The Latecomer Edge: How Myanmar is Fast Tracking Mobile Money Adoption
If any country needed to get mobile money right, it’s Myanmar. More than 70 percent of its 53 million people have never used formal financial services. Most live in remote areas and would likely never be reached by brick-and-mortar banks, even if the branch network grew exponentially. Fortunately, mobile penetration has skyrocketed in the country, going from less than 10 percent in 2013 to nearly 80 percent today, opening the doors for mobile money to bring basic financial access to millions of Burmese.
As countries like Colombia, Kenya, Tanzania and the Philippines have seen, providing basic access to financial tools — on the rails of a digital payments systems — can be a critical enabler of inclusive growth. In Kenya, more than two-thirds of the adult population has a mobile money account, making it cheaper for banks to reach consumers with savings and microloan offerings. It has also spurred growth of off-grid solar systems as digital providers can collect small payments digitally at low costs.
Compared with those countries, Myanmar has largely leapfrogged feature phones. Nearly 80 percent of mobile subscribers have a smartphone and 55 percent are regular data users, which have a much broader capacity to generate insightful data and open possibilities for all kinds of “over the top” (OTT) financial services.
Myanmar has the advantage of starting late, leveraging the latest technologies and proven policies to promote faster growth. Indeed, the central bank has demonstrated a solid grasp of what’s worked in other geographies, like East Africa. Its regulations, released in March, enable mobile network operators (MNOs) and other non-bank providers to offer mobile financial services. Experience shows this drives scale faster than bank-led models — part of what held back mobile money in India until recently.
The new rules also include Know Your Customer (KYC) requirements that are proportional for small and large transactions. Users can open a mobile money account with a $200 daily transaction limit with just a SIM number and a National ID. This is absolutely essential in a country where more than 95 percent of adults are employed informally and therefore lack traditional KYC document requirements, such as proof of employment and address. In addition, in order to give customers more touchpoints, last-mile agents cannot be exclusive to one provider. This, and the central bank’s emphasis on account-to-account interoperability, reflects the industry wisdom that interoperability benefits both customers and providers.
Setting the Stage
The central bank’s new regulations are just the latest step in Myanmar’s effort to incorporate lessons from other countries and create an environment where digital financial services can take off. In 2013, the government issued operating licenses to two global MNOs, Telenor and Oredoo, through a transparent bidding process. This ended the monopoly of state-owned Myanmar Post and Telecom and created the competitive environment that spurred Myanmar’s rapid mobile penetration. In just a few years, the price of a SIM card dropped from over $1,000 to less than $1.50.
Furthermore, financial inclusion targets were baked into the MNOs’ contracts, and the government has set itself a target of extending financial access to at least 40 percent of the population by 2020. This is an ambitious goal for a country where less than 5 percent of the population have a bank account, but might be an achievable one based on the market conditions that have been so carefully curated by the government so far.
Less than five years after emerging from complete isolation, Myanmar has wisely used its late start to implement well-balanced regulations and to establish a competitive MNO landscape — creating an environment in which mobile money can scale quickly, maybe even as fast as the handsets themselves.
