Myanmar skips credit cards, goes directly from cash to mobile payments
An employee stands behind a MasterCard logo during the launch of the international credit card issuer's first ATM transaction in Myanmar, in Yangon November 15, 2012. Soe Zeya Tun / Reutuers
In a trend among developing nations, locals get mobile phones before bank accounts making mobile payments an innovative solution for both the local economy and nascent tourism sector.
Visa Inc. and MasterCard Inc. said payments using mobile phones will help Myanmar reduce the use of cash when wireless networks are rolled out across Southeast Asia’s poorest country starting this year.
The world’s biggest electronic payments companies emphasized the potential for mobile-phone payments in Myanmar, where the government is preparing to grant two new telecommunications licenses at the end of this month.
“In markets where you don’t have that fixed infrastructure in place, it may well be that mobile acceptance is going to be the way to go,” Matthew Driver, MasterCard’s Southeast Asia head, said in an interview yesterday in Naypyidaw. “There’s a great opportunity to leapfrog.”
Making mobile phones available to the wider population in Myanmar, where fewer than one in 10 out of 64 million people now own a handset and the majority of transactions are made in cash, would make electronic payments possible. This would mirror the development in the last few years in African countries such as Kenya, where a mobile money transfer system is used to transact more than $900 million a month.
Myanmar is in the final stage of selecting winners for its telecom licenses. The country plans to boost coverage to as much as 80 percent by 2016 and to make services affordable, the government said in January. There were 5.44 million mobile-phone subscribers as of December, or 9 percent of the population.
Visa and MasterCard are among attendees at the three-day World Economic Forum on East Asia hosted by Myanmar this week.
“We are hoping Myanmar can leverage some of the opportunities” with mobile payments, Peter Maher, Visa’s Southeast Asia head, said in an interview in Naypyidaw, the nation’s capital, yesterday. “The people in Myanmar have no legacy issues, so they can take advantage of the digital era.”
People in frontier markets are more likely to get a wireless handset before a bank account or even a fixed-line telephone, providing an opportunity for payment networks and phone companies to offer mobile payment services.
Kenya’s Safaricom Ltd., in which Vodafone Group Plc owns a 40 percent stake, is the inventor of M-Pesa, a mobile money- transfer system that is used to transact 80 billion shillings ($940 million) a month. Kenya is the most advanced country for mobile payments, Visa said Feb. 13.
More transactions are carried out using M-Pesa within Kenya than are processed globally by Western Union Co., the world’s biggest money-transfer business, according to the International Monetary Fund.
MasterCard became the first payments network to issue a license to a Myanmar bank in September when it signed an agreement with Co-Operative Bank Ltd., as the Southeast Asian nation moves toward integrating with the global financial system after half a century of military rule.
The card companies expect debit and pre-paid cards will be the first to be introduced in the country, rather than credit cards, MasterCard’s Driver and Visa’s Maher said.
Visa may first issue pre-paid cards for Myanmar businessmen traveling overseas for work this year so they don’t have to carry cash with them, Maher said.
“We have a high degree of confidence” that the rollout of the cards will happen this year, Maher said. To do that, Visa is working with seven local banks it has partnered with in Myanmar, including Kanbawza Bank Ltd. and Myanmar Oriental Bank Ltd.
The number of automated teller machines in Myanmar that can access Visa’s transaction network may double to 300 this year from the current 150, Maher said.
Growth in the country’s tourism industry will be the main driver for electronic payments, which could help create more businesses and jobs for local companies, according to Maher and Driver.
Myanmar plans 38 tourism projects valued at $500 million, the government said in a joint statement with the Asian Development Bank and Norway’s government. With continued economic, political and social reforms, international visitor arrivals are forecast to increase sevenfold to as many as 7.5 million in 2020, with tourism receipts set to reach $10.1 billion, according to the statement.
That growth means the tourism industry could provide as many as 1.4 million jobs by 2020, according to the plan.
President Thein Sein has allowed more political freedom and loosened economic controls since coming to power two years ago, prompting nations including the U.S. to ease sanctions and attracting companies such as Coca-Cola Co., Ford Motor Co. and Unilever NV.
Editors: Lars Klemming and Suresh Seshadri.
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