New developments in cross-border payments in Thailand: opportunities and challenges ahead

Introduction: Thailand Digital Payments Market Overview

With the booming digital economy in Southeast Asia in recent years, Thailand, as an important regional economy, has seen unprecedented vigour in its cross-border payments sector. According to the latest data from the Bank of Thailand (BoT), Thailand's e-payment turnover will grow by 35% year-on-year in 2023, with cross-border payments growing at a rate of up to 42%, significantly higher than the level of domestic payment growth. Behind this trend is the result of a combination of factors: government policy push, changing consumer habits, innovation by fintech companies, and accelerated regional economic integration.

This article analyses six key developments in cross-border payments in Thailand, providing comprehensive industry insights for companies and investors interested in expanding into the Thai market. From changes in regulatory frameworks to technological innovations and applications, and from the competitive landscape to changing user behaviour, we will analyse the business opportunities and challenges of this rapidly evolving market.

I. Major adjustments in regulatory policy: openness and regulation at the same time

Central Bank Digital Currency (CBDC) Pilot Advances as the Most Noteworthy Regulatory Breakthrough in 2023. At the beginning of the year, the Bank of Thailand announced the launch of the retail CBDC test programme "Inthanon-Lite", which aims to explore the potential of digital currencies in cross-border settlement. This initiative not only improves the efficiency of clearing (the test showed that the transaction confirmation time was reduced to 2 seconds), but also marks the official recognition of the new payment infrastructure.

At the same time, the full implementation of the Personal Data Protection Act (PDPA) has imposed strict requirements on cross-border data flows. The concept of "data sovereignty" has never been higher, as financial service providers are required to ensure that customer information is stored locally while being transferred across borders. This has prompted international players, including Alipay and WeChat Pay, to accelerate the deployment of localised systems.

Notably, the release of the Exposure Draft of the Virtual Bank Licence Framework signals that 2024 may usher in the birth of a new type of digital bank." We expect the first 3-5 licences to be issued mainly to multinational fintech groups with proven risk control experience," analysed Dr Suchart, Director of the Centre for Fintech Research at Bangkok University, "which will have a catfish effect on the cross-border business of traditional banks."

II. Technology integration gives rise to new types of solutions

Substantial progress has been made in the application of blockchain technology in the field of trade finance." The second phase of Project Inthanon-LionRock successfully connected Hong Kong's Real Time Gross Settlement System (RTGS) with Thailand, reducing the cost of direct baht-to-hong kong dollar conversions by 40%, an innovation that enables SMEs to save an average of US$15 on a single cross-border transfer," said Standard Chartered's CEO for Southeast Asia.

biometric authenticationThe efficiency of identity verification has increased dramatically as a result of the soaring penetration rate, with Krungthai Bank's "Face Pay International" service reducing customs clearance time by 70% by enabling foreign tourists to complete their duty-free shop purchases through facial recognition, and VISA Asia Pacific's research revealing that 67% of tourists travelling to Thailand preferred to use biometric authentication over physical card transactions. VISA Asia Pacific research shows that 67% of visitors to Thailand prefer biometric authentication to physical card transactions.

AI-driven dynamic exchange rate engines are reshaping the foreign exchange market landscape." While traditional banks' FX bid/offer spreads average 1.81 TP3T, the intelligent pricing systems of mega-apps such as GrabFin can compress the spreads to less than 0.61 TP3T," reveals a FX broker who wished to remain anonymous, "The frequency with which the algorithms adjust their quotes every five minutes renders the static pricing model completely ineffective."

III. Diversified competition among market players

Local digital wallet TrueMoney started to export its technology solutions to neighboring countries after its users exceeded the 30 million mark; Ant Group deepened its scene penetration through its shareholding in local e-wallet Ascend Money - Line Pay Thailand has accessed 7-11 convenience stores with a total of 85%. Nium launched B2B instant cross-border foreign currency clearing service "Nium Direct" after obtaining the remittance licence issued by the Securities and Futures Commission of Thailand, and the number of corporate customers' account opening has increased by 2,10% quarter-on-quarter.

Particularly noteworthy are the differentiated breakout strategies of small and medium-sized banks: "SCB Abacus captured the cross-border e-commerce sellers' market by embedding a freight auto-settlement function in cooperation with logistics company Flash Express; Kasikornbank focused on the Japanese clientele by launching the 'K+ Remit' specialised Kasikornbank has launched 'K+ Remit' special service focusing on Japanese customers to realise 10-minute Tokyo-Bangkok remittance." A senior banking analyst pointed out the key value of such refined operations.

The catfish effect of emerging players has forced traditional institutions to accelerate the pace of transformation - Siam Commercial Bank spent US$120 million to upgrade its core system to support multi-currency real-time clearing; and Pangkor Bank reduced its QR code acquiring fee to 0.25% to cope with the e-wallet price war.

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Fourth, the outbreak of cross-border e-commerce to promote the upgrading of the payment infrastructure

Thailand's cross-border e-commerce transaction scale exceeded $12 billion in 2023, up 55% year-on-year, directly driving a surge in cross-border payment demand. 70% of cross-border orders on the platform are settled using localised payment methods, with Buy Now Pay Later (BNPL) instalments accounting for 25% of the total, according to Lazada Thailand data. This change has prompted payment service providers to accelerate innovation:

• "One-Stop Acquiring SolutionOmise, 2C2P and other local aggregated payment platforms have launched a "unified API" to support merchants to simultaneously access regional mainstream e-wallets such as PromptPay in Thailand, MoMo in Vietnam and DANA in Indonesia, and shorten the settlement cycle from T+3 to T+1.
• Dynamic Currency Conversion (DCC) OptimisationTo avoid the high exchange losses associated with traditional DCC, Stripe Thailand introduces real-time FX hedging technology to help merchants automatically choose the optimal settlement path, with tests showing savings of 1.5%-3% in exchange rate costs.
• Customs-Payment Data Direct LinkThailand's Customs Department and Airwallex have been working together to pilot the "Smart Payment for Customs Clearance", which generates a customs declaration number at the same time as the consumer completes the payment, compressing cross-border parcel clearance time from an average of 72 hours to 8 hours.

V. Tourism consumption scenarios become a key growth point

The rapid recovery of international arrivals to Thailand in the post-epidemic era (28 million by 2023) has spawned three innovative trends:

1. "Super App + Digital Wallet" convergence model

Grab and Kasikornbank jointly launched "GrabPay-K PLUS", which allows foreign tourists to top up their baht balance directly from their own bank accounts and enjoy instant tax refunds. During the trial period, ARPU (average revenue per user) for Singaporean users increased by 40%.

2. CBDC's first on-the-ground applications in the tourism industry

The Bank of Thailand has piloted a retail digital currency, the Digital Baht, in Phuket, which can be exchanged by tourists through a designated app and spent at 2,000 merchants. The key breakthrough is the support for automatic conversion of unused balances back to the original currency upon departure - a solution to the pain point of traditional prepaid cards where funds are deposited.

3. New BOT regulations spur contactless payment penetration

Under the Regulation on the Facilitation of Electronic Payment for Foreign Travellers, all foreigners on short-term visas will be able to open a full-featured e-wallet (with a limit of 50,000 baht) under a single identity verification from 2024 onwards.Visa research shows that this policy has led to a jump in the proportion of non-cash transactions by foreign tourists from 351 TP3T to 611 TP3T.

VI. Risks and Compliance Challenges Highlight Industry Pain Points

Despite the rapid growth of the market, emerging issues cannot be ignored.

Anti-fraud technology investment has become an industry watershed - TrueMoney deployed an AI wind control system "T-Shield" to achieve an abnormal transaction interception accuracy rate of 98%; while small remittance companies lacking technological reserves are facing difficulties in licence renewal.

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🔍 Extended Thinking: The proportion of local currency settlement of China-Thai trade has risen to 28% after RCEP has come into full effect, and the construction of a direct RMB-Thai baht clearing channel in the future may become the next breaking point. (End)