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Cashless payment: Drastic need for state management

Cashless payment: Drastic need for state management

Wednesday 11, 12 2019
"What is the reason for the challenge of slowing the transition from magnetic stripe to chip card" is the first issue raised during the discussion at the Forum of Developing E-Payment Ecosystem 2019: Moving with Chip technology held by Vietnam Economic Times in collaboration with Vietnam National Payment Joint Stock Company on 10th December 2019.

Banks alone cannot do it

Mr. Nguyen Dinh Thang, Chairman of LienvietPostbank's Board of Directors, said that the big reason was due to big bank expenses. Investing in old technology requires a period of depreciation, meanwhile, when applying for the chip card, the system of technology must change, the terminal system, ATM, POS system must change ... Those are huge costs. In addition, changing chip cards back for customers also takes time.

In the same opinion, according to Mr. Tran Cong Quynh Lan, Deputy General Director of Vietinbank, when switching to chip cards, banks have to change a series of machines, the cost of issuing chip cards is also much higher than that of magnetic cards. However, banks have realized that it is necessary to convert and are determined to transfer magnetic cards to chip cards, turning challenges into opportunities. The challenge is how chip cards can be integrated and synchronized to pay a lot of expenses such as education, health care, and insurance, not merely from keeping ATM accounts.

On a more positive view, Mr. Nguyen Quang Hung, General Director of Vietnam National Payment Joint Stock Company (Napas), said that the bank has had a strong movement. As evidence, at the beginning of the year, there was a ceremony to launch chip cards, at that time there were only 7 banks but now Napas and more than 20 banks are willing to convert chip card technology.

By the first quarter of 2020, not only will stop 20 banks and 6 chip card providers, but there will be 26 banks and 10 chip card companies. "These things show that the bank has been very active," Mr. Hung assessed. In terms of state management, Mr. Pham Tien Dung, Director of Payment Department, State Bank affirmed that banks cannot develop without our ecosystem. Mr. Dung likened that the ecosystem is like a handshake, the bank presents a hand, the other party also has to present its hand to match. For example, carriers also have to fix their information systems, but banks alone cannot do it.

There is a need for drastic government management

Discussing solutions to promote cashless payment, Mr. Nguyen Dinh Thang said that to change, there should be specific solutions. Propaganda alone is also not allowed.

Besides the solution from the bank to ensure safety, according to Mr. Thang, there is another solution that requires imposition. For example, the Government requires cashless payment, which everyone must use. The ecosystem we have built stores must be changed, otherwise, business licenses will not be issued. "It is a policy, it needs drastic from the state" Mr. Thang proposed.

According to the Director of Napas, in order to promote cashless payment, it must take place from two sides, between card-issuing banks and retail stores, as well as between public payment facilities and card-accepting places, in order for the ecosystem to be completed. Napas is oriented towards the development of card payment which goes both ways.

Cashless payment

"Napas and banks, on the one hand, convert magnetic cards into chips, on the other hand, go to the payment points to accept chip cards on the other hand. Typically, the signing ceremony today has gasoline and hospitals. All Vietnamese people buy gasoline, with 99% of them use cash. Cars use 1 million, while motorbikes use 50,000 - 80,000 VND. Within that limit, the contactless card is very useful, as people only need to use the card to pay after purchasing gas. That's what Napas and the bank are looking for a big market like Petrolimex to popularize people to use cards not only to withdraw money, "Mr. Hung said.

Lessons from other countries

Speaking at the Forum, Mr. Nguyen Kim Anh, Deputy Governor of the State Bank of Vietnam, affirmed that converting domestic payment cards from magnetic cards to chip cards is one of the tasks approved by the Prime Minister at the project on developing non-cash payment. Deploying this task, on October 5, 2018, the Governor of the State Bank of Vietnam issued a set of domestic chip card standards, specifying Vietnam's domestic card specifications in accordance with EMV international standards, preventing card counterfeiting in physical environment through ATM and POS channels.

Chip cards help banks issuing domestic cards in Vietnam have the potential to expand the payment ecosystem into industries such as transport health, insurance, providing practical benefits and superior experiences for the people using the services.

The State Bank also issued Circular 41 stipulating the roadmap for conversion to chip cards, with the conversion route for the card accepting device at the point of sale operating in Vietnam being similar to the card payment institution until December 31, 2020, and domestic card issuers in circulation 31/12/2021, as well as organized the issuance of domestic cards in circulation until December 31, 2021.

The Deputy Governor stressed that the transition to contactless and non-contact chip technology is still challenging, so the Forum is an opportunity for banks and related organizations to share and discuss the issues around this topic.

The State Bank wants presenters to discuss the trend of lessons learned on the conversion of domestic chip cards from international countries, to overcome the increasing situation of high technology crime, focusing on the unimplemented market. The coordination of banks and related units to accelerate according to the issued schedule, ensuring information safety and confidentiality during the card conversion process.

"The State Bank also wants the parties to enhance learning and exchange to promote the Vietnamese card industry in accordance with the world trend to ensure security, safety for sustainable development, and timely application of achievements of the Industry Revolution 4.0, bringing convenience to the people, creating favorable conditions for developers to develop new payment features, opening up opportunities for domestic cards to integrate internationally, "Deputy Governor Nguyen Kim Anh said.

Related Article -> Digital payment is currently the leading fintech segment in terms of players and investment

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