Crowded market, tighter norms to drive M&As in Vietnam’s e-payments space

Photo by Tran Phu on Unsplash

Vietnam’s e-payments landscape is likely to witness a wave of consolidation triggered by stiff competition for market share and tighter state regulations.

The State Bank of Vietnam (SBV) has 37 licensed intermediary payment services (IPS), including 34 e-wallets, that serve an adult population of slightly over 66 million. The relatively low ratio of the operator to the adult population at 1.8 potentially lends itself to more M&A activity as companies will increasingly look at sustainable operations, industry watchers reckon.

In Indonesia, the ratio of the operator to the adult population is the highest. Yet, the market is showing signs of consolidation at play with the reported talks of a potential merger between two of its major e-wallets, Dana and Ovo.

Source: Data from various central banks (September 2020), World Bank (2018 figures)
Note: Operators refer to registered e-money operators, e-wallet operators, payment or financial intermediaries involved in financial or monetary transactions under respective regimes. 

According to Dung Hoang, Head of Vietnam Office, Genesia Ventures, “In Vietnam, there are already 34 e-wallets, too crowded to serve about 13 million users together.” Genesia Ventures, which is scouting for bets in Vietnam, is an early-stage internet and mobile tech investor. Its fintech portfolio companies are aiming to soon deploy services in Vietnam and Southeast Asia.

Apart from the overcrowded market, players also have to contend with the new SBV circular (No. 23/2019/TT-NHNN) that requires them to follow tougher know-your-customer processes and additional reporting obligations.

“Additional requirements imposed on the IPS company’s managers will cause a delay in the licensing process,” said Dang Thanh Son, managing partner at corporate law firm DNA Vietnam.

Despite the hurdles, Son believes there will be more competition in this market and the M&A activities in the e-payment sector will gain pace with foreign investment flowing in from Korea, Singapore, Japan and China.

Echoing his views, Fintech News Network founder Christian Konig said the removal of the 49 per cent foreign ownership, and more restricted licensing will surely open doors for acquisitions.

“Every company owning a license is now a very interesting and valuable target for foreign players particularly in the time of COVID-19. As expansion into new countries has become more difficult due to travel restrictions, it means an acquisition is a perfect strategy to enter Vietnam,” he added.

DealStreetAsia recently reported that Indonesia’s Gojek had acquired a majority stake in local payments startup WePay Payment Services Co Ltd to secure the licence it needs to operate an e-wallet in the country.

The lure of Vietnam

Vietnam’s digital payments market is projected to record a total transaction value of $8.6 billion in 2020. It is expected to grow at a CAGR of 16.4 per cent to hit $14.59 billion by 2024, according to Statista.com. Digital commerce is seen as the main growth driver, making up 86.4 per cent of digital payments in 2020.

Southeast Asia’s gross transaction value is expected to see a 10.6 per cent CAGR between 2019 and 2025, according to Google-Temasek’s SEA e-Conomy report in 2019.

With only 45 per cent of the population with access to banking services last year, based on State Bank of Vietnam estimates, it is not surprising that the sector in Vietnam is enjoying a higher growth rate than in the rest of the region.

Food delivery, e-commerce and gaming are likely drivers for digital payments growth in Vietnam. That explains why regional decacorn Grab invested $200 million as of 2019 in Vietnam while Gojek has built a sizable presence in the country via its food delivery arm (previously known as Go-Viet).

The Vietnamese payments landscape is dominated by a few large players accounting for a lion’s share of the market while several others are burning cash to acquire customers.

Then, there are some who only possess an e-wallet licence with no customer base or competitive advantage.

Some of these “shell” companies could get lucky as seen in Gojek’s recent acquisition of WePay in Vietnam.

“Companies like WePay and Moca most likely would not have survived without the Gojek or Grab acquisition [respectively] and run out of cash,” König opined.

In the end, the winners would be those who find either a perfect niche or get big, he added.

Nguyen Hoa Binh, Chairman of NextTech Group, which is now operating two e-payment units including NextPay and Nganluong.com, pointed out that Vietnam’s e- payment market is still quite small and it takes a lot of time and resources to educate the market.

“At least two-thirds of the licensed businesses will be bankrupt or unable to survive,” he said, adding that viable businesses are those who cater to a large and niche market segment.

Key Players

Expand Table

E-walletCurrent ownershipInvestorsUser baseKey partnersEcosystem targetedMerchant Network
MomoForeign investors (66.49%)/ M-Service (33.5%)Warburg Pincus, Standard Charter, Goldman Sachs20 milion BAEMIN, Tiki, Lazada, Ride hailing, e-commerce, gaming 100,000
MocaNot AvailableGrabOver 5 million (2018)OceanBank, Shihan Bank, Vietnam Airlines, McDonald’s, 7-Eleven, EVN, VNPT, FPT TelecomRide hailing200,000
PayooForeign investors (64%)NTT Data GroupNot AvailableHanwa Life, FE CREDIT, 25 banks, IDP, FPTRide hailing, e-commerce, gaming

12,000
WePay Not AvailableGojekNot AvailableNot AvailableNot AvailableNot Available
1PayForeign investors (90%)TrueMoney (Thailand's CP Group) 100,000+7-Eleven stores, SCB Bank, HD BankE-commerce30,000
eMonkeyNot AvailableAnt Financial Not AvailableGPBank, Vinafone, Mobifone, LazadaE-commerceNot Available
VNPT EPAYForeign investors (70%)Korea Omega Investment Corp, UTC Investment Co Ltd., Not AvailableVietinBank, Vietcombank, BIDV, Sacombank, VPBank, Woori Bank, BAE MINRide-hailing, e-commerceNot Available
ZaloPayForeign investors (not available)
VNG owns 60%over 2 million (2018)Bamboo Airways, BAEMIN, Golden Gate restaurant chain,...Ride-hailing, e-commerce, gamingNot Available

Currently, MoMo, Moca and ZaloPay are the three prominent e-wallets in Vietnam’s two main cities, accounting for more than 90 per cent of online payments, according to a survey by HCMC-based market research company Cimigo.

MoMo, the leading e-wallet in terms of users, is 66.49 per cent owned by foreign investors including Warburg Pincus, Standard Chartered and Goldman Sachs.

For Moca, it merged with Grab in 2018 so as to leverage each other’s technology and partner networks.

In other major cross-border deals in the space, China’s Ant Financial quietly acquired a sizeable stake in Vietnamese e-wallet eMonkey, operated by fintech firm M-Pay Trade, last December. And, Thailand’s TrueMoney acquired 90 per cent stake in 1Pay; Japan’s NTT Data Group bought 64 per cent of Payoo; South Korean investors Korea Omega Investment Corp and UTC Investment Co Ltd picked 70 per cent in VNPT EPAY.

On the other side of the deal table, local Vietnamese tech unicorn VNG Corporation in February reduced its stake in Zion, the operator of e-wallet ZaloPay, from 100 per cent to 60 per cent. Perhaps, the tech giant spots an opportune time to take some chips off the table as the space gets crowded.

The state extended four more licences this year taking the total number of e-wallets to 34 even as it is also in the process of approving a pilot project for local telco players to launch mobile money services. VNPT, Viettel and MobiFone have indicated an interest in launching these services.

“First, we will see a few more players, but consolidation is unstoppable. Nobody needs five payment apps. I also think that some banks might be interested in taking over some players as many Vietnamese banks just started with their digital-only strategy,” said König.

Sharing his views on the future outlook, NextPay’s Binh said, “I do not believe in the future of e-wallet in Vietnam because next time mobile banking will gain the upper hand.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.