Home to more than 96 million people, Vietnam is on the cusp of a mobile payment revolution, fuelled by an amalgam of factors, including a high smartphone penetration, and government’s vision of a cashless society.
Its people are young – 70% of Vietnam’s population are under the age of 35 – and tech-savvy, excited about a digitising society. In first-tier cities like Hanoi and Ho Chi Minh City, increasingly, consumers are becoming receptive to the idea of a digitalised society and lifestyle, thanks to the growth of e-commerce and mobile payment services.
According to the Deputy Prime Minister of Vietnam Vuong Dinh Hue in October 2018, there are “78 credit organisations” providing “cashless payment services” as well as “28 others” e-wallet companies in the country.
The Deputy PM has been enthusiastic about reducing the use of cash money; in January 2017, he signed a policy decision to make the number of cash transactions less than 10% of total market transactions by 2020 – this plan includes developing alternative ways of payment in less urbanised areas and having pensions paid through e-payments. With this explosion in digitization comes an opportunity in the payment space that companies are only too happy to jump on, resulting in an influx of mobile wallets.
Crowded space
The current market leader appears to be local contender Momo, which according to a public survey dated last April (in Vietnamese) is said to surpass its foreign counterparts in Vietnam like Samsung Pay and PayPal.
Others include Moca, a company that has struck up a deal with Southeast Asian O2O giant Grab; telco-run ViettelPay; Payoo; VNG’s ZaloPay; and third-tier city targeting Ononpay. Overall, there are 27 licensed payment services and 20 of which operate e-wallets.
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The appeal goes both ways. For digital wallet companies, they typically earn revenue from businesses for facilitating transactions or from consumers and financial institutions for offering value-added services like loans. They are also sitting on a trove of useful data, from location to consumer spending habits and more, which they can either sell directly or indirectly to other businesses that are looking to better understand their clients.
And for consumers, they are getting convenience at typically no financial cost. Those who are in metropolitan areas can pay for goods offline and online in a fast manner without having to deal with notes and coins, and those in rural areas do not have to commute in order to pay for goods and services. The unbanked can gain access to financial services that might give them a better shot at starting a new business; such features can come in the form of a digital credit score that helps the consumer apply for loans and the ability to save money in a way that maximises returns.
Asian inspiration
Vietnam seems to be in the footsteps of nearby Asian countries China and Indonesia, both claiming a burgeoning fintech ecosystem.
China’s mobile wallet landscape is dominated by two tech powerhouses Alibaba and Tencent with Alipay and WeChat Pay, respectively. In China, it is often joked that it is better to lose your wallet than your smartphone, as people do virtually everything via these nifty devices.
Alipay was launched in 2009 with WeChat Pay launched four years later — today, the two companies control around a combined total 94% of market share, per Jumpstart Mag, allowing people to pay for anything and everything from tipping a street musician to buying a bowl of noodles from a hawker to shopping online on Taobao or JD.
Indonesia, while closer to China’s e-wallet prowess, is struggling to push itself towards its goal of becoming cashless. There is a tight fight between O2O players Grab (which has a linkup with payment wallet OVO) and Go-Jek’s in-house wallet feature Go-Pay, usable for food delivery, booking of rides, and in physical shops.
While still considerably young compared to traditional banks, Go-Jek has been deemed a threat by seven of 10 local financial institutions as it rides into the country’s difficult payments sector, according to a report by PwC cited by SBR. In terms of usage, the Google-backed company has hit over 100 million monthly transactions and US$5 billion in payment transactions in 2017.
Benefits of going cashless
An emerging market like Vietnam has a large number of unbanked individuals. With just 31% of the country in ownership of a transaction account, as per the World Bank in 2017, the remaining 69% may suffer from a dearth of options that come as a result of them not having a credit score or history. This means that people who do not have a bank account will not be able to apply for loans or benefits that their banked counterparts are free to do so.
Additionally, in third-tier cities and rural areas, banks may not be operational or even have a presence there due to logistical difficulties that come with setting up a branch in a less-developed spot. Ononpay is one company that aims to help unbanked consumers in such areas, connecting them to value-added services like banking loans and letting them pay for services like utilities and everyday goods via the e-wallet app.
Another benefit that comes with going cashless is that consumers get to enjoy a higher level of convenience and efficiency. Instead of fiddling with coins and change, they can make payments in a second or two, and keep track of expenses via digital receipts.
Moreover, consumers can also enjoy discounts and subsidies as e-wallet companies are competing to find their footing in the crowded market. Apps like Momo and ZaloPay, supplies customers with free money and cash back when they do certain actions, like transacting with a certain bank partner or spending on Vietnamese New Year, perhaps a leaf out of WeChat and Alipay’s book during Chinese New Year.
While all e-payment wallet apps strive to provide the most convenient, accessible service, only the one that can offer the most number of use cases, paired with the most seamless experience, will be able to emerge victorious as the defacto market leader.
At the moment, Momo appears to have cornered the market with ample use cases, from buying movie tickets to booking flights. For companies like Grab and Go-Jek, its experience running on-demand services like food delivery and others may help it get a better grip of the market in Vietnam even as it strengthens its e-wallet offerings.
Vietnam’s cashless dream
Though the country might be poised in terms of number of e-wallet companies operating, the bullish vision of the government, and the proliferation of smartphones, many things are still lacking before it can realise its dream of a cashless society.
“The market will be still growing a little faster than today, than this year, but we’re still in the early stage,” said Syphong Bui, the founder of Ononpay, on how the ecosystem will look like in 2019. He expressed concern that some e-wallet companies will not be able to stand up to the pressure of running a payment business unless they can generate revenue “fairly quickly on value-added services” that are placed “on top of payments” and can subsist on a “long runway”.
Aside from that, e-wallet providers must discover enough use cases that the average Vietnamese consumer comes into contact with on a regular basis to encourage cashless behaviour.
While there aren’t specifics on the number of e-wallet users in Vietnam, one report placed it at “up to 10 million”, a mere fraction compared to the country’s sprawling population. For e-wallet businesses, this is a two-fold problem: not only do they have to educate those who do not already know about their products on the benefits of going cashless, they also have to create loyalty.
At the end of the day, one key factor to raising e-wallet adoption is to make it ubiquitous at as many places as possible. Otherwise, it will just be a pipe dream, after all.
Editor: Ben Jiang