Category: Research

Empowering ESG with Blockchain Technology

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Image by Finboot

Blockchain and its underlying technologies have been around since the late 1970s and were brought to life from the introduction of Bitcoin in 2008. The general public might associate blockchain technology with just cryptocurrency, but the application of blockchain technology goes beyond that. As people see that blockchain is a valuable technology due to its nature of transparency and traceability, automation (from smart contracts) and decentralization, the technology has been evolving tremendously over the past years to include new use cases in several sectors such as banking, supply chain, healthcare, etc. The technology is considered to be on the path to mainstream adoption in coming years.

On the other hand, the topic of Environmental, Social and Governance (ESG) has been a growing topic of interest and businesses have to fine-tune their operations to raise the standards and accountability to comply with the current and upcoming regulations. Blockchain offers a great fit for organizations that have a desire to initiate and/or incorporate ESG initiatives to their existing operations and manage relevant reporting requirements.

In this article, we will discuss the current use cases of blockchain in Environmental, Social and Governance aspects, current and foreseeable challenges from leveraging blockchain to tackle the ESG issues and implications to financial institutions (FIs). 


When Blockchain Collides with ESG 

Conceptually, the key strengths of blockchain of traceability, automation, and decentralization could be translated to an increase in transparency, efficiency and accountability across Environmental, Social and Governance elements in several meaningful ways.

Nevertheless, the intersection of how blockchain and ESG could work together is only at the beginning of formation, as blockchain is still considered as an emerging technology and the ESG impact measurement and reporting practices are still under development. Due to the urgency of the problem and suitability of using blockchain technology, there are a number of use cases on the Environmental aspect, compared to Social and Governance elements that are still in the exploration phase. 

Image via  iStock by Sakorn Sukkasemsakorn

Environmental x Blockchain 

There are growing use cases in the Environmental aspect by utilizing blockchain technology particularly the infrastructure levels to promote transparency and efficiency such as energy management, deployment of renewable energy, recycling etc. Nevertheless, there are three main use cases of blockchain technology consisting of tracking, trading and compliance, which are currently implemented across different industries. 


The immutable ledger of blockchain enables a better transparency to the supply chain. The companies can track the movement of materials from the point of origination to the destination, leading to the opportunity to pinpoint the area of inefficiencies, energy usage, and carbon emission. The traceability allows the companies to better reduce waste and carbon footprint, control that the production is operated in a sustainable manner and promote economic circularity from recycling materials and transparency to consumers. For example, Food Trax is a farm-to-fork traceability solution provider enabled by blockchain technology to eliminate food waste from storage and improper operations and offers better visibility of consumers. The company is developing a solution to collect and monitor various data points leveraging RFID, variable data printing, scanners, mobile computing platforms, and et cetera to cover all steps in the supply chain. The transparency yields an increase in revenue and higher brand loyalty from clients.  


One of the main advantages of blockchain is its ability to provide a more effective and efficient settlement process as the nodes/validators certify the transaction and all members in the network have the same record, reducing the need for reconciliation. Blockchain could be the backend technology for the trading of sustainable financial products such as green bonds and renewable energy credits including renewable energy certificates (RECs). Additionally, tokenization of real-world assets such as carbon credits can enable more efficient trading by reducing the investment ticket size from fractionalization, increasing price discovery and liquidity to the market and performing almost real time settlement. Consequently, businesses and individuals can participate and promote the growth of renewable energy and sustainable production. For instance, Toucan Protocol is developing technology to bring carbon credits to an open blockchain, allowing everyone to have an access to the carbon markets. The protocol has built Carbon Bridge to tokenize the carbon credits by transferring certified carbon credits onto Toucan’s system and mint TC02 carbon tokens. TC02 carbon tokens can be staked into Toucan’s carbon pools with each pool linked to credits with similar characteristics and receive carbon pool tokens, a fungible token backed by one tokenized carbon credit. This mechanism allows carbon pool tokens to be traded in decentralized exchanges and used as collateral in the lending markets, paving the green building block in Web3. 


The transparent nature of blockchain as well as smart contracts, a self-executing program that automatically executes the required actions if the conditions are met, could help companies to comply with the ESG standards. As the companies are able to trace its supply chain, they could report the emission and trading of carbon offset in a more accurate manner. Furthermore, smart contracts could help automate the enforcement of sustainability and ethical practices. This could help smaller companies with limited time and resources in their ESG monitoring and reporting endeavors. One of the companies helping companies to comply with ESG reporting using blockchain technology is Diginex. Its DiginexClimate integrates climate-related data to the existing ESG reports that companies have to do and comply with the company’s reporting requirements covering different frameworks such as GRI, SASB and TCFD. The solution could greatly save time and cost for businesses following the ESG standards. 

Social x Blockchain 

It is undeniable that the general media usually ties cryptocurrencies with criminal activities. However, according to Chainanalysis, in 2022, only 0.24% of all cryptocurrency transaction volume is associated with illicit activity. In contrast, cryptocurrency and blockchain could bring the ‘good’ to society by providing solutions to promote financial inclusion and facilitate humanitarian causes. The most developed use case is payment for cross-border payments, domestic transactions and payment for humanitarian causes. 

Cross-border Payments

Due to Blockchain’s decentralized nature and the ability to transact without intermediaries, crypto transactions could be faster, cheaper, inclusive and censorship-free. This means that cross-border transfers can be made with smaller amounts at a much lower cost than the traditional money transfer. A report by Oliver Wyman and J.P Morgan found that digital currencies could save global corporations $120 billion a year in transaction costs for cross-border payments. They are arguably a better alternative than cash in countries with volatile and/or depreciating local currencies. 

Domestic Transactions

Nations are separated into two schools of thoughts regarding regulations of crypto as means of payment. Thailand and China as examples of viewing crypto as means of payment on a stricter side. While Thailand has regulations supporting digital asset businesses, the country banned cryptocurrencies as a method of payment. The Thai Securities and Exchange Commission (Thai SEC) stated that digital assets do not provide improved efficiency to the payment market because of their volatility and high transaction fees. China wiped out trading and cryptocurrency mining. 

El Salvador and Ukraine, on the other hand, legalized crypto transactions. El Salador has made bitcoin a legal currency and aimed to become a hub for crypto activity. Additionally, in 2022, Ukraine passed a law that creates a legal framework for the cryptocurrency industry in the country. The first use case was accepting donations toward its military defense against Russia via bitcoin and ether.

Payment for Humanitarian Causes

Apart from the commercial use case of payment, cryptocurrency could also support humanitarian causes. One of the prime examples is a project by the United Nations High Commissioner for Refugees (UNHCR) and the Stellar Development Foundation, a nonprofit that supports the growth of the Stellar blockchain network. UNHCR realized that some refugees do not have a bank account and cash is difficult to move around. The two organizations are working alongside MoneyGram, a money transfer company, and Circle Internet Financial, an issuer of the USDC stablecoin, to deploy an alternative system to send aid directly to Ukrainian refugees using cryptocurrencies. The UNHCR delivers USDC through the Stellar network to a refugees’ digital wallet installed in their smartphones. The refugees then exchange USDC for local currency at the MoneyGram facilities.

Governance x Blockchain 

Blockchain advocates argue that decentralization promotes good governance from the absence of a single point of failure. No single entity has control over the network. Nevertheless, to fully and properly govern the networks, it will take time for stakeholders to participate, design and enforce rules to ensure stability, and penalize bad actors. There are two emerging use cases for the Governance aspect that blockchain could provide value-adds on the transparency consisting of measuring and assessing ESG milestones and blockchain voting. 

Measurement and Assessment of ESG Milestones

Blockchain networks with decentralized databases could help entities measure and prove ESG milestones. Participants in the network may include vendors, suppliers, internal business divisions to share information such as product tracking, carbon emissions and labor conditions. Smart contracts embedded in the blockchain networks can be applied to automatically disclose the data, all without the need for human intervention. The regulators or a credible third party could securely access the collected data and verify whether the organizations are meeting standards as claimed. Blockchain could act as a tool to boost transparency.

Blockchain Voting 

Blockchain voting has been in discussion globally. This use case is still in its early stages, and there are many challenges to be addressed through several pilot testing before implementing nationwide. However, several countries have put efforts and endorse blockchain voting. In October 2022, Cointelegraph reported that Greenland was exploring an online voting platform, which may be based on blockchain. In November 2022, South Korea became the first country to set up an online voting system based on blockchain making sure each vote is secured and cannot be manipulated. In India, blockchain-based voting has been tested for Telagana’s municipal election in 2021. The pilot showed positive signs; however, more pilots are needed to fully implement the system. 


Challenges of Utilizing Blockchain in the ESG Space

Despite a lot of benefits that blockchain technology could bring to support ESG initiatives, there are a few points that also need to be considered as blockchain is not problem-free. The current challenges of using blockchain can be seen from both the technology layer and its applications across Environmental, Social and Governance aspects. 

Technology Layer of Blockchain 

Blockchain is mainly a backend enabler

Blockchain technology does not help businesses determine what kind of data to collect, measure or verify but it is rather an enabler to make the process more efficient. It is important to determine which types of data, verified or unverified, to be uploaded to a distributed ledger or set rules on how to differentiate them as the uploaded data cannot be changed and can affect business’s data usage and compliance with the ESG standards

Blockchain technology is still in its early days

Blockchain technology is considered as an emerging technology. The infrastructure is yet to be fully developed despite its proposed potential to disrupt several industries. Additionally, companies across verticals are still at the beginning stage to integrate blockchain to their current operations. Therefore, the technology is still evolving and it has to be developed in parallel with the initiatives in the ESG space through trial and error. 

Applications of Blockchain Across ESG Aspects 

(E) Utilizing energy-inefficient blockchain create environmental impact 

By using blockchain with Proof of Work (POW) consensus like Bitcoin, it is very energy-inefficient as the miners who compete among themselves need to use a lot of electricity to tackle computational problems to get a chance to validate the transaction and receive reward. It creates more problems than trying to solve the environmental impact. Therefore, it is crucial to use energy-efficient blockchain, which can be Proof of Stake (POS) consensus, to decrease carbon emission or use POW blockchain that uses electricity from renewable energy sources. 

(S) Crypto space has been plagued with fraud and cybercrime

Given the nature of blockchain, it attracts fraudsters to continue to exploit user’s funds as crypto transactions could not be reversed and no personal data is required to receive cryptocurrencies for the non-custodial wallet. The safety of user’s funds is often compromised and causes tremendous loss to the users. It is very important for both centralized and decentralized platforms to step up in the game to enhance their technology stacks/codes to increase platform securities, improve ID-proofing without increasing onboarding friction and/or utilize data enrichment tools to get to know more about the users. These solutions could help prevent scammers from participating in crypto activities. 

(G) Blockchain also subjects to risks of bias and conflict of interest

Despite blockchain’s benefits of transparency and automation, the design of the blockchain that involves human decision-making can be flawed with human biases. Conflict of interest also arises when people behind the code design do not put the users at heart. Certain groups of users, especially minorities or marginalized populations, might be treated differently and not have the access to a particular product/service or users’ data might not be properly managed. Ethical code of conduct and regulations could potentially solve the issues and govern blockchain technology. There is no bullet-proof solution at the moment and awareness on these risks is needed to be able to utilize the technology in a fair and appropriate manner. 

How the Concept can be Applied to Financial Institutions 

Apart from using blockchain as a backend technology for financial institutions (FIs), the institutional adoption of Web 3.0 is becoming an increasingly popular topic as digital assets are seen as a portfolio diversifier and can create more yields in a portfolio and treasury account. A relatively new concept such as Regenerative Finance (ReFi) is also being discussed on how Web 3.0 and FIs could play in the space such as responsible lending by taking into account environmental and social factors. 

While Web 3.0 gives people sole control over data and assets, it comes with complexity. Unclear regulations, complicated user experience and limited scalability and interoperability hinder the growth of institutional adoption in the space. Web 2.5 may help solve the issue. Web 2.5 is used to describe blockchain businesses that operate in between Web 2.0 and Web 3.0. “The idea behind Web 2.5 is that consumers want the advantages of a blockchain-based platform. However, they don’t want the complexities and friction that often come with blockchain-based systems.”, DropChain explained.

Web 2.5 takes advantage of both worlds by prioritizing privacy and decentralized nature while maintaining the ease and accessibility. Blockchain technology is used at the infrastructure level and appropriate Know Your Customer (KYC) measures take place to mitigate the risks for sensitive financial data.  

With the concept of Web 2.5, blockchain could help solve the challenge of FIs and their customers across ESG aspects.

  • Improve Internal Infrastructure

Financial Institutions could build and/or integrate blockchain-based Infrastructure for collecting, tracking and tracing data for ESG-linked bonds, green loan origination and credit rating embedded with ESG factors. As multiple parties are involved in ESG measurement from data collection to validation, Web 2.5 could bridge the gap by providing a secure and transparent platform with ease of use to all parties.

  • Collaborate with External Parties

Financial Institutions can collaborate with external parties by leveraging their solid compliance capabilities or partnering with blockchain companies to expand reach of existing businesses or build new products/services. FIs could provide modular services such as KYC services to partners and clients to reduce risks and comply with current regulation and ESG standards. FIs could also partner with trusted blockchain companies to support open finance initiatives and improve financial inclusion such as providing access to low-cost cross-border payment for foreign workers or unsecured personal loan. 


Although blockchain proposes a lot of potentials to support the growth of sustainability going forward, the technology is not a panacea for tackling all the sustainability issues and there are a number of challenges that blockchain has to overcome to maximize its capabilities. The organizations including financial institutions need to define their sustainability goal then initiate strategies which involve the identification of which tools, technologies and partners would work best for them to accomplish impactful outcomes for the organizations and the society. 


Authors: Wanwares Boonkong (Pin), Panuchanad Phunkitjakran (Pook)

Editor: Woraphot Kingkawkantong (Ping)

Carbon Post Tax Economy

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The World with Carbon Tax: Impacts and challenges to businesses, consumers and governments

The world is getting warmer 🔥

The world is getting warmer, and has been for 46 consecutive years. 

We, humans, are the main cause of the change. We cause climate change by emitting greenhouse gas (GHG) from activities like burning coal or flying airplanes. Climate change matters because it affects the lives and safety of all living organisms on earth. People have already had to relocate due to a rise of sea-level or droughts, and animals and plants face the danger of going extinct. With an ongoing emission rate, the United Nations expected that the number of “climate refugees” will further increase. 

In December 2015, countries signed the Paris Agreement to limit global warming and to reduce greenhouse gas emissions (most commonly tracked as carbon emissions) as soon as possible. According to the IMF, 140 countries (accounting for 91 percent of emissions) have already proposed or set carbon net-zero targets for 2050.

While government support is vital for hitting carbon reduction targets, continual subsidies are not sustainable. Market mechanisms like carbon taxes and trading systems are arguably among the easiest and most cost-effective ways to achieve the targets by shifting the burden to those who are responsible for it.

Carbon taxes provide economic incentives 🤑 to reduce emissions 

Large-scale capital and financing is required to significantly reduce emissions. The Intergovernmental Panel on Climate Change (IPCC) reported that all countries are massively short on decarbonization funding. Carbon credit markets, where carbon credits are bought and sold, could solve this issue by shifting funds from heavy emitters to people and organizations decarbonizing the economy. Broadly, there are two types of carbon credit markets: compliance (regulatory requirement e.g. cap-and-trade in which factories are allowed to emit specific amounts of emission and trade emission-reduction to others) and voluntary (to issue, buy and sell carbon credit on a voluntary basis). A carbon price stimulates clean technology projects and innovation. However, building integrity in carbon markets is key, as the ultimate goal is to reduce emissions, not just force emitters to pay for it.

Illustration A: Carbon credit market allows reallocation of capital to carbon-reduction projects

Source: Beacon VC

Generally, carbon credits are generated from verified carbon or GHG reduction projects, and can be traded to a carbon emitter who wishes to offset their carbon emissions. For example, solar panel deployment or tree planting projects are converted into tonnes of carbon dioxide equivalent or tCO2e. Those offsets are priced in USD or Euro per tCO2e for trade. There are two main types of offsets: carbon avoidance (reducing emissions from existing or future operations) and carbon removal (removing carbon or equivalent GHG from the atmosphere).

Under a carbon tax, emitters must pay for each ton of greenhouse gas emissions they emit. Taxes act as financial incentives for corporations and individuals to reduce emissions, switch fuels, and adopt new technologies to reduce tax burden. 

According to the World Bank’s carbon pricing dashboard, carbon pricing (carbon tax and emission trading system) initiatives have been implemented globally (see Illustration B). As of April 1, 2022, 103 national jurisdictions have initiated carbon pricing, covering 24.30% of global GHG emissions. Of those, 47 have implemented or considered implementing carbon tax. In Europe, carbon credit pricing ranges from less than €1 per metric ton of carbon emissions in Poland to more than €100 in Sweden. The tax rate and tax scope can vary based on the types of GHG and countries’ policies; for example, while carbon tax in Spain only applies to fluorinated gasses, other countries cover most types of GHG emissions. 

Illustration B: Carbon Pricing Implementation Globally

Source: State and Trends of Carbon Pricing 2021. (World Bank, 2021)

In Thailand, more progress has been made on carbon markets than on taxes. In 2014, Thailand Voluntary Emission Reduction Program (T-VER), a voluntary carbon credit market, was introduced by the Thailand Greenhouse Gas Management Organization (TGO), a public entity set up by the government to promote sustainable low-carbon economy and society. Since 2015, T-VER has issued and certified (to measure and verify carbon reduction) 141 projects. The amount of GHG reduction from the projects grew at 45% CAGR from 2015 to 2022. 

Most T-VER projects are carbon avoidance projects, which commonly replace coal energy with green energy such as wind or biomass. Other projects such as forestation are nature-based carbon removal projects. There is also growing interest in technological solutions for carbon removal such as direct air capture technology. This technology pulls carbon dioxide from the air and safely stores it. For example, Climeworks AG captures carbon and stores it underground. Carbon Limit produces cement that absorbs carbon from the air. However, the challenge for technological solutions is scalability, which could lower the cost of adoption and encourage mass deployment.

On the one hand, the timing and scope of carbon taxes in Thailand are still being debated, though there are positive signs that Thailand will implement a carbon tax economy. Mr. Ekniti Nitithanprapas, ex-Director General of the Tax Revenue Department said that “Thailand cannot avoid collecting carbon tax because many other countries have already started doing it. If Thailand does not collect carbon taxes on these goods, exporters will have to pay the tax at the destination EU nations. If we collect the tax in Thailand, we will negotiate with the EU to exempt the goods from double carbon tax.” It seems likely carbon taxes will be implemented, but the big questions are when and how. 

Illustration C: Statistics of Issuance of T-VER 

Source: TGO, adjusted by Beacon VC

Carbon Post Tax Economy 🌏 

Carbon tax will drive higher costs of energy-intensive goods and shift the way consumers and businesses make decisions. However, the quantifiable effect of the carbon tax is still debatable. While it is believed that carbon tax would positively impact emissions, policy makers may have  concerns about a negative impact to the economy. However, most economists who have analyzed the situation argue that there will not be a negative impact on the economy.

Since carbon taxes will drive costs of energy-intensive goods, The National Institute of Economic and Social Research expects carbon taxes to drive inflation in the short term and lower GDP by 1-2% in carbon-intensive countries. In the longer term, the effect on the economy depends on how revenues from the tax are used. The UN’s ESCAP is also optimistic that the tax revenue will have a positive effect on GDP in the long run by increasing economic activity and reducing poverty and GHG emissions. Other economists believe there will be little or no impact on GDP and unemployment. They believe that long run GDP growth rates are driven more by fundamentals than by policy variables such as tax rates, and therefore unlikely to face negative impact from implementing carbon tax policies.

GDP measures production capacity and economic growth; however, it does not explain the market trend and behavioral shifts. Carbon tax could potentially accelerate changes of consumer behavior. Consumer behavior changes overtime and changes fast. Robert H. Frank wrote in The New York Times about behavioral contagion that even though the carbon tax could affect a small group of consumers, the behavioral change could spread like “infectious diseases.” Similar to cigarette taxes, carbon taxes affect a small group of people which could expand rapidly by network effect. In turn, consumer preferences impact business decisions. 

With or without a carbon tax, businesses will already face various risks ranging from climate change, price of raw materials, consumer preference and regulation. Carbon tax would likely increase administrative burden and costs of running business especially in carbon-intensive industries such as oil and gas, power generation, transportation, and construction. The costs may translate into higher prices to end customers, so businesses must identify the risks and design strategy going forward.


The big challenge is to align incentives to truly reduce emissions. Carbon credits (especially in Thailand) focuses on monetizing existing projects, not building new ones. Those credits, therefore, do not contribute to carbon reduction. Additionally, with different tax policies, businesses may seek to move to operations with less stringent policies and, as a result, increase total emissions. Other complex issues include double-counting of emission reduction, and greenwashing (companies falsely market their green credentials).

Stakeholders are trying their own ways to solve those issues. Some startups are trying to solve these problems. ImpactScore and Good on You provide a “green” score for shoppers to check and help alleviate greenwashing issues. Companies are looking to create data solutions such as IoT devices for greater traceability and apply ESG information disclosure and standards. Governments, together with non-profit organizations, are working on policy alignment to reduce emissions worldwide. Financial institutions are designing mechanisms to alleviate initial high ESG adoption costs to businesses and consumers. 

Closing Thoughts

It is abundantly clear that global warming poses a major threat to society. Nations worldwide have agreed to slow down and ease the threat of global warming, leveraging various initiatives to incentivize reduction of the GHG emissions which are the cause of global warming. Carbon tax policies may be a catalyst for speedier adoption of green energy and technology to reduce or avoid carbon emissions in the private sector. Consumers and businesses are also paying more attention to carbon reduction and ESG risks. Based on the shift in consumer preferences, it is expected that more goods and services labeled ESG will be sold, though the challenge of how to prevent greenwashing and ensure that consumers can effectively express their preferences remains

Beacon VC is excited and ready to support its parent company, Kasikornbank, across a wide variety of impact initiatives, particularly with regards to sustainability and net zero carbon targets. Beacon VC has recently launched the “Beacon Impact Fund” to invest in startups seeking to create a positive impact on ESG issues. The Beacon Impact Fund is part of Kasikornbank’s overall sustainability strategy and leadership vision in the field of ESG finance.  Both Beacon and Kasikornbank are committed to upholding ESG principles and paving the way for Thailand’s transition into the new world.


Author: Panuchanad Phunkitjakran (Pook)

Editors: Krongkamol Deleon (Joy), Pajaree Prasitsak (Wan), Woraphot Kingkawkantong (Ping)

What is Digital Inequality and Why does it Matter?

Posted on by beaconvcadmin

Digitalization has influenced banking services around the world to move online. It is common these days to see bank branches closing down as many commercial banks have shifted their focus to digital banking in order to better serve customers’ demands and satisfaction. However, even in countries like Thailand, which is known for having high smartphone and social media penetration rates, many people are still needing to wait in line at bank branches to conduct their own financial transactions or to seek assistance in obtaining government financial aid (aid which is provided via an online system such as “Khon La Khrueng” or คนละครึ่ง). Understanding why these situations occur helps to highlight the fundamental problems that need to be fixed to ensure that everyone is included in the new digital economy.


What are the Causes of Digital Inequality?

Digital inequality refers to the disparities in knowledge and ability to use digital and information technology based on different demographics, socioeconomic backgrounds, and information technology experience and competencies. The problem is not merely one of access, as disparities also exist among people who have access to digital technology. The digital gap is also caused by lower-performance computers, lower-speed wireless connections, and limited access to subscription-based content.


These disparities stem from barriers in three areas: availability, affordability, and adoption.

  1. Availability: digital infrastructure needed to access online services through alternative channels, such as wireless data plan, wired broadband, and fiber services.
  2. Affordability: to stay connected, individuals must pay for device acquisition and service subscriptions, which are continuous expenses. 
  3. Adoption: people are prevented from utilizing the internet by knowledge hurdles, such as a lack of digital literacy or educational constraints.


Digital Inequality is a Human Rights Issue

Computers and smart devices have become vital to almost every aspect of daily life, from fundamental activities like paying bills and shopping, to more enjoyable activities like entertainment and socializing. They are also essential for maintaining relationships with loved ones. Access to the internet has opened up new opportunities for employment, health care, financial support, and pursuing both informal and formal education. Those without access to the internet are missing out on information that may help them find jobs, online entertainment, and many other essentials. Research shows that households that adopted broadband are on average 8.1% more likely to be employed, and earned on average 2,202 USD higher annual household income. Lack of internet access has also been consistently linked to a high risk of mortality from COVID-19. Hence, the capability to access and work with data and digital technology should be considered as fundamental human rights. Without it, there are no opportunities to access what the knowledge economy and digital connectivity can provide.


Is Inequality Persistent in Thailand?

Thai people are renowned for being active online with some of the highest proportions of social media users in the world. Approximately 50.05 million Facebook users are located in Thailand, representing 71.5% of the country’s population. The smartphone penetration rate was 59.3% in 2022, ranking Thailand the 12th place in the world. Thailand also ranks 87th in the world with 54.5 million internet users (77.8% of the country’s total population).


While Thailand’s internet availability is high, affordability and adoption remain problematic. According to the International Telecommunication Union (ITU) and TDRI, only 21% of Thai households have computers, which is lower than the global average and the developing countries’ average, at 49% and 38% respectively. Moreover, computer affordability is worse for low-income households. According to the National Statistical Office of Thailand in 2017, only 3% of low-income households (households with an average annual income of less than 200,000 baht) have Internet-connected computers, compared to 19% of households with higher income. Low accessibility to proper digital devices has caused immense inequality for Thai students’ education, especially since the start of the Covid-19 pandemic. Covid-19 has widened the gap of digital divide among students as learning has been moved online. Recent studies suggest  that learning loss will be the greatest among low-income students as they are less likely to have access to high-quality remote learning or to a conducive learning environment, such as a quiet space with minimal distractions, to devices they do not need to share, to high-speed internet, and to parental academic supervision. 


Digital inequality has not only amplified the importance of technology in education, but also affected the wellbeing of Thais. During the pandemic, the Thai government offered subsidy programs to help Thai citizens with their economic hardships. The most well-known package was “Khon La Khrueng”, roughly translated as “Let’s Go Halves”, in which the government subsidized half of all qualifying payments via an e-wallet application. To sign up for government’s aid and make payments, individuals needed to have internet-capable devices, data plans, and access to Wi-Fi to receive the benefit. 


Given Thailand’s smart device penetration rate of 59.3%, this meant that almost half the Thai population were excluded from the government program. Challenges also emerged in relation to adoption: elderly and low-income persons who were likely to be targets of such campaigns were also less likely to be familiar with using mobile applications.  


Due to these issues, the government was pressured to allow people to register for “Khon La Khrueng” offline at branches of government-supported banks, resulting in lengthy waiting lines. The congestion at the banks made many people lose work opportunities while still not alleviating the struggle to register for the package. This case truly highlights the need for digital education to be able to obtain a fundamental support population in the present world. 


What Has Been Done to Reduce Digital Inequality

As highlighted previously, there are three main obstacles that prevent the realization of digital inclusion: availability, affordability, and adoption. This section will focus on the approaches taken by private organizations, governments, and financial institutions to reduce the gap in each dimension.



Hardware innovation has emerged as a way to improve the accessibility of the internet. Starlink, a low-latency broadband internet system project, has introduced the internet via satellite, which is expected to benefit people in remote areas where telecom cell sites and fixed broadband internet services are inaccessible. The average download speed for Starlink is slightly below the average for the entire fixed wireless internet category, at 105 Mbps and 131 Mbps respectively (though far better than rivals Viasat and HughesNet). Although there is still much to be done (Starlink will likely need at least 10,000 satellites to cover a majority of the globe), rapid progress has already been made, with Starlink available in 32 countries, using more than 2,300 satellites.


Governments are also acknowledging and trying to solve this infrastructure issue. Net Pracharat, a nationwide project aimed to extend high-speed internet to all villages in Thailand, covered 24,700 villages with free public Wi-Fi hotspots in 2017 and reached 6.6 million users in 2019. However, problems remain. Internet use from community locations declined during the pandemic as a result of concerns regarding the spread of Covid-19 in public areas.  Similar projects have been developed to increase internet connectivity, including National Broadband Plan (Philippines) and Palapa Ring (Indonesia). This highlights the need to expand internet connectivity programs to households, not just public areas. 


Recently, Kasikornbank has introduced Solar Plus, offering a free of charge service of solar roof installation for Thai households. Proven by Teltonika and Bartech, the service could be combined with cellular routers, offering internet connectivity for households. This self-sustained technology would provide the end-users superior internet connection in places without access to the power distribution grid. It would therefore allow expansion of internet connectivity at a more affordable price.



Although the price of internet devices has been declining, upfront costs remain a major barrier for the low-income population. Thus, some governments have implemented smartphone and computer subsidies for low-income or senior citizens to increase adoption. For example, Singapore has a program called Mobile Access for Seniors which provides subsidized smartphones and mobile plans to low-income seniors.  The Singaporean government has also offered affordable-price computers to students or persons with disabilities who come from low-income households via the project “NEU PC Plus”. The Vietnamese Ministry of Information and Communications in collaboration with smartphones’ manufacturers launched a universal smartphone program, aiming to push smartphone penetration to 100% by reducing the price of a smartphone to approximately 20 USD. 


Private entities have also begun finding ways to reduce this gap. For example, UOB launched a project called UOB My Digital Space which provided students in Singapore with digital learning devices including a new laptop and a Wi-Fi dongle with monthly data usage together with online learning resources to take them beyond the school curricula for their longer-term development.



To date, most efforts aimed at closing the digital inequality gap have focused primarily on availability and affordability problems. Although investment by government and private sector players to build out the requisite infrastructure and make internet service affordable are critical, the benefits will not be fully realized if households lack the knowledge to use and fully realize the benefit of these services. Accordingly, several startups have emerged to tackle this challenge. Jules, a Singapore-based startup, works with 200 preschools in Singapore, Malaysia, Vietnam, Taiwan and China to train children between the ages of four to eight in computational thinking. The company runs a “School of Fish” curriculum where children are taught digital skills such as programming, animation, and game design through games and animated storytelling. Ruangguru is an Indonesia-based startup that collaborated with the country’s Ministry of Communication and Informatics (Kominfo) to create Indonesia’s Digital Literacy Space Program in 2021. The company created content that covers digital security, digital ethics, and digital culture. The program is expected to train 50 million students by 2024. In addition to startup efforts, Saturday School, a Thai educational non-profit foundation, creates the Saturday Film camping program aiming to equip students with the skills necessary to convey stories through various kinds of media. The foundation has also partnered with corporations to foster children’s digital literacy via several projects including Young Safe Internet Leader Camp Version 1.0.


Financial institutions are also launching initiatives to increase digital literacy. KLOUD is an example of a project by Kasikornbank that aims to facilitate individuals’ learning by offering a co-working space to offer an alternative space to students who lack internet access or appropriate learning environments. KLOUD also hosts knowledge sharing events for the public, including financial literacy, cyber literacy and green awareness. 


The adoption barrier is also a huge threat for ASEAN nations competing in the digital economy. Despite having the third largest population in the world, the sixth highest GDP, and the fourth highest trade value, ASEAN’s digital economy only accounts for 7% of its GDP, lagging behind China’s 16%, the EU-5’s 27%, and the US’s 35%. Accordingly, the Go Digital ASEAN program was launched to increase digital skills participation across all 10 ASEAN nations, reaching everyone from farmers and home-based handicrafts producers to small-scale hotels, restaurants, and shops. The project has already reached Phase 2, which will provide more advanced training for up to 200,000 underserved MSMEs on skills like business and financial literacy.


Closing Thoughts

Digital inequality is not all about internet connectivity. Despite considerable investment to develop the necessary infrastructure, the advantages will not be fully realized until people embrace and use the services. In other words, the affordability of data plans and devices together with digital literacy are essential to cope with the digital divide.


Although the situation of digital inequality in Thailand is relatively less severe compared to neighboring countries, many Thai students were still left behind when in-class instruction switched to online learning. Thais from lower socio-economic backgrounds were also left behind with unequal access to government programs intended to provide economic relief.

So far, both private and public sectors have made tremendous efforts to narrow the digital gap and include all people in digital transformation. Still, there are countless steps left to reach the goal of digital equality. Research shows that digital agents are crucial for getting people to adapt to digital technology. Banks can utilize their current resources, primarily staff and physical branches, to deploy agents and help close the inequality gap. Particularly in Thailand, bank branches are all over the country and can play a leading role in driving adoption in rural areas. As financial transactions are increasingly executed online, instead of laying off branch staff, banks may consider changing their role from day-to-day transaction operators to digital navigators who can educate banks’ clients in-person about how to make financial transactions online, troubleshoot issues, and other digital skills such as helping them to become familiar with banks’ digital products. This transformation shortens the time to achieve the goal of digital equality. 


Banks may also share digital infrastructure to individuals, which could help increase the level of internet accessibility, especially in the rural areas where households rarely have internet access. Since branches and ATMs always need to be connected with the internet, banks might see an opportunity to split the network and share public Wi-Fi to facilitate bank-related activities.  A similar project was seen in New York City in 2015, using payphones instead of ATMs.  In that program (LinkNYC), payphones in New York City were transformed into free Wi-Fi hotspots


In conclusion, all three factors that contribute to digital inequality (availability, affordability, and adoption) must be considered as part of the transition plan so that all humans have equal opportunity to thrive in the new digital economy.


About Beacon Impact Fund

In recent years, society has placed an ever-growing level of importance on social impact.  As seen in the examples above, many of the world’s problems (whether they be categorized as environmental, social, or governance issues) are being tackled by startups, which are well suited for the fast experimentation and innovation needed to address these problems. Kasikornbank, as one of Thailand’s leading financial institutions, has also launched many ESG initiatives to help drive Thailand’s transition to a sustainable economy, including several of the projects discussed previously regarding digital inequality.  It is clear that affecting material change to these areas requires active participation by all.


Beacon VC sees a great opportunity to not only support these startups which are seeking to create positive social impact, but also to drive the conversation and collaboration between startups and large corporations to magnify and accelerate that impact, and is proud to announce the launch of the Beacon Impact Fund.  Beacon Impact Fund is a 30 MUSD fund that will invest in for-profit startups that have quantifiable, sustainable, and scalable impact. Beacon Impact Fund intends to invest to accelerate the shift to a sustainable economy, improve social equality by promoting financial inclusion, digital literacy, and equal-opportunity growth, and to support good governance and privacy protections in both business and consumer markets.  The hope is for the Beacon Impact Fund to inspire new generations of innovators to solve the planet’s biggest challenges, and to inspire investors and institutions to take a proactive approach to creating impact, as achieving meaningful impact will require support by all stakeholders.





Author: Supamas Bunmee (Jae)
Editors: Krongkamol Deleon (Joy), Woraphot Kingkawkantong (Ping)

Making sense of the Crypto M&A wild west world

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“It is a wild wild west out there right now; there’s no framework” – Vanessa Grellet, Managing Partner of Aglaé Ventures at Permissionless 2022


The M&A scene in the crypto market is relatively young. Nevertheless, the industry has witnessed an ever-growing number of deals over the past few quarters. While the crypto M&A industry is still evolving, analysis of the current state of the industry can give readers a basic framework and thought-starters to comprehend this nascent phenomenon.

Market conditions favor a Crypto M&A boom

In the past several months, the entire crypto market has weathered storm after storm, which, although not necessarily started by Luna’s collapse, was definitely exacerbated by said collapse. Nevertheless, many seasoned Crypto Believers remain hopeful, as true innovations are born in crypto winters, learning from the past and paving the way for the next crypto summer.

As the market retreats from the high-yield gold rush, innovators must develop sustainable innovations with real use cases, such as decentralized identity solutions or blockchain security and protocol audits, making the crypto market, or the general Web3 industry as a whole, more appealing to institutional investors.

Institutional investor’s appetite for engagement in crypto manifests in many forms, including building a dedicated team to develop solutions in the crypto space (for example, KBank’s Kubix), investing in crypto tokens (an emerging area still under consideration by some regulators), investment into crypto native VC funds (such as Pantera Capital), and conducting Merger & Acquisition transactions (“M&A”).

Despite being a staple in the TradFi industry, M&A in the crypto market is a relatively new but robust phenomenon. According to Blockworks, M&A activity in 2021 tripled to 180 deals from 59 deals in 2020, and the industry already has seen over 92 deals in the first half of 2022. Many industry experts believe that industry participants will witness even faster growth of M&A activity over the next year as crypto winters present an opportunity to shop for companies or projects at a very low valuation.

Crypto M&A helps accelerate innovation within the industry

At its core, decentralization promises the elimination of intermediaries, and Crypto Believers see this as a very important evolutionary step in our civilization. With the industry being in its early days, full decentralization requires a massive attempt to build necessary infrastructures, develop appealing products and services, recruit communities, and unite ecosystems. For these to happen, innovation within the Crypto industry must occur not only for Crypto Believer’s hedonism or altruism but also for economic and financial reasons.

As many people believe that innovation is a way out of this crypto winter, M&A can accelerate the rate of innovation within the Crypto space expanding the possibility for innovators to get incentivized for their endeavors, which is especially important during this turbulent time. More M&A activities in the space create a positive feedback loop for more innovation. In addition, having M&A as one of the exit goals, innovators are required to think about the monetization, economics, and risks of their projects early on, giving the innovation landscape the ability to withstand shocks in the long run.

What types of M&A can the industry expect?

Traditional reasons for M&A typically fall into four categories, corresponding to that industry’s life cycle: capability acquisition, market access & customer acquisition, promoting economies of scale, and market consolidation.

M&A objectives by industry life stage

Source: Beacon VC internal analysis

Despite the shrinking market capitalization during crypto winter, many Crypto Believers think the market is still in the early or growth stage, meaning that most upcoming M&A activities within the crypto space will be for capability acquisition or market access.

Strategic Motives behind M&A in the Crypto Market

Strategic motives seen in crypto M&A transactions can broadly be categorized by who and whom the acquirer and target are (Enterprise vs. Protocol). To clarify, Enterprise refers to companies with a conventional equity structure (either TradFi or CeFi), managing the organization using a centralized top-down approach, while Protocol refers to Decentralized Applications (D’Apps) or decentralized autonomous organizations (DAOs) with governance tokens representing ownership in a decentralized protocol.

The list of strategic motives below is a sampling of what the market has seen, and is by no means meant to be totally conclusive.

Overview of Crypto M&A transaction motives

Source: Beacon VC internal analysis


Given regulatory uncertainties, especially for DeFi, not all enterprises are ready to offer on-chain DeFi products or services, but many see the opportunity to capture the value created in the crypto space. Enterprises looking for a less risky way to engage with the crypto market are eying infrastructure provider/ enabler play, which is achievable through acquiring existing infrastructure, blockchain enablers, or CeFi companies. The types of services that will be provided by enterprises for the crypto industry include wallet and custodian services, auditing services, or blockchain-as-a-service, similar to what AWS does for Web2. Paypal’s acquisition of Curv is a great example of this strategy.

CeFi companies can also be acquirers, especially large CeFi exchanges looking to enter new jurisdictions. The target would likely be existing CeFi exchanges with local licenses and hopefully good relationships with regulators. FTX’s acquisition of Liquid Group, then rebranding it to FTX Japan, reflects this strategy.

Innovation Leapfrogging

Innovation happens fast, often faster than blockchain-native CeFi companies can keep up. Acquiring frontier protocols allows companies to leapfrog their competition. In fact, many industry experts expect that CeFi exchanges to be the most active acquirers. Coinbase, for instance, has made more than 20 acquisitions since its inception, accounting for over $800 million in acquisitions.

Traditional enterprises are also developing a clearer picture of their long-term strategy and crashing the protocol acquisition party to accelerate innovation. For example, eBay recently acquired NFT marketplace KnowOrigin as a part of its ‘reimagine eBay strategy’.

Real-world Capability Cultivation

Successful decentralized protocols rely heavily on their communities to push out innovations and build infrastructure. As these projects tend to scale rapidly, many lack sufficient resources to handle the ecosystem. 

Many successful protocols that are cash-rich may take crypto winter as an opportunity to develop internal capabilities for the next crypto summer, by acquiring traditional companies to develop real-world capabilities. The acquisition target for these protocols would likely be an existing vendor or supplier to that protocol, as the community already has buy-in for the value that the target is able to generate. Sandbox’s recent acquisition of Uruguayan tech firm Caulit is a great demonstration of the attempt.

Synergy Building

As previously discussed, successful projects place high importance on their communities and the platform’s ability to maintain the community. During crypto summer, investor goodwill is high, and funding is easy to come by. When investor money is tight, however, projects and their communities turn to each other in the hope of sharing resources and growing their footprint in a more cost-efficient manner.

The acquisition motive for synergy can take many forms. One can be product-driven similar to Uniswap’s acquisition of Genie, an NFT marketplace aggregator, to complement its existing NFT liquidity pool – Unisocks. Another could be efficiency-driven similar to the Rari-Fei protocol merger to create a mega $2B liquidity pool.

Possible Structures of Crypto M&A

There is still very limited disclosed information on the deal structure, therefore the structures described below are solely based on market observations and internal analysis. In addition, there are still several challenges in executing a crypto M&A, and there is no standard playbook. In general, however, the Equity/ Token Direct Acquisition is the default method of M&A for its relative simplicity for all types of M&A motives, while Token Swap and Token Merge happen exclusively within Protocol-Protocol acquisition.

Level of control associated with transaction structures

Source: Beacon VC internal analysis

Equity/ Token Direct Acquisition

The direct acquisition method involves purchasing a controlling stake of the target’s equity or governance token, usually aiming to acquire total operational and directional control of the target. The process is executed similarly to traditional M&As, where both parties agree on the transaction price, draft legal documents, execute the agreements, and transfer the securities (or tokens). 

Unlike traditional M&As, there are still several challenges in crypto M&A such as token valuation, legal recognition of governance tokens as an acquirable asset, governing jurisdiction, and the absence of a legal entity for many crypto protocols. With these complexities, it is not surprising that the deal structure for direct acquisition will vary greatly, depending on the specific challenges of the deal.

Token Merge

Token merge happens when the acquirer and acquiree merge to form a new entity and issue a new token. Under this structure, both parties have approximately similar bargaining power, knowing that each party cannot succeed without the other party’s strength. The aforementioned Fei-Rari Merger is a great example for this case. Token holders of Fei and Rari would exchange their respective tokens for a new TRIBE token, under the project name FeiRari. 

Some other remarkable token mergers include the WRAP-PLENTY token merge into PLY to provide a more comprehensive all-in-one DeFi experience on the Tezos blockchain. More details on the merge mechanics are available here.

Token Swap

Token swap usually happens when the acquirer has a larger market capitalization compared to the target, and is looking to acquire smaller projects to complement or help complete its current product or service suite. Unlike total acquisition, the acquirer wants to allow the target company autonomy to operate and innovate. To put it in simpler terms, as Cointelegraph has put it, token swaps can be viewed as a crypto partnership on steroids, to drive the stickiness of the main ecosystem. TNC’s, a blockchain network company, announcement of 4 token swap transactions is an example of this pursuit.

Executing token swap transactions requires multiple smart contracts to manage both parties’ tokens staking into each other’s platforms, or through a shared wallet. The swap itself is a smart contract design problem, but the real challenge happens pre-transaction, similar to the token merge structure, as successful conclusion of the deal involves an extensive community buy-in program for both parties’ stakeholders, not only to align at the financial level, but also to align on project directions. 

Some Areas with Still More Questions than Answers

There are still many questions in the crypto M&A space that need to be answered. Most remaining questions are related to the execution of transactions, since there is still limited understanding of blockchain economics, and an unclear regulatory framework surrounding the space. Below are some of the biggest questions by stage of transaction that deal practitioners are trying to answer.


Valuation: How to value the project as a basis for acquisition? 

At the moment, there is no definitive approach to value crypto-based companies for general investment or M&A, creating tremendous difficulties at the negotiation table. 

Some of the methodologies being used to uncover ‘fair value’ of the project include:

  1. Market Approach – use comparable tokens and respective market price/ capitalization ratios;
  2. Cost Approach – approximation of input cost to create that specific token or project as a lower bound of valuation range;
  3. Income Approach – discount the future economic benefit or utility of such protocol at an ‘appropriate’ discount rate; and
  4. TQM or Quantity Theory of Money approach – approximation of equilibrium market capitalization value in the future, discounted to estimate the present value of the project.

These approaches are inherently subjective by nature, and the characteristic of tokens in each project also brings tremendous complexity.  For a deep dive into crypto valuation, follow the link to EY’s report on the valuation of crypto-asset or’s guide to crypto valuation.


Utilization of on-chain transparency: How to best leverage the abundance of on-chain data for deal-making?

On-chain data promises to help investors make smarter and more well-informed decisions. However, only a handful of investors really understand how to mine insights from the blockchain. Most investors lack the right tools to conduct on-chain due diligence, and further development of the market requires investors to explore how best to leverage on-chain data.

During-transaction/ Deal-making

Agreement drafting and enforceability: How to ensure that the transaction is legally enforceable and minimizes counterparty risk?

The difficulty of enforceability arises from the discrepancies in how different jurisdictions recognize digital assets or DAO entities, or the lack of recognition in several jurisdictions. Cambridge Judge School of Business provides a deeper analysis of the legal and regulatory framework of different nations. In addition, many institutions are subject to anti-money laundering regulations, requiring that any transactions or activities be free of potential money laundering activities. As decentralized blockchain transactions are anonymous in nature, such institutions may be unable to participate in these transactions. 

Legal practitioners and deal makers have been trying to popularize provisions, which protect both parties, including adverse materials, definitions of digital assets, and agreement termination clauses. Bloomberg Law has published a great analysis piece on crypto drafting trends. 


Means of payment and volatility hedging: How to shield parties from the volatility of digital currency as means of payment?

While there is strong demand to use digital currency as means of settlement for crypto M&A (either for tax, transaction speed, or any other reasons), the high volatility within the market prompts both acquirer and target to question how to best shield their position. At the current stage of the market, there aren’t many cost-effective hedging options available, even for institutional investors.


Integration of technologies and communities: How to ensure successful post-merger community and technology integration?

Many M&A transactions ultimately fail due to a lack of compatibility between entities. Integrating two blockchain projects and work processes is a major problem, as currently there is no standardization between projects. Another problem is how to best handle the two communities, whose interests and passion for the projects may not fully align.

Closing thoughts – the beginning of beginnings

With the industry learning more about crypto M&A, we hope that industry participants are working to close the industry’s understanding gap in good faith and for the sake of innovation, and not in an exploitative mindset. 

While many people hope that decentralization would become one of the most prominent turning points of mankind, there are several pieces of evidence suggesting that M&A activities can adversely affect the rate of innovation in a monopolistic or oligopolistic market environment. Acquirers must strive to remember that these transactions must be done for the sake of value creation for all stakeholders, and in pursuit of the betterment of society. Only with the joint hands of institutions and innovators to lay the groundwork and create meaningful solutions, the pursuit of decentralization dreamworks can be realized.

Author: Woraphot Kingkawkantong (Ping)
Editors: Krongkamol Deleon (Joy), Wanwares Boonkong (Pin)

A New Wave of Finance: Banking-as-a-Service and Data-as-a-Service

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You might have heard of “Open Banking”, “Banking-as-a-Service” and “Data-as-a-Service” and wondered how these terms differ.

Open Banking and Banking-as-a-Service both provide banking services via open connections or open APIs to third parties. While open banking provides access to the data of existing bank customers, Banking-as-a-Service (BaaS) provides access to bank functionality, so that non-bank companies can connect users outside a bank’s existing footprint to banking services. On the other hand, Data-as-a-Service (DaaS) is a service that uses the cloud to deliver value-added data via a network connection. In some contexts, there may be overlapping use-cases between BaaS and DaaS. For example, providing transaction data through API can be considered as both BaaS and DaaS.

1Q2021 Beacon Quarterly Insight will briefly explain to you the definition of BaaS and DaaS (in financial services context), together with market landscape and use cases.


Banking-as-a-Service (BaaS)

What is BaaS?

BaaS is an on-demand service that enables users to access financial services (e.g. payments and banking data) over the internet using application programming interfaces (APIs) and cloud-based systems. For instance, a fintech company pays fees to BaaS providers (banks or non-banks) in exchange for API usage. The fintech company then uses APIs to build new financial services solutions for customers.

BaaS allows financial services to be embedded in a wide variety of software and applications. This is also called “Embedded Finance.”

Nowadays, digital brands are embedding financial services into their customer touchpoints, creating more BaaS providers. Many tech companies have realized that their talents are best spent on their core business, thus they are outsourcing to specialists to provide the infrastructure to run financial services at scale.

The BaaS ecosystem includes three parties: brands, BaaS providers, and license holders. License holders rent licenses out, often through partnerships with providers. Providers offer modular financial capabilities to brands to embed financial services in their customer offering. This allows license holders to focus on regulatory compliance and to shift the technological development to providers. BaaS providers would fill in the gap of license holders’ high cost of maintaining pace with regulation.

Examples of BaaS Providers

There are two types of BaaS providers: BaaS-focused fintechs and BaaS with a banking license. Marqeta is a pure BaaS provider in the US. Marqeta offers payments and debit cards programs focusing on card-control features and real-time experiences. In Europe, Railsbank works with payment processors, banks and fintechs to create debit cards, payments and FX through one API.

Examples of commercial banks engaged in BaaS include BBVA and Goldman Sachs.  BBVA Open Platform is a platform that uses APIs to let firms offer their customers financial products without having to take on full banking themselves. In addition, BBVA partnered with Uber in Mexico. In Jan 2020, Goldman Sachs announced its intent to build full BaaS capability: its cloud native, fully API-based platform which is scalable and secured. Already, they have built a new cloud-based infrastructure for accounts and payments, and have released access via APIs for developers to easily integrate new products on top of the platform.

The Landscape of BaaS in Thailand

BaaS players in Thailand are limited; however, there are initiatives from traditional banks.

Thai commercial banks such as Siam Commercial Bank (SCB) and Kasikornbank (KBank) have begun offering open API functions. Open Banking APIs include loan origination, payments, identity sharing, authentication, and slip verification.

There has been very little regulatory conversation about Open Banking in Thailand and to date, regulators have not initiated any frameworks or regulations on this issue. Nevertheless, there is room for financial service providers to experiment through Bank of Thailand’s regulatory sandbox.

In the Asia Pacific region, only Australia currently requires account providers to allow authorized TPPs to access customer data and initiate payments on behalf of clients. The Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority (HKMA) do not require that financial institutions provide open APIs, but have consulted with industry experts  to create open API playbooks for banks.


Data-as-a-Service (DaaS) 

What is DaaS?

DaaS providers capture, clean, organize, and process data from various sources. DaaS providers then deliver these value-added data services in different forms to clients mostly through APIs or Software-as-a-Service (SaaS) platforms. B2B clients of DaaS providers utilize data to build incremental business results or improve their products and services for their end customers. In B2C business models, end customers utilize data such as credit monitoring data in exchange of money or other incentives. The data comes in various forms including raw data, aggregated data, statistically analyzed data, visualized data, or advanced analytics.

According to IDC, there are multiple possible stakeholders in the DaaS ecosystem that are involved in different stages of service. Data Collectors obtain data from different sources. Data Providers process or analyze data before offering value-added data services such as transaction and customer insights to their clients. In some cases, clients can obtain data through Data Marketplaces, which are platforms where users buy or sell different types of data sets and data streams from several Data Providers.

DaaS landscape

According to Mordor Intelligence, a global market research firm, the highest growth of the DaaS market is found in APAC. Growth of the DaaS market is expected to directly correlate with the growth of end-user industries e.g. financial service DaaS market growth correlates with increased financial inclusion. Further, as DaaS is based on a cloud deployment model, its growth also correlates with cloud computing adoption. According to Forbes, demand for cloud computing is expected to increase to USD 160 billion by 2020, attaining a growth rate of 19%. According to synergy research group, although the APAC region does not yet account for a third of the worldwide market, it is growing much faster than the North American or EMEA regional markets.

Examples of DaaS Providers

There are several DaaS providers supporting the financial services industry.  Examples include Equifax, Mastercard, UnionBank, and DBS.

Equifax, an American multinational consumer credit reporting agency, provides credit and demographic data to business and sells credit monitoring and fraud prevention services directly to consumers. Mastercard offers a powerful analytics platform that enables organizations to make better and faster business decisions based on real-time, anonymized and aggregated transaction data, and proprietary analysis.

Among the financial institutions engaged in the DaaS industry, UnionBank provides an API Marketplace that empowers developers to create new products and services by leveraging data from UnionBank and other fintech players. Another bank, DBS,  has built BaaS and DaaS APIs for business clients. Each has a specific function related to sharing information and instructions, from balance inquiries to data required in settling a payment.

The Landscape of DaaS  in Thailand

Similar to BaaS, the number of DaaS players in Thailand is currently limited compared to other countries like Singapore or UK where there are regulatory body-led initiatives regarding Open-API or Open-Banking.

There are two major initiatives in Thailand related to data and DaaS: NDID and PDPA. Initiated by Bank of Thailand, NDID (National Digital ID) is a platform to provide identity authentication (eKYC) that allows customers to do 100% online transactions such as eOpen Accounts and Digital Lending. DaaS providers will need to take into account the impact of  NDID once it is fully rolled out. Another potential concern for DaaS providers is the Personal Data Protection Act (PDPA), Thailand’s streamlined version of the European GDPR. Of great relevance here is that the usage of data and API goes hand-in-hand with the data protection legislation.

Closing thoughts:

Perfecting the customer experience is the ultimate goal of consumer-facing companies. Financial services and data help companies improve the customer experience, which provides opportunities for different stakeholders in BaaS and DaaS to play in the ecosystem. BaaS and DaaS business models allow different stakeholders to utilize their strengths and at the same time minimize costs by outsourcing the areas where they lack expertise. Therefore, players must identify their unique competitive advantage within the ecosystem in order to win this new-wave-of-finance game. In Thailand, financial institutions play a big role in implementing new banking technology. They quickly adapt to change as the industry is highly competitive. Therefore, they potentially expand their roles from license holders to BaaS and DaaS providers. Nevertheless, fintechs are likely to get a piece of a pie by providing products and services at lower cost and greater quality.

Authors: Panuchanad Phunkitjakran (Pook) and Phanthila Saengthong (Mook)

Editor: Krongkamol Deleon (Joy)

Business Insider’s BaaS market outlook for 2021:

11:FS’s Banking as a service report:

IDC Market Glance: Data as a Service:

Big Data as a Service market:

Other interesting reads:



SPAC – A New Potential Exit Strategy for Startups

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As startups grow their revenue and user bases after several rounds of private fundraising, they  have a variety of exit options including acquisition by a larger company or going public, either through a traditional Initial Public Offering (IPO) or a direct listing. A new option, SPAC (Special Purpose Acquisition Company), has recently gained popularity as an exit option to go public for startups, especially in the United States.

Deep Dive into SPAC

Overview of SPACs

A SPAC is a company that is formed to raise funds through an IPO with a purpose of acquiring a private company and taking the target company public. It is normally established by a group of investors called sponsors, and it must be registered with the Securities and Exchange Commission (SEC). These sponsors have 2 years to find a target company while the funds are placed in an interest-bearing trust account. If they cannot find a target company within the given period, they must liquidate the SPAC and return the money to investors.

One of the most high-profile SPAC deals is the acquisition of 49% of Virgin Galactic for $800M by ex-Facebook executive Chamath Palihapitiya’s SPAC Social Capital Hedosophia Holding in 2019. An upcoming SPAC deal is the merger between SoFi, a consumer financial services startup, and Social Capital Hedosophia Holding Corp V, which would value the company at $8.65B. Recently, Pershing Square Tontine Holding debuted as the largest SPAC with a total raise of $4B in July 2020.

Target Companies for SPACs

The ideal candidate for a SPAC contains 3 qualities:

  1. Growth-stage companies operating in a high-growth industry which have the operations and support from the management team to go public;
  2. Companies that are looking for fast alternative means with limited market and timing risk to go public and;
  3. Companies that are searching for access to capital or liquidity routes during uncertain equity and debt markets.

Moreover, the size of target companies may vary depending on how much money the SPAC can raise. But smaller companies, typically with less than $100M annual revenue, tend to go public via SPAC as they have high growth prospects, but may not meet the qualified threshold for an IPO. Therefore, mature startups are attractive targets for the SPAC sponsors to take public.

SPAC Comeback 

Even though SPACs have been around for decades, 2020 was a year to be remembered for SPACs. The key reason is because investors are searching for yield in a low interest rate environment with a volatile stock market. According to SPACinsider, a total of 248 SPACs filed for IPO, raising a total of $83B in gross proceeds in 2020. Compared to 2019, 2020 had more than 4 times the number of SPAC IPOs, and 6 times higher fundraising amount. The number and size of SPACs are getting larger than ever before. It is also becoming more common for VC funds to launch their SPAC to bring their mature portfolio companies public as for the case of FirstMark Capital. Prominent underwriters such as Goldman Sachs, Credit Suisse and Deutsche Bank are stepping into the game.

Advantages of SPACs

  • Cheaper: the cost of SPAC IPO is 2% of the gross proceeds
  • Speed to market: the faster process of SPAC ranges from 2-4 months can accelerate the company’s market entry
  • Investor’s assurance: The SPAC secures a long-term group of investors through private placement in public equity instead of sell a company at IPO roadshow
  • Higher sale price: by selling to a SPAC, the sale price is 20% higher than that of private equity deal as SPAC is not mainly driven by ROI first approach and allows the company’s management to evaluate opportunities from both short-term and long-term perspective
  • Price transparency: For investor, the price of SPAC is not determined a night before the IPO

Disadvantages of SPACs

  • Uncertain investment: the investors do not know the target company of the SPAC, so it is impossible to evaluate the investment opportunity
  • Potential long lag time: there might be a long interval between the time the investors put money in the SPAC and when it acquires a target company
  • Mixed track record: the performance of the merged SPAC hardly beats the market index and often underperforms, particularly 3-12 months after the acquisition
  • High dependence on sponsor’s credentials: Investors have to largely rely on sponsor’s profile as attractive SPAC candidates would choose high-profile sponsors to acquire and manage the company

Going Public via SPAC VS IPO

In spite of the same end goal, there are several differences between going public via SPAC and traditional IPO in terms of cost, process, time, and risks.

The following table demonstrates the key differences between the 2 methods:

A Glimpse of SPACs in Asian Markets

The concept of SPACs already exists in Asia as Hong Kong, Malaysia, and South Korea have been adopting SPAC for the past 5-6 years. For instance, in 2014 Reach Energy completed the country’s largest SPAC-enabled listing of $229M in Kuala Lampur, Malaysia. Hong Kong has gradually emerged as the second largest area for SPACs as its investment community has better insights in China, Asia Pacific, and Southeast Asia (SEA). Therefore, Hong Kong SPACs have a better chance of acquiring high potential startups compared to the rest of Asia.

According to the Asia Times Financial, the Asia Pacific region has increasingly embraced the use of SPACs as an exit option for mature technology firms. Compared to the number of transactions in 2019, the number of SPAC IPO transactions were four times higher in 2020.

SPAC transactions in Asia are expected to be more common in the coming years. Various investors in the region have been active in this market. For instance, Anthony Lueng, the former finance secretary of Hong Kong and an ex-Blackstone Asia executive, is regarded as the father of Asian SPAC investments. He bought United Family Health in 2019 via his SPAC which had raised a total of $1.5B from the New York Stock Exchange.

Southeast Asia is no exception as SEA’s tech unicorns have received growing interest from SPAC sponsors. Grab and Gojek (ride-hailing and food delivery giants in SEA), Bukalapak (leading e-commerce firm in Indonesia), and Traveloka (SEA’s largest online travel app) have all been approached by several SPACs. Tokopedia, another prominent e-commerce player in Indonesia, has received acquisition interest from Bridgetown Holdings, a $550M SPAC backed by Richard Li, a Hong Kong businessman, and Peter Thiel, a Silicon Valley investor. If this deal is successful, it may inspire other tech unicorns in SEA to follow suit, sparking a boom of SPAC transactions in SEA.

The Implications of Future Fundraising in the Startup Space

Given the surging trend of SPAC exits, there are several implications that we can expect to see in the startup space as follows:

  • It is a significant opportunity for SEA’s mature startups that may not yet meet certain IPO thresholds to get listed in the U.S. stock markets where the company can anticipate deeper liquidity than their home country;
  • Additional channels to access capital markets and exit opportunities gives founders capital to initiate new ventures, which could further boost SEA’s startup ecosystem;
  • High number of SPAC IPOs could potentially shift the bargaining power to the target companies;
  • VC firms could raise SPACs of their own to bring late-stage portfolio companies public, which could further accelerate the local tech IPO;
  • Nevertheless, exchanges in SEA are at a disadvantage of losing local tech IPOs either they do not allow SPAC IPOs or smaller markets compared to the U.S., meaning that the value of SEA startups are seized and gained by foreign investors. Local retail investors will not have the opportunity to invest in these high-growth startups in the region that they are familiar with.

Startups need to carefully weigh the costs and benefits of going public via SPAC. Even though access to the capital markets is crucial to grow in an increasingly competitive environment, it eventually comes down to the readiness of the company’s performance and the management team in order to go public successfully.

Author: Wanwares Boonkong

Editor: Krongkamol DeLeon

Sources and Other interesting reads:

Overview of the e-sports industry in Thailand

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What are e-sports?

The gaming industry encompasses many types of businesses and revenue streams.  E-sports in general refers to the professional gaming market, where players can earn an actual living through their gaming skills.

E-sports in Thailand can be broadly divided into three pillars:

  1. Game Development and Publishing: the development of new games and/or the business of securing distribution licenses for games in various regions
  2. Event Organization: businesses which secure the right to organize events, such as official gaming tournaments
  3. Professional Gaming: individuals or teams who compete in professionally organized and broadcasted tournaments, or who stream their personal gaming sessions online

The global e-sports market is expanding rapidly. NewZoo’s market research estimates that global e-sports revenues will reach USD 1.1 billion in 2020, mostly driven by media rights and sponsorships.  South Korea, China, and the United States are the three most competitive e-sports markets in the world, as measured by total prize money.

According to NewZoo, Thailand is currently the 19th largest market for video games, generating USD 667 million per year in revenue.  While most of this revenue came from traditional video game sales (not from e-sports), there is evidence of growing demand for e-sports in Thailand.  There are an estimated 27 million gamers in Thailand, and Garena cited that in 2019, online views of Arena of Valor’s Season 3 tournament play have exceeded 51 million.

What’s happening with the e-sports market in Thailand?

In recent years, there has been activity from both traditional businesses expanding into the e-sports industry as well as startups attempting to capitalize on the growing demand.  In Thailand, corporate interest has been primarily driven by the telecommunications giants.  Thailand, unlike the US or South Korea, remains a mobile-first gaming country due to strong mobile penetration rates and the high hardware costs associated with PC gaming.  Accordingly, both True and AIS have begun supporting e-sports streaming and tournament organization, viewing the industry as both an opportunity to diversify revenue streams and as a channel to cross-sell their core products.  Due to high capital requirements for game development and publishing, startup companies including Thailand’s Infofed and Indonesia’s Evos are targeting event organization and the professional gaming market to build up the competitiveness of Southeast Asia’s gamers.

What should we look forward to?

For the Thai market in particular, strong barriers remain for the e-sports industry.  The largest barrier has been the mindset of traditional Asian society, which views video games as a childish indulgence.  However, attitudes towards e-sports have gradually been improving, along with increased support from government institutions and universities.  Per Garena’s estimates, successful players can earn as high as THB 5 million per year from streaming and competitions.

Higher education institutions, such as Bangkok University, have begun building curriculum on e-sports, which could help develop more competitive gamers from Thailand to compete an international level.  According to Mr. Jirayod Theppipit, CEO of Infofed, other potential developments to look for in the Thai market could include official university leagues or a Thai national e-sports team. While COVID-19 has temporarily slowed the pace of investment into the e-sports industry, community activity has shot up during the lockdown. As the talent pool increases, industry experts foresee a boom in Thai e-sports once competitive tournaments resume.

From a financial services perspective, fintech has already played an important role in enabling microtransactions and wallets for purchasing in-game items.  However, the rise of competitive e-sports also represents an opportunity for financial service providers to tap into a younger demographic who may be seeking access to bank accounts, wealth management products, and other financial services to support their rising income prospects.  Similar to other athletic professions or influencer segments, e-sports can provide alternative marketing opportunities for financial institutions looking for new ways to connect with the younger generation of consumers.

Author: Krongkamol deLeon (Joy)

Editors: Woraphot KingkawkantongVitavin Ittipanuvat


How startups are braving the Covid-19 pandemic

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In the time of Covid-19, not all startups were created equal. We have seen some startup founders going through some of their worst nightmares, while some others are having the time of their lives. In this article, based on our experience, we want to examine the impact of Covid-19 to the startup community and paint pictures of how these startups are reacting to the situation.

Adapted from Roland Berger’s Covid Impact Matrix, 2020

One way to assess the impact of COVID-19 to startups is through examining the pandemic’s effect on short term liquidity of startups, and the long term profitability (which correlates with the market size of that particular startup’s playing field). This model is adapted from Roland Berger’s Covid Impact Matrix. We then try to map the technology industry by sector into four startup groups: Shining star, Trapped Tiger, Slow Sore, and Panicking Patient, with a definition of long-term as five years.

Model adapted from Roland Berger, analysis by Beacon VC

Shining Star: This group is marked by its strong growth potential in both the short term and long term. Startups in this space are characterized by the ability to create and capture value completely online and ease and/or urgency of adoption. Covid-19 has driven real demand for solutions in this space, accelerated adoption, and trained consumers to be accustomed to using these virtual solutions. The startups that are included in this group are Healthtech, eCommerce, Online Enterprise Productivity Tools (such as ERP and Software-as-a-Service, or SaaS which can cover anything from accounting, CRM, to property management) Online Media & Entertainment, Insurtech, and e-Payment. Unlike other groups, they have the luxury to focus on perfecting, not fixing, their businesses, and riding the wave during the time of Covid-19.

Boost marketing spend to acquire new users: Responding to the growing demand pie in these industries, many startups were seen to have increased marketing spending to obtain new users. We have witnessed different eCommerce giving out very attractive first-time user incentives. This move is endorsed by many researchers suggesting that increasing marketing spend – instead of decreasing, is a dominant strategy in times of economic uncertainty, if the company can afford it.

Nocnoc user acquisition: first-timer discount

Invest to develop new offerings: As lockdown forces the mass from Gen Alpha to Baby Boomers to migrate to online platforms (many wouldn’t have migrated otherwise), several Shining Stars have spotted new business opportunities or new potential use cases for their products that they can capitalize or build loyalty upon. For these startups, they have the privilege to innovate on new offerings without having to worry so much about cash flow. Houseparty, a much loved social networking app that enables group video chatting, for instance, launched a new feature that allows friends to ‘co-watch live events with their friends’ (from sport events to comedy shows).

Integrate new payment mediums to support digital payment of the non-cardholder:  Online payments have traditionally been done through credit card, and a good portion of the now digitally adapted population has no access to them. According to the Thailand payment research by JP Morgan in 2019, Thailand’s credit card per capita is as low as 0.29, and debit card per capita is 0.77. As the Thai population migrated online, startups who have the time and resources are now exploring ways to integrate new online payment methods to facilitate payment from non-credit cardholders (usually students and non-urban population). The alternative payment channel includes payment through mobile operators (credited to monthly billing), cash cards, integration with mobile banking apps, and e-wallets.

Although the Shining Stars are thriving in this new market condition, many have reported difficulties in fundraising. This is because Covid-19 has made networking with investors difficult and many investors are very preoccupied with supporting their own portfolio companies.

Trapped Tiger: This group is poised to ride the wave of the longer-term market growth but currently trapped by short-term illiquidity and/or temporary sales slump. This is because the startups in this space offer complementary value products or services whose values are created offline (such as mobility or B2B logistics), or the demand for their products or services is highly elastic (such as wealthtech). Their main agenda is to outlive the Covid pandemic and prepare themselves for the upcoming bullish market.

Freeze or reduce expenses: As revenue halts, their net burn rate accelerates. Founders are faced with a tough trade-off between how far they want to cut costs (or resources) to keep burn rate under control, and how much resources to preserve so that they can get back on track once the market recovers. We usually witness headcount freeze, pay cut measures (many founders take steeper cuts than their team to keep morale high), reduction of employee benefits, and decrease in marketing spending. Many have moved from aggressive marketing spending (to acquire customers – which is what the Shining Stars are focusing) to defensive marketing spending (to just make their offering stay relevant in the customer’s head).

Finetune existing offerings and prepare for the next big launch: If their cash position allows it, some Trapped Tigers reported that they are optimizing their platforms, developing new features, or redesigning the user experience to be more on point. Many also have plans to formally launch an upgraded version of their offerings to create a strong rebound momentum for their business once the crisis is over.

Explore creative use cases for excess supply/capability: Many startups are also working creatively to capitalize on their excess supply resulting from diminished demand. Zoomcar, a self-driving car rental platform, for instance, has been working to shift the excess car in their system for B2B, medical emergency, and last-mile logistic use.

Slow Sore: The Slow Sores are usually B2B enterprise solutions that have locked down short to medium-term SaaS contracts with large corporates. This is why these companies will likely be able to sustain cash flow in the near future. The solution generally comes in the form of back-end efficiency enabler, data infrastructure, and management tools (such as Enterprise IT and Construction-tech). Nevertheless, to onboard these solutions, the corporates would normally have to go through lengthy configuration and system migration, where the startups would then charge ample implementation fees. We can expect that the Slow Sorer will have a hard time making new sales as corporations will try to preserve cash, diminishing sales potential and profitability in the longer run.

Retain and assist existing clients: Startups are devoting time to retain its original customers through feedback-based product improvements. Startups with longer runways also have considered deferring payment schedules to give breathing room for their clients to sort things out first. Amazon Web Service (AWS) has been running a program to give cloud credits or fee deferrals to small companies who are affected by Covid, helping them to continue operation and delay potential job slash.

AWS gave its small business clients $5,000 credit on cloud service

Reprioritize company’s efforts: Companies are also re-prioritizing their potential clients based on which clients will thrive under the new normal, and shift sales and innovation effort to better suit those growing clients. Many construction-techs are turning their attention to the B2G construction segment, which was once overlooked due to its bureaucratic and traditional approach to business. The reason is that, with the private sector’s growth outlook remaining stagnant, government spending on infrastructure will likely be the only prominent source of industry growth.

Focus on streamlining the onboarding process: Noticing that troublesome and expensive onboarding process is among the key barriers to adoption, many startups are now trying to pursue growth by making the onboard easier and cheaper for their clients. This could mean offering a more standardized solution, a self-guided onboarding wizard, and elimination of implementation fees to target small and medium enterprises.

Panicking Patient: The Panicking Patient group is affected by Covid-19 in every worst way. These startups are behind the industries that are heavily involved with offline activities (such as Traveltech and Eventtech). The light at the end of the tunnel (that comes in the form of Covid-19 vaccines, treatment, or virus mutation to a much weaker strain) for this group still seems far away at the time of writing this article (many expects that the pandemic wouldn’t get resolved for at least another 2 – 3 quarters). These companies are in a big battle for their survival and need to pivot or at least diversify fast.

Extend the company’s cash runway: Like the Trapped Tigers, we have witnessed several expense reduction efforts by the Panicking Patient. Companies are returning office space and adopting the 100% WFH model. Steep pay cuts accompanied by reduced workdays and staff reduction are becoming prevalent. Indonesia-based Traveloka laid off 10% of its employee in April, while Bangkok-based Agoda slashed up to 25% of its workforce in May. Many are also borrowing cash from future revenue by offering prepaid vouchers or unlimited future passes. This example is also evident in the traditional travel industry, in which airlines and spas are selling heavily discounted vouchers to get cash for the survival of their businesses.

Pivot to other businesses: Because it is unclear when the situation will be back to normal, some startups choose to pivot to related business(es). Eventpop or Airbnb, for instance, chose to pivot to the online experience space, offering exclusive online events to its customers from dough making lessons to online meditation events. Some startups went to a more extreme route and completely shifted their businesses. Flying Elephant Production, an Irish startup focusing on exhibition and event setups, pivoting to selling desks made from the excess plywood they have in inventory.

Example of online events offered on Eventpop website

Closing thoughts:

In this difficult time, we hope this piece will spark some food for thought for you and your organization, no matter what roles you play in the ecosystem – founders, investors, corporate partners, or a mere observer. The pandemic forces us into the lifestyle and working mode that we thought would never be possible. Similar to us seeing new joys in the new normal, businesses and startups will see new rooms to thrive. Like what the US President John F. Kennedy once put, “when written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”

Author: Woraphot Kingkawkantong (Ping)
Editors: Wanwares BoonkongVitavin Ittipanuvat
Covid Impact Framework: Roland Berger

Other interesting reads:

The Role of Fintech in the Post-COVID World

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Fear is a powerful factor that creates a fundamental shift in human behavior as the human brain is hard-wired to avoid loss. Scientists and behavioral economists call this “loss aversion.”

We are seeing this trend play out in real-time as the COVID-19 contagion accelerates globally; people are adopting technology at a pace they have never done before. Schools are being conducted through teleconferences. Senior citizens are adopting QR payments and digital banks for the first time. Online activities and transactions are no longer a convenience factor but a necessity. As people adapt to a digital lifestyle, so too will they expect the same convenience and seamless experience from other areas of life, including financial services.

Thailand has made great strides in digital payments thanks to the Promptpay initiative, but it was only during the COVID-19 outbreak in March that we witnessed a noticeable jump in the adoption of digital payments. PromptPay transactions rose 93% or an average of 11M per day in March, up from 5.7M per day in the same period last year. Digital channels are becoming the primary point of access for payments for the mass population in both online and offline purchases.

One of the challenges is not all financial transactions can be done digitally. Think about the last time you wanted to open a bank account, open an internet banking account, take out a loan, or make cross-border transfers, what did you do? Even in today’s world, some types of transactions still require us to visit bank branches.

With the change in customer behavior and expectations, coupled with the pain points of existing products, how will financial services evolve going forward? How might we use technology to improve the way financial products are served?

Credit: Long gone the days of paper-based loan application

Yesterday: As the world enters recession, the bank loan approval rate tends to decline as banks become more cautious over the health of their loan portfolio. This leaves the cash-strapped SMEs with little option for financing. The typical process requires borrowers to submit paper-based loan applications, together with heaps of financial statements and other documents, at bank branches while credit decision-making is done manually and takes weeks.

Today: Google search shows a surge in search activities for words, such as “loan” and “loan from fintech app”, as SMEs and furloughed workers seek alternatives as they scramble for liquidity. In fact, the number of Thai companies that have declared bankruptcy due to financial problems rose 46% in the first two months of the year vs same period last yearAspire, the neobank for SMEs and our portfolio company, helps digital merchants get working capital loans near instantly utilizing alternative data from e-commerce, account software and point-of-sale systems. The number of active borrowers for Aspire has accelerated in February 2020 vs the year before.

Tomorrow: Looking ahead, a lot more can be done using technology. Some of the things that we’re excited to see are

  • A platform that automates and digitizes loan application and decision-making processes, both for long-term high value (e.g., mortgage) and unsecured loans (e.g., credit card). Blend, for example, uses software to assess information that the bank has about you — income and assets held at the bank — to almost immediately calculate how big a loan you can afford, and reduces the risk of fraud and errors by replacing document uploads with connections to financial data sources and by automating data verification.
  • A private credit scoring data aggregator that links different private data sources and fintech players and collects data that can be used for assessing borrowers’ credit scores, including national credit bureau (NCB) data, mobile data from telecommunication companies, utility payments. By democratizing credit scoring data, data owners can monetize the data, and reduce the risk of fraud and default for the whole ecosystem.

B2B Payments: Digital process creates the visibility required for supply-chain financing

Yesterday: A process to make payments is still analog with 90% of businesses receiving their invoices the old fashioned way (on paper). Payments might have to go through a purchase order process, invoicing, accounts payable, various data entry points and disbursement. It costs an organization nearly $8 to process a single account payable to suppliers[1].

Today: Since 55% of B2B sales in APAC is made on credit with 32 days terms on average[2], companies need a way to manage, initiate, approve and make payments in a fully digital way with full visibility on financial resources and commitments (e.g. APAR, and payroll).  FlowAccount, one of our portfolio companies, offers software that digitizes the process of issuing invoices and recording receivables.

Tomorrow: By linking disconnected players in supply chain payments – from buyers, suppliers, to banks, businesses will not only better manage their liquidity, but also a better opportunity to access working capital.

  • A platform that connects buyers and suppliers can provide full visibility on where things get stuck and helps businesses optimize workflows. Tradeshift helps businesses connect with all their suppliers digitally, remove paper and manual processes across procure-to-pay, and seize early payment discounts to save money. AvidXchange automates AP processes for medium-sized companies.
  • Access to real-time payments (RTP) could enable companies to access payment delivery statuses and settlement information and, thus, better manage their liquidity. Highradius helps companies get paid faster on their receivables via AI and machine learning. Finlync connects businesses’ enterprise resource planning (ERP) systems with banks’ payment portals, allowing its customers to have full visibility over cash flows.

These are some instances where fintech can help improve the way financial products are served. COVID-19 is just a catalyst that helps push customers along the technology adoption curve. Once onboarded, users tend to stick with the new habit because it’s more convenient. This shift towards digital products and services, accelerated by the virus, will have a long-lasting effect on the years to come. The winner will be those who can serve a digital-native product and adapt to customers’ digital behavior with speed and ease of access being table stakes.

Author: Nattariya (Nat) Wittayatanaseth

Editors: Wanwares Boonkong, Vitavin Ittipanuvat

Photo by Clay Banks on Unsplash

Banking 3.0 – Strategies for Banks to Become an Open Platform

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Visa recently surprised the banking world with its $5.3B acquisition of Plaid, a fintech startup that allows applications to connect with customers’ bank accounts easily and instantly. This is by far the second biggest acquisition Visa has ever made after it paid $14B for Visa Europe in 2015. It also marks an important shift in Visa’s strategy towards becoming an “Open Platform.”

Visa seems to be shifting its strategy significantly from partnering with banks to expand its card networks to partnering with startups to facilitate money movement through both card and also non-card payments (digital channels). The shift comes at an important juncture. While Visa’s payment value had been growing at a steady rate in the last decade, the rate has dropped below 10% in the past two years. Card penetration in emerging economies remains sluggish with penetration in a majority of Southeast Asian countries remaining well below 10%. Consumers are leapfrogging cards to other methods of payments, such as mobile wallets, altogether. Where mobile wallets are nascent, governments have pushed initiatives to facilitate low-cost interbank transfer (such as Thailand’s Promptpay), limiting the role of cards even more. Finding a new growth driver is mission-critical for card networks.

With Plaid on-board, Visa can pursue its Open Platform strategy at full speed. Currently, Plaid allows 2,600+ app developers to connect to users’ bank accounts easily. But, together with Visa, Plaid can utilize Visa’s network and infrastructure to offer new capabilities, such as cross-border money movements or fund distributions and collections, to those developers from the get-go. Fintech partners can connect to, interact with, and create and exchange value with each other through Visa’s network. In return, Visa stands to get large transaction flows from the 200+ million customer accounts that are powered by Plaid.

The popularity of Plaid highlights startups’ growing demand to add financial services to their product offerings. Software-as-a-service (SaaS) companies can monetize by offering financial services, serving as a new revenue stream with zero customer acquisition cost and creating a moat around the business. Fintech is no longer a primary business model, but also a secondary business model for startups (think of it as an ingredient to the main dish). Japan’s largest e-commerce site Rakuten, for example, has 40% of its revenue from financial services. Another example is Shopify, a website that helps small businesses set up e-commerce stores, which has more than half of its revenue from payment processing.

This is an emerging opportunity not only for startups but also for banks who can leverage those startups as a new distribution channel, apart from bank branches and digital banking apps. There are three strategies that banks can pursue to capitalize and capture a piece of this pie:

1) A Closed Ecosystem: Banks directly integrate with startups to offer financial products on third-party platforms. An example of this is Grab Thailand which offers Grab Wallet powered by KBank. In this model, banks would have to dedicate its resources to do the heavy lifting work of allowing its legacy system to communicate with third-parties’ systems. Since most banks still employ complex centralized technical infrastructure, changing such systems to allow external access is not easy and may result in unintended consequences. Due to the significant requirements of both time and resources, banks are generally selective of the partners, prioritizing by the scale of the partners, thus, early-stage companies often get relatively low priorities.

2) An Open Ecosystem: On the other end of the spectrum, banks can turn itself into an Open Platform, changing its centralized system into microservices that can interact with one another through application programming interfaces (APIs). Third-parties can then build and test their software on top of the banks’ infrastructure easily without the risk of messing up the banks’ centralized systems. Adopting this Open Platform strategy is not a difficult decision, but one that requires a strong commitment from the bank’s management and a complete overhaul of the banks’ monolithic legacy system (e.g., mainframe); this ‘transformation’ process can take years.

3) A Semi-Open Ecosystem: There exists a middle ground, a model that banks can adopt as they slowly progress towards an Open Platform. Banks can work with startups that act as middlemen between banks and other startups. These middlemen – so-called ‘core wrappers’ –  are doing the heavy lifting work of connecting with banks through APIs, wrap the integrations within its platform, and open its platform to other third parties to build or offer financial services to end customers.

This is where Plaid comes in. We can think of Plaid as Amazon for e-commerce. Before Amazon, merchants had to do everything from inventory storage, packaging, distribution, to return handling and customer support. With Amazon, those issues are taken care of, and merchants can focus on their core activities and what they’re good at. In the same way, Plaid acts as a middleman between banks and startups, providing a one-stop-platform for bank account access to third-party apps.

Many other startups are considered Core Wrappers for a variety of financial use cases. Stripe allows developers to process online payments and money transfers from a customer’s bank account into a merchant’s bank. Nium (previously Instarem) allows corporations and SMEs to send money cross-border, spend money through Nium-issued prepaid cards, and collect money from counterparty abroad. Synapse offers end-to-end banking services to app developers, eliminating the need for startups to identify bank partners and initiate one-to-one integration with the bank. Startups can easily offer financial services on its app by just plugging into Synapse.

Software is rapidly changing how financial services are offered. We are transitioning into the Banking 3.0 era where financial services are no longer sold in a physical bank branch (Banking 1.0) or mobile banking app (Banking 2.0) but are offered and sold through third-party platforms. Financial service is no longer a standalone service, but it’s being abstracted away and served to the customers in a digital-native way, wherever they are, and in a way that they are used to, instant and seamless.

Author: Nattariya (Nat) Wittayatanaseth

Editors: Woraphot Kingkawkantong, Vitavin Ittipanuvat

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