Experts examine AI's impact on Thailand’s financial services sector

Embrace AI or be left behind, an expert said at the Asian Banking & Finance and Insurance Asia Summit today.

Financial experts warned that fully banking on artificial intelligence (AI) won’t guarantee a positive return on investment but pinned that clean data, industry collaboration, and proper risk management are key to navigating volatility.

During the Asian Banking & Finance and Insurance Asia Summit today, spokespersons from the industry discussed Thailand's challenging financial landscape. The event, which received over 220 attendees, was held at the Renaissance Bangkok Ratchaprasong Hotel.

Warotai Kosolpisitkul, International Economic advisor, Fiscal Policy Office, Ministry of Finance, underscored the nation’s commitment to digital finance expansion.

Highlighting the success of PromptPay and QR-code-based transactions, he noted that "Thailand takes pride in adopting and expanding the use of national electronic payment systems," particularly as these systems played a pivotal role in economic resilience during the COVID-19 pandemic. The Thai government is also preparing for the introduction of virtual banking licenses.

"Once operational, virtual banks will be able to reach unserved and underserved populations, providing banking services at lower costs and improving financial inclusion," Baratan explained. 

Meanwhile, Christopher Saunders, partner - head of Advisory, head of Financial Services, KPMG Thailand, provided an analysis of AI’s impact on financial services. 

"Expectations are high—embrace AI or be left behind," he said.

Citing global data, Saunders noted that AI-driven efficiencies could translate to "productivity gains equivalent to 19% to 23% of salary costs, and EBITDA improvements ranging from 4% to 18%."

However, he said that the perception AI will provide a return on investment the majority of the time is not always the case. In Thailand’s banking sector alone, he estimated annual savings of $1.4b from AI adoption, particularly in operational streamlining and customer service automation. Despite these projections, the industry faces rising costs in serving customers.

"Customer experience scores have been declining as banks struggle to keep pace with heightened expectations for hyper-personalised services," Saunders said. 

Naris Sathapholdeja, Chief Data & Analytics Group, TMBThanachart Bank PCL, shared its approach to combating digital fraud, a growing concern in Thailand’s banking ecosystem. In 2023 alone, over $2.1b (THB70b) was lost to digital fraud and scam-related financial crimes, they shared.

Fraudsters are increasingly sophisticated, leveraging data at an unprecedented scale. "Criminal networks are highly data-driven—sometimes more so than banks themselves," the speaker noted.

AI and machine learning models are being deployed to combat these threats. "Preventive measures, when implemented correctly, can reduce fraudulent activities by up to 30 times," the TTB representative emphasised. 

In the first panel discussion, moderated by Shin Thant Aung, director at YCP, the experts explored the evolving role of financial executives.

Andrew Samaratunge, Chief Financial Officer, Generali Thailand, said "Insurance often lags behind banking in digital adoption, but the urgency is growing as customers demand more seamless experiences,”

Other experts such as Pitiporn Bee Phanaphat, head of Digital Business (FEVP) of Siam Commercial Bank, Arapat Sangkharat, CEO of Maybank Securities Thailand, and Phisit Orasapiwat, country head of Product Management – Global Payments Solutions at HSBC, stressed that transformational leadership must be hands-on.

Effective leadership, they discussed, combines technological literacy with a deep understanding of customer and employee needs.

Additionally, Thanat (Beng) Chamnanratanakul, associate partner at Bain & Company, highlighted the challenges financial institutions face in these segments and the opportunities presented by technology.

Thailand’s mass affluent and mass retail segments account for over 40% of total assets under management (AUM), with around 27% of these assets concentrated in mutual funds.

"Thailand is heavily skewed towards retail investments," Beng noted. However, despite the significant AUM, penetration rates remain lower than in more developed markets like Hong Kong and Singapore, signaling room for growth.

Rauhan Bhalla, senior account executive of Southeast Asia at CleverTap, highlights the challenge of a changing total addressable market (TAM). 

"It's changing because newer influential channels like social media channels like Facebook, channels like Instagram are now making all the decision-making buttons and dynamic every day. It's streaming. The way it changes for me might not be the same that it changes for you.

Hence the importance of generative AI. Hence the importance of having clean data,” Bhalla added.

On the macroeconomic front, Burin Adulwattana, Chief Economist at Kasikorn Bank, remains uncertain.  

Reflecting on the global economic climate, Adulwattana noted, "I just want to remind you that it's only been less than a month that Trump took office. But there's just so much upheaval in the economic [landscape]. We just seem to be up at night, you know, trying to figure out what is the next move,”

Focusing on the Thai economy, Adulwattana reveals that Kasikorn Bank projected a GDP growth of only 2.4%, a relatively bearish outlook.  

He also cautions against inaction on critical issues like carbon emissions, warning that a lack of response could have significant consequences. 

"Let's say every country in the world is adopting some sort of carbon ban or carbon tax, 30% of Thai GDP will be at risk," he warns, advocating for a measured approach.

In a second panel discussion about embedded finance, industry experts weighed in on the growing role of embedded finance, the challenges associated with regulation and data privacy, and the potential for deeper consumer engagement. 

The panel, moderated by David Uhlenbrock, partner at Kearney, discussed with panelists Sirinpach Lauhapattanapreecha, Chief Governance Officer at ERGO, and Ben Assanasen, managing director (Non-Motor Business), Thai Setakij Insurance PLC, pinned that embedded finance has seen rapid activity particularly in e-commerce and travel. 

Despite its benefits, embedded finance faces hurdles in regulation and consumer trust. The panelists emphasised the need for clear communication with customers and compliance with data protection laws.

Silvio Struebi, partner at Simon-Kucher, tallied top three pricing and discount challenges across financial institutions.

Mainly, leader products generate revenue, whilst remaining products are typically heavily discounted despite high cost to serve. 

Secondly, unavailable real-time data about pricing and discounts prevents sales force from making informed decisions, resulting in inconsistency in pricing across products and revenue leakage. 

Lastly, Pricing adjustments are typically ad-hoc – driven by immediate pressures rather than proactive, long-term, relationship-based strategies.

Thailand's healthcare system faces sustainability challenges, particularly in balancing government funding, private insurance, and out-of-pocket expenses, coined Thomas Wilson, country manager, President & Chief Executive Officer, Allianz Ayudhya Assurance Pcl. Whilst not a crisis, these issues require attention to prevent long-term financial strain.  

“In general, I think Thailand is on par with regards to health infrastructure, if not competitive,” Wilson said.

Additionally, 70% of healthcare costs are covered by the government, 18% by private insurance, and the remainder paid out-of-pocket. Private health insurance is growing at a faster rate, driven by increased income levels and the impact of COVID-19.  Despite this growth, health insurance remains a complex product that is more often sold than actively purchased, Wilson explained.

In the third panel, moderated by Struebi, speakers emphasised the need for seamless access to high-demand financial products, with digital wealth management playing a crucial role in improving efficiency.

Panelists Thiyachai Chong, head of Wealth & Preferred at CIMB Thai, Vikas Jain, Country head of Funding Societies, Gidon Jerome Kessel, head of Deposit and Wealth Management at UOB Thailand, and Pitcha Siriyaphan, head of Payments Thailand of J.P. Morgan, advised banks to continue to refine digital strategies by balancing automation with human expertise.

Adisorn Hatairatana, head of Consumer Credit Risk Management & Technology, Krungsri (Bank of Ayudhya), emphasised the importance of advancing credit risk models in the virtual banking era: credit risk model community. 

“In these areas, we're going to need different ways to solve these problems that meet the business needs,” Hatairatana said. In line with this, he mentioned four critical gaps in terms of credit risk models: local analytics solutions; industry-academic collaboration; open professional discussion forum; and model risk management culture.

The final panel, moderated by Kevin Kwek, partner and head of Financial Institutions Group SEA, focused on Thailand’s preparation for the launch of virtual banking. Industry leaders coined challenges such as the need for strategic planning amidst global trends and the evolving local financial landscape.

Dalad Tantiprasongchai, Chief Operating Officer & International Business Officer at SCB X, and Chalee Asavathiratham, President of Lightnet Group, addressed the profitability challenges faced by digital banks. 

Chalee cited that 79% of digital banks in Asia remain unprofitable, with only 43 achieving profitability. He stressed the importance of avoiding common pitfalls that have led to failures in other markets.

Ittiphan Jearkjirm, Executive Vice President for Digital Business at Gulf Edge Company Limited and head of Virtual Bank Business at AIS PCL, noted that most consumers already use multiple banking apps, making differentiation crucial for new virtual banks. He advised insittutions the importance of forming strong consortiums with shared strategic goals, rather than expanding purely for publicity.