Myanmar’s burgeoning financial sector attracts foreign suppliers

Foreign companies are rushing in to beef up Myanmar’s financial infrastructure, vying to win orders for ATMs and financial software from commercial banks that are rapidly growing under a civilian government.

This month, Diebold Nixdorf, the world’s top ATM supplier, will open its first sales office in Myanmar. It is to be staffed with its own employees. The American company used to sell its mainstay ATMs in Myanmar through a local agency. Diebold has supplied such machines to major local commercial banks, including Kanbawza Bank and Ayeyarwady Bank, known as Aya Bank. It currently has 70% market share for Myanmar’s ATMs.

But with local commercial banks increasingly investing in financial systems as their businesses grow, Diebold decided it needs its own sales base. The office is located in Yangon, Myanmar’s largest city.

Diebold has won orders for 500 ATMs from Co-operative Bank,known as CB Bank, another major bank. The company hopes to expand its client base to include convenience stores, supermarkets and other retailers. It also plans to boost sales of its point-of-sale systems.

In 2016, Diebold acquired German rival Wincor Nixdorf. Although Diebold now controls 40% of the global ATM market, its market share in the Asia-Pacific region remains at about 20% to 30%.

There were some 1,800 ATMs installed in Myanmar in 2015. The penetration rate in Myanmar is the lowest in Southeast Asia and there is a huge potential, said Neil Emerson, senior vice president and managing director of Diebold’s Asia-Pacific department.

Japan’s Hitachi fully entered Myanmar last year, offering financial systems and related services. It supplies high-end ATMs and hopes to sell accounting systems to banks, among other products. According to an industry group, Myanmar’s ATM market is projected to grow by over 20% annually until 2021.

Last summer, Vietnamese major software developer FPT partnered with Myanmar Payment Union, the leading electronic payment service provider in Myanmar set up by some 20 local banks. FPT plans to transfer technology to MPU over the next 10 years to help MPU’s member banks shift to digital settlements.

In cooperation with member banks, MPU has issued some 2 million debit cards that can also be used at ATMs. FPT plans to upgrade the settlement system for those cards and help banks adopt international settlement standards.

VMware, a major developer of virtualization software based in the U.S., joined hands with Myanmar Oriental Bank, a major local bank, last summer, offering its own cloud-based settlement system. MOB is the first commercial bank in Myanmar to fully adopt VMware’s system. VMware has supplied systems to the Central Bank of Myanmar in the past.

Foreign companies like Diebold are expanding operations in Myanmar because local commercial banks are growing rapidly. In the 1960s through 1980s, under the socialist government, Myanmar’s financial market was dominated by state-owned banks. From the 1990s onward, relaxed requirements for opening a bank caused a surge in the number of commercial banks in the country. According to one estimate, there are over 20 commercial banks today, and their combined assets are four times the size of state banks’ assets. The rise of swift commercial banks is quickly turning the country’s banking services from a mostly paper-based to digital format.

The number of bank branches in the country grew from 1,300 in August 2014 to over 1,700 in May 2016. During the same period, the number of commercial bank branches increased by 50%, from 800 to 1,200. As the bank network grew, so did demand for ATMs and accounting systems and software.

One promising area is mobile banking. Mobile phone penetration in Myanmar has grown from less than 10% under the military regime to over 90% today. In parts of the country where banks are still scarce, people have mobile accounts rather than bank accounts.

A joint venture between Yoma Bank, a major local bank, and Telenor, a Norwegian mobile communications company, has been providing mobile banking services in Myanmar.

Source: Nikkei Asian Review

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