Government support needed to develop digital payment habits in Myanmar

Government support is badly needed for the local digital payments sector to develop further, U Zaw Lin Htut, CEO of Myanmar Payment Union (MPU) told The Myanmar Times in a recent interview.

Despite the MPU’s attempts to reduce cash dependency since 2012, local payments are still mainly settled via paper money. Even for payments for licenses and under various business deals such as public private partnerships, only cash is accepted. This will have to change if digital payment systems are to be widely adopted in Myanmar, U Zaw Lin Htut said.

“To reduce the usage of cash, other countries use measures such as levying lower taxes on payments for purchases or transactions made by card and higher taxes on payments made by cash. With such measures, governments can show their support for reducing the use of cash,” he said.

In Myanmar, cards are mainly used for cash withdrawals rather than for making other payments. Of the 4.5 million existing MPU card users, only 100,000 use their cards for payments at Point of Sale (POS) terminals, for example.

E-commerce ready

Meanwhile, MPU is taking steps to prepare for an anticipated surge in e-commerce activity, both in Myanmar as well as across Southeast Asia.

“MPU cards have been ready for e-commerce since 2015,” said U Zaw Lin Htut.

Yet, card users still need to register at the bank at which the online payment service is provided before a one-time-password (OTP) is sent to them. “Otherwise, they can’t transact online,” U Zaw Lin Htut said.

Furthermore, the OTPs, which are automatically generated numeric or alphanumeric characters authenticating the user for a single transaction, are sent to users’ emails instead of their mobile phones via SMS, The Myanmar Times understands.

That is all impeding the e-commerce environment in Myanmar at a time when activity is expected to surge over the next few years.

According to a 2016 report by Google and Singapore sovereign wealth fund Temasek Holdings, Southeast Asia’s internet user base is expected to nearly double to 480 million users by 2020. It further predicted that the region’s internet economy could be valued at a total of $200 billion by 2025, driven by online growth including in e-commerce.

The way U Zaw Lin Htut sees it, Myanmar can contribute to the rise in e-commerce activity. However, he conceded that more needs to be done to make online payments more efficient for consumers. “Also, to improve at a faster rate, a lot more education and government support is necessary to change local payment habits.”

He pointed out that the number of MPU card users has increased to 4.5 million during the 2017-18 fiscal year compared to 3.7 million in 2016-17, saying “the rise in plastic card usage is satisfactory, but if compared to the country’s population, the rate of increase is still very slow.’

Based on his forecasts, the number of MPU card users in 2018-19 should reach 5 million, or around 9 percent of the total population.

Rising competition

Meanwhile, mobile money transfer services like OK Dollar, WaveMoney, M Money and TrueMoney are emerging fast and consumers have begun to leapfrog the card payment system in Myanmar.

“But those services are only for withdrawals of certain cash amounts. I don’t see how having more mobile financial providers is competition for the use of cards,” he said.

In fact, U Zaw Lin Htut reckons the two services go hand in hand. “With increasing demand for mobile money transfer services, the government will be required to allow service providers to use cards to expand their offerings,” he said.

“If and when the use of cards is allowed in mobile money services, the use of physical cash will fall quickly in favour of digital payments. This will create more opportunities for MPU to build a more integrated digital payment system.”

Digital payments officially began in 2012, when the MPU was established by the government and the private sector to replace cash payments in Myanmar. MPU was converted from an association into a private firm in 2015, enabling 23 member banks to become shareholders of the company. Most of the banks have since issued cards and installed ATMs and POS terminals in the market.

According to its 2016-16 annual report, the MPU’s main objectives are to transform the retail payment system into a cashless system by sharing services through an inter-bank electronic payment network among member banks as well as linking to international payment systems.

Source : Myanmar Times

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