THE ROLE OF NEW TECHNOLOGY IN DEVELOPMENT OF MYANMAR’S BANKING INDUSTRY

U Htoo Htet Tay Za, Managing Director, AGD Bank

 

Myanmar’s economy is one of the fastest growing in Asia and presents a dynamic business environment for international investments and business. But it is not without its problems. High interest rates, fluctuation and instability of the local currency vs the dollar exchange rate can all present difficulties.

The lack of a centralized scoring system has led to problems with verifying credible candidates for access to finance options. With many companies indebted to banks and unable to repay their overdrafts this has led to high non-performing loan ratios. There is a real need for companies to agree a timetable to repay these loans, as this affected the long-term security of the banking system.

 

U Htoo Htet Tay Za

Opportunities provided by new technology

There are 53 million people in Myanmar and by 2030 and the smart phone user rate is constantly increasing. The digital technology sector in ASEAN could be worth up to US$625billion, which represents 8% of the region’s entire GDP. To reach this, our region must establish cohesive regulatory frameworks for the delivery of new services, which includes the development of Fintech.

Banks and financial institutions play a key role in the transformation in market economies. Fintech is largely an untapped market within the ASEAN region. This is where the financial sector should focus its opportunities and increase awareness and understanding of digital banking, e-commerce and online business.

 

Is cash still king?

In an economy where 99% of all estimated transactions are cash, the future of banking still lies in digital. Only 23% of adults have a bank account which presents some challenges to the finance industry in Myanmar. Branch penetration across all banks in Myanmar is less than 10 percent which equates to 3.8 branches per 100,000 people, with the global average a lot higher at 11.7 per 100,000.

However, smart phone penetration is at its highest rates, with an estimated 80% of adults having access to the internet. Data usage across the country on a par with more developed European countries. This leads to a strong shift towards the digitisation of products and services from banks throughout the country.

In countries such as China the increase of smart phone penetration has driven the requirement for more mobile payment options, and I’d see the development in Myanmar to be similar. Smart phones have opened new avenues of integration to financial services such as new apps and services.

Digital wallets and lifestyle mobile apps, like Onepay, are on the rise and enable the unbanked population to perform mobile transactions. Most banks in Myanmar are seeing the change and creating their own versions of e-wallets, such as KBZ Pay, MAB Mobile and Onepay supported by its banking partner AGD Bank.

Digital wallets offer a lot more security for their users, as there’s no need to carry large amounts of cash around. Mobile, or digital, wallets also help the unbanked population establish a credit rating in order to access finance. For example, AGD Bank use the data from their usage to establish credit scores for future use, or similar to use the data to cross-sell other banking products.

But retail businesses and merchants are benefitting too from the development in new technologies. Both electronic and physical merchants are now all accepting card payments through Visa, Mastercard, UnionPay or MPU. With applications like AGD Pay, the first QR payment application in Myanmar it has opened access to more access to mobile transactions.

The rise of new technologies in Myanmar has led to a new trend of mobile payments, with explosive growth of mobile and internet penetration that is making a huge impact on the financial services sector. Merchants will be able to offer users a secure and easy way to pay for goods and services as well the ability to add or withdraw cash to and from their e-wallet.

 

The future of banking  

Banking in Myanmar is constantly changing, and I expect this to continue in the future. It’s looking good and I predict that we’ll be seeing an increasing amount of the population gaining access to financing.

In June 2019, International banks were granted licences to begin retail banking in Myanmar, and whilst I don’t necessarily see International banks opening loads of branches as it’s a very long process to get the licence, I think they’ll start looking to local banks to start new partnerships.

Whilst the opening of International bank branches will present some competition for local banks, we don’t see it being with our retail customer base. Local banks have the knowledge and a solid branch base which benefits our customer relationships going forward.

The Myanmar banking system has always had the willingness to develop and invest in new technology and we’re already seen

AGD bank is already seeing a strong shift to the digitalisation of products and services and I expect this to continue for some time.

 

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