If the Thai startup ecosystem is to help Thailand drive innovation and creative thinking, it must actively guide this transformation by simultaneously developing those industries that Thailand is already known for leading, and improving Thailand’s position in industries where it has historically lagged. I will focus on two such industries as brief case studies: tourism/travel (a historical leader) and finance (a historical lagger).
Travel has always been a natural focus area for Thai entrepreneurs as well as international companies looking to grow their presence in Thailand because of the country’s status as a global tourist hub. In 2016 alone, Thailand had 32.6 million international tourist arrivals according the United Nations World Tourism Organization, making it the world’s 9th most visited tourist destination, and Asia’s 2nd most popular destination behind China. These travelers support an exceptionally large portion of Thailand’s national GDP; the total contribution of travel & tourism to Thailand’s 2016 GDP was THB2,906.8 billion (US$82.5 billion), representing a whopping 20.6%.
With continued industry growth expected in the coming years, there is still plenty of room for new and improved products and solutions in the established TravelTech market. Tripzii.co is an example of a Chiang Mai-based travel platform for foreign tourists. I connected with the Tripzii team while in Chiang Mai to learn more about their company vision and some of the challenges and opportunities they’ve encountered. Tripzii aims to help foreigners browse the vast range of tourist options, and receive unbiased reviews from a team of locals. They hope to differentiate themselves from international competitors like TripAdvisor through locally sourced recommendations, transparent information about descriptions and pricing, and the ability to book directly through their platform.
As an early-stage company looking to survive and raise funds in an already crowded market, one of the major challenges Tripzii faces is the increase of international startups in the region that have already secured Series A investments (often with larger investments than investors are willing to make in local Thai companies because of a perceived lower level of risk). It’s incumbent upon Thai investors and the government to improve their treatment of and support for local companies; to promote a national strategy of homegrown startup growth and build out Thai TravelTech. It would behove the startup community to jump at the opportunity to play a role in the expansion of an industry on which the Thai economy depends.
In contrast to Thailand’s illustrious history as a tourist hub, the country’s financial history and reputation is marked by volatility and crisis. In 1997, the collapse and devaluation of the Thai Baht following attacks by currency speculators caused a widespread financial crisis throughout East Asia known as the Asian Financial Crisis. The Thai government’s decision to abandon pegging the Baht to the U.S. dollar led to the subsequent collapse of currencies and stock markets across the region. Following this crisis, the economy and banking system eventually stabilized, but to this day questions remain about Thailand’s financial attractiveness.
An October 2017 survey ranked Thailand 7 out of 10 Asian countries according to a FinTech Competitiveness Index accounting for factors across the political, financial, regulatory, and business realms. When it comes to forward-looking national benchmarks like digital banking penetration, Thailand’s 19% penetration trails that of Taiwan (92%) and Singapore (94%) by a substantial margin. The Thai population in general has not embraced digital payments at the same rate as many of their neighbors. Credit card usage in Thailand stands at a measly 3.7%, as many people are accustomed to paying with cash and because the process of being approved for a card is particularly difficult given the minimal amount of easily available employee/work experience data. Of those with credit cards, a large portion either work in government jobs, or in corporate jobs in Bangkok. Moreover, as I experienced throughout my time in Thailand, many businesses operate as cash-only, and do not accept credit cards.
Recognizing a need for improvement and opportunity in the fintech space, entrepreneurs as well as the government have made a concerted effort to lend their talent and resources. For instance, in December 2016 the Bank of Thailand launched a regulatory sandbox for fintech companies to experiment with and test innovative products, services, business models and delivery mechanisms without immediately dealing with all the typical regulatory requirements. The Thailand 4.0 government project is also tasked with laying the foundation for sustainable fintech growth.
These efforts have paid off in the form of increased foreign investment an increase in investment in Thai fintech companies, led by Omise, Finnomena, and MoneyTable. That said, work is needed on the regulatory front. Many of the existing regulations, specifically those surrounding crowdfunding and peer-to-peer lending, lack the clarity or definition needed for companies to feel confident in moving forward with their ideas.
Looking ahead, if the private and public sectors are able to coalesce around fintech development, there’s a sizable potential upside for Thailand, and its fintech startups. Because of its lagging position and lack of digital infrastructure, Thailand has the ability to outpace its more developed neighboring countries and lead the next wave of digital commerce in the region. For example, perhaps the low credit card usage rate in the country and a consumer preference for cash payment can and will translate to an earlier and easier adoption of blockchain-based digital cash payments; Thai consumers could transition from cash payments directly to digital cash payments similar to what’s occurring in parts of Africa like Kenya and Zimbabwe. This idea of leapfrogging developed economies and startup ecosystems holds true of all young and developing startup villages and countries, assuming they are thoughtful, efficient, yet bold with where they focus and how they direct resources.
An early indicator that Thai fintech startups are headed in a positive direction and are driving technological advancement in the country is that they have incited many of the largest and oldest Thai banks to step up and invest in their own digital strategy and technology to maintain their position. In 2018, Siam Commercial Bank Pcl announced plans to continue to invest in its newly spun off artificial intelligence unit, SCB Abacus, to launch a robo-advisor service in response to growing competition from fintech providers. The unit has already attracted 30 Thai technologists from abroad to return to Thailand, a “reverse brain drain” in the words of SCB Abacus’ CEO Sutapa Amornvivat, herself a graduate of Harvard and MIT who returned to Thailand to start the unit.
By focusing on these two industries–travel and finance–the Thai startup community can reach new heights both by shoring up its strengths and making strides in its development areas. The continued evolution of both industries will be key to the overall success of the Thai startup ecosystem.