Telenor and Yoma Bank are teaming up in mobile banking, aiming to provide basic financial services for millions of unbanked people in the country.
The two prominent firms have already started working together in some areas like hiring skilled workers and selecting an IT infrastructure, though they are now waiting for clarity on the regulatory regime that will govern the service.
Only about 6 percent of the population has a bank account, meaning there is a vast unbanked population in the country, said Yoma Bank chair and CEO Serge Pun.
“They might be living in very remote areas where getting access to a branch of any bank is problematic. They might be in professions which don’t give them time to get to a bank – by the time they arrive it is closed,” he said in an exclusive interview on November 19.
“We want to serve those people who don’t have a bank account.”
Telenor Myanmar CEO Petter Furberg said mobile banking is a better method of financial inclusion than the banks for people at the lower end of the pyramid.
Banks face high fixed infrastructure costs that limit their branches, meaning they generally attempt to attract the most valuable customers first.
“They will always start at the top of the pyramid and go downward. We are starting at the bottom of the pyramid and working upward and serving a segment that will not be served by the banks in general because the cost will be too high,” he said at the November 19 interview.
While Telenor and Yoma’s intent to cooperate is clear, they may be a bit ahead of game in terms of regulatory statutes. Mobile banking takes many different forms in different markets around the world, and it is as yet unclear how such services will be required to set up in the country.
The two firms are awaiting regulatory clarity from the Central Bank of Myanmar, and intend to comply with the regulations when they are released, said Mr Pun.
“The difficulty is [that the question of] what kind of structure will comply with the regulations is still up in the air.”
“Mobile money, mobile banking if you look at it deeply is neither a telco operation nor a bank operation,” said Mr Pun.
Several Central Bank of Myanmar officials declined to comment or could not be reached last week, though officials have previously said two different models of mobile banking will be allowed. In July, a senior Central Bank official told The Myanmar Times that there were plans for non-bank-led mobile payment licences, in addition to bank-led mobile payment licences, for which the rules were laid out nearly a year ago.
“Non-bank-led mobile payment licences will be granted to Mobile Network Operators once they are ready,” the official said in July.
Bank-led mobile banking is already operating in Myanmar, with Innwa Bank-connected Myanmar Mobile Money as perhaps the most prominent example. However, non-bank-led models, such as the service proposed by Telenor and Yoma, are often more flexible in the services they can provide.
It is also the non-banking rules that have yet to be released by the Central Bank of Myanmar.
Mr Pun said it is likely there will be a cap on the size of transactions that can be made under the non-bank-led rules, probably around US$500 or less, partly to ensure mobile banking does not turn into shadow banking.
Telenor Myanmar CEO Petter Furberg said the Norway-based telco is setting up mobile banking operations across its Asian markets, and had made a similar commitment to Myanmar when it entered the country.
The firm decided to work with Yoma Bank for two reasons, he said. Firstly, mobile banking is about trust, and Yoma has an established brand in the country. The second is that the bank has a lot of knowledge of money transfer services, which is at the core of mobile banking.
Telenor for its part brings its extensive distribution network, said Mr Furberg.
The telco already has 14,000 points of sale in Yangon, Mandalay and Nay Pyi Taw, and is aiming for 100,000 in five years – though not all will be equipped to handle mobile banking.
Mr Furberg said that while the specific structure the firm will use rests on the regulatory environment the central bank puts in place, it counts on its distribution network to help drive the business.
Many “mom and pop” shops are already selling Telenor top-up, often through electronic E-Load devices rather than scratch cards. Once the mobile banking business begins, Mr Furberg said he envisions someone wishing to transfer money from Yangon to an aunt in Mandalay would approach one of these mom-and-pop shops and buy an amount, such as K10,000, from the shop. The agent inputs this figure on her phone, and both sides get a receipt acknowledging the transfer.
The aunt in Mandalay meanwhile would receive a code through a method such as SMS. She would then go to another participating shop locally and show the code, then receiving the K10,000.
Mr Furberg said the agent selling the top-up in the first place must pay for it in advance, while at the cash dispersal side, the Telenor distributor network clears all settlements usually every two days, which removes much of the risk. The agents will generate revenues by receiving a commission on the amount.
“To me the essence of it is the ability to cash in and cash out a very small amount at a very low price,” he said.
Initially there will likely be an over-the-counter service, though in the long run Mr Furberg said he would like to see interoperability with other platforms, though that is something not on the table right now.
Although there are some things the two firms can do together without the rules in place, such as begin selecting systems and hiring staff, they cannot begin the service until regulatory clarity is in place.
“It’s good, it’s actually extremely important for Myanmar that we get this going,” said Mr Furberg.
Mr Pun added; “Stay tuned”.