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Updated on February 7, 2019 From Myanmar Times

Red Dot closure concerns spread to industry, draws light on licensing procedures

Disenfranchised agents of the now defunct Red Dot Network Ltd plan to file a court case against the payment-solutions provider after being turned down by the Consumer Protection Central Committee, which said their case could not be handled under the Consumer Protection Law.
       The agents are unhappy that deposits paid to Red Dot will likely not be returned to them. Red Dot, which sells virtual credit top-ups for mobile phones and facilitates mobile money transfers, bill payments and online purchases, shuttered its operations last December. The company had provided its services to app providers Viber, Ananda, iflix and Viu as well as the four telecommunications operators, Ooredoo, Telonor, MPT and Mytel.
       Meanwhile, phone numbers provided to agents to contact Red Dot’s support service on Monday were not in service.
       No reason has been given for the shutdown of the company, which registered as a foreign company with the Directorate of Investment and Company Administration (DICA) in 2017. “The company has not applied for liquidation in accordance with the Companies Law,” U Aung Naing Oo, director general of DICA, told the The Myanmar Times.
       The Red Dot fiasco has once again drawn light on the Central of Myanmar (CBM)’s licensing procedures for financial services and fintech companies in Myanmar. In 2017, the issue was brought up in Parliament after fintech company Ok Dollar was given a Mobile Financial Services (MFS) licence by the CBM only one year after it started operating.
       MPs had stressed that the CBM allow only financial organisations, including fintech companies, to operate only after confirming that their business models are credible and licensed.
       The CBM currently issues two licences for mobile-based financial service providers and fintech operators in Myanmar. The MFS licence was first issued in 2016 and these are given to operator-led firms like OK Dollar, Wave Money and M-Pitesan.
       The Mobile Banking licence, which was issued in 2013, is awarded to traditional banks. Firms then operate under the bank’s licence. For example, Thailand’s TrueMoney operates under AGD Bank’s Mobile Banking licence.
       According to the law, financial institutions without an official licence to operate from the CBM are not allowed to provide money transfer services in Myanmar. The government can sentence company officials that break the law to jail or issue fines.
       Red Dot first began operations in Myanmar in 2015, even before registering as a foreign company in 2017. Red Dot was founded by Irish businessman John Nagle, who bought the firm from mobile operator Digicel last June. Mr Nagle launched Red Dot with backing from Digicel in 2014, after emerging from bankruptcy in the UK, according to media reports.
       Under Digicel, the firm had earlier attempted to apply for the MFS but was unsuccessful. Yet, Red Dot continued to operate and told the media it had reached 10,000 stores across Myanmar, investing upwards of US$25 million in its first year of operations.
       “Red Dot is an agent company, which is neither a banking business nor a financial services provider,” U Bo Bo Nge, deputy governor of the CBM told the media on Wednesday.
       “Red Dot had never applied for a licence from the central bank, nor had the central bank issued a licence for it,” said U Bo Bo Nge.
       In a statement issued Wednesday, mobile money services provider Wave Money sought to reassure the public, saying that unlike Red Dot, it is licensed by the CBM under the Mobile Financial Services Regulation.
       “A core component of this regulation is safeguarding of agents and customers funds. As per regulation, 100 percent of these funds are in a trust account in Yoma Bank. This guarantees agent and customer funds are protected and completely safe.
       “We are backed by trusted and well-capitalised investors, including Telenor Group and the Yoma Group,” it added.
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