Posts

Financial Technology, or “fintech”, has been at the forefront of Southeast Asia’s growing digital adoption. In 2015 and the first half of 2016, a total of $345 million was invested in fintech startups in the region alone because market maturation and ecommerce adoption have been stagnated by payments.

In recent years, there has been an array of mobile wallets and government initiatives in the region, like PromptPay in Thailand, or Wave Money in Myanmar. Not many initiatives have involved a less explored and more popular technology in the West – blockchain and bitcoin.

eIQ speaks with Philip Lim, the founder of SKYBIT, a bitcoin startup that encourages cross border payments to a frontier market – Myanmar.

He explains the concept behind blockchain, how SKYBIT could possibly change the lives of the Burmese and why he decided to launch his startup in one of Southeast Asia’s less developed countries.

What is blockchain technology and bitcoin?

“A blockchain is a ledger of transactions which are grouped into blocks and tied together one after the other by encryption,” explains Philip.

The bitcoin blockchain is the largest and most active one, it is the token of monetary value that flows in the network.

“A blockchain is immutable, which means you can’t change its history, as the system would reject it,” says Philip. “Immutability also means that the record is seen as permanent. A good non-payments application would be for transfer of assets like land.”

“The number of bitcoin transactions per day around the world has continued to increase and has recently almost reached 370,000. Such increase in transactions could be attributed to media attention, especially of bitcoin’s steep rise in price recently but the technology has actually been around since 2009,” says Philip.

How does SKYBIT utilize blockchain technology?

Philip developed SKYBIT to create significant social impact in Myanmar by solving difficulties in transferring money to Myanmar as it was one of the factors impeding the country’s and the peoples’  development.

The SKYBIT payment processor helps Burmese businesses and aid organizations receive payments from abroad. A number of charity organizations have already signed up to accept donations from anywhere in the world.

Merchant Accounts dashboard on the SKYBIT platform

Example Ad Item on the SKYBIT advertising platform

A customer who wishes to make a payment clicks on the “Pay with bitcoin” button on the sales page, enters details such as email address and bitcoin address (used in case of refund), and is taken to an invoice page, where they can simply scan the uniquely generated QR code using any bitcoin app such as Copay, Coinbase and Bitcoin Wallet.

Invoice page and QR code generated by SKYBIT.

Payment is detected instantly and the entire process is done in a matter of minutes.

Invoice page and QR code generated by SKYBIT.

Behind the scenes, the bitcoin is received by SKYBIT, and SKYBIT deposits Myanmar Kyat into the organization’s SKYBIT account. The organization doesn’t need to handle or even understand bitcoin at all.

In case of a refund, SKYBIT can send bitcoin back to the bitcoin address provided by the customer and there is a limited amount of time to report a problem related to an invoice or request a refund, during which the merchant cannot withdraw the amount earned from the sale from their SKYBIT account.

“Signing up to use SKYBIT is far easier than applying for a merchant account to accept credit cards, as banks only want to deal with large businesses. This may encourage small merchants and even individuals to use SKYBIT and access a global market,” comments Philip.

“Credit cards also still have many problems, especially fraud and chargebacks, which can cause losses to merchants. With bitcoin, which was designed especially for the internet, transactions are detected immediately and irreversibly settled within minutes, and cryptographic checks prevent fraud,” says Philip.

“Traditional forms of payment are outdated and not entirely secure as they were designed before the internet was even invented,” says Philip.

Cryptocurrency adoption within Myanmar

Bitcoin can be purchased from SKYBIT via its exchange to effectively open up a whole new world of online shopping for the more affluent Burmese.

Myanmar banks have only recently released cards that are accepted internationally, but most locals would not qualify for one or the process takes too long.

“Traditionally, Myanmar is a very cash based society. People have stacks of money kept at home, and most understand it’s not practical,” says Philip.

To address this issue, mobile wallets like Wave Money have been introduced in Myanmar to allow locals to send local currency via smartphone, even in rural areas.

“Since Wave Money can only be used to send Myanmar Kyat, it cannot be used for international payments so Wave Money and bitcoin can actually complement each other,” says Philip.

“It makes a lot more sense to replace USD as the de-facto currency of the internet with bitcoin, as there is too much friction when dealing with traditional fiat currencies on the internet.”

“Businesses also aren’t allowed to display prices in any currency other than Myanmar Kyat. Within the past two years, many businesses in Myanmar, including Swensens and The Pizza Company, began openly quoting prices in USD. Authorities ordered them to stop because of the weakening value of the Myanmar Kyat relative to USD at the time,” says Philip. “They are afraid it will devalue the local currency.”

A social enterprise

“There have been, and still are, so many big problems that need to be solved in Southeast Asia, especially in Myanmar. Poverty is the normal mainstream thing there,” says Philip. “Most people around the world have been oblivious to Myanmar’s problems.”

“I was learning about bitcoin and could really connect with all the things that prominent bitcoin evangelist Andreas Antonopoulos was saying. For example, 5 or 6 billion people have not been cared for by traditional financial systems. He also mentioned that one of the common uses of bitcoin was for donations.”

The sky’s the limit for SKYBIT

Philip, together with a new co-founder, plan to push offline marketing in order to meet organizations face-to-face in Myanmar.

“This is not the kind of thing I can create a Facebook ad for because the technology, even just web pages and email, is so foreign to much of the Burmese,” he says.

Despite currently being one of Southeast Asia’s most underdeveloped markets, Euromonitor predicts the country will become one of the 20 ‘markets of the future’ to offer the most opportunities for consumer goods companies globally.

But opening up Myanmar to the world takes investment and finding such is currently SKYBIT’s highest priority.

“The platform is ready, and ideally will flourish once I have enough funds to open an office in Myanmar filled with a strong marketing and sales team,” says Philip. “The country is full of potential and I’d like to take the next steps in introducing Myanmar’s goods and services to global shoppers, whilst simultaneously helping the people of Myanmar at all levels of society.”

Mobile payment apps, widely known as mobile wallets, hold digital information about credit and debit cards for making payments, store coupons and loyalty programs.

And they’re projected to become a $300 billion industry by 2022 in the US. Market research firm Park Associates estimates that proximity payment transactions, which require users to tap their phone at a point-of-sale station, generated more than $30 billion in the US last year alone.

The following are a few examples of companies properly utilizing their own mobile payments apps:

One player that stands out is global coffee chain Starbucks.

Currently 2X as many consumers use Starbuck’s mobile app as Apple Pay, according to Park Associates.

Other brands such as New York based Fresh & Co, a grab and go cafe chain, have been using mobile wallets since 2014 and currently has 30,000 customers paying for their sandwiches via the company’s own mobile app.

US drugstore chain CVS also operates a successful mobile payments app by incorporating its ExtraCare rewards program. Users don’t have to produce a rewards card to earn points at the cash register, they’re transferred directly to the app.

Users can also manage multiple prescriptions and medication refills on the app.

But not all mobile wallets are providing a good return. Walmart’s mobile payment app, Walmart Pay, can serve as a cautionary tale for retailers looking to launch digital wallets. The app is reportedly underperforming, due to the absence of a loyalty rewards scheme for users.

Overall, there is a quick and widespread adoption of mobile payments in the US and has largely attributed to the rise of ecommerce – currently 11% of retail sales in the country.

Looking east, brands and retailers in Southeast Asia can also leverage mobile wallets, especially as the adoption of the smartphone among the population grows. A problem arises when considering approximately 74% of Thai shoppers prefer to pay for online shopping via cash or bank transfers and is also the case in Indonesia and the Philippines. This is because only 27% of the entire region has a bank account let alone a credit card to pair with a mobile wallet, but there are a few ways around this.  

Businesses can allow consumers to top-up their mobile wallets at the store counter using cash like Starbucks already offers as an option. Points collected in the app could also be used like a digital currency to purchase goods. All would nurture the adoption of digital payments in the developing region – a large obstacle in the growth of online retail.

Ecommerce giant Amazon is tackling the unbanked population in the US through its Amazon Cash initiative that allows users to top-up their Amazon cards with cash at selected brick and mortar stores, such as drug store CVS, across the country.

The appeal of mobile payment apps for consumers

Building a mobile payments app may be expensive, at least $20,000, but it will introduce customers to the built-in loyalty programs, which will incentivize them to return to collect more points through purchases in a positive feedback loop.

In some cases, it has been found that loyalty programs can work in tandem with increasing brand awareness i.e. if a consumer shares a product with 20 friends, they get 20% off their next purchase.

“Across the board, consumer satisfaction is about 80%for mobile wallets,” says Chris Tweedt, mobile-payments analyst at Parks Associates.

Marketing tactics like this would work in Southeast Asia as consumers are both mobile and social media driven.

In the US, merchants also see a 7-9% larger basket size when customers pay with a mobile wallet and businesses see an additional 9% spike in average sales when customers show up to redeem loyalty incentives. The added convenience makes on the whim-shopping much easier.

With a brand’s own payments wallet, they can dictate what payment types to accept, such as Alipay or Samsung Pay, but they need to be widespread and so far the region doesn’t have a dominant player yet, which becomes the greatest barrier to its adoption.

It’s also important to keep in mind that retailers using third party wallets such as Apple Pay or Alipay have to pay processing fees for each purchase, typically 2-3% for credit cards and less than 1% for debit cards according to Amittabh Malhotra, CMO of digital commerce platform OmnyPay.

Taking the next steps

Businesses in developing markets can start small as more payments players come onto the scene by opening a point program first to build engagement if a mobile wallet seems out of reach.

The long-awaited entry of China’s dominant payments platform Alipay in Southeast Asia through deals with Thailand’s TrueMoney and Indonesia’s Emtek, owner of Blackberry, should encourage the mobile wallet ecosystem as brands can then integrate more digital payment options into their platforms.

Another players to look out for is the Thai government’s online payment platform PromptPay that has signed millions so far and could be huge if advertised properly to the cautious Thai people.

Starbucks in Thailand is moving quickly in the game. The coffee chain already has a Starbucks Thailand app that allows users to scan and pay through collected loyalty rewards and locate the nearest branch. A mobile wallet is about convenience – it’s not only about payment – and only a few businesses are getting it right.

The $300 Billion Trend Your Company Needs to Get in on Now was originally published by Inc. Read the original article here.