Fintechs in Vietnam are facing many barriers because the regulations of the State Bank of Vietnam (SBV) require the accounts of electronic-wallets (e-wallets) to be connected to bank accounts.
A recent survey of FT Confidential Research showed that 46 percent of urban people use cash to perform transactions in Vietnam. This also shows that the government is doing on the right track to meet the target of reducing cash transactions in urban areas to 50 percent by 2020. However, Vietnam is still slow in accepting non-cash payments compared to other countries in Asean 5 and is likely to stay the same if regulations are not loosened.
The government expected that mobile payment will boost the non-cash payment trend, based on the increasingly popularity of smart phones in Vietnam. Moreover, Vietnam’s population is young and tech-savvy. According to the SBV, 41 banks and 23 non-banking Fintechs are currently providing mobile payments in Vietnam.
Despite accounting for less than 10 percent of digital transactions, mobile-based transactions have been developing rapidly in Vietnam. In the first nine months of 2018, mobile banking transactions increased by 126 percent compared to the same period of 2017, reaching 1,030 trillion dong (equivalent to 44.5 billion US dollars), while transactions via e-walletsmobile payment service provided by Fintechs accelerated by 161 percent to reach 65 trillion dong.
The size of e-wallets is fairly small, but they may greatly affect the scheme to develop non-cash payment of the government, because e-wallets are designed for handling daily transactions with low value. The average size of an e-wallet transaction is about 19 US dollars, much lower than the 366 US dollars of each mobile banking transaction.
Fintechs have pioneered in applying mobile payment in Vietnam, especially the payment of daily items at low cost. These companies are continuing to develop multi-use applications and pour a lot of capital to attract new users.
Domestic application Momo is currently the most popular e-wallet in Vietnam and very active in building market share. As of November 2018, Momo welcomed the 10th million user, marking a 10-time growth compared to two years before. This application very early attracted foreign capital with 28 million US dollars from Goldman Sachs and Standard Chartered Private Equity in 2016.
ZaloPay the second most-mentioned e-wallet in the survey of FT Confidential Research has very quickly developed after its launch in late 2017, based on the network of 100 million users from Zalo of the parent company VNG Corporation.
Meanwhile, Grab has used discounts to convince customers not to use cash in payment. Grab which is backed by SoftBank acquired all of Uber’s operations in Southeast Asia last year. The firm is spending a lot of money to shape a habit for consumers in Vietnam, from travelling, food delivery to digital payment.
At present, banks and Fintechs now mainly choose to cooperate with each other. Banks tend to not see Fintechs as threats, as the combination between reputable e-wallets and huge networks of banks will bring commissions and revenue from fees.
However, an article on Nikkei said that Fintechs in Vietnam are facing many barriers because the regulation of SBV requires the accounts of e-wallets to be connected to bank accounts. It means that without a bank account, you cannot open an e-wallet account.
Account registration is also complicated when the Internet Banking service often comes with a monthly fee and tends to be alienated by users. Moreover, in Vietnam, only 31 percent of adults have bank accounts.
In response to these shortcomings, the government has requested the SBV to submit a plan which allows people to top up their e-wallet accounts without the need to use bank payment accounts before the third quarter of 2019.