At the meeting between the Prime Minister and business taking place in early May, the Governor of the State Bank (SBV) Le Minh Hung said that this agency had submitted to the Prime Minister the decision on the pilot application of using telecommunications accounts to pay for small-value services (Mobile Money).
Two months ago, the Ministry of Information and Communications (MIC) also issued a written request to major telecommunications networks such as Viettel and VNPT to soon complete procedures and infrastructure to deploy Mobile Money service.
This is a move to prepare a roadmap for providing this service to customers after the Prime Minister asked the SBV to urgently submit a specific decision on the pilot use of telecommunications accounts to pay for nonvaluable transactions, transfers, deposits and withdrawals.
If the pilot is launched this June, telecom companies will officially enter the payment service market, with more competitive advantages than banks and e-wallets currently participating in Vietnam's digital payment market.
Telecommunications companies, with their network infrastructure spread across the nation's (or transnational) borders, have an advantage as they can easily bring financial products to people who do not have bank accounts residing in remote and isolated areas. When Mobile Money is put into practice, the proportion of cash on total means of payment by the end of 2020 is forecast to decrease to 10% from 11.33% in 2019.
According to the Global System for Mobile Communications (GSMA), more and more Vietnamese use digital payment and this market is expected to reach USD 71 million in 2025, with a double-digit growth rate of 18.2% in 2018.
Mobile phone usage rates are higher than bank accounts. This shows Mobile Money's potential to help Vietnam promote comprehensive finance, or simply provide appropriate and convenient financial services to all individuals and organizations, especially for low-income and vulnerable people, to give them the opportunity to have access to basic financial resources which help improve them improve their living standards, and circulate capital flows, thereby promoting economic growth. In addition, Mobile Money will also help Vietnam promote financial services on a digital platform, moving towards becoming a cash-free economy under the government's goals.
In 2018, e-payment in Vietnam increased by 61%, but mainly in urban areas. GSMA believes that Vietnam needs a nationwide payment infrastructure with affordable transaction costs to cover the widespread electronic payment; and Mobile Money will be a practical solution to narrow the gap between urban and rural areas.
GSMA assessed that more than 90% of mobile phone subscribers in Vietnam are prepaid accounts. In order for Mobile Money to be successfully deployed, carriers will need a network of agents nationwide, especially in rural and remote areas to provide payment services via telecommunication accounts.
According to Kiva, a non-profit organization connecting Internet lenders to low-income businesses and students in 77 countries, Vietnam needs to soon deploy Mobile Money to promote comprehensive financing due to several benefits it brings.
One of the benefits is that micro-borrowers, usually low-income people, will have to pay less interest. In particular, with telecom account payments, microfinance institutions will be able to charge lower interest rates for those who borrow small loans, as they will not need to send staff to each village and commune by motorbike to collect the repayment, thereby saving labor costs and cutting maximum interest rates.
Secondly, international microfinance institutions can reduce the fees for international transfers and thus may disburse micro-loans in Vietnam on a more frequent basis, bringing small loans to those who really need it.
Thirdly, borrowers will be able to save money and keep track of liabilities on their own mobile devices. The poor, according to Kiva, often do not have official bank accounts. In Vietnam, only 31% of people have a bank account at a financial institution and only 2% have a credit card.
Opening a bank account is very expensive, and banks are often not interested in providing financial services to the poor. Most poor people will have to think of ways to store or save cash (for example, store in a safe place at a relative's home).
Mobile Money service will allow borrowers to easily track their due debts and easily manage money and save money for the future. For example, studies in rural Kenya showed that people here who decided to use payment services via M-Pesa telecom account saw their income increase by 5-30%.
>> Vietnam Fintech market to be reshaped