Thailand is due to roll out a national digital payment system that levies much smaller transaction fees than the nation’s banks. However, lenders expect the network to help, rather than hinder them financially.
Commercial banks could save about 77 billion baht (US$2.18 billion) in the next 10 years as the so-called PromptPay service curbs the use of cash, Thai Bankers’ Association chairman Predee Daochai said, adding that would exceed the revenue loss from money transfers and payments by 20 billion baht.
“The revenue loss impact will not be significant,” Predee, also a president of Kasikornbank PCL, said on Tuesday in written responses to questions.
More than 30 million registrations for PromptPay are expected by the end of this year, he added.
Thailand plans to unfurl the network this quarter after a delay to fix glitches. Modernizing the national payment system is seen as one way of helping to lift the economy out of a period of subdued growth.
Asian neighbors, including India and Singapore, are also promoting cashless transactions to boost efficiency and curb illicit financial flows.
PromptPay transfers of less than 5,000 baht are free, with the levy for the biggest transactions capped at 10 baht. In contrast, interbank 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,” UOB Kay Hian Securities (Thailand) PCL Bangkok-based analyst Thananchai Jittanoon said. “It may cut banks’ fee income by about 5 percent, 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 might offset each other, although 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.
Thailand’s SET Banking index has declined about 21 percent in the past two years, compared with a 0.3 percent drop in the benchmark SET Index. The banking index yesterday climbed 1.6 percent to the highest level since August last year, while the overall stock market rose 0.4 percent.
PromptPay has some similarities to India’s Unified Payments Interface, as both are government backed. However, the Indian cashless payment platform has struggled to gain traction, with just 2 million registered users as of early last month.
There have been about 20 million registrations for PromptPay, in a country with a population of 68 million, the association said.
PromptPay was meant to have been implemented at the end of October last year, but the start date was pushed back to allow for more testing.
The value of transactions via mobile and Internet banking in Thailand rose by more than one-quarter to 3.2 trillion baht in the six months through September last year, the latest data from the Bank of Thailand showed.
Fees for money transfers and payments account for about 2.5 percent of Thai banking industry revenue, half of which would be affected by PromptPay, Predee said.
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