Myanmar mobile banking and payment: where to start?

Myanmar is currently largely a cash economy.  In this post we consider the types of mobile banking and payments solutions we predict will first gain traction in the Myanmar market: remittance services and banking the unbanked.

Outside Myanmar, the way people bank and pay has been revolutionised: from the introduction of credit cards, telephone banking and mobile banking to the launch of PayPal and Bitcoin.  The global growth of e-commerce has been accompanied by an increasing demand for online and mobile payments systems.

It is possible to imagine places where the use of cash might disappear entirely in the future.Whilst the rest of the world has still not fully exploited the benefits of mobile banking and payments, Myanmar has yet to start.

Burmese brollies

Mobile banking and payment solutions

What do we mean by mobile banking and mobile payments?

Mobile banking means banking done from a mobile device.  Banks provide a portal to access banking services across mobile platforms, including via its website, apps for tablet and apps for smartphones.  The introduction of mobile banking usually requires banks with legacy systems to re-engineer their delivery methods (i.e. to digitise service delivery).

Mobile payments means using a mobile device for the initiation, authorisation and realisation of a payment transaction.  Mobile payments systems allow payments to be made a mobile device via a proximity payment or via a mobile remote payment.  Depending on the way the solution works, the parties involved can include customers, merchants, mobile payment service providers, telecoms companies and banks.

There has been rapid innovation and disruption globally.  From traditional payment systems (e.g. Visa) and Internet payment systems (e.g. PayPal) to varying mobile payment systems (e.g. M-Pesa, Apple Pay) and retailer-led systems (e.g. integration of customer behavioural data and store-cards).  There’s no winning ‘secret formula’ across global markets.  In some countries there are constrains to potential approaches.  In every market partnerships and alliances have been and are still critical to success (between e.g. telecommunication companies, technology manufacturers, traditional banks, payment companies and retailers).

The market in Myanmar and where to start

Both the telecoms and banking sectors are very underdeveloped in Myanmar.

There are a low number of access points, low customer awareness, a lack of services and a lack of infrastructure and processes.  However, these are focus sectors for investment by the Myanmese government and investors, and by foreign investors.

It is tempting to imagine that Myanmar can leapfrog ahead and adopt sophisticated mobile banking and payments solutions for all because it is unencumbered by legacy IT systems and processes and can dive straight into the deep end.  However, as Myanmar also lacks access points, awareness, services, infrastructure and processes, the starting point must still be basic.

One of the biggest current challenges is the lack of distribution networks for getting cash in/out.  In our view, remittance services will be one of the first services to be developed.

There’s no point developing fancy mobile banking solutions and payments if people can’t get cash in/out.  Providing the most basic banking services for a largely unbanked population will the next major focus followed by basic payment services.

Remittance services  

It is common for Myanmese families to work and live apart, and as economic development and foreign investment drives urbanisation it will only increase.  Domestic remittance services are need to help families to send money to each other.  There are also a large number of overseas Myanmese workers and so international remittance services are needed.

The challenge for this in Myanmar is that there is a bottleneck of cash in/out points.  A secondary challenge is that it is difficult to authenticate parties.  Telcos have the ability to address both of these challenges, because they offer outlets and a means to authenticate users.  One solution therefore is for the banks and the telcos to partner and integrate a basic remittance offering.

Banking  the unbanked  

Most Myanmese citizens have no bank account today.  Experience from Africa shows that a move from a cash system to a banking or quasi-banking system brings widespread benefits.  Again, however, the banks have the enormous challenge of building distribution (i.e. branch access), whereas the telcos are already building distribution and reachBank and telco partnerships are therefore a likely formula to success because the scale of the distribution network is critical.

Structuring and negotiating a successful mobile banking partnership

Banks have a clear role to play to build the banking services in Myanmar.  However, they do not have the networks or the technology to succeed alone.  Partnerships with telcos are most likely to offer success but what do the parties to such a partnership need to consider to make it work?

First, the parties must have a clearly defined idea of what the ‘end to end’ system will look like and which role each of the parties will play.

Second, the parties must consider the regulatory risks.  Do one or both of parties need a licence and can they comply with the licence requirements?

The commercial aspects of the deal will also need to be agreed.  Who is responsible for taking what actions and providing which services?  Can each party fulfill their relevant obligations?  What are the consequences if a party fails to meet its obligations?  And what is the price or reward for each party?

Final tips

Parties involved in these kinds of negotiations should never assume that the other parties know what they are doing.  The mobile payments and mobile banking space can be very complex and parties who are more familiar with in the space will use often use jargon.  You should not be afraid to ask simple and basic questions, especially in a new market.  Finally, don’t be wowed by complex solutions.  It’s definitely better to walk before you can run, so we predict the winners will be those who keep it simple and do the basics first.

This post was co-written with @matthew1hunter.

Visa adds mobile payment and banking capabilities, as Google and MNOs launch contactless payment services

This week Visa Inc added significant incremental mobile payment and banking capabilities – acquiring Fundamo, a mobile money transfer software company and announcing a five year deal with Monitise.

The Fundamo deal is designed to bolster Visa’s position in developing markets where the mobile operators are increasingly able to leverage the lack of a traditional banking infrastructure and their customers’ trust into providing ‘banking for the unbanked’ (or at least mobile enable payment and money transfer). In contrast, Monitise provides a sophisticated platform and links to the banking ecosystem that enables banks in the developed world to provide mobile banking solutions. See this recent post on the launch of the  Monitise sponsored Future Foundation’s report on their research into consumer adoption of mobile banking for more background on why adoption rates are likely to increase over the near future.

Visa’s announcement follows Google’s recent announcement of its (so far available only in the US) mobile wallet,  which will exploit NFC technology in the current generation of android smartphones to enable users to use their phone to make payments. The announced functionality seems similar to that provided by Orange / Barclays in the UK, shortly to feature in a TV ad.

I have been trying to use contactless payment wherever possible, but judging by the blank looks  from retail staff when I try to use it to buy a coffee it is clearly in the very early stages of adoption, and is still not a familiar technology.

Mobile banking and payment: what consumers really want?

Mobile banking and payment is a recurrent theme for this blog.

I have previously posted on rumours that the iPhone 5 might contain NFC technology, and mused on the possibilities unlocked by the integration of mobile payments with location-based offers and services.

This week sees both the publication of the (Monitise sponsored) Future Foundation’s research on emerging trends in mobile banking and tomorrow’s launch of the UK’s first commercial NFC mobile payment service by Orange and Barclays. Meanwhile, O2 announced that it had signed up Wave Crest, FIS™, Intelligent Environments and Visa Europe to enable its mobile wallet launch, following its earlier announcement that it was applying for e-money authorisation in its own right.

I was lucky enough to attend the Future Foundation’s launch event, presided over by Barry Clark. The attendees were more drawn more from the world of the traditional banks and payment institutions than the mobile ecosystem, but in contrast to the nascent mobile NFC payment products what struck me was that mobile banking is here, and that the debate has moved on from ‘if’, to ‘how fast?’. One common denominator between the traditional payment and mobile worlds was that both mobile banking and mobile payment were both enabled by increasing smartphone penetration (although another key enabler, not addressed by the Future Foundation’s work, although a key complement to smartphone penetration, was the availability and speed of mobile broadband).

The research illuminated the debate around ‘how fast’ with some evidence based insights into consumer behaviour. The first was that the recession had made controlling the household budget a task that made people feel good about themselves. The availability and always-on nature of mobile banking helped consumers to do something that they wanted to do, and that led to both adoption and advocacy of mobile banking products. The second was that mobile banking enabled people to fill time that would have otherwise have been wasted – what the Future Foundation called ‘smart boredom’.

Moving to Orange and O2’s announcements, the research also explored consumer attitudes towards adoption of mobile payment. Encouragingly for the emerging mobile payment services, 70% of those already using mobile banking are interested in using their handsets to pay for goods and services.

I intend to go to a shop to see if I can play with the technology on the Orange launch tomorrow. Initially the service will only be available on one handset, the Samsung Tocco Lite, and requires users to have a Barclays or Orange card. My feeling is that we will look back on this product in years to come with the same sense of ‘how far things have come’ that we have now when we look back on Gordon Gekko’s cellphone from the 1980s, but a first is always exciting. The O2 announcement is short on detail, but long on ambition, explaining future capabilities for their mobile wallet will include ‘m-commerce, airtime top ups, contactless / NFC payments and peer-to-peer payments.’