Which one will win in the race between the electronic wallets (e-wallets) and banks’ applications?
Too many electronic wallets
The era of smartphones entails many changes in consumer and payment behaviours of users. Statistics of Visa card organisation showed that seven out of 10 users in the globe would shop via smartphones.
In Vietnam, on average, about 1.3 million e-transactions are processed through the NAPAS and banks, up by 1.75 times over the same period. This shows that payment habits of users are shifting in a positive direction, said NAPAS’ representative.
Nevertheless, people will give very different answers if being asked about how to make payments, because there are too many e-wallet brands or banking applications that can be used to buy phone cards, movie tickets or pay utility bills.
In this trend, even banks, despite having specific applications for Mobile Banking, still launch applications for customers named “Pay”. Recently, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) has launched Sacombank Pay as an e-wallet. Users can top up money from their Sacombank accounts or other banks and use the e-wallet for trading. Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) has VCB Pay, Commercial Joint Stock Bank for Investment and Development of Vietnam has BIDV Pay+, Tien Phong Commercial Joint Stock Bank (TPBank) has Savy, and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) has YOLO application.
Most credit institutions (CIs) believe that these applications would bring different experiences to the usual Mobile Banking applications. Nevertheless, the services are currently still inconsiderable and just related to popular services such as making payment for telecommunications services and utility bills; making financial, insurance and educational payments; or booking hotel rooms, air and train tickets, etc.
Meanwhile, e-wallets the rivals of the “Pay” applications of banks, are much diversified. Long-term wallets like MoMo and Payoo have their own position in the market, while other e-wallets are facing to offer promotions to attract more customers, typically ZaloPay, or AirPay (of Sea (Garena) Ltd). Many other e-wallets, which have been developed in their own ecosystem, are also booming, such as Moca which was acquired by Grab.
Which one will win?
In the Chinese market, the use of WeChat Pay and Alipay is seven times higher than the average use of the five applications offered by the country’s five leading banks. It can be seen that the outstanding points of fintech companies in payment field are the faster, more convenient, and diversified services. It is thus easier for them to score with individual users.
Most e-wallets now have their own strength. For example, some own an ecosystem of many applications and high traffic such as ZaloPay. The pioneer group in the market includes MoMo, etc. Meanwhile, most of the bank services can hardly compete with those e-wallets in terms of quantity, coverage and diversity. As mentioned in the above, banking applications now still focus more on popular payment services in the areas of electricity and water, health, public administration, shopping, entertainment, education, transport, which offer modest difference to other e-wallets.
Nevertheless, in fact, the number of users of online banking applications is rising very fast. In emerging Asian countries in 2017, 52 percent of urban customers used digital banking, while it was only 33 percent in 2014. Unlike payment e-wallets, the advantage of the banking applications is keeping the financial services internally, while e-wallets only call from external sources.
The customers of these two models are more or less different. Banks can provide different financial services to customers from savings, borrowing, insurance and investment but not only payment. For example, the Fast Mobile application of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has options that allow users to connect investment funds. YOLO of VPBank has posted advertisement of a “virtual credit card” for shopping (to preserve the real cards and avoid information risks).
The participation in providing different technological applications to users, in addition to retaining existing customers, also offer an important source of behavioural financial data for banks. These data are becoming more and more valuable, because banks can base on that to analyse customer behaviours, rate credit, and make decisions of online borrowings in a much faster way compared to before. That is why banks must join the technological race with many different application products.
Nevertheless, banks are not only competed by payment fintechs (which account for the highest quantity) but also by the new fintechs operating in personal or corporate finance (borrowing and savings).
Certainly, other fintech types which directly compete with banks still need to wait for the adjustment of the law. However, the advances in computer science and data analysis technology today put banks in a race with fintechs. At this time, banks would have to make choices on whether self-investing, cooperating with fintechs, or big techs to launch unique products to retain customers.
Some e-wallets in the current competition want to become “super applications”, which is to become a destination with difference choices. When the services are brought together, banks must have to follow to serve these super applications. A further perspective can be seen, in which payment activities can be made through different tools, not just smartphones. That could be a ring, a wristwatch, and users can make payment from a car or smart home control system. Banks at this time may only have the role of a “behind system.”
