Interview: Neil Emerson
How is ATM usage developing in Myanmar?
NEIL EMERSON: Some 85% of the world still uses cash, and as a growing economy Myanmar needs cash to function properly as well. As of end-2016 there were approximately 2500 ATMs installed in the country, and RBR has forecast that the installed base of ATMs over 2017-22 will have a compound annual growth rate of 13%. The usage of ATMs has continued to rise, as they provide 24/7, year-round access to cash.
Transiting cash poses financial institutions with a number of challenges, such as security, cash cassette damages, managing multiple cash-in-transit operators and cash outages. Cash recycling can help to reduce the frequency of transiting cash between different ATMs for refilling purposes. Currently, banks have to use a vast amount of resources to manage the cash requirements of ATMs and branches. However, since customers are not restricted by opening hours and can use the ATMs to deposit their cash, a constant flow of cash both in and out of ATM machines is developing, thus providing a cash supply that prevents ATMs from running out. The machines also have anti-forgery detectors to reject any notes that they deem to be fraudulent.
What effect is the traditional banking sector having on the growth of fintech solutions and vice versa?
EMERSON: Today there is a growing number of new fin-tech companies which offer consumers a wide variety of solutions, from money transfers to payment systems. Many of these solutions are solving country-specific problems, such as offering easier payment platforms for financial inclusion. Fintech companies can provide solutions that larger banks are not focused on, which is beneficial for Myanmar’s population.
Furthermore, any company that is able to enhance the user and customer experience by reducing the complexity of banking will help raise financial inclusion, particularly in countries with unbanked populations. However, with all new technologies introduced, companies must ensure that their solutions fit or can be enhanced within the existing banking infrastructure managed by the central bank, to ensure they are compliant and regulated to protect customers. Such processes and regulations have often been in place for many years and are difficult to update quickly. The other main challenge is the rapid change of technology, as it is common for technologies to become obsolete in a short period of time. The rate of user adoption and the pace of change are key factors that will determine whether a fintech solution remains in use.
In what ways are emerging fintech channels changing the landscape of Myanmar’s financial services?
EMERSON: We are in the midst of a rapidly shifting payments landscape, in which the physical and digital worlds of currency are converging faster than ever. Mobile payments are predicted to grow to $54bn by 2019, according to a recent report from Javelin. In the report, 51% of respondents indicated that they would prefer to use a mobile wallet from their primary financial institution, even though fintech companies may have been more successful at making headlines with their pay initiatives over 2017.
Of those who have not used mobile payments to date, 42% cited security concerns as a reason for their reluctance. This research reveals there is a huge opportunity for financial institutions, but they will need to take advantage of this opening now, before competitors – banks and nonbanks alike – sink their teeth deeper into the evolving relationship between consumers and fintech solutions. Although customers are embracing digital technology in many aspects of their life, they are still not ready to abandon their established relationships with traditional service providers as trusted protectors of their money; however, there’s no guarantee that will stay the case over the long term. Financial institutions will need to develop and implement a strategy that places new trends and technologies front and centre.
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