players like LINE and Grab, adoption of the internet of things (IoT) and smart devices, as well as the adoption of blockchain that is reshaping business models. Our first topic is building the next generation of digital banks in Thailand and developing unique experiences for the customers.
We would like to talk about your journey to build the next generation of digital banks. What are the broad types of consumer needs that any digitisation effort must address? What do people expect, what they want you to add in comparison to what they've experienced in the other retail platforms? We would like to start with our panel of speakers. What are the initiatives that are taking place in Thailand that they can share with us and how it has impacted the customers and employees as well in the course of this journey? With that, we would like to start off by having the first question.
FBP: Supaneewan from Kasikornbank.
Collaborating with partners in creating an ecosystem
Supaneewan Chutrakul (SC): We have been doing all this for a couple of years because we believe that our customers are our partners’ customers as well. Since we are in different industries, for example, if they would like to go for the deliveries they will go to Grab or online LINE Man. If they like to go shopping, they will go to Shopee or Lazada. That's the initiatives that we are starting with and the strategies that we will be collaborating with partners because our ecosystem is not big enough for the customers. Our journey will be how we'll be able to link ourselves to all our partners’ ecosystem and be able to bring the customer experiences across the platform. That's our own strategy that we would like to be wherever our customers are that has started for a couple of years. It started from very little collaborations which is linkage on the payment. For example, we are doing pay with K PLUS with Facebook. If you are buying things at the Messenger, the senders, the sellers, we have a link then we are going through that. It's switching a link to the K PLUS and we are able to pay through the mobile banking. It's been extended from Facebook to other social media and other ecosystems of e-commerce as well. It started from that collaboration and now we are starting to have, for example, cross-platform call lending, doing a joint venture company with us, such as KBank doing a joint venture company with LINE, and is coming to the Kasikorn Line (KLine) company, which is offering all the loans.
We are leveraging our strengths in each of the partners, for example, we have our own data, our partners have their own data, we are mixing up together, how we'll be able to serve customers broader than what we have done as a bank and that will be our strategy.
We would like to grow with our partners. Some of the initiatives that we have done during COVID-19, is its all collaboration. We help a lot of customers with our own data. For example, we are able to lend to some very limited people because we are based on financial behaviour, either statements or payments. But when we are working with our partners, we are able to use the strength of our panels as well, they have other behaviour data that help us to be comfortable with lending with the broader customers. It shows both our growth in loans and our subsidiary, such as KLine. What we would like to mention here is the experiences across the platform to make it seamless. To make the customer feel that they don’t have to remember anything in financial. It helps in the engagement and the growth of mobile banking a lot, and increases the satisfaction of the customers, as well. At the same time in working with the partners, it’s not just customer experience, but all the way to the back end. It’s the credit scoring model, it’s the other kind of experience, which is not the user experience/ user interface (UX/UI). We can collaborate and leverage the strength of each of the partners. If we make it well with our partners, in the front, we will be able to serve our customers well. That's all we have done for the past couple of years, and we will still have a long way to go. It's a continuous journey that we have to follow up with the change of the customer behaviour, environment, and the strategies of each of the partners that we would like to win together as well.
WC: Given the fact that you made a lot of moves in building up your ecosystem, working with partners, and looking from end-to-end covering risk management, how have you leverage AI to build the kind of volume of data that you're handling?
SC: What we have done with our partners as KBank, we have a lot of behavioural data in financials, all the payments, transactionals, the way they engage with our platform, our channels. But what we don't have, for example, are those for small and medium-sized enterprises (SMEs), if they get things with cash, and their ability to pay back or willingness to pay back. Sometimes, it does not come with the financial stuff, because if you are rich, but you spend a lot more than what you earned, you will not return the money either. What we are extending to that level is we are using the behavioural data. We are working with our portfolios, and come up with the behavioural score that we are able to approve the customers. I will say that we will use a comparative of the scoring, both financial and behavioural, and we can test a lot on that infrastructure as well, so that's about the data.
About the AI, we use a lot to help us make more of the operations efficient. With all the data or the lending or the scoring, if they are not using our own statements, we have to ask them for other bank statements. How we will be able to reduce it? All those pre-screening for our back office people to be able to work with the potential customers, all those AI and data analytics will help us a lot in operational efficiency. With facial recognition and digital ID (DID) that we linked with all the industries or with other banks, it helps in onboarding customers, as well.
WC: Rottapron, would you like to add on Bank of Ayudhya’s journey, what have you been focusing on?
Offering non-financial products to adapt to the changing behaviour of the ecosystem
Rottapron Ekabutr (RE): The pandemic is a wake-up call for all of us. It is a catalyst for innovation, and it will accelerate the adoption of digital over physical, and this will change the customer behaviour, and it will have a long-lasting effect. One of the strategies for Krungsri is on the ecosystem and partnership, which every bank is doing. We're focusing on two tracks; one, is on becoming a platform provider and also becoming a provider to the platform. What we meant by being the platform provider is that we try to leverage our platform and see how we can move beyond our limit into adjacent business or beyond banking and connecting with our partners and offering other non-financial products and lifestyle products just to learn and gather the new behaviour.
The other thing that we try to connect to an ecosystem is the Co-op, a cooperative platform. We call it a people-centric enterprise owned. They provide their members with a secure means of saving money and they can get loans that carry a reasonable lending rate. But the pain point is that they have to travel to the branch of the Co-op to withdraw the cash, lending and savings. By connecting with our platform, they can gain access to our channels, whether it's the mobile app, transfers or our ATM channels. It helps solve that pain point, by becoming a provider to the platform, like what others like to call banking-as-a-service. All banks are looking at this in a similar way because if you look at the overall market, Thailand is among the top in the world. As you mentioned earlier, whether in daily time usage on the internet, Thai people use it five hours a day. We look at e-commerce adoptions, we are one of the highest in the world. The use of mobile payments is also quite high. It's critical to position ourselves where customers are and create a corresponding digital platform for development to have a marketing position, that's our respective objective, that's where we're heading on the Krungsri side.
WC: We are talking a lot about this, if we are here maybe 15 years ago or 10 years back, we will probably be talking about bank branches. Now, with digitisation, we're particularly interested in what is transforming the branches? How are the bank branches, the retail bank branches being reimagined? Would you like to give us some view on how big Thai branches are transforming?
RE: Moving back 10 years ago, we were talking about expanding, opening more branches. The more branches you have, the more customers you get. That's right in a certain way, but during this COVID-19 pandemic, it's the opposite because we embark on our journey to build the digital bank. Krungsri has set up a separate and dedicated team, running digital bank, and the brand is Kept by Krungsri. We launched in July last year during the COVID-19, it’s a purely digital onboarding process with no physical branches at all.
Focus on customer engagement and onboarding to take advantage of developments in Thailand
We provide services that empower customers to manage their finances better through our mobile apps. The data will become the key important area for the consumers. They want to know about themselves and their financial well-being and understand where they're heading. How can we help them improve their financial well-being, that's our aim. With that being said, when we look at the customer engagement, we see high engagement on this app, this digital banking because our aim is to make saving more fun and affordable and effortless, and with automated features.
We launched what we call Auto Grab, where the system will grab from Kept savings, and transfer part of their funding to other accounts. They could set a certain fixed limit, a percentage of savings or around that, or they could set regular savings. We're trying to make it more fun for the consumer, and we're seeing traction in this part.
We’re so honoured to receive an award from The Asian Banker on this product as well, in the Excellence in Retail Finance. We recently received the digital brand campaign on this part as well. I'm certain that we're on the right path on our digital journey and hopefully, we can back this further and become the next generation of digital bank in Thailand. Why people are moving away from banks? Now, with the COVID-19 pandemic, people are trying to stay away from branches, and they want to do things now, at this time, at this moment, at this place, it's 24/7 now. It's not like 10 years ago when you have to go to the banks at a certain period, 8.30 AM to 4.30 PM. Things change, people change. Hopefully, we’re on the right track on that.
WC: Dariusz, from the technology standpoint, how is Thailand adopting it in the latest trend of technology, moving towards virtual reality (VR) or augmented reality (AR), as well as the backend support in the digital transformation?
Dariusz P. Trocyszyn (DPT): From my perspective, when I cooperate with the banks in the region, I see that they are very busy upgrading their digital platforms. The thing is that the approaches are slightly different. There are some banks that focus more on the ecosystem, working with the partners, networks of other companies, and they try to grow along with them. Other banks focus on the processes and try first to upgrade the backend functionalities and make sure that the customer journeys are frictionless and can be improved and then enhanced later on using different products and services. Both approaches are good.
The thing is that the customer behaviour is changing and the banks need to adapt towards that. What is very important is to understand that this trend of digitalisation is not something that came up yesterday and it's going to finish tomorrow. It's the journey the banks need to do in order to be competitive, grow, attract more customers and provide them with better functionalities. Another thing is that if we talk about AR and VR, it's the functionalities that are nice to have because they bring some potential value. They're very interesting to the clients. I would rather suggest focusing more on the straight-through processing (STP) throughout the whole customer lifecycle and the product lifecycle. This means that the customers should have the journeys frictionless. They can be offered the right product at the right time to meet their business needs, and then go through the whole process of opening, managing, amending the product, and then closing the product and getting the report. This is the key value. Delivering that AR or VR package is even better. I would rather focus first on this frictionless customer journey.
WC: Banks in Thailand are moving at quite a very strong speed in transformation, leveraging on the technology trends, such as AI, data, data analytics. The next topic is about cloud which we'll discuss in a more detailed. With the use of contractualisation, as you mentioned, Dariusz, about focusing on not just the front-end customer engagement, but also in the backend STP so that the customer onboarding can take advantage of developments that the Thai government is putting in place in infrastructure, national identity systems, as well as the payment systems, and 5G is also taking place now.
FBP: We heard so far from the banks, KBank and Krungsri talked a lot about ecosystem, partnership, and platform. A lot of these e-commerce partners are cloud-native service providers, whereas traditional banks grapple with the challenges of legacy operations and systems characterised by siloed data, fragmented processes and non-integrated channels that create transactional friction for customers and operational inefficiencies for employees. A survey of five banks indicates that 50% of digital workload will move to the cloud in the next five years. How realistic do you think this is? Is it too ambitious, too conservative? Where do you think the industry and your bank specifically is, at the adoption of cloud and this journey towards more agile and scalable operations? I'd like to put that question first to Supaneewan of KBank.
Fifty percent of digital workload will shift to the cloud in the next five years
SC: We would like to say that 50% of it will move to the cloud if possible, because we have already started to do some kind of cloud system. What we have done is we put our system into the private cloud to make it more secure. Since banking is more trusted, that needs to be your highest priority. We have started doing that already. We are in the process of looking for which other parts we are able to and more comfortable to move it onwards to the cloud. We have seen that the cloud system has helped a lot because of what we have seen in our own transactions. Since it’s behavioural, using all those digital channels, you have a peak one and then now it's a peak period, and then it's coming down, all those kind of stuff. The scalability in the cloud, flexibility of the cloud for that kind of scale will help us a lot in being able to serve the customers with the increasing usage of the digital channels that we have gone through.
FBP: Are you moving your workload to the cloud by 50%, 70% or 100% in the next five years?
SC: Well, talking to our own IT people, they are thinking about 50% in five years is possible. We are looking forward to that because it will help. We have changed a lot over the past two years because COVID-19 has forced us to do so. We will try to move forward at a faster pace because we already see the scale of that is coming. We need those kinds of infrastructures to support us.
FBP: In the domestic regulatory environment, are there any hurdles to go into the cloud? Now, some banks in their transformation strategy are to take a divide and conquer approach. They set up separate subsidiaries and let those subsidiaries that are of smaller size to take on this challenge. For KBank, you have KLine, Kasikorn technology company and the joint venture with LINE, LINE BK. Are you testing the cloud waters so to speak with some of these approaches?
Creating different business models, subsidiaries and digital services
SC: We are not categorising the usage of the cloud in subsidiaries and the bank. It will be about the securities of the information on the financial things. For some parts of the KBank, we use cloud because of the ecosystem it will have gone through. Some, we are not comfortable yet doing so. In KLine or the subsidiaries, it will be the same process that we have to go through, all of those processes.
FBP: Next, we would like to hear from Rottapron from Krungsri, is it ambitious or conservative to move 50% in the next five years? I would think that it is rather conservative at the pace that technology is moving now.
RE: Over the next decade, we’ll see more changes happening in the banking industry than we have ever seen in the past 100 years. I believe that the next five years can be crucial for digital transformations. Thailand is among the top in the world in the use of banking and financial services app. We have 70 million people, 76 million accounts right now that are using mobile banking. Five years is not too aggressive. It's a goal for us to meet because within five years, you see a lot of changes happening in the banking industry. Krungsri has adopted cloud transformations a few years back. It is similar to KBank. From my perspective, we're still in the initial stage. Thinking about which part to move to private cloud, sensitive data and non-sensitive data, whether it complies with the new Personal Data Protection Act (PDPA) regulations, we cannot move that sensitive information abroad. Those are the issues that we are focusing on, and it's quite a challenge. Once we move beyond that challenge, it's going to speed up fast on the cloud transformations.
FBP: Krungsri, your strategic investor and partner, MUFG, would have experience with cloud from the many kinds of geographies and businesses that it operates in. What kind of lessons can you draw from MUFG in cloud implementation?
RE: The good thing about being a part of MUFG is that you get to learn from them and see different use cases that we're exploring. We're working towards finding that development with unlimited environment, or, we could encourage innovation and experiment, and enhance continuous integration and delivery. It's not just about information only. The other is platform resilience, how we can make sure that we have the availability of the platform and perform advanced data analytics.
MUFG is helping to bring in all the knowledge and fill this gap in and try to drive this for Krungsri, as well. We're still in the initial stage and we should be able to drive this use case forward.
FBP: To Dariusz, as a neutral but very interested observer, how do you see this? You have observed this shift to the cloud in other markets in Europe that you have operated in, as well as elsewhere in Asia, that you also advise on. Tell us about this whole trend towards moving to the cloud, how do you see different markets? How will you compare Thailand to those markets? Where are they in that journey and what advice would you give?
DPT: The cloud is very complex, and like a multi-layered problem that is hard to break down in a short session. It has got so many dimensions, it's hard to count. The discussion before that I've heard between Kasikornbank and Krungsri Bank is very interesting because they are in the process of moving many modules, products, services to cloud, step by step and this is a very nice strategy. What we need to consider is the compliance. We need to take into consideration regulatory risk and many other factors.
In Europe, in banks that I talk with, fortunately enough, they have the European Commission that makes those compliance rules, in a way in advance. If you want to do some banking project, you know what is going to happen, the demand, regulations you need to do. Before you start the project, you will read that. Unfortunately, this kind of data cannot be released outside of the country. You know in which environment you're looking at.
As for business processes, from the business perspective, what happens is that very often the banks need to consider what they would like to do by themselves. What kind of services they want to provide with the partners, or what is better to acquire. Sometimes, it's faster and better to acquire some functionalities, specific products from the cloud, from our provider that is already on the market and has got tested solutions. So, just plug in and extend the services to the client. Whereas if you have needs far beyond, you can develop by yourself. But again, you need to consider the timing, experience, and resources as well. It strictly depends on the strategy and the timeline of the bank. How they like to bite through this. As for the initial question you asked about this 50%, I would guess it's a pretty accurate number. In five years’ time, they'll be halfway through the transition towards the cloud. But, this is just my subjective opinion. I might be wrong.
FBP: In five years, you see 50% going through the journey of going to the cloud, not 10 years to move all the banks to the cloud. Now, banks leverage the cloud to enable more agile and real-time data to deliver frictionless customer experience. You mentioned about regulatory risk. Recently, we observed regulatory scrutiny over the use of data. It's always been there, data privacy and so on, so forth. But now with the technology, and especially with AI, machine learning (ML) and the use of algorithms, being able to create a certain outcome, the worry is more about bias and how you use that technology. Regulators are more concerned about how data is used and how to protect consumer rights and outcomes. How do you see that in Thailand versus this whole movement towards putting data in the cloud?
DPT: I can come up with, for example, the AI that is being used in Thailand in anti-money laundering (AML) because in some countries that I work with, the regulatory is quite clear. They say that we need to counter these AML proceedings, and the bank should do whatever they can. What is in their power and reach to do. But other regulators who would say, you have to do it, plus, you need to deliver us the result of how you did it. How did you come up with this idea? How did you manage to categorise that this kind of transaction was marker of fraud, and that one was not? What happens is that, in some of the countries, we can use pure AI, in order to pick up some patterns and flag this particular transaction as potential fraud and give it to the compliance officer to scrutinise the transaction, whereas, in other countries where we need to deliver the results to prove why the AI did what it did, we can implement XAI. XAI is explainable artificial intelligence, and how it works is that it's broken down into smaller pieces, using some sort of advanced mathematics, statistics and other tools, and modelling.
We can track down what kind of decisions that AI did, and what was the outcome because of what kind of data was fed in, and the weight that was assigned to that kind of data. Using this XAI, we can prove to the national bank of a particular country that our result is this and that because it's based on that kind of Science. This is what we can do, bring to the market and prove that AI can be used for the AML and it's not a black box anymore but can be explainable. This is one of the reasons why that tool can help the banks and the clients because their transactions will not be stopped because the banks will have much less work and risk on their side.
FBP: You mentioned one use case, which is in the use or in the case of AML, for sanction and identifying sanctioned parties. I'd like to ask the same questions about the use of advanced analytic technology and customer outcome. How important or critical is this area that you're looking into, this whole example of XAI that we know. What is in the technology? What's the algorithm? How is that impacting the customer outcome, especially as we move towards the cloud, where everything is more agile, and real-time. Rottapron, if you have any thoughts on this? In the use of advanced data, how will that impact customer outcome? Are you seeing increased concerns coming from the regulators, and in having to explain the technology being used, or potential bias and how you deal with bias?
RE: Using AI and ML, definitely, that's one of the issues and challenges that we're currently facing. On that part, it's quite an early stage. In terms of regulators, they have a challenge with us in using that. But if we use it on something that it's explainable and mathematical, like what Dariusz just mentioned, that way, it might be possible. For example, informative lending, utilising data from partnerships and other things. Those kinds of things that we find correlations and derive the behavioural score and all that will be one use case that we can, and definitely, we are exploring and looking forward and working towards. Those are the data field that we're working on, as well as some of the basic data we’re looking at is cognitive banking, where how can we provide customer information, informing customers and getting them to utilise that to drive them to financial well-being of the customers. Those are the directions that we are exploring in advanced data. It may not be advanced, but that's in AI and ML that we're looking towards. But for those that are unexplainable, and then it just spits out the result, that would be the challenge that we still have with the compliance and legal as well. That would be another step that maybe in a future state, we would explore further.
WC: Just sticking on to the topic of using AI with the support of cloud, I have a curious question, which I'm sure Thailand, like in many of the Southeast Asian countries, the central banks or the regulators have already come out with ethics on the use of AI, the guidelines, as well as the use of data in how you cleanse your data and protect the data flow. Very clearly, Thailand would have similar guidelines, like what Singapore or Malaysia has, is that true? Are there any ethical guidelines? I'm talking about how? I’ve seen this in Singapore, when I was on the digital project. There are guidelines on the use of data, managing of data, as well as ethical use of AI.
SC: With the PDPA in Thailand, it made it much harder for us to use data freely to track customers and understand customers. We have all the guidelines that we have to ask for the permissions of the customers before doing that. However, the good thing is, from the social statistics yearly that they do, it seems that the Thai people have the willingness to provide their own data, if they get much better benefits. We have been doing the LINE BK services, which has the beauty of the companies using the strings of data of each of the companies. One is financial, the other is behavioural. Along the way of processing that, they are asking for lending. They have a very high willingness to provide data if they are able to receive services. We should be able to blend all these regulations of the PDPA, put it in our onboarding process, or the process that we are able to communicate to them that they will get what type of benefit if they provide all the data for analytics and for marketing. With that consent of the information, it helped us build as far as we have been using it, such as a good credit scoring model, we have a new one compared to the financials only that we use in the bank. That kind of data shows that it helps with a big data and all those MLs.
RE: Wilson, just now you mentioned about the ethics that Singapore has for AI, would you be able to share what kind of ethics they have on AI?
WC: Simply, the ethics about the use of data and AI, the AI has to be tested. AI is supposed to help humans move faster in analysis, but at the same time, AI needs to be audited to make sure that it's not biased. For example, they do not have what we call stereotyping because we are all very sensitive about discrimination, racial discrimination and stuff like that. These are ethical guidelines that when you use AI, you’ve got to watch, monitor and track the results to see whether there's any kind of bias that is against the culture or country. It happens in the US, for example, to make sure that there is no racial or gender discrimination. You do not come to the conclusion that when you do your credit scoring, you conclude, because to start off with AI, you require basic data. The traditional human-used data and the credit scoring sometimes there's a lot of bias in it. AI will start with basic data and then evolve to improve itself as it comes in. By the course of it, you’ve got to do the testing to make sure that you remove those biases. That’s briefly the guidelines.
RE: In banking, we do that as well. We tested the model, do it together with our underwriting team, and see which one has more bad credit or turns out better. That's another way that we are monitoring. It's not in the rules or regulations, or in the ethics that we implement.
WC: Hong Kong has it, also Singapore and eventually Thailand will. Dariusz has mentioned the use of AI in AML. In AML, you use AI to reduce false positives. A lot of this data again, the biasness has got to be managed very carefully.
FBP: In many of these jurisdictions that are rolling out digital banking licences, where a lot of players are digital and use advanced data technology, those kinds of guidelines and provisions.
WC: All the digital banks in Hong Kong and Singapore don't have legacy system. They use cloud and they will move very fast, low costs, data agility, speed to market because any changes can take place with the assistance of cloud. These are the challenges that so-called incumbent banks will have to address.
DPT: There is one more factor that comes into play. I'm partially involved in AI research with my colleagues from Comarch from different countries. What is interesting, maybe to you, is the fact that different jurisdictions have different approaches to AI in data anonymisation. For example, for Thailand, because Thai people are more open more friendly and as Supaneewan has said, they are more willing to share the data in order to get some better results, predictions, offer. They are more willing to share the data, which means that the model that is going to be built by the AI team may be more accurate because there will be less data that will be anonymised. In other countries, in other jurisdictions, you have to cut out more data in order to provide it for the team to build a model. The more data you cross out or replace, the less accurate prediction will be. Thailand can potentially build better models because the data will be more accurate that will be fed into the algorithm.
WC: The very important topic in relation to Thailand is SME. SME in Thailand is a very critical contributor to the Thai economy. How do SMEs overcome some of their financing and business challenges? What are the gaps that banks can help to close as well as enable them to manage a more sustainable business? In Thailand, officially, there are 3.1 million SMEs employing some 12.7 million people. Unofficially, SMEs that are not included in the formal banking system could number as high as five million, according to our research.
According to the International Finance Corp. (IFC), in Thailand, SMEs have an estimated financing gap of $40.7 billion or about $3.5 trillion in loans. The pandemic has hit the segment quite hard, like any of the other countries across the region and the world. The government has rolled out all kinds of initiatives to help out the SMEs in financial relief and support. The Thai government has rolled out something like THB 250 billion ($7.5 billion), talk about the challenges and opportunities. How are we going to close the gap and at the same time, what are the initiatives leveraging technology and digital systems to provide not just banking but beyond banking services to SMEs? What do small businesses want from the financial service providers or banks, in helping them grow within borders and across borders?
We have to talk about cross-borders, given e-commerce and that's the extension given that Thai relies a lot on tourism, and that industry has been affected badly by the pandemic. Therefore, cross-border sales are very critical to support the shortfall in the tourism industry. SMEs want to know how easy it is to manage their finances and business operation with the help of banks. How they can get accurate real-time data to meet their financial cash management forecast. Cash is a very important element. We would like to know what kind of initiatives you have worked on during this pandemic with your SMEs, in helping them grow and sustain through these challenges? What are the risk and rewards you're managing in the course of doing so? With that, we would like to start with Bank of Ayudhya’s Rottapron, maybe you can make some comments on the SME front.
RE: One of the initiatives that we're working on is the Digital Factoring Ecosystem, which is part of the Bank of Thailand (BOT) initiative, where they're doing a factoring process to reduce the fraudulent and double financing on the invoices, and lower the barrier of factoring service for micro SME. One of the key issues for SME is to access cash, so that's one area that we're focusing on. The other areas, how we can onboard them on the digital platform, so we can naturally help them in sales. We offer other services like margin platform, QR merchants and we have a marketplace. Those are the things that we can do to help and support the SMEs to drive sales and to pass through these challenges of the COVID-19 pandemic. That’s the initiative that we have put forward.
Effective strategy to help SMEs expand their market as they are the core of Thailand’s economy
SC: In SME, they need two things. One, they need money, especially for the past two years that they are not able to sell products much as before. Two, they want us to help them expand their opportunity to sell, so find a market for them to meet with customers. In their need to borrow money, we have a couple of initiatives that we have done. One, is for our own customers who got loans from KBank. We have gone through all those deferring payments back. Those kinds of things that we work with the regulators to help our own customers. For those new customers, we have worked with partners as well. For example, we work with Lazada and Shopee, using their own data to help us identify the right customer who's in need. We have a lot of applications, but we want to find the good ones. The ones who are in need now, and they have willingness to pay back, and not just need the money and go off.
We work with our partners, Lazada, Shopee and Facebook, and with our channels as well. We are doing onboarding, for example, commercial loans on KPlus, because in Thailand, we have huge SMEs and a very long-tail or small SMEs. We are using our own platform to make them able to get into the financial system. We have commercial loan on KPlus, we started to have it this year. The customers who sell products, if we can identify and there’s approving internal data that they are sellers, we will try to offer them that because of the interest rate and those kinds of things. It will be much better than personal loans. It will be the combinations that will be a capped sized. In finding the market, what we have is, one, we have our own that we are not calling e-commerce but we have a platform that small merchants will be able to onboard and sell some of their products. We tried to make our SME customers meet with our retail customers on the platform, because we have huge digital retail customers. One that helped them expand their own market, like I said we worked with Lazada and Shopee. Now we are looking for a bigger market, not in Thailand, for example, Amazon. We will have some other solutions and settlements. All those things are coming up very soon. We will like to help SMEs because they are the core of the Thai economy, as well.
WC: Any specific comments from Dariusz in the support that we need in backend systems and processes to make the onboarding as well as the ongoing and proactive support to SMEs that banks can do?
DPT: Yes, definitely. The SMEs’ needs are derived from the position where they are at the moment. In order to get something, you need to know where you are in order to think where you're going. But the problem is that many SMEs in Thailand are either unserved or underserved. Some of them might not have all the physical, digital cash in their banks. It's quite difficult for them to manage all the finances. There could be some invoices flowing in and out. Some of them can be in paper versions. Some information may be stored in different banks as well. Without this concept of the open banking and Account Information Service (AIS), payment information service, they might not have all the data in one place, which makes it a little bit more complex for them to make decisions.
Once, we have this open banking where the bankers can show to SMEs that all financials that they have in their own bank but also in the other banks, then they can make very good decisions. Those decisions can be impacted by AI and some other tools that make them do more decisions and better decisions. What is worth mentioning is that the bank obviously needs to know their customers very well. The job of the bank is to have all the data that they can have and to have this data structured, working and analysed. Having all those steps, the bank can make an offer. If we will be discussing the unique experiences of the SME, the client, that needs to be backed up by the bank that provides the timely offer.
The offer, as my colleague said, for example, factoring, supply chain financing or loans that will be exactly timed and profiled because what the bank would like to avoid is to fill in and feed to the client an offer that the client is not interested in. This is where the concept of open banking with AI joins together and helps the bank utilise it to its full potential.
FBP: In this dialogue, we've heard from two of the leading consumer financial institutions in Thailand, KBank and Krungsri, about how the digitalisation of the consumer business is bringing unique customer experience to their consumers and customers through partnerships, building of ecosystem with leading social media, e-commerce and ride-hailing platforms. It's all about putting customers in the centre and embedding their service where their customers are.
What is exciting to hear is that they are creating different business models, subsidiaries like KLine, LINE BK, or in Krungsri’s case, creating digital services like tech, which is quite different from their traditional offerings. It is that shift towards a greater platform or ecosystem that is making them relevant in an increasingly connected environment and increasingly disruptive one. What is also very exciting is that they are enabling that part of the business to take on technology like AI and ML, and move towards the cloud, not wholesale, but in some parts of that business where it's critical to connect with their ecosystem partners.
They need to be in the cloud and they have done that. We look forward to the industry as it moves towards the cloud, maybe in the next five to 10 years as their journey continues to unfold.
The SME market is very important. We hear from both banks that it is an important area that they continue to create new solutions. The central bank is creating new initiatives like the factoring ones, delivering a better experience and at the same time minimise or mitigate the risk of fraud. All very exciting. We hear from Dariusz that the use of AI can enable it.
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