Thailand's Digital Finance Journey: Lessons for ASEAN

Dr. Sethaput Suthiwartnarueput, Governor of the Bank of Thailand, shared valuable insights into the country's evolving financial landscape, emphasising the critical balance between financial inclusion, infrastructure development, and economic efficiency. With a strong focus on shifting policies from GDP-centric to household well-being, he highlighted the challenges and innovations in payment systems, such as Thailand's PromptPay, and the ongoing debate around public versus private roles in payment infrastructure.

Additionally, he delved into the complexities of cross-border payments, the future of CBDCs, and the essential need for robust cybersecurity measures, advocating for greater regional and global cooperation.

Governor’s Perspective on Financial Inclusion and Infrastructure

1. Financial Inclusion & Market Infrastructure

• Focus on Household Well-Being: Moving away from GDP-centric policies, the emphasis is on improving financial well-being and inclusion.
• Balancing Priorities: Regulatory frameworks should harmonise efficiency, inclusion, and stability, using open and accessible financial infrastructure to mitigate trade-offs.

2. Payment System Innovations

• PromptPay Initiative: Addressed high costs and inefficiencies in Thailand’s payment systems, reducing fees to increase adoption and efficiency.
• Economic Sustainability: The dialogue around the costs of public payment infrastructure highlights the challenge of balancing private investment with public utility benefits.

3. Public vs. Private Roles in Payments

• Role of the State: Discussion on whether payment systems should be treated as public goods, considering their non-rival but excludable nature.
• Natural Monopolies: Recognising the challenges of network externalities and the potential risks of closed systems, advocating for open, interoperable infrastructure.

4. Cross-Border Payment Systems

• Project Nexus: Emphasises multilateral frameworks over bilateral linkages for more efficient cross-border payments, acknowledging the complexity of governance and regulatory alignment.
• Supplementary Solutions: Development of innovations like tourist wallets to facilitate cross-border payments seamlessly.

5. CBDCs and Digital Currency

• Retail vs. Wholesale CBDCs: Retail CBDCs face hurdles like privacy concerns and unclear use cases, while wholesale CBDCs show promise, especially for cross-border transfers.
• Enbridge Project: Demonstrates the potential of wholesale CBDCs to reduce settlement times significantly and improve transparency.

6. Cybersecurity & Digital Risks

• Addressing Concentration & Cyber Risks: Critical to manage security concerns that come with digital finance advancements, including fraud and systemic vulnerabilities.
• ASEAN-Wide Initiatives: Advocates for broader regional cooperation on cybersecurity to combat emerging threats as digital finance becomes more interconnected.

Conclusion:

• Regulatory Guardrails: Regulators must be cautious not to stifle innovation by over-regulating prematurely but must clearly define unacceptable outcomes.
• Open Data & Infrastructure: A call for ASEAN-wide collaboration to connect digital infrastructure, with a pragmatic approach to long-term goals.

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