Crawling, walking, but not yet running: electronic banking turns one in Myanmar

With the easing of most sanctions by the EU and US earlier in the year, Myanmar’s banking landscape has been transformed, although challenges to increasing access to banking services among the wider population remain.

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Published in The Bangkok Post on 4 November 2013

Just one year ago, Myanmar was a purely cash economy: there were no automated teller machines and international credit cards were not accepted, save for those of a few well-connected companies that routed payments to offshore companies.

Tyler Turkle's MasterCard/Visa, 2006, poured a...
Tyler Turkle’s MasterCard/Visa, 2006, poured acrylic, each 54 x 43 inches (Photo credit: Wikipedia)

In September 2012, MasterCard became the first international payments network to issue a licence to a local bank. Two months later, the first ATM transaction took place at a Yangon branch of Myanmar’s Cooperative Bank (CB Bank).  MasterCard has established partnerships with eight local banks and one financial institution, which include CB, KBZ, Myanmar Apex Bank (MAB), Myanmar Citizens Bank, Myanmar Oriental Bank, United Amara Bank (UAB), Ayeyarwady Bank and Asia Green Development Bank (AGD).

According to the country’s largest private bank, Kanbawza Bank (KBZ), there are now 2,500 credit card payment terminals across Myanmar, with the majority in the commercial capital of Yangon. KBZ’s General Manager Za Lin Htut told The Bangkok Post, “We are going to expand our ATM network to 250 to 300 over the next 12 months and also plan to roll out ATMs not only the major cities, but also in smaller ones.”

“We are hopeful about partnering with more banks. Any bank that’s interested can partner with us, so long as they comply with the US Treasury’s Office of Foreign Asset Control [OFAC] requirements,” MasterCard’s country manager for Myanmar and Thailand, Antonio Corro, told The Bangkok Post.

Although the decision to exempt a bank from being blacklisted “has nothing to do with MasterCard, Mr Corro said, “We are a public US company and cannot make any compromises as to who we do business with.”

Part of OFAC’s requirements include background checks regarding a bank’s ownership, as some of Myanmar’s banks are owned by individuals blacklisted by the US due to having strong ties to the former military regime.

On February 22, OFAC removed four Myanmar banks off the blacklist, even though at least two are controlled by people close to the former military regime and who remain on the Treasury Department’s Specially Designated Nationals (SDN) list. The reason given for the exemption was that increased access to Myanmar banks by American companies would help promote social and economic development and serve as a model for responsible investment.

“Things are evolving. Members of the US Treasury visited Yangon recently to do some research, so I wouldn’t be surprised if the US government makes further announcements in the next few months,” Mr Corro said.

He described the banks MasterCard is partnering with as “very serious, cooperative and sincere. They’d been isolated for so long and want to be part of the international banking and contribute to the local economy.”

Meanwhile, Visa has partnerships up and running with five banks – KBZ, Myanmar Oriental Bank, MAB and UAB. Three others, Myanmar Citizen Bank, AGD and Ayeyarwady Bank are in the “implementation stage,” Mr Somboon Krobteeranon, Visa’s country manager for Myanmar and Thailand, told The Bangkok Post.

Mr Somboon said that by the end of the year, Visa expects all eight banks to be connected with VISA. VISA now has more than 200 ATMs and 600 POS.

Other payment machines in Myanmar accept locally issued debit cards as well as cards from the world’s second-largest payment network after Visa, the Shanghai-based UnionPay, plus Japan Credit Bureau.

Mr Somboon said, “When I look back over the past year I’m impressed by how hard all the related parties have been working. It’s been very successful.”

Another major development occurred in the sector on October 8, when MasterCard and Myanmar’s Cooperative Bank (CB Bank) jointly announced the introduction of a prepaid international travel card for Myanmar citizens, which allows holders to deposit up to US$5,000.

Mr Corro said, “My understanding there has been a lot of applications [for the prepaid travel card].”

Myanmar travellers can use the EASI Travel Master Card to withdraw money in more than 210 countries; however Myanmar isn’t one of them.

When asked why Myanmar citizens cannot yet obtain a credit card, Mr Corro said, “It’s a decision for the Central Bank of Myanmar. CB Bank was the first bank in Myanmar to be given permission to provide a card that can be used internationally, but part of the requirements was that it can only be used outside the country.”

He said he is unaware of any specific reason as to why, saying, “I think [the Central Bank” wants to make sure that everything moves forward in the right way. There’s a lot happening right now, such as new laws being passed, banking policies being reviewed and so forth. We will have to wait and follow what they are doing.”

Mr Somboon said that it will take “some time for more sophisticated products such as VISA debit and Visa cards” to become available for locals.

“There will also need to be a knowledge transfer to local bank staff to operate such technology,” he said.

He added that, “In the very near future, VISA will announce the launch of a strongly competitive product [for a prepaid card for Myanmar travellers].”

INFRASTRUCTURE PROBLEMS

Electricity shortages remain a burden on Myanmar’s banking sector, with frequent power cuts disrupting electronic banking services. However both VISA and MasterCard said the problem is manageable.

“Electricity shortages remain one of the greatest challenges [for banking], along with weak infrastructure. However ATMs are usually located in front of a bank branch, which has a power generator. So there’s not much down time,” Mr Corro said.

“We definitely had our challenges in terms of infrastructure. But considering we started off [in December 2012] with nothing  and that this time last year there were only about 30 ATMs, I’m really pleased by the speed of progress. We expect a growth rate of about 100 additional ATMs every year,” Mr Somboon said.

Mr Somboon said that “Last year wasn’t so good” in terms of the number of transactions successfully authorised.  “But right now it’s quite comparable to the system efficiency in neighbouring countries. However it remains a fact of life in Myanmar that there won’t always be an electricity supply.”

Mr Corro believes that international travellers will now feel confident about banking services in Myanmar.

“MasterCard holders usually check our website to see where we have a presence. We now have 500 merchants accepting MasterCard in Myanmar – mostly at hotels and elsewhere in the tourist industry. It’s very encouraging to have 500 POS in the third quarter.”

However it seems that many international visitors remain unaware of the availability of credit card facilities.

Although the technology to accept MasterCard and VISA was introduced at Mi Casa Tapas Restaurant in Bahan Township three months ago (via United Amara Bank), restaurant manager Jack said, “Ninety-nine percent of our foreign guests pay in cash.” He also added that power shortages continue to affect the restaurant’s ability to process credit cards.

Some may also feel wary of making use of the new technology in Myanmar, and there seems to be some justification for this. French citizen Florian Guerithault said, “Many people have problems using credit cards in Myanmar, whether it’s paying a $1,000 bill but being charged $10,000, or requesting a withdrawal of K200,000 at an ATM and getting K100,000. Once I tried to withdraw K100,000 and I never got the money, but it was deducted from my account. There’s no security in banking here.”

Mr Guerithault said he was also disappointed when Siam Commercial Bank asked him to sign a statement saying that the Bangkok-based bank would take no responsibility for any loss of money during its transfer to his recently opened local bank account with KBZ.

“I had to sign the statement in person and when I asked why they wouldn’t take any responsibility for money transfers, I was told it’s because there are still sanctions in place. But I think if [Siam Commercial Bank] is going to offer these services, they should do so properly.”

French citizen Natasha Schaffner, who owns Alamanda Inn and has lived in Yangon for nine years, said, “I have no plans to open a local savings account, because I still don’t trust Myanmar banks.”

However locals – of whom only a tiny minority now have access to banking services – appear more enthusiastic about moving cash savings into a bank.

Htun Phu Nin Htay, 22, is currently saving up for a Masters degree. She told The Bangkok Post, “I opened a savings account with United Amara Bank three months ago. I used to give my salary to my parents and they kept it under their mattress at home, but I feel safer knowing that my money is in a bank.”

Visa’s country manager Mr Somboon told The Bangok Post that the cumulative figure for ATM withdrawals and POS transactions stands at $15 million. MasterCard does not make such figures publicly available.

“It’s quite a lot,” Mr Somboon said, although the figure pales in comparison to neighbouring Thailand, where VISA process $2 billion a year.

He is hoping that 300 ATMs will accept VISA within the next year.

“Wherever the banks have a branch there will be an ATM,” he said.

“It’s hard to predict what the figure could be by this time next year, but if travellers make use of the VISA card in Myanmar, I believe there will be an exponential increase.”

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