In the past year, consumers in Hanoi have adopted new ways of paying for things. In some parts of the city, they no longer need cash or conventional bank cards. Stroll down Nguyen Huu Huan Street, which is known for its popular coffee shops, and you’ll spot customers settling their bills using smartphones by scanning QR codes.
In Hanoi and Ho Chi Minh City, the colorful stickers and placards of popular e-wallets like Moca and Momo are appearing on storefronts—a sign that Vietnamese urbanites are embracing cashless payment methods.
But that’s just two cities. Overall, nearly 90% of the country’s transactions still use cash. The Vietnamese government has been open about its intentions to reverse this. In 2017, it decided to implement measures that aim to reduce cash transactions to just 10% by 2020, allowing digital methods to take their place. It’s an ambitious plan, but there is good reason to think that this goal is achievable at some point in the near future.
About two-thirds of the population are online, and by 2018, 72% of the population already owned smartphones. E-commerce has grown at a phenomenal rate of 25–30% in recent years as a burgeoning middle class is more willing to click and spend. All signs have been pointing to Vietnam’s remarkable potential to go cashless.
Fierce competition
With those conditions on the ground, fintech companies have been mushrooming in Vietnam to seize the game, particularly in e-payments. At the moment, it’s still a free-for-all, with about 35 startups and platforms providing digital payments in the country, constituting the largest chunk among fintech segments. The State Bank of Vietnam has licensed 29 providers of intermediary payment services, and 27 of them offer e-wallet services.
A few players in the e-wallet market are more well-known. Momo is the first Vietnamese firm to be counted among the top 100 fintech companies, and raised USD 100 million from Warburg Pincus in January. ZaloPay is part of VNG, Vietnam’s only unicorn. Moca has formed a partnership with Grab. ViettelPay was developed by Vietnam’s biggest mobile and IT services provider, its namesake Viettel. But there are still opportunities for others to jump in. Out of Vietnam’s population of nearly 96 million, there are only an estimated 4.2 million authenticated e-wallet users, according to local media citing statistics from the State Bank of Vietnam.
Meanwhile, fintech firms are rushing to convert not only middle-income earners in urban areas, but also more than half of the population that does not have access to bank accounts.
“The over 20 e-wallets need to build proper ecosystems in order to emerge victorious in the fierce e-payment market,” said Nguyen Thanh Binh, a finance professor and fintech expert at RMIT University’s School of Business and Management in Ho Chi Minh City. “When we look at the success of AliPay and WeChat Pay in China, we can clearly identify their expanding ecosystems as the key driver to success.”
To achieve this, e-wallet providers need to attract enough funding to acquire or merge with other providers, Binh added. This has recently been seen in Vietnamese conglomerate Vingroup-backed VinID’s acquisition of MonPay, as well as the merger of Vimo and mPOS into NextPay under NextTech Group.
Consumers’ trust
Despite top-down enthusiasm in Vietnam for e-payments, and a slew of platforms ready to make them mainstream, Vietnamese consumers still prefer cash. To win the hearts and minds of consumers may take some time.
“The fintech market now is like the ride-hailing market several years ago as it’s about how we can change the habit of consumers,” said Ngo Anh Tuan, deputy director of  local financial services company VNPAY, at a recent event in Hanoi discussing cashless payments to promote online tourism.
Momo, which is considered Vietnam’s most popular e-wallet, claims that it has established a network of 100,000 stores in the country. The company’s latest funding has made it possible for Momo to expand coverage domestically.
One of Momo’s notable competitors is Moca, which partnered with Grab in September 2018 to cruise on the popularity and ubiquitous nature of ride-hailing services, making it one of the front-runners in the e-wallet space. Aside from Grab, Moca claims to have 1,500 merchant partners in Hanoi, and another 2,000 in Ho Chi Minh City.
Tran Thanh Nam, Moca’s co-founder and CEO, believes that the acceptance and adoption of cashless payments has to do with “habits and trust,” which e-wallet providers in Vietnam must address.”We do believe that Vietnamese people are ready for cashless payments, especially small and daily transactions, if the technology fits their everyday needs,” Nam said. “What we need to do is enrich our payments ecosystem and create more use cases so that consumers see that cashless payments are far simpler and more convenient.”
A helping hand from the government
At a conference to celebrate the first-ever Vietnam Cashless Day on June 16, Deputy Prime Minister Vuong Dinh Hue was quoted by local media as saying that fintech service providers must not focus on profits at the beginning as they attempt to attract more people to go cashless.
Sticking to their 2020 pledge, the Vietnamese government is also laying the groundwork to support a transition to cashlessness. The State Bank of Vietnam is drafting a “regulatory sandbox” for fintech companies to test new technologies. VNPT and Viettel, two of the country’s major telecom providers, have also been given green lights to explore the deployment of mobile money, which can potentially be transferred between mobile users, even those without smartphones.
RMIT University’s Binh believes the authorities can also lend a helping hand to facilitate cashless payments by allowing e-wallets to decouple from bank accounts. However, the requirement that all e-wallets have to be linked with bank accounts has not been amended by the State Bank of Vietnam, creating one of the obstacles for the government to achieve its cashless goal.
