Paying for houses and cars in huge pallets of cash is normal in Myanmar right now, but will be almost unimaginable in just a few short years. Financial technology in Myanmar is at a critical inflection point - many players have thrown their hats into the ring and are innovating in order to win customers and digitize a highly cash-based economy. We’ve attempted to map out the current state of the Myanmar fintech landscape below - see how many of the companies you know!
As can be seen from the map, payments are especially messy - mobile wallets (Wave, OKDollar etc) are competing with cash acceptance networks (Reddot, 123), banks (AGDPay, KBZPay), card networks (MPU, Visa) and platforms (Oway, Get) in an all-out war to gain traction, although cash is still the main competitor, accounting for over 99% of ecommerce transactions. We expect to see a lot of consolidation in the next 2-5 years, with a digital payment adoption rate that mirrors the trajectories of other countries in the region like Thailand and Indonesia.
One of the major challenges is a lack of financial infrastructure, for example interbank transfers and credit bureaus, although progress is being made on these fronts, aided by new regulation from the government.
The fintech ecosystem is evolving rapidly, and overall we think it’s in a healthy state. As adoption rates climb, everyone will reap the benefits of increased convenience and efficiency, driving growth in the economy as a whole. We’re looking forward to seeing how it all plays out.
See full list of sectors and players below:
Telcos: MPT, Telenor, Ooredoo, MyTel
Mobile Wallets: Wave Money, M-Pitesan, True Money, OnGo, OKDollar, MyKyat
Payment Systems: MPU, MyPay, Reddot, Get Digital Store, Paypoint, 123, 1stop, Giantpay, Oway
Banks: MOB, Aya, CB, Shwe, KBZ, Yoma, MAB, AGD and more
Backends: ConnectNPay, 2C2P, Trusty E-commerce, Fintech Myanmar
Lending: Thitsaworks, Scorestarter, Mother Finance, Zigway
Crypto: Skybit, Everex
An interesting pattern has cropped up as we comb through our EME database of all the startups and investments in Myanmar from 2012 onwards: we can identify three distinct waves of startups based on time, product and business model.
The first wave: fundamentals
Founded from 2012 to 2014 or so, the first wave of startups were the fundamental consumer internet platforms, mostly online marketplaces for cars, jobs, houses and travel. Often founded by repatriates who had worked in Singapore or the West, these companies included CarsDB, iMyanmarHouse, Oway and MyJobs, as well as more pure-technology companies like Bagan Innovation Technology (Myanmar-language keyboards) and Nexlabs (software development).
Rocket Internet entered the market aggressively in 2013 with a stable of platforms including house.com.mm, motors.com.mm, ads.com.mm and more, none of which are still alive today except Shop.com.mm, which is now owned by Alibaba. Honourable mentions go to the nascent social networks and chat apps which didn’t have much of a chance against the blue tide of Facebook that swept the country. Most of the first wave companies are either dead or dominant by now, although new competitors can enter their markets at any point.
The second wave: niches
From 2015 till 2017, the second-wave was defined by more niche value propositions. There was still a lot of low-hanging fruit to be picked by replicating successful overseas models in more specialized markets. These include companies like Joosk Studio (digital animation and illustration), Bindez (search engine & news aggregator) and Bagan Hub (B2B ecommerce). BODTech also made a round of investments in Flymya (travel), YangonD2D (food delivery), Innoveller (bus ticketing) and more.
Also included in the second wave were fintech plays, often by corporates or regional entities. These include large companies like Wave Money, Reddot, Ongo etc, all trying to stake out territory in the digital payments market. Many of these companies are beginning to see real traction, as they carve out their niche in the rapidly growing digital economy.
The third wave: experiments
We are seeing from now onwards a third wave, defined by greater experimentation, either with business models or with technology. Witness Expa.ai (chatbot builders), RecyGlo (recycling-as-a-service) or Mote Poh (employee rewards coupons). While some of these models have yet to be validated, the ecosystem is in a healthy state as entrepreneurs continue to innovate.
Some of this experimentation has been made possible by the entry of institutional investors and accelerators, for example Phandeeyar, whose accelerator program has graduated 11 startups and counting. The incubator / accelerator space is becoming increasingly crowded, with Rockstart Impact, SeedStars, Impact Hub and more beginning to make their presence felt.
EME sees opportunities across all three waves of startups. CarsDB, one of our first two investments, is a leading member of the first wave as undisputed #1 in online car classifieds. Our other portfolio company, Joosk Studio is a definite second-wave company - providing a first-of-a-kind product in a specialized field with opportunities for further expansion. We’ll continue to look for companies across this whole spectrum as the Myanmar startup ecosystem develops further.
Join the conversation on our Facebook page to let us know your thoughts.
We have an office bet going on here at EME. Over lunches at MICT Park and long cab rides to downtown, we discuss the following proposition: Myanmar will create a unicorn (a company with a valuation over $1 billion USD) within the next 5 years. The stakes are a round of beers for us and possibly much higher for the market at large.
Disclaimer: we’re not talking about existing companies or prospective investments (that’s a separate bet), so much as the overall trends and market conditions that would allow a unicorn to emerge.
As anyone who has stood in line at a Myanmar government office can tell you, there are significant structural challenges for startups to solve. Nevertheless, the population is large, young and increasingly digitally-connected, and as McKinsey suggests, the economy could enjoy years of strong catch-up growth over the next decade in line with other countries in the region like Indonesia and Vietnam. This creates a long-term opportunity for a local tech company to grow into a unicorn.
Sector-wise, the startup would probably be in transportation, ecommerce or fintech. All of these sectors have large market sizes, viable business models and can use technology to scale. While other sectors (healthcare, education, logistics etc) also have large potential markets, they are often more challenging to digitize and/or monetize.
For funding, this prospective unicorn would probably get seed investment from angels and local funds like EME, then tap regional VC funds and family offices for Series A / Series B. Corporates and later-stage PE/VC investors e.g. Alibaba, Softbank, Sequoia, would fill out the later rounds. Investors are increasingly interested in Southeast Asia and have a lot of unspent capital. As long as this prospective unicorn could demonstrate strong user growth and potentially expansions to other countries in the region, access to finance wouldn’t be an issue.
Of course for the purposes of the bet, the potential unicorn would have to avoid getting acquired before reaching that magic $1b valuation. Even after reaching unicorn status, a company may stay private for many years (now often referred to as the Softbank Effect after SoftBank’s $100 billion Vision Fund). Acquisitions by major global platforms seem to be preferred to IPOs at present. Nevertheless, the recent listings of Sea, Razer and Kioson prove that IPOs can be viable for Southeast Asian technology companies.
Overall, we’re very optimistic about Myanmar’s prospects for a unicorn in 5 years. As long as startups continue to work hard, engage users and build products that generate real value, the chances are good that a local player can grow sufficiently fast to achieve unicorn status. It may come as no surprise then, that EME is investing in and supporting early stage tech companies.
If you want to join the bet, take our poll on Facebook. See you for beer in 5 years.