Vietnamese teleco providers such as Viettel, Vietnam Posts and Telecommunications Group (VNPT), and MobiFone are gearing up to launch ‘mobile money’ platforms in a bid to expand their operations in the burgeoning e-payment market which has a huge proportion of unbanked and underbanked people.
The development comes in as the Vietnamese government has approved the pilot application of ‘mobile money’, which will enable users to access mobile phone credit to pay for small-value goods and services on phones.
Mobile money service will be deployed on the ViettelPay ecosystem to take advantage of the e-wallet sector that already has 10 million users, Truong Quang Viet, deputy director at Viettel Digital Services Corporation, told DealStreetAsia in an interview.
“Before the official implementation, Viettel has successfully tested the mobile money service on 40,000 internal customers, ready to provide services to 100 per cent of Viettel customers as soon as the pilot runs,” he said.
According to the State Bank of Vietnam, by the end of 2019, 63 per cent of the adults in the country had a bank account. Going forward, the government targets at least 80 per cent of the adults to have bank accounts by 2025. With the mobile money project kicking off, Viettel, as well as other telco firms, aim to cater to the rest of the adult population.
VNPT, meanwhile, is ready in terms of technology, infrastructure, and business networks to deploy its services. This telco also owns e-wallet VNPT Pay, which has over 100,000 accepted transaction points that can convert to offer mobile money to meet the demand of customers even in remote areas, mountainous, and island areas.
The other telco firm, MobiFone, has completed the technical infrastructure for mobile money deployment. This network operator has just been licensed by State Bank to provide intermediary payment services and mobile money is expected to account for about 10 per cent of MobiFone’s revenue over the next few years.
Viettel serves 41 per cent of Vietnam’s mobile subscribers, outflanking two other state-owned enterprises, Mobifone at 34 per cent and Vinaphone at 22 per cent, according to the research arm of telco lobby GSMA.
The total number of mobile phone subscribers in Vietnam currently stands at about 132.5 million, according to data from the Ministry of Information and Communications.
Experts believe that the license to pilot mobile money in two years will create a strong change in payment for essential services such as electricity, water, health, education, and public services, thereby promoting comprehensive financial and non-cash payments in Vietnam.
Experts also indicated that entering the e-payment market will promise to bring a new source of revenue for telco firms at a time when traditional telecommunications service market is saturated.
According to the Vietnam Telecommunications Authority, Ministry of Information and Communications, mobile service revenue is still confined within the boundaries of traditional services, especially voice and SMS, which account for more than 54 per cent. However, these services are saturated.
Notably, the telecom market has seen a drop in data prices since 2018, causing data traffic to double or triple, but data revenue of carriers has only increased from 10-20 per cent.
In addition, the COVID-19 pandemic has promoted non-cash payments that create a favorable moment for telecom operators to enter the field.
According to GSMA’s latest research, for the first time, more than $1 billion was sent and received in the form of remittances globally every month via mobile money.
Despite early fears that transactions would decline as people worldwide suffered job losses and income cuts during the pandemic, it remains clear that diasporas continued to support family and friends back home. As a result, the total value of transactions increased by 65 per cent to an annual total of $12.7 billion in 2020.
Currently, there are 310 mobile money services across 96 countries, bringing more people into the formal financial ecosystem.
Rival or win-win?
It is a pivotal moment for Vietnamese telco providers to grab a share of cashless financial transactions that have been so far been the domain of fintech startups. According to economic expert Can Van Luc, when mobile money is officially deployed, the competition between mobile money and e-wallet and banking models will increase.
“However, this competition is healthy and necessary,” he emphasized.
Truong indicated that even as the concept of e-wallets has primarily picked up in bigger cities, mobile money is expected to cover rural areas.
According to World Bank estimates of 2018, about 64 per cent of the Vietnamese population resided in rural regions.
“Actually, mobile money is born to complete Vietnam’s digital payment ecosystem and promote non-cash payments, not compete with other e-payments services,” he said.
Vietnam currently has 39 licensed intermediary payment services (IPS), including 35 e-wallets, that serve an adult population of slightly over 66 million.
The country’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.
Dao Tuan Anh, CEO of Vietnam-based AppotaPay JSC, believed that mobile money is not a rival of e-wallets.
“In my opinion, each service has its own mission and contributes to the construction of a cashless society. Mobile money is deployed by telecom businesses as an extension arm to speed up the cashless payment process,” he told DealStreetAsia in an email interview.
AppotaPay received a payment intermediary licence from the country’s central bank in October last year. It is a subsidiary of game publisher Appota Group, which is backed by Korean investors including Korea Investment Partners, Mirae Asset Venture Investment and Kiwoom Investment. The e-wallet’s target-users over the next 2-3 years are the young generation, familiar and willing to pay for digital entertainment.
Financial expert Huynh Trung Minh said that e-wallets have to regularly offer promotions and incentives to increase market share, therefore, mobile money will create more pressure. However, in this race, users will have more non-cash payment channels, promoting comprehensive finance in Vietnam.
Truong Cam Thanh, CEO of ZION Company, the owner of ZaloPay e-wallet, said that competition is difficult to avoid, but in reality, each enterprise has different strategies, market segments, and customers.
“If Mobile Money is in line with the original orientation of comprehensive financial development, providing financial services to customers in remote areas, it will contribute to promoting non-cash payments across the country,” Thanh told local media Nguoi Lao Dong.
Challenges for mobile money
Currently, the cap set for small value transactions via mobile money is VND10 million per month, while for e-wallet it is VND100 million. So, educating the market may take time, according to Truong.
Currently, people are more familiar with e-wallet transactions, so acceptance of mobile money may take time.
MoMo, Moca and ZaloPay are the three prominent e-wallet players 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.
In addition, some 80 per cent of Vietnamese adults prefer to use cash in daily transactions, according to figures from the Ministry of Industry and Trade.
Mobile money will create a group of users who have the habit of using e-money. When the habit of using mobile money is formed, if the customer has higher demand, there will be more advanced services on Viettel Pay with a limtation of VND 100 million per month.