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Something big is about to happen in Myanmar’s financial services sector. The country’s smartphone penetration has rocketed to a whopping 80 percent, and data use is on par with what we see in developed European economies. Yet bank account penetration lags at just 23 percent, and about 99 percent of all transactions are estimated to be in cash. This set of conditions is unprecedented. No other country has such a disparity between smartphone and account penetration. While it’s difficult to predict exactly how financial service adoption will play out, the experience of countries like China — where smartphone penetration has driven mobile payments adoption — suggests that mobile financial services are likely to start growing and help close this gap.
To see how smartphones could transform people’s financial lives in Myanmar, let’s look at how a real person is already using her phone. Myat Su is a social media-savvy rice seller in the city of Bago, a short drive from Yangon. Between business and personal use, Myat Su spends at least six hours a day on her phone. She has a small shop and makes 80 percent of her sales through Facebook. Here is how it works: Her Facebook business page provides information about the more than 20 types of rice she sells, and her customers place orders through Facebook Messenger. They usually send her a screenshot of what they want, she checks her inventory, they chat to settle on a price, and then they exchange address and delivery details.
While Myat Su engages in limited e-commerce, she faces challenges that merchants in more developed countries don’t. By using free-format chats to arrange sales, each deal typically takes 20 minutes to complete. Cash on delivery leads to cash-related problems such as having to manage change or the headache of ferrying around money. Clients are often away, attempt to renegotiate deals, or back out when it comes time to pay. All of these situations represent enormous burdens on her business.
As Myat Su works through these challenges, her Chinese counterpart transacts via an app sporting intuitive shopping pages, built-in payments features, escrow services, inventory management, customer rewards and relations options. All the while, they enjoy a credit line generated based on payment data. By contrast and despite her daily smartphone use, Myat Su’s financial life takes place entirely offline.
She is not an outlier. Small businesspeople in Myanmar have gone online in droves and use Facebook in similar — if limited — ways. They have to, because despite rapid growth, mobile financial services in Myanmar is still in its infancy and has yet to enjoy widespread adoption by people like Myat Su.
While Myat Su obviously has a need for mobile financial services to better conduct her business, how specifically might smartphone-based solutions address this need? Partly to answer this question, CGAP embarked on an effort to learn more about the impact smartphones are already having on financial inclusion in Asia. We interviewed more than 20 thought leaders in the region, and it was striking how much they agreed on the following.
- Smartphones open up new avenues for mass adoption of financial services. They do this by integrating financial services (especially payments) with apps and services that customers understand and genuinely want. In China, on a night out, for example, a group of friends can use payment-enabled chat to do everything from coordinate where to meet for dinner, hire rides to the restaurant and split and pay the bill. This approach of hitching payments to apps that meet popular demand — rather than selling financial services alone— seems to be the key to getting people to adopt en masse. For Myat Su as a consumer as well as a businesswoman, the key will likely revolve around being able to buy and sell things remotely, dependably.
- Smartphones enable a richer product portfolio for digital and financial services providers while minimizing cost of reach. China’s experience clearly demonstrates this app-led approach to financial services. As pointed out in a recent CGAP blog, China in 2016 had more than 500 million mobile payments users, and they transacted 97 billion times on nonbank mobile apps. Alibaba’s e-commerce and WeChat’s messaging platforms are largely behind these numbers, which they achieved by matching their enormous, highly engaged customer bases with payments services. It’s safe to say that neither provider would have enjoyed breakthrough success had it led with a payments offering.
High smartphone penetration coupled with developed country data use levels suggest that Myanmar is poised for large-scale digital financial services adoption. If the experiences of countries like China are any indication, when this happens it will not be because the Myat Su’s of the world embrace financial services for their own sake. It will be because they couldn’t do something else — whether selling products online or gifting a cup of coffee to a friend via an app — without them.