Myanmar today sits comfortably alongside some of South East Asia’s biggest names, in among a region best characterised by explosive growth and an abundance of emerging economic opportunities (see Fig. 1). While most would consider the country to be one of the region’s lesser prospects, there exists a fair few reasons to feel positive about Myanmar’s future.
For one the country’s banking sector has withstood extended periods of political unrest, and Myanmar’s policymakers have recently taken pains to promote growth and boost the sector’s attractiveness to international parties. When its central bank announced earlier this year that it would allow foreign banks to set up shop in Myanmar for the first time in two decades, global industry names quickly assessed what opportunities were there for the taking, whereas local banks proceeded to speculate about how the decision might come to bear on their standing. The interest generated and progress made thus far, however, shows that the country is serious about advancing its banking sector, and capitalising on emerging economic opportunities.
Already established players have seen the banking sector come on leaps and bounds in recent years, and helped turn a largely undeveloped market into a formidable economic force. Ayeyarwady Bank (AYA Bank), for example, is one institution that has weathered the challenges of years passed and cemented its place as a major regional player and an industry benchmark.
Serving the wider public
Established little over four years ago, AYA Bank is authorised to operate as an investment and development bank for domestic market participants. Among the institution’s key responsibilities are comprehensive borrowing and lending facilities, as well as a number of key international banking services, including international remittance, payment and trade. What’s most important, however, is that the bank has at no point let up in its ambition to bring international quality financial services to Myanmar’s long underserved banking public.
“Due to some financial liberalisation and two new telecoms players in Myanmar, we are seeing the banking industry expand at a far greater rate than ever before,” said one spokesperson for AYA Bank. “Add to this the fact that the Central Bank of Myanmar will also allow some qualified foreign banks to operate limited banking business soon in Myanmar, and the sector’s prospects look promising.”
The country’s banking sector has expanded at an impressive rate, although the speed at which the sector is growing has brought with it a number of complications. “There are some challenges when a bank is expanding rapidly in Myanmar, in terms of human resources, attracting qualified personnel and also the telecommunication and legal infrastructure.”
Another of the challenges facing those in the banking industry is the fact that certain regions of the country are far less developed than others, and much of the population today is without access to banking services. Therefore, Myanmar’s leading industry names have made every effort to expand their reach to often-neglected areas of the local community. “I think we have strategised in a way that we made our presence known in such regions with our physical existence,” says the spokesperson at AYA Bank, which, since its inception in August 2010, has opened up no less than 74 branches in order to cater to every corner of the country.
However, expanding upon their physical presence is only one part of the solution, and AYA Bank has moved to also develop its online presence in order to tap a number of precious opportunities in Myanmar’s emerging online and mobile banking sector. “Although internet penetration is fairly limited, we have seen a hike in the use of mobile phones and 3G services, especially in areas such as Yangon, Mandalay, among others. We have also seen shifts in customer preferences, and this did not deter us from introducing the first internet banking service in the entire banking and financial sector in Myanmar on June 17, 2014.”
Although internet penetration is still fairly limited in the country, AYA Bank has sought the services of expert third parties in negotiating the challenges that come with tapping a population with limited access to the internet. “It is a revolutionary financial service and one that will hopefully change the perceptions of the local people with regards to banking services. AYA Bank is also the first and only bank that has centralised its core banking solutions to enhance electronic banking services in Myanmar. Even though internet penetration is limited across the country, with poor speed and bandwidth, AYA Bank has managed to work with system/solution providers with the relevant knowledge and experience to run solutions in this present condition.”
Standing in the way
The bank’s centralised electronic solution allows customers to essentially take out and transfer money wherever they may be, which represents a major step forward for a country that not long ago left the majority of the population with no option but to do without financial services altogether.
While the development marks a major step forward for both AYA Bank and the country’s banking sector as a whole, it also shines a light on the country’s deficiencies, and the extent to which internet banking is hindered by weak or inadequate infrastructure. However, this is far from the only obstacle standing in the way of the digital banking sector’s development.
One of the major challenges for internet banking is to ensure that customers are made to feel at ease with new technology and the possibilities it brings ahead of traditional channels. The short history of online and mobile banking is littered with instances of failure, owing predominantly to the poor reception of consumers, yet AYA Bank maintains that this is certainly not the case in Myanmar. “I think customers are very receptive – they now have more choices and more confidence when they see a strong physical presence in the region,” said one spokesperson for the bank. “We believe that we need to move from a cash-based banking to cashless banking that saves time and cuts costs for customers who need no longer make the trip to a bank. Therefore the consumer and market response to AYA Bank’s continued development of electronic and online banking is quite positive.”
Irrespective of its high standing in the domestic banking space, AYA Bank remains a relative newcomer to the market, although it has managed to make good on what few advantages come with being a new entrant, predominately by focusing on innovation and technology. “I think being a newcomer has its pros and cons, in that we get to learn from earlier entrants,” says the bank’s spokesperson. “Additionally, with advancements in technology, we are able to better analyse shifts in customer preference before developing innovative new products and services. Moreover, being a relative newcomer, it was easier for us to migrate to a core banking system compared with those with more years experience and a much bigger customer base.”
Innovation and technology, however, are far from the only departments in which AYA Bank excels, and it has also taken major steps to instil a sense of customer-focus across the entirety of its operations. “Differentiation and customer-centricity is the core strategy of AYA Bank in staying ahead of our competitors. Expansion of the branch network is still one of the strategies in a country of this size and with this population. On the other hand, channel expansion through the development of electronic banking is also one of the key ways of differentiating traditional banking systems, such as ATM, internet and mobile banking. However, customer service is one area on which our bank management is always focused in gaining a competitive advantage.”
The country’s predominantly cash-based economy will take some time to peter out, although it’s only a matter of time before pioneering names in the banking sector lead the slow transition into a cashless economy. Spearheaded in part by the government’s decision to welcome foreign players into the market, local names will be looking to bolster their IT capabilities and reputations in order to adequately compete with international names in the banking space.
“We plan to expand our branch network, as well as introduce new processes to improve efficiency at our branches,” says the spokesperson. “Our plans also include more innovative product and service offerings in order to stay ahead in the competitive market, especially with the expected entry of foreign banks to the country.” Once completed, the banking sector’s reorganisation and modernisation should see the national economy rise to rank alongside some of its more successful neighbours, and finally make good on the IMF’s prediction that the country could well become “the next economic frontier.”
