In Cambodia, fintech development is a part of its nation-building exercise. Source:

In Cambodia, fintech development is a part of its nation-building exercise. Source: Shutterstock

What drives Cambodia’s fintech ecosystem?

EVERY country in the Asia Pacific (APAC) region is pursuing digital transformation in its own way, and recognizes fintech as one of the critical components that will drive tomorrow’s economy.

In Asia, many of the innovations and development in the fintech ecosystem are feeding off of the rapid growth of e-commerce platforms in the region.

But not in Cambodia. In the low-lying plains of the Mekong Delta, fintech development is a part of the nation-building exercise.

The country’s financial industry itself is still in its nascent stages, and according to its central bank, the National Bank of Cambodia (NBC), digital finance could be a “game changer” in the nation’s efforts for financial inclusion and poverty alleviation.

The NBC has iterated that digital finance is vital in reaching the unbanked and under-banked population in Cambodia, which also has 7 million internet users and 8.5 million active smartphones.

The industry players are well aware of this and have responded accordingly. One such player looking to establish itself within Cambodia’s growing fintech ecosystem is Clik.

Based in Phnom Penh, the fintech startup has recently raised US$2 million from its global partners and is expecting to launch a payments aggregator platform in 2019.

Lucrative market

Clik’s CEO and co-founder Matthew Tippetts, in an interview with Tech Wire Asia, said that cash is still the preferred mode of payment in Cambodia but only due to a void in the market.

When the company carried out a large market feasibility study in the country two years ago, it found out that up to 85 percent of the people surveyed were willing to use mobile phones to make payments.

“Considering that now, out of 8.5 million smartphones only 1.5 (million) are used to make payments, is a proof that what is in the market is not answering the demand. Because if they have what they were looking for, 85 percent of the people will be using it, and we’re far from that.

“There is a big market opportunity,” he said.

Solving the data problem 

Clik, which is currently in beta phase is poised to solve the payment fragmentation issue in Cambodia as well as provide valuable insight on consumers to the merchants.

Merchants in Cambodia have multiple payment terminals, accept different wallets that are not interoperable and not integrated. Cash is the mode of payment for up to 70 percent of the transactions in the country.

These transactions, however, do not generate any data.

Tippetts said that Clik will solve this problem by aggregating all payment methods and networks under its platform, as well as collecting transaction data, so it can provide the merchant with valuable information about its consumers.

While more than 150 merchants have already signed up, the company expects to onboard more than 500 merchants across different industries by the end of year.

“The merchants have a vested interest in using the platform and getting their customers to the platform as more customers use the platform, the more they can understand who that customer is and how they can get them to shop more with them,” Tippets explained.

Nothing comes without challenges

Cambodia, much like its neighboring countries, has seen a fair amount of saturation in the market. Mobile payment companies such as Wing, Pi Pay, PayGo, and True Money have entered the country, but faced similar problems.

Getting customers to maintain a balance in the online wallet, to ensure regular usage, is a common challenge.

“Most people top-up their wallet specifically to do one transaction. They have to top-up to do the next transaction and that’s an impediment,” said Tippetts.

Giving a reason for consumers to keep a balance on their e-wallets is a critical challenge for the industry players, according to him.

e-Commerce a non-factor

At this moment, e-commerce is not at all a driving force for fintech in Cambodia. Tippetts feels that the lack of a legal framework protecting e-commerce players has something to do with it.

However, he added that e-commerce is slowly gaining momentum in the country, and getting more prevalent – along with it driving up the demand for reliable payment gateways.

Progressive governance

Regulations are often seen as standing in the way of innovation, especially in fintech.

But Cambodia’s NBC is very progressive in spurring the growth of fintech solutions in the country according to Tippetts.

“In 2017, they (NBC) came up with a specific license for payment service providers like us. It is a much clearer framework than it was before, effectively allowing us to apply directly to the central bank, without the need for sponsorship from a bank,” said Tippetts.

The process takes, on average six months, and upon completion of the analysis of the applications, vendors are allowed to launch their product on a small scale.

When certain specified milestones are met, the central bank then grants the operating license.

The proliferation of payment service providers may have a chilling effect on consumer interest. However, at the same time, the saturated market will also present a highly competitive environment which might boost innovation.

And with China always seeking to bolster its presence in the Southeast Asia region, an investment, or merger with one of the Chinese giants may, after all, determine the long-term trajectory of fintech in Cambodia.