Bank of Thailand issues digital loan rules
The Bank of Thailand has issued digital personal loan regulations, paving a path for consumers with no financial statements to better access financial services.
The central bank issued a circular to business operators that want to apply for digital loan business licences to incorporate alternative data for digital personal loan analysis apart from the existing use of financial documents.
Alternative data includes payment of utilities such as water, electricity or telephone bills and income or financial behaviour of online shopping.
Alternative data will help service providers of digital personal loans to analyse the ability and willingness of borrowers' debt payment based on information-based lending, said central bank governor Veerathai Santiprabhob.
Digital loan providers also need to adopt digital technology for operational processes such as loan offering, debt repayment and information disclosure such as interest rates, fees and penalties.
Under the digital personal loan regulations, the maximum credit line offered to a borrower is capped at 20,000 baht, with the longest loan period of six months.
The central bank does not stipulate the purpose of digital loan products. Interest rates and all fee charges, covering service, penalty and other fees, are limited to 25% annually.
"Digital personal loans will help people, particularly those who do not have fixed salaries, cannot provide proof of income and have no asset-backed collateral, to better access loans in the formal financial system," Mr Veerathai said.
The digital channel and alternative data should also help business operators reduce operating costs and improve their business potential, while helping to build up the digital footprint of the financial system to the public, he said.
Kasikorn Research Center (K-Research) forecasts outstanding digital loans to be worth up to 12.5 billion baht by year-end, representing a mere 0.2% of total outstanding loans in the retail loan segment. The outstanding loan projection is based on the small ticket size, short-term maturity of 1-3 months and high interest rate, K-Research said.
When digital loan providers use alternative data to analyse loan approval, especially incorporating artificial intelligence and big data analytics, this facilitates the growth of digital loans, it said.
The digital platform will open more opportunities for business operators to expand into new market segments amid a change in consumers' financial behaviour stemming from greater digital adoption and the Covid-19 pandemic, according to K-Research.
Chalee Asavathiratham, senior executive vice-president and chief data officer of Siam Commercial Bank, said customers have switched to use services via the digital channel during the past 2-3 years, with the Covid-19 pandemic accelerating a change in customers' banking behaviour.
Transactions conducted via mobile banking have leapfrogged, while applications for new loans via the SCB Easy app saw 41% growth in the first half, Mr Chalee said.
Digital loans offered through SCB Easy are assessed based on sophisticated data associated with demand and the debt-servicing ability of customers, he said.