Insights

The Landscape of Digital Banking in Cambodia.

Over the past six years that Mäd has been in business, approximately 80% of our client base has been in the financial services and banking sector. We’ve worked with major Cambodian financial service providers, including Amret MFI, Canadia Bank, Vattanac Bank, Chip Mong Bank, and Pi Pay, among many others.

In this relatively short period, we’ve noticed a significant shift in the demand for complex fintech products, particularly consumer mobile banking apps that serve the growing needs of modern Cambodians. We’ve been fortunate enough to be on the frontlines throughout this transition, as we collaborate day in and day out with firms that are shaping the future of the mobile banking landscape. 

With that in mind, we took a deep dive into the key factors driving this change and how local businesses can navigate it.

 

Digital Transformation. 

In the past few years, mobile banking has seen a rapidly increasing rate of adoption in Cambodia. And like in most sectors across the globe, the COVID-19 pandemic has only accelerated the need for secure and easy-to-use digital banking solutions. 

To remain competitive, major local banks have collectively begun engaging in extensive digital transformation efforts to meet the local market’s growing demands. With this urgent need to adapt, combined with the favorable demographics of Cambodia — the median age in the country being around 27 — it’s no wonder that we’ve seen over 15 new (commercial) banks pop up in the last five years alone.

Looking more broadly at Cambodia’s digital landscape over the past decade, digital products are swiftly transforming offline models in most industries — food delivery, loan applications, and transport, to name just a few. This is a direct result of the continuously growing number of smartphone users, whose demand for convenience, security, and ease of access calls for mobile apps to enhance or even replace traditional service providers. 

The speed of adoption could be attributed to the pandemic years and the general patterns associated with emerging markets. But the reality is that Cambodia currently has one of the highest mobile penetration rates in the world, with almost 21 million mobile connections — which makes up an astounding 124% of the population! Within this number, at least 13.6 million use some sort of mobile payment service. 

Surprisingly, despite such high levels of mobile usage and connectivity, only about half of adults in the country are formally banked (i.e., have opened a bank account and use it consistently). Nonetheless, the numbers alone indicate both a willingness of the market to adopt digital-first solutions and a clear growth opportunity for financial firms.

If you’re interested in learning about how our clients have leveraged these favorable demographics, read more about our work with Financial Institutions.

Shifting Financial Services.  

As of 2022, there are 69 financial institutions providing mobile banking services in Cambodia, according to reports by the National Bank of Cambodia (NBC).

69 mobile payment services spearhead Cambodia’s mobile payment transactions to $113.67 billion. (Source: Khmer Times)

The rapid adoption of digital financial services and mobile banking capitalizes on the growing demand for higher levels of service and better digital tools to manage day-to-day banking needs. From street food vendors to shopping malls, mobile payments by scanning QR codes or via in-app transfers are now the most common means of transacting throughout the country; closely followed by fully digital account opening and micro-loan applications.

In Cambodia, advancements in fintech first emerged about a decade ago in the form of e-wallets and digital payment solutions. 

One of the first movers in the financial services space was Wing, which introduced its Mobile Financial Services in 2008. Since then, Wing has remained at the forefront of the sector, further expanding its services with the opening of the first physical branch of Wing Bank in 2022.

Another innovator in the early stages of mobile banking in Cambodia was Pi Pay. As one of our clients, we worked with Pi Pay to design one of the first accessible digital payment systems in the market. Their unique customer-centric and completely cashless payment app provides a  secure e-wallet for day-to-day transactions. Alongside this, the Pi Pay ecosystem seamlessly connects customers with merchants (and even friends), providing a range of additional services. 

Pi Pay was one of the earliest movers in Cambodia’s digital banking landscape. In 2018, its collaboration with the Cambodian government was key in helping the country take a major step toward implementing cashless payments. (Source: Southeast Asia Globe)

Although e-wallets comprise only a subset of some of today’s fully-fledged banking apps, as first movers, both Wing and Pi Pay paved the way for a significant shift in the local banking landscape. Mobile money usage then saw its most considerable growth to date between 2015 and 2020, when the number of registered mobile accounts increased by more than 20 times, reaching almost 10 million. This suggests that over 80% of the adult population in Cambodia had opened a mobile money account or e-wallet by the end of 2020. 

Major industry players have tracked these developments, capitalizing on the early success and adoption of e-wallets. Fast forward to today, and the market has been flooded with innovative developments that are set to have a considerable impact on the country’s economy. 

The pandemic has further driven a significant rise in cashless and online transactions — a solution encouraged by NBC and other institutions as part of nationwide efforts to combat the spread of COVID-19. In 2021, Cambodia recorded over 700 million online payment transactions worth almost 114 billion US dollars. The former statistic is up by nearly 50% from the previous year. This is also partly a result of financial literacy initiatives by NBC, which have increased the total number of people using banking services overall. 

Surprisingly, the number of registered mobile money accounts has been continuously surpassing the number of formal deposit accounts with banks since 2019. This suggests that consumers have embraced digital financial services at a much faster rate than traditional banking services — likely because those providers have succeeded in reaching populations previously excluded from the traditional banking system.

As the digital landscape continues changing, so do customer demands. Mobile banking app users now expect the option to open a bank account, view their account information, and manage transactions without having to step foot in a branch.  

The Benefits of Mobile Banking Adoption.  

At the beginning of the pandemic, many businesses experienced temporary closure and had to operate primarily through delivery services. Financial institutions were also forced to seek other solutions, subsequently multiplying the number of first-time users of mobile banking apps. Collectively, these changes accelerated the trend and emphasized the advantages of digital banking.

Convenience and ease of use. 

Mobile delivery and shopping apps have reported a surge in cashless payments among users, particularly in the last two years. 

A 2021 report by Visa found that over 35% of Cambodians had started using digital alternatives to cash, and one in five consumers regularly use QR payments and online card transfers. These segments are led by younger age groups (Gen Y and Z).

ABA Bank was one of the first to introduce a QR payment system, ABA PAY. (Source: Cambodia Investment Review

Both consumers and merchants across the country have collectively embraced QR payment, which has made cashless transactions even more convenient in everyday life. To pay for something, a customer simply scans the seller’s QR code via their banking or e-wallet app to instantly get redirected to the payment system. Then, all they need to do is confirm the transaction. 

In addition to the increased convenience of transacting, online and cashless payment methods also enhance the speed and accuracy of payments, as buyers and merchants can avoid dealing with physical bills. A cashless payment removes the need to manually calculate and confirm transactions, making the process both simple and accurate. 

It’s increasingly common these days to see QR code standees and stickers everywhere in Phnom Penh: from regular grocery shops, cafes, and restaurants, to wet-market vendors and street food stalls, and even fixed to the seats of tuk-tuk drivers. 

Businesses can use the ABA Merchant app to request​ printed ABA​ QR​ collaterals​ for​ free​.​ (Source: ABA Bank

Financial inclusion. 

In recent years, the goal of sustainable finance initiatives in the country has been to increase the rates of financial inclusion among the rural population. 

For Cambodia’s highly diversified customer base, mobile banking has become a critical aspect of the broader move towards greater financial inclusion. It breaks barriers for lower-income and elderly segments of the population, reducing the cost, distance, and complexity of transacting — typical pain points of creating a formal financial sector. The introduction of mobile banking services has helped to overcome most of these problems via a single solution.

The growth of digital banking services also enables a well-functioning financial system by promoting inclusive growth. It aids financial institutions and service providers in better understanding (and meeting) customers’ economic needs. Banks and microfinance institutions (MFIs) have started developing their own digital platforms to serve both individuals and smaller businesses in a convenient and secure way. 

ABA’s inclusive approach has resulted in a 21% increase in its overall customer base in the first half of 2022 alone. (Source: Cambodia Investment Review

These innovations have given more opportunities to unbanked people (i.e., those who do not use formal banking services yet), providing them with access to user-friendly financial services at lower charges. For instance, mobile banking solutions have helped digitize the process of account opening and onboarding, granting rural Cambodians access to services without the need to travel to visit a bank. 

Industry Leaders Snapshot. 

Top Mobile Banking Apps in Cambodia.
  1. ABA Mobile Bank. 
  2. ACLEDA Mobile. 
  3. Wing Bank. 
  4. ABA Merchant. 
  5. TrueMoney Cambodia.
  6. Binance.
  7. Canadia Bank.
  8. Bakong.
  9. AMK Mobile.
  10. U-Pay Wallet. 

*(Ranked on iOS App Store, as of 17/10/2022.)

While not an exhaustive list, these firms are some of the most prominent leaders in the introduction and promotion of digital banking solutions. Still, there are dozens more, all striving to provide the most innovative and user-friendly mobile banking solution in the market, and competing to become its most trusted expert.

Here, we give a detailed look at a few of the most notable players in Cambodia’s mobile banking environment, some of which we’ve had the pleasure of collaborating with. 

Wing

Launched over a decade ago, Wing is the pioneer of e-wallet and mobile banking platforms in Cambodia, and it remains one of its leading digital financial service providers. 

Wing Bank introduced an instant, secure, and convenient mobile banking system via its Wing Bank App, which provides 100% coverage of all districts in the Kingdom, with over 10,000 Wing Cash Xpress agents and 55,000 merchants across the country. 

Clients line up outside a Wing Xpress agent (Jan 2018). In 2017, Wing was the first recipient of the Best Mobile Payment Solutions in Cambodia title in the prestigious Global Banking & Finance Awards. (Source: Khmer Times)

It has revolutionized access to financial services, offering an innovative and accessible way to do banking: from local money transfers to cashless payments and even instant international transfers. Wing’s partnerships with industry leaders like MasterCard, Western Union, and Visa position it at the forefront of the mobile banking landscape in Cambodia. 

Wing’s success is proof of the country’s potential in the digital financial services industry, as it continues to promote financial inclusion while highlighting other vital areas of focus and development.  

ABA

Advanced Bank of Asia, better known as ABA, is the unquestionable industry leader among private financial institutions in Cambodia: its digital banking system is the model that most local banks aspire to have.

Awarded the title of “Best Bank in Cambodia 2022” by Euromoney, ABA dominates both traditional banking and online/QR payments — after all, the slogan of ABA Mobile is “The bank is in your smartphone.” Its app boasts over 1.5 million users, with more than 40,000 merchants using its merchant app services. 

ABA explains its success through its strategy: it consistently tailors its offerings to specific, changing customer needs. It was one of the first banks to integrate its payment system with PayWay (which enables payment by scanning a QR code) and KHQR, which allows users to receive transfers from customers of other local banks within NBC’s Bakong payment system free of charge. ABA also has a physical 24/7 self-banking network spread across the country.

ABA Bank’s commitment to providing meaningful and convenient solutions to its customers is essential to maintaining its prominent position in Cambodia. 

Already ranked the top commercial bank in the country, ABA​ Bank has​ earned​ another​ Domestic​ Retail​ Bank​ of​ the​ Year​ in​ Cambodia award​ in​ the​ Asia​ Banking​ and​ Finance​ magazine's​ Retail​ Banking​ Awards​ 2022.​ (Source: ABA Bank)

Pi Pay

Pi Pay first entered the Cambodian market in 2017 as a small fintech startup. It quickly became a leader in digital app-based payment services, gaining traction among its customer base as one of the first e-wallet providers in the country. 

The Pi Pay app acts as a secure e-wallet that enables instant cashless and online payments. Its platform connects customers with merchants (and even friends) in a seamless digital environment, providing a range of services for both communications and transactions.

We worked with Pi Pay from its earliest stages of conception to design and build an impactful brand and product. After its launch, it was thrilling to see the results of introducing this one-of-a-kind (at the time) innovation to the market. 

In the first thirty days after its release, Pi Pay became the seventh most downloaded app in Cambodia.

Within the first year alone, over 200 million USD were processed via the platform. 

Pi Pay ended that year with 250,000 active users.

In 2020, Pi Pay merged with SmartLuy, another local industry giant, with the goal of becoming the leading payment platform in the Kingdom.  

Bakong.

Bakong is a unique payment system that enables peer-to-peer transactions, linking financial institutions across Cambodia. Launched by NBC in late 2020, it is now recognized as one of the world’s first central banking digital currencies (CBCDs). 

The Bakong app makes it efficient and convenient to transfer money from one banking platform to another at low costs but with enhanced speed via its all-in-one interface. It can also be integrated directly into the apps of local financial providers without any additional investments.  

Bakong was developed through the collaboration between the NBC and SORAMITSU, a technology company that specializes in developing blockchain-based fintech solutions for enterprises, universities, and governments. (Source: Soramitsu)

At its core, Bakong uses blockchain technology to act as an intermediary between various banks and other financial institutions. Its main aim is to provide additional features and infrastructure to support and empower local providers’ existing mobile banking software. 

Although Bakong is not quite a bank by definition, it is undeniably one of the most important fintech developments shaping the future of mobile banking in Cambodia. 

How Can Banks Adopt Digital Transformation?

Although some industry leaders are seen as role models in the field, we encourage clients to be different. Banks often come to us asking for help to be identical to industry giants like ABA — but this does not guarantee a direct path to success. Just because a particular model worked for one provider does not mean it will be equally effective for the rest. 

In general, digital transformation will not look like going directly to strategizing and building a digital product: it is a more elaborate process that requires adjustments to a few fundamental aspects.

Shifting to a digital mindset. 

Embracing a digital mindset is not only about developing new digital-first products and services. It often touches nearly all aspects of the business as an organization collectively shifts towards a focus on digital. 

In some cases, a firm’s brand and visual identity are incompatible with a new way of organizational thinking and broader digital transformation efforts. So, an effective means of driving a wider shift to digital thinking often entails redefining a firm's branding and positioning. 

Another effective means of shifting to a digital mindset is leveraging existing processes and products that are already digital. This is why providers like Wing and Pi Pay have seen so much success: many of their existing operations have always been digital, so it became more straightforward for such firms to capitalize on that and use it as a core aspect of their continued digital transformation efforts. 

Start and end with your customers. 

Related to embracing a digital mindset, financial firms that want to succeed in their digital transformation endeavors should not neglect the importance of adopting a customer-centric approach. 

This means always thinking about the user and their journey: What does it look like with existing products and services? How can it be made more efficient? How might users experience the digital product or platform offered by the provider? Questions like this may unlock important considerations and opportunities for organizations as they shift more toward digital product and service offerings.  

This lean feedback loop with customers should be embraced as an integral part of a firm’s digital product and service design lifecycle. Through this approach, key pain points and needs of customers can be clearly identified to enhance the purpose and value propositions of the product.

For example, customer feedback might reveal that users struggle to find the answers to their questions on the bank’s website, or that it’s not as secure to pay with a physical debit card. Opening these sorts of conversations with customer groups sheds light on what the organization’s focal points should be as they work toward digital transformation.

Unlocking innovation. 

In addition to the process-related aspects of digital transformation, it’s also essential that the underlying systems and infrastructures that enable new solutions to be created are robust, secure, and scalable long-term. 

To do this effectively, it’s important to identify gaps in the underlying IT infrastructure that may hinder a firm's ability to take advantage of the rapidly developing banking landscape in an agile way. In our experience, mapping out both the current infrastructure and long-term goals of our banking clients usually points to a move towards cloud-based solutions.

Platforms to handle processes like accounting and bookkeeping, or managing invoices, loans, payment schedules, and bank accounts, are just as important as the main “customer-facing” app. So creating inclusive software systems to digitize the finance and business practices for both organizations and individuals could significantly streamline their work. 

An example of this is in our work with one of the leading microfinance firms in Cambodia. Through rethinking their Loan Origination System (LOS), we simplified the day-to-day work of their agents and their users. The key distinction is that this sort of application is exclusively internal and only used by the bank’s employees to digitize and quicken complex workflows. 

Challenges. 

Despite the rapid adoption and pace of change within the Cambodian digital banking ecosystem, there are still a number of challenges that major financial institutions haven’t yet addressed, hindering access to the untapped potential for further growth within the sector.

Low financial and digital literacy in the country.

The numbers of elderly and low-income populations living in rural areas are still high, with Cambodia only reaching the status of a lower-middle-income country in 2015. 

The majority of people within these communities lack the knowledge, resources, and necessary financial and digital literacy skills to comfortably approach both traditional and digital banking. They may also not have the means to travel to more urban areas to access a physical bank branch. As a result, about 30% of Cambodians are still unbanked — primarily due to a lack of information and access to banking services.  

 An Amk MFI agent working with clients in a rural area. The development of microfinance in Cambodia has had positive effects on financial literacy and financial inclusion.​ (Source: Incofin)

However, there is increasing potential for both traditional and mobile banking services to become more reachable thanks to recent developments. As more firms begin prioritizing financial inclusion, their digital initiatives also aim to cater to a less privileged customer base. 

Cybersecurity threats.

Due to the sheer pace of change in the digital banking landscape over recent years, cybersecurity laws, regulations, and providers are often slower to adapt. This is true even in developed markets — although in developing and emerging markets, it is especially crucial not to neglect the importance of cybersecurity, as a significant percentage of individuals and local firms may not be familiar with cybersecurity threats and how to mitigate them. 

Compared to more developed countries, cybersecurity developments may still lag behind in Cambodia. So when it comes to adopting new technologies — especially high-risk systems dealing with money — any issues with safety, privacy, and security could easily shake public opinion and confidence in mobile banking providers. In the worst case, this could disrupt financial stability within the society as a whole (although unlikely).  

This highlights the importance of financial institutions prioritizing cybersecurity and maintaining the same high standards as security in traditional banking. Learning more about security in a digital ecosystem will help providers be better prepared to address potential threats.

Over-saturated landscape of providers.

While relatively young, the mobile banking landscape in Cambodia has become increasingly crowded. 

The dozens of financial providers in the country all offer similar products and features, which can be disorienting — particularly to a customer base that was previously unbanked. New users are likely to have limited knowledge of market developments and be unaware of which mobile banking app best suits their needs. 

Over 30 Cambodian private banks and microfinance institutions are collaborating with NBC to standardize all banking QR codes. (Source: Khmer Times)

There are some apparent preferences, and these are determined by who currently dominates the market (not to mention who does the most effective marketing). People might be unwilling to experiment: facing the unknown could threaten the financial security of an already risk-averse population. 

In short, it may be challenging for new players entering the field to stand out among others and offer truly meaningful services without intimidating potential customers. 

Final Thoughts. 

Cambodia is a country rich with opportunity, and the flourishing financial services industry is fundamental to how it will embrace these opportunities to enable future development.

Banks and other financial providers are recognizing the gaps in traditional banking service offerings and pushing to overcome them. With rapid advancements in technology and new players entering and competing in the market, mobile banking has stood out, revealing its high potential for success. 

Undoubtedly, the COVID-19 pandemic propelled greater urgency for banks to leverage technology and adapt quickly. Still, banks and other financial providers were already well on the way to adjusting their approach to serve an expanding customer base prior to that. As part of a national strategy to make banking more inclusive, financial institutions have prioritized accessibility and convenience — and mobile banking has excelled in these domains. 

Local industry leaders, such as Wing Bank, ABA, and Pi Pay, initiated the shift to these new (and now more familiar) banking practices. First, e-wallets introduced a simpler way of making transfers and online payments. Then, banks began creating their own mobile applications and integrating existing e-wallet and e-commerce systems. Now, mobile banking apps have become all-inclusive, efficient platforms that fulfill a variety of customer needs. From opening a bank account and requesting a card to making transactions between accounts or across different banks both locally and internationally, to features like requesting a loan or automating bill payments. 

It’s hardly surprising, then, that the mobile banking landscape in Cambodia has seen such swift growth. It has also meant that both new and existing firms are continuously looking to expand and improve their services. More often than not, this search leads to digital transformation. 

While we’ve touched upon a few broad-stroke ideas on how financial firms may approach digital transformation, at Mäd, we deeply understand that each organization has its own unique requirements and strategic objectives. To discover more about our approach, visit our Financial Institutions practice area to find out how we can help.

 

We are always happy to share our latest ideas and observations so you can get a better understanding of how you and your company can navigate the local business environment and find opportunities for collaboration. If you are interested in pursuing digital transformation for your business and would like to receive comprehensive insights and personalized advice, don’t hesitate to reach out to us at hi@mad.co.

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