The approval of the Prime Minister in early March 2021 to the pilot scheme for the use of telecoms accounts to pay for small-value goods and services (Mobile Money) has attracted much interest of both experts in the fields of banking, finance, telecoms as well as the general public.
It is expected to increase non-cash transactions, especially in remote areas. Viettel, VNPT (Vietnam Post and Telecommunications) and MobiFone, the three biggest network operators, are preparing to apply for Mobile Money licenses.
E-wallets, Mobile Banking and Mobile Money are market segments that target different groups of customers. The purpose of Mobile Money is popularizing non-cash payment, especially in rural and remote areas where banking services cannot reach. Moreover, Mobile Money does not have relations to finance and banking operations, because Mobile Money providers are not allowed to lend money, mobilize capital or pay interest on money.
The difference among the types of services can also be seen in the transaction limits stipulated by the Government. While e-wallets target clients in large cities and have a maximum transaction limit of VND100 million a month, Mobile Money provides non-cash payment service to clients in remote areas and has a limit of VND10 million.
A survey by Cimigo in 2019 showed that even in cities, only 30 percent use Mobile Banking and 29 percent use e-wallets for payment. With youth’s ability to adapt to internet and technology quickly, as well as the high income of urbanites, the potential market for fintechs and banks is still big.
Telecom carrier and fintech cooperation
Well-known apps such as MoMo and ZaloPay can work with mobile network operators, who have great advantages in providing Mobile Money, to improve users’ experiences. The two sides can take advantage of each other’s customers and business experience to increase revenue and expand operations.
Fintechs have experience in providing intermediary payment services, and can help network operators design convenient and friendly features for Mobile Money. Users’ spending behaviors in e-payment will help mobile network operators design more attractive services to Mobile Money users.
And fintechs will also have new data for exploitation. In addition, once Mobile Money users realize the convenience of cashless payment and want to improve their experience with other services, they will be motivated to create bank accounts and access multifunctional services, including e-wallets. And this will benefit fintechs.
For example, Viettel Pay e-wallet is a super-app with 10 million customers. The experience from Viettel Pay deployment will help Viettel popularize Mobile Money to clients.
Non-cash payments to rise
The Ministry of Information and Communications shared that Mobile Money introduction will encourage a raid development among Vietnamese telecoms companies, which now own over 130 million mobile subscribers.
Mobile Money is for legal goods and services in Vietnam only, so international payment is not allowed. In addition, Mobile Money only welcomes the use of citizens whose mobile number is registered with a valid ID card or passport and a complete identification procedure. Therefore, each Vietnamese person can only own one Mobile Money account in one telecoms company. This account is similar to a telecoms account, but can be used for money-related activities. Different from an e-wallet, this account does not require a link to any bank account. Payments are done via apps (smartphones) or SMS (regular phones or in no-Internet areas).
At the moment, major telecoms businesses in Vietnam are hurriedly preparing necessary legal documents, infrastructure, technologies, human resources for their Mobile Money operation to ensure safety and convenience for users.
It’s believed that Mobile Money will increase the number of cashless payment transactions, especially in remote areas. If Mobile Money is attractive with its low service fee and convenient transactions, even people who have bank accounts and live in urban areas will use Mobile Money as well.
The launch of the Mobile Money program under the Prime Minister’s decision also promotes non-cash payment and the use of financial services. This will take full advantage of the infrastructure and database of the telecom network, reduce costs, expand non-cash payment on mobile devices, and bring benefits to users.
Mobile Money will bring utilities to people, especially ones in rural areas – making it easy to shop, minimize costs and time for travel, remove problems in cash management, reduce the number of payment methods, and help them manage their spending.