.svg)
New Bank of Thailand guidelines require payment providers to apply a risk-based approach in their relationships with merchants.
The Bank of Thailand has released "Know Your Merchant" (KYM) policy guidelines, requiring banks, non-bank financial institutions and payment providers to apply a risk-based approach when they provide services to businesses that allow online payments.
Effective from January 2022, the guidelines will require payments providers to sort their merchant partners into three categories and adjust their transaction monitoring and reporting exercise based on that risk profile.
The three categories of merchants include general stores, merchants with high-risk characteristics, and merchants with prohibited characteristics.
The classification should weigh in various factors, including the products or services they sell, location and anti-money laundering considerations.
Payments firms are then required to establish procedures and internal controls commensurate to the different risk profiles for the ongoing monitoring of their partner merchants.
The guidelines complement previous guidance issued by the Bank of Thailand on know your customer (KYC) requirements.
The introduction of KYM comes at time where there has been a significant explosion of payments growth in Thailand. In particular, the creation of real-time payments service PromptPay has been a catalyst for digital payments growth in the country.
At the time of its launch in early 2017, there were roughly 48 non-cash transactions per person annually. Four years later, an explosion of usage led by PromptPay has helped payments growth exceed expectations and rocket Thailand close to the 200 transactions per capita mark.
To put the speed and development of Thailand's payments market in perspective, total transactions per capita across the comparatively developed European Union in 2017 was 231, increasing to 283 in 2020. Not only is Thailand fast catching up with the EU, at current rates of growth, it is possible that it could exceed it in terms of penetration of non-cash payment instruments over the next few years.
Combined with QR code standardisation, one of the benefits of PromptPay is not just that payments are fast and cost effective, but there are relatively low barriers to entry. This means it has been a practical solutions for both small and large merchants. Alongside PromptPay, there has also been significant growth in both cards and e-money payments at the point of sale. Therefore, tightening of rules round merchant risk may be partly linked to this positive growth story.
