We recently explored the Fintech industry in Cambodia, which as an emerging market showcases a different side of the Fintech industry compared to developed markets like Singapore and Malaysia.
We had a chance to speak to two entrepreneurs, one an established player in the local Fintech scene and a newcomer looking to build a brand in the market. A veteran in the industry, Tomas Pokorny is the Chief Executive Officer and Co-founding member of Pi Pay, took time from his busy schedule to share his thoughts on the growing market and how one of the strongest players in the market has seen the industry flourish in the last few years.
Clik is the newcomer to the market and are due to launch their full service in Cambodia later this year. Having recently raised a US$2 million seed round, they are poised to go big in the market. Their CEO and Co-Founder, Matthew Tippetts also shared his views about the industry and how they plan to take control of the market.
Both entrepreneurs have significant experience in the Fintech industry and the Cambodia market, making them ideal experts for us to tap into their knowledge about the market.
How many users do you have at the moment? If you have other relevant stats like participating merchants or bank partners that you think would be interesting, please do mention them.
Matthew (MT): We expect to launch the second half of this year, at present, we have close to 400 merchants which have agreed to participate into our beta testing, as well as distributors giving us potential access to a further 4,000 merchants. We are in partnership discussions with multiple banks in addition to FTB, and we have a couple of Micro Finance Institutions (MFIs) which have also entered our beta testing program.
Tomas (TP): Pi Pay has more than 250,000 payment users users; over 3,500 merchants across the country; financial partners including ABA Bank, Sathapana Bank, RHB Bank, and MFIs AMK & Amret; payment partners with AliPay and WeChat Pay; and more than $170 million has been transferred through the Pi Pay app since we launched slightly more than years ago.
Merchants range from roadside coffee stalls, all the way to international brands such as Carl’s Junior, Nike, Domino’s Pizza and many many more. Topping up phone credit, buying cinema and travel tickets, hotel and spa stays, dentist trips; all are offering cashless convenience in Cambodia via Pi Pay.
What are the biggest challenges that payment solutions companies like yourself face in Cambodia’s market?
TP: Cambodia has traditionally had a large unbanked population, but that is quickly changing. The work of MFIs in rural locations has brought more and more people into the formal financial space, and the same is true in urban residents: all government salaries and most private sector are now paid into bank accounts (and some even directly into Pi Pay wallets via our Payroll service), and the growth of e-commerce and ride-hailing are other ways that are encouraging more and more Cambodians to adopt mobile wallets and cashless payments.
A large number of Chinese residents and tourists in Cambodia (some 2 million are expected to visit in 2020) has been a great boost to cashless adoption, as many wish to use their Alipay and WeChat accounts to pay for goods and services in Cambodia. However, while we are authorized partners and offer tax compliant services for local merchants, there has been a proliferation of unauthorized services that have sprung up, which do not offer the same levels of safety, security and legality as Pi Pay.
MT: Is it the usual infrastructure and large unbanked population, or are you seeing other issues arise? In a market where 60/70% of payments are still in cash, with 10 wallets fragmenting the market, the real challenge is to have a value proposition for merchants, incentivising them to reduce cash usage, while also having an attractive proposition to consumers. The infrastructure, 3/4G coverage and smartphone penetration are good, and the un-banked population is actually an opportunity, not a challenge.
How are you overcoming these issues?
MT: By providing more than just payment, helping merchants better understand their customers, build a personalised relationship with them and improve their experience. We are doing this with technology, like our innovative mPOS solution, but also data analytics, and tools which enable merchants to reduce their customer acquisition costs, improve customer retention and make their marketing more effective. Our value proposition is to help them grow sustainably profits.
TP: We work closely with the National Bank of Cambodia to ensure our full compliance, and to support their efforts to regulate the rapidly growing mobile payments sector. Educating merchants as to the importance of tax compliance etc is something we actively do, and we are seeing success in ensuring that credible merchants offer their customers the safest payment solutions.
As for reaching the unbanked, or underbanked populations, we are also seeing a lot of success in this space. By expanding our network of merchants outside of Phnom Penh, increasing numbers of Cambodians are being exposed to cashless payments and money transfers, and the convenience that this brings in their daily lives. Our growing list of financial partners also helps in this aspect, with many having branches and offices in rural communities across Cambodia.
Cambodia has seen some foreign investment and entry into the market by companies like Visa and global banks through local partners. Do you think this is helping the payments market grow in Cambodia?
MT: Yes, absolutely. Having more investment coming into Cambodia, especially that helping create a more vibrant start-up ecosystem, helps bring digital payments into the mainstream. Seeing companies like Visa or international banks like BRED invest in Cambodia helps drive the acceptance of digital payments.
TP: Foreign interest in Cambodia’s payment’s landscape is certainly helping the sector to grow. By making it more convenient for people to pay for goods and services, and demonstrating the security and convenience of the services, more people are joining the cashless revolution. The arrival of big regional and international financial companies and banks sends the signal that Cambodia is a safe, expanding and competitive area of growth, and this only further encourages the public and private sectors to explore digital payment solutions.
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Where do you see the payments market in the next 5 years?
TP: I see greater adoption of digital payments by government ministries. We have signed a partnership with the Ministry of Public Works and Transport to boost their digital payment options such as paying for driving licenses and vehicle registration. I foresee more ministries adopting digital payments for public-facing services as a way to meet transparency requirements and to boost the efficiency of their operations.
In the next 5 years, cashless payments will be far more normal outside of the main urban areas, as the convenience of cashless payment and transfers are better understood. In short time since we launched, the number of people making use of cashless in their daily lives has grown dramatically, and I am very excited to imagine the payments landscape in 5 years!
MT: Payment will become a commodity, transactions costs will go to 0, and blockchain technology will be prevalent. This is like the market for voice minutes on cell phones 10 years ago. Today your mobile package most likely doesn’t bill you per minute, and it’s been commoditised, packaged in offers where you can’t even find the price per minute, and now free messaging apps like WhatsApp, Messenger are driving more voice minutes than the mobile operators!
What is next for the Cambodian payments or Fintech industry?
MT: More entrants, and more innovation, like Clik! Mekong Business Initiative’s FinTech Report highlighted the enormous gap (>$24bn is their estimate) between financial services needs and formal supply. FinTech will play a key role in helping fill this gap, not just with payment, but also with new digital banks, and other FinTech sectors such as InsureTech and lending.
TP: In the short term, I think paying for utility bills, and monthly expenditures such as life insurance premiums, will continue to grow as people appreciate the ability to do this digitally and avoid long trips to the bank or provider’s offices.
Better integration with the growing e-commerce and logistics sector is key. People are still ordering online, but paying in cash, which is an unnecessary step.
Digital money transfers and remittances from abroad will also grow, and there is growing interest in P2P lending options in Cambodia.