In the next five years, the e-wallet market is expected to enter a fierce competition. Accordingly, 70-80 percent of e-wallets will have to leave the market
Talking to the Investment Newspaper reporter, Nguyen Hoa Binh, Chair of NextPay Partners (VIMO and mPos e-wallet joint venture just merged last month) said the e-wallet market is in bloom, but most of them are speculative. Specifically, many companies do not have clear and sustainable directions, so they mainly follow the e-wallet and intermediate payment fever.
“Many businesses jump in and face dilemma, because this market is extremely fierce, profit margins are only 0.2-0.5 percent, while many other industries, profit margins are up to dozens of hundreds of percent. Too many units jumping in will be a waste. In my opinion, in the next few years, there will be only about five e-wallets that exist in the market, that is, those with different products, creating big transaction volume or supporting large ecosystems “, Binh said.
According to the Investment Newspaper, Nextpay is one of the few e-wallets having profitable business in the market. Many businesses investing in this sector are suffering heavy losses. For example, by the end of 2018, Momo e-wallet had accumulated losses of nearly one trillion dong. Similarly, Zion Joint Stock Company also reported a loss of $177 billion with the ZaloPay wallet product in 2018, up nearly ten times higher than the loss of previous year, although ZaloPay and Momo are among the top e-wallet with highest number of users.
Pham Tien Dung, director of the Payment Department (the State Bank of VietnamSBV) confirmed that most e-wallets in the market operated unstablely and suffered losses while about 20 percent of units were profitable. The survey of a number of market research companies also showed that although there were 23 e-wallets in the market, but users focused mainly on four to five e-wallets such as: Momo, ZaloPay, ViettelPay and Airpay.
Sharing with the Investment Newspaper reporter, the CEO of an e-wallet also said that the market existed too many types of e-wallets, causing confusion for consumers and even the ineffectiveness of the e-wallets itself.
“Most e-wallets are established with the aim of calling capital, selling to foreign investors, anticipating the growth of e-commerce. However, unlike other fields, for e-wallet market, the existence of too many e-wallets is not necessary. The proof is that in China, only Alipay and Tenpay dominate the market. I think that 80 percent of e-wallets will disappear within the next five years,” said the CEO.
Fierce competition, low profitability and even losses, but surprisingly, e-wallet has still attracted strong investment. A series of million dollar deals still take place in this sector. In early 2019, Warburg Pincus (USA) poured hundreds of millions of dollars into Momo, VINID (a subsidiary of Vingroup) bought shares of People Care (provider of e-wallet service MonPay). Previously, a series of giants also poured capital into e-wallet as VNG invested in ZaloPay, Grab bought shares of Moca, Internet Sea (Singapore) participated in Airpay and 1Pay had TruMoney’s investment.
As can be seen, most investors in this field are not “dreamers”. The question is, why are the investors still pouring capital?
Responding to the reporter on the “burning money” strategy of the e-wallet with foreign investors, Nguyen Hoa Binh said that foreign investors might want to acquire the market first by creating consumer habits, similar to the way Uber has deployed. However, when consumers use the e-wallet as a habit, it is possible that they want to take advantage of this to exploit other areas (such as consumer loans), rather than simple payment.
Technology revolution 4.0 has completely changed the traditional business model. Accordingly, seemingly unrelated businesses easily connect with each other in an ecosystem. Although there is no big margin, but in an overall business strategy, e-wallet is an indispensable “super-application” for businesses to perfect their ecosystems. That is the reason why e-wallet businesses these days often have a strong shareholder behind operating in e-commerce, logistic, food order and consumer lending business.
In the context of strong e-commerce, e-payments and possession of e-wallet licenses becoming increasingly difficult, the wave of investment in e-wallets has not stopped. Many banking experts say that new sharks can still appear at the same time as natural purification, until the market forms e-wallets that can dominate the game. According to Momo representative, in the future, the market will only have a few dominant units in this field.
