Singapore agreement offers opportunity for Cambodian retail banking market

By Rebekah Tunstead | 12 April 2019

A fintech agreement between Cambodia and Singapore authorities provides an opportunity for the former’s underbanked and underbanked population, according to lawyers, while the vice president of both Cambodia and Singapore’s fintech associations says lessons can be learned from both central banks’ implementations of blockchain.

“For [Cambodia], with a market of which 70% is underbanked, fintech would be a great thing for them in terms of opening up payments and digitizing all of that, but it would be very slow for them to adopt that because they are so weighted to cash,” says Natalie Curtis, who leads Herbert Smith Freehills’ financial services regulatory practice in Singapore.

The Memorandum of Understanding (MoU) took place on the sidelines of the 5th Association of Southeast Asian Nations (ASEAN) finance ministers’ and central bank governors’ meeting last week.

“There was already a meeting on broader financial industry issues, and maybe some of those bigger topics around regulation are harder to tackle, but if [both parties] sign an MoU in the fintech space then everyone goes away feeling good that [they] have been able to collaborate on something, but without really giving much away,” says Curtis.

For Eddie Lee, vice president of both the Cambodian and Singaporean Fintech Associations there is an opportunity for both countries to learn from one another as their respective central banks attempt to implement blockchain for settlement purposes.

“There is an initiative going on in Singapore called project UBIN. They have been experimenting with blockchain since 2016 and were trying to do bank to bank settlement using blockchain. With Cambodia also trying to leverage blockchain, I thought it was quite natural for them to work more closely together to see how they could exchange best practices,” says Lee. 

According to a whitepaper published by the World Economic Forum in March, there is a lack of efficiency in Cambodia’s domestic payment and settlement processes. However, the research also reveals that the National Bank of Cambodia is set to be one of the first to use blockchain in its national payments system. The central back will carry out experiments on implementing the technology in the second half of this year.

But Curtis points out Cambodia has significantly more to gain from this mutual understanding as there are considerable differences in both fintech infrastructure and regulation between the two countries, but this could be useful to Singapore as it intends to create similar agreements with more south-east Asian countries.

“Cambodia is much less developed in terms of its fintech infrastructure,” says Curtis. “As far as the Monetary Authority of Singapore teaming up with Cambodia on a joint project, it would be unlikely because Cambodia isn’t going to be able to contribute as much as say Australia, and Singapore were able to tie up because it is more a partnership of equals.

“The Singapore government has an agenda to make Singapore a smart nation. There is a government directive that every aspect of what is done in Singapore should be focused on innovation, and digitization, so this has come from the top down. The regulator here is very tech-savy, and they use a lot of innovation and regulation themselves in their own operations.

“Singapore realizes that firstly, it is good to have cooperation agreements around the region. It is a very easy way of improving country relations because signing is a bit of goodwill, it doesn’t cost anyone, anything,” she says.

“Singapore does see itself becoming a fintech hub of ideally of Asia, but at least of south-east Asia. These smaller things just form a foundation that maybe one day, we can bring these smaller countries along.”

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