In Vietnam the world of payments and commerce is being transformed. Consumers are using their mobile devices to compare products and prices, actively search for deals or vouchers and purchase goods and services from around the world.
The rate of online shopping in Vietnam is low compared to other countries in the world but is growing rapidly. In 2016, Vietnam’s e-commerce market climbed to approximately $4bn, making it one of the fastest growing markets worldwide. By 2020, the government has projected that online retail e-commerce revenue will reach $10bn and account for 5% of the country’s retail market.
As a result of the changing shopping demand, various online payment apps have recently been launched in Vietnam, such as MoMo, Payoo, Timo, and PayHub. There are now 30 FinTech startups in the country, two thirds of which are in online payment and the remainder in technology for digital payment via POS/MOS.
A cash dominant economy
However, figures from M_Service show that cashless payments in Vietnam are still relatively uncommon. Despite drivers such as the promotion of electronic payments for State administrative services (which covers tax, electricity, water and telecommunications), cash payments remain the primary method of payment. Surveys suggest that 91% of buyers have used cash on delivery at least once and 48% use bank transfers.
The reason for this appears to be concern over security breaches, such as fraud and the leaking of customer information. In addition, IT platforms in Vietnam are poorly developed, which causes problems for customers in the transaction process.
However, electronic payments have unquestionable potential and many advantages
Compared to paying by cash, e-payments possess many advantages. They can save time, are simple and transparent, and the more people pay online, the more Vietnam’s e-commerce market is boosted. In addition, Mr Le Ngoc Phuong, Managing Director of PayHub, states that “Online payments involve providing personal information, which helps shops take care of customers and improve service quality”.
Therefore, even though the online payment market still has some way to go in Vietnam there is great potential and 2017 is set to be a turning point towards development. Evidence of this comes directly from the support of the Vietnamese government. Earlier this year, Deputy Prime Minister Vuong Dinh Hue signed a plan that ensures that the country has the infrastructure and equipment that it needs to progress toward a cashless economy by 2020.
The McKinsey Global Institute (MGI) estimates that by providing customers with digital accounts would cost financial service providers 80-90% less than accounts offered through more traditional bank branches. Therefore, digital banking provides low income customers with access to banking and lending that was previously not possible. As a result, financial inclusion becomes profitable for providers even when account balances and transactions are small.
Why the future of Vietnamese commerce is mobile first
Vietnam has some of the highest growth in smartphone use, with over 35 million people in possession of one. This smartphone market has enormous potential for online payments. Furthermore, according to Internet World Stats the internet penetration rate is above the average in Asia and is currently ranked 18th in the world in terms of the number of internet users.
Join us at Seamless Vietnam on the 6th and 7th of September 2017 to find out more about the future of the payments, e-commerce and retail landscape in Vietnam.
Image credit to Huy Nguyen, Zuen Photography.