Massive growth in mobile phone use in Myanmar has paved the way for the introduction of a money transfer system with the potential to transform the banking sector.
It is in many ways difficult to marry the jolie laide of Myanmar’s decayed streets with the surprisingly common sight of smartphones. Yangon has recently become home to legions of minimalistic, pristine tech stores. For now, they stand in sharp contrast to the rest of the city’s chaotic and idiosyncratic high street. Myanmar has rapidly embraced the digital revolution but it is still considered one of the world’s poorest countries. This has enabled it to leapfrog conventional telecommunications infrastructure and has presented opportunities to swiftly redefine its banking sector.
More than 35 million active SIM cards are being used by over 50 percent of the population, a huge rise from 7 percent in 2012. The telecoms industry expects to increase coverage to between 80 percent and 90 percent of the population within the next four years. A recent report by telecoms giant Ericsson said Myanmar was among the world’s top five countries for mobile phone subscription growth in the third quarter of this year. This is a remarkable transformation in a country where access to SIM cards a decade ago was heavily regulated and cost up to US$5,000.
As mobile usage has gone up, so has internet access. “We have seen an explosive growth in voice and data usage,” said Ooredoo spokesperson Daw Thiri Kyar Nyo. About 80 percent of the company’s 4.8 million customers use smartphones, meaning that their rst phone is more akin to a computer than the humble de- vices that became available in the devel- oped world in the early 1990s.
Unsurprisingly, as Ooredoo’s client base has enjoyed rapid growth, so has the company’s provision of data. In the third quarter of 2014 it provided 360 terabytes; a year later this had increased 18-fold to 6,444 terabytes, or about 650 megabytes per user a month.
The growth of Ooredoo’s data provision outpaces growth in call minutes. Although data usage increased by 18 times, the use of minutes only grew twelve-fold, from 193 million minutes a quarter, to 2,246 million. This suggests the primary function of users’ devices is the internet. Daw Thiri Kyar Nyo listed Facebook, Zapya and Viber as being among the services most used by customers. This suggests that Myanmar’s users have leapfrogged one step further, from no telephones to communicating via social media, email, instant messaging, le sharing and VOIP services.
Access to communications technology can also act as a catalyst for development in other sectors.
“In future, [the customers] will know more about mobile services such as MMoney, MEducation, MHealth, MAgri, e-commerce and online shopping,” said Daw Thiri Kyar Nyo.
The use of mobile phones to transfer money has the potential to transform banking in Myanmar. Throughout the developing world mobile money transfers have been used to deepen financial inclusion. In Zimbabwe, for example, mobile money transfers are used by 6.2 million people, who transfer about $512 million a quarter.
By enabling the electronic transfer of small amounts, mobile money sidesteps the need for more formal payment systems and the conventional banking infrastructure needed for transactions.
Myanmar has struggled to create a banking system that has the public’s trust. Under military rule, the nancial sector was sorely neglected. After General Ne Win seized power in 1962 and implemented his disastrous “Burmese Way to Socialism”, domestic banks were nationalised and foreign banks were expelled. The ensuing decades were riddled with corruption and gross economic mismanagement. People’s savings evaporated when the kyat was demonetised.
In the early 1990s, private banks were again permitted and the Central Bank of Myanmar was re-established. The fledgling system suffered a liquidity crisis in 2003, when a run on banks followed the collapse of unauthorised financial institutions that had been accepting deposits.
Despite progress in recent years, including granting independence to the Central Bank of Myanmar, the expansion of domestic banks and the introduction of ATMs, caution persists among the public about the banking sector. Fewer than 10 percent of the population holds a bank account, though confidence in the formal banking sector is growing.
Looking to capitalise on the untapped demand for financial services is one of several entrants into Myanmar’s growing mobile money sector, Wave Money, a joint venture between one of the country’s largest private banks, Yoma Bank, and mobile service operator Telenor.
Wave Money intends to enable customers to send and receive money throughout the country quickly and safely. The service will allow customers to “digitise” cash at service centres called “Wave Shops” and use mobile phones to transfer and receive funds.
“Digitising cash solves many problems in Myanmar, including the difficulty in sending small amounts of money to family and friends,” Wave Money’s chief executive, Mr Brad Jones, told Frontier.
By leveraging existing infrastructure, in particular a customer’s mobile phone and its network, mobile money has the potential to be reliably ready far before a well-trusted nancial infrastructure is in place.
The establishment of a ubiquitous national network of agents to process deposits and withdrawals is essential for a mobile money system to be effective. “One of the advantages that we have is that we can leverage the distribution network that Telenor have successfully built in Myanmar to provide Wave Shop outlets wherever Telenor have launched,” said Mr Jones.
Wave Money is undertaking commercial testing and is hoping to receive regulatory approval from the CBM to launch early next year, after the draft Mobile Financial Services Regulation has been approved.
Myanmar has embraced the digital revolution by leapfrogging conventional telecommunications infrastructure and going straight to mobile phones and social media. It remains to be seen whether the Myanmar people will be willing to embrace new-found technology as an alternative to the banks they have so far been hesitant to use.