Siam Commercial Bank invests in U.S. fintech venture

Siam Commercial Bank has invested in San Francisco-based Ripple, a developer of blockchain technology for financial settlement solutions, becoming the first Thai bank to make such an investment, while Thailand’s central bank announced it would open the way for financial technology product experimentation.

In July, Siam Commercial Bank (SCB) launched a $50-million venture capital fund to invest in financial technology startups. The direction being taken by SCB marks an evolution for Thai commercial banks, as the Kingdom’s banking and finance sectors are shedding a protectionist mindset and engaging more deeply with the global banking sector and exploring new financial technologies, or fintech.

SCB’s investments will be made through its recently established subsidiary Digital Ventures. The Deal Street Asia website said the $50 million fund size is significant because overall venture capital financing activity in Thailand is estimated to only be about $80 million at this point in time.

“Blockchain is an exciting, emerging financial technology that is slated to transform the world of financial services and online transactions,” said Thana Thienachariya, chairman of the Executive Committee at Digital Ventures.

While the size of SCB’s investment was not disclosed, Ripple raised $55 million from investors in the Series B round of financing, bringing its total capital to $93 million. SCB joins several venture-capital heavyweights in supporting Ripple, including GV (Google Ventures), Andreessen Horowitz, IDG Capital Partners, and Jerry Yang’s AME Cloud Ventures, Standard Chartered, Accenture Ventures and SBI Holding, Santander Innoventures(the venture arms of CME Group and Seagate Technology), and Venture 51.

Deal Street Asia described Ripple as “the only provider of enterprise blockchain solutions.” Its network includes 15 of the world’s 50 largest banks, including Standard Chartered, Royal Bank of Canada, Westpac, National Australia Bank (NAB), Mizuho Financial Group, BMO Financial Group and Shanghai Huarui Bank. All of them have implemented blockchain technology for their cross-border payment transactions.

“When the blockchain network is commercially viable and gets approval from the Thai financial regulatory authority in the future, the knowledge base gained from this investment can be integrated to our system, and will bring a significant improvement in the quality of SCB’s international money transfer services through a fast, convenient, cost-saving and secure world-class online transaction platform,” SCB’s Thana said.

A Bank of Thailand official said last week that the central bank would begin encouraging fintech experimentation under its regulatory sandbox during the first quarter of 2017. Regulatory sandboxes aim to create a safe space for developers to test and experiment with financial technologies that have yet to be perfected while posing limited risk to the financial system or consumers.

Vireka Suntapuntu, senior director of the Financial Institution Applications Department at the Bank of Thailand, said commercial banks would be the first group allowed to join the sandbox.

The sandbox is an appropriate mechanism for banks, non-bank fintech developers and technology firms that have sufficient capital and human resources to test and experiment with new products, she said. Start-ups that are fintech newcomers would do better to join incubator programs offered by financial institutions or the Fintech Club before joining the sandbox, she added.

Bank of Thailand Governor Veerathai Santiprabhob has been taking a balanced approach to fintech in the bank’s role of supervising the financial sector. Establishing the sandbox encourages innovation to degree never seen before in Thailand’s financial sector, but the governor has also said regulators need to be cautious and develop new regulations to ensure that consumers are protected.