Mobile money is still a relatively new service in Vietnam, but shows great potential for future development. Though Vietnam is still a cash-based society, consumers have been shifting towards new methods of payment since the outbreak of the Covid-19 pandemic. This presents a desirable opportunity for mobile money services to develop in Vietnam.

Vietnam Government actively encourages mobile money 

The Government has issued various measures to boost non-cash payment methods over the past decade. The Decree 101/2012/ND-CP contributed significantly to improving the basic legal framework for non-cash payments. Decree 101 has brought many positive changes to the payment activities after over 6-year implementation. It is one of the most prominent legal documents to promote the transformation and development of cashless payments.

Innovative technologies are rapidly developing, and Vietnam has not been immune to its impact. In 2019, Vietnam officially licensed the adoption of eKYC (Electronic Knows Your Customer) into verifying customers’ identity. This is a digital verification of one’s identity using video call and AI technologies such as face-matching for photos on an ID card. Vietnam’s access to modern technologies paved the way for more foreign credit institutions and tech companies on eKYC to enter and develop the Vietnamese market.

Basically, digital banking and non-cash payment are among the goals that the Vietnamese legislature is aiming for in the near future. This will subsequently contribute to the development of Vietnam’s digital economy and digital society. On March 9 2021, the Government launched a pilot program that allowed the use of mobile money service (MMS) to pay for small-value goods and services. After 8 months, in November, the State Bank of Vietnam officially licensed three carriers, Viettel Military Industry and Telecoms Group (Viettel) and the Vietnam Posts, Telecommunications Group (VNPT) and Vietnam Mobile Telecom Services (Mobifone), to pilot MMS. Mechanisms have been built to manage and supervise the deployment of MMS. The government continues to promote telecom operators to transform telecommunications infrastructure into digital infrastructure. After 6 months of launching, over 1 million users registered for mobile money accounts, more than 60 per cent of whom were from rural, mountainous, remote, border and island areas.

Le Anh Dung, deputy director of the Payment Department, assessed that the pilot had achieved significant results, contributing to the development of non-cash payment activities in general. Taking the advantage of telecommunications infrastructure and data, the pilot program has helped reduce social costs and expand cashless payment channels. In the long term, it will be a crucial contributor to the deployment of e-government, the national digital economy and society. 

Following the success of the pilot enterprise, in 2022, the Department of Telecommunications will implement the coverage of broadband networks to industrial parks and high-tech zones; 100% adults will have smartphones; 75% of households will have FTTH (Fiber To The Home); 85% of mobile broadband subscriptions per 100 people. Noticeably, the Department has also set the target that by 2022, 100% of mobile phone users will have a mobile money account.

Targeting the potential market

In recent years, many countries have prioritized the development of an inclusive financial system that benefits all members of society. Notably, in developing nations, mobile devices have played an essential role in fostering inclusive finance and overcoming geographical barriers. According to the GSMA (2015), mobile money has contributed to the expansion of financial services in the last decade more than what traditional banks did in the last century. Since 2016, the State Bank of Vietnam has worked with World Bank specialists to build a national financial inclusion plan. Having a large population with low financial literacy, Vietnam  views digital transformation as the key to achieve an inclusive financial system.

According to a survey conducted by the State Bank of Vietnam, nearly 70% of Vietnamese adults have a bank account. This also means the main target for mobile money is the 30% remaining, most of whom live in rural or mountainous areas and might also have difficulty accessing a bank. Moreover, the percentage of credit card owners is still low, though the mobile subscriber density reaches 100%. People in remote areas tend to pay in cash for transactions valued less than 100,000 VND. Therefore, mobile money could be a potential remedy to accelerate cashless payments among rural populations. 

Taking the advantage of their existing telecommunication infrastructure, the leading telecom providers have prioritized the provision of mobile money in remote areas. They all expect to further promote financial inclusion in Vietnam. In return, The Ministry of Information and Communications shared that mobile money introduction would encourage a substantial development among Vietnamese telecoms companies.

The launch of mobile money is aligned with Vietnam’s aim of becoming a digital society, while gradually improving the national competitiveness by providing locals with access to financial instruments. Accordingly, it helps narrow the digital gap and promote socio-economic development.

Strategic collaboration with digital banking

Although the trend of technology banks has spread to Vietnam, the digitization of Vietnamese banks is still nascent. Experts said the deployment of mobile money service would speed up the digitization process.

Collaboration and synergy between important “players” such as banks and telecom providers are key requirements to ensure efficiency of mobile money service. The collaboration will promisingly result in expedited growth of both banks and telecom operators: banks can increase their bottom line while telecom operators can expand their service portfolio.

Speaking at a banking conference, Nguyen Manh Hung, Minister of Information and Communication stressed there was no need for banks to feel worried about the development of mobile money. Mobile money would gradually train users, turn them into banks’ clients and improve their financial literacy. It’s a golden opportunity for digital banks and telecom providers to work together and impose strict regulations on consumer protection. This will lead to the increase in consumers’ satisfaction. 

When it comes to customers’ satisfaction, the collaboration of digital banking and telecom providers plays a vital role because it can allow users to connect services of several platforms. The partnership makes payments more transactional and systematic, which saves lots of time and effort for users. In the long term, all efforts of cooperation would lead to the universal “digital ecosystem ” where users feel both safe and confident to conduct their daily transactions.

By and large, mobile money is an emerging trend and holds great potential for development in Vietnam. These major opportunities created by the government, the target users and the cooperation demonstrate the promising future of Vietnam’s digital economy in general. With insightful and up-to-date knowledge of the Vietnam market, Viettonkin is confident in our ability to provide strategic guidance for our partners. Let our success story begin now!