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The rise of Fintech in Cambodia
Up until a few years ago, Cambodia operated on the basis of a cash economy. However, this is no longer the case as Cambodias financial sector has undergone a radical evolution. It may come as a surprise to many, but the Cambodian Fintech industry is growing exponentially and has become an attractive destination for Fintech companies.
In this article, we will examine the key factors that have enabled this shift away from a cash-based economy.
Strong connectivity, high mobile penetration rate and young demographics
Cambodia has a very young population, with a median age of 25.6 years. Having such a young population has a profound impact on how the general public will adopt the innovations offered by the public and private sectors. A younger population has been crucial in explaining the digital and technological awareness of Cambodians, which explains the country’s massive adoption of digital payment solutions.
In addition, other traditional means of payment such as bank cards were present in Cambodia but had not yet been fully democratised, which greatly facilitated the implementation of these new means of payment. There was no transition process as such, Cambodia adopted digital payments in the same way that most Western countries adopted credit cards when they first appeared.
The breakthrough of electronic payments is also due to Cambodia’s high connectivity and mobile phone penetration rate, which is 124% of the population. Indeed, there are more sim cards and internet subscriptions in Cambodia than there are people.
This has led to a proliferation of banking applications offering digital payment services, including QR codes, which are growing at an unprecedented rate (notably doubling in 2021).
According to the National Bank of Cambodia’s (NBC) 2021 Financial Stability Report, electronic payment transactions in Cambodia accounted for more than $100 billion in that year, which is equivalent to more than three times the country’s GDP.
The Cambodian Fintech ecosystem is therefore positioning itself as a real engine of growth for the country and a business facilitator. Cambodia now has a strong and innovative digital infrastructure and offers many opportunities for all businesses.
Bakong Project – Cambodia’s first CBDC
In October 2020, the NBC officially launched the Bakong project, one of the world’s first central bank digital currencies (CBDC).
Countries such as the Bahamas and Nigeria have also launched similar projects, but the Bakong project has been officially recognised as the first CBDC using a blockchain-powered payment platform.
While Bakong officially has only 270,000 users, partnerships with other banks have significantly expanded its reach to nearly 8 million Cambodians.
According to NBC, the project has several ambitions, namely to encourage cashless payments and the use of local currency to fight against dollarisation, but also to allow better interoperability between banks and different financial institutions and to promote financial inclusion.
This shows the willingness of the sector and the Cambodian government to build an innovative financial infrastructure that breaks away from traditional models and to be at the forefront of tomorrow’s economies. CBDCs are indeed on the agenda of many countries and their implementation could lead to the creation of a very efficient international network for cross-border transactions, which the Cambodian authorities seem to have understood.
In conclusion
Cambodia has entered a phase of modernisation and is evolving at full speed. The digital economy has become one of the government’s priorities, and to achieve this transition, the country is betting big on Fintech.
The population has already largely embraced this new face of the banking and financial world and it is now the turn of businesses to seize the opportunities that this sector has to offer. Cambodia is a startup-friendly country but is also capable of attracting larger companies.
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