All aboard for the e-commerce future

Thailand’s digital economy and digital society have rapidly evolved in the past year, with the latest development being major commercial banks seeking regulatory approval to board the e-commerce bandwagon, a move likely to blur business boundaries in the digital age. Having tested the ubiquitous QR Code as a new e-payment method  earlier this year, Thai banks are quickly following up, exploring other possible e-commerce platforms. At least two of them – Kasikorn Bank and Siam Commercial Bank – have already sought approval from the Bank of Thailand to enter the e-commerce sector. Their bid appears aimed at helping them stay relevant in the digital age, in which banking and financial services are constantly facing fresh challenges from fintech and other emerging players around the world.China-based Alibaba has become the world’s largest e-commerce platform in terms of sales, outgrowing top US e-commerce sites and underlining China’s position in the global digital economy. In the meantime, Alibaba has also challenged Chinese banks in the domestic market, prodding them to become more efficient online lenders to numerous small and medium enterprises (SMEs) that sell goods and services on Alibaba’s huge platform. All of this is thanks to the benefits of Big Data.Chinese banks are thus facing formidable non-bank challengers on their home turf. For these struggling banks, one of the most effective solutions is to compete against giant e-commerce sites head-on. To do so, they have moved into the e-commerce sector, blurring the traditional business boundaries.

In Singapore, the banking sector’s regulatory body has also allowed banks to enter into the e-commerce sector, on condition their e-commerce operations are low-risk. Thailand is likely to follow suit, with central banking authorities now weighing the pros and cons of permitting commercial banks to climb onto the e-commerce bandwagon.

E-commerce – mobile commerce, in other words – is set to grow exponentially in coming years due to the ubiquity of smartphones, which already outnumber the entire Thai population. Unless banks have more flexibility in pursuing new forms of business, they are likely to see eroding competitiveness in the digital age, since giant e-commerce sites, as well as more nimble tech-oriented start-ups, are preparing to disrupt traditional banking and related businesses.

According to Thai banks, the age of “machine commerce” is dawning, on top of mobile commerce, as each of the major banks now has millions of customers using their mobile-banking applications. The combined value of transactions amounts to hundreds of billions of baht. From this huge mobile market base, the top banks aim to serve as the new digital middlemen via their own e-commerce platforms, which will automatically match customers’ needs with numerous vendors of goods and services.

The selling point is that the Thai SMEs will have lower costs and a more efficient platform to market their products when adopting bank-operated e-commerce platforms that use sophisticated machine-learning models and predictive analytics to do the matching for transactions.For the banking regulator, the top concern is probably the risks associated with banks diversifying into non-banking businesses. But the plus side is that banks will have plenty of data to make better judgements on lending to small business operators based on the transactions they conduct on the platforms.Customers should also be happier, due to more convenient shopping, e-payment and delivery services, all done with a few taps and swipes on their mobile phones.