Compared to many of its Southeast Asian neighbors, Thailand has a highly developed FinTech industry with many players such as banks, corporations, and startups offering a variety of services like mobile banking and retail applications. The rise of FinTech in Thailand also alludes to the development of peer-to-peer payment platforms and blockchain enterprises which have taken the interest of both local and foreign investors.
It is beyond doubt that FinTech will play and increasingly pivotal role in the way commercial activities are conducted in Thailand, with many residents opting to adopt platforms such as Line Pay as a way of conducting transactions. In fact, merchants and retailers, particularly those with a significant online presence, are gradually adopting FinTech solutions as a way of making transactions more secure and convenient.
Given the developments in FinTech, Thai authorities have begun regulating the industry to ensure that key stakeholders, particularly users, are sufficiently protected from unscrupulous elements. Having said this, it is important for those seeking to participate in Thailand’s FinTech industry to understand regulations that govern the sector.
Current Regulatory Regime
In the past, the Thai legislature has floated draft laws meant to promote the development of financial technology and related businesses. However, there is currently no FinTech specific legislation. The industry is governed by laws that relate to the particular service or offering, such as the Payment Systems Act 2017, which regulates the entire electronic payment infrastructure in Thailand.
Although financial services are generally under the supervision of the Bank of Thailand, in the meantime, the Securities and Exchange Commission (“SEC”) provides a regulatory sandbox for businesses that offer FinTech related products or services that would normally be regulated as a capital markets product and which would therefore be under the supervision of the SEC. The regulatory sandbox allows such FinTech businesses to offer their product or service within a limited geographic scope and/or to a limited sampling of the population without being subject to the normal regulatory requirements. When applying to operate in the sandbox, firms must emphasize that their services involve new FinTech solutions that are not already available in Thailand or will serve to enhance existing technologies which they must be able to demonstrate during their application. The sandbox duration varies depending on the project; however, it is possible to extend the period at the discretion of the SEC.
There are, however, legislation that specifically regulate digital assets and cryptocurrencies. The 2018 Royal Decree on Digital Asset Businesses, alongside minor notifications, regulates different aspects of creating a digital asset venture in Thailand, specifically with regard to the definition of the types of tokens, fundraising, how initial coin offerings (ICOs) can be conducted, and which cryptocurrencies can be used during ICOs.
Obligations under the Personal Data Protection Act
Another regulation that is relevant to FinTech businesses includes the Personal Data Protection Act which governs the way data controllers are to handle personal data of their data subjects. Naturally, as collectors of users’ personal data, FinTech businesses must acquire consent from data subjects and use infrastructure that will keep the data safe, among other requirements. Fintech businesses should also be aware that failure to comply with the Act’s regulations will result in harsh sanctions from authorities.
It is also worth noting that FinTech businesses established overseas will not be exempt from the abovementioned data privacy law if they provide services to Thai users or if data controllers or processors monitor their data. According to the Act, oversees FinTech businesses must appoint a local representative in Thailand and should be based in a country that has adequate data protection regulations in order to be allowed to conduct international data transfers.
Intellectual property implications
Competition in the FinTech industry and reliance on third-parties, such as software developers and IT service providers, highlight the importance of intellectual property rights in this field. Due to the digital nature of FinTech services and products, copyright protection is quite significant concern for both FinTech startups and established financial institutions. Since the legal process may be slow to respond to copyright violations and vindicate the rights of IP owners, FinTech businesses may consider using technological mechanisms, such as digital rights management in order to prevent possible violations.
Competitors within the FinTech industry often differentiate themselves by developing innovative platforms and solutions which call for patents to be made as a way of protecting their intellectual property (“IP”). The most notable legislation that upholds this protection is the 1979 Patent Act which authorizes the Department of Intellectual Property to issue patents to new inventions or designs, thereby giving the firm exclusive rights to exploiting or selling their product or service. The Act states that the invention must be new and have undergone an inventive step.
While Thai legislation recognizes all manner of IP, technological products are specifically protected by patents which are granted on a 20-year term from the date of application. Patent owners will be allowed to license or assign their invention to a third-party and receive royalties; however, they must note that only local rights are enforceable unless the particular matter is relevant to international agreements.
While law makers are still drafting legislation that directly governs FinTech businesses, existing regulations are still applicable particularly in the way they offer their services, handle data, and protect their intellectual property. Thailand’s positive regulatory outlook regarding these businesses is demonstrated by the Kingdom’s robust FinTech industry which has not only seen increasing adoption among users in Thailand, but also innovative solutions that rival those offered in other countries. Silk Legal looks forward to the upcoming Financial Technology Business Bill and will be vigilant for any other developments in the field.
Are you looking to set up a FinTech company in Thailand or require legal assistance regarding the matter? Contact us at [email protected].