The National Bank of Cambodia has already seen tremendous success with its digital payment app Bakong, which uses DLT. There are more than ten million wallets in a population of 17 million people. Now it has released a soft launch app for Cambodian tourists.
In addition to the Bakong Tourist App, a key goal of Bakong is to promote the use of the local currency, the riel. Around 80% of all local transactions are made in US dollars, compared to less than 60% through Bakong. The Bakong Tourist App only supports QR code payments in riel.
Today, most tourists use a mix of cards and cash, often locally available US dollar bills, which are quite damaged. Credit cards are accepted at 55,000 points of sale, compared to 3.3 million locations that support the KHQR codes used in Bakong, including small stalls.
Tourists can download the app and register via email. Currently, they have to top up their balance at banks and hotels. Soon, it will be possible to enter card details through the app. This type of identity verification allows tourists to spend up to $1,000 per day, with a limit of $3,000 after personal identity verification. The post hinted that hotels and travel agencies can conduct the verification using a passport ID check.
Upon departure, the remaining balance can be exchanged at a bank, donated to a local charity, or used at other tourist destinations in Thailand, Laos, Vietnam, and other countries. We note that using Bakong abroad is subject to at least an exchange rate markup, but these countries are also at the top of the list for foreign arrivals in Cambodia.
Further integrations with Malaysia and South Korea are expected to go live in the coming months. The central bank has also signed cooperation agreements with China, India, Singapore and Japan for cross-border payments. The Japanese company Soramitsu is the technology provider for Bakong.
Although many consider Bakong to be a CBDC, it is not. In fact, it is a tokenized deposit solution developed by the central bank.
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Benefits of the Bakong Tourist App
The Bakong tourist app offers several benefits. The stated goal of using local currency means that the banks and central bank effectively receive foreign currency while traders receive more local currency. In addition, the central bank mentioned convenience for tourists and the avoidance of shoddy dollar bills.
We see a few other benefits. The 55,000 stores that accept card payments can avoid the expensive merchant fees that western credit cards incur. For the central bank, it helps to gain a better insight into economic activity, as tourism accounted for more than 18 percent of GDP in 2019. A simple survey of departures at airports can help it get a sense of how many tourists are using the app. Otherwise, with a large proportion of cash transactions, it’s hard to know what’s really going on in the economy.
The data could potentially be used for tax purposes, but once that happens, Bakong usage could decline. Getting a picture of economic activity is a big win in itself.
