About 5 per cent of Myanmar’s population has a bank account, but the number of people holding debit or credit cards is now over 1 million, or about 1.8 per cent of the population.
According to the Myanmar Payment Union (MPU), an umbrella organisation for 21 domestic banks, 1 million debit cards have been issued so far. There is no figure for how many credit cards have been issued.
To the issuers, the number is more than satisfactory given that debit and credit cards were just introduced to the cash-based society in 2012. To consumers, the convenience is beyond imagination in a country where cash was until recently the only means of payment. It was a revolution considering that prior to 2012, Myanmar had fewer than 100 ATMs (automated teller machines), compared to over 1,000 now, while no shops accepted cards. And the outlook is bright. In 2013, Myanmar had 0.57 ATMs per 100,000 people, compared to 104 in neighbouring Thailand, according to the World Bank.
Banyar Min Min Htun, a lecturer at Sagaing Cooperative University, prefers using plastic cards to cash. He uses an MPU card issued by the Cooperative Bank.
“It is safer and quicker than using cash or going to the bank to withdraw money. Wherever I go across the country, I just bring the card and don’t bother to carry a lot of cash,” he says.
He uses the card for shopping and money withdrawals. More supermarkets and shops are accepting plastic and ATMs usually allow a maximum withdrawal of Ks300,000 (US$250).
“If I need to withdraw more than Ks300,000, I need to go to two ATMs as MPU cards are accepted by ATMs at all banks. The most obvious advantage is that I do not need to go to the bank and stand in a queue. And I also do not need to take banking hours into consideration. I can withdraw money at my convenience,” he says.
Currently, most plastic cards widely used in Myanmar are debit cards issued by the MPU.
The Central Bank of Myanmar (CBM) formed the coalition in 2011 as the Myanmar Payment System Development Committee. It was renamed the MPU in 2012. The MPU first distributed debit cards with the support of 17 founding members, including state-owned, semi-government-owned and private banks. The MPU is now finalising the process to transform itself into a public company in the next few months.
Bright future for MPU
Zaw Lin Htut, chief executive officer of the MPU, says that more than 1 million MPU cards have been issued and they can be used in every machine at all the member banks. The central bank recently allowed the MPU member banks to issue credit cards.
“MPU cards have spread widely across the country thanks to the support of the central bank,” he said. “With permission to issue credit cards, we expect the number of MPU card users to reach 1.5 million by this year’s end. Over the next three years, that number should rise to 4-5 million cards.”
MPU cards are currently accepted at most of the large shops in Yangon, including three City Mart (the country’s largest supermarket chain) outlets in Myaynigone, Junction Mawtin and Junction 8. The MPU is currently in negotiation with City Mart to have MPU cards accepted in all 20 City Mart branches: 19 in Yangon and one in Mandalay.
“We see a very bright future for plastic cards as the economy opens. If credit cards are issued in the months to come, customers can use their future income in advance. Obviously, this will help increase the number of card users,” he explains.
Zaw Lin Htut sees risk management as key to issuing credit cards.
“Like in other countries, there are risks with issuing credit cards. But our member banks are not new to the business. Most of the banks are long established and experienced. When issuing credit cards, banks may issue two kinds – secure and insecure credit cards – depending on their knowledge and relationship with customers. If a bank does not know much about a customer, a deposit may be required as collateral,” he said.
Credit card risks to issuer banks should be under control now that all MasterCard and Visa cards issued by domestic banks are more or less like debit cards. Cardholders therefore need to fill their cards with cash before using them.
In November 2012, MasterCard Worldwide was the first international payments network to issue a licence to a Myanmar bank, paving the way for branded cards to be issued and accepted in the country for the first time.
Visa International, the world’s largest payment network by value, followed shortly afterwards.
Hiro Taylor, country manager of Visa Myanmar, says the network has witnessed double-digit growth but did not disclose the number of cards issued.
Currently eight client banks – AGD, AYA, CB, KBZ, Myanma Apex, Myanmar Oriental, Myanmar Citizen and United Amara – are issuing Visa cards.
The cards can be used to make online purchases or to shop overseas in different currencies. How the banks screen customers varies and depends on the banks’ own policies and processes.
Taylor says that Visa aims to displace cash with electronic payments, which will provide great efficiency and transparency to the economy. The firm therefore works tirelessly with financial institutions, government agencies and related stakeholders to improve card acceptance nationwide.
“As a global payments technology company, we see one of the most valuable contributions we can make as helping to bring more people into the formal financial system. We do so by creating pathways to financial inclusion for the financially underserved through our products, services, technology and payments expertise; financial literacy tools and resources; and our strategic partnerships,” he said.
“We believe access to financial services is essential for progress. Financial inclusion moves people from being untapped and isolated members of our economic system to thriving and contributing participants. Improving access to financial services and electronic payments is a critical building block to help more people improve their lives and lift themselves out of poverty.”
The economic impact of electronic payments on an economy can be profound. Electronic payments added US$983 billion in global economic growth from 2008 to 2012, according to Visa.
“Electronic payment is taking shape in Myanmar and it is crucial that the financial industry as a whole takes the right step. We continue to support the financial sector in capacity building,” said Taylor.
Visa helped establish the Myanmar Risk Management Council in 2013 and ran workshops to educate key stakeholders. Recently Visa held a workshop on mobile financial services which was attended by more than 80 government personnel from 13 ministries. Visa has also sponsored two members of the CBM to study electronic payments at the National University of Singapore.
Visa cards are now accepted by 1,800 retailers, mostly concentrated in tourist destinations such as Yangon, Inle Lake, Mandalay and Bagan. Recently, a deal was struck to allow the use of the cards at City Mart outlets.
They can also be used to withdraw money from 1,150 ATMs nationwide.
“This is particularly good news for tourists buying gifts in Myanmar to take home. Businesses can increase their sales safely and securely, knowing their money will be deposited to their bank accounts the following day.”
May Zin Soe Htet, City Mart’s marketing director, says the chain decided to accept Visa and MPU cards for customers’ convenience.
“For the time being, acceptance of plastic cards has not shown obvious effects on our sales. But we value our customers’ convenience. Now our customers do not need to bring cash when shopping. As the country develops, the use of plastic cards will definitely increase day by day,” she said.
May Zin Soe Htet admits that the chain sometimes faces IT hiccups and wants better online facilities to accept plastic cards.
“Currently, the Internet here is not that good. The system works properly as long as the Internet speed is high. Otherwise, there may be some delays and inconvenience,” she said.
She says City Mart outlets have not yet seen many plastic cards users. On average, each of the three Visa-accepting stores usually process transactions for about 30 Visa cards while the three MPU-accepting branches receive about 15 MPU cards a day.
May Zaw Lin Htut says that Myanmar needs to take time to transform the cash-dominated society into a card-accepting one.
“Thailand and Malaysia applied the practice more than 20 years ago. But they still use cash in some places. Likewise in Myanmar, for the plastic cards, it may take about 10-15 years to cover the whole population,” he said.
“Obviously, Internet speeds have increased since last year. Internet speed and mobile penetration are increasing year by year… More people should get used to using banks. At the same time, banks should also provide more products and services for the convenience of their customers.”
Banyar Min Min Htun prefers using an MPU card to a Visa card, as the balance of a Visa card account must be at least US$30. This blocks him from withdrawing more money while an MPU card allows the cardholder to drain all the cash stored.
Su Su, an English teacher at a private language school that employs more than 400 staff nationwide, is using an MPU card for withdrawals. Her school pays her salary through the account.
Su Su says that the biggest shortcoming of the card is the insufficient cash stored in ATMs, especially at the end of the month.
“Generally, it is good except from 3pm-4pm when banks usually calculate the balance. At that time, machines often do not work. And on the first and last three days of every month, the machines regularly run out of cash. They should supply more notes.”
The technology seems unable to catch up with consumer expectations. That is what Chaw Su Hlaing has experienced.
“Earlier this year, I came to a KBZ ATM to withdraw money. The ATM just stopped working after I put my card in. It was not because of an electricity blackout. It was late and nobody was around except for a security guard. I had no other choice but to come back to the bank the next morning to meet the manager. Only then could I withdraw money and get my card back,” she said.