Journal Report

Journal Report 28: Vietnam’s Mobile money outlook

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What’s going on here?

Mobile money definition

  • Simply put, imagine that you have reached the payment step for your online shopping experience, and instead of going through multiple verification steps for your bank account to confirm the payment/transfer the money, you only have to click one button on your phone to do the same thing. That’s basically Mobile Money (MM)‘s existence around us.
  • However, MM could be best defined when distinguishing it from Mobile Banking & E-wallet . The most basic difference is that Mobile Banking & E-wallet requires a bank account, while MM does not. Instead, a MM account is typically linked to a mobile phone number, so MM is often provided by the same companies that run the country’s mobile phone services (e.g: Viettel in Vietnam).
    • Examples of MM: Paypal, Venmo
    •  Fun fact: Momo is not MM (although its name is originally short for (Mo)bile (Mo)ney LOL), as it’s more of a payment intermediary between your bank account and vendors;
  • 2 main functions of MM:
    • Mobile wallets:
      • storing money digitally on a mobile device
      • E.g: Paypal account balance, Cryptocurrency
    • Mobile payments
      • spend money digitally
      • E.g: Paypal, Venmo

MM scale internationally

  • MM has existed since 2018.
  • Around 90 countries have developed MM platforms, with about 900 million users (~1/7 of the world’s population).
  • Daily transaction value via MM is about USD 1.3 billion, and the CAGR is 20%.

MM in Vietnam

  • Is only about to go through the pilot phase. 
  • A lot of room is expected for MM to develop, especially in rural areas.

Network operators have done the preparation

  • License:
    • Since 2019, the 3 major network operators in Vietnam – Viettel, VNPT & MobiFone have applied for a pilot license to deploy MM.
    • Up until now, VNPT & Viettel have been granted the license.
  • Viettel, at the end of June 2019, established Viettel Digital, which is identified as a technology company focusing on 3 main areas: digital finance, data services, and e-commerce.
  • VNPT
    • has also been ready for MM in terms of both infrastructure and finance.
    • One advantage that VNPT has is its digital financial ecosystem with VNPT Pay that has nearly 50,000 payment acceptance locations.

Regulation supports

  • By March 2020, the Prime Minister had asked the SBV to implement fee exemption & reduction programs for e-payment services to directly support users, especially online payment fees for public administrative services.
    • E.g: you might have been familiar with discount codes for online payments of electricity, water, …
  • The pilot implementation
    • In May 2020, the SBV finally submitted to the Prime Minister a decision on the pilot implementation of using a telecom account to pay for other small value services (i.e: MM ). However, it has not been decided yet.
    • In August 2020, the Prime Minister once again mentioned this implementation. 
    • Recently, several network operators have submitted a petition to the MIC on a plan to allow businesses to deploy MM services. In response, the MIC affirmed that
      • Mobifone has to submit a written report on problems in applying for the license.
      • For VNPT and Viettel, the MIC is actively coordinating with the SBV and ministries to finalize the draft decision to submit to the Prime Minister for the pilot approval of MM.

Future outlook

Stages of development

  • Still in the early stage, MM service providers in Vietnam focus on only 1-2 services, including money transfer and service payment).
  • At a later stage, service providers can expand their ecosystems with additional products such as insurance, savings, and credit. MM’s partners would then be insurance companies, banks, microfinance institutions, etc.

     

Business implications

  • The most significant change that MM brings to credit products is that
    • disbursement will be faster than traditional methods.
    • the NPL ratio will also be lower.
    • access to finance would be promoted for people and microenterprises, as payment values through MM are usually small.
    • understanding of financial services would be improved, thereby directing people to use advanced financial products
  • Regarding revenue, MM service providers will have direct revenue from the user’s transaction fees. However,
    • before reaching a certain scale, MM’s revenue contribution is estimated to be only 1-5% of the total revenue of mobile network operators in Vietnam
Sources:
1. Ben Burrell-Squires. (2020) Mobile money vs mobile banking – what’s the difference?. Available at: https://www.worldremit.com/en/stories/story/2020/05/22/mobile-money-vs-mobile-banking [Accessed on Jan 12th, 2021]
2. VietnamCredit. (2020) Outlook for Vietnam’s digital payment market. Available at: https://vietnamcredit.com.vn/news/outlook-for-vietnams-digital-payment-market_14265 [Accessed on Jan 12th, 2021]

 

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