Retired professional Nguyen Xuan To did not see any use for mobile banking. After all, he could simply go to an ATM anytime and withdraw cash. But that was before COVID-19 struck home.
The pandemic and a subsequent lockdown in Vietnam has pushed To and other digital laggards in the country into embracing mobile banking services.
“Due to the nationwide lockdown, it has been hard for my wife who takes care of the family’s purchases as she doesn’t know how to use the payment apps,” he said.
To has now installed local lender Agribank’s mobile app and uses it to make online transactions, including paying bills and cable TV dues, and buying his favourite wines.
Like Agribank, more than 30 other banks have launched their own mobile apps to offer digital services to their customers in partnership with payments firm VNPAY in the country.
The startup, whose parent company VNLIFE recently bagged funding from Singapore sovereign wealth fund GIC Pte and SoftBank Vision Fund, sees a large opportunity in partnering with local banks in their digital transformation.
“It is a simple premise that if digital banking continues to grow, which it no doubt will, then we continue to grow,” Niraan De Silva, managing director of VNLIFE, told DealStreetAsia.
VNPAY is working with local banks to build and manage their mobile banking infrastructure and related technology. Its B2B2C model has enabled banks to facilitate not only QR code payments but also other online services such as bill payments, flight and hotel bookings, bus and train tickets and movie reservations, in addition to SMS banking.
Within QR code payments alone, VNPAY provides its service through a network of 32 banks and eight e-wallets in the country. The company claims to have over 70,000 payment points and is on track to achieve over $1 billion in annualised payment volume from QR codes.
“In Vietnam, banks have caught up with technology much faster than some other countries in the region and as a result, most banks’ mobile platforms are akin to a ‘super app’,” De Silva said.
According to the Vietnamese central bank’s latest data, financial transactions via mobile phones in the first 11 months of 2019 surged 169 per cent and 225 per cent in terms of volume and value, respectively, compared with the corresponding period of 2018. The number of active mobile banking users at the end of 2019 nearly doubled year-on-year.
Bank services in the country covered 43 million people by the end of last year, or 63 per cent of Vietnamese adults, compared to 30 per cent in 2015.
However, cashless payments only accounted for about 11.5 per cent of total payments in 2019, rising slightly to 13.27 per cent in January this year.
One factor that has spurred the adoption of digital services through banking apps in Vietnam, De Silva said, is how people still see banks as a “store of value.” Despite a close geographic and cultural proximity to China, where non-banking financial services have become broadly diverse, Vietnamese adults continue to choose banks over e-wallets as the primary source of wealth protection.
In addition, e-wallets, which in other markets are meant to cater to the unbanked segment, are required to be linked to users’ bank accounts in Vietnam.
“In Vietnam, it’s impossible to see an e-wallet replacing a bank,” the VNPAY executive said.
However, De Silva asserted that the requirement was not a hindrance to fintech growth in the country but was aimed at ensuring players complied with the regulations, especially know your customer (KYC) norms.
“One of the goals that the government is trying to push is to bank the unbanked so that everyone will have the benefits of financial services as a baseline,” he said.
Tram Tran, a manager at research firm YCP Solidiance, opined that with the regulation to link e-wallets to bank accounts and the limit on e-wallet transactions, the government was seeking to protect users from frauds and money laundering.
“Customer loyalty to digital apps is low as users would go for anything that offers them more discounts,” she added, suggesting that there will be a lot for banks to do to acquire and retain online retail customers.
Leveraging an ecosystem
De Silva was positive that people will increasingly opt for cashless payments.
Vietnam was forecast to be a $7.8 billion fintech market in 2020 by YCP Solidiance and is expected to be one of the fastest-growing fintech hubs in Southeast Asia.
“The government is very supportive of financial technology and innovation with accommodative policies and regulations designed to foster change,” said De Silva.
Even though the digital payments market in Vietnam is strictly regulated and calls for a lot of investment and engineering capability to set up a new business, there is always room for new entrants and innovation, according to De Silva.
“We ourselves are actively looking to back entrepreneurs,” he added.
Within the VNLIFE ecosystem, the company invests in and operates a spate of subsidiaries in online travel, mobility and new retail.
De Silva said that during the COVID-19 lockdown, VNPAY has seen its business grow as it added more digital services to its portfolio such as ordering grocery delivery through mobile banking apps.