Mobile Money: the way to bring back glitter to the Golden Land Myanmar?

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There are two sectors that are most progressing in Myanmar; they are telecommunications and financial services. The two combined, creates an exciting venture: mobile financial services.

People still have distrust for the formal financial institutions in Myanmar. Only 4.8 percent of the population has bank accounts. To get people out of poverty, financial inclusion is necessary. However, some do not even meet the minimum deposit amount to open a bank account. In fact, 62 percent of adults do not have savings in Myanmar. Cash is still king and many prefer to load up on physical assets such as gold and gem stones. This in turn would limit the banks to lend money, fuel investment and provide job opportunities, thereby hampering economic development of the country. Furthermore, in rural Myanmar, if people need to use the bank, many would have to travel to another town for the nearest available bank, which will cost them a whole working day, plus another to travel back. Thus, coupled with little faith in the financial sector, they are prompted to turn to loan sharks in times of need.

Mobile Money is the Key

Myanmar has the fourth fastest growing mobile market in the world, being responsible for 5% of the world’s 84 million new mobile subscriptions. Banks need to take a short cut and jump on the bandwagon to link the poor to safer and more regulated financial services. Mobile money could be the country’s best bet to reaching the unbanked and achieve financial inclusion. In 2016, the new regulations have allowed non-bank financial providers to offer mobile money services.

What is the difference between mobile banking and mobile money?

Mobile money is different from mobile banking in that although users can perform the same transactions such as money transfers, salary disbursement, mobile phone top-ups, peer-to-peer transfers and perhaps more in the future, they do not need to have a bank account.

How does mobile money work?

Even though a bank account is not necessary, there is still an agent shop to go through. A user must still visit the nearest company agent to do any money related transactions. Cash will go to the agent and user’s account will be credited with the same amount in digital currency.

What do you need to become a mobile financial service provider in Myanmar?

As required by the Central Bank of Myanmar, the mobile financial service providers must show a minimum capital of at least 3 Billion Kyats (approx. 2.2 million USD to date) if they wish to provide mobile money services. They also need to register for a Mobile Financial Service (MFS) license, and pay an application fee of 3 Million Kyats. Additionally, unlike its customers, MFS providers must open a trust account in commercial banks in Myanmar, approved by the Central bank, and maintain 100% of liquid assets in the account.

Current situation in Myanmar

The most talked about mobile money providers in Myanmar include Wave Money – collaboration between Telenor and Yoma Bank – and True Money – partnership between C.P Group and Asia Green Development Bank. Both are bent on targeting remittances because banks could shift their focus to more profitable activities in the future. In the end, mobile money service still has a long way to go in the country. Although it bridges the unbanked and underbanked to affordable financial services, there are still impeding factors such as limited mobile access in unbanked areas, literacy and ongoing regulatory landscape. Hence, if these technology companies succeeded in building trust from the consumers and explaining the value of such financial platforms, people would become used to digital financial services, which in the future, could lead to beyond making simple money transfers or top-ups. It seems that currently, early movers into Myanmar would have the advantage, as there is a competition for signing banks up for partnerships and establishing an agent network, which will be needed to extend services across the country.

The next trend in Myanmar

In the future, digitalizing financial services through mobile alone would not be enough. It is apparent that the next generation that grew up in this Information Technology age would expect more than mobile technology from financial service institutions. Hence, to get a head start, banks should also start focus on creating a seamless digital channel experience for customers in its branches.

We will be in Yangon, Myanmar this coming November, where there will be a feature of banking panel, discussing about the technology adoption in banking and financial services. Yoma Bank and KBZ Bank will also be sharing their experiences in mobile banking and digital branches, so stay tuned for more updates!

If you have any questions, leave a comment!

Su Htwe

Mar 10, 2017

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