Covid-19 and fintech: Myanmar's chance to expand financial inclusion?

Myanmar has seen an increase in financial technology (fintech) and digital payment offerings since the outbreak of the coronavirus pandemic, raising hopes for the expansion of financial inclusion in a country where banking penetration remains below the regional average. 

After Covid-19 arrived in Myanmar, fintech solutions quickly proved to be effective in encouraging social distancing and limiting community transmission.

Where possible, one-off payments of MMK30,000 ($22.78) to vulnerable households under the government’s Covid-19 Economic Relief Plan were distributed through local digital platforms such as Wave Money and OnePay.

Digital transfer options were also extended to social security payments, loans for farmers, emergency funds for garment workers and financial relief for street vendors.

As well as partnering with the government and humanitarian organisations to ensure the transfer of funds to the general public, Wave Money also announced that it would forgo all transfer fees for at-risk and affected sectors for the duration of the crisis.

The adoption of digital payment methods resulted in a substantial increase in activity since the onset of the pandemic, with data analytics company Statistica projecting a 7.1% increase in digital transactions and a 19.7% rise in the number of users in Myanmar this year.

“The banking and financial services sectors were definitely the major beneficiaries of the pandemic,” Serge Pun, chairman of Yoma Strategic Holdings, told OBG. “The number of users switching to digital platforms, creating bank accounts and using mobile payment methods has grown exponentially.”

Spike in investment

The growth in digital payment usage over the past six months has also coincided with an increase in fintech investment.

In mid-September regional media reported that Myanmar fintech start-up NearMe had secured a seven-digit funding offer from Japanese conglomerate Sumitomo Corporation.

NearMe, which was formerly known as 1-Stop, provides digital retail services to small and medium-sized businesses, and has a network of 50,000 partners across the country.

Elsewhere, Wave Money received investment of $73.5m from Ant Group in May, making the financial arm of Chinese e-commerce giant Alibaba a significant minority shareholder.

The following month, it was announced that Yoma Strategic planned to take a controlling interest in Wave Money through a $76.5m investment in the shares of joint-venture partner Telenor, the Norwegian telecoms giant. 

The development comes as Wave Money looks set to diversify its services by providing loans to businesses and individuals via its app.

According to regional media, Yoma Bank is working with Alibaba to develop credit analysis technology that would use artificial intelligence to calculate the creditworthiness of prospective customers, allowing individuals and businesses to bypass traditional banks when it comes to securing loans.

Access to credit is a longstanding problem in Myanmar, with formal lenders forced to abide by interest caps imposed by the central bank and the vast majority of consumers unable to meet collateral requirements for bank loans.

Meanwhile, other operators in the market are also extending their offerings.

In May OnePay launched a mobile interbank platform that allows users to transfer money between seven local banks without having to set foot inside a branch. In a sign of increased demand, within a month of its establishment the app had 150,000 registered users.

High ceiling for growth

With only around one-quarter of adults having access to a bank account, the development of fintech services and digital payment methods is seen as key to boosting financial inclusion in the country.

According to a report from London-based market research company Kantar TNS, mobile money uptake in the country has increased dramatically in recent years, rising from 0.8% in 2016 to 80% last year.

Despite this stratospheric growth, industry stakeholders believe there is significant room for further expansion, given that smartphone penetration stands at around 80% yet only 6% of adults use more than one fintech product – and an estimated 7.5m people do not use mobile financial services at all.

To help facilitate growth, the country is looking to improve its financial infrastructure and strengthen regulations in the sector.

To this end, after receiving funding from the World Bank’s International Development Association, in April the Central Bank of Myanmar launched a tender for the creation of a national real-time retail payments system, as well as a QR-code generation and repository system, while there are ongoing efforts to tighten legislation governing the sector.

“In order to boost the development of credit card and QR code technologies, Myanmar’s government and related agencies are looking to improve regulation of the cashless payment environment,” Christopher Loh, CEO of local bank UAB Myanmar, told OBG.

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