Brad Jones wasn’t sure what to expect when he moved to Yangon in early 2015 to become chief executive of a two-year-old fintech outfit with high hopes of revolutionizing mobile financial services in one of Asia’s poorest countries.
His new employer, Wave Money, a joint venture between Norwegian telecoms operator Telenor and Yoma Bank, one of Myanmar’s best private lenders, had all the right credentials.
Jones, a cheery Australian with “infinite patience so long as he gets his way” as one close contact notes, was clearly the right man for the job. His CV was line-perfect, given that he was head of business transformation at National Australia Bank, a former director of mobile money and innovation at Visa in Singapore, and adviser to the IFC on payments systems in emerging Asia.
To clinch it all, in 2007 he founded Wing Cambodia, an ANZ-backed mobile money provider that processed more than $6 billion in payments in 2017 in the tiny frontier market.
He couldn’t wait to get started.
“I’ve been around this emerging payments space in Asia for 10 years, and Wing was a great experience,” he tells Asiamoney. “But Myanmar was a far more exciting market than Cambodia, geographically and in terms of scale, and a chance to work with great partners.”
At first, Jones had to rein in his ambitions as he waited for the central bank to pass a new banking law. But in August 2016, Wave Money got the licence it needed, becoming the first non-bank institution to provide mobile financial services in Myanmar.
Whatever hopes Jones had, they have surely been exceeded. Wave Money had no customers 18 months ago. At the start of this February, it had 1.3 million, or about 2.5% of Myanmar’s entire adult population.
Its roster of mobile agents has expanded so fast that even the firm struggles to keep count. In February, it put the total at 14,000; interviewed a month later by Asiamoney, Jones says the firm employs 18,000 agents, dispersed around 267 towns and villages.
Two weeks later, the number has risen again, to 20,000, across 279 townships.
“The number is growing very fast as we expand our network across more parts of the country to meet demand for services,” a company spokeswoman says.
We went from zero to 100 miles an hour almost overnight - Brad Jones
The genius of the system lies in its simplicity. Wave Money’s cheerful yellow-and-blue website also keeps it simple: no frills, no flab, just a precise description of the firm’s narrow range of services.
Customers open an account by linking it to their Telenor cell phone number and then digitally transferring money to anyone else with a Wave account.
Money can be deposited in the account, or withdrawn from it, at any Wave Shop – which is where the firm’s network of mobile agents comes in. They are typically pillars of the local community – traders, farmers, village elders. Customers top up their account by handing over cash to the agent, who credits their account and sends them an SMS to confirm the transaction.
Cash is taken out the same way. Money can be sent by anyone to anyone, whether they have a Wave account or not: all both parties need is a valid picture ID.
Transfers “are popular as [they are] ideal for a large population in rural areas with little experience using technology,” Wave says.
Jones still seems shocked at the speed of adoption.
“Look, mobile money services don’t just take off overnight,” he says. “You think of them as planes taking off, nice and steady. But ours took off like a rocket ship. We went from zero to 100 miles an hour almost overnight. There are very few places in Myanmar now where you cannot find a Wave shop.”
Anyone visiting Yangon these days can testify to that. From municipal highways to narrow alleyways, every road is festooned with colourful hoardings beseeching the passer-by to put their money to work with Wave Money or one of its rivals, a list that includes OK Dollar, a division of local firm Internet Wallet, and M-Pitesan, a joint venture between local lender CB Bank and Qatari telecoms operator Ooredoo.
Bank account
With hindsight – always such a useful way to justify predictions no one thought to make – the success of Wave and others should not perhaps be such a great surprise. Seven years after the country began opening up to the world, financial inclusion remains pitifully low; fewer than one in 10 people have access to a formal bank account.
Commercial lenders have reacted the only way they know how: by opening more branches. That is a costly business. It’s also clunky and slow: KBZ, the largest privately owned bank, unveiled its 500th branch in November 2017, having opened its first in Yangon 24 years ago.
Compare that with Wave, which took 18 months to assemble a team of 20,000 mobile agents, one of which is rarely more than a stone’s throw from your home or office.
Yet banks continue to open new branches apace, a phenomenon that Wave Money’s Jones finds perplexing.
“This country has one of the lowest penetrations of bank branches in the world – around 3.3 per 100,000 people, on a par with Haiti and South Sudan. That underpins banks’ rationale that more branches are needed,” says Jones.
“But I’d contend that with 80% smartphone penetration, and with pretty much everyone already on Facebook, the need is to reach people by improving your digital offering. Most people here don’t want a bank account. They just want to be able to send and receive money easily and make payments.”
Moreover, leading commercial lenders know they face a daunting challenge to convince the unbanked to open accounts.
“People new to the system do not like walking through our doors,” admits a leading banker. “No matter what we do, we look grown-up and intimidating.”
Another adds: “This is a country in thrall to convenience, speed and simplicity. Some mobile service providers are open seven days a week. We are open on weekdays from nine until three.”
Compare that with the cheery bonhomie emanating from mobile financial providers, which are notably popular among consumers entering the workforce.
“Young Burmese are incredibly technologically astute,” says Sean Turnell, a former analyst at the Reserve Bank of Australia, who was hired as economic consultant and chief digital adviser to civilian leader Aung San Suu Kyi after penning a treatise about Myanmar’s banking sector.
“They are big adopters of mobile technology, so mobile services make great sense to them. The popularity of Wave and others threatens to swamp traditional banks, who will need to start rolling out services that young people and the unbanked really want.”
Some lenders, seeing the threat presented by new mobile financial operators, are attempting to take back the initiative.
Mobile banking
CB Bank, founded in 1992, while one of Myanmar’s oldest commercial lenders, is also one of its most innovative. It opened the country’s first ATM in 2011 (it now has 700 and counting), and the first domestic mobile banking app and internet service two years later.
Chee Seng Liew, adviser to chief executive Kyaw Lynn, reckons 500,000 people are regular users of its digital platform, or one in every three customers.
A big step forward came in 2014, when CB Bank, ever the trailblazer, unveiled its Easi mobile agent service. Despite preceding Wave Money by two years, it has been slower to expand; by February, the lender had 1,110 Easi agents dotted around 330 towns and villages, including 136 based at post offices.
There are a few differences between the two. Wave Money requires each of its agents to retain a net positive cash balance of K200,000 ($150) at any given time, while every one of CB Bank’s Easi agents has to have a minimum of $5,000 in cash on hand.
“It’s more like a security deposit, but it helps protect our brand, and ensures that our customers don’t go wanting,” says Liew. “The largest withdrawal a customer can make is $1,000, but the average transaction is under $100. Our target is to have 5,000 agents by the end of 2020. We won’t stop opening branches, but banking can be made available outside the branches. We’re trying to have the best of both worlds here.”
CB Bank has also been slower to hire agents in part because it thinks and acts more cautiously, as one would expect from an older mainstream lender.
“We identify people – maybe a shopkeeper or the head man in a village – or they approach us, and we do proper KYC (know your customer) and background checks on them,” says Liew. “If they pass our tests, they can become an agent.”
I don’t think anyone has seen anything quite like this, and yet we are still only at the take-off stage - Sean Turnell
Rajesh Kumar, a money-handler with a small store on Strand Road in Yangon’s Pabedan Township, has been an Easi mobile agent for CB Bank since 2014. He serves two main types of customers: locals who come in to collect remittances from family members working overseas, and farmers and traders living outside Yangon who transfer small sums of money on a regular basis, via Kumar and CB Bank, to their suppliers in the city.
“They usually buy the same things: rice, tools, household goods,” Kumar says. “It’s a simple old-fashioned trading system using digital means. Before, a farmer would have to come to the city with cash, buy seeds and equipment and then return home. That’s a long, exhausting and expensive day. The agent system means he can have everything sent to him. He doesn’t have to worry about travelling costs, or losing a day on the farm or in the shop. And he doesn’t have to worry about carrying loads of cash around. There are many thieves on the road.”
It’s deathly quiet in his shop, even at 7am, apparently the busiest time of the day, so the question arises: how is business?
Kumar shifts in his seat and looks a little morose. He is clearly a man of means, though the Apple Watch and nicely ironed pink shirt are at odds with his bare feet – but you wouldn’t know it to listen to him.
“I earn around $200 to $250 a month” he sighs. Why so little? “Because I’m in Yangon and there is a lot of competition.”
Kumar later admits that in his part of town, he’s only up against one other Easi agent.
What kind of money did he expect to earn? “If I’m honest, I expected to make between $500 and $1,000 a month.”
Kumar plans to roll out an advertising campaign on Facebook and feels certain that business will pick up as more people catch on to mobile-money services.
“But what would really help agents like me is for CB Bank to do more work on their brand here. They only advertise in rural areas.”
A clear schism is emerging in Myanmar. On one side are the new mobile players and lenders keen to embrace digital disruption in its many forms, including Yoma Bank, CB Bank and Aya Bank. On the other are commercial lenders that either lack the wherewithal to invest heavily in their online operations or prefer to play a game of wait-and-see with emerging technology.
One lender in the latter camp, curiously, is KBZ.
An insider at the bank tells Asiamoney: “We’ll let others make mistakes first.”
That could be an error in itself. Financial technology has been a game-changer in some parts of the emerging world, while in many developed markets its impact has been, at least so far, negligible. But in Myanmar, it has been nothing short of revolutionary.
“I don’t think anyone has seen anything quite like this, and yet we are still only at the take-off stage,” says Turnell, the digital adviser. “Wave Money is going to be a huge and long-term financial player. People trust them. And their alliance with Telenor adds to their credibility, because people trust that brand more than they trust any local bank.”
New segments
For his part, Wave Money’s Jones still brims with ambition. Despite the firm’s 20,000-plus mobile agents, it is “still nowhere near where we want it to be,” he says. “The goal is to get as much volume through the network as possible. When agents earn income, they stay engaged. We want to get to the point where every customer is within walking distance of an agent, and to create so much business that no two agents miss out, no matter how close they are to one another.”
He adds: “New segments that we didn’t even know existed are popping up all the time. University students receiving help from their family and kids new to the city sending money to very rural locations. The same is true with military graduates, who use the system a lot. We didn’t see that one coming.”
Each month, it seems, brings a development, usually in the form of a new product or market entrant, or an eye-popping investment. In September 2017, Ooredoo Myanmar joined forces with CB Bank to roll out M-Pitesan, a mobile wallet that will offer nationwide money transfer and bill payment services. The Qatari firm, which has its own 2,400-strong network of mobile agents in five main cities including Yangon, Naypyidaw and Mandalay, aims to increase that number to 10,000, serving 100,000 customers.
In March this year, Yoma Strategic Holdings (YSH), the Singapore-listed parent of Yoma Bank, announced plans to buy a 34% stake in Wave Money for $19.4 million.
First Myanmar Investment, a holding firm also owned by YSH and Yoma Bank founder Serge Pun, will hold the stake, boosting the tycoon’s ownership of Wave Money to 49%. Telenor will keep its existing 51% stake.
There are “significant opportunities to grow this business and other financial services” the holding firm says in a statement.
That chimes with the thinking of Jones, who says Wave Money’s aim is to push into areas of the financial system still dominated by traditional lenders.
“We plan to work with Yoma Bank as a full financial partner, offering insurance and micro-insurance, and providing loans to individuals and small businesses,” he says.
Once a new and more reform-minded governor takes the helm at the central bank, which is likely in July 2018, “you will see new products approved,” says one government insider, adding: “It would be a surprise if these new firms were not allowed in time to offer savings products and loans and to take deposits”.
For its part CB Bank, always thinking ahead, can see where Wave Money is going.
“When it comes to our customers, right now, it’s not always about making profit, but about being with them on their journey,” says chief executive-adviser Chee. “Eventually, some or many of these young companies and entrepreneurs will become SMEs and then large corporates, and hopefully then they will continue to grow with us.”
Credit risk
Amid all the hoopla – the young bucks disrupting a banking system that has barely got started, while providing vital financial services to the poor and unbanked – it’s easy to overlook the real value here: the data. Myanmar still lacks a single credit bureau, making it tricky to assess the credit risk of a new customer.
But firms like Wave Money, OK Dollar and M-Pitesan are accumulating financial data on their customers at “an astounding pace,” says Turnell.
“As a user, you are constantly sharing a huge amount of personal and financial data with these firms,” he says. “They already know a heck of a lot about you, far more than the banks do – to the point where it raises genuine questions about privacy. That data is invaluable.”
It also makes you wonder: when the central bank approves the first credit bureaus, which is likely to be in late 2018 or early 2019, will they be needed? Or will these new mobile money operators simply roll out their own, data-rich versions – and charge traditional lenders accordingly?
Given the dizzying speed of adoption of new mobile money services in Myanmar, should the country’s clunky old banks be afraid? Yes, undoubtedly, if the ambitions of Wave and its cohort are even close to being achieved.
“When we look back on this time period, we will see that Myanmar made the big leap forward in banking by introducing these services,” says Yoma Bank chief executive Hal Bosher.
Turnell predicts a future in which traditional lenders “spend all their time in catch-up mode, unable to change, chasing a smaller and smaller share of the market. Three quarters of Myanmar’s banks have been too slow in grasping the changes about to roll over them from the digital economy.”
At Wave Money meanwhile, Jones shows no sign of dispensing charity to old-style financial laggards, or of wanting to let up.
“We don’t see banks as our long-term competitors: that role is taken by the likes of Ooredoo,” he says. “We are heading in one direction: onwards and upwards, with more market share and more penetration.
“By the end of this year, there will be very little of Myanmar that isn’t covered by our shops.”
