The new policy to halve the amount of cash in circulation by 2026 comes as the Bank of Thailand joined four other Southeast Asian central banks in creating a cross-border payment zone that uses QR codes and avoids converting and reconverting to US dollars.
Thailand’s central bank is pushing forward with a plan to reduce cash in circulation by 50% by 2026 when compared to the end of 2021. The move comes in a week when the bank published a new policy statement in which it argues that more electronic payments will increase economic activity and when it signed a memorandum of understanding with the central banks of Malaysia, Singapore, Indonesia and the Philippines to use a QR code system to make international payments across the 5 Southeast Asian countries without using the US dollar.
The Bank of Thailand is pushing forward with the agenda of making Thailand a cashless society as it plans to unveil a new PromptPay system to make it easier to make payments and transfer money from one party to another in Thailand.
The central bank plans to have 42% of all payments in the kingdom made by digital means by the end of 2024 with each person making 800 such payments in the course of a year.
50% cut in circulating bank notes by 2026 targeted by Bank of Thailand despite a public preference for cash
At the same time, under the bank’s ambitious plan, this will result in a 50% reduction in banknotes in circulation.
The new policy being pursued by the bank flies in the face of a study conducted earlier in 2022 which found that nearly all Thai people regarded cash as essential to living and conducting day-to-day activities in the country.
The same study showed that even after three years of the pandemic and the growing utilisation of government apps and payment systems, a full 50% said that they would continue to use cash only for day-to-day payments.
The survey also showed that cash was between 5% to 10% cheaper than using electronic payment systems because of inbuilt fees and charges.
New guidelines and policies from the Bank of Thailand strongly push more digital payments to create a faster-growing, more innovative economy
However, this week, the Bank of Thailand has issued new guidelines and policy objectives in a document entitled: ‘A new landscape in the Thai financial sector for Digital Economy and Sustainable Growth’ which sees the innovation and development of digital payment methods as essential to the country’s economic development.
The widespread adoption of digital payments, the policy statement argues, will encourage innovation and greater flexibility within Thailand’s financial industry and also improve risk management capabilities.
The plan, for the period from 2021 to 2024, is bullish about extending digital payment systems and promoting them within day-to-day life in Thailand.
Currently, the PromptPay system handles an average daily volume of 42 million transactions with 72 million registered to use the system.
The daily average value is ฿121 billion while it also processes ฿7 million in QR code payment points.
Moving digital payments into commerce with an easier business-to-business digital payment option
The next stage in the development of the PromptPay system is to extend its use to Thai firms from large corporations to small enterprises by allowing users on the system to send documents along with payments as part of any business-to-business transaction.
The goal is to have 3,000 businesses using the PromptPay system by 2024.
The immediate goal of the PromptPay system is to replace and reduce the use of both cash in terms of banknotes exchanged and cheques issued by companies in favour of more transactions per person through the digital payment service.
Thailand is currently a regional leader in Southeast Asia in the use of such technology with the average person making 312 digital payments per year according to 2021 data compared to only 170 times in Malaysia.
Thailand teams up with other Southeast Asian nations to create a new cross-border QR code payment system
On Monday at the G20 Summit in Bali, Indonesia, Thailand’s central bank joined with those of Indonesia, Malaysia, the Philippines and Singapore in a memorandum of understanding to facilitate cross-border electronic payments between the 5 countries without converting to the US dollar using a quick response QR code system.
In Thailand’s internal commercial payments sphere, the movement away from the use of business cheques has already begun with a 16% reduction seen in 2021 and a corresponding transfer value decrease of 12%.
The Bank of Thailand estimates that an accelerated pace in the takeup of digital payments will increase overall economic activity.
It is targeting 800 transactions per person per year by the end of 2024.
Circulating cash to be reduced by 50%
In this way, it is hoped that by the end of 2024, 42% of the total domestic economy will be electronic or digital payments compared to 37% in 2021.
According to this plan, the Thai central bank will be able to reduce the number of banknotes in circulation to under 50% of what it was at the end of 2021 by 2026.
This would involve doubling the annual rate of cash reduction by the end of 2024.