24 May 2015
Banks have been urged to plan ahead and invest more for the future to meet
trends and challenges in both Thailand and the region.
In his speech at the Association of International Banks Dinner Talk on 21
May 2015 in Bangkok, Governor of the Bank of Thailand Dr. Prasarn Trairatvorakul
highlighted the trends and challenges from technological developments, the
ageing society, urbanization, and regionalization.
Firstly, Dr. Prasarn stated that, with technological developments,
traditional barriers to entry were brought down, allowing non-banks, such as
financial technology ("fintech”) companies and cross-border players, into the
market, which helped reduce operating costs. At the same time, consumers expect
better and more timely services. Banking has become something that customers
want to do "anytime and anywhere,” and they want to do it cheaply as well. While
technology may help people reach their destination faster, it also dictates that
they be more adaptive and responsive to changes. Banks that get stuck in the
past will lose out quickly.
A second challenge that put banks’ adaptability to the test is the shifting
demographic structure of Thailand’s population. It is expected that by 2025, the
number of older persons in Thailand will account for 20 percent of the
population and exceed the number of children under 15 years old.
In an ageing society, Dr. Prasarn said, banks that are able to cater to the
needs of an older population and tailor their products to accommodate changing
demands would be successful.
The next trend, urbanization, happening in many East Asian countries,
brings both challenges and opportunities. According to the World Bank Research
that had come out early this year, almost twelve million people in Thailand now
live in urban areas; about ten million live in Bangkok alone. The number seems
low for the area outside Bangkok because of the strict definition of urban areas
employed by the World Bank.
The same research also says that cities outside Bangkok are growing at a
much faster rate, and some cities, such as Surat Thani, have more than doubled
their population in ten years. Urbanization results in increased purchasing
power and fuels domestic demand. More infrastructure investments, such as
housing, electricity, and transportation, will be required. This is where the
financial sector can contribute and benefit from the development.
The trend toward regionalization poses a fourth challenge as well as an
opportunity for the banking sector. With the commencement of the ASEAN Economic
Community in late 2015, competition will intensify, benefiting those prepared to
pursue opportunities across borders. ASEAN as a group has already agreed on its
Financial Integration Post-2015 Vision for 2025, and now is in the process of
operationalizing it with the milestones and targets to be set in all areas,
including banking, capital markets, and insurance.
The Governor of the Bank of Thailand stressed that banks could no longer
afford to focus on maximizing short-term returns at the expense of future growth
and competitiveness. They should not get struck with maximizing short-term
returns or past successes, but must invest more for the future.
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