Mobile money was just about to be launched in Vietnam but promised to become the ‘biggest’ electronic wallet in the market and a formidable opponent of banks.
Telecommunications enterprises impatiently applied for licenses
If the mobile subscriber had 1 million dong in their account, this amount was currently only used to pay for calling, texting and data. However, if users registered mobile money, they could use it to pay bills, shop online, and so on, without having a bank account.
The convenience of mobile money made this form of payment expected to explode if licensed. That was the reason why the operators were so eager. In addition to Viettel Group (Viettel) and Vietnam Posts and Telecommunications Group (VNPT) granted intermediary payment licenses, Vietnam Mobile Telecom Services One Member Limited Liability Company (MobiFone) also submitted applications. The goal of all three carriers when applying for an intermediary payment license was mobile money. At the high-level Forum and International Exhibition on Industry 4.0 held in the middle of last week, leaders of Viettel and VNPT both urged the regulatory agencies to grant this service license quickly.
Because there was no need to link to a bank account, mobile money was aimed at the segment of customers without a bank account, thereby speeding up financial popularisation to people. Besides, mobile money can deploy services such as loan disbursement, funding for people to pay for essential services, public administration, education, transportation, etc. Mobile money was also easy to combine with e-commerce, transportation, finance companies to create an ecosystem, promote currency circulation, national commerce and economic growth.
Reportedly, the State Bank of Vietnam (SBV) supported the view of mobile money development and was finalising the project before allowing it to be implemented. According to Pham Tien Dung, director of Payment Department (SBV), mobile money was an electronic wallet, with the most significant difference being that there was no need to link to a bank account. That was not in line with the current regulations, so there must be rules before the pilot.
The reason why many authorities were concerned about mobile money was the authenticity of customer information, safety, security, risk of fraud, money laundering, tax evasion, and so on. Because of not including a bank account, the deposit into mobile money would process through the agent. Thus, the management of cash flow of agents, monitoring agents that receive money from users for payment intermediaries were what authorities have to anticipate to prevent.
Are banks afraid of mobile money?
By the end of June 2019, the whole country had 134.5 million mobile phone subscribers, including 51.1 million broadband mobile subscribers. With a large customer base and high convenience, when deployed, mobile money would be a formidable opponent of other electronic wallets. Then, what about the banks?
Nguyen Dinh Thang, Chair of Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank)’s Board of directors, confirmed that mobile money was a small payment system, not directly competing with banks. Banks supported the development of this model and hoped that mobile money would become an extension of bank.
According to Thang, Vi Viet (e-wallet of LienVietPostBank), although developing very well, was facing difficulties because people in remote, rural areas cannot afford to top up their wallet to spend. That mobile money was allowed to be recharged into Vi Viet or to have an agent system to top up was fundamental. At that time, at the beginning of the village, there was a man selling water, and at the end of the hamlet, there was a lady selling groceries, which was allowed to act as an agent to deposit money into electronic wallets. Thang would like SBV to untie the mechanism for agents to act as an extension arm for banks, thereby speeding up cashless payments.
Leaders of many commercial banks said that mobile money or fintech were aimed at niche markets, into small segments that banks can not afford to cover at all. Therefore, mobile money was more complementary than competing with banks, creating a habit of non-cash payment, accelerating overall finance. Mobile money development would also promote cooperation between banking and fintech to diversify products and services to customers, bringing benefits to both parties.
If SBV allowed the application of electronic authentication (eKYC), people could open an online account, and banks would expand its operation to remote areas. At that time, the competition between banks and e-wallets might be fiercer, but each side still had its own advantages.
Both banks and fintech affirmed that, in the market where cash usage habits still dominated like Vietnam, the payment pie was still for both exploits. The problem was how e-wallets and banking applications attracted users.
Currently, there were nearly 30 e-wallets in the country, but customers mainly focus on five types of wallets. With the launch of rookies like mobile money, the following period would witness the elimination of some electronic wallets. Banks must also improve service quality to compete. In this race, the unit that provided excellent service, reasonable fees, and diverse ecosystems would be the winner.
