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24 Jul 2020

Econ Digest

Growth opportunities for digital lending in Thailand remain dependent on access to data and investment in digital technology

         Digital lending is a loan service carried out through online platforms such as applications and websites, and which uses alternative data other than information from bank statements or income for credit approval while using AI technology or Big Data Analytics to speed up the credit approval process. Digital lending services are aimed at serving new customers who have limited or no access to the financial services of main financial institutions such as self-employed individuals, temporary workers and traders with unstable income, as well as fixed income earners with middle-to-low income and others. The financial services they are eligible for come mainly in the form of personal loans and business loans that do not require collateral or personal guarantees.

         Digital lending services in Thailand are still in their infancy and are modest in scale, as digital lenders lack sufficient customer data for risk assessment; therefore, most digital lenders choose to provide loans to existing borrowers with a good repayment history and new borrowers with steady income or clear account statements. Digital credit providers tend to grant 1-3 month short-term loans with small credit lines and high interest rates. These loans are suitable for general customers seeking emergency cash for consumption or micro enterprises that need emergency funding as working capital for businesses. By and large, the digital lending market value in Thailand remains insubstantial.  KResearch projects that Thailand is likely to see digital lending outstanding of approximately THB 12.0 – 12.5 billion in 2020, which represents 0.2 percent of total retail loans in the system.

        There are large opportunities for digital lending service providers to expand their customer bases by focusing more on marketing to capture new target customers once Thailand's economy begins to emerge from the present COVID-19 crisis. To do that, two driving factors are required: the first involves expanding the scope of data usage further into alternative data when granting loan approval, such as utility payment information, mobile phone usage behavior, and online platform trading behavior; the second is investment in related technology by operators in the digital lending market, including existing lenders and new non-bank service providers or fintech companies, in order to expedite the credit approval process and to broadly serve new target customers.

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Econ Digest