The Advent of Cashless Transactions in Myanmar: Cash is (Still) King

The advent of Covid-19 is accelerating the trend towards a cashless society and driving the growth of e-commerce around the world. How will this pan out in Myanmar given the low uptake of e-commerce and mobile financial technology in the country?

E-commerce in Myanmar is in its early infancy. It was valued at only US$6 million in 2019 according to a report by Colliers, a real estate company. This is a small fraction of the retail market, which the US International Trade Administration estimated to be worth US$10 billion in 2018. Interestingly, e-commerce is dominated by Facebook. Engagement with Facebook accounted for 85 per cent of all internet traffic in the country in 2018, according to Frontier Myanmar, making it difficult for companies to persuade customers to move from Facebook to their own shopping platform or website. Facebook’s position will continue to strengthen as the company launches its new shopping feature, allowing businesses to display and sell products directly on its Facebook pages. 

Despite these challenges, several enterprises have entered the e-commerce fray. Alibaba acquired Daraz Group – which operates Shop.com.mm – in 2018 and City Mart Holdings launched citymall.com.mm in 2017. Both sites offer a wide range of products for sale. Other local e-commerce websites have also cropped up, including RGO47, Barlolo.com and 365 Myanmar.

Given the growing e-commerce market, will Myanmar be able to shift quickly to cashless, contactless transactions to reduce the transmission of Covid-19? The short answer is no. Most purchases made on Facebook are paid for by cash on delivery. This is because consumers are afraid that their taxes will increase if they use digital payments; moreover, they do not trust online sellers. Smaller online sellers often face challenges in providing customer service, online payment facilities and guarantees of safe and secure online transactions. 

In addition, only a small proportion – 30 per cent – of the Myanmar population has a bank account and through that, access to online banking services. This is due to a very real fear and distrust of the formal banking sector brought about by several rounds of demonetisation in the 1960s and 1980s, and a run on banks in 2003. 

Given consumers’ distrust of banks, e-commerce and online payment, the hope is that financial technology will overcome these obstacles. The most notable example of this is represented by Wave Money, a mobile wallet provider. Mobile wallets are virtual wallets that store payment information in a mobile device. The most common uses for them are making payments and money transfers digitally. 

Access to smartphones has enabled people to make financial transactions through their phones, replacing cash with digital payments, and circumventing the need to open a bank account.

Wave Money has performed very well in Myanmar, announcing in 2019 that it facilitated more than US$4 billion in mobile remittances. This accounted for 5 per cent of Myanmar’s GDP, and represents a threefold increase from its transactions in 2018. In fact, the number of Wave Money customers represents 30 per cent of the adult Myanmar population. The growth is noteworthy: in March 2016, less than one per cent of the people who sent or received money were doing it digitally. In March 2019, this had increased to 80 per cent. Given this success, Ant Financial, an affiliate company of the Alibaba Group, recently announced plans to invest US$73.5 million in Wave Money.  

One of the main reasons for the uptake of mobile wallets such as Wave Money is the high penetration rate (80 per cent) of smartphones. Access to smartphones has enabled people to make financial transactions through their phones, replacing cash with digital payments, and circumventing the need to open a bank account. As a result, the market for mobile wallets is saturated with Myanmar’s four big telecoms companies. 

Despite the increase in mobile wallet transactions, there are limitations to the way that mobile wallets are used and to the expansion of e-commerce. People use Wave Money mainly for money transfers and to top-up their mobile phone credit. These money transfers are mostly for remittance purposes rather than for the payment of purchases in general. 

Will financial technology overcome the general population’s distrust in banks, aversion to tax payment, and misgivings about using digital transfers when purchasing online? The early signs are that this is happening but there is still a long way to go. For this to happen, it would be necessary to build a more developed financial infrastructure, increase digital literacy and create better e-commerce services. In the meantime, though, cash remains king in Myanmar.

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