Latest CBM ruling seen as setback for cashless transactions

An announcement from the Central Bank of Myanmar (CBM) disallowing the use of prepaid cards in the local currency is a step backwards for cashless transactions, industry observers said.

The CBM, which made the announcement on July 25, said prepaid cards with a limit of US$5,000 issued by local banks in partnership with foreign financial services firms can only be used as a payment option by Myanmar nationals on trips abroad as well as foreigners in the country. No transactions can be made in the kyat equivalent using these cards by Myanmar nationals in the country.

A manager with a local private bank told The Myanmar Times that the instruction not allowing the use of these cards for transactions in the local currency “is a step backwards for cashless transactions and also e-commerce”.

U Zeya Aung, Head of Cards and Merchant Services at CB Bank, said consumers used cashless transactions because of the convenience. “This announcement means that another way must be found to encourage going cashless,” he said.

U Nyein Chan Soe, chief executive officer of Get, a digital platform that operates a ride-hailing service as well as a digital store, said the latest ruling “is a setback for e-commerce as foreign-payment cards are convenient for settlement, which is why consumers use them when shopping for online locally, especially for ordering food or purchasing air tickets”.

He said locally issued cards were limited by their technology and not quite as convenient when compared to those issued by foreign firms, adding that the CBM needs to have clearer instructions for online purchases.

U Zeya Aung added that outside of Myanmar, governments were encouraging consumers to adopt cashless payments. “Using prepaid cards is using your own money, while those who use credit cards have to pay at the end of the month. When consumers use their prepaid cards, they can also get discounts,” he said.

On the face of it, the ruling appears to be pushing consumers to choose using credit and debit cards issued under the Myanmar Payment Union (MPU) system if they want to have transactions denominated in kyat.

Prepaid cards predate credit cards in Myanmar, with US-based Visa issuing debit cards in the country from 2012. It was only from May 2015 that a ban on the use of credit cards was lifted. However, restrictions still apply, for example credit card transactions are only allowed for companies who join the MPU, which issues all the credit and debit cards, some co-branded with foreign financial services firms, in Myanmar.

Besides Visa, other foreign financial services firms with a presence in Myanmar include US-based Mastercard, China’s UnionPay International and Japan’s JCB Co Ltd, all of whom have local partners. The four firms were named in the CBM’s July 25 directive.

Meanwhile, MPU chief executive officer U Zaw Lin Htut believes that the situation has not changed for e-commerce and cashless transactions as credit and debit cards, even those co-branded with foreign firms, can still be used and transacted in the local currency. “It’s only that prepaid cards issued by the foreign firms cannot transact in kyat and can only be used outside of the country,” he added.

U Zaw Lin Htut noted that use of MPU’s online shopping cards, e-commerce cards and debit cards had increased exponentially in the first-half of this year compared to the previous year.

The Myanmar Times reached out to the CBM for comments on this report, but did not get a reply.

Source: Myanmar Times

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