I have been very fortunate over the last few years to speak at a variety of banking events and conferences across the world. Having spoken to bankers from Singapore to Paris and even Tehran, one thing that has always struck me is the commonality in the challenges that banks face irrespective of region or maturity level. I had got to the stage where I thought I had seen and heard it all before. That was until I visited the beautiful country of Myanmar recently.
I was very fortunate to be asked to speak to 40 leading Myanmar bankers on the topic of Mobile Banking in March this year. The event was organised by UK Trade & Investment in partnership with the Central Bank of Myanmar and was kindly hosted at the head office of AGD Bank in Yangon. If you think the UK Banking Industry is undergoing a period of great transition, spare a thought for our counterparts in Myanmar.
The domestic banks have suffered from decades of isolation and stagnation. Only 10 per cent of the market is currently banked and about 20 per cent of the country has mobile network coverage. As recently as 18 months ago, Myanmar was a purely cash based economy; there was not one single ATM and cards were not accepted. Myanmar is one of the last countries in Asia to permit Mobile Banking. In fact, Mobile Banking will become the first ‘digital’ transaction service that Burmese banks provide to customers.
To give you a sense of how far behind the local banking industry is, most banks don’t have a core banking platform, there is no Online Banking and most have only recently launched basic websites. It really is green field banking in a land of green fields. You can safely assume that the majority of the rural population have never seen an ATM or bank card in their life. For most locals banking has sat somewhere between putting cash in an underground safe or stuffing it under their mattress.
However, after the recent political reform Myanmar is now opening up and working on evolving various sectors of its economy, including the banking industry. And from what I could see first-hand, there is a real enthusiasm on the part of Myanmar’s government and banking leaders to learn and adopt best practice from across the globe. Since the start of the recent reform and opening-up process, the banking sector has already undergone tremendous changes.
Banks are currently up-scaling their operations and growth in terms of number of clients, number of branches and total assets. A new Financial Institutions Law, which is expected to come into practice by early next year, will most likely give banks more freedom to further develop their range and pricing of products, including their credit portfolio. In addition, new regulation is expected to allow foreign banks to enter the market later this year, via joint-ventures and foreign bank licenses respectively.
The Burmese Government has just confirmed its two initial foreign network operators – Norway’s state-controlled Telenor and Qatar’s Ooredoo. Whilst mobile phone penetration in Myanmar is less than 20 percent today the Government has lofty amibitions. Its aspiration is to increase mobile phone penetration to 75% in 2016. Ooredoo’s internal forecasts suggest that 97 percent of the country’s population will be covered within five years. Heady days indeed…
To proactively support local banks, the Central Bank of Myanmar recently finished their official guidelines on how Mobile Banking services should be structured. On key decision, to the huge relief of local banks, was that all mobile money services must be led by a bank – thus avoiding any Kenya like M-Pesa disintermediation scenarios. Payment limits are currently set quite low (at the equivalent of GBP£600 a day) however it is likely that these limits will increase rapidly over the next few years.
Without the burden of legacy platforms and infrastructure the banks can now pick the best off the shelf core banking products in the market. Extensible, scalable and open cloud-based technologies will create speed, efficiency and cost savings unheard of in Western banking. More importantly, without the constraint of legacy services, the banks are free to create new compelling end-to-end customer experiences. The challenge for the local bankers will be deciding on what to copy from overseas and what to ignore.
These present exciting times for Myanmar as the country has the opportunity to genuinely ‘leap frog’ many of the steps other economies have made to modernise their banking industry. Local banks are wisely deciding to skip large investment in Online Banking and ATM’s. They have their eyes on a bigger prize - Mobile Banking – and the opportunities in this economy are endless. As mobile networks and devices proliferate, mobile banking and payments stand a real chance of becoming the life blood of a new emerging working class.
On my final day in the country, as I stood at the base of the Shwedagon Pagoda, a stunningly bright gold Buddhist shrine in the centre of Yangon, I remembered an old Myanmar proverb that I came across on my trip, “Do not dwell in the past; do not dream of the future, concentrate the mind on the present time”. I couldn’t think of a more apt recommendation to local Myanmar bankers and regulators myself.