Since former Prime Minister Nguyen Xuan Phuc approved a pilot program in early March, Vietnam’s telecom firms have been racing to roll out mobile money services, in hopes of ushering in a new era of financial inclusion or the country. In all, 69% of the adult population in Vietnam still don’t have access to digital payment options, let alone own a bank account, according to World Bank data from 2018.
Unlike with e-wallets, which need to be linked to a bank account, the pilot only requires consumers to register their mobile numbers, along with an ID card or passport. Participants can then deposit cash in person at telecom branches, or transfer a balance from existing bank accounts or e-wallets. They can pay for goods and services, with a maximum transaction limit of VND 10 million (USD 430) per month, according to the announcement.
“The pilot program is set to open more opportunities in the mobile payment and fintech sector,” Varun Mittal, head of fintech in emerging markets at Ernst & Young, told KrASIA. “Previously, consumers without bank accounts had limitations to get access to mobile payments and other financial services.”
Telecom firms and their subsidiaries that hold e-wallet service licenses can apply to join the two-year pilot. While the program mandates enterprises to provide nationwide services, the companies have been asked to prioritize remote and rural areas of the country in a bid to pursue financial inclusion. “There will be more use cases ranging from local remittances, digital lending, and so on,” Mittal added.
A crowded field
Several telcos have expressed interest so far, including state-owned Vietnam Posts and Telecommunications Group (VNPT), as well as the local giants Viettel and Mobifone, according to a report by Vietnam Investment Review. They are joining the mobile money upstart MoMo, the largest e-wallet by users, Grab partner Moca, Ant Group-backed eMonkey, and ZaloPay, which is controlled by entertainment unicorn VNG.
The use of cashless payments surged more than sixfold in the first six months of 2020, compared to the same period in 2019, while the aggregate transaction value rose over seven times in the same period, according to a report published by Visa in August. While the pandemic has helped accelerate the shift towards digital payments, it also intensified competition in the e-wallet sector, with leading players burning cash to sustain growth.
MoMo, for example, saw its revenue more than double to VND 4.23 trillion (USD 182.6 million) in 2019, but its losses also doubled to VND 854 billion (USD 36.8 million), according to local media reports. Zion, ZaloPay’ parent company, recorded losses of VND 390 billion (USD 16.8 million) in 2019, up 189% from the previous year, with the expectation that it will go deeper in the red in 2020.
Mittal, however, remains sanguine. “Telecom firms could monetize their financial products from day one, by selling micro-insurance, digital content and services, as well as micro-investment products,” he said. “Global and even regional telecom firms like the ones in the Philippines have built one of the largest fintech ecosystems in the country by leveraging their tech prowess and financial resources.”
The mobile payments market is going to be much bigger, as e-wallet players and telecom firms will get to share a larger pie, Mittal predicts.