Financial technology, more commonly referred to as fintech, is being developed and adopted at a fast rate in the Kingdom, but experts say the future growth of the industry is dependent on a plethora of obstacles being overcome.

A recent report titled Accelerating Financial Inclusion in Southeast Asia with Digital Finance, commissioned by the Asian Development Bank (ADB), predicted fintech has the potential to increase the Kingdom’s GDP by about 6 percent. In addition to generating more than $1.7 billion in additional electronic payment flows, the report said unlocking fintech in Cambodia could underpin more than $2.5 billion in additional credit uptake.

Fintech, or digital finance, has the potential to transform Cambodia’s economic landscape, most notably in the sectors of payments and transfers, credit and insurance.

However, Gordon Peters, a partner at investment and consulting firm Mekong Strategic Partners, doubts the ability of fintech to have such a significant impact on Cambodia’s GDP, with ADB’s estimate of 6 percent equating to about $1 billion.

“Banking sector profit is about half that amount, and we’ve not estimated what the market size could be from the digital finance but I can’t imagine digital finance will surpass the banking sector in five years,” he said.

While still in a nascent early growth stage, Peters highlighted that there were several companies in Cambodia making progress in the space by capitalising on opportunities that utilised digital technology.

“Interest has surged recently among entrepreneurs as some of the early entrants in mobile money have taken off, such as Wing Money,” he said.

ADB’s digital finance report also recognised the significance of Wing Money, noting: “Wing in Cambodia now processes a volume of transactions equivalent to about 50% of the country’s GDP through a mobile money network consisting of some 4,000 digitally connected agents. In doing so, it has reduced money transfer fees by between 40 percent and 80 percent.”

Chanda Pen, managing partner of Bongloy, an API-based payment solution that enables merchants to acquire payments online, believes the prospects of fintech in the Kingdom remain bright.

“I’m really optimistic about fintech,” he said. “I think it’s going to develop and it’s going to change a lot quicker and faster.”

Pen was recently a mentor at the “Startup Weekend Fin Tech Phnom Penh”, whereby small teams got an opportunity to tackle the challenges at play in the fintech industry by pitching and testing their ideas to potential customers over 54 hours.

While there were some standout ideas, Pen said the team that ended up coming out on top was called Angkor Biz Pool. The team pitched a fintech business model that would allow entrepreneurs to pay government taxes directly through a specially developed web-portal or accounting application by connecting it to a special API.

“The idea is that, because everyone here in Cambodia is using excel to do their tax recordings, why not have this platform that allows businesses to upload their excel documentation and then they convert and submit that excel information to the General Department of Taxation and it’s all done electronically,” he said.

Pen said while events like the StartUp Weekend gave local budding start-ups a platform to share and develop a suitable business model for their fintech ideas, he noted that the demand side of fintech products and services was still lacking in Cambodia.

“For local Cambodians, it [fintech] hasn’t really taken that next step yet to push that button to say ‘check out’,” he said.

“It’s not quite there yet. It’s all about education and trust.”

An overriding scepticism in trusting digital services is not the only barrier preventing the industry from going into overdrive. Peters says Cambodia’s reliance on cash as a means of payment is another obstacle.

“The single biggest barrier for fintech is the prevalence of cash as a means of payment, and that won’t change overnight,” he said.

According to Pen, fintech can only truly move forward on a large-scale in Cambodia when A and B connect.

“The A and B would potentially be financial institutions wanting to work with somebody who is a fintech developer or fintech business to more on the consumer side wanting to use that service,” he said.

“You need to have at least the banks cooperating in order to have a full fintech system.”

Zokhir Rasulov, the chief digital officer at ABA Bank who was on the judging panel at the StartUp fintech weekend, described the state of the fintech sector in Cambodia as one that was developing smoothly and chaotically at the same time.

“Cambodia is one of the few countries in the world where most of the population is young without conservative opinion on adoption of any technologies, making it a great place for fintech,” he said.

“In my humble opinion, here the fintech is in a “chicken and egg” situation: companies are not willing to offer anything new to the market since there is little demand, while the market’s demand in fintech solutions is low because of lack of knowledge and experience.

“In such situation, I believe the offer should be done first and the market will adopt it in case of proper delivery.”

Rasulov said ABA Bank had witnessed the rapid change in the way that Cambodians are being influenced by technology, and as a result, established a dedicated business unit called Digital Banking which is focused on the development of new banking channels, as well as on delivering products and services based on digital technologies.

However, Rasulov noted that none of the new digital solutions offered by ABA Bank or the fintech space in general can succeed without proper investment in education.

“Moreover, close collaboration among the industry’s key players is also required to create standards in offering new solutions and make market adoption easier,” he said.