Mobile Money in Myanmar: Going Directly from Cash to Digital
In 2011, a SIM card in Myanmar cost $1,500 and mobile phones were used by less than 5% of the population. Following the entry of two foreign mobile operators in 2011, the price of a SIM card dropped to $1.50. Today, over 90% of the country’s population has a cell phone, and over 80% of those users have smartphones. And yet, only 6% of the population uses a formal financial institution, making the country ripe for adoption of mobile financial services.
Since the mobile phone revolution began in 2012, there has been widespread excitement and significant hype about the potential for mobile money to take hold in Myanmar, but it seems like 2017 may be the year the industry finally gains traction. The 8th Annual Myanmar Mobile Money and Agent Banking Summit, held in late February in Yangon, brought together industry experts to discuss the current status of the market and its potential to promote financial inclusion.
Mobile money in Myanmar
All three of Myanmar’s major telecommunications companies have applied for a license to offer mobile money services, but to date, the Central Bank has only approved one application, for Wave Money, which is majority-owned by telecom operator Telenor. Wave Money currently allows customers to make person-to-person transfers (P2P) and buy airtime top-up for mobile phones.
Customers cash in and out of the mobile money system with one of Wave’s 5,500 agents, currently located in 61% of Myanmar’s townships nationwide. This agent network allows Wave to cover a lot of ground with very little infrastructure. Wave’s parent company, Telenor, has over 100,000 agents selling airtime scratch cards across the country, so Wave has enormous potential to scale up to more distribution points. Wave will soon begin offering bill payments and plans to offer international remittances later on. These functions are particularly important to advancing financial inclusion, as microfinance institutions will be able to use the bill payments channel to collect loan repayments.
Currently, Wave is only available to Telenor customers, who represent 38% of mobile users in the country. Wave’s strategy is to provide a universal platform for microfinance institutions and formal financial institutions to offer services to those underserved by the current financial system. To that end, Wave plans to make its mobile money service available to customers of the other two mobile operators in Myanmar by July 2017.
Their competitors will put up a fight, however. Myanmar’s largest telecom, the formerly state-backed Myanmar Post & Telecom (MPT), aims to launch MPT Mobile Money by April of this year. MPT has more subscribers than Telenor – almost half of all mobile customers in Myanmar. As a formerly government-owned company, they are strategically positioned to corner the market for government salary payments and government-to-person (G2P) transfers. Ooredoo, Myanmar’s third telecom provider, also plans to launch mobile money services, initially targeting their own SIM card users.
What does this mean for financial inclusion?
Mobile money is key to bringing affordable financial services to those unserved by traditional financial institutions. In the context of Myanmar, the near-ubiquity of mobile and smartphones creates the potential for mobile money to reach underserved populations that are particularly difficult to serve through other means, such as rural clients and informal unregistered businesses, which are primarily run by women. Using mobile money to deliver loans and collect repayments significantly expands the coverage radius and number of people that a single branch can serve, as loan officers do not need to visit each client as frequently if they do not need to collect loan repayments in person.
Hal Bosher, CEO of Yoma Bank, Myanmar’s fifth largest commercial bank and a shareholder of Wave Money, explained the time and money that is wasted managing the physical cash at each branch. He described how each branch has at least a dozen individuals counting bundles of cash using electronic counting machines, tying the bundles together, and packaging them into pallets for customers making large withdrawals. A similar process is required for companies to pay suppliers for large shipments or deliveries. Digital transfers would drastically improve efficiency both for customers and for bank staff. Mr. Bosher posited that while the traditional evolution of money acceptance has been from cash to card, then from card to digital, Myanmar is well positioned to leapfrog the credit/debit card phase and go directly from cash to digital.
Mobile money transfers also provide an opportunity to use the data they generate to drive further financial inclusion, by creating alternative credit scores and using that scoring to offer nano-loans through mobile phones. Fintech companies like Konfío, Destácame, and Shubham are already doing this in other countries.
The future of mobile money in Myanmar
Wave Money’s CEO Brad Jones emphasized the importance of following the GSMA Code of Conduct for Mobile Money Providers. Following repeated bank failures and demonetizations in the past, there remains widespread mistrust of formal financial institutions in Myanmar. Mobile money providers have an opportunity to provide useful services to the country’s financially underserved population, but the industry must collectively work to maintain the reputation of the entire sector in its nascent stages, or customers will not trust any single provider.
Jacques Voogt, the current CEO of Ooredoo’s mobile money service, is also the former head of mobile money giant M-Pesa’s Tanzania operations. Mr. Voogt sees many parallels between Myanmar and Tanzania’s ecosystems for mobile banking adoption, including similarities in total population (51 vs. 55 million, respectively), percentage of financially underserved population (80% vs. 90%), number of bank branches countrywide (about 1,500 in Myanmar, about 2,000 in Tanzania), and urban/rural split (30%/70% in both countries). Mr. Voogt noted that in Tanzania, the mobile money ecosystem took about four years to fully develop – including merchant acceptance, agent saturation, and customer adoption. Myanmar is just entering year one of this promising process.