People use either cash or credit cards when they buy something from the store here. In many countries like Canada or Korea, they just scan mobile phones. People were using their ring to make purchases during the Rio Olympic Games, whereas it was their gloves at PyeongChang Winter Olympics. These items only needed a chip to be installed, and it could be read or scanned from a distance. This type of payment significantly reduces queues and saves time for everyone.
The technological revolution today has allowed for the absence of cash for making payments. Some countries are even talking about transformation into a cashless economy. Digital payment not only accelerates the circulation of money in an economy but also removes a lot of time-wasting process. Furthermore, it can also help to fight corruption. It is time that buyers and purchasers have the freedom to transfer money between their bank accounts without any fees and without any cards involved.
Digital money
Money is a means of exchange, a carrier of value, and a unit of payment. You exchange your money for the goods and services you need. So you save your money to spend on the things you need later on. Prices form the basis of comparison between goods of the same type. In our common perception, money is banknotes that are issued and guaranteed by Mongolbank. These banknotes will be accepted and acknowledged anywhere in Mongolia as means of exchange.
Many opportunities to make payments without cash have been enabled by technological advancements. These include credit cards, debit cards, electronic transfers, and pay waving or scanning that was mentioned before. These tools all allow cashless payments but require both giving and receiving parties to have a bank account.
Now we are able to make payments without having an account in a bank as well. The means of exchange used here is referred to as ‘digital money’, which is a value stored electronically in a special card or your mobile phone. Digital money can be handed over to the receiving party electronically. In Hong Kong, you can get a card called Octobus, charge it up with money, and use it at 24-hour stores, fast food chains, petrol stations, and coffee shops. Korea has Upass, London has Oyster card, and now Ulaanbaatar has Umoney, which is the card used in public transportation. All this digital money is expressed by the currency guaranteed by the central bank of that country.
Lately, another type of digital money has come into use – cryptocurrency, one of which is Bitcoin. This type of digital money is not a currency of any country, never centralized anywhere, and allows for a bilateral payment system where the third party is non-existent. Therefore, its security is strong. However, it is not easy to exchange cryptocurrency for a national currency.
Digital payment
Digital payment is becoming more common in Mongolia. According to a Mongolbank report, Mongolians owned 3.8 million bank cards, 1.7 million of which are actively used, at the end of 2017. Approximately 2.4 million of all cards are in Ulaanbaatar while 100,000 cards, which is the majority of the remaining pool, are used in Selenge aimag. Seventy-two percent of all cards are tugrug cards while 16 per cent are Visa and 10 per cent are UPI. There are 27,304 POS, 3,499 mPOS, and 2,031 POB terminals as well as 1,897 ATMs and 41 other similar machines placed throughout the country. In total, transactions worth 6.4 trillion MNT were made in the fourth quarter of 2017, which is a 71-per-cent year-on-year increase.
Transactions with a value of less than one million MNT are treated as low-value. Credit transfers, internet banking, and mobile banking payments are made through this low-value transaction system while ATM, POS, e-commerce, and some government payments are made through the bank card system in real time. In 2017, a total of 30 million low-value transactions worth 3.9 trillion MNT and 98 million tugrug card transactions worth 3.8 trillion MNT were made in 2017. Mongolbank also informed that, during peak hours, 500 transactions are made per minute.
All of these transactions go through Mongolbank’s national clearing house, which deducts a fee from every transaction. Commercial banks receive 160 MNT from interbank, low-value transactions, 200 MNT from other types of transactions, and 300 MNT from high-value transactions. These fees are then handed over to Mongolbank, who made revenue of 5 billion MNT in 2016 and 6.8 billion MNT in 2017 from fees and deductions.
New players
Non-banking financial institutions, mobile network operators, online businesses, and other interested companies are now getting a better opportunity to be involved in the technologically advanced financial system. In order to get their services up to international standards, Mongolbank is preparing to replace its low-value transaction system by an automatic clearing house system. Beginning from next year, they will start following international standard ISO-20022 and relating to IBAN. These standards allow other businesses and digital money service providers to be directly connected to the automatic clearing house system and do transactions.
In any case, Mongolia must have an overall policy that supports cashless transactions to build a cashless economy. We need to lower the fees imposed on digital payments and set it at an amount lower than that of cash payments. Also, we now have an opportunity to enable payments to made on 2G network (SMS), which would enable better accessibility in a country like Mongolia with a vast territory and a dispersed population. Also, we can now use our mobile phones to make payments and transfer money, without having to go to the bank, and use cards or other means.
Mongolia increasingly has a stronger platform for digital payments and financial services to flourish.
2018.06.13
Trans. by B.Amar