My Thoughts on Leapfrogging in Myanmar’s Financial Sector

It’s been phenomenal living in Myanmar for the past five years. Before I left the country to further my studies in Singapore less than a decade ago, I told my family that I probably would not be coming back to Myanmar and that I would be building my future elsewhere.

Evidence of Myanmar’s Telecommunication Leapfrog

Fast forward to 2017, not only I find myself back in Myanmar but also being excited to be part of Myanmar’s transformation story. Different media have dubbed the story with multiple eye-catching headlines. But one that has stuck throughout the years is the story of “Myanmar’s leapfrog.”

When we think about leapfrogging in Myanmar, we tend to only think about the communications & connectivity leapfrogging (i.e., over 60% smartphone penetration in less than five years). Over the past two years, this seems to be a recurring and the only theme when it comes to leapfrogging. The growth is explosive, surely. But what about other sectors of leapfrogging? What about leapfrogging in Myanmar’s nascent financial ecosystem?

Recently, I had the opportunity of attending Singapore FinTech Festival 2017 where different people (25,000 attendees) from different countries across the world gathered in Singapore to speak about FinTech, Financial Inclusion and all the latest innovation (including Bitcoin and ICOs) in the finance sector.

These conversations had me thinking about what we need to do to grow the financial sector in Myanmar. One of the most significant opportunities to develop the finance industry in Myanmar is to leverage the high penetration of smartphones. Let’s explore what’s possible.

Fully embrace digital

Digital should be at the front and center of any FI (financial institution). There is no such thing as a digital strategy. Digital should be integrated into your brand’s DNA. Digital is not something that you label. You cannot call yourself a digital bank to become a digital bank.

You might argue that you already have a mobile app and an internet banking interface. That’s great. But if one still has to walk into a branch to do specific tasks, you’re still not embracing digital as much as you should. Most of the FIs are going through a transformation process internally which is excellent. But let’s embrace digital fully. Instead of building asset-heavy and expensive branches, let’s move all the operations onto digital such that no one needs to walk into a branch ever again. digibank by DBS India is doing just that by onboarding customers as mobile money users and giving them the opportunity to open a full bank account when they’re ready. That’s where financial inclusion happens.

Digital KYC

KYC is one of the most significant challenges for an emerging country like Myanmar. Myanmar’s national identity system is broken. Just a few days ago, my UX director was tackling a problem for an app that has to do Know-Your-Customer (KYC), and we realized that there are two entirely different formats (the older format is less known now and only used by a handful of people). Moreover, one of my relatives used to have two NRCs. I have also met people who hold dual citizenship, and Myanmar does not allow dual citizenship. All of these scenarios create an excellent opportunity for a digital identity system.

India has a digital identity programme called Aadhaar. Estonia has a programme called e-Estonia. Such digital identity system contributes to leapfrogging in the financial sector. Gates foundation has written about breakthroughs that can break poverty by providing better access to finance and also stresses that digital identity and authentication systems will play a vital role in providing financial services to billions of people that are currently under-served.

Myanmar has an opportunity to embrace a digital identity ecosystem fully, and a whole variety of industries will reap its sow.

Open instead of Closed

CEO of one of the well-known Myanmar banks have remarked that Myanmar banks need to move away from being egoistic and to step into the world of an open ecosystem where everyone can innovate. The future of banking looks like a marketplace where consumers have the choice to pick different service offerings from various service providers instead of going to an all-in-one FI.

Traces of this concept can already be seen in new challenger banks such as Change Bank. This new concept of an open ecosystem, in the long run, would create better financial service offerings for the consumers and will create a level playing field for all the FIs, regardless of being big or small. I found similar evidence during Singapore FinTech Festival as well where major banks are trying to integrate with local/regional/global FinTechs to provide a better experience for its customers.

Regulatory Framework

But while everyone is pushing for leapfrogging, regulators must also play their role in ensuring that there is enough attraction for talent and room for innovation. We can only leapfrog if all the stakeholders work hand-in-hand.

I was very inspired when Mr. Ravi Menon of Monetary Authority of Singapore (MAS) delivered the keynote speech at Singapore FinTech Festival 2017. Over the past couple of months, MAS has been very vocal and progressive about how regulators could be working with technologists and finance specialists. They’ve introduced a sandbox environment for innovators and FinTechs (3rd party ecosystem) to innovate and build new digital financial services. Such setup is crucial to push Myanmar’s financial sector forward. Regulators must play a part in fostering an environment for innovators to innovate. 
Take a look at Project Ubin which is a regulator-led innovation experiment (Using blockchain technology to perform cross-border and inter-bank transactions). That’s leapfrogging.

I cannot wait to see a more inclusive financial ecosystem where challenger FIs are also welcomed. If we truly desire for leapfrogging and if we genuinely want to stay true to Myanmar’s brand of “leapfrogging,” we must embrace digital innovation. I overheard a conversation between two Senior Vice Presidents from one of the biggest banks in Asia. They were talking about agile methodologies, design-thinking, and prototyping. They were discussing how they could escape from legacy systems and plotting a plan to work with FinTechs. When was the last time you heard senior management from FIs talk about those?

Probably, the answer is “never” because the world of finance is changing. It’s not just about the technology. It’s about the mindset and the culture. It’s about working together. It’s about an open and collaborative environment. It’s about creating value and delivering it through digital channels.

The time is now. The opportunity is before us. It’s up to all the players and regulators in the financial sector in Myanmar to seize it.

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