THAI banks are betting on reaping the savings from the increased popularity of mobile banking, even as many of the major lenders begin waiving fees for transfers and bill payments on mobile and other Internet banking services, said Predee Daochai, chairman of the Thai Bankers’ Association.
However, Predee conceded that the industry faced many challenges due to the intensified competition among banks and non-bank financial operators. His comment came as the major banks start offering clients fee waivers on transactions such as transfers and bill payments when these are made with phone applications or on the computer. These banks include Siam Commercial bank, Kasikornbank, Bangkok Bank, Kiatnakin and Krung Thai Bank.
“Fee waivers will have some effect on banks’ profit, but we expected mobile and Internet banking will lower the overall cost,” said Predee, who is also president of Kasikornbank.
Kasikorn Research Centre projects that fee waivers will cost the banking system Bt9 billion in foregone revenue this year – figure dwarfed by the overall fee income of Bt190 billion in 2017.
The move will have little impact on the banks’ profits as they can generate more fee income from other services, according to the research house. Fee income collected on money transfers for the whole system is about Bt15 billion to Bt20 billion.
Consumers’ take-up of mobile and other Internet banking services will lower costs for the whole financial system as they do more transaction on their mobile devices and computers. This means less use of cash and less contact with bank branches.
Predee said that, within Internet-based services, mobile banking is expected to dominate the market as bank customers find it much more convenient, along with the cost savings, to make their transactions by phone. According to data from the Bank of Thailand, the number of transactions via mobile platforms jumped to almost one billion last year. With this growth, that level exceeded the number of transactions made by other forms of Internet banking, as well as by credit card and cheque.
Profit growth in the banking sector shrank 7.2 per cent to Bt174 billion, with fee revenue accounting for 20 per cent of this amount. Kasikorn Research Centre projects that fee revenue for the industry will grow by 2-3 per cent this year.
Among the issues for the industry, Predee said, is that the national e-payment system has cut into fee revenue, and this has resulted in the banks competing on the fee waivers.
The rapid changes in technology have also affected consumer behaviour. This has spurred intense competition among banks and the advances in technology have enable non-bank operators to compete in a reshaped financial services industry.
However, Predee said he was confident Thai banks would be able to compete and survive.
He recounted that with the 1997 financial crisis, many local financial institutions collapsed and foreign banks moved into the country. But, so far. large foreign banks have had limited success in doing business in Thailand. Moreover, the non-bank operators that have begun deploying financial technology to compete with the traditional banks could do better in only some areas, he said.
Lastly, a key challenge came in the form of new accounting standards imposed on the banks by regulators. This will cause bank to have higher financial reserves, and risk weighting on some assets will rise. Such an outcome would increase the cost of lending for some business, Predee said.
He said that bank lending for businesses is expected to grow 4.8 per cent this year, up from 4.6 per cent last year. Government investment in infrastructure projects will lead to more investment by the private sector, Predee said.
Retail lending is expected to ease to 5.5 per cent growth this year, compared with 6 per cent last year. High household debt would limit retail lending growth, Predee said. Household debt is estimated to be about 77-78 per cent of gross domestic product this year.