Card Companies Try to Conquer Myanmar

Visa and MasterCard sign up banks in a country that clings to cash
One of three ATMs at the Shwedagon Pagoda in Yangon

A year ago, Myanmar had no automated teller machines linked to international networks and not a single hotel or restaurant able to swipe credit cards. The throngs of foreigners arriving in the newly opened country had to bring crisp U.S. dollars to pay for everything. Today, Myanmar has 2,500 machines that process credit card payments, known as payment terminals, and 450 ATMs, including at least three at the gates of Yangon’s Shwedagon Pagoda, a popular tourist attraction, according to Kanbawza Bank, the largest privately owned bank in Myanmar. There’s a long way to go. While “the absolute need to carry bags of cash is declining, Myanmar remains a cash economy,” says Matt Davies, the International Monetary Fund’s mission chief to the country. “It takes time for practices to change.”

Visa and MasterCard are working to speed the transition. Since September 2012, MasterCard has signed up nine banks to issue its cards. The company says those banks have installed payment terminals at 491 merchants, including the Strand and Governor’s Residence hotels in Yangon, the financial capital. About 210 ATMs also accept MasterCard for cash withdrawals. Visa says it has licensed eight banks to issue its cards, and they’ve signed up more than 600 merchants, including hotels, restaurants, airlines, and retailers, and installed more than 200 ATMs.

Myanmar’s remaining payment machines accept locally issued debit cards as well as cards from Shanghai-based UnionPay, which has expanded to 141 countries in the past decade to become the world’s second-largest payment network by value of transactions processed, behind Visa.

Myanmar represents one of the last huge growth opportunities for card companies. Neighboring Thailand, with a population of 68 million, about the same as Myanmar’s, has 47,759 ATMs, and 264,236 Thai merchants have payment terminals, according to the Bank of Thailand. Still, success in Myanmar won’t come easily. Even where cards are accepted, terminals often don’t work and are hindered by poor Internet and telephone connections and unreliable electricity, says Aung Thura, chief executive officer of Thura Swiss, a Yangon-based market research and consulting firm for companies entering Myanmar. “The general advice to tourists and business travelers is to bring in your clean dollar notes, because you might not be able to get money from ATMs,” he says, recalling an experience in July when he tried to use his locally issued debit card at a restaurant and the telephone line didn’t connect.

“We tell customers that we’ll swipe the card with pleasure, but we cannot guarantee the line will work,” says Cherie Aung-Khin, owner of the Green Elephant restaurant in Yangon, which is popular with foreign visitors. The Green Elephant was the first establishment in Myanmar to accept Visa. About $50 of the restaurant’s average daily sales of $800 is paid for with Visa cards.

Since coming to power two years ago, Myanmar President Thein Sein has expanded political freedom and loosened economic controls. That prompted the easing of European Union and U.S. sanctions on the country starting last year and allowed, among other things, the transfer of funds from the U.S. to Myanmar and the setting up of businesses by U.S. companies.

For Visa, the immediate goal is to promote card acceptance among merchants and increase the number of ATMs available to serve the expected influx of visitors to the 2013 Southeast Asian Games to be held in Myanmar in December, according to Somboon Krobteeranon, Visa’s country manager for Myanmar and Thailand. MasterCard greets travelers arriving at Yangon International Airport with advertisements encouraging them to withdraw currency from ATMs using its network. American Express began working last year to find merchants to accept its cards, according to Fritz Quinn, a company spokesman. The Governor’s Residence hotel accepts AmEx cards, adding a 5 percent surcharge to the bill.

Visa and MasterCard processed about $7 trillion in credit and debit card purchases worldwide in the 12 months ended June 30, according to company data. Visa reported $15 million in purchases and cash withdrawals in Myanmar from December through Oct. 23. While MasterCard doesn’t break out a number, Matthew Driver, the company’s Southeast Asia president, says Myanmar’s contribution is “virtually zero” compared with global card use. “It’s going to be a long-haul play and may take 5 to 10 years until people start to be comfortable” with plastic.