This National Bank of Cambodia report explains the rationale, technology choices, design features and potential implications of Project Bakong "next generation" retail payments system. Rather than focusing on central bank digital currency, the project targets infrastructure modernization to respond to the need to expand financial services access in the Kingdom's rural areas. A pilot test is currently underway to examine the feasibility of the approach and identify potential issues before the official launch.
USSD also has its limitations. The customer experience is not as smooth nor does it offer the same security capabilities as STK or mobile internet. Further, USSD sessions can be dropped, potentially raising costs and harming customer trust. Despite these and other challenges, the majority of leading MFS providers rely on USSD, including many MNOs. Large deployments that rely primarily on USSD include bKash in Bangladesh, WING in Cambodia, EasyPaisa in Pakistan, ZAAD in Somaliland, M-PESA and Tigo in Tanzania, and EcoCash in Zimbabwe.
The National Bank of Cambodia (NBC) partnered with Soramitsu to modernize the country's legacy retail payments using the Hyperledger Iroha blockchain framework. The project, called Bakong, allows users to transfer money and buy from merchants with a simple smartphone app. Merchants gain a fast, cashless, and secure payments system. And banks can do interbank transfers at much lower cost. A pilot project went live in July 2019 and ran successfully with more than 10,000 users. The next step is to let everyone in the country know that the system is available and working, and launch country-wide later in 2020.
The Bank of the Lao People's Democratic Republic is reportedly launching a CBDC study. The monetary authority has employed the Japanese fintech firm Soramitsu which was involved in a similar project in neighboring Cambodia (Project Bakong). (Laos recently signed a memorandum of understanding with the Japan International Cooperation Agency.)
The National bank of Cambodia's (NBC's) Chea Serey, who leads the central bank's Project Bakong blockchain-based retail interbank payment system, said Bakong's electronic wallet reached 200,000 users in June, doubling from three months earlier. Project Bakong, launched in October 2020, allows Cambodians to pay at stores or send money through a mobile app in riel or U.S. dollars. Serey said that the mission of Bakong is to "increase the usage of the local currency," with the long-term goal to "solely use our local currency." NBC is also exploring cross-border transactions through Bakong. Currently it is working on this with Malaysia's Maybank as well as Thailand's central bank.
"You can call Project Bakong NBC's moonshot. This blockchain-based "backbone payments system" could remake the lives of millions of people and set a benchmark for how such modern infrastructure can improve lives in the developing world and beyond. It's certainly already turning heads within the crypto community, which is intrigued by the idea of central banks doing a digital currency thing."
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