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Deutsche Bank makes fintech play for Thai onshore FX

Deutsche Bank Thailand partners with XTransfer to help companies manage complex forex needs.



Pimolpa Simaroj, Deutsche Bank

Deutsche Bank’s Thai business has begun to transact foreign exchange trades on behalf of global clients onshore with the help of a Hong Kong-based fintech, XTransfer.

Pimolpa Simaroj, the bank’s Thailand country officer, says this represents the next step in bringing FX transactions involving Thai baht onshore.

The banking regulator, Bank of Thailand, introduced a regime in 2022 called non-resident qualified company (NRQC) rules that is designed to bring baht FX onshore.

Before NRQC, a company would need a local entity, and local bank accounts, to conduct baht transactions related to selling services to local counterparts. They would have to collect payment in baht and then apply to Bank of Thailand for approval to trade baht for another currency.

For international companies, the process is slow, manual, and expensive, so they tend to transact baht FX deals offshore. This means Bank of Thailand can’t see these flows, which hampers its ability to maintain the currency’s stability.

Bringing FX onshore

With NRQC, appointed banks can now step in to conduct onshore transactions on behalf of international companies, so long as they can show Bank of Thailand that their FX trades represent corporate payments, not financial speculators.

Pimolpa says Deutsche Bank negotiated with Bank of Thailand for NRQC and was the first bank to launch transactions under the new regime.

NRQC has made it easy for offshore companies to collect payments from local customers. But businesses still faced the challenge of disbursing those monies to their own suppliers, which often involves many small- and medium-sized enterprises around the region.

These SMEs need to be paid in dollars, renminbi, or other currency. A global transaction bank such as Deutsche doesn’t have relationships with these companies; it prefers to operate among large multinationals or with other banks.

This meant Deutsche Bank could support one leg of a client’s Thailand FX needs: collecting baht payments and exchanging them for a new currency, thus eliminating FX risk before a company needed to disburse monies to its suppliers. But what about the other leg – sending those monies to where the client corporation needs them to go?

Adding legs

Bank of Thailand has now introduced a new layer in NRQC rules, enabling eligibility of fintechs to participate. “We call this NRQC version 1.5,” Pimolpa said.

Deutsche Bank teamed with XTransfer, which facilitates trade payments to suppliers in China, and helped it win approval from Bank of Thailand to participate in the scheme.

Pimolpa says the bank’s NRQC platform needn’t be China-specific, but Chinese SMEs are major suppliers to Deutsche Bank’s corporate clients. For example, Deutsche Bank also works with another fintech to support international payments in education, for Thai families sending children overseas to study.

The bank’s focus is on adding partners to support its global clients, particularly those in e-commerce and other ‘new economy’ sectors. Deutsche Bank handles local collections in baht, using PromptPay, the local real-time payments system, converts this to renminbi or other currencies, and pays this in a lump sum to XTransfer, which can distribute monies to the SMEs in the client’s network.

XTransfer also automates the reporting so the bank (and the regulator) know who is receiving these payments and why.

Deal benefits

The partnership allows Deutsche Bank to handle payment flows to SMEs. It also enables FX transactions to occur instantly, so that the corporate client isn’t exposed to market risk while awaiting regulatory approvals. By maintaining its focus on international companies and fintechs, Deutsche Bank doesn’t have to compete with big Thai banks onlshore, or venture into SME or retail businesses.

The XTransfer deal allows the bank to serve new-economy multinationals, as well as many European or even Chinese companies looking to diversify their supply chains.

Thailand is competing with other countries to get a slice of the action as many multinationals reduce their reliance on manufacturing and assembling in China. Thailand may not have the young and large population of Vietnam, which has a low-cost and industrious workforce.

But it has longstanding manufacturing and logistics experience and infrastructure – the country has been a major center for automobile manufacturing for decades, for example. “We have the skills base,” Pimolpa said.

She says Chinese electric-vehicle makers are also looking to establish local manufacturing capabilities, so they can make their EVs closer to their destination markets. She wants the partnership with XTransfer to help Deutsche Bank become a transaction bank to these newcomers.

While this is not the first time XTransfer has worked with Deutsche Bank, the NQRC deal could be a step toward deeper relationships in Thailand and in other markets. For example, it opens the door to XTransfer serving large-scale corporate bank transactions, going beyond the Thai regulator’s Bt200 million account limit that the fintech would face if it was facilitating payments on its own.

Pimolpa says this would also help boost the Thai arm of the bank’s business. “This partnership is a good showcase for our businesspeople,” she said. “It gives us in Thailand a unique advantage.”

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