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A cashier inserts a credit card into a POS machine yesterday in Phnom Penh.
A cashier inserts a credit card into a POS machine yesterday in Phnom Penh. Hong Menea

E-payments to dethrone cash

While digital payments show great promise to drive economic growth and increase financial inclusion in Southeast Asia, targeted approaches that address local cultural barriers are key to the widespread adoption of e-commerce and e-payments, industry players said during the World Economic Forum (WEF) on Asean summit, which wrapped up on Friday.

“There is a clear correlation between the share of electronic payments and the opportunity for GDP growth,” Tim Murphy, general counsel and chief franchise officer for MasterCard, told The Post on the forum’s sidelines.

“With every 1 percent increase in the share of electronic payments of a country’s personal expenditure, you can see somewhere between a third and a half of a percentage point increase in GDP.”

However, the challenge according to Murphy is that the vast majority of Cambodians remain unbanked, with almost all daily transactions made in cash. He said that efforts to build a digital economy must begin with solutions tailored to the local market, where trust of online payments remains very low.

“You have to recognise that you are living in a cash environment and one of the most effective ways to encourage consumers to adopt electronic payments is to make sure they understand that they are able to get cash from a lot of places,” Murphy said.

“One of the most powerful ways to encourage consumers to adopt electronic payments is by allowing them access to cash through retail points of sale [POS] locations, not just ATMs.”

Exposure remains high in developing markets for digital payment providers, Murphy said, adding that this opens the door to public-private partnerships that can mitigate the initial risks of deploying financial technology, also known as “fintech”.

He explained that although fintech often has a disruptive effect on the financial industry, traditional regulated institutions will continue to play a crucial role in payments for the foreseeable future.

“You will not see scaled direct financial services that aren’t in some ways regulated,” he said.

“So I think fintech has a huge role to play, but it will always be at some level through the partnership with a bank.”

Arn Vogels, country manager and chief representative for MasterCard in Indochina, added that new technological products are facilitating financial inclusion and digital payments, though cash remains an essential part of any payment infrastructure.

He explained that solutions like QR codes, which can be scanned to make or receive payments on mobile devices, greatly reduce costs and increase convenience in sectors such as e-commerce.

“Commerce is very fragmented around Southeast Asia with a lot of family-owned businesses where putting a traditional point-of-sale terminal that costs $300 or $400 is not economically viable,” he said.

“Digital payments like QR are an excellent alternative because printing a QR code does not cost anything, or very little.”

This is where a large space exists for local fintech players, who through technology are able to bridge the gap between banks and SMEs, allowing consumers access to the digital economy, Vogels explained.

“Take Wing in this country as an example,” he said.

“It started as a domestic remittance program and it is now clearly expanding and will open up network opportunities for companies like us working with them.”

Speaking during a WEF panel on digital payments on Friday, In Channy, president and group managing director of Acleda Bank, noted that there are three main barriers to the widespread adoption of e-commerce in Cambodia.

He cited inadequate consumer education, lack of regulation and the limited reach of institutional financial networks.

Channy added that in order to implement successful change, there needs to be more integration among the market players rather than having each actor pursue their objectives independently, as is often the case.

“There are many providers who say, ‘This is my know-how, I will develop by myself and I will work alone’,” he said.

“If you still say that ‘This is my technology and my copyright’, it won’t work. We need to work together at the country level.”

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