Cambodia Investment Review

Fintech-Powered Digital Banks Pave the Way for Financial Inclusion and Economic Growth in Cambodia

Fintech-Powered Digital Banks Pave the Way for Financial Inclusion and Economic Growth in Cambodia

Harrison White

As the fintech revolution continues to reshape Cambodia’s financial sector, the country is witnessing rapid digital transformation in its banking industry. The combination of a tech-savvy population, favorable economic conditions, and key industry players like Wing Bank is driving this change, leading to improved financial inclusion and accelerated economic growth.

The International Monetary Fund (IMF) defines fintech as the delivery of financial services through technology, encompassing mobile applications and electronic platforms. Bunthe Hor, Deputy Chief Executive Officer of Wing Bank, has observed that several significant factors have contributed to the widespread adoption of fintech in Cambodia’s banking sector, including a young, tech-savvy population eager to explore and utilize new technologies, and the country’s promising economic outlook.

“Embracing fintech and digitalization is essential to meet the demands of Cambodia’s rapidly changing economy and tech-savvy population. It is critical for the future growth of the banking industry,” says Bunthe Hor, who has a decade of experience in digital banking.

FinTech industry driving financial inclusion

In recent years, mobile wallet and payment providers have been at the forefront of Cambodia’s flourishing fintech industry. The National Bank of Cambodia (NBC) 2022 annual report revealed that the number of e-wallet accounts surged to 17.9 million in 2022, driven by concerns over Covid-19 and advancements in fintech. This growth in e-wallet usage contributed to a significant increase in e-payment volumes, reaching $272 billion in 2022, 34% higher than in 2021, and representing ten times Cambodia’s GDP.

Sok Voeun, Chairman of the Cambodian Microfinance Association, discussed the initiatives introduced by the industry, such as the Cambodia Shared Switch (CSS) and Real Time Fund Transfer (RFT), which have substantially expanded access to financial services in rural areas. These innovations connect citizens to a broader network of financial institutions and facilitate transactions across the country.

Read more: FinTech continues to develop as three million Wing Money users can now e-request their credit reports from CBC

“With the support of the National Bank of Cambodia, the financial sector has laid the groundwork for financial inclusion by implementing innovative solutions like KHQR and Bakong, enabling digital payments and secure, transparent transactions for all citizens, regardless of their location or the size of their business,” said Voeun.

Mr. Sok Voeun, CMA Chairman.

Digital payment systems played a crucial role during the pandemic, as they supported online businesses and facilitated fast and transparent fund transfers for workers, the poor, and other vulnerable citizens. The NBC actively promoted the efficiency and convenience of digital payments during this critical period, introducing several new payment systems, including the blockchain-based Bakong system in 2020.

The NBC’s 2022 annual report also highlights progress in banking digitalization, with 37 licensed institutions offering Internet banking and 33 providing mobile app services. This development is expected to grant greater access to formal financial services for the Cambodian population, as evidenced by the 14 million deposit accounts and 3.7 million credit accounts at local banks and microfinance institutions.

However, challenges related to internet access and digital literacy persist, particularly in rural regions. To tackle these issues, the NBC has initiated several programs aimed at enhancing financial education and public knowledge in remote areas of Cambodia.

Adopting fintech can stimulate the economy in various ways

Wing Bank, one of the major digital banking players in Cambodia, has been instrumental in promoting fintech innovation. In 2022, the bank launched a digital loan service called 2-1-0 Lending, meaning it takes 2 minutes to apply for a loan, 1 min to approve and 0 seconds to disburse. The digital loan service allows customers to apply for a loan up to $50,000, with interest rates as low as 1% per month and a loan term of up to three years. The service eliminates the need for customers to physically visit a bank branch, as they can apply for a loan via the Wing Bank app, with instant notification of their application status.

Wing Bank app users can apply for a loan without pledging collateral, and loan amounts range from as low as $20 to as high as $50,000, depending on the customer’s usage of Wing Bank services. The more customers use Wing Bank as their primary bank account for payments and transfers, the higher their probability of being eligible for a $50,000 digital loan.

Read more: Developing Cambodia’s digital economy and FinTech landscape

According to Bunthe Hor, adopting fintech can stimulate the economy in various ways. It enhances the efficiency of the entire financial system and improves financial inclusion by providing access to services for previously unbanked or underbanked individuals. This increased access can lead to greater economic activity through efficient savings and investments, improved access to credit for starting businesses, and reduced transaction costs.

Bunthe Hor, Deputy Chief Executive Officer of Wing Bank.

These benefits align with the core objectives of the National Financial Inclusion Strategy, which aims to increase access to quality formal financial services for 70% of adults by 2025, up from 59% in 2015. The strategy also seeks to improve household welfare and support economic growth.

Banks like Wing Bank are at the forefront of driving financial inclusion in Cambodia due to their extensive presence across the country. With over 11,000 Wing Cash Xpress agents, nearly 150,000 merchants, and partnerships with various industry players, Wing Bank boasts one of the largest digital banking ecosystems in the country.

Wing Bank’s goal is to offer a comprehensive range of banking services and digital payment solutions that can enable Cambodians to live a 100% digital life. The bank provides cash collection services for SMEs and corporates, business banking, payroll, digital lending services, and powers many e-commerce platforms through its Wingpay solutions. Wing Bank has extended its services to every district in Cambodia, working towards driving financial, gender, and digital inclusion in the kingdom and positioning itself as the Digital Bank of the Future for Cambodia’s youth.

Balancing rapid growth and regulatory compliance

Visa’s Consumer Payment Attitudes study published last year highlighted the rising adoption of mobile banking apps in Cambodia, with 60% of survey respondents considering them secure and 50% appreciating the benefits of reduced physical contact. The study found that increasing preference for mobile payment apps is due to their convenience and various payment features.

Industry experts predict the emergence of insurtech and regtech in the near future, with online banking or neobanks (online-only banks) also expected to become more popular and widely used. “Proactive anticipation of future trends and investment in those trends is essential for Cambodia to remain at the helm of the fintech market,” Bunthe Hor emphasizes.

Read more: CamTech Summit and Awards 2022 showcases the best and brightest in Cambodia’s FinTech community

The NBC also acknowledges that new fintech technologies bring risks such as cybercrime, necessitating the strengthening of information technology regulations and vigilance from all stakeholders. Collaborative efforts from all parties are now crucial for the continued evolution of Cambodia’s fintech industry, creating a safe and secure financial ecosystem that benefits everyone.

Tomas Pokorny, Board Director and Secretary General of the Cambodia Association of Finance & Technology (CAFT), spoke about the regulatory and compliance challenges of such a fast-growing industry: “The rapid pace of digitalization in Cambodia has led to significant regulatory and technological gaps in the market, creating both internal competition among organizations and confusion for consumers. As the fintech market matures, we expect to see consolidation and stabilization, allowing for more diverse and competitive growth in the future.”

Secretary General of CAFT Tomas Pokorny deliver the associations AGM.

CAFT is committed to fostering digital literacy and creating a supportive ecosystem for collaboration and innovation. Through events like the upcoming fintech conference in Rwanda, the organization aims to establish connections between regions and unlock new opportunities for growth and innovation within the fintech sector.

“Fintech is playing an essential role in advancing digital banking in Cambodia by making financial products more affordable, transparent, and accessible to consumers. As the market continues to evolve, we expect to see even greater advancements in these areas, contributing to a more inclusive and efficient financial landscape,” Pokorny added.

The ongoing adoption of fintech in Cambodia’s banking industry is poised to lead to increased financial inclusion and economic growth. If current positive trends persist, financial institutions, businesses, and consumers alike will benefit from the innovative landscape.

Cambodia has an impressive track record in fintech innovation, and as the industry continues to evolve, collaborative initiatives and proactive investments are necessary to maintain the kingdom’s leading position in the fintech market. This progress will create further opportunities for businesses, investors, and the Cambodian population as a whole.

In conclusion, the rapid growth and adoption of fintech in Cambodia, driven by industry players like Wing Bank, has revolutionized the banking sector and increased financial inclusion. The development of mobile wallet and payment providers, digital lending services, and various digital payment solutions has allowed millions of Cambodians to access formal financial services, boosting economic growth and improving the overall financial landscape.

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