Banking on Plastic

By Kyaw Hsu Mon 25 June 2015

Almost a decade after Myanmar’s 2003 banking crisis, the government introduced debit cards overseen by the Myanmar Payment Union (MPU) in 2012, the country’s sole domestic card-based payment system. Despite a still-weak local banking sector, debit cards are rapidly gaining in popularity, although technical errors and poor infrastructure continue to hamper users’ experiences. The Irrawaddy’s Kyaw Hsu Mon spoke with Ko Zaw Lin Htut, Chief Executive Officer of the MPU, on his vision for a “cashless society.”

When was Myanmar Payment Union (MPU) first formed and who led the process?

MPU was founded in 2011, at the start of the civilian government’s term. It was established under the Central Bank of Myanmar. There was a payment system development committee before the MPU was formed, so the government reorganized the committee and allowed us to form the payment union in 2011. The chairman was the Central Bank of Myanmar’s chair at that time. The member banks became the vice chairs and filled the other positions. In late-2011, member banks contributed 200 million kyat to start the process after setting up the union. There were [originally] 15 banks including three state-owned banks. In October 2012, we started operating the MPU debit cards and distributing them to users. At that time there were only four ATM machines, each from member banks, set up for card users around the country. In 2015, there are now 21 member banks and more than 1,300 ATM machines around the country are ready to use.

When can we expect credit cards to be launched in Myanmar?

Actually we had launched credit cards prior to the 2003 banking crisis, but it was stopped. A card-based system was re-introduced in Myanmar in 2012. We’re proposing to the Central Bank to allow credit cards on behalf of members’ banks here. We expect that the Central Bank will allow this very soon as they know we need a better financial system. That’s why we’re encouraging member banks to get ready to issue credit cards when the Central Bank gives the green light.

Which foreign financial groups are working with MPU today?

UnionPay International (UPI) [a subsidiary of China UnionPay] and Japan Credit Bureau (JCB) are both working with us. We launched their cards for use here in 2013. Now we’re working together to launch core brand cards like JCB-MPU and UPI-MPU soon. When we’re permitted by the Central Bank, the members’ banks will produce cards soon. MPU cards can also be used in foreign countries within our member banks’ network. So Myanmar card holders will not need to bring cash and, like other citizens, can use cards… They [UPI and JCB] have been working in the banking industry for a long time. We can study the latest technology and how to make the process run smoothly [by learning] from them.

What are MPU’s plans to upgrade the system? Some card users have recently complained that they can’t withdraw money from ATMs due to technical errors.

Some said their cards have been taken by the machines after they keyed in the wrong [pin] number three times when withdrawing money. This just means that we’re protecting the card holders. If the real owners are using their own cards, they can’t be entering the wrong [pin] number three times. It is international practice that if a pin code is [entered] wrong three times, the machine will take the card, believing it is fraud. That’s why we’re always warning users to set easy pin numbers that can’t be forgotten. Communications [infrastructure] was terrible in 2012 compared with today. Now the internet connection is getting better. But we can’t say it is one hundred percent OK. We know we faced difficulties when starting the cards, we know card holders are facing problems, anyway, we thank them and the media too. But to be successful in this process, MPU can’t do it alone; we will have to work together with the government, stakeholders and users.

What is your plan to protect users against fraud, including those who have their accounts accessed by third parties from ATMs?

This kind of fraud is happening everywhere, not only here. Card fraud happens all over the world, it can be counted in billions of dollars every single year. That’s why card companies use the latest technology to protect card holders from fraud. We’re also going down this path. Because we’re coming to this business late and learning lessons from other countries, we can be protected by the latest technology here.

How many MPU card users are there in the country?

About one million people are now using MPU cards in Myanmar. At the moment, we can only issue debit cards. If we could issue credit cards here also, we would expect an increase of three to five million users each year [to a total of] 30 million card users.

What do you think will be the impact when the Central Bank allows banks to issue credit cards, since most Myanmar people have not owned a credit card before?

The advantage of credit is that when you do not receive your salary and you need to buy something urgently, you can use your credit card. But if you can’t control your credit and use it excessively, it will create problems. We will have to find a balance. But it is the best way to transition to a cashless society in the future. I think the government is taking a long time before allowing credit cards because it is considering different views.

Are you facing any delays or difficulties in working with the Central Bank?

I agree some processes are being delayed by the Central Bank, though they are an independent body now. I think they are also facing a human resources problem too. If they can take quick action and processes, it will be better for the speedy development of the market in our society.

What is the latest on the MPU transforming into a public company?

Recently, we’re now working with our local consultant company to finish our own policy. We will apply for company registration with the government within two months. We will attempt to start working within one year. After forming the public company, we will look to stand as a commercial organization. So we will look to profit too. Our payment system will be upgraded for people to use, at lower prices. We will later expand in many areas.

This interview originally appeared in the June 2015 issue of The Irrawaddy magazine.