Myanmar has taken some decisive steps towards cashless payments, particularly in a time of the Covid-19 pandemic. But there are still some obstacles to be overcome before the country becomes a cashless society.
Myanmar has moved a step closer to cashless payments. It has adopted digital transfer platforms such as Wave Money, KBZ Pay and Onepay to disburse funds to individuals and communities struggling from the economic effects of the Covid-19 pandemic.
Various government agencies, humanitarian organisations and corporations are working with Wave Money to facilitate cash transfers. For example, the government, as part of its Covid-19 Economic Relief Plan, disbursed one-time cash payments of 30,000 kyats (US$21.36) to about 441,000 women and elderly citizens through Wave Money and Onepay. The Social Security Board under the Ministry of Labour, Immigration and Population has also used Wave Money’s services.
Other organisations such as the Myanmar Agricultural Development Bank have used Wave Money to enable farmers to access digital loans. The European Union’s Myan Ku (quick assistance) Fund project which supports garment factory workers and raises funds for street vendors has been using Wave Money as well.
These agencies have teamed up with Wave Money to reduce the reliance on cash and therefore the risk of spreading the Covid-19 virus. Of particular interest is the fact that Wave Money has waived all service fees for the disbursement of funds to at-risk and affected sectors. This is both a benevolent and strategic move for the mobile wallet provider. First, it increases the reach of Wave Money to under-served populations. Second, it increases its credibility and legitimacy in the eyes of these populations through its partnership with government, multilateral and humanitarian organisations.
At present, Wave Money is the leading mobile financial services provider in Myanmar. It has been successful because it has circumvented the need for having a bank account and because 95 per cent of the population has a mobile phone. Its cash transfers are done through mobile phones and over-the-counter services through its network of 58,000 agents throughout Myanmar. In fact, the number of agents it has exceeds that of bank branches and ATMs in the country.
This model is indispensable in Myanmar because only a quarter of the population owns an account of any type with a financial institution, compared to 70 per cent in the rest of Asia. In 2016, the volume of cash held outside the banking system was about 15 per cent of the GDP. This is high compared to that of other countries in ASEAN – under 10 per cent for the same period.
… there are still technical and policy barriers to overcome before Myanmar can become a fully cashless society. For example, all players have to contend with a shortage of point-of-sale technology, and the inability to operate across different platforms.
The reason for this is longstanding distrust of the banking sector in the country brought about by several rounds of demonetisation in the 1960s and in the 1980s, and the 2003 banking crisis. The latter came about because informal finance companies collapsed, resulting in widespread panic and a run on private banks.
As a result, cash deposits in bank accounts have not traditionally been used as a store of value in Myanmar. Banks, aware of this distrust and believing that financial technology would not be taken up by Myanmar citizens, were slow on the uptake of digital financial services for individuals and small businesses. This left them scrambling when Wave Money began to experience success in Myanmar in 2017. With rapid and high uptake of mobile phones, digital financial transfers usage and services leap-frogged banks and banking services and landed directly on mobile phones. This has circumvented the need for a bank account and bank infrastructure, but has required digital payment platforms to build their own network of agents.
The mobile wallet market is now a crowded space, as other players like KBZ Pay, CB Pay, M Pitesan, and OK Dollar are jockeying to secure first place. In May, OnePay was launched. It is a mobile application which enables users to transfer money among local banks and to add cash to their mobile wallet through an agent rather than through a bank account. Apparently it has been popular, having acquired 150,000 users in its first month.
More people in Myanmar are signing up to mobile wallet services, particularly in the time of Covid-19. However, on the supply side, there are still technical and policy barriers to overcome before Myanmar can become a fully cashless society. For example, all players have to contend with a shortage of point-of-sale technology, and the inability to operate across different digital payment platforms. In addition, government policies are cumbersome. At present, there are three licences and regulatory frameworks by type of institution – digital banking, mobiles financial services and non-banking financial institutions – which could be used for similar mobile-based services.
It appears that the pandemic has spurred the government, multilateral agencies, organisations and individuals to avail themselves of the digital payment services available in Myanmar. This has the double benefit of helping to reduce the spread of Covid-19 and creating trust in these service providers. Nevertheless, there is still a long way to go before Myanmar becomes a cashless society.
Su-Ann Oh was Visiting Fellow of the Myanmar Studies Programme at ISEAS – Yusof Ishak Institute.