With a population of nearly 100 million, and more than 60% of which is the young population, Vietnam is a potential market for suppliers of all industries, including those working in fintech.

In the 4.0 era, fintech is now a familiar concept in Vietnam when foreign and domestic enterprises are flocking to this market to get their foot in the door. According to economic experts, the e-wallet market in Vietnam in 2020 will be tougher than ever as the government of this country discourages the use of cash, while e-wallet providers are continuously offering attractive promotions.

On a Friday afternoon, a group of generation Z (people who were born after 1995) gathered in a milk tea shop on Tran Cao Van Street, District 1, Ho Chi Minh City. After the meeting, the group decided to go to the movies together. If it was two years ago, the whole group would have gone the cinema to buy the tickets in person, but now, they only need to open the app on their smartphones, select the nearest cinema, the suitable time, seat, and purchase the tickets right away. Movies ticket apps now offer a wide range of payment method. Not limited to cash payment and card transactions, Vietnamese youth now has more choices to pay with electronic wallets. One of the friends suggested: “If you use MoMo wallet to buy the ticket, the price would be 79,000 VND per ticket, but ViettelPay offers only 1,000 VND per ticket since it has special discount on Friday … !!!”

So, instead of going to the theater, waiting in long queues at the ticket counter and paying from 110,000 VND to 125,000 VND per ticket like how it used to be, now the whole group can buy tickets at a very competitive price, only 1,000 VND, which is 100 times cheaper than the original price! This is what e-wallet providers are aiming for when targeting young, dynamic users who like innovations and easily get attracted to promotions.

Besides, the Government set a goal to increase the rate of non-cash payment to account for more than 30% of the total means of payment in Vietnam by 2020. This goal also leverages e-wallet providers to fully promote the service.

 

When e-commerce cooperates with e-wallets

In early November 2019, online shopping channel Lazada officially integrated the eMonkey (eM) payment method into their e-commerce platform. To stimulate shoppers to use the e-wallet, Lazada launched 1 VND/product sales programs especially for those who make payment via their eM wallet. Although it is too early to comment on the success of eM, but according to the observance of the writer, there has a few tens of thousands of purchases made in the sales program. Lazada launched these promotions to create a habit of using eM for future payments instead of cash or via bank card.

Shopee also offers many appealing promotions to shopers when they make payments via the AirPay wallet, which includes discount codes and free shipping. Customers can buy cheaper products from a few tens of thousands to hundreds of thousands of VND if they choose to use AirPay.

In addition, e-commerce platform Sendo has SenPay as its e-wallet, while Tiki partnered with e-wallet MoMo.

According to e-commerce giants, the rationale behind e-wallets is that they want to improve the shopping experience for users on the digital platform, thereby increasing the rate of returning users and loyal customers. Furthermore, owning an e-wallet and encouraging users to buy has other profound benefits.

Economic experts said that reducing the rate of COD (cash-on-delivery) orders could help e-commerce channels reduce costs. The number of orders that customers cancel or deliver unsuccessfully will decline significantly if users were forced to pay first. E-wallets also help these online shopping sites reduce the flow of money through intermediaries. Furthermore, e-wallets also help e-commerce platforms poitrait users as well as their shopping behaviors.

Thus, e-commerce platforms can add features best suited for each target audience, and create their own added value. User data is the ultimate goal of e-commerce platforms when owning a wallet, which is more important than the benefits of completing a user experience or lowering selling costs.

 

The popularity of e-wallets

Due to the innovation of e-wallets, it’s easy to come across e-wallet advertisements regardless of where you go, from small takeaway coffee shops, convenience stores, luxury restaurants, to movie theaters or even supermarkets, bookstores and fashion boutiques. If customers choose to pay with e-wallet, they will get a discount of 10%, 20%, or even 50%. Customers only need to scan the QR code using their smartphone to pay for the order. On November 1st, 2019, people lined up at shopping centers or petrol stations all over the country when MoMo launched a promotion named “Super Cashback 50%.” Before that, Grab stirred up the market by offering promotional codes and refunds up to 400,000 VND when users pay electricity bills using Moca e-wallet.

Since Grab announced its acquisition of shares and strategic cooperation with Moca e-wallet in September 2018, the technology carrier’s e-payment platform has achieved much success when Moca’s growth rate elevated vigorously within a short period. Specifically, the number of Moca users increased by six times in 2019 compared to last year. In the first half of 2019 alone, the total number of payment transactions via the Moca wallet on the Grab app increased by 150%, with the number of monthly user interaction rising by more than 70%. As of September 2019, Moca transactions accounted for 42% of all cashless transactions on the Grab platform. As a mobile payment solution for the entire Grab ecosystem, Moca was used to perform services, or to pay for rides, food orders, delivery, money transfers, in-store payments, mobile top-up, utility payments, etc.

E-wallets were considered as the extended arm of physical bank cards to every corner of consumers’ life, contributing to the development of cashless payment. According to the Vietnam State Bank, the number of payment intermediaries increased to nearly 30 companies, with 26 of which providing e-wallet services, and 10,000 units accepting e-wallet payment. As of December 31^st, 2018, the whole country had about 5 million verified e-wallets linked to bank accounts. According to the report of payment intermediaries, 214,639 thousand items were purchased using e-wallet in 2018 with a total value of more than 91.06 trillion VND (~4 billion USD, an increase of 15.39% in terms of transactions compared to 2017), the average is about 424,253 VND per transaction. According to Napas, the total value of electronic payment through intermediaries’ networks in 2018 increased by nearly 170% compared to the previous year.

In Vietnam, the e-wallet market is quite active when not only foreign suppliers but domestic suppliers also rush into the race. Telecom enterprises such as Vinaphone, Viettel, VTC, FPT launched VNPT Pay, ViettelPay, VTCPay and Pay FPT, respectively. Even Zalo which provides messaging service also made their move by launching ZaloPay. Domestic banks participated with Bank Plus products (cooperation between Viettel and MBBank), Timo (VPBank), MEED (Maritime Bank), Vi Viet (LienVietPostbank), etc. And lastly, financial technology companies joined the game with MoMo, VNPayQR, NextPay, Payoo, 1Pay, Bao Kim, Vimo, Mobivi, eDong, eMonkey, Pay365, TopPay, etc.

According to the Asia-based digital marketing strategy and marketing consulting firm Solidiance, the value of Vietnam’s e-wallet market is expected to reach 7.8 billion USD in 2020, with 10 million users.

 

Strong penetration, fierce competition, and fast elimination

The introduction of e-wallets has enlivened the QR code payment market by bringing in many discount promotions, with no sign of cooling down. E-wallets are considered an initiative to promote the digital economy, e-commerce, non-cash delivery, digital payment, etc. “I feel that the fintech market in Vietnam is entering a big olympic game,” Mr. Nguyen Xuan Truong, Director of the Social Payment division at MoMo, said.

However, Mr. Truong also shared with VnExpress: “In 2020, Vietnamese still prefer cash payment. To persuade them engage in non-cash payment, e-commerce platforms or e-wallets still depend on promotions. However, that method wouldn’t go the long way since no one has enough money to support the whole market. Therefore, in addition to promotion, these businesses must enhance user experience, provide better value, and become an irreplaceable part of the service ecosystem.”

Although many e-wallets companies have repeatedly used promotions to attract users, a majority of people ended up using e-wallets just because of the discount; thus, they have less loyalty to the brands. Up to 47% of users said that they were willing to try out new brands, only 7% said they would be loyal to the brand they were using.

Therefore, e-wallet providers are still pouring their money without making any profit. As the expansion process continues and more users are joining in, the loss that brands suffer from is becoming more significant. Even the market leaders are also facing the same problem. By the end of 2018, MoMo e-wallet had accumulated losses of nearly 1,000 billion VND (~43 million USD); ZaloPay also reported a loss of 177 billion VND (~7.6 million USD), almost ten times the loss of the previous year despite the fact that both ZaloPay and Momo are among the top e-wallets with the most users today.

The Business Times published the five-year-forecast by economic-financial experts, stating that e-wallets market in Vietnam will bloom with the support from foreign investors, which will help to increase the competitiveness of this relatively new market. As many e-wallet providers co-existing separately in the crowded market, none has been able to grasp the dominant position. Therefore, natural selection in the e-wallet market would be inevitable. This is necessary because many companies develop e-wallets as speculation with no clear and sustainable direction.

Many experts also said that if there is no differentiation and a large volume of transactions, or without the support from a big ecosystem, only a few dominant businesses will remain in the future market.

 

Author Vi Mai is a PR Manager at EloQ Communications. Vi has ten years of experience in journalism and social media marketing. She is also a strategic planner for many of EloQ’s campaign.