Mobile Payments and Financial Inclusion in Myanmar

Welcome to Pacific Exchanges, a podcast from the Federal Reserve Bank in San Francisco. I’m Nick Borst.

And I’m Sean Creehan. We’re analysts in the Country Analysis Unit, and our job is to monitor financial and economic developments in Asia.

Today’s episode is part of our continuing series on financial technology in Asia. We sat down with Jason Loughnane, a microfinance specialist with Accion International, where he’s working to develop mobile money in Myanmar.

Jason is an expert on the use of mobile phone technology to deliver financial services to remote, unbanked populations. Before his current assignment in Myanmar, he worked for the Grameen Foundation in Sub-Saharan Africa, and got his start at Goldman Sachs in New York.

In our chat, he focuses on the ways that mobile phones can help transform the lives of poor people who might otherwise be several hours away from any formal financial institution.

So, I think listeners will appreciate this conversation, particularly as we’re focusing on a frontier market, a place where only a few years ago nobody had a mobile phone. Jason talks about his own misconceptions about the best uses of microfinance before he got to the field, and he also addresses an important tension in encouraging innovation that we’ve covered on previous episode. How do you help competing technologies work together to maximize their network effect, while at the same time, ensuring that the best solutions are economically viable so these startups stick around?

Okay. Let’s hear from Jason.

Thanks for joining us, Jason.

Thanks for having me.

So, why is financial technology important to a frontier market like Myanmar?

So, financial technologies are important in a frontier market like Myanmar because the physical infrastructure that exists is severely limited. As a microfinance institution, we have branches that are in far-flung areas of the country that often get flooded during the monsoon season which runs for five to six months of the year, and it makes it very difficult to operate a physical network of branches with the traditional model where loan officers take a bus, or walk, or ride a bike to visit the clients when the clients may be so distant and remote.

For certain microfinance institutions that have a very heavily rural focus, they feel it even more acutely. Where their farmers may be miles and miles apart from one another, it makes it very, very difficult to operate the traditional analog model of group-guaranteed microfinance, where everyone meets in the same place, the borrowers get very resentful about having to take so much time out of their day to go to a meeting point, so I see mobile money, especially in financial technology in general, as really advancing financial inclusion in Myanmar due to the relatively sparsely populated areas that most of the country occupy. Seventy percent of the [people in the] country are still, basically, rice paddy farmers, and they’re in desperate need of credit.

There’s an enormous demand, and there’s not the physical infrastructure in place to meet it. So, I see fintech as, really, the best solution we have to address the needs of those borrowers, or those potential borrowers.

So, do you see Myanmar essentially leapfrogging an older model like a bank branch, and kind of jumping to this more mobile-based technology?

Absolutely. Myanmar has certainly leapfrogged the landline. You now have mobile penetration over 80%, approaching 90%, in the country. A similar thing is likely to happen with mobile finance. You’re going to go to a cash-based economy, and you’re going to leapfrog right over credit cards and debit cards and traditional relationships between clients of banks and bank branches, directly to a situation where most people are connected to the financial grid via their cell phone.

I definitely see that happening. I think we’re starting to see the first signs of it with a company called Wave Money in Myanmar, which just got their license to provide mobile financial services about a year ago, and they’ve seen a lot of uptake where people are sending money between urban and rural areas. You see people who are working in urban areas sending money home to their families in rural areas. You see families from rural areas sending money to their children who are students in universities in urban areas, and you also see traders sending large volumes of money between urban areas over the mobile platform because the alternative is cash. Nobody writes checks. Nobody does bank transfers. So, the alternative is literally filling up a truck full of cash and driving it a couple hundred miles to complete a transaction, which is how things generally work in Myanmar.

So, yeah, I think mobile money will work very well in the country because the infrastructure demands it.

So, Jason, can you tell us about some of the specific challenges in building a national digital payment system? You mentioned smartphone availability. How widespread is that in Myanmar, how quickly is it growing? Then, what networks are being used, actually, to build it out? Is it private companies? You mentioned Wave Money, or is it also being done in conjunction with the government?

So, there are three mobile network operators in Myanmar. There is one that was a government-provided telco called Myanmar Post and Telecommunications, or MPT, and in 2013, the government licensed two foreign firms to begin providing tower service and mobile telecom services, and that was Qatar-based Ooredo and Norway-based Telenor.

So, you’ve got these three companies, now, Telenor, Ooredo, and MPT that make up the whole market. With the advent of Telenor and Ooredo entering the market in 2013, the price of a SIM card dropped precipitously. Before, when it was only MPT providing the service, it was around $1500 for a SIM card, and obviously only rich people had them, only rich people used cell phones. Then, once Ooredo and Telenor were able to come in, globally, the availability of SIM cards had become very easy and they simply brought SIM cards in and flooded the market with them. They made it effectively free to join their network. It cost around 1500 kyat, which at the time was $1.50, to buy a SIM card, and mobile phones were available for $20 to $30 for a second-hand, cheap, Chinese-made phone, and so you had virtually no barriers to entry for people to suddenly jump into a mobile network.

Now, where does that leave us in terms of digital payments? Most people still have feature phones. You see a lot of smart phones in the cities, but when you step outside of the cities to the more rural areas, or even peri-urban areas outside of the main city centers, most people are still on feature phones. So, the USSD (Unstructured Supplementary Service Data) network is still important. Data is expensive relative to the income of most people who are in far-flung areas, so it’s important that digital finance operators make a USSD offering available if they want to reach the base of the pyramid.

So, there are quite a few digital payment providers that are linked to banks in Myanmar, currently, that work through an app, that allows people who have a bank account to access their bank account using their cell phone, much like you or I would use an app on our phone to access our Citi Bank or Bank of America account. It’s simply using a third party to access your existing bank account, but it’s still called mobile banking.

The new players in the market are under what’s called a mobile financial services license, and the mobile financial services license is radically different in so far as you don’t need an underlying bank account to open an MFS license. So, this is similar to what you see with M-Pesa and Kenya where a customer simply needs to use their SIM card and their mobile number to open an account. They may have to provide some sort of additional KYC, like their name of their date of birth or their national registration card number, but those KYC features are typically registered when the SIM card is purchased, so there’s no additional KYC needed to open up an MFS account using your phone.

Once you have that MFS account, it’s very easy to put cash in. It’s free to put cash into the system. It’s free to send money within the network. You do pay a fee to take cash out of the network. So, there’s an incentive on the part of the network provider for customers to use the liquidity that’s already in the system and to make payments.

So, now, you have a lot of people who have the right provider. They have a Telenor SIM card or an MPT SIM card, and those services are now trying to onboard them to the mobile wallet, and then the next step is to get people to actually start trusting the mobile wallet to hold their money and to show them they can put cash in and take cash out and it’s not going to disappear. Then, you’re going to see person-to-person transfers. You’re going to see airtime top up. Those are the first two products that are always introduced as the kind of simplest use cases for mobile money. Where I think the real value will come in is when you start having bill payments, when you start having person-to-business merchant transactions and business-to-business, so paying suppliers, paying for inventory, that’s really where you start to see mobile money start to reduce the frictions in the economy that cash creates.

Jason, you mentioned that in terms of the know your customer requirements, the initial hurdle is sort of getting a SIM card and then after that you can start using mobile payments. What are the protections once you have money in the system to prevent people from being taken advantage of, or in terms of fraud, and how will that help build trust in mobile payment systems going forward?

Anybody who wants to move money within the system has to enter their four-digit PIN number. That’s the first layer of protection. I think the second layer of protection is that the amount of funds that we’re dealing with are capped by the central bank at…I think the max transfer is about $1000 per day into a personal account, and if you want to move…I’m sorry, it’s much less than that. It’s 200,000 kyat per day, which is around $150 per day that you can withdraw from the system. With the level of KYC required simply by activating your SIM card into a mobile wallet. If you want to open a business account, you can get up to 30 million kyat per day, which is around $25,000, but that requires providing formal business registration and I think you have to have an associated bank account with that as well, so then you get into the bank-level KYC.

So, I think the small transaction size, capped by the central bank, for personal accounts limit the potential for mobile money accounts to be used for AML, CFT kind of transactions.

So, Jason, you were talking a little bit earlier about the potential for uptake of this sort of technology by merchants to see more B2B transactions using mobile money, so not just consumer transactions, and that could really create some sort of positive network effects. In earlier conversations we’ve had on the podcast with people that are doing work in, say, China and India, one of the issues you sometimes see is the lack of, I guess what we call intermodality, or just kind of connectivity between different mobile wallets, or say a mobile financial provider has an ecosystem, a payments ecosystem, but maybe it doesn’t connect to the banking system quite as easily.

So, I’m wondering, is that a challenge that you’re seeing? Is that not an issue given the regulatory structure? You know, you mentioned two different mobile wallet providers. Are they connecting to each other or not? Could you talk a little bit about that challenge?

Yeah, it is an issue. It’s a huge issue, and we’re still early enough in the development of the ecosystem that each of the three providers promises that interoperability is important to them, but at this point, each of the three providers is only making their mobile wallet available to their own subscribers. So, if you use Telenor, your associated mobile money company is Wave. If you use MPT, it’s MPT Mobile Money. If you use Ooredo, it’s Ooredo Mobile Money. So, they each want to build up their own infrastructure first, and make sure that their kinks are worked out and the bugs are smoothed over before they introduce interoperability.

We were at a conference back in February, and each of the three big mobile network operators had a representative saying, “Yes, we understand that interoperability is paramount. That’s the key to development of the ecosystem, so they’re talking about it. There hasn’t been action yet, but I would not say that it’s maliciously withheld. I’d say it’s more that only one of the three operators has their MFS offering up and running, and that’s Telenor. The other two expect to have their offering going by July/August of this year. Then, once they feel comfortable that their system is robust, then I think they’ll work in earnest to make it interoperable with the other mobile network providers because they each understand that you can’t just close the garden and hope that your borrowers or your subscribers will provide you with enough transaction flow to make the system worthwhile. There has to be some sort of a revenue share if you’re moving money between providers.

And yeah, there can be some preferential pricing. I know, for example, that Telenor’s platform has a zero-rated data usage, so anyone who wants to jump on the app and move money around, they do it over the 3G network provided by Telenor but it doesn’t cost them any money against their data plan. So, that’s one small advantage that Telenor provides to its customers, and I think the other mobile network operators will make that same benefit available to people using their platform. So, to that question, the pricing arrangements between MNOs, between the platforms offered by MNOs have and to been discussed, because we’re still too early in the ecosystem development.

To your other point, moving money between the mobile network and banks, you’re absolutely right. That plumbing hasn’t been installed yet. The Telenor offering, Wave Money, has an arrangement with a large commercial bank called Yoma Bank. It’s one of their principal shareholders, and they’ve made it very easy to move money in between your Wave account and your Yoma Bank account, but if you have a bank with another institution, it’s time-consuming and it costs you a fee to do so. So, it’s something that yes, absolutely needs to be worked out, but the same could be said about moving money between bank accounts in the U.S., frankly.

So, Jason, you’re currently working with DAWN Microfinance. Can you tell us a little bit about your work, and specifically, what’s the link between mobile payments and microfinance?

Sure. So, DAWN Microfinance is formerly a project of Save the Children in Myanmar. Before 2011, only NGOs were allowed to offer microfinance in Myanmar, and then the industry has gradually evolved since then. In 2014, the parent company that I also work for, Accion International, along with two other shareholders, acquired the DAWN Microfinance Program from Save the Children, and Accion installed myself and the CEO to help manage the institution. Accion also provides technical assistance through its credit-risk department, its analytics departments, and its new product methodology departments to DAWN, so we have technical assistance providers coming in and out every month to provide consulting services to us. So, it’s an extensive arrangement between Accion and DAWN, and one of the biggest relationships that we have within DAWN is within Accion’s Digital Solutions Group.

So, they are constantly helping us determine whether it’s a good idea for us to get into an Asian network, or they’re helping us design a mobile money pilot. Currently, we’re still a cash-based institution, which means we disburse in cash to the clients when they come to the branch, and then we collect the loan installments from them in cash at the group meetings, which are usually held at the home of the group leader. So, it’s a very traditional, Grameen Bank, Muhammad Yunus model where it’s all women, all group-guaranteed, and we collect in cash, we disburse in cash.

What we’re hoping to do in the near-future is start collecting repayments using a mobile connection service provider. So, we would be set up as a bill payment provider, and the customers would simply use the app on their phone. They’d have to put the cash in at a merchant, and then they would use the app on their phone and do a bill payment to DAWN Microfinance, and then we pay a small fee to the payment provider, but it would replace the process of our loan officers needing to physically go around to the borrowers’ homes and collect cash in person.

So, this is groundbreaking for us if we can get to that point, but that’s probably six months to a year away, optimistically.

So, it sounds like it could not only save you some in terms of expenses, but also make tracking the progress of loans easier as well?

Yeah, I think it provides three major benefits to us. First and most immediate is increasing loan officer productivity. You know, a really good, mature loan officer can manage about 500 group clients right now, which is fine. That’s a loan officer that’s making money to cover his own expenses and also to make a profit for the institution, but if we can increase that to 700-or-800, then we’d really be looking at a breakthrough in the scalability and efficiency of our organization. How we would do that is a loan officer wouldn’t have to go to the field. Currently, they collect from clients twice a month. If we were able to say to the clients, “Okay, you have to make your installment payments over mobile money, but we’re still going to hold group meetings once a month,” not only would the loan officer be able to handle many more clients, but we could actually use those group meetings productively and in interesting ways, either through the provision of financial education, or financial literacy…Perhaps we’d do a partnership with an NGO to provide health-training services. So, there are a lot of potential partnerships we’ve been talking about to make the group meeting a more productive and useful time for both the borrowers and potentially for our staff, as well, because right now, the group meetings are mainly about collecting and counting money and taking attendance.

So, that’s the first benefit is that our loan officers become more efficient. Our group meetings will become more interesting. Beyond that, we could expand the radius that an individual branch is able to reach. Right now, we tell our loan officers not to go more than an hour away by bus from the branch. So, you have a lot of far-flung clients, and this is where you really get into the challenge of serving rural clients, but you have a lot of clients that live more than an hour from the nearest branch that we simply cannot operationally service because of the need to visit them twice a month, and because for them to come and collect the loan in the first place, it’s a long way to travel for the branch. So, if we can reduce the frequency of visits to those clients by virtue of them making their repayments over mobile money, then it makes it a lot more economical for us to serve the clients who may be three, you know, two to three hours away from the branch. That’s the second reason.

Third reason is that, if the clients have access to a mobile wallet, then we hope that they’d me much more likely to use it for savings services. We may be able to start doing emergency loans or help loans that would be disbursed into their mobile wallet. Currently, all of our disbursements are done in cash at the branch, so it makes it so it’s a challenge. You have to plan the logistics of that. The whole group has to be there at the same time. They have to sign a piece of paper saying they got their loan.

If we could start depending on the mobile wallet to reliably accept a transfer, then we could do disbursements and collections over mobile money, which would increase the possibility of us offering new and interesting loan products. Like I said, same-day loan disbursements for emergency lending, or education loans that are timed to coincide with when school fees are due, things like that that could be really exciting for financial inclusion in the country.

Yeah, I would imagine that that broader offering would help kind of keep people involved, give them new access and maybe they see that greater potential for financial services, not just this one product that they’ve encountered, but seeing the broader potential.

Exactly. Our current product is, you know, it’s a business loan. It’s a declining balance, amortizing loan, much like a mortgage, and we disburse once, maybe twice a year to a client. That’s a good product. We’ve had a lot of success with it, but the cash flows of our borrowers sometimes don’t match the disbursement pattern that we’re able to provide to them, and I think that’s a limitation of the cash-based economy and a limitation of the microfinance model that we have in place. I think mobile financial services would really make it more interesting for us to start tailoring the…You know, we could do things like lines of credit. We could do things like multiple disbursements in a year for borrowers that need smaller infusions of cash instead of one large infusion of cash up front.

So, there’s a lot of different things we can do with the possibility of less operational expense at the disbursement point and also at the collection point to make the product offering more interesting for a lot of our clients.

So, you’ve had an interesting journey to get to Myanmar. I know you started off in your career working in New York in banking, and then spent a lot of time in Sub-Saharan Africa. I’m wondering if you could talk a little bit about some of the common challenges you’ve seen working in various developing countries, and then maybe any differences between the challenges in Asia versus Africa, or Myanmar specifically?

Yeah, sure. So, I worked in New York for Goldman Sachs for four years, and then I went to grad school and studied international development, and then that took me to Kenya with the Grameen Foundation where I worked in Nairobi, and I worked with two financial institutions there, and then I was in Uganda for about three months, and then to Myanmar where I’ve been for about 2.5 years.

So, a handful of countries, and I’ve also visited MFIs (micro finance institutions) in Latin America and other parts of East Africa, and in India. The common challenges I see are unreliable cash flows. I’d say the unreliable cash flows for low-income borrowers is the number one issue that we help to address. Typically, the family knows that money will come in, on average, $2 to $3 to $5 a day, but they don’t know exactly when it will come in and they don’t know if they’re going to have work that day or work that month, and so you see this need for income smoothing, this need for financial access that will help them have a predictable amount of cash available at the end of each day, and that’s really where microfinance can play a big role.

The second thing we see is that, the vision of microfinance that I had before getting to the field was that the use-proceeds of this was going to be for some sort of an important income-generating fixed asset. You know, something like a refrigerator to keep the drinks cold so that they could sell at higher prices because they’re selling cold soda instead of warm soda, or they could put their tomatoes and bananas in their fridge at the end of the day so they wouldn’t spoil overnight.

You do see that. You do see productive fixed-assets being purchased, but not nearly as much as you see the use of proceeds being for bulk purchases of inventory. So, really, for large-scale inventory finance, which is an interesting use of proceeds because it kind of tells you a lot about the way these borrowers are living. They tend to live far from the market. They have a small amount of additional cash at the end of each day. Typically, they go do the wholesale market every single day, very early in the morning, and they buy what they’re going to sell that day.

That costs them a lot of time, they pay a higher price because they’re buying smaller quantities, and what our microfinance loans allow them to do is go to the market instead of five times a week, twice a week, or even once a week, or even, for longer-lasting products like rice or dried beans, once a month to buy a large bag, to buy a 90 kg bag of rice instead of a 2 kg bag of rice.

And that really changes their lifestyle, when you do an inventory finance. It’s something that they’re able to buy in bulk, they’re able to pay a lower price, and they don’t have to travel so many times a week. They can spend more time with their families. They can spend less time on the bus. Less time on transportation expenses, les money on transportation expense, rather. So, I’d say that’s been the biggest insight for me, in terms of the use of proceeds, that simply having enough working capital to make the business run smoother is a really good use of proceeds.

I kind of thought it was a waste at first. I thought, if you’re not spending a microfinance loan on something that will really improve the cash flow and the income of your business in a meaningful way, then maybe you’re wasting the money, but I don’t think that anymore. Now, I see the use of proceeds as something that the borrower tends to know what their needs are. They tend to know where there’s an opportunity. And, frankly, the borrowers, they know that they’re paying interest on these loans. They know that they shouldn’t take a loan unless they know that they can repay it, so there’s a lot of intelligence there that we don’t dictate to them what the use of proceeds should be.

If, to them, it’s more important to use the funds to pay for school fees and then whatever’s left over will go into their business, frankly, that’s a fine use of proceeds. That’s not what we advise. We advise the money to go directly to their business, but as long as the borrowers repay…There are certain restrictions on the use of proceeds that we advise. They can’t do illegal activities, we don’t want them on-lending it to other people at a higher interest rate, but other than that, they tend to know what they’re doing with their money.

So, Jason, obviously the challenges can be very different between emerging markets and developed markets, but there’s also a big issue with access to finance here in the U.S. Do you see any developments in these emerging markets that might have relevance for the U.S.?

I think what the challenges in the U.S. are really about providing financial access to thin-file customers, which is very similar to what we deal with in the developing world. Really, that’s the essence of microfinance, and then doing so in a responsible manner.

I personally feel like, in the U.S., it’s more of a regulatory challenge. So, you know, we support access to finance for immigrant communities, for low-income communities in the United States that are unbanked in the United States, as well. I personally am not as involved in that side of the business, so I can’t really speak to the details of it, but it is something that we take very seriously in that we apply the learnings from international environments that are actually quite salient here in the U.S. with customers that have little to no credit, but have a good idea. Maybe they have a community network that can support them.

I like the idea that more and more companies in the U.S. are doing sort of a “have your friend guarantee your loan” kind of model, where it’s like, if you provide the name of three of your Facebook friends, the lender will reach out to them and you feel some sort of a compulsion to repay your loan because you’ve provided the name of your friend and your friends will find out if you don’t repay the loan.

You know, that’s straight from microfinance. That’s the idea that Professor Yunus had back in the day. So, I see the distinction between U.S. access to finance and global access to finance, I see the walls kind of coming down, and a lot of that is, how do we provide appropriate financial services to no-file or thin-file customers. The challenges are very similar in developing countries and in the U.S.

So, you’ve kind of already touched on this a bit, but kind of more broadly speaking, what do you see is the role of regulation in promoting fintech solutions to financial inclusion challenges? I guess, specifically, now, what you’re doing in Myanmar, but you know, more broadly, in the developing countries you’ve been working in?

Well, I think with fintech as with any utility, you want the appropriate amount of antitrust and anti-monopoly rules, but you also need some sort of a barrier to entry to encourage there to be a network effect for the best provider to make it worth their time to build the infrastructure out. So, I think regulation needs to address that and to intentionally limit the number of providers such that it’s financially sustainable for them to continue investing in their network, but at the same time prevent it from being one parent company that’s controlling everything.

Interestingly, in Kenya, you know, M-Pesa was the only game in town, and I was working with a microfinance company that had a really hard time. They only did mobile disbursements and mobile collections. They’re called Musoni and they’re operating in Nairobi. One of the issues that they had with reaching the very, very poorest customers was that the minimum loan size that they had had weekly repayments that were…I forget what the exact amount was, but let’s say it was $2 a week. Well, the minimum transaction size for an M-Pesa loan was about $0.35. So, if you’re only collecting $2 a week and the minimum transaction size is $0.35, that’s going to eat into a lot of either what the borrower has to repay if you put the fee on the borrower, or what the lender is going to earn if you’re going to take $0.35 out of $2 a week.

While I was in Kenya, Air Tel opened up a mobile money offering and overnight the minimum transaction fee dropped to $0.10, just like that. Because M-Pesa suddenly had a single competitor in the market, they were able to cut the minimum fee by two-thirds, which enabled our microfinance partner to start lending to poorer customers. So, it was really highly beneficial to us.

That’s a perfect example where our microfinance partner was saying to us, “Why don’t you put more pressure on Safari Com and on M-Pesa to lower their fees? You guys have a good reputation in the industry.”

And we said, “Look, there’s nothing we can do. They’re a huge company, they control the pricing of the whole industry and this is the price they’ve set. We’re not a big enough player to influence it.” But, once a bigger competitor came in, you saw the pricing come down. So, I think it’s important to have a few strong mobile offerings in a country. Not too many, and certainly not one.

So, Jason, looking forward, what is the potential in Myanmar? How far can we go in terms of financial inclusion, adoption of mobile payments, does Myanmar have the potential to look like Kenya, in terms of these items in a couple years? Or are the challenges much more severe?

I’ve actually heard a talk that said that the demographics of Myanmar are very similar to Tanzania, and let me just get into that in a little bit of detail. The urban/rural split is approximately the same between Myanmar and Tanzania. The population is within a few million of each other, they each have about 50 million people. The amount of mobile penetration is similar. The number of mobile network providers is similar. Myanmar has three, Tanzania had three or four. There’s competition between commercial banks for customers and there’s differentiation between the mobile banking offerings being provided by banks and those being provided by mobile network operators. The bank ones, you need to have an associated bank account, but the NMO ones you don’t.

So, in both of those veins, the two countries are very, very similar to one another, and what it took in Tanzania was about five years from when the first mobile network that wasn’t linked to a bank account was launched to where they have what they would consider wide-spread access and adoption of mobile financial services. So, it’s going to take about the same time in Myanmar, is what everyone’s expecting. First you’re going to have to have acceptance of the offering. You’re going to have to have people literally downloading the app or opening up the USSD application, you know, entering the short code and starting to say, “Okay, what is this?”

Then, telling their friends about it and then sending money to their friends and family, and putting money into their account, and taking it out, and putting it back in, and taking it out just to make sure that it’s there. I remember hearing a story when I worked in Tanzania that customers were depleting their accounts because it cost them one shilling to check their balance, and they would just keep checking it and keep checking it, so it’s important to have a free way of checking your balance because customers like to check their balance. They don’t trust that the money is really there. They’re used to a cash economy. So, you tell them, “This is the money in your account,” but they want to see it. They want to know. They want to get the receipt. So, you have to make that free.

But, it takes time. It takes time first to get the customers onto the network. It takes time to get them comfortable sending money to their friends and family, and then from there you have to get merchant acceptance, so they have to start keeping money in the ecosystem. You can’t just have them put money in, send it to a family member, and then have the family member take it out. That’s not going to provide enough transaction volume for the mobile network operator, or the mobile money provider, to see enough benefit to become profitable.

It’s very, very difficult. A cliché is, “It’s hard to make money in mobile money,” and that’s because you need the customers to keep the money in the ecosystem and for it to keep sloshing around to earn the transaction fees to cover the upfront investment and the advertising necessary to ensure wide enough adoption to make the system sustainable.

So, I think there’s a huge amount of potential. There are a lot of people in Myanmar with mobile phones. It’s an entirely cash-based economy, and there are three strong providers that have a very, very good…Between the three, it’s like 40%, 30%, and 20% coverage of the subscribers, so you’ve got enough people within each network that they feel like it’s worth it, to invest in a mobile network for digital finance. The question is, can we get the full ecosystem to develop? Can you get business-to-business?

Maybe USAID starts doing disbursements. One thing I heard about is that World Food Program is starting to do disbursements over mobile money to areas of Northern Myanmar that are very remote where it’s harder to get debit cards or cash out into the field. So, things like that, when you start injecting liquidity into the system through government-to-person payments or business-to-person payments. Maybe you create a partnership where salaries get paid out over mobile money.

But just to kind of have a nudge for people to start feeling more comfortable with the idea that money is an idea that exists not only in cash, but also in their phone, and keeping it in their phone and using their phones to pay for things and to take payments. All that, that whole process, is probably going to take four to five years, and we’re just in year one, so it’s an exciting time to be there.

Thanks a lot for joining us, and telling us about all your experiences. It’s really interesting stuff.

It was my pleasure, guys. Thanks for having me.

Thank you so much.

We hope you enjoyed today’s conversation with Jason. For more episodes like this, you can find us on iTunes, Google Play, and Stitcher. For even more content, look up our Pacific Exchange Blog, available at frbsf.org. Thanks for joining us.