Mongolia, a country of striking contrasts, presents a unique fintech landscape. Despite being one of the world’s largest nations by land area, it is also one of the least densely populated, with vast distances separating its people and economic hubs. This distinctive geography shapes the challenges and opportunities within Mongolia’s evolving fintech sector.
Historically rich and culturally vibrant, Mongolia’s modern history has been deeply shaped by its experience is a Soviet satellite state, a status it held until the Soviet Union dissolved in 1989. Following the collapse of Soviet control, Mongolia rapidly transitioned to a free-market economy by 1992, embracing economic reforms that opened the door to global trade and investment.
While maintaining strong cultural and economic ties with its neighbours Russia and China, Mongolia has also developed significant partnerships with Western nations, including Japan, South Korea, and the United States, further integrating itself into the global economy.
Mongolia is currently classified as a lower-middle-income economy, with a gross domestic product (GDP) per capita exceeding $5,000. Although agriculture and livestock historically rooted its economy, Mongolia has since diversified significantly. Today, abundant mineral resources, including copper, coal, tin, and gold, heavily drive the country’s economic output. Additionally, the production of construction materials and high-value animal products, particularly cashmere wool, play a crucial role in the nation’s economic productivity.
Despite its vast land area, Mongolia remains one of the least densely populated countries in the world. Spanning 1.565 million square kilometres, it is the 18th largest country globally. However, with a population of just 3.398 million people, the country faces unique challenges related to its sparse population distribution.
Nearly half of Mongolia’s inhabitants – about 1.452 million people – reside in the capital, Ulaanbaatar, with the wider metropolitan area accounting for approximately 1.615 million people. Outside the capital, many Mongolians continue to live traditional, nomadic lifestyles, which often results in limited access to financial infrastructure.
The financial sector
Five major banks – Golomt Bank, Khan Bank, State Bank, Khas Bank and Trade and Development Bank -predominantly control Mongolia’s financial services sector, collectively accounting for around 90 percent of the country’s financing.
In 2022, the total assets within the banking sector grew by 12.3 per cent, reaching 46 trillion MNT (approximately $13.581billion). The Bank of Mongolia, also known as Mongol Bank, serves as the nation’s central bank, overseeing monetary policy and financial regulation. Notably, Mongolia currently has no foreign banks operating within its borders, reflecting a banking sector that remains domestically driven.
However, the financial landscape in Mongolia is undergoing significant transformation. Recognising the potential of digital technology to drive economic development, the government has been proactive in promoting digitalisation.
In 2020, it launched an ambitious five-year plan to build a ‘Digital Nation,’ with the goal of achieving 90 per cent digital transformation across the country by this year. To spearhead these efforts, the government established the Mongolian Ministry of Digital Development and Communications, signalling a strong commitment to integrating digital solutions into the nation’s economic and social fabric.
Digital ecosystem
These digital initiatives are already making an impact across Mongolia’s broader digital ecosystem. A significant milestone occurred in January last year when the Parliament passed the Investment Banking Law, paving the way for the establishment and operation of investment banks within the country. This legislative move is a clear indication of Mongolia’s commitment to expanding and modernising its financial sector. Moreover, the government remains steadfast in its goal to achieve 90 per cent digital transformation across the nation by the end of this year.
Among the government’s key initiatives is the E-Mongolia platform, making government services available online. By 2022, over 75 per cent of the population had already engaged with the platform, highlighting its widespread adoption. For a country with a sparse population and a deeply rooted nomadic culture, the creation of a centralised digital platform for government services represents a ground-breaking achievement. As of today, the E-Mongolia platform has digitalised over 2,000 government services, providing convenience and accessibility to citizens regardless of their location in the vast nation.
In addition to E-Mongolia, the government has leveraged artificial intelligence (AI) to digitalise various certificates and university diplomas. To support this digital transformation, several key laws were enacted in 2020 and implemented in 2022, including legislation on Personal Information Protection, Public Information, Cybersecurity, Digital Signatures, and Virtual Asset Service Providers.
Growth
Despite its small population, Mongolia is actively extending its fintech influence beyond its borders. For instance, this year, the Financial Regulatory Commission of Mongolia (FRC) signed a memorandum of understanding (MoU) with the National Bank of the Kyrgyz Republic (Kyrgyzstan).
Its first fintech service includes the SocialPay digital wallet, which was introduced in 2017 with nearly half a million users and owned by Golomt Bank.
One of Mongolia’s earliest fintech successes is the SocialPay digital wallet, launched in 2017 by Golomt Bank. With nearly half a million users, SocialPay set the stage for the growth of digital financial services in the country. Additionally, key organisations such as the Mongolian Fintech Association (MFA), established in 2019, have been instrumental in fostering the development of the fintech ecosystem.
Foreign investment
Foreign direct investment (FDI) and international partnerships continue to play a significant role in advancing Mongolia’s fintech sector. For example, Singapore-based Finbots.ai partnered with M Bank in 2022 to enhance the bank’s digital lending capabilities. Similarly, Khan Bank’s collaboration with Alipay+ this year has expanded digital payment options in Mongolia, allowing tourists from countries like China, the Philippines, South Korea, and Thailand to use their preferred e-wallets, including Alipay, GCash, Kakao Pay, and TrueMoney while traveling in Mongolia.
While Mongolian banks have traditionally been slow to adopt digital experiences, this is rapidly changing. Many banks are now actively partnering with fintech companies and transitioning to digital banking. Notably, at least two-thirds of Mongolian banks have implemented biometric authentication for customer identification, and over 80 percent report accepting online loan applications from small and medium enterprises (SMEs).
Mongolia’s vast and underpopulated territory, rich in cultural heritage, presents both challenges and opportunities for the fintech sector. The ongoing digital transformation offers significant potential for financial inclusion and economic development, positioning Mongolia as a growing player in the global fintech landscape.
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