Vietnam has rapidly become one of ASEAN’s most attractive host countries for Foreign Direct Investment (FDI), but the era of measuring success by volume of investment alone is coming to an end. The real challenge for the country is improving the quality of foreign direct investment to foster sustainable, long-term growth. The goal of attracting […]
In March 2021, the Government launched a pilot program to deploy mobile money service in the Vietnam market. They targeted the underprivileged population who live in the countryside, islands, and mountainous areas to aim for an inclusive digital society.
After six months of launching, there have been over 1.1 million mobile money users. This is still a low number given that there are 123 million phone subscriptions in the country. The total number of transactions via mobile money has surpassed 8.5 million, yet their value remains modest at about $16 million. Positive results have been seen; however, mobile money has not gained much popularity as major challenges still remain.
Little spare space for mobile money in the market full of “giant players”
Speaking at a banking conference, Nguyen Manh Hung, Minister of Information and Communication said that Vietnam once had the opportunity to become the leading country adopting mobile money in payment. However, Vietnam didn’t seize that opportunity. Mobile money is the most suitable for the period when digital financial services were still limited, 3G and 4G networks were not ubiquitous, and people only owned a basic phone. Vietnam has been behind the world for 20 years. The golden time for introducing and promoting mobile money has long passed.
These days, according to the State Bank of Vietnam, over 70% of adults in Vietnam have bank accounts. This is the major difficulty to make mobile money popular nationwide. The government opted for remote areas to launch a mobile money pilot. However, alternative financial technologies have also penetrated the rural markets.
QR codes, e-wallet and internet banking have already taken the majority of market share. The number of E-wallets in Vietnam has grown to more than 40 options, compared to only five E-wallets just six years ago. This makes E-wallets one of Vietnamese consumers’ most favorite payment methods for making online transactions. Digital wallet use is 42% among the banked and 17% among the unbanked. Therefore, it is hard to provide a lucrative landscape for mobile money to flourish.
Lack of customer identification database
Since the beginning of the pilot program, telecom providers have had major difficulties in identifying customer information. The information they had was collected a long time ago and they have not been able to access the national population database for identity verification purposes. As a result, according to Ms Pham Minh Tu, Deputy Director of Mobifone Digital Services Center, three leading telecom providers missed 50% of their target customers due to the misinformation of customers’ identification.
In order to collect the latest information, mobile money requires people to subscribe to a new version of state-issued ID cards. However, many citizens in remote areas still use the old ones. They also face the inconvenience of going in-store to update details because online updating is still unavailable.
Therefore, a great effort should be put into developing a customer identification database based on the national population statistics in order to mitigate the potential risks regarding information security.
Lack of strategic cooperations
The Vietnam Government is aiming for a national digital ecosystem which mobile money is a crucial member of. To achieve that goal, it is such a long journey to go. There has been no collaboration among telecom providers. This makes users unable to transfer money to another account of a different telecom provider from their own.
An obstacle to mobile money’s nationwide adoption is how it is not linked to a bank account just like e-wallets despite performing similar functions. This presents inconvenience to those who are used to making payments via bank accounts, then consequently leads to users’ dissatisfaction.
In fact, there has been little priority given to the collaboration among telecom providers particularly and between telecom providers and banks generally. Telecom providers consider mobile money as a value-added service, similar to creating a mobile internet site, and want it to seamlessly integrate with their existing operations. Meanwhile, banks assume it is simply another type of mobile banking service, intimately related to their core business and easily fit into their current infrastructure. As a result, they have made little progress to form a strategic cooperation, which can increase users’ convenience and satisfaction, and gain benefits for both businesses.
Low transaction limit
The monthly limit for transactions via mobile money account is 10 million VND (US$438) per user. VNPT Deputy Director Nguyen Son Hai stressed that this transaction limit “did not provide enough elbow room for bills and daily expenses.” Meanwhile, in 2019, instead of a daily transaction limit, Vietnam's central bank set up a monthly limit of 100 million VND (US$4284) for e-wallet users.
There are differences between expenses of urban and rural populations. However, as consumers’ demand is growing rapidly even in remote areas, the transaction limit of 10 million VND seems relatively unappealing to a large number of users.
Insufficient effort into educating target customers about mobile money
Though populations in remote areas are the most potential ones to adopt mobile money, they are still mainly cash-based communities. This makes it hard for the Government and telecom providers to change their belief and behavior, then nourish trust in them.
Lack of information is a real challenge facing the users of mobile money, especially the rural communities. Most of the rural populations lack the information that mobile phone money can be used as well to buy goods through the use of till numbers and payment of utility bills as long as there is a business number. This shows a clear indication that inadequate information posed a challenge to embracing the wide range of services their mobile phone money technology could offer to them.
A large number of target customers, especially the mountainous communities, are utterly unfamiliar with the concept of cashless payment let alone mobile money. Therefore, mobile money also requires significant marketing effort to educate its target customers on what mobile money is and how it can help them better than cash. Launching mobile money must be an expensive business.
The Government has discussed a strategic plan and taken immediate action to address these above challenges. Popularizing mobile money nationwide is not a “mission impossible” because they view challenges as opportunities for innovation and further development. There is a promising future for mobile money to compete in Vietnam's competitive market.
