How Thailand’s big banks shape – and stifle – fintech innovation

As unicorns worldwide struggle with funding challenges and waning investor interest, Thailand’s fintech sector has managed to sidestep the drought. But that’s because the startups and investors don’t exist: the country has no fintech unicorns and few foreign VC firms operating within its borders.

“In Thailand, the reason we don’t have fintech unicorns is because if you would like to do a startup, you need venture capital, and we have so few VCs and private equity funds here,” Chonladet Khemarattana, CEO of the Thai Fintech Association, tells The Business Times. “All the VCs are actually CVCs (corporate venture capitalists).”

Bangkok Bank is one of the largest commercial banks in Thailand./ Photo credit: Shutterstock

Chonladet is a prime example of how the local fintech scene works – or doesn’t. In 2017, he launched a startup called Robowealth, which pioneered robo-advisory services in the country. But he ended up selling a majority stake in the firm to Beacon Ventures, the VC arm of Kasikorn – one of Thailand’s leading banks.

“In this country, the pattern is to innovate and collaborate,” Chonladet says.

While selling out to a local bank can offer fintech startups access to valuable data and capital, it may also stifle their potential to evolve into unicorns. As Chonladet points out, many fintech firms in Thailand are designed to support banks with targeted projects rather than to scale into independent, high-growth ventures.

Things might be different if there were a greater presence of foreign VC firms and private equity funds to tap into.

“Venture capital is part of the finance for SMEs to grow a startup, and Thailand does not have enough venture capital moving into the country,” says Cristian Quijada Torres, senior private sector development specialist at the World Bank.

Part of the challenge is the lack of a competitive environment in the Thai economy, where innovation is dominated by corporate bigwigs.

The country’s six largest banks – Bangkok Bank, Kasikorn, Krungthai, Siam Commercial Bank (SCB), Krungsri, and TMBThanachart – dominate the commercial banking sector, controlling 82% of the segment’s loans and deposits.

In recent years, these sector stalwarts have invested heavily in digitalizing their operations while waiving fees on online transactions such as money transfers and bill payments.

While arguably good for customers, analysts say that these efforts have clipped the wings of new fintech startups in terms of the value add they can offer.

Virtual banking

Thailand expects three new virtual bank licenses to come sometime in the middle of the year. But analysts do not see these players disrupting the incumbents’ digital banking stranglehold.

For one, three of the five contenders for the licenses are consortiums led by big Thai banks – Bangkok Bank, Krungthai, and SCB. The other two have family connections to the Charoen Pokphand conglomerate, which owns Ascend Money, Thailand’s largest fintech firm.

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