Cambodian unbanked helps fin tech and new payment solutions to start – Tomas Pokorny

Pi Pay, a mobile electronic payment service that grows its popularity and persistence in Cambodia. Since the release of its service in June, we now see the company's pink logo at various stores. They are expanding their electronic payment services where it is said that the platform for electronic payment is not in place.
We asked Mr. Tomas Pokorny, CEO about the company's business overview. (Interviewed at: August, 2017)

Interviewee Profile

Tomas Pokorny : CEO of Pi Pay .

Providing mobile payment as a connecting platform

Could you tell us about your company?

Pi Pay is an infrastructure of an electronic payment service. When you go from business perspective, Pi Pay is an aggregation of payment services and payment infrastructure. The main scope is essentially to build infrastructure in Cambodia for cashless payment services. And we are combining services that we provide to merchants such as retails and wholesale services and to consumers like you and me. So, you can use mobile payment at businesses as a connecting platform.

Could you tell us about your personal career?

I’ve been in Cambodia for almost seven years. I have always been in the payment industry. Since I came to Cambodia I was trying to setup my own payment service but it was a long journey. During this journey, I was CEO for World Bridge commerce and World Bridge outsourcing. When I was there, there were 700-1000 people, so it was a big outsourcing agency. But I was always focusing on payment service and trying to organize a payment company like Alipay in China, because I thought it was possible here.

By coincidence, I met one of our current board members and together we discussed a business plan and we agreed on the venture. This is how Pi Pay started in December 2015. To provide financial services in Cambodia, we need to comply with laws and regulations. We have been preparing for business licenses and last November, we received the license from the national bank Cambodia as a third-party processor. This was finally the time to start providing payment services such as merchant payments, mobile peer to peer remittances and everything else. But we must be supported by a commercial bank, and our supporting commercial bank was CIMB. So, we are governed by NBC and CIMB.

Could you tell us the current situation of Pi Pay?

On June 26th we started our beta stage application for Pi Pay, we have more than 65000 downloads on both android and IOS. And we have signed with more than 1400 merchants. But we won’t deploy them all at the same time and go step by step because of our strategy. In the first week of August in the Phnom Penh Post, we announced the mark of 1 million transactions in process through our system. Now three weeks have passed and we’ve already had 3 million transactions. It is a rapid growth. There are 250000 individual transactions and more than 3 million is in process in less than two months since June 26th.


Cambodian unbanked helps fin tech and new payment solutions to start

Why did your company succeed even though Cambodia is still cash country?

There are several ways to look at this, Cambodia is still a cash based country and the banked population is still low. It is said that 80% of Cambodians don’t have bank accounts and there are many businesses functioning without banking services involved. Cambodian consumer’s average behavior of not holding bank accounts doesn’t mean that they don’t have financial literacy or they don’t use additional financial services.

There are many payment services or cash remittance providers in different sectors such as Wing, true, e-money, smart and many others. For a long time, it was just Wing and a few small providers, as far as I know wing has been in the cash remittance service since 2007 and they have achieved an enormous success in the sector. They enabled the payment infrastructure and the payment processes even for people who don’t have bank accounts. Cambodia may be heavily unbanked and heavily cash based, but because of that it helps fin tech and new payment solutions to start here.

When we are analyzing the Cambodian market, we were thinking that it may be unbanked but it doesn’t mean that Cambodians are not ready. First thing we will be looking for in a traditional market is how many people have bank accounts and how many people have access to the banks. But more innovated point of view is that how many people in Cambodia understand services other than just bank? Cambodians understand this more than almost any other country because they needed to other ways than just traditional banking. So, all we needed to do was to explore that niche a little more, and give people a chance to try it.

People who failed tend to say that it’s not their fault, it’s because Cambodia is not ready. But again, to me it was only lack of creativity and a lack of destructive elements inside of their business plans. Because from our point of view, all you need to do is to provide people a reason to try. If we use cash every day, we don’t have a good reason to use cashless services because they are happy using cash. But if somebody gives us the reason to use cashless payments such as discounts, community, speed of services or security, we might be convinced to try it out.

We need to have something special and disruptive. If it’s the same thing, we don’t have a reason to switch. The lack of disruption is the reason that digital payments haven’t kicked off until now. When you think of the number of mobile phones we have in Cambodia, the 4G internet services provided by Cellcard, Smart and Metfone is throughout the country, the infrastructure on connectivity and the accessibility to smart devices is there, Cambodia has it and it is a perfect base to start.


The demand of e-commerce needs time to grow

In order to proceed on the e-commerce services, the Central Bank has set the licensing of payment service providers (PSPs). And now, the government is planning new laws.

What do you think of these changes?

We welcome changes, there has been long talks about ecommerce laws that have been talked about for ages but still not in place but now I think it is moving towards success. On the other hand, there was a new law implemented by the national bank pf Cambodia. Now, a company like us who is a third-party processor must re-apply for a license of payment services. That license particularly has a much higher capital requirement than before, so some companies are worried about this and because this may lower the competition in the country. It might reduce the market players but it will not eliminate them all. We believe it might lead to inclusion, such as mergers and more partnerships within those companies.

In addition, PSP will give us a bigger clearer and a define scope for us and any fin tech players in the market. Before PSP happened, nobody knew if you are just a technology provider or technology service. People thought that we maybe need to apply for the license by the national bank even if you didn’t provide any money processing services, nothing was clear on the licensing of this sector. The new prakas is very clear on that point and we think that this will boost the fin tech market in Cambodia.

What prospects do you have about the expansion of e-commerce in Cambodia?

E-commerce in Cambodia has been here for a long time, six or seven years ago people were trying to open their merchants. Some local internet groups were here but they left the game last year and they were not successful. I was running a small online shop and it’s still active. There was a little bit of mismatch of expectations by big investors. Every investor who thought to open an online shop thought that it will be big right from the beginning. But if it fails, that people tend to blame it on Cambodia as it has no online payment or financial services. People create those reasons because they don’t know why it failed.

There are a lot of small online shops operating through Facebook and even on normal websites and platforms, people are more and more into e-commerce. In the past 6 years, we learned that the level of expectations we had before is probably not going to happen. It’s not going to be a huge market because Cambodia has only 15 million people, we can supply a healthy e-commerce or a healthy online shopping experience but it needs time to grow.

It’s probably best to focus on small online shops rather than focusing on one huge portal that will cover the entire market in Cambodia. We cannot blame it on one issue saying that Cambodia is not ready or there are not enough payment options, because there are many other issues too such as logistics. It’s all about building the e-commerce community, for us the cashless payments build a community in the payment service, then that combines the online shopping and this re-creates the business.

So, people need to start seeing the benefits first. I believe that more and more startup will be in e-commerce because the traffic situation is getting worse, it’s hot outside so people tend to stay home where it’s more comfortable. Shops opening here are gaining credibility, if you don’t have a good review then people don’t trust you. Even if you are small shop on the streets but you have good reviews and people talk about you, people tend to help your business.

Again, I don’t think that it’s just one factor. For me, it’s mainly about creating that community. E-commerce and e-business will succeed if there is a community strong enough. Pi Pay is creating a new community, businesses need to be creative and disruptive to bring in new factors of innovation so it creates attraction. I think any business is driven by community in Cambodia, they are a very social country. Facebook has been used in Cambodia as a main business communication tool, more than websites and anything else. The main reason is because the community is a building it.


In-app direct communication between consumer and company is important

What services do you provide for consumers now and what about future plans?

As I mentioned, Pi Pay is a service for merchants and users and partners, it combines all those three factors. For merchants, we want to be a B to B platform for them providing merchant payment infrastructure. If you are a big merchant, we will introduce POS, we will build our merchant software so they can trace the payments.

We will be adding a tool on the platform for advertisements such as banners or offers, a solution like LINE. There is something that is called official accounts in LINE, where the merchant has their own pages. We will be doing the same thing so merchants can communicate directly to their consumers and advertise on their own. They don’t need to ask us, the platform will be modified so it can be used for advertisements.

Then for users, though it’s seems like it is just an online application same as mobile wallet or Alipay, it would be a combination of Alipay and LINE together. We are providing application for payments. We will add more features for our users through our upgrades every two weeks. We also will start a money transfer service which is not cash to cash but digital money transfers between accounts.

From the application side, the final aim of it is to utilize the mobile wallet at merchant places for merchant payments, you can go to the merchant and pay by using the application instead of using your wallet and a pen. As we go down the line, we are adding a few extra services, especially in the innovation of biometric technology, I can’t mention specifically now but there will be a lot of new merchant payment services to be released which is not a QR code or wallet and pay.

For partners, we are mainly a payment connection services and communication of engagement platform. So, they can engage and communicate with consumers. If you are a restaurant and you’re going to open a new branch, you can advertise it on your own without using agents but through our application. Of course, Facebook is still important because Cambodia is based on Facebook, but we think that in-app advertising and in-app direct communication is important and it’s coming for sure.

Payment gateways and bank transfers will be launching in September. You won’t need cash any more, you will be able to send money from Pi Pay to bank in real time instantly. There are many things in the payment infrastructure planned for the next few months, our first partnership is with ABA, we will be able to send money from ABA to Pi Pay and Pi Pay to ABA. We have already signed with 13 banks such as AMK, CIMB, MAYBANK, ICBC etc.


there is a big potential growth in provincial areas

What do you think about the finance industry and Cambodia’s economy?

This is always a popular question because this is where you can prove that Cambodia is strong. If you look back at the world financial crisis in between 2008 and 2009 which was rock bottom, Cambodia grew every year at 6.5 to 7.5% as GDP. The GDP was around 20.2 billion in 2016. Growth domestic product per capita was around 1.27 billion in 2016. It’s still small compared to Thailand or anywhere else, but the interesting thing is stability.

Cambodia can bring stability of growth to investors. People are always asking why, but to me it’s quite clear. For now, the center of business is Phnom Penh, sometimes Siem Reap, Sihanoukville and Kampot but everything else is almost like one big provincial area. Phnom Penh has two to three million people depending on how you define it, then you have another two million in the additional areas such as Siem Reap and Sihanoukville, but you still have ten to eleven million people outside of those big urban areas. They are not properly accounted for in the economy.

Once people start focusing more on financial inclusion, they will penetrate in those provincial areas. It won’t be only the main urban center area so I think there is a big potential growth there. Stable growth is one thing, and the political situation is another, people may complain but there are people complaining in other countries too, Cambodia is still stable. Countries like Myanmar may have even more GDP per year than Cambodia, but the numbers go up and down. When you think that’s just from 30% of the country and there is another 70% uncounted for, therefore I see high potential. Cambodia will keep growing but in five to ten years, things will boost.


Do you have a messages for our readers?

There may be people who have lost their opportunity or have had a bad experience. But I don’t think it’s only about Cambodia. Every country has its pros and cons. Before people come to Cambodia, they should study the sector well. For example, the F&B business may be very attractive to some but there are a few thousand restaurants on every street and district in Phnom Penh, because it’s a very popular industry and everybody is trying to open new restaurants. Still it’s possible, depending on what concept you have, location, target segment or target market. Any logical industry studies and selects the segments before entering, but I have the impression that businesses considering Cambodia often tend to underestimate the facts.

I would recommend for anybody who is coming, to look at the untapped industries, areas nobody has touched. There are still many things that can be done here. Another is provincial expansions, everybody who is entering is focused on Phnom Penh, but this is very hard because there are many businesses already. If you see Phnom Penh as a starting point, then enter provincial areas, there is still big potential for growth there.

When they come and ask the level of bank statistics, they see Cambodian account holders of less than 20% and it may seem that financial literacy is very low. But you should keep in mind that this may be partially true. The financial literacy level is an unknown standard. The majority of Cambodia might be unbanked, but they understand what financial technologies are and there are other opportunities they can have and use daily to operate their business without having banks. For anyone who is disruptive and innovated enough can open the doors because I would always encourage people not to get scared of the statistics. In the fin tech sector, Cambodia is growing more than any other country in the region.

    • Pi Pay
    • Description of Business : Payment Services