Summer really heated up in June, with a host of great deals like refunds, discounts, free shipping, and gift vouchers being offered to customers by supermarkets, banks, and e-wallet providers. All were activities marked “Cashless Payment Day”, which took place in Vietnam for the first time on June 16. The government and the State Bank of Vietnam (SBV) will mark the day every year, when consumers are encouraged to use cashless payments when shopping or making other payment transactions and will enjoy special offers from credit institutions, payment intermediaries, retailers, and service providers.

Cashless payments are now common around the world and provide benefits to both customers and suppliers, and Vietnam is making its own moves away from the overarching preference for cash in the country. “Vietnam’s economy is still largely based on cash, but the government and the central bank are committed to the progressive reform of the national payment system and there are different activities that are aimed at facilitating the development of digital payments,” Mr. Ousmane Dione, World Bank Country Director for Vietnam, told VET.

Initial moves

The government has done a great deal to promote cashless payments. The Prime Minister issued Decision No. 2545/QD-TTg, approving a scheme for the development of cashless payments in Vietnam during the 2016-2020 period, with the goal of cash payments falling to 10 per cent of all transactions by the end of 2020.

Many banks in the country are also implementing cashless payment services. According to the SBV, in the first quarter of this year, the number of payment transactions via bank cards stood at more than 65 million, up 18.45 per cent over the same period of 2018, with a value of over VND171 trillion ($7.3 billion), up 18.82 per cent. Many features and utilities have been integrated into bank cards to improve service quality and safety and security in payments.

Most banks have also established and upgraded their core banking systems, developed an internal payment system, and integrated modern payment channels on mobile and on the internet to adapt to the increasingly diverse needs of customers. Seventy-five banks offer internet payment services, and 41 others provide mobile payments, while 16 banks conduct QR code payment services. The market as a whole has more than 30,000 points accepting QR code payments, according to the SBV. In the first quarter, the number of transactions via internet banking reached more than 101 million, with a value of about VND4.5 trillion ($196.6 million), an increase of 65.81 per cent and 13.46 per cent, respectively, against the same period of 2018. Transaction numbers via mobile channels reached more than 76 million, with a value of more than VND924 trillion ($39.6 billion), an increase of 97.75 per cent and 232.3 per cent, respectively, year-on-year.

At a press conference on May 20 announcing “Cashless Payment Day” in Vietnam, Mr. Pham Tien Dung, Director of the Payment Department at the SBV, said all new payment technologies are being applied in Vietnam, including QR code, PoS, and mobile payments, in which mobile payments are the most common.

Barriers to address

In order to fully move towards cashless payments, however, Vietnam will still have to overcome a host of challenges. One of the biggest is awareness in the population. Ms. Winnie Wong, Country Manager of Mastercard Vietnam, told VET that, currently, only about 30 per cent of the population have access to banking facilities and mobile money accounts. “Ensuring the unbanked population has access to financial services is the first step towards achieving financial inclusion, as it provides them with the means to participate in the formal marketplace without depending on physical cash,” she said.

Meanwhile, the legal framework for payments remains incomplete, with laws relating to electronic payments and e-commerce not providing peace of mind to many. Mr. Dione pointed out that the majority of innovative mechanisms for the provision of payment services are based on pilot schemes that are constantly being renewed and are not based on established legislation. “The country needs proper rules on the role of agents and on the participation on non-bank payment service providers in the market,” he said. “These are the most critical elements that prevent the further expansion of digital services in the country, particularly in remote and rural areas.”

Mr. Nguyen Kim Anh, Deputy Governor of the SBV, told the “Non-cash Society: Policy and Practical Situations in Vietnam” workshop on June 11 in Ho Chi Minh City that a cashless society does not always bring about positive results. “There are certain concerns about the potential risk of breach of confidentiality, data safety, and network security,” he said. According to the SBV, 80 per cent of bank customers or cardholders prefer to pay cash on delivery for their e-commerce purchases. “These are matters Vietnamese management agencies will pay attention to in the process of planning and implementing policies to become a cashless society,” he added.

Improvements continue

The role of the SBV is crucial in developing cashless payments. “Digital payments will all be linked via centralized infrastructure overseen by the central bank,” Mr. Dione said. “This would allow it to detect possible risks and take necessary actions to prevent major problems and eliminate negative factors and challenges.”

The SBV, therefore, is developing a draft decree to replace Government Decree No. 101/2012/ND-CP on cashless payments, which sets out solutions to expand the scope of services and range of users. At the same time, it has been focusing on implementing assigned tasks for the banking sector in Resolutions 01 and 02 from the government, issued this year.

From the perspective of providers, Ms. Dang Tuyet Dung, Vietnam & Laos Country Manager at Visa, told VET that the government could look to offer incentives to help encourage merchants, perhaps in the form of tax breaks or small grants, to invest in PoS systems and leverage convenient cashless payments to grow sales. “For many smaller businesses, these setup costs may be prohibitive, and so assistance could help to substantially drive uptake,” she said.

Visa launched its Future of Security Roadmap for Vietnam earlier this year, outlining a robust approach to strengthening payment security in the country over the years to come. The roadmap focuses on a number of key initiatives that will enable security to evolve at the same pace as the technologies changing the way we pay. “Though Vietnam is a relatively young market when it comes to electronic payments, we’ve seen very strong adoption with both merchants and consumers,” she said.

Meanwhile, Ms. Wong believes that strong partnerships between governments, the private sector, and non-government organizations can also improve access to and use of formal financial services, which will ultimately deliver inclusive growth and empower people. Mastercard also considers Vietnam an important market and has worked closely with the government and business partners to introduce innovative solutions to help the country realize the benefits of cashless payments, in line with the vision it shares with the SBV to move towards a world beyond cash. “There is no doubt in our minds that Vietnam can become a cashless country,” she said.

VN Economic Times