Although cash remains prevalent in the Kingdom due to the country’s unbanked population, inadequate banking infrastructure and low acceptance, payment card usage at retail outlets are gradually expanding.
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Currently, there are around one million international debit, credit and pre-paid cards such as VISA, Mastercard, UnionPay International or UPI.
According to Advanced Bank of Asia (Cambodia) Ltd (ABA) chief card and e-service officer Sanzhar Adbullayev, the number of international payment cards in the Kingdom is growing at a rate of 70 percent per year.
He considers it to be a good ratio but there there is still room for payment cards to grow based on the volume of active users.
Recently, National Bank of Cambodia introduced the Cambodian Shared Switch (CSS) which is an interbank domestic card payment scheme.
Starting July, automated teller machine (ATM) cards of participating banks and microfinance institutions can be used at ATMs to withdraw cash and transfer funds at reasonable rates. This applies for CSS members.Observers say this could push the usage of payment cards further.
More turn to debit compared to credit
Abdullayev says ABA has a much greater portion of debit cards in its portfolio because of the popularity of debit card usage among its customers who are aged 35 and above, and are regular online payment users.
Phnom Penh Commercial Bank (PPCBank) chief executive officer Shin Chang Moo says demands are big on debit cards but bigger on virtual cards that are part of online banking services.
He says most commercial banks are offering payment services via their respective banking mobile applications.
“I think we are seeing a shift towards this direction as we believe that these services could replace physical plastic payment cards,” Shin adds.
Debit card adoption has seen a growing adoption in the country. The percentage of the banked population in the country has increased to 24.4 percent in 2018 from 12.7 percent in 2014.
Foreign Trade Bank of Cambodia card and e-banking head Soi Sathya says banks have a higher debit card portfolio compared to credit cards as many are not eligible for the latter.
It is believed that if credit cards are offered despite ineligibility, it would lead to a higher risk of late payments or rising debt.
Abdullayev says interest in its virtual Mastercard and VISA cards are picking up, particularly among younger customers.
The bank has been providing various perks to credit card holders such as promotions for the purchase of products and services worldwide.
He is positive that this will help educate bank customers on the usage of cards and retain them with interesting offers.
For instance, credit card usage is often limited to those who travel overseas. “Credit cards are usually used for hotel stays which also doubles up as a guarantee to payments,” President Shin of PPCB says.
Credit cards are equipped with security chips to reverse transactions which e-wallet and mobile payment services are unable to make.
Surcharges, hidden costs
Shin highlights that credit card fees can be costly because of the infrastructure that facilitates the service which e-wallets are unable to perform.
“While e-wallet usage is easily used in the retail market, credit cards work better in overseas transactions,” he adds.
Another prevailing issue surrounding credit cards is the practice of charging additional fees or surcharges by merchants. Banks are working with the central bank to address the matter. While the country has a potentially good environment for card acceptance, it unfortunately does not have a wide merchant compliance for credit cards.
Abdullayev says the bank ensures its customers understand that all their cash transactions will be charged while non-cash transactions have a grace period of 45 days.
“We always recommend using the auto-settlement option. As soon as customers maintain enough balance on their settlement account, the credit card will not be charged with interest after the grace period,” he says.
In Cambodia, charge cards are usually automatically provided by banks to their customers as an addition to debit cards.
FTB, for instance, provides charge cards in the form of physical and virtual card.Unlike debit cards, charge cards have a similar model to credit cards in terms of expenditure limit.
“We apply expenditure limit on our charge cards in order to avoid opening any doors to fraudulent transactions,” says Sathya.
He adds that their Classic charge card has a limit of $500. The Blue charge card has a $5000 limit imposed, and its tailored for frequent spenders. This is in accordance to National Bank of Cambodia’s guideline on charge cards being able to perform transactions of not more than $2,000 a day.
Customers are allowed to only perform up to seven transactions a day, and if they want to go beyond the limit, the banks will be able to provide the access upon assessment.
Near term expectations
As more payment channels are introduced and implemented, Abdullayev believes that payment cards would become prevalent. He claims that ABA is among the leading banks to implement dynamic quick response-payments based on the international Europay Mastercard Visa standard.
“Customers want to make sure their payment instrument is accepted everywhere. In that sense, no payment option can compete with payment cards yet,” he says.
Cambodia currently does not possess a variety of card products unlike other parts of the world. Abdullayev says based on this observation, “There is a good opportunity to further develop credit card products in Cambodia,”