Cambodian Financial Pioneer Tranforms a Country

In an interview with the Phnom Penh Post, WING Chief Executive, Anthony Perkins shared the amazing results of a profitable year before taxes in 2013, and that 2014 “will undoubtedly be net profit positive for the year with a great starting position." An astounding financial result for the mobile money business that only started taking customers in 2009, in the small South East Asian market of Cambodia. The success catapults the mobile money business into the category of mobile money & financial inclusion elite. Wing saw increases in domestic remittances – transferring money to someone inside the country for a small fee via mobile phone or by visiting one of the company’s Wing Cash Xpress outlets – drove transaction volumes to $1.5 billion last year. 150% of the year's forecast shared back in May.

Wing Mobile Money Cambodia

Mobile has been a catalyst for change in dozens of industries. From books, to music and media. Mobile has managed to rewrite the rules, creating entirely new ecosystems that foster accelerated growth, leaps forward in inclusion and best of all create meaningful impact to people across the world. For nearly a decade, one of those industries that have seen rapid transformation is financial services, as mobile money has driven the agenda of financial inclusion and an ambition of a cashless society. Dozens of new financial inclusion services and payments ecosystem launched into emerging markets, like Cambodia, overcoming the previous barriers for broader inclusion. One strong theme has been the ability of these markets to leap frog evolutions of technology and infrastructure.

Exclusion to Financial Inclusion

Very few people have first hand experience with the downside to financial exclusion. Financial exclusion can be described as the inability of individuals, households or groups to access necessary financial services in an appropriate form. It can stem from problems with access, prices, marketing or financial literacy, or from self-exclusion in response to negative experiences or perceptions. Financial exclusion is a reality for many of the world's citizens, especially in small emerging nations like Cambodia.

The term financial exclusion was first coined in 1993 by geographers who were concerned about limited physical access to banking services as a result of bank branch closures (Leyshon and Thrift, 1993). Throughout the 1990s, there was also a growing body of research relating to difficulties faced by some sections of societies in gaining access to modern payment instruments and other banking services, to consumer credit and to insurance. Consumers at the bottom of the pyramid pay much higher prices for most things than middle-class consumers do, which means that there’s a real opportunity for companies, particularly big corporations with economies of scale and efficient supply chains, to capture market share by offering higher quality goods at lower prices. There was also concern about some people lacking savings of any kind. It was in 1999 that the term financial exclusion seems first to have been used in a broader sense to refer to people who have constrained access to mainstream financial services (Kempson and Whyley, 1999). Since then, a number of commentators have added their views of how financial exclusion should be defined.

The challenges in tackling financial exclusion are manifold and driven by a complex set of interactive factors (basic financial literacy, geographical exclusion, relative costs of financial services and products) as well as being linked to a wide range of social issues. The financially excluded are disproportionately likely to come under the term NEET (not in employment, education or training), care leavers, homeless and disabled people among others. It, therefore, raises the question of how best to tackle financial exclusion, how can an industry of money issuance dominance include those that are beyond the reach of traditional branch models.

The term "financial inclusion" has gained importance since the early 2000s, a result of findings about financial exclusion and its direct correlation to poverty. The United Nations defines the goals of financial inclusion as follows:

    1. access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance;
    2. sound and safe institutions governed by clear regulation and industry performance standards;
    3. financial and institutional sustainability, to ensure continuity and certainty of investment; and
    4. competition to ensure choice and affordability for clients.

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. An estimated 2.5 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institutions. For example in Sub-Saharan Africa only 24% of adults have a bank account even though Africa's formal financial sector has grown in recent years. It is argued that as banking services are in the nature of public good; the availability of banking and payment services to the entire population without discrimination is the prime objective of financial inclusion public policy. But there remained a continual commercial feasibility barrier preventing investment in ecosystem expansion to include the bottom of the pyramid, especially in emerging nations.

Break-through Financial Inclusion in Cambodia

Wing, a growing Cambodian mobile payment and mobile money company, had a better-than-expected 2013. The amazing performance of the business does wonders for a industry that has struggled for commercial sustainability and viability. And a constant battle between banks and mobile operators for mobile money dominance, squashed between the morale debate on what regulation is appropriate for mobile money based financial inclusion. Mobile money is simply a mobile driven replacement for cash as a value instrument, a notion many regulators, including Cambodia, have implemented based on the idea of prepaid (a term with direct crossover from the mobile operator domain).

Last May, Wing’s CEO Anthony Perkins estimated that the company would reach transaction volumes totalling $1 billion by the end of 2013, including domestic remittances, mobile phone top ups, bills and payroll disbursements. Something that warmed the heart founding Wing CEO, Brad Jones, triggering his post 'In an Industry of Disappointments, Why is WING Cambodia Successful?' Jones goes onto say 'Profitability(at Wing) had been achieved just on four years since the launch of the business, and in an industry where profitability is rare, I think it is a remarkable achievement, even if the original estimates assumed break even a couple of years earlier.' I can only imagine Brad's is busy preparing a heart felt commentary as he reads Wing's actual success for 2013. After Wing, Brad went onto drive the success of VISA's move into mobile money through the acquisition of Fundamo. The South African mobile financial service solutions provider that is now rumoured to power VISA's mVISA solution in Rwanda. Even after returning to the banking industry, Jones remains a key influencer in the mobile money space. And someone I continue to admire.

In 2013, an increase demand in domestic remittances drove transaction volumes to $1.5 billion for the year. At least $1 billion of the total came from remittances. “That's, far and away is our biggest and most successful product. It has taken off,” he said, adding that while mobile money transfer technology is the future, face-to-face banking is still the most favoured means of transferring funds in Cambodia. In December alone, Wing’s product usage increased four-fold when compared to the same month of 2012, reaching $240 million. If one was to extrapolate that December figure, Wing could be on track to the $3 Billion dollar mark in 2014 and move into the global top five mobile money performers.

Economic growth to continue for Cambodia

Since the mid 90's Cambodia has been a country of growth, development and prosperity. Cambodia’s cards and payments industry recorded a CAGR of 24.87%, rising from 525,900 cards in circulation in 2008 to 1.3 million cards in 2012. Between 2013 and 2017, the industry is projected to grow at a CAGR of 10.96% from 1.5 million cards to 2.3 million. A strong complement to Wing's Mobile Money growth in Cambodia.

The Cambodia market has a large youth demographic, changing spending patterns, advancements in e-banking services and the emerging trend of online shopping, Cambodia’s card service providers have ample growth opportunities. Multiple demographics in the economy show signs of leap frogging traditional approaches directly to digitally oriented services. The country’s GDP declined from 19.8% in 2008 to 2.6% in 2009, but recovered to reach 10.3% in 2012. The World Bank projects GDP growth will stabilise at 9.9% between 2008 and 2017.

On the ICT front, internet penetration rates increased from 0.5% in 2008 to 3.1% in 2011. According to Internet World Stats, in June 2012 there were 662,840 internet users in Cambodia, representing a penetration rate of 4.4%. This was largely driven by the country’s urban and youth demographics which are anticipated to drive the use of debit and credit cards for the purposes of online shopping. Cambodia recorded about 2.7 million internet users as of December last year, a 60 percent rise year-on-year, a trend that does and will continue to underpin the ICT lead digital inclusion for the country.

The future is bright for Cambodia and Wing Money. With any luck the team that helped create this amazing business will reunite in Cambodia this year to celebrate the continued success of this ground breaking pioneer. Mobile money needs more success stories like Wing, to lead money and payments into a new era of inclusive technology driven ecosystems. Wing will always be close to my heart, so I look forward to each and every trip I get back to PP.

Best of luck on this amazing journey to Anthony and the team at Wing.