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Outlook for Vietnam’s digital payment market

Outlook for Vietnam’s digital payment market

Saturday 09, 01 2021
According to BIDV Securities Company (BSC), in the early stage of development, Mobile Money service providers often focus on one or two services including money transfer and service payment. Accordingly, this service contributes only about 1-5% to the total revenue of mobile network operators in Vietnam.

Mobile Money service has been deployed since 2018. So far, there have been 90 countries developing Mobile Money platforms with about 900 million users, accounting for 1/7 of the world's population. In addition, daily transaction value via Mobile Money is about 1.3 billion USD, and the average annual growth rate is 20%.

What have network operators prepared?

Since 2019, the three major network operators in Vietnam (Viettel, VNPT and MobiFone) have all applied for a pilot license to deploy Mobile Money, and VNPT and Viettel have been granted the license. 

Specifically, at the end of June 2019, Viettel Digital Service Corporation (Viettel Digital) was established by Viettel Group. This enterprise is identified as a technology company focusing in three main areas, including: digital finance, data services and e-commerce.
What have network operators prepared?
Similarly, VNPT has also been ready for Mobile Money, in terms of both infrastructure to finance. The advantage that VNPT has is that it has built a digital financial ecosystem, and VNPT Pay has nearly 50,000 payment acceptance locations.

By early March 2020, the Prime Minister had asked the State Bank to implement fee exemption and reduction programs for e-payment service to directly support users, especially online payment fees for public administrative services.

In May, the State Bank finally submitted to the Prime Minister a decision on pilot implementation of using a telecom account to pay for other small value services (Mobile Money).

However, the pilot implementation of the Mobile Money service has not been decided yet. In August 2020, Prime Minister Nguyen Xuan Phuc once again mentioned about this implementation. Recently, several network operators have submitted a petition to the Ministry of Information and Communications on a plan to allow businesses to deploy Mobile Money services.

Regarding this issue, the Ministry of Information and Communications affirmed that it is necessary for Mobifone to have a written report on problems in applying for a license, because at present, only Viettel and VNPT have been granted this license.

For VNPT and Viettel, the Ministry of Information and Communications said that the ministry is actively coordinating with the State Bank and ministries to finalize the draft decision to submit to the Prime Minister for the pilot approval of Mobile Money.

Future outlook

According to BSC, except from the fact that it does not require a bank account, Mobile Money's services will be quite similar to e-wallet. Specifically, in the early stages of development, Mobile Money service providers often focus on money transfer and service payment.

At a later stage, service providers can expand their ecosystems with products such as insurance, savings, and credit. Mobile Money's partners would be insurance companies, banks, microfinance institutions, etc.

BSC informed that the most significant change that Mobile Money brings to credit products is that the disbursement through this service will be faster than traditional methods. Besides, the NPL ratio will also be low. 
Regarding revenue, BSC emphasized that Mobile Money service providers will have direct revenue from the user's transaction fees. However, this source of revenue only reaches great value when the product reaches a certain scale. It is estimated that Mobile Money's revenue contribution will be only 1-5%.

In addition, the value of payments through Mobile Money is usually small, so the implementation of Mobile Money will promote access to finance for people and microenterprises. Moreover, this payment method can also limit the risks of using cash such as theft, counterfeit money, especially in places where security is not guaranteed.

BSC believes that Mobile Money will improve the position of network operators, however, it does not mean that of bank will be dominated. Mobile Money will contribute to improving the understanding of financial services for people, thereby directing people to use advanced financial products. In addition, advanced Mobile Money products will still have to be linked with banks.

In general, there is a lot of room Mobile Money to develop, especially in rural areas. 

Source: cafef


Banking & Finance

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