In the past two years Myanmar’s local banks have begun to feel the pull of internationalisation as foreign firms appear in the country to offer their services. Potential joint venture partners, technology retailers, payment system providers and a wide selection of other products are now at their fingertips. Yet while advancements are definitely needed, some warn that prudent spending, strategic planning, education and professional branding are more pressing concerns.
ATMs first arrived in Yangon in early 2012, and a few months later MasterCard and Visa began providing their services to local banks, allowing foreigners to withdraw money in Myanmar. Later that year, China UnionPay launched, in conjunction with the existing Myanmar Payment Union, services in Myanmar. UnionPay is the largest card provider in the world by cards issued, accounting for 45% of the global total in 2012, and has a monopoly on card services in the world’s most populous country. Its operations in 135 countries pushed it to second place globally in terms of combined debit and credit card purchase volume in 2012, with 23.8% of the market in the first half of 2012. This surpassed MasterCard (21.7%), but is still a long shot from the leader Visa (46%).
In the fray it is easy to overlook the simpler infrastructure needs on which these services rely. “ATMs are often hindered by Yangon’s poor network connection, which remains one of our biggest obstacles,” said U Pe Myint, managing director of CB Bank, the country second-largest private bank. Networks in Myanmar are due to be upgraded in the coming years by international telecoms partners, but banking partners may have to wait.
A long list of foreign financial institutions have seen the promise of Myanmar’s nascent banking system and are pre-empting developments to gain an early mover advantage. More than 30 firms have representative offices in Yangon, including Standard Chartered, ANZ, Siam Commercial Bank and Bangkok Bank. “Foreign banks are not yet allowed to operate in Myanmar, but when they are allowed to enter the market, they will only be able to operate joint ventures with local banks initially,” said Daw Naw Eh Hpaw, deputy director-general of the Central Bank of Myanmar, at a conference in July 2013. Regulations were changed at the end of 2013 to allow international banks to form joint ventures with local banks, and the details of these regulations will specify what stake can be acquired. But as with any joint venture, the demands and requirements of each party must be in line with a long-term relationship. U Pe Myint told OBG, “Local banks may suffer as bigger banks may be able to squash them because of their significantly greater capital.”
Demands & Advice
U Sein Maung, chairman of First Private Bank, one of the country’s few publicly traded banks, is clear on his demands from international partners that have approached his institution. “I believe joint ventures with foreign banks can assist the local sector in three key areas,” he said, “Firstly with technology transfer, secondly capital injection and lastly skills training. These areas are vital for the development of Myanmar’s banking sector.”
While technology and capital can be negotiated and bought immediately, training and education are far more long-term and challenging goals. U Mya Than, chairman of Myanmar Oriental Bank, told OBG, “We need to build up our capacity within every sector, especially with regards to human resources.” The success of future joint ventures will rely not only on capital and services, but on the strategic and management alignment, and the ability to grow in tandem as well.
“An integrated long-term business strategy is the most important element to the success of a financial institution, especially in emerging markets where high growth potential can be easily derailed by unforeseen external market forces,” said Michael Madden, CEO of Ronoc, a financial services advisory firm focused on emerging markets and operating in Myanmar. “Education, training, and carefully selected boards and advisors are essential at this point, and those that can keep ahead of the game will win out in the years to come.”