Fantastic news this month for Myanmar’s startups and entrepreneurs: The Central Bank of Myanmar has finally removed restrictions on the use of domestically issued Visa cards.
But what does this mean for startups?
Until recently, domestically issued cards couldn’t be used for purchases within the country. This meant that anyone who held a card could only use it to make payments overseas, or through overseas-based online platforms. (On top of this, if you were using one of the pre-paid cards, you often faced the situation of reaching a checkout page only to find that a pre-paid card wouldn’t be accepted, and all your previous form-filling efforts were for naught.)
In a country where internet access has gone from 2 million to an estimated 39 million in just 3 years, over half of Facebook’s Myanmar 15+million users joined in the last 6 months, and mobile phone penetration has equally zipped up from 6% to a (possibly disputed) 90% since 2012, this was a major problem for startups looking at generating online revenue.
Non card-based payment channels for Myanmar digital startups
As a solution, for revenue many online startups relied on cash-in-hand payments, such as handing cash to delivery drivers or payments made in person direct to business representatives (esp. in the case B2B businesses).
Some (including myself) have also experimented with revenue models that rely on transferring phone credit – a complicated scenario when factoring in the three (soon to be four) different, incompatible operators. Others still have relied on printing their own scratch card vouchers which are stocked by local partners and redeemed online or by phone (actually, this can be quite a good solution when you consider the low cost of printing, low financial literacy and the cash based economy).
These recently announced changes herald a new era where online payments are increasingly possible and revenue at last flows directly from individual customers to startups via online payment gateways.
Slow or fast? The adoption of a digital economy in Myanmar
However, it’s not the answer to the startup entrepreneur’s prayers just yet: we must accept that true change will take time.
Like others, I’ve been excited to see the appearance of ATMs around Yangon in the past year, but the card-carrying culture is not yet established. The country still only has an estimated 1,500 ATMS for a population of 54million. That’s 1 ATM for every 36,000 people. Meanwhile neighbouring Vietnam has a much healthier ratio of 1 ATM for every 5,200 people.
On top of this, cash is in Myanmar is something special. Of course physical currency everywhere is something tangible and known, however within Myanmar it is also associated with mighty levels of distrust, trust and authenticity.
The Myanmar Kyat – emerging from a turbulent history
Myanmar’s Kyat has gone through two horrendous currency demonetisations in recent years – the 1987 demonetisation of a range of notes without warning or compensation made 75% of the currency worthless overnight. The Kyat does not feel inherently stable.
Additionally, as Myanmar returns to the world stage, Myanmar people are eager to help restore the previously-hobbled country to the powerful economic status it once enjoyed and deserves.
Could these be push factors that encourage an explosion in card uptake and which fuel a growth in Myanmar’s digital economy, to mirror that of smartphones and internet penetration?
And yet, and yet… go into any Myanmar bank today and you will see people withdrawing bricks upon bricks of notes. And, where they are collecting US dollars, still inspecting each and every note with a close eye, ready to reject them upon detecting the slightest blemish. This is despite these notes being handed to them by the bank itself, and in blatant rejection of recent decrees that it is no longer acceptable to refuse blemished dollars.
With so much energy and scrutiny going into the printed currency, can we imagine that Myanmar’s people will so readily embrace the opaque world of cards and digital transactions?
So, how should startups view the opportunities in Myanmar’s digital economy?
We must lean to the optimistic; online card payments are the future, but will be just one amongst multiple payment mechanisms.
The case for card payments:
Despite the Kyat’s turbulent history, and despite the physical comfort of cash-in-hand, there is an internal, undeniable drive to restore Myanmar to the world stage that is remarkable in its pressure. This will quickly overcome caution and reticence about cards and card payments.
Plus, significant numbers of Myanmar’s digital startup entrepreneurs have experience working or studying overseas, and are looking to opportunities in their country of birth. Returning to Myanmar, integrating online payment gateways into their platforms is a normal practice to them, and these digital entrepreneurs will help drive a wider uptake of cards and online transactions.
So startups that begin building for and strategizing for online payments now will be in pole-position as card uptake soars. Those that don’t will be quickly left behind.
Support card payment with other payment channels
However, to succeed into the immediate future, startups should a) provide Myanmar’s citizens as much support and transparency as possible to encourage online card payments; and importantly b) remember to still invest in other payment channels.
ATM rollout – and therefore card uptake – isn’t going to be instantaneous in a country the size, geography and economy of Myanmar. Meanwhile, competition between the Telcos is going to become increasingly fierce and in an attempt to solidify their market shares it is only a matter of time handling fees are cut and deals are struck that allow transfers of credit between different operators. Such moves will advance mobile payments in a significant way.
In short: The future looks good. Startups should build strategies and channels for accepting card payments in Myanmar now, but also recognise that payments via phone credit is going to increasingly become another viable channel. Both must be explored and accounted for.