There are 33 e-Wallets operating in the market, but only a few of which stand out. Currently, promotion is one of the main factors that motivate users to carry out transactions through e-Wallet. Popular promotions on e-Wallet apps are Cashback, Point Accumulation, and Discount based on transaction value. Thus, to attract new users as well as to encourage current users to carry out electronic transactions, e-Wallets are competing fiercely by burning money for promotions.
Vietnam currently has approximately 13 million e-Wallet accounts, accounting for about 14% of the population. Vietnam is also one of the country with the fastest growing number of smartphone users in the region, with the number of users having doubled since 2014, reaching 51 million users. Therefore, electronic payment is expected to thrive in Vietnam as in China in previous years. Not only domestic enterprises but also many foreign investors are very interested in the e-Wallet field in Vietnam.
The outbreak of the Covid-19 pandemic has made a strong push for cashless payments. However, while the number of electronic transactions increased during the quarantine time, the value of transactions decreased as the pandemic affected purchasing power of consumers. Cost, Diversity of Service and Membership Benefits are three factors that influence consumers’ decision in choosing a brand of e-Wallet. Besides, the biggest factors that stimulate users to make transactions through e-Wallet platform are Convenience and Promotion.
Currently, promotion is one of the most important factors that help e-Wallet to attract users. Popular promotions are Cashback, Point Accumulation, Discount based on transaction value. The most common purposes of using e-Wallet are to top up and transfer money, though, the transaction value is still limited.
With the dream of becoming Alipay and Wechat Pay of Vietnam, e-Wallets constantly “burn money” forpromotions like cashback, point accumulation, discount, etc. However, unlike Alipay or WeChat Pay, which can take advantage of the millions of existing users of Alibaba and WeChat, Vietnamese e-Wallet companies have to buy users “little by little”, as said by Varun Mittal, a top technology talent at E&Y. According to experts, “burning money” for promotions alone cannot help e-Wallets to remain their heat in the race. The reason why Wechat Pay has a competitive advantage that makes it unique in China is because Chinese people basically cannot live without WeChat, which is in the same ecosystem with Wechat Pay. And Alipay thrives because its ecosystem, Alibaba, accounts for 90% of the e-commerce market share in this country of 1.4 billion residents.
It is hard to tell who’s the winner in the war of “burning money” among e-Wallet operators in Vietnam. When e-Wallets compete in launching promotions with lavish amount spent, many customers download these applications to enjoy incentives, but then quickly removed them as they have no need. Mr. Nguyen Ba Diep, Vice Chairman and co-founder of Momo e-Wallet said that using promotions to attract customers is a traditional method, which only works well when the market is new and customers do not understand the product. In the long run, only qualitymatters the most and whichever e-Wallet that leads in technology may gain a greater share of the pie.
In Vietnam, it is also true that e-Wallets that develop on the basis of popular platforms or diverse ecosystems tend to attract more users. Report of Q&Me shows that while Momo dominates the market thanks to the convenience it brings to customers, AirPay is popular among online shoppers, specifically, users of Shopee, an application that comes from the same ecosystem as Airpay, ZaloPay attracts women due to its integrated friendly chat functionsince it was built from the most popular messaging app in Vietnam, Zalo, ViettelPay is popular in the North because of the parent company’s strength in doing business and establishing a brand name in this market.
According to Dr Doan Bao Huy, a Finance Lecturer from RMIT University’s School of Business & Management, different e-Wallets are offering services with many similar features, which means people can use multiple choices of wallets for the same product or service. At the moment, the e-Wallet that could offer customers the best deal may draw customers to carry out transactions through its app, therefore, e-Wallets need a lot of effort to wincustomers’ loyalty.
Also, as stated by Dr Nguyen Thanh Binh, a Lecturer and Acting Senior Program Manager, Finance, in the School of Business & Management at RMIT University, e-Wallets would have to put priority in balancing the growth of their user base and the implementation of a sustainable business model if want to remain in the “burning money” race. Currently, when the portions market share are not decided just yet, e-Wallets may be forced to spend more money on launching promotions without increasing payment transaction fees to expand their user base.
However, in the long run, they could make users willing to pay for the services they provide by adding more value to their ecosystems. Instead of focusing on charging fees to become profitable, e-Wallets could provide a wide range of financial services, such as lending, wealth management and insurance, similar to what Alipay and Ant Group have been doing in China.