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Special report: Cambodia's digitalization, a favorable landscape for foreign investors

In just a few years, Cambodia has succeeded in digitizing key sectors such as finance, e-commerce and several categories of services, both public and private. Even today, the sector continues its impressive progress.

This rapid phenomenon can be explained by Cambodia’s young, highly connected population, its willingness to engage with new technologies, private sector initiatives and proactive government support for digital initiatives.

The country’s ability to embrace cutting-edge technologies positions it today as a future leader in the region, creating a favourable environment for foreign investors looking to capitalise on a rapidly evolving digital economy.

In the beginning

A number of factors contributed to Cambodia’s early adoption of financial technology – more commonly known as FinTech. The country has a young, technophile population, and the government supported fintech adoption from the outset by offering financial incentives to companies implementing these technologies. Finally, the cost of implementing these solutions remains low, making them an affordable option for all sizes of business.

Fintech

Cambodia is ahead of the curve in fintech adoption, notably in the electronic payments segment. By 2016, a number of electronic payments providers were already operating in the Kingdom, including Wing, ABA Pay and Pi Pay. These providers offer a variety of services such as electronic payments, mobile banking, online transactions and QR code settlements.

Deliveries

Meal delivery apps such as Foodpanda, Nham24, Grab Food and a few others were launched in Cambodia back in 2015. These apps enable users to order from various restaurants and have their food delivered to their home or office. These solutions have cushioned the shock of the difficult conditions created by lockdowns during the pandemic and became very popular.

Transport

Transport apps such as Grab BookMeBus, WeGO Taxi or PassApp enable users to book a ride with a nearby cab, bus or tuktuk driver, or to book a longer trip. These applications are also very popular in Cambodia.

Success in the plural

Cambodia’s digitalisation has progressed exceptionally well in recent years, the best example being mobile banking with the incredible proliferation of solutions offered by ABA Bank. The country now boasts over 10 million mobile banking users, representing more than 60% of the adult population.

E-commerce is also experiencing impressive growth in Cambodia. The market is worth almost one billion US dollars, and is expected to exceed this figure by 2025. Most major retail groups now offer online-application solutions for shopping and delivery.

The Cambodian government is also making progress in digitizing public services. In 2021, it launched an online platform that enables citizens to access a variety of government services, such as paying taxes and applying for passports.

The Bakong digital payment system enables Cambodians and businesses to make international payments using financial technology, creating more opportunities.

QR code payment systems have been hugely successful in Cambodia, and have been rapidly adopted for both personal and business needs. Today, QR code payments have become so commonplace that a large majority of the population hardly use cash any more, except for tips and small miscellaneous payments, or in less urbanised areas. What’s more, QR code payments are linked to local banks and financial institutions that can also be used in Thailand, Vietnam, South Korea and soon China, providing a significant additional advantage for businesses operating in Cambodia.

« From tuk tuk drivers to shopping malls, mobile payments by scanning QR codes or via in-app transfers are now the most common way to make transactions across the country, closely followed by opening fully digital accounts and micro-lending apps. »

The World Bank praised Cambodia’s digitisation and the way it very quickly overtook traditional systems by adopting mobile payment platforms in the banking sector, stressing that, ‘thanks to this development, Cambodians have access to modern mobile financial services, offering them convenient and secure options for making transactions, inspiring trust’.

Government support

Officially, the Digital Economy Policy was launched in 2016. It aims to make Cambodia a digital-friendly country by 2025 and includes a number of initiatives to promote digitalisation, such as improving the country’s Internet infrastructure and developing a specialised workforce.

The e – Government Master Plan – National eGovernment Master Plan was launched in 2017. It aims to make government services more accessible and efficient. The program includes a number of initiatives to digitise government services, such as the creation of an online platform for citizens to access government services and the development of a mobile app for the same services.

The Digital Cambodia initiative was launched in 2018. It aims to promote digitalisation in the Kingdom by providing financial support to businesses. It has funded a number of projects, such as the development of an online education platform and the creation of a digital payment system.

The creation of the Cambodian ICT Federation (CICT) and the Cambodian Information Technology Development Fund (CIDF) testify to the government’s commitment to creating a favourable environment for the technology sector.

Regional context

Cambodia’s speed of digitisation is quite impressive compared to its neighbours. The Kingdom has the highest penetration rate of mobile banking services in Southeast Asia, with over 60% of the adult population using them. This is significantly higher than in neighbouring countries such as Thailand (30%) and Vietnam (20%).

Cambodia’s e-commerce market is also growing rapidly, with a value of just under one billion dollars by 2022. This figure is still modest compared with the e-commerce markets of neighbouring countries such as Thailand ($35 billion) and Vietnam ($15 billion). However, the Cambodian e-commerce market is growing at a faster pace than those of its neighbours.

The FinTech sector in Cambodia can rely – in a French-speaking context – on the presence of French Tech and also of several startups – Confluences, for example – specialised in this sector and which can offer market studies and follow-up for setting up in the Kingdom.

Opportunities

The digitisation of Cambodia certainly offers a wide range of investment opportunities in multiple sectors. E-commerce, for example, is growing steadily, offering investment opportunities in logistics, payment systems and delivery services.

‘With the growing adoption of digital payments and mobile banking, investing in fintech solutions, mobile wallets and payment gateways can prove lucrative.’

Digital payment platforms in Cambodia include ABA, Pi Pay and Wing. Pi Pay is an example of an initiative that has secured substantial investment from foreign investors to develop its digital payment services.

Investing in the development of digital infrastructure, such as Internet connectivity, data centres and cloud services, is essential to support Cambodia’s digitisation. Several local companies and joint ventures have already invested in this area.

Engaging in the development of mobile applications, software solutions and IT services helps to meet the growing demand for these kinds of tools and services. The development of applications for sectors such as healthcare, tourism and transport could prove beneficial.

The development of smart city initiatives, such as the partnership between the Cambodian government and South Korea’s NXC Corporation, also shows that foreign investors can also contribute to Cambodia’s urban transformation.

Challenges ahead

Cambodia has made significant progress in digitisation in recent years. However, a number of challenges still need to be overcome if the full potential of digital technologies can be realised.

One of the main obstacles to digitisation in Cambodia remains the low level of knowledge. Many people in Cambodia, particularly in rural areas, do not yet have the required expertise or skills to use digital banking services. This makes it difficult for them to access financial services and participate in the digital economy.

Another challenge of digitisation in Cambodia would be cybersecurity. As more and more people use digital banking services, there is an increased risk of online fraud, even though the country has so far not suffered any serious attacks in this industry. Also, the mobile banking market in Cambodia is becoming increasingly crowded. There are now dozens of different providers offering similar products and services. So it’s imperative to come up with a project that makes sense, and to find out whether it’s realistic.

Original ideas and new investment in Cambodia will help to alleviate these difficulties and reinforce the country’s digital development.

Sources: Cambodian Ministry of Economy and Finance – Aquarii – Datareportal – World Bank.

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