Most Thai banks fall short of digitalisation goals, PwC Thailand says

Despite substantial investment and effort, many Thai banks continue to fall short of successfully digitising their organisations, with cloud adoption lagging behind other leading banks in Southeast Asia, PwC Thailand said. 

Thai banks must overcome four significant obstacles to create new customer bases, enhance technological capabilities and upskill its people as well as collaborate with ecosystem partners that complement one another to drive digital transformation, it said.

Vilaiporn Taweelappontong, Consulting Leader, PwC Thailand and Financial Services Strategy and Operations Leader, PwC South East Asia Consulting said that although the Thai banking sector is very active in enhancing their competitive advantage and improving customer experience in financial transactions, the gap between digital strategy and successful execution is an important reason why banks haven’t achieved digitalisation.

“Most Thai banks have digital strategies and a proactive vision in place, but execution remains a great challenge, especially when it comes to closing the gap between digital strategy planning and putting that plan into practice,” Vilaiporn said. 

This aligns with PwC’s Digital Banking Survey 2023: Southeast Asia landscape that reported 80% of banks in Southeast Asia have not yet successfully achieved their digitalisation, despite over 70% of respondents indicating they have a clear digital strategy. 

Vilaiporn said that Thailand’s banking sector has been eager for digital transformation in recent years and almost every bank, including non-banks, is currently digitalising their front-end channels to serve customers. This front-end system is expanding services across all customer groups such as corporate, SMEs and retail customers. In addition, in August, the Bank of Thailand (BOT) launched ‘PromptBiz’, a digital payment system service to help the business sector conduct financial transactions, trades and payments as well as loan requests and other financial services.

Many Thai banks have also partnered with ecosystem partners to offer innovative financial services. The banks manage the front-end system, distributing their products and services to platform partners, such as loans, money transfers and purchasing systems. This not only makes transactions more convenient and aligns with customer needs, but also provides another avenue for expanding their customer base, she explained.

Four key barriers to implementing effective digital strategies for banks

Vilaiporn said that Thai banks still face four key obstacles in putting their digital strategy plans into practice.

1. Customers using banking services are concentrated within the same group, resulting in limited expansion in the customer base to include those who have bank accounts or use services of other banks. Banks are interested in creating new customer bases and attracting the attention of ecosystem partners. However, this is different for the unserved and underserved groups, which make up about 18%-19% of the total population but receive minimal attention from commercial banks.

2. Technological capabilities are still low. To define and implement a digital strategy that delivers outcomes, a deep understanding of technology is essential. Adding to this challenge is the fact that many banks rely on legacy technology, requiring the modernisation of their technology stacks for service development. It may be necessary for banks to migrate their entire systems to the cloud to keep pace with the rapidly evolving technology ecosystem and support scalability.

3. Personnel lack the digital skills and agility needed to drive innovation, whether they’re in the bank’s IT or business departments. What’s more, a siloed and complex operation is a hindrance to the development of new products and services. Banks must enhance their organisational agility to match technology-focused companies, which can rapidly introduce new services and products to the market. 

4. Collaboration with partners and ecosystems that genuinely support each other is crucial. Many Thai banks have engaged in partnerships or business restructuring, including the creation of holding companies or subsidiaries dedicated to developing financial innovations. However, major challenges remain in selecting the right partner that aligns with the bank’s vision and goals, as well as choosing the appropriate ecosystem model for the business requirements. 

Thai banks remain in nascent stage of cloud adoption 

Cloud adoption is another key factor that will help banks drive their digital transformation strategies to success. According to the PwC survey, 60% of banks in Southeast Asia have mature cloud capabilities or are in the process of building their capabilities, 30% are in the initial phase of planning and exploration, and only 10% are not leveraging cloud technology.

Vilaiporn said that cloud adoption among Thai banks is still in its early stage and does not fully take advantage of the system’s potential. The main obstacle is the large quantity of legacy applications in core banking systems, making integration with a new system challenging. Additionally, banks continue to face skill gaps while implementing their digital strategy.  

“Banks that aim to maximise cloud adoption efficiency will need to have people with cloud skills, effective resource and cost management and the ability to optimise cloud usage to bring out the technology’s potential to yield tangible results. If used incorrectly, the costs will be higher than not using the cloud technology in many cases,” she said.  

As for other reasons on why Thai banks are still unable to leverage cloud system to its full potential, some banks have already invested in data centre systems and therefore want to use them to their fullest potential first, while others are still in the process of developing cloud capabilities.

Vilaiporn said that currently, a few Thai banks have migrated some systems, such as customer relationship management, to the public cloud, But critical core banking systems have not yet made the transition due to security concerns and regulatory compliance. It is believed that in the near future, more banks will begin moving their core banking systems to the public cloud.