Digital payment firms in pole position in Myanmar super app race

Mandalay, Myanmar. Photo by Guilherme Romano on Unsplash

Future super apps in frontier market Myanmar will likely emerge from payments upstarts, unlike Southeast Asia’s major full-stack platform strategies built predominantly on the back of ride-hailing.

With the number of mobile phone users at five times more than bank account holders, fintech firms are strategically placed as the conduits for achieving Myanmar’s financial inclusion target.

Early movers eyeing the trophy include Yoma Group’s Wave Money, travel and transport tech firm Oway and CB Bank’s CB Pay.

Although net income contribution from Wave Money is still a small portion to Yoma, its group CEO Melvyn Pun told DealStreetAsia that he is confident that it will become “quite large in the next couple of years.”

Oway, which runs the businesses of OTA, ride-hailing and recently added online grocery to its offerings, currently operates its Oway Pay app to serve its drivers. CEO Alok Kumar expects its e-payment service can expand to serve more consumers.

“Maybe in 2021, we will be able to bring a very synergistic solid (payment) product for the consumers in Myanmar,” Kumar said.

Leading apps with e-wallets are not the only ones pursuing the super app trophy.

Local banks such as CB Bank are also getting onto the bandwagon. The bank launched a standalone payment app in 2018, CB Pay, in addition to its mobile banking app. CB Pay has partnered with Grab to help with the latter’s payment processes, while it introduced a digital supply chain financing function.

“We have more than a hundred features on our application. For us, it is not just a mobile banking app; we consider this as an ecosystem or a super app,” said Thein Zaw Tun, Managing Director at CB Bank.

Factors driving interest in Myanmar’s fintech space

Myanmar’s young and vastly unbanked population, high mobile phone penetration, as well as the 4G telecom infrastructure, call for disruptions in the payments space.

In addition, a host of challenges related to a far-from-smooth user experience offered by existing payments apps is seen as attracting the interest of both investors and startups eyeing the untapped market potential.

Sample the macro data: With mobile phone connections at 126 per cent of the population, the ratio is close to that of the US (129 per cent) and exceeds China (116 per cent), according to data from World Bank. Internet penetration in the frontier market stood at 41 per cent, per a report by We Are Social and Hootsuite released in January.

Despite the mobile penetration, the adoption of digital services has remained low with a mere 3.6 per cent of the population making online purchases and/or paying bills online, and only 0.7 per cent having a mobile money account, according to the report.

Not surprisingly, low adoption presents a significant opportunity set for businesses and investors. Data shows that investors have been tapping the burgeoning Burmese middle-class spending through capital injections in the microfinance sector.

The first half of 2020 saw a major deal in the space, when Digital Money Myanmar Limited, which operates the Wave Money service, wooed Alibaba’s Ant Group as a new strategic investor and Yoma Strategic Holdings to double down on the sector.

For Wave Money, its partnership with Ant Group and Yoma gives its “super app” ambition a boost. The company already enjoys synergies with Yoma’s other businesses such as fleet leasing, consumer and real estate. A potential collaboration with Ant Group for vetting online loan proposals is already on the cards.

Expand Table

Company
VerticleInvestment amount
Investors
Year of transaction/ commitment
DAWN Microfinance
Consumer financing
$7.5M
FMO
2020
Wave Money
Mobile financial services
$150M
Ant Group, Yoma Strategic Holdings
2020
Yoma Bank
Digibank
$88.7M
GIC, Norfund
2020
Daung Capital
Financing platform
Undisclosed
Mike Than Tun Win, Majuven
2019
Bards
E-wallet backend
Undisclosed
Trust Venture Partners
2019
DO Microfinance
Consumer financing
Undisclosed
Daiwa PI Partners, OK Myanmar Limited
2019
Easy Microfinance
Consumer financing
$7M
Delta Capital2018
Keb Hana Microfinance Limited
Consumer financing
$13M
International Finance Corporation2018
Myanmar Finance International
Consumer financing
$2.7M
Myanmar Investments International Limited
2014

Low entry barriers for e-wallets

E-wallet businesses started to operate once they obtained licenses under Myanmar’s mobile financial services regulation that came into effect in 2016. A wallet business is required to have 3 billion kyats ($2.2 million) in a trust account, and make sure that the balances in the wallet and the trust account at the bank are in sync in real-time.

The attractiveness for foreign investors lies in the lack of limits to foreign ownership. “Investments have started,” said Thein Zaw Tun, referring to the Ant Group funding in Wave Money. “If you are a big operator looking into this wallet segment, I think there might still be a chance from the regulatory perspective.”

With the Myanmar government’s ambitious target of enhancing financial inclusion to 60 per cent of the population by 2022, it creates opportunities for both domestic and international fintech firms to play their part.

Fragmented market but still attractive

Myanmar, with an adult population of 36 million, is already a crowded mobile financial service market. Despite having about half the adult population of Vietnam, it has 40 registered e-wallet-type operators, compared to 34 in Vietnam. Thus, the ratio of the adult population to registered e-wallet operators is at 0.9, lower than neighbouring Thailand (1.8) and Vietnam (1.9), based on figures from World Bank and central bank websites.

Potential users in millions per licenced e-money player. Source: DealStreetAsia’s Chinese Tech Giants’ E-Wallet Proxy War in SE Asia.

In 2019, Wave Money’s transfer volume more than tripled year-on-year to reach 6.4 trillion kyats ($4.3 billion). During the same period, revenue and transaction numbers also tripled. “By the end of this year, we are on track to be north of a million monthly active users. And in four years, our target is to have 11 million monthly active users,” Pun told DealStreetAsia.

“The key concern is whether Yoma and Ant Financial will be able to drive Wave Money to its next level of growth with the departure of Telenor. While the next part of the journey may be rocky with increased competition, we believe Wave Money’s dominant position in Myanmar and the synergistic opportunities that both Yoma and Ant Financial can provide will give Wave Money a firm platform as it expands into a super app,” wrote DBS Vickers analysts Rachel Tan and Derek Tan in a note.

Other payment apps have also achieved a significant user base. TrueMoney Myanmar, a part of Thailand’s Ascend Group which is also an affiliate of Ant Group, has been providing mobile financial services through a partnership with AGD Bank.

“We have an agent network of 20,000 located nationwide. Besides, we have also converted our distribution model to territory distributors, which allows us to continuously enhance the quality of our agents and expands our network,” said Kyi Thar Romanet, managing director of True Money Myanmar.

Nonetheless, regional players such as Grab and WeChat are contemplating an expansion into the frontier market. WeChat Pay is in a pilot phase in Myanmar, while GrabPay had earlier planned to hit this market in 2019. Grab could not be reached for comments for this story. The unicorn has already partnered with CB Bank for its Myanmar foray.

Mobile financial service firms in Myanmar

Expand Table

CompanyPartner
No. of agents
No. of users
Other highlights
Wave Money
Yoma Strategic, Ant Group
58,000
1M MAUs
11M MAUs aimed in 4 years
True Money Myanmar
AGD Bank20,000
NAOperates territory distributors
KBZPay
KBZ Bank
270,000
5M aimed by 2019
- In partnership with Huawei Technologies
- 2.8 trillion kyat ($2M) transactions in 2019
CB Pay
CB Bank
2,500
1M
- 6,000 agents aimed for 2020
- One of the first two interbank apps
Onepay
AGD Bank
NA
150,000
One of the first two interbank apps
MPT Pay
MPT (telecom operator)
27,000
NA
Leveraging MPT's 25M phone subscribers
Mytel Pay
Mytel (telecom operator)
20,000 at launch (June 2019)
NA
75% of Mytel customers using 4G
M-petisan
Ooredoo (telecom operator)
10,000 in one year of launch
400,000 in one year of launch

Source: company reports, media reports

Most of the payment apps in Myanmar are associated with banks and telcos. “There is fierce competition amongst the banks and telcos which leaves little to no space for an independent [player] to come in and offer a full, licensed mobile banking service,” commented Matt Viner, investment manager at VC firm Emerging Markets Entrepreneurs.

“As the market expands there could be more opportunities for new companies to offer complementary services or to aim to specialise in particular verticals, but it certainly won’t be easy,” he added.

While lamenting the lack of data regarding the actual size of Myanmar’s e-payment market, CB Bank’s Thein Zaw Tun said CB Pay recently processed around $600 million worth of transactions per month.

“The volume last year was less than half of it. We feel the number of transactions will pick up and this trend will continue,” he said, adding that 80 per cent of the bank’s transactions were taking place on the digital channel.

Meanwhile, Viner cited data from Bagan Innovation Technology that since Q4 2019, KBZPay by KBZ Bank has taken the majority of market share for e-payment.

The last-mile connect

Local industry experts observe that the most popular services used among Burmese people are still money transfers and mobile top-ups.

Viner estimated bill payments for services such as the internet, bus tickets and other daily transactions at just 10 per cent of the mobile payment usage.

Even as some apps have appeared to be the leaders for mobile top-ups, users were mainly resellers instead of the end customers, he asserted.

Banks have the resources and ability to cater to business clients. Companies like Ongo and 2C2P are capturing shares in the B2B segment.

“The last-mile is quite difficult for banks as it very transaction-heavy while yielding lower volumes,” added Thein Zaw Tun, saying that CB Pay was looking into a partnership model to reach the last mile.

Therefore, in a market like Myanmar, physical agents “are a critical part of the value chain”, said Kumar. “They play a very solid role in terms of customer acquisition, raising awareness and adoption.”

But that could also lead to an incoherent customer experience cashing in and out.

“Over time, these non-financial costs will help transition people to use the technology themselves. Banks may have an advantage here as they have greater options for cashing out – such as KBZPay which lets customers cash out through their network of cash machines,” Viner opined.

Join hands or fade?

While CB Bank and AGD Bank are the first two in Myanmar to allow interbank transactions, mobile payment apps are still operating in silos, as each company is still trying to build its category.

“Once the category is right, it will attract some serious investors in the business,” said Kumar.

“If you look at the general population, the middle class is still emerging, so it is not a huge burden for them to leapfrog to digital, unless there are some significant reasons, and one of the reasons is basically an investment in promotion offers, building the overall experience and then driving adoption,” added Kumar, who predicts a possible consolidation in the market.

Thein Zaw Tun has a different stand. “A few more investors might be coming in because some e-wallet players might be looking for investors for expansion. We don’t really see consolidation happening [in services run by the banks or the telecom operators].”

He foresees the next round of investments will focus on improving user experience, adoption rate, and data management generated by the massive amount of transactions.

Then, there is a need for interoperability between the e-wallets which the government is pressing. The local government is also planning to invest in a QR interoperability system, according to Thein Zaw Tun.

“This is a winner takes all market, with increasing competition among existing established companies. This might attract an investor with experience or interest in a particular approach,” Viner said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.