Cambodian Banking Systems Continue Digitalisation and Push For Innovation

Hardly a week passes without one of the many many Cambodian banks announcing it's navigating the digital landscape, it's a key area every bank needs to be investing in to stay relevant as the local (and international) customer market is urging for easier and innovative apps and payment systems. Importantly, the Cambodian government and the NBC are key drivers of this change too, we look at some of the latest development in the local banking system. The National Bank Cambodia (NBC) recently said that as many as 70 financial institutions provide mobile payment services in the Kingdom.

Cambodia & Vietnam Payment Systems MoU

The Cambodia and Vietnam central banks have signed a memorandum of understanding (MoU) to cooperate on financial innovation and payment systems. the main purpose is to boost cross-border payments between the two neighbouring ASEAN nations who see a large number of their respective populations work in each other's territories. NBC governor Chea Chanto and his State Bank of Vietnam governor Nguyen Thi Hong signed the MoU with the NBC adding "The MoU aimed to enhance the cooperation framework for the development of the fintech and payment system between two countries." It is hoped this would also lead to:

• Promote the adoption of the KHQR standard for banking quick response (QR) codes in Vietnam.
• Allow for a more convenient payment system to facilitate cross-border trade.

NBC has entered into a similar agreement with the Bank of Thailand, while the Bakong system is also being used for cross-border transactions through Maybank and can be availed in Malaysia. Photo Credit: SPM

Cambodia & Laos Payment Systems MoU

The National Bank of Cambodia (NBC) and the Bank of the Laos P.D.R signed a similar sounding Memorandum of Understanding in late November 2022 "to develop bilateral financial innovation and payment systems in banking integration between the two countries" Again the main motivation is the increase in cross-border payments and transfers between the two SEA nations. The Governor of NBC and the Governor of the Bank of the Laos P.D.R Bounleua Sinaxayvoravong signed the MoU, with the NBC releasing a statement “This connectivity is essential for especially businesspeople, investors, tourists and workers to be provided with formal financial services that are easy, quick, low-cost and safe to facilitate and boost the economic, tourism and trade activities between the two nations." Initially, Acleda Bank Plc has been selected by the two as the settlement bank as Acleda has already developed a similar system for the cross-payment between Cambodia and Thailand. The system connects the NBC Bakong to PromptPay in the case of Thailand, but for Laos - the bilateral systems will connect Bakong (currently partnered with 40 banking and financial institutions) to Laos’s Lap Net (a network of 30 banks and financial institutions). The Phnom Penh Post reported that the timeline for implementing the Vietnam and Laos launch of the KHQR universal quick response (QR) code system will be before the end of 2022 and the first quarter of 2023, respectively.

• KHQR - intended to standardise banking QR codes was rolled out in mid-2022 to all financial institutions that are members of the Bakong system.

Bakong Payment System - Cambodia

NBC has claimed that the banking infrastructure offered by its Bakong payment system has "contributed to the use of financial technology and innovations". By the numbers, in 2022:

• Transactions have increased year on year by 3.6 times to 10.24 million transactions
• The total value amount of the transaction in 2022 was 4.34 trillion Riel and $4.76 billion- this is an increase of 5.7 times and 6.3 times compared to 2021.

Since launching in October 2022 and connecting dozens of local banking and financial institutions, NBC has been making a drive to integrate the system to allow for increased cross-border regional money transfers. With the SEA Games taking place in 2023 - this would be an obvious target date to have more integrations and a cross-border KHQR universal quick response (QR) code system for international visitors.

World Bank - GovTech Maturity Index (GTMI) 2022

Although not purely fintech-based, the World Bank GTMI recently was published and Cambodia has been upgraded from a C to a B Grade. The latest report suggests "154 out of 198 economies (78%) have launched digital government or GovTech initiatives and 147 economies (74%) have relevant strategies to address country-specific digital transformation challenges." The Cambodian government is prioritising its digitalisation efforts but there remain areas for improvement, the Khmer Times article suggests these are: online customs clearance, restructuring company management and construction permits. Globally, the 198 graded countries fall into the following grades with some regional examples:

• A (35%) - Singapore, Thailand, Malaysia and Indonesia
• B (23%) - Cambodia, Vietnam, Brunei and the Philippines
• C (27%) - Laos
• D (15%) - Myanmar