A year ago, Myanmar had no automated
teller machines and not a single hotel or restaurant able to
swipe the credit cards proffered by throngs of foreigners
arriving in the newly opened country, who instead had to bring
crisp U.S. dollars to pay for everything in cash.
It has come a long way since: 2,500 credit- and debit-card
machines, known as point-of-sale terminals, and 450 ATMs
including at least three at the gates of Yangon’s Shwedagon
Pagoda, according to Kanbawza Bank Ltd., known as KBZ, the
country’s largest privately owned bank.
“The absolute need to carry bags of cash is declining,”
said Matt Davies, the International Monetary Fund’s mission
chief to Myanmar, who first traveled to the country from
Washington in November before there were any such machines, and
said he still can’t fully rely on plastic. “It takes time for
practices to change. Myanmar remains a cash economy and will
continue to be a cash economy for some time.”
Not if Visa Inc. (V) and MasterCard Inc. (MA) have their way.
MasterCard began signing up Myanmar banks starting in September
2012 and has so far licensed seven, which in turn have installed
payment terminals taking MasterCard at 285 merchants including
the Strand and the Governor’s Residence hotels in the financial
capital Yangon, according to data provided by the Purchase, New
York-based company. About 210 ATMs also accept MasterCard for
cash withdrawals, with at least 130 of those in Yangon.
China’s UnionPay
Visa has licensed eight banks, which have enlisted 550
merchants including hotels, restaurants, travel agencies,
airlines, retail stores and souvenir shops frequented by
tourists, and more than 200 ATMs, data from the Foster City,
California-based company show.
Myanmar’s remaining 1,665 payment machines accept cards
from Shanghai-based UnionPay, China’s payment network that has
expanded to 141 countries in the past decade to become the
world’s second-largest by volume behind Visa, as well as locally
issued debit cards. These payments use a local electronic
network, Myanmar Payment Union, set up in September 2012 by 17
local banks and the Central Bank of Myanmar, which doesn’t yet
permit the banks to issue credit cards.
About a year before the local network began, some banks led
by Co-Operative Bank Ltd., a privately owned Myanmar lender
known as CB Bank, set up ATMs for cash withdrawals by Myanmar
nationals, said Thein Zaw, a former deputy director general at
the Central Bank of Myanmar.
‘Very Low’
While the numbers may look large, they are “very low”
compared with the needs of arriving tourists and business
people, said Aung Thura, chief executive officer of Thura Swiss
Ltd., a Yangon-based market research and consulting firm for
companies entering Myanmar. Even where cards are accepted,
payment terminals often don’t work and are hindered by poor
Internet and telephone connectivity and power supply, he said.
“The general advice to tourists and business travelers is
to bring in your clean dollar notes because you might not be
able to get money from ATMs,” said Aung Thura. “Even if you
have your cards, you always have to think about the backup,” he
said, recalling an experience in July when he tried to use his
locally issued debit card at a restaurant and the telephone line
didn’t connect.
“These places where cards are accepted are places tourists
frequent, but I don’t think it’s really embedded in the normal
day-to-day transactions of local businesses,” said Kelly Hattel, a financial-industry specialist at Manila-based Asian
Development Bank, who traveled to Myanmar for the fourth time
this year in late September.
High Fees
While she was able to use her credit card at the Yangon
hotel where she stayed, she had to pay in cash for her room in
Naypyidaw, the country’s political capital 215 miles (350
kilometers) north of Yangon. Almost all Myanmar merchants accept
U.S. dollars as long as bills are unworn. She also had to pay
$500 in cash to the travel agent who arranged her domestic
round-trip flight and car she hired in the capital.
“That was frustrating,” she said.
Fees to get cash locally can add up. Withdrawals are
limited to 300,000 kyat ($310) per transaction, and banks charge
5,000 kyat to use an ATM on top of any fees charged by
travelers’ home banks, according to San Dar Tun, a manager in
the cards department at CB Bank. A maximum daily withdrawal,
limited to 1 million kyat, would cost a minimum of $20.60 in ATM
fees. ATMs dispense only local currency. The resulting pile of
cash would be too large to fit in a wallet and would require a
tote bag.
Loosening Controls
A credit card issued by HSBC Holdings Plc in Singapore used
to get cash at an ATM in Myanmar, regardless of which payment
network it operates on, will incur a cash-advance fee of 5
percent of the amount withdrawn, a 1.5 percent administrative
charge for a foreign-currency transaction and a minimum of 2
percent per month on the amount withdrawn until it’s repaid,
according to the bank’s website. Charges for overseas cash
withdrawals vary by issuing bank and locale.
Myanmar President Thein Sein has expanded political freedom
and loosened economic controls since coming to power two years
ago. That prompted the easing of European Union and U.S.
sanctions on the country starting last year and allowed, among
other things, the transfer of funds from the U.S. or by an
American to Myanmar, and the setting up of business by U.S.
companies including Visa, MasterCard and American Express. (AXP)
‘Virtually Zero’
For Visa, the world’s biggest payment network, the
immediate goal is to increase card acceptance among merchants
and ATMs to support the travel and hospitality industries for
the expected influx of visitors to the 2013 Southeast Asian
Games to be held in Myanmar in December, according to Bangkok-based Somboon Krobteeranon, country manager for Myanmar and
Thailand. He didn’t elaborate on the company’s growth targets
for the country.
Visa and MasterCard processed about $7 trillion in credit-and debit-card purchases worldwide in the 12 months ended June
30, according to company data. Visa reported $10 million in
purchases and cash withdrawals since its payment network began
in Myanmar in December through Oct. 9.
MasterCard doesn’t break out a number, except to call it
“virtually zero,” according to Matthew Driver, MasterCard’s
Southeast Asia president in Singapore. That compares with 40
percent of global retail sales settled using cards, according to
a September study by the company.
Fertile Ground
Countries such as Myanmar are fertile battlegrounds for
MasterCard to wage its “war on cash,” which Ajay Banga
declared in September 2010 after taking over as chief executive
officer. MasterCard greets travelers arriving at Yangon
International Airport with advertisements encouraging them to
withdraw currency from ATMs using its network.
“We’re really starting at ground zero in terms of the huge
amount of cash there is in the system,” Driver said. “It’s
going to be a long-haul play and may take five to 10 years until
people start to be comfortable for us to really broaden out
things to a significant kind of scale compared to where it is
today.”
Neighboring Thailand, with a population of 68 million
compared with a similar number in Myanmar, has 47,759 ATMs, and
264,236 Thai merchants have payment terminals, according to the
Bank of Thailand.
Along with UnionPay, Japan’s JCB Co. has also aligned
itself with the local payment network, which planned to start
accepting the Japanese cards later this month, according to Zaw Lin Htut, senior general manager in charge of the international
banking division at KBZ.
Three Machines
MasterCard and Visa each run networks in the country,
requiring merchants to install three separate card-payment
machines to be able to accept all international credit and local
debit cards.
American Express Co., the biggest U.S. credit-card issuer
by customer spending and operator of its own global-payment
network, began working last year to find merchants to accept its
cards, according to Fritz Quinn, a spokesman in Sydney for the
New York-based company, who declined to disclose the number. The
Governor’s Residence hotel accepts AmEx cards with a 5 percent
surcharge.
Poor telephone connectivity and electricity supply are
deterring faster adoption. So is a fee that some merchants pass
on to card users, which a June report from management
consultancy McKinsey Co. puts at 4 percent of the purchase
price on average.
Telephone Lines
Many telephone lines date from “circa 1950 or 1960” and
don’t support data transmission, said Anton Corro, MasterCard’s
Bangkok-based country manager for Thailand and Myanmar.
Myanmar, also known as Burma, has the lowest penetration of
telecommunications infrastructure in Southeast Asia, according
to the McKinsey report. Only 13 percent of the population has
access to electricity, compared with 99 percent in China,
Malaysia and Thailand, according to the report.
“We tell customers that we’ll swipe the card with
pleasure, but we cannot guarantee the line will work,” said
Cherie Aung-Khin, owner of the Green Elephant restaurant in
Yangon, which is popular with foreign visitors.
The Green Elephant was the first establishment in Myanmar
to accept a Visa card, in January, according to a statement by
the payment processor. About $50 of the restaurant’s average
daily sales of $800 is paid for via Visa, said Zayar Latt Han,
the restaurant’s food and beverage officer.
“Travel agents still give tourists instructions to bring
lots of cash when they come to Myanmar,” Aung-Khin said.
Cash Aboard
The Road to Mandalay, an $840-a-night cruise operated on
the Irrawaddy River, also known as the Ayeyarwady, by Orient-Express Hotels Ltd. (OEH) carries the equivalent of $50,000 to
$100,000 worth of kyat, said Thomas Henseler, general manager of
the Governor’s Residence, also operated by Orient-Express.
The large stash of cash is kept aboard the luxury boat in a
safe and pays for food and supplies en route, between the
ancient ruins of Bagan and the Chinese-influenced northern city
of Mandalay, he said.
“Everything’s paid for in cash in Myanmar,” Henseler
said, pointing to the low level of electronic payments and
banking in the country. “Even gold and gems are stored in the
pillow case.”
Fewer than 10 percent of Myanmar nationals have access to
banking services, said Zaw Lin Htut of KBZ. Outside of Yangon,
installation of ATMs and point-of-sale machines is limited
mostly to Mandalay and Naypyidaw, the IMF’s Davies said.
“All these systems will ultimately be used by the people
of Myanmar when they are allowed to use” credit cards and more
of them have access to banks, Davies said.
Banking Crisis
Myanmar’s central bank doesn’t allow local banks to issue
credit cards because it constitutes unsecured lending and had
threatened the “stability of the economy” in 2003, said Win Htein Min, deputy director of financial-institutions supervision
at the Central Bank of Myanmar.
Asia Wealth Bank and Myanmar Mayflower Bank, the two
largest in the country at the time, collapsed that year,
following a bank run, he said. Starting on Feb. 6, 2003, people
rushed to withdraw their money after the failure of several non-banking financial companies that accepted deposits at rates
higher than those offered by lenders to finance investments in
real estate, construction, trading and manufacturing. Myanmar
allowed privately owned banks in 1992 and had 20 of them with
350 branches in early 2003.
“A few of the private banks that operated in 2003 were
faced with a liquidity shortfall, and they could not collect
their money from cardholders,” Win Htein Min said.
ATM Shutdown
Locally issued credit cards were barred and ATMs that
existed then were shut down, said Thein Zaw, formerly of the
central bank and now vice chairman of Myanmar’s newly licensed
Construction and Housing Development Bank Ltd.
Recently, the central bank allowed the issuance of prepaid
debit cards for Myanmar residents traveling overseas. On Oct. 8,
MasterCard partnered with CB Bank to introduce the first such
cards, which can be reloaded.
In February, the U.S. authorized transactions involving
Myanmar’s privately owned Asia Green Development Bank Ltd. and
Ayeyarwady Bank Ltd., and state-owned Myanma Economic Bank and
Myanma Investment Commercial Bank, which were previously on a
U.S. blacklist barring U.S.-linked companies from doing business
with them. Several Myanmar banks remain on the list.
Plastic Bags
ATM use is slow to catch on. CB Bank, the country’s third-largest private lender by assets with more than 100 ATMs, sees
only 0.2 percent of the 20 billion kyat withdrawn from its
branches daily via ATMs, said Pe Myint, a Yangon-based managing
director of the bank. Used to banking in person, customers
prefer taking out cash from deposit windows and carrying it in
plastic bags, he said in an interview in his second-floor office
just above the bank’s primary branch, which is strewn with
bundles of kyat notes on the floor as workers put them through
the 20 counting machines.
Card acceptance has helped improve business at shops that
cater to tourists. Nandawun Souvenir Shop Myanmar Book Centre,
a Yangon store which sells items including gems, jewelry,
lacquer ware, traditional clothing and paintings, installed
machines that accept MasterCard and Visa in February, said owner
Thant Thaw Kaung.
Electronic payments have contributed to 50 percent of the
store’s increase in sales in the first eight months of this year
compared with a year earlier, as customers are no longer
hindered by not having enough cash, he said.
Easier Payment
“Especially when buying high-value products such as gems
and jewelry, tourists consider it a lot easier to pay with a
card,” he said.
When Hattel of ADB visited Yangon’s Scott Market, 300
meters (330 yards) from Shangri-La Asia Ltd. (69)’s Traders Hotel,
where she stayed on her most-recent visit, she said she was
surprised to see “little tiny shops, little jewelry counters”
accepting MasterCard and Visa.
“I would suspect that not a lot of people would know
that,” she said. “Most people probably still think they need
to carry cash.”
Traders Hotel, where a U.S. Embassy travel alert said an
American tourist was injured about midnight Oct. 15 by one of
several bombs that exploded around Myanmar, still doesn’t have a
machine that allows credit-card payments. Customers who pay with
plastic authorize electronic payment by signing a form that
bears the card number and amount, which gets sent by e-mail to
Singapore and processed by a third party.
Client Service
“We started this in April last year as a service to our
clients, many of whom did not know that Myanmar didn’t accept
credit cards,” said Phillip Couvaras, general manager of the
hotel owned by Malaysian billionaire Robert Kuok.
Though engaged in talks with six banks on the installation
of a payment terminal for about three months, Couvaras says no
bank was able to show him a single machine that handles both
Visa and MasterCard, which has delayed the process.
Couvaras may have found his answer in CB Bank, which has
just enabled a single machine to process both Visa and
MasterCard, according to the bank’s San Dar Tun.
Such incremental changes are being made every day, said the
IMF’s Davies.
“It’s very impressive, what the country has been able to
do in such a short period of time,” he said.
To contact the reporter on this story:
Sanat Vallikappen in Singapore at
vallikappen@bloomberg.net
To contact the editor responsible for this story:
Chitra Somayaji at
csomayaji@bloomberg.net
ATM Machines in Yangon
Dario Pignatelli/Bloomberg
The Visa Inc. and Mastercard Inc. logos are displayed on the side of an automated teller machine (ATM) as a customer withdraws money at a shopping mall in downtown Yangon.
The Visa Inc. and Mastercard Inc. logos are displayed on the side of an automated teller machine (ATM) as a customer withdraws money at a shopping mall in downtown Yangon. Photographer: Dario Pignatelli/Bloomberg
June 5 (Bloomberg) — Matthew Driver, president for Southeast Asia at MasterCard Inc., talks about the company’s business strategy for Myanmar.
He speaks from the World Economic Forum on East Asia in Nay Pyi Taw, Myanmar, with Haslinda Amin on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)
CB Bank ATM in Yangon
Paula Bronstein/Getty Images
A security guard reads a newspaper next to a Co-operative Bank Ltd. (CB Bank) automated teller machine (ATM) in downtown Yangon.
A security guard reads a newspaper next to a Co-operative Bank Ltd. (CB Bank) automated teller machine (ATM) in downtown Yangon. Photographer: Paula Bronstein/Getty Images
Plastic Bag of Cash
Sanat Vallikappen/Bloomberg
A customer receives a plastic bag containing the cash she withdrew at the counter of Co-Operative Bank Ltd.’s (CB Bank) primary branch in Yangon.
A customer receives a plastic bag containing the cash she withdrew at the counter of Co-Operative Bank Ltd.’s (CB Bank) primary branch in Yangon. Photographer: Sanat Vallikappen/Bloomberg
Sacks of Cash in Myanmar Hard to Rout for MasterCard, Visa
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