Thailand's central bank is studying measures to prevent systemic risk to financial stability and ensure consumer protection to cope with the rise of financial technology (fintech).

"The businesses using fintech need to be regulated," said Bank of Thailand governor Veerathai Santiprabhob.

"Fintech services have generated new risks, so consumer protection and supervision of service providers have to be sufficient. Consumers might not be familiar with many aspects, such as technological services, risks or the regulatory framework, so safeguarding consumer rights is an important issue."

As fintech businesses expand, regulations need to be in place to prevent systemic risk to financial stability, he said, citing how systemic problems could arise as certain countries have not imposed sufficient regulations and losses of consumers' savings have occurred.

Regulations on fintech businesses, however, will not be too stringent as this would impede innovation, said Mr Veerathai, reiterating that a regulatory "sandbox" would be implemented for fintech supervision.

A sandbox is defined as a safe space in which businesses can test innovative products, services, business models and delivery mechanisms while ensuring that consumers are protected.

The central bank also wishes to join the Thai FinTech Club to help foster development.

Earlier, Mr Veerathai said fintech startups would be asked to register with the central bank as an initial step towards establishing a regulatory framework.

He said the Payment System Act, which supports and supervises electronic transactions, has received cabinet endorsement and is being considered by the Council of State. It is expected to be approved by the National Legislative Assembly soon.

A system for businesses to verify the identity of clients will be put into practice among financial institutions, while a standard on payment by Quick Response Code is expected to come into effect in the final quarter.

The law related to the National Credit Bureau (NCB) has been amended to allow peer-to-peer lenders to become NCB members, which will allow them access to consumers' credit information for loan risk assessment, said Mr Veerathai, noting that the procedure awaits the Finance Ministry's approval.

The central bank's Financial Institutions Policy Committee has also relaxed investment by financial institutions in fintech businesses in terms of venture capital and private equity trusts, he said.

Re-disseminated by The Asian Banker from Bangkok Post