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Myanmar: credit card market hots up

Date: 18/03/2013
Source: Financial Times
Myanmar: credit card market hots up

In Myanmar, southeast Asia’s latest golden investment opportunity, being in first wins headlines for foreign companies, as Coca-Cola and Standard Chartered have recently shown.

But as credit card issuers MasterCard and Visa have discovered, it doesn’t guarantee a lead over the competition.

For the growing number of repeat visitors to Myanmar, including business people, foreign government officials and aid workers, the tedium of carrying massive wads of cash is the price of doing business in Myanmar. Not only that, but under unspoken rules observed by nearly all hotels, shops and businesses, the cash must be pristine US dollars.

Running out of dollars always used to mean getting stranded, but since the government allowed the entry of foreign credit card issuers in November, the economy, at least for visitors, has opened, albeit tentatively, to card transactions and ATM machines. With the next step – enabling credit card issuance – just around the corner, the market for credit and debit cards has already become highly competitive.

MasterCard, the number two card provider in the US, was the first to notch up an ATM transaction in Myanmar last November and since then has dispensed over $1.7m to foreigners, according to local media. As it completed its first ceremonial card payment at an airline on March 4, the company announced that it would increase the number of ATMs available to foreign card holders. By the end of 2013, it promises to enable card payments at over 500 restaurants, hotels and shops in four cities.

But while MasterCard was early into Myanmar, it is no longer alone – or even ahead.

China UnionPay, a 10-year-old credit and debit card group set up by China’s government, is now bigger globally than Visa and MasterCard by number of cards issued – 2.9bn by the end of 2011, 45 per cent of the world’s total. The company began offering payment services to foreigners in Myanmar in February, and already allows its cardholders to access 198 ATMs and 465 point-of-sale terminals.

While MasterCard has arranged deals with individual banks to provide access to ATMs, CUP has negotiated a similar deal with the Myanmar Payment Union, an organisation of 17 local member banks which opened in September 2011. Myanmar is just the latest battle ground between the global card issuers.

In Myanmar, Visa has taken a similar tack to MasterCard, signing its first licensing agreements with three banks in November and performing country’s first ever international card transaction in January, while competitor Japanese Credit Bureau also negotiated contracts with MPU member banks to supply branded credit cards to customers. Visa is shortly expected to announce several more partnerships with Myanmar banks which will expand its network to allow customers to use their cards in more places.

To date, deals between local banks and card companies have mainly focused on visiting foreigners. Card companies are waiting on permission to issue credit cards in the country, and say it could be a matter of weeks. While Myanmar citizens are entitled to open bank accounts, the take-up has been low, partly due to deep-seated mistrust of banks following bank scandals and collapses in the early 2000s and the continuing lack of deposit insurance.

Efforts by local banks to win back customers received a setback earlier this year amid rumours – eventually proven unfounded – that the chairman of Kanbawza Bank, one of the country’s largest banks, had been arrested. The damage was done by early reports, resulting in a run on the bank that led to the withdrawal of $10.5m in October last year.

Despite these difficulties, private domestic banks have begun offering letters of credit to businesses and international banks have begun moving in. As Myanmar welcomes record numbers of visitors – over 1m in 2012 – and more foreign companies and hotels set up, the competition among card issuers will only intensify. But credit card companies know that their future in the domestic market also depends on the revival of consumer confidence in the banks – something which takes years to build and days to destroy.

Topic: Financial
Did You Know?
There are many neighboring countries which surrounds Myanmar; namely, Bangladesh in the west, India in the northwest, China in the southeast, Laos and Thailand in the East. ... More

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