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.

International bar association debates mobile payment

Mobile payment is a topic close to my heart, so I am delighted to be joining a distinguished panel at the International Bar Association‘s annual conference in Dubai this afternoon to discuss developments in mobile payment from a comparative perspective. The session is being run jointly by the communications, banking and technology committees of the IBA and that theme of the collision of world-views from players in the different eco-systems (traditional payment, mobile and online) is a consistent theme that arises in the business, as well as the legal, context of this topic.

The panel consists of:

  • Yutaka Nakamura, General Counsel, NTT DOMOCO Inc, Tokyo
  • Alessandro Fiumara, Strategy and Business Development, Post Mobile, Rome
  • Odusola Rotimi, Legal Counsel, MTN Nigeria, Lagos
  • Hartmut Siebel, Legal Counsel, European Payments Council, Brussels
  • Samee Zafar, Director, Edgar, Dunn & Co, London
  • Gareth Rowlands, Legal Counsel,  Visa Europe, Foster City
  • Tom Levine, Partner, A&O, Abu Dhabi
  • Rolf, Auf der Maur, Vischer, Zurich
  • me

and will be ably moderated by Marco Dalla Vedova and Ewa Butkiewicz.

I plan to update this post after the session, but if you are in Dubai at the IBA, do come along for what promises to be an interesting session.

(Apologies to regular readers for the recent radio silence. I am in the process of moving to Singapore to set my firm’s first office in Asia – normal service will be be resumed shortly, although with a more international flavour with the regular diet of UK and EU regulatory developments coupled with a view from Asia, as well as general updates).

UK mobile operators create m-commerce joint venture

Last week, three of the UK’s four mobile network operators announced a mobile marketing and payments joint venture.

The venture is subject to regulatory approval, and is summarised in the press release as:

  • Creation of a single ecosystem for m-commerce helping advertisers, retailers and banks to reach consumers through their mobile phones
  • Consumers will be able to replace their physical wallet with a secure mobile wallet using Near Field Communications (NFC) technology to pay for goods and services
  • Consumers will also benefit from relevant offers and coupons, delivered direct to their phone
  • Everything Everywhere, Telefónica UK and Vodafone UK to provide start-up investment

The mobile operators will continue to compete in the retail market, so it appears that the join venture will not affect the previously announced mobile payment products from O2 and Orange/Barclays.

Instead the strategic rationale for the joint venture appears to be around creating a common interoperable infrastructure platform, and also gaining economies of scale.

With initial products already launched by O2 and Orange, the next announcement to look out for is the retail proposition from Vodafone.




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.’

Post(card) from the Digital Money Forum #dmf14

I’m chairing a session this afternoon on Mobile Money at the Digital Money Forum 2011. Should be interesting with the speakers being:

Mark Hartley, American Express

John Conlon, Barclaycard

Elisabeth Berthe, Grameen Foundation

The current session is looking at the way that cash is being replaced in different jurisdictions. Richard Johnson from Monitise is chairing the session. He introduced the session, by considering why cash might be replaced. The digitisation of cash creates new commercial opportunities for market players, but more significantly if you link payment transactions with data about the transactions there are opportunities to make the experience ‘ten times better’. In that context the ubiquity of mobile devices and integration of tap and go technology is starting to transform the user experience, and can enable the seamless linking of physical and virtual world payments.

First speaker is Douwe Lycklama from Innopay, talking about the Dutch experience. He started by explaining that he saw the Internet as splitting into different ecosystems – Facebook, Google, Apple,PayPal and eBay, Twitter, etc. In his view each of these ecosystems intermediate between online buyers and sellers and their off-line banks. Mobile applications create additional intermediate payment ecosystems. These multiple ecosystems create a lot of complexity and relationships.

Second speaker is Jane Zavashalina, Yandex, Russia. She started by explaining that their banking infrastructure is very young – retail banking perhaps less than 20 years old. However, great progress as 138 million cards with 140 million people. However, 90 per cent of payment are still made outside banking system. She explained that telecoms carriers had developed faster than banks, and that from pre-paid mobile accounts they had expanded into providing de facto banking and that a lot payments were mediated via this type of account. However charges could be as high as seven per cent so great opportunity for banks, but their reaction was not to compete but to complain to government.

The third speaker is David Steed, PayPoint UK. He started explaining that cheques were declining, cards increasing and PayPoint rapidly increasing and likely to soon exceed cheque payments. Users want low cost and universality, and that was driving PayPoint growth. They have moved into mobile phone payments in areas such as car parking where cash collection costs very high.

Final speaker in this session is Erich Ringewald from Boku. He explained their business which was to enable payments on Facebook by debited users’ mobile telephone bills. Very significant growth, demographic was young and therefore growing.

Summary of session is that cash is already under challenge from a variety of different business models.

O2 applies for first UK e-money licence whilst Everything Everywhere and Barclaycard announce contactless payment service

Mobile money is a recurrent theme for the watcher. See the mobile money overview post and Apple’s incorporation of NFC into iPhone post. As anticipated, all the industry players are jostling for position and there have been a number of recent announcements by UK mobile operators.

O2 announced in an interview with the Sunday Telegraph that they had applied for an e-money licence which will enable them to provide payment services without needing to partner with a traditional bank. James Le Brocq, managing director of O2 UK‘s financial services division, commented to NFC world that they plan was to: “bring the contents of your wallet to your mobile phone and create your mobile wallet.” This will complement their existing Cash Manager and Load and Go cards which are provided in association with Natwest. O2 will not renew their partnership with Natwest when it expires at the end of the year.

O2’s announcement follows the recent announcement by  Everything Everywhere and Barclaycard that they would be launching a contactless mobile payment service in the UK by summer 2011. Their customer proposition is deceptively simple. Orange customers with phones appropriately equipped with NFC capability (which at the moment looks like only the Nexus S, but choice will rapidly increase) will be able to touch their phones against contactless payment terminals to pay. Payment will be SIM-based, with payment capability provided by Barclaycard.

Although no integrated product or services have yet been announced by either O2 or Everything Everywhere, the interesting developments to watch will be the integration of mobile payment with location-based services.

The other mobile operators currently appear to be behind the curve in the UK with Vodafone focusing more on their international mobile money transfer product (M-PESA) aimed at unbanked customers in developing markets such as Kenya, Afghanistan and Tanzania, with plans to introduce them to South Africa, Qatar and Fiji, and no plans yet announced by struggling Three.

Will Apple’s move into NFC mobile payment reshape industry alliances?

My eye was caught today by a story on TechCrunch (an excellent blog BTW) that Apple may incorporate near field communications technology (NFC) into its next generation of devices, thereby enabling ‘real’ payments on the move. For those confused as to the difference between mobile payment for real and virtual goods the easiest way to think about it is to think about what would happen  if you ever tried to buy a can of your favourite soft drink via the iTunes Apps store.

In a prior post about the eco-system for mobile money I described my conceptual mental map of three overlapping circles – traditional bank and credit cards, internet payment and mobile payment.  As the TechCrunch article makes clear, this would position Apple bang in the middle of the intersection between mobile and internet payment and could be another ‘game-changer’. For me, the real question is here is who does what to react? Players in each of the circles have to date tended to define their competitors by reference to their existing competitors and there is not currently significant co-operation across the circles (until you tell me otherwise of course…).

It seems to me that Apple’s move (which of course is unconfirmed) will require some of the other players to co-operate in order to react. It is an issue I am spending some time on at the moment, by undertaking some primary research with some of the market players. To the extent confidentiality permits I will share any insights in future posts.