With some 90% of the population living in rural areas, card penetration in Cambodia is low. However, the establishment of the Credit Bureau of Cambodia has begun a regulatory dialogue that, if continued, could bolster consumer confidence and encourage the deeper penetration of payment infrastructure
Cambodia is a cash-based society. This is a result of low banking penetration, a lack of consumer knowledge of other payment instruments, and limited payment infrastructure.
The government and banks are focusing on providing financial access to the country’s unbanked population, expanding banking infrastructure, and introducing agent-based banking.
Payment cards are gradually becoming more accepted, and between 2017 and 2021 are anticipated to register a CAGR of 12.52% in terms of transaction value.
Use of cards is mostly limited to cash withdrawals at ATMs, with little use recorded at merchant outlets – card transactions at POS terminals accounted for only 4% of the total card transactions in 2016.
A major challenge to the growth of card-based payments in Cambodia is the practice of merchants charging additional fees. International scheme providers and commercial banks are working to remove surcharging by educating customers and merchants about the benefits of card-based payments.
Cambodia is a highly dollarised economy. Most payment instruments are paid in two currencies: US dollars and Cambodian riel. Over 70% of card transactions are carried out in US dollars, with POS payments only available in this currency.
Low banking penetration
Debit card penetration stood at 10.1 per 100 individuals in 2016, which is lower than in peers such as China (369.8), Malaysia (140.7), Thailand (116.5), Vietnam (114.4), India (60.7), the Philippines (49), Indonesia (48.2) and Pakistan (15.7).
Low banking penetration and limited consumer awareness of the benefits of cards remain primary reasons for low debit card uptake among the public.
As the majority of the population resides in rural areas, exposure to electronic payments is relatively low.
To this end, banks and the government are undertaking various measures to bring more people into the formal banking system.
Local operator Wing is focusing on providing access to financial services to rural and remote locations; the bank has expanded its presence in 25 provinces and serves consumers through a network of 5,000 branches. Wing also offers agent-based banking services, with its three million customers carrying out around 60 million transactions annually through agents.
To increase access to infrastructure, Acleda Bank increased its ATM network from 219 machines in 2014 to 280 in 2015, and the number of POS terminals from 2,116 to 2,595 over the same period.
These initiatives provided a much-needed boost to the government’s financial inclusion programme, and resulted in the banked population rising from 10% in 2012 to 33% in 2016.
Scope for growth for credit cards market
With the majority of the population belonging to the lower middle class, and with 90% residing in rural areas, exposure to credit cards is very low.
Banks are therefore focusing more on corporate, upper-middle-class, high-income customers, and travellers.
An absence of bankruptcy laws has also hindered credit card adoption, as supplying credit cards to consumers without any legal assurance of receiving repayments is risky for issuers.
Despite being small in size, the credit card market has registered significant growth in terms of both the number of cards in circulation and the transaction value.
The Credit Bureau of Cambodia (CBC) was established in 2011 to help develop the country’s credit cards market. The CBC is a private company, regulated and licensed by the NBC, and is responsible for the administration of credit information.
The CBC has provided the market with a framework and some regulatory structure, which has built confidence in issuers and customers. Since the CBC’s establishment, the credit cards market has registered an average annual growth rate of 17.3% in terms of transaction value.
Banks offering own m-payment services
All major banks in Cambodia are now developing their own mobile wallets (m-wallets), in an aim to offer convenient banking services to customers.
Maybank launched its MayBank Mobile app in May 2016, allowing customers to conduct transactions, transfer funds and make online purchases. Similarly, ABA introduced ABA Mobile in May 2016, which facilitates person-to-person payments, cash withdrawals at ATMs via a code system, transaction and balance history checks, and utility bill payments.
Acleda Bank launched a mobile banking solution, Acleda Unity, which enables customers to view balances in the form of a mini statement, and provides payment services such as provisions for utility bill payments, mobile phone top-ups and fund transfers.
Regulation and compliance
The NBC was established on December 23, 1954, and operates as the central bank of Cambodia.
According to the law on Banking and Financial Institutions, it licenses and supervises all banks in the country.
As of December 2015, there were 36 commercial banks, 11 specialised banks, eight foreign bank representative offices, 58 microfinance institutions, 104 credit operators and nine leasing companies active.
It also has statutory responsibility for payment system oversight and supervision. The NBC has the authority to implement Anu-Kret and Prakas. Anu-Kret is an executive regulation prepared by relevant ministries, and must be adopted by the Council of Ministers and signed by the country’s Prime Minister. Prakas covers all regulations made at ministerial level.
In 2011, the NBC published the Banking Code 2011, which is applicable to all financial institutions. The code was subsequently updated in accordance with Basel Committee principles.
In 2012, the NBC upgraded the National Clearing House to an automated system, to allow clearances of cheques, credits, direct debits and credit remittances in a central location. In addition to these, it will facilitate intra-bank electronic payments.