The financial services sector is undergoing a technological revolution. Today’s financial technology–or fintech, as it’s more commonly known– allows financial institutions to continuously upgrade the way they approach and interact with clients, while moving further away from traditional banking. This reinvention has many positive impacts on society, none more so than in developing countries such as Cambodia, where banks traditionally reach only a small fraction of the population. Fintech is now giving the unbanked and the underbanked access to and confidence in financial institutions.
For those not fully attuned to the concept of banking, “cash is expensive and can lead you to easily spend on unnecessary fees,” says Jojo Malolos, CEO of Wing, a leader in mobile finance. “For example, withdrawing cash from a bank other than your own, sending cash through money gram or Western Union, and paying for transport to collect the cash can easily turn your $100 salary into $95.” Cambodia has about 1,200 ATMs and 700 bank branches for its population of almost 16 million, or one ATM for every 12,500 people and one bank branch for every 21,500 people.
Bridging a Gap
This is where Wing steps in, with a solution to provide the unbanked people of Cambodia–about 75% of the population, according to Mr. Malolos– access to a system of branchless banking that offers all the services of a commercial bank branch. With almost 5,000 agents across the country, Wing has the largest financial network in Cambodia and its strategy, while being business-orientated, has a pinch of social enterprise to it. Wing does not invest in establishing branches; instead they identify entrepreneurs who are willing to create a Wing counter in their shop and then provide all the equipment and training required to operate it.
Through these kiosks, Mr. Malalos believes that Wing has created for Cambodia a new paradigm in terms of financial transactions. “As of now, Wing has more than three million customers and processes almost 500,000 bills payments every month, bigger than any other bank,” he says. The flow-on effect of Wing’s fintech solution is that companies and individuals are able to do business more freely and the cost of doing business is reduced, meaning more can be spent on goods.
There is also an increasing interest from banks in reaching the unbanked. ABA Bank, one of the first to fully embrace fintech in Cambodia, has taken great steps to accommodate the new trends of the industry, catering to their customer base and to non-customers. In 2013, together with partners PayGo, they placed interactive cash deposit machines on the streets that allow anyone, ABA customer or not, to pay bills and top up phone credit. At these machines, ABA clients are also able to deposit money directly into their accounts.
Another element of Cambodia’s new banking paradigm is the explosion of mobile applications and the concept of mobile money—the ability to store, access and use money via a mobile phone. With the majority of Cambodians now having access to a mobile phone, they can be approached by financial institutions, no matter the location, and offered cashless banking solutions— one of the great advances made here via fintech. “It is becoming a trend to have a smartphone,” according to Zokhir Rasulov, chief digital officer at ABA. “Access to social media and the Internet via the smartphone has pushed many industries to go digital. It’s almost a requirement for banks to go digital too.”
Mobile Population, Mobile Money
In a country where business is booming despite financial literacy being limited, mobile banking is crucial to bridging the gap between the busy entrepreneur and their finances, according to Mr. Rasulov. Taking time to queue up at a bank is no longer feasible for many, he says, and mobile banking apps are critical to streamlining operations. Having a young population works in Cambodia’s favour, with adoption of new technologies happening fast. In fact, after launching last year, ABA’s banking app now has 35,000 regular users.
However, many citizens, particularly older ones, are still managing their money without fintech—a fact that can only be remedied by changing perceptions, according to Mr. Rasulov. “Banks should be investing more time and money into educating people about the benefits of using a bank, which can then translate into them making the switch to digital. Oftentimes, the general perception of banks was that it was for oknhas and people with high incomes,” he says. “This is something ABA wants to change, and that can only be done through financial education.”
An additional challenge facing banks regarding mobile applications and fintech is opening accounts for new customers outside of a bank branch. The verification and identification process of each client becomes more difficult, and thus creates security risks. “Mobile banking in remote areas of Cambodia may not be as useful and effective as the traditional banking method,” says Mr. Rasulov. “Through traditional banking we will slowly help people make the switch to digital banking, walking them through each step, rather than doing it the other way around.” ABA is penetrating the provincial markets through traditional banking and then easing clients into digital banking, he adds.
Mr. Malolos said that the government, via the National Bank of Cambodia, has set financial inclusion as a key goal. “They see merit in our push, and the National Bank of Cambodia has been looking at the opportunities in mobile and branchless banking,” he says. Despite this, and despite the success of Wing adopting the latest fintech, Mr. Malolos says old habits are still difficult to change in some. “The biggest challenge is for Wing to continuously convince the population to use branchless banking and e-money. The complexity that comes with the use of technology is important. Levels of education and literacy have to be considered. Is our targeted audience able to understand our branchless banking system or even our mobile application user interface? Awareness and education is important to tackle.”
Words by Vivaddhana Khaou