Mobile money attempts to topple classic banking

The newly-launched mobile money pilot programme is expected to heat up competition for domestic players but also open collaboration opportunities to cash in on the niche market.

Mobile money attempts to topple classic banking
Mobile money apps are presenting consumers with much more streamlined options for their banking needs. Photo: VIR

Since mobile money is still in its concept stage, Vietnamese telecom behemoths Viettel, VinaPhone, and MobiFone are quickly preparing the necessary infrastructure to roll out services once being greenlit by the authorities. The companies are making efforts to break into the new segment as the traditional market has been saturated – and their entrance is expected to create fierce competition while also placing pressure on banks that utilise more established payment methods.

Vietnam has witnessed a booming e-wallet business in the past few years. According to the latest research by Cimigo, MoMo, Moca, and ZaloPay are the top three most popular e-wallets in the two main cities in Vietnam, accounting for more than 90 per cent of the e-wallet market.

In the beginning of 2021, MoMo raised at least $100 million from six global investors. Meanwhile, VNPay has become the second unicorn startup in Vietnam and one of 12 companies in Southeast Asia with a valuation of $1 billion. Other apps have also recorded impressive growth.

Marcin Miller, associate partner of McKinsey Vietnam, told VIR that mobile money’s could impact the payment market on several levels – first is smartphone penetration, and second is the banking distribution network.

That said, there are other methods of cashless payments that are widely available in Vietnam. The pilot will nevertheless help to confirm whether this form of payments resonates with groups that do not have bank accounts or are not already using e-wallets or other cashless payment methods.

Truong Cam Thanh, director of ZaloPay, said it is inevitable for the competition between mobile money service providers and e-wallets to grab a share of consumer wallets.

However, each player has their strategy, market, and consumer target. “Mobile money can grow well in remote and rural areas while e-wallet apps will be more popular in urban cities,” he said.

Meanwhile, Ngo Trung Linh, general director of VietUnion – the development unit of e-wallet Payoo – said the firm is partnering with other telecom providers to provide mobile top-up services. 

Transforming the market

Some experts also argue that the pilot programme likely puts pressure on traditional banks so they need to step up their game to maintain their market share. As telecom providers are likely to re-establish competitive fees leading to more people opening mobile accounts for payments, the earnings of banks can shrink significantly.

However, McKinsey’s Miller stated that traditional banks still have ample room to play and innovate, as the mobile money programme offers new complementary assets that traditional banks can leverage.

Through partnerships with telco players, banks can introduce new products – such as a top-up services for mobile money wallets – and target new user groups, enabling them to transition mobile money users to fully banked clients. “Mobile money cannot replace a full banking offer. Instead it can be an attractive payment method for specific groups of clients,” Miller said.

 

According to Riddhi Dutta, regional director for ASEAN and South Asia at Netherlands-based digital-first banking provider Backbase, Vietnam has a high growth potential and the country remains in the early stages of development for a fintech framework. “It is imperative that local firms work with foreign investors and enterprises to access the technology, experience, and capital they need,” Dutta said.

With core banking and payment system modernisation being the top priorities among banks, fintechs can take this opportunity to enter the market and partner local banks and enterprises to help scale their innovations.

The partnerships will also allow financial enterprises and banks to embrace the new technology offerings through their new fintech partners to achieve value-creating collaboration, according to Dutta. 

Cracking the market

Besides the vast opportunities, there are a number of potential issues for the fledging services. According to a report by the BIDV Training and Research Institute, disposable SIM cards are the most difficult problems for customer identification.

With mobile money, each customer is only allowed to open one primary SIM payment account at one carrier. However, disposable SIM cards are still available in many transaction points despite the effort to curb this problem.

Thus, if the management of disposable SIM cards along with anonymous transactions are not strictly implemented, mobile money could become a channel for laundering and fraud.

There are also other risks like infringement of customer data, security risks, gambling, and others. For service providers entering the mobile money pilot programme, the Backbase representative suggested businesses should provide greater levels of convenience, overcome financial literacy challenges, and improve accessibility to meet the needs of the unbanked and underbanked population.

“It is crucial for them to adopt a customer-first mindset and approach to ensure a successful adoption of their digital platforms,” Dutta explained.

“Choosing the right fintech partner is also essential to ensure these digital banking platforms are resilient and survive the test of time over the next 15 years. These partnerships will only be beneficial when working with the same vision, commitment, and appropriate technology to address the needs of customers,” he said.

VIR

Mobile Money: one decision benefits millions of people

Mobile Money: one decision benefits millions of people

With Mobile Money, people in mountainous areas or islands can remit money and make payments for goods and services through SMS on their mobile phones.

Mobile Money to increase pressure on banks

Mobile Money to increase pressure on banks

The payment market is expected to see big changes with the appearance of Mobile Money.

 
 

Other News

.
Vietnam’s stock market draws foreign capital from new funds
Vietnam’s stock market draws foreign capital from new funds
BUSINESSicon  24/04/2021 

Statistics by securities companies show that in 2020, foreign investors had net sold more than VND39 trillion in the stock market. 

Central bank to keep proactive, flexible monetary policy
Central bank to keep proactive, flexible monetary policy
BUSINESSicon  23/04/2021 

For the time ahead, the State Bank of Vietnam (SBV) will keep a proactive and flexible monetary policy basing on market developments and forecasts for the macro-economy, SBV Deputy Governor Dao Minh Tu told a meeting on April 22.

FDI firms still dominate electronics shipments
FDI firms still dominate electronics shipments
BUSINESSicon  23/04/2021 

Foreign direct investment (FDI) firms still dominated electronics shipments to foreign markets in the first quarter of 2021, accounting for a whopping 95% of the total revenue from electronics exports,

Foreign firms register trademark protection for Vietnamese rice in U.S.
Foreign firms register trademark protection for Vietnamese rice in U.S.
BUSINESSicon  22/04/2021 

Four foreign companies have registered trademark protection for Vietnam’s ST25 rice in the U.S., which may choke off Vietnamese food exporters tapping the market later,

Experts: E-commerce to grow solidly in 2021
Experts: E-commerce to grow solidly in 2021
BUSINESSicon  23/04/2021 

Vietnam’s e-commerce market will maintain its solid growth trajectory this year, analysts said at a ceremony announcing Vietnam’s E-Business Index within the framework of the Vietnam Online Business Forum on Tuesday.

PCI 2020 pinpoints areas to improve on
PCI 2020 pinpoints areas to improve on
BUSINESSicon  23/04/2021 

While advancements in 2020 Provincial Competitiveness Index strengthen local business climate, breakthrough approaches are urged to create new room for future improvements to increase investment attraction amid tougher regional competition.

Two VN female entrepreneurs named in 2021 Forbes 30 Under 30 Asia
Two VN female entrepreneurs named in 2021 Forbes 30 Under 30 Asia
BUSINESSicon  22/04/2021 

Three Vietnamese women, including two entrepreneurs and a fashionista, were listed in the 2021 Forbes 30 Under 30 Asia, which was announced on April 20.
 

Hanoi, Ho Chi Minh City lead Vietnam e-business index 2021
Hanoi, Ho Chi Minh City lead Vietnam e-business index 2021
BUSINESSicon  22/04/2021 

The trend of e-commerce development differs between slow-growing regions and developed regions.

Consumer finance market anticipated to continue facing difficulties after recovery
Consumer finance market anticipated to continue facing difficulties after recovery
BUSINESSicon  23/04/2021 

 The consumer finance market in the year ahead is predicted to struggle making any significant breakthroughs, despite lending interest rates witnessing a downward trend, according to experts.

Proposals for global financial centres picking up steam
Proposals for global financial centres picking up steam
BUSINESSicon  23/04/2021 

Tremendous attention has recently been placed on building an international financial centre in both Danang or Ho Chi Minh City, as Vietnam could profit handsomely from its reputation as a future offshore hub for high-profile financial services.

Securities firms report improved results in Q1
Securities firms report improved results in Q1
BUSINESSicon  22/04/2021 

Recently released financial reports show the earnings of securities companies were positive in the first quarter of 2021.

Policy implementation capacity needs improvement to support businesses
Policy implementation capacity needs improvement to support businesses
BUSINESSicon  24/04/2021 

Chairman of the Vietnam Chamber of Commerce and Industry Vu Tien Loc talks about solutions to help businesses overcome difficulties caused by the COVID-19 pandemic.

Experts: E-commerce to grow solidly in 2021
Experts: E-commerce to grow solidly in 2021
BUSINESSicon  21/04/2021 

Vietnam’s e-commerce market will maintain its solid growth trajectory this year, analysts said at a ceremony announcing Vietnam’s E-Business Index within the framework of the Vietnam Online Business Forum on April 20.

LG’s smartphone production line in VN to be used to make home appliances
LG’s smartphone production line in VN to be used to make home appliances
BUSINESSicon  21/04/2021 

Korean tech giant LG Electronics Inc. said on April 20 that it plans to produce home appliances from its smartphone manufacturing line in Vietnam’s Hai Phong city as the company earlier decided to fully withdraw from the mobile business.

Domestic electronic firms urged to enhance capacity, improve linkage with FDI
Domestic electronic firms urged to enhance capacity, improve linkage with FDI
BUSINESSicon  21/04/2021 

Enhancing the linkage between domestic and foreign-direct-investment (FDI) electronic enterprises can be an important solution to promote the development of this industry which is now dominated by the FDI sector.

Firms to get help to expand rice export markets
Firms to get help to expand rice export markets
BUSINESSicon  21/04/2021 

The Ministry of Agriculture and Rural Development reported the volume of rice exported reached 450,000 tonnes with a value of US$246 million last month.

PM orders control over capital poured into property sector
PM orders control over capital poured into property sector
BUSINESSicon  21/04/2021 

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam (SBV) to closely control the capital injected into the real estate sector to prevent property speculation and ensure that property projects meet the demands of residents.

Transport Ministry proposes support policies for Vietjet, Bamboo Airways
Transport Ministry proposes support policies for Vietjet, Bamboo Airways
BUSINESSicon  20/04/2021 

The Ministry of Transport has proposed the Government work out policies to support Vietjet and Bamboo Airways, 

Essence of giant waterbugs has value in Vietnam, favored by wealthy
Essence of giant waterbugs has value in Vietnam, favored by wealthy
BUSINESSicon  22/04/2021 

Ca cuong, or giant waterbug, looks like a cockroach. However, unlike cockroaches, ca cuong, with a rare and precious essence, is very expensive and sells for VND3.5 million per kilogram.

Small banks change as big companies become shareholders
Small banks change as big companies become shareholders
BUSINESSicon  22/04/2021 

KienLong Bank share prices have been increasing sharply in recent days despite the downward pressure on the overall market.

 
 
 
Leave your comment on an article

OR QUICK LOGIN