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Opportunities and challenges lay ahead in Cambodia’s shift to digital

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Chris McCarthy, co-chair of the eBusiness Working Group, is optimstic about Cambodia’s ability to make the transition away from a reliance on a cash payment system. Photo supplied

Opportunities and challenges lay ahead in Cambodia’s shift to digital

Southeast Asia is being touted as the world’s fastest-growing internet region, and Cambodia wants in.

According to a recent report from Google and Temasek Holdings Pte. Ltd., the Singapore sovereign fund, Southeast Asia’s internet economy could grow to more than $200 billion over the next decade, with electronic commerce (e-commerce) tipped as the major driver for this growth.

E-commerce, by its definition, involves any commercial transaction undertaken over an electronic network– typically the internet.

Capturing the opportunities that e-commerce can offer, such as enabling firms to provide a cheaper and more efficient distribution chain for their products or services isn’t going to be an easy task for the developing countries within Southeast Asia, with prevalent issues such as sluggish internet speed and logistics remaining key barriers.

For Cambodia in particular, another headwind stands in the way of electronic payments and transactions reaching a point of critical mass – the greenback. According to latest industry statistics, a paltry 40,000 people in Cambodia have adopted credit cards, and while the uptake of debit cards is better – with about 1.5 million people in possession of bank cards – the popularity of the plastic in a country with about 15.5 million people is microscopic.

Despite the less than attractive figures, there are a number of dedicated people working hard to progress and evolve Cambodia into an e-commerce market.

Speaking at a recent BritCham panel discussion on the current state of ePayments in Cambodia, industry experts widely agreed that there needs to be a push for merchants to adopt and simultaneously promote electronic payments – ePayments – while shifting away from cash on delivery (COD).

“When we look at Cambodia, the way we spend, it’s based on cash,” said Steven Path, chief executive at Pathmazing and president of the ICT Federation. Furthermore, Path said Cambodia is lagging behind in a lot of the basic e-commerce processes.

“If we start using the plastic, then we can kind of start looking at taking things online. But if our society is more driven by cash, it’s going to be very difficult to move into the online transaction space,” he said.

Path believes Cambodia should aspire to get to the amazon.com level or the ebay level within the technology space, acknowledging that the consumer market is still in its infancy, with customers generally lacking understanding about ePayments.

While Cambodia’s e-commerce system was described as being an incubated system, Cambodia Mekong Bank executive vice-president Paul Clements said the e-banking space is burgeoning.

“We are excited about the new markets that we want to tap into,” he said. “At the moment though, the opportunity and the focus is on small-value transactions in the e-banking space,” adding that the hotel market was also keen to enhance its e-commerce solutions.

Clements noted, however, that there are only a small number of financial institutions that have actively engaged in the e-banking space, namely Mekong, ACLEDA Bank and Maybank Cambodia.

Speaking at the roundtable discussion, Sopheap Loeung, senior vice-president & and head of product development at ACLEDA, said the company is one of the more progressive banks in Cambodia when it comes to its online payments and the overall e-banking system, even giving its customers the option to pay for its electricity bills online.

He said the company has proactively taken steps to collaborate with the telecoms and banking sector in a bid to diversify away from traditional payment methods. But, it hasn’t all been smooth-sailing.

“It has been very challenging in the last couple of years,” he said.

Loeung, who has been at the forefront of ACLEDA’s shift into the digital banking space, has helped to launch the company’s suite of electronic banking systems, which include ACLEDA Internet Banking and ACLEDA Payment Gateway. Loeung called for unity and collaboration within Cambodia’s top- tier firms to enhance consumer demand for online banking and e-commerce systems more broadly.

“We need to be very creative and work together as an industry because we know that e-commerce can potentially be very interesting,” he added.

The cohesive sentiment was echoed by Clements, who said Cambodia’s e-commerce sector needs to be “global and diverse”, incorporating private sector partnerships and government agencies.

Hot on the heels of releasing its mobile banking app, Maybank Cambodia CEO Cynthia Liaw said the launch formed part of the company’s strategic objective of being a digital bank of choice.

“The introduction of our mobile banking app reinforces our commitment of putting our customers’ preference first and transforming to deliver next-generation customer experience,” she said.

The mobile app, which enables Maybank customers to check their account balance and perform fund transfers, can also be used to withdraw cash from an ATM without the need of an ATM card.

Liaw said Maybank’s online banking channel, M2U, has enjoyed an increase in registered users of over 50 per cent within the past year, propelling the company to continue to advance its online platform.

“Maybank customers can look forward to many new and exciting payment services on our mobile/internet banking platforms that will bring them unprecedented banking and payments convenience,” Liaw said.

Aside from Cambodia’s financial institutions, some mobile service providers are using a little ingenuity to integrate virtual payment systems into their business.

According to Thomas Hundt, CEO of Smart Axiata, young people in Cambodia are lapping up the use of apps and online music content stores.

“As the mobile operator, we came out recently with a product called Smart Pay which is a virtual credit card directly attached to your debit card so it is a direct operator billing concept where subscribing to SmartPay gets you a MasterCard number which can then be used to buy your stuff on the iOS app store,” he said.

Referred to as an open-loop network, whereby multi-party systems operate through a system that connects two financial institutions, Hundt said Smart is working to establish ePayment networks, and urge other companies to also view ePayment solutions as platforms to creating an “e-commerce eco-system.”.

While educating and converting customers to non-physical ways of purchasing goods have been identified as obstacles in Cambodia’s shift to digital transactions, so too is the country’s non-existent regulatory framework around e-commerce.

Chris McCarthy, co-chair of the eBusiness Working Group and chief executive at Mango Tango Asia, is hopeful the e-commerce law will be passed before the end of the year, but highlighted that there are limitations around the scope of the proposed law.

“It’s a great step but I think more needs to be done to instill consumer confidence and merchant confidence,” he said, adding that the e-commerce law in the making may only go as far as dealing with the validity of contracts and electronic signatures as opposed to also including requirements which address consumer expectations.

In an interesting reference, McCarthy highlighted China’s thriving e-commerce sector, indicating the enormous possibilities that transitioning to an online environment can create.

“Twelve years ago in China, the e-commerce market was pretty much zero,” he said. “It is now worth $500 billion. That is possible here in Cambodia as well.”

But opportunities are not without their challenges, and there are many to grapple with as Cambodia’s economy begins to mull the prospects of a virtual economy. According to Path, the current cost of online transactions incurred by the merchants is too steep.

“E-commerce is expensive because banks are actually charging a higher percentage margin,” he said.

“I think that will come down dramatically in costs in the next twelve months, so the merchants should be pleased with that.”

While Path is optimistic around the future of Cambodia’s online sector, he believes education and collaboration would ensure the steady growth of e-commerce in the Kingdom.

“The market is going to develop but I think it comes down to education,” he said. “We need more education but we all need to work together on that education solution.”


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