The Central Bank of Myanmar has required local banks to upgrade the card payment technology, as a step toward integrating the payment system with the ASEAN region.
Daw Than Than Swe, the director general of the Central Bank, told the Myanmar Times that all the payment cards issued by local banks will have to be upgraded to EMV standard, as a measure to strengthen security.
Currently, Myanmar banks are issuing debit and credit cards which are classified as non-EMV chip cards. Therefore, these cards will be switched to the EMV standard which offers more protection, and all local banks will finish phasing out the old cards by 2020, she explained.
According to information from JPMorgan Chase, EMV chip technology is becoming the global standard for credit card and debit card payments. Named after its original developers (Europay, MasterCard and Visa), this technology features payment instruments such as smart cards and mobile phones with embedded microprocessor chips which store and protect cardholder data. This standard, also commonly known as “chip and PIN” or “chip and signature”, have more sophisticated encryption and is primarily designed to prevent fraudulent transactions. EMV cards are also harder to clone.
In order to implement this nationwide upgrade, Myanmar Payment Union (MPU), which was established together by 23 local private banks, signed a deal on February 7 with Unionpay International (UPI).
“These chip cards which are currently issued by local banks are highly secure as well. But the EMV-standard cards are internationally recognised as the safest. Hence, we would need to change our cards so as to follow the international standard,” the director general said.
“We need to make sure our cardholders are protected with better security measures and to get ready to be part of ASEAN,” she said, adding that 2020 is the deadline for the transition to be completed.
In the ASEAN region, Singapore, Malaysia, Indonesia, Thailand and Vietnam have implemented the EMV payment system, and are also using the Asian Payment Network (APN) system. The APN is set to become a common standard for ASEAN members, said Mr Yan Wen Hui, general manager of UPI Southeast Asia.
Among all the 10 ASEAN member states, UnionPay cards have also been widely accepted. The people in Myanmar, Singapore, Malaysia and Thailand use UnionPay cards frequently in domestic consumption as well as when travelling overseas.
“Myanmar will also be joining the ASEAN’s own network, the Asian Payment Network, in the future,” said Daw Than Than Swe.
The APN was an initiative launched in 2006 by ASEAN member countries, namely Singapore, Malaysia, Indonesia and Thailand, in coordination with their respective central banks. The initiative was organised as a private sector response-and-dialogue partner to the then-ASEAN Pay Steering Committee, a body comprised of representatives from central banks in ASEAN. The APN and the committee were tasked to establish common standards and formulate a framework for efficient and reliable cross-border payment services across the region.
The APN brings together payment operators from the four ASEAN members, with the Philippines and Vietnam subsequently joining. Some other non-ASEAN Asian electronic payment operators have also taken part. The initiative has established standards for cross-border automated teller machine (ATM) cash withdrawals, balance inquiry and funds transfers.
A working paper published by the Asian Development Bank Institute (ADBI) in 2013 argues in favour of a more regionalised payment system for the ASEAN, which was expected to benefit from the significant growth in the Asia-Pacific payments market. Growth in economic activity in individual countries would increase the overall size, scale, and scope of payment transactions. Enabling the scale and scope of payments to fulfil its potential would require national payment and transaction systems to be regionally integrated.
Standardising and improving the card payment systems is one of the steps paving way for Myanmar to join the game.
An official from a local private bank, who wished to remain anonymous, told the Myanmar Times that, among all the cards issued by the banking sector, only the cards which are MPU-issued are non-EMV cards, and have to be replaced.
That view is shared by the Central Bank.
“Those cards which are not issued by the MPU already have the EMV system. What the Central Banking is essentially saying is that the MPU-issued cards should be changed,” said U Zay Yar Aung, an official from the CB Bank department of cards and machine maintenance.
Another official from Kanbawza Bank (KBZ) also said, “Most cards issued by the banks these days include the EMV technology system. That is why I don’t think a lot of cards have to be replaced.”
Apart from MPU-issued cards, Master cards and Visa cards issued by Myanmar banks, there are also jointly-issued cards such as MPU-Master, MPU-Visa, MPU-UPI, and MPU-JCB cards.
The UPI has agreed to provide technical assistance and technology service to MPU for the EMV upgrade. MPU started issuing cards in 2012 and, at present, there are a total of 2.8 million MPU cards issued by the 23 local private banks.
Adopting EMV cards is another sign that Myanmar is keen to connect with the global financial system. Last March, the AYA Bank became the first lender to offer bank cards with a stamp from global payment network provider JCB. The bank started issuing debit and credit cards with a joint stamp from Japan’s JCB and MPU, meaning it can be used in Myanmar and across a JCB network spanning some 31 million merchants in 190 countries and territories.
Why did the Central Bank set a deadline for the technology transition? This is probably a measure to avoid following in the footsteps of America’s slow embrace of the smart cards.
A few years back, American card companies and banks were very reluctant to do what had been done elsewhere — start issuing the upgraded payment cards. But without the government’s command, the card industry has been locked in a dilemma labelled by The Economist as a “chicken-and-egg situation”: stores had no reason to install EMV-card readers while financial institutions had been reluctant to issue those cards; and banks had refused to embrace them while they were not accepted in stores.
With the instruction from the Central Bank, the payments industry in Myanmar is set to embrace the technology very soon.
Source: Myanmar Times