From left to right: Dr Phạm Nguyễn Anh Huy, Dr Nguyễn Thanh Bình and Dr Đoàn Bảo Huy. — Photo courtesy of RMIT
The growth of e-wallets may be good news for Việt Nam’s cash economy, but fierce competition among e-wallet providers may result in a ‘survival of the fittest’ situation. Top finance experts from RMIT University share their views with Việt Nam News.
What’s the competition currently in the e-wallet market?
Phạm Nguyễn Anh Huy: We are witnessing fierce competition among e-wallet providers. Although the market is rather crowded with more than 30 providers (as of 15 October 2020), big names such as MoMo, Moca and ZaloPay are dominating. MoMo is one of the oldest players with a huge customer base, which recently topped 20 million, while Moca and ZaloPay are taking advantage of their ecosystems. Stiff competition leaves only a small space for newcomers, who may have to resort to competing via discounts and spend lots of money in the process.
Đoàn Bảo Huy: At the moment, each e-wallet is trying to offer some sort of exclusive products and services. Momo is active in payment services for grocery and convenience stores. ZaloPay, which is built on top of Việt Nam’s most popular messenger app Zalo, offers lucrative cashback deals for mobile top-ups. Meanwhile, Moca’s reach has grown upon the two basic services on Grab’s platform – ride-hailing and food delivery. However, many built-in functions are similar across different e-wallets. This means people can use multiple wallets for the same product or service as long as they get the best deal out of it, so e-wallets need to work very hard to gain the loyalty of customers.
What are the biggest long-term challenges for e-wallets to be profitable?
Nguyễn Thanh Bình: To come out on top in the war of financial attrition, e-wallets need to balance the growth of their user base and the implementation of a sustainable business model. They need to develop more value-adding ecosystems that can attract and make users willing to pay for the services they provide. Given the current strong competition of e-wallets offering cashless payments, it may be difficult for e-wallets to increase payment transaction fees while expanding their user base. Instead of focusing on charging fees to become profitable, e-wallets could morph into fintech companies and provide a wide range of financial services, such as lending, wealth management and insurance, similar to what Alipay and Ant Group have been doing in China.
Phạm Nguyễn Anh Huy: One of the biggest problems with e-wallet providers is that they fail to show clear advantages over traditional banks in the long run. Most services offered by e-wallets such as fast money transfers or utilities and e-commerce payment are now included in mobile apps offered by traditional banks. Bank apps might have to catch up with e-wallets on a number of other services, but this can be easily solved via mergers and acquisitions. I think e-wallets need to go back to the original idea of replacing a traditional wallet: a wallet is not only used for payments and holding different bank cards but also to store other things such as loyalty cards, membership cards and business cards.
What does the future hold for e-wallets in light of recent regulatory changes?
Đoàn Bảo Huy: The State Bank’s Circular 23/2019/TT-NHNN, which took effect from January this year, requires that the monthly e-wallet transaction value per customer and service provider not exceed VND100 million. This seems reasonable as the average daily transaction is around VNĐ230,000 to VNĐ274,000, according to market research firm Cimigo. However, with the linkage between e-commerce platforms and e-wallets (such as between Tiki and Momo or Zalopay, Shopee and Airpay, and Lazada and eMonkey), the current regulation can hinder e-wallet users from paying for home appliances and electronics products priced at dozens of millions of đồng, hence eliminating associated transaction fees earned by these e-wallet providers.
In addition, the Vietnamese government has recently given the green light to a mobile money pilot project. Mobile money generally performs the same function as e-wallets, but it does not need to link to a bank account like the latter. This new announcement allows the top three biggest mobile networks - VNPT, Viettel and Mobifone - to step into the e-payment industry and reach the unbanked population. Together with their advantages in capital, infrastructure and customer awareness, their presence will certainly increase the competition in the industry.
Nguyễn Thanh Bình: In June 2020, the State Bank of Vietnam released a draft decree on the regulatory sandbox for fintech activities. This is opening the door for fintech companies, such as e-wallets, to experiment more with innovative financial products that benefit the Vietnamese financial market. — VNS