Digital Banking in Cambodia

Updated On : July 2019

Today with the popularity of the rapid development of the internet, digital banking has been the focus of most commercial banks. The Cambodian economy has been growing at a fast pace and has not looked back since it earned the 6th spot among the fastest-growing economies of the world according to the World Bank Report in 2017. It has risen to attain significant socio-economic transformations over the past decade. With internet banking, the previous business organization model, as well as the traditional settlement payment scheme also changed considerably.

The financial health of Cambodia has shown steady growth and banking has emerged as one of the most robust industries set on making healthy profits. The priority for National Bank of Cambodia today is to continue strengthening the balance between promoting financial inclusion and sustaining financial stability.

To improve the fiscal health of Cambodia and digital banking in the country, a few areas of improvement have been identified. They are

• Implementing security to protect the banking system against online fraudulent practices and money laundering is an immediate requirement. In addition, the introduction of advanced technological systems like blockchain, encryption technology, including a CA certification system and control on access will add to the security environment and boost digital banking in Cambodia.
• Banks should also look at reinforcing the online stream with confidentiality awareness among bank employees, improved hardware and stringent software security measures. It is crucial to establish authorization systems and an appropriate management strategy.
• A step towards defining the international regulatory and compliance system and a relevant legal system will bring in integrity, promote regulation and avoid differences.
• It is important to build a credible social credit environment, which will help to regularize business transactions, support the digital movement, set up a relevant credit rating system and attain social resource sharing.
• Awareness needs to be raised about MFIs in the village, commune, district, and provincial levels. NBC's public campaigns are a good step in this regard.

Building Cambodia's digital banking will also bring in a lot of benefits by helping their economy to get rid of the traditional banking system of settlement payment and improve business organization models.

Some of the marked benefits of improved digital banking and digitization of banks in Cambodia are

• Enhanced competitiveness of banks
  The advent of internet banking lowered the operating costs of commercial banks significantly, which make it possible for traditional commercial banks to compete and be compared with financial companies on the internet.
• Increased profit margins
  Earlier traditional commercial banks would open sub-branch outlets to provide key services to customers. However, this required considerable manpower, finances, and material resources, which resulted in increased operating costs and reduced profitability. Digital banking helps traditional banks to actively bring in high-quality customers, reduce the number of sub-branch outlets, and enhance the bank's profit margins.
• Provides high-tech support
  The introduction and application of new-age technology enable banks to carry out financial product innovation and provide quality service to customers. Digital banking helps to develop new financial products, enhances the efficiency of a bank, and expands the scope of a banking business.
• Reduces operating costs
  With the number of internet banking customers increasing, the unit cost borne by the bank decreases which in turn lowers the marginal cost of internet banking. Hence, the cost of a network bank transaction becomes lower than the traditional commercial banks.
• Increases information and service levels
  With digital banking, banks can contact customers directly and provide safe, high quality, and convenient service, anytime and anywhere. Digital banking can also publish the bank's relevant policies through mobile or other tools.
• Realigns customer groups and business scope
  The customer base for Internet banking is usually the young, well-educated population with the ability to create social wealth. They have good development prospects and high-income levels. Digital banking can appeal to this lucrative customer base and continue to provide services for them even when they are on the move and sometimes migrate to other regions.
• Showcases competitive financial products
  Bank competition today deals with not only service levels, but also competition in internet banking. Banks are striving to stand out amidst the fierce competition by increasing the use of the internet and emerging technologies in network banking services and decreasing the cost of operations.

As banks and financial institutions expand their reach in Cambodia, customers are realizing the safety and convenience that digital banking provides. MFIs have broadened their service offerings, offering money transfer, mobile banking, ATMs & microinsurance. Nelito's Fincraft^TM suite for banks and MFIs enables these organizations to leverage cutting-edge technology and provide end-to-end digital banking solutions to their customers.