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Heading towards a cashless society

Sok Chan / Khmer Times Share:

The adaptation of financial technology (fintech) in Cambodia’s banking system is still been in the early stages of development compared with neighbouring countries.

However, the Cambodia central bank is now looking to fintech to facilitate the payment within the local market and to boost a cashless payment society as well as promoting the local currency, the riel.

In the past few years fintech has caught the world’s attention by offering wide options on payments, which are optional methods to traditional means of payment such as cash.

Fintech has provided a lot of advantages by promoting payment services to be more effective, through lower costs, acting more speedily and creating higher integration, as well as helping to deepen financial inclusion and supporting economic growth.

Fintech is also making financial services and products more accessible, more affordable and more efficient and cheaper for individual users, said Chea Serey, director-general of the National Bank of Cambodia (NBC), at the Building Global Fintech Connections: Singapore with Cambodia event, on July 29.

“In this sense, the National Bank of Cambodia has been keeping an open-minded and pragmatic policy when it comes to innovative ideas and technology that can help us to achieve a financial inclusion agenda,” she adds.

Favourable conditions

The NBC has provided favourable conditions for such technology to be offered in the banking sector such as the use of mobile payments, QR codes and e-wallet accounts in domestic and cross-border payments and transfers.

Head of Consumer Banking of CIMB Bank Plc Heng Thida said that the adaptation of fintech will provide customers with a convenient way for payments and cash transactions in real time, anytime and anywhere.

“They [customers] will not need to come to the bank and they can transfer money and request cheques or use other bank services via the online platform,” Thida says.

Thida adds that CIM only now has internet banking, but the bank will add more online services in the future to help its corporate, business and retail customers.

“For us the adaptation of the financial technology, customers will reduce the cost of visiting the bank, while it will also help the bank to reduce the cost of having more locations, branches and staff because the customers serve themselves on the online platform,” Thida adds.

ABA Bank, a leading commercial bank in the Kingdom and a member of the National Bank of Canada group, is focusing on its offer of fintech services, believing that the technology promotes inclusion, particularly for the unbanked.

Constantly developing

“We are constantly developing our ABA mobile app and launching new features with a focus on our clients,” says Lach Vannak, public relations supervisor at ABA bank.

“The app helps customers interact with the bank more fast and safely,” he says, adding that some of the most common features include access to account statements, bill payments, fund transfers, cardless ATM withdrawals and push notifications on every transaction.

“Recently, we have also introduced fixed deposit and savings accounts, virtual cards and QR code payments,” he says.

Fintech can also play a critical role in financial education, which is particularly important given the country’s current stage of development, Vannak adds.

The Global Findex Database 2017 reports that to ensure people benefit from digital financial services requires a well-developed payments system, good physical infrastructure, appropriate regulations and vigorous consumer protection safeguards.

By moving routine cash payments into accounts, governments and businesses could help dramatically reduce the number of adults without bank accounts.Gover-nments make several types of payments to people: paying wages to public sector workers, distributing public sector pensions and providing government transfers to those needing social benefits, according to the report from Global Findex, the world’s most comprehensive set of data on how people make payments, save money, borrow and manage risk.

Digitising payments

“Digitising these payments could reduce the number of unbanked adults by up to 100 million globally. Many of these adults have the basic technology needed to receive these payments in digital form,” it notes.

NBC’s Serey, however, says that fintech offers countless benefits, but it also brings more risks that may affect the stability of the whole system, mainly cybersecurity.

“While we are establishing a conducive environment for fostering fintech, we, as the regulator, have to enhance both its regulatory and its institutional capacity to cope with fast-changing technology and ensure … the system is protected,” she adds.

In early July, to complement the private sector regarding payments and remittances, the NBC launched the pilot Bakong project, a mobile payment application using blockchain technology that will bring all payment services providers and banks onto the same platform, allowing the user to experience smooth and affordable services.

The Bakong project is the backbone of the payment system in Cambodia that connects banks and payment service providers. By using the Bakong application installed on a smart phone, customers of financial institutions can make real-time fund transfers across banks and platforms.

It allows users to transfer funds in riel and US dollars to one another across the platform in Cambodia. It is said to be safe, easy, fast and free of charge.

Peer-to-peer transfers

“The Bakong system is a peer-to-peer fund transfer service available to the retail customers of nine participating banks in Cambodia. Currently, there are nine financial institutions that have joined the system. They are Acleda Bank, Foreign Trade Bank (FTB), Wing (Cambodia) Ltd, Specialised Bank, Vattanac Bank Plc, BIDC Bank, Cambodia Post Bank, Cambodia Public Bank and Speed Pay” says NBC.

Speaking at the Money Asia 20/20 in September, Serey said the bank was seeking to overcome problems regarding different banks’ different systems. She expects to launch it in the third quarter of the year.

For Cambodia, electronic payment transactions have also increased dramatically as a result of rapid technology evolution. A total of 25 banking and financial institutions have been providing internet banking services and 20 banking and financial institutions have been providing mobile banking services, according to the NBC’s annual supervision report 2018.

The total size of the transactions conducted through internet banking is more than 1.03 million and accounted for 20.2 trillion riel, while the total mobile banking services transactions are 14.07 million, accounting for 27.7 trillion riel.

By the end of 2018, 14 payment service institutions and five banks were granted licences by the NBC to operate payment services, including money transfers in and out, bill payments, retail payments, online payments and cross-border money transfers.

Competition promoted

Serey, however, added that the growth of payment service institutions has promoted competition and expanded access to formal financial services across the country. As a result, payment fees and, in particular remittance fees, have decreased remarkably, which is very beneficial for Cambodians, especially for those who live in rural areas.

Acleda Bank, one of the members of Bakong, has integrated its system to synchronise with NBC’s system to make them able to talk to each other.

The bank’s President, In Channy, says fintech is very crucial for all stakeholders. He adds fintech could eliminate the need to travel long distances to a financial institution. And by lowering the cost of providing financial services, digital technology might increase their affordability. “They can use the mobile application to pay for all their utilities, other bills, school fees, phone top-ups and business transactions,” he adds.

“Financial institutions, particularly fintech, play a crucial role in contributing to economic development and enable the people to access financial institution services and they also indirectly contribute to poverty reduction.” In says Bakong, for example, will lead to a cashless society.

Fintech, is a nascent industry in the Kingdom, with the government, through the NBC, working to upgrade the regulation that governs the financial sector and striving to reduce the risks of using digital wallets. The development of fintech, including smartphones, internet and blockchain technologies as well as data analysis, has boosted the Kingdom’s financial sector.

Cross-border transfers

Ouk Sarat, director of the payments system department at the National Bank of Cambodia, says fintech in the Kingdom is continuing to grow, particulary when it comes to payment systems and tools for cross-border money transfers and loan disbursements.

“These technologies have increased efficiency, safety and transparency, while reducing costs and enhancing access to financial services for many. They have revolutionised the sector,” said Sarat at a financial technology forum held in Phnom Penh.

However, pressure remains on traditional banks to monetise financial technology and compete with rivals.

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