Owning a payment intermediary company is the destination of firms going towards ecosystem development.
VinID Joint Stock Company, a member of Vingroup (code VIC), just completed the procedure to buy shares of People Carecompany that owns MonPay e-wallet. Not only an investment, leaders from VinID replaced all former employees of People Care’s Board of directors, right before the deal completed.
Previously, from the end of 2018, leaders of Grab Vietnam also appeared on the Board of Mocaa payment intermediary Fintech. Then the payment portion of this transportation network app transferred from GrabPay, operating on a third-party platform, to GrabPay by Moca.
In fact, Moca and MonPay are just two of many cases of Fintech with the participation of new partners. The market of payment platforms, represented by electronic wallets (E-Wallet), boomed from the period 2015-2016 is entering the next periodreshapingwith the emergence of “bosses” with financial potential behind. From the perspective of analysts, these moves can bring the market into a new phase with higher competitiveness.
“The participation of new “players” is a good signal because they only invest when the payment market really has the potential and demand of customers”, Nguyen Ba Diep, vice Chair of Momoone of Vietnam’s first E-Wallet and payment intermediary, said.
By the end of 2018, there were 4.2 million E-Wallets linked to bank accounts with a total transaction value of over 91 trillion dong. But these numbers are still modest compared to the market potential.
Both the first E-Wallets like Momo, Bankplus, Mobivi, Vimo and the later names AirPay, ZaloPay, Vi Viet are all in the same race for market share. Even so, the current market share is not determined by which one comes out sooner or later, but mainly because of the “willingness to pay”.
Studying from 21,000 social media discussions in July 2018, Buzzmetrics said that users’ interest focused on four E-Wallets: Momo, Viettelpay, Zalopay and Airpay, accounting for more than 90 percent of interaction.
However, from these interactions, Buzzmetrics found out the biggest reason users choose E-Wallet was because of promotions. 25 percent of people sharing the purpose of using E-Wallet were to participate in promotions from suppliers. Others used E-Wallet because of their online payment habits when buying goods. And this was also the reason why most of Fintech’s payments were in losses.
Pham Tien Dung, Head of the Payment Department of the State Bank of Vietnam (SBV) once said that only about 20 percent of firms had profits from transactions, the rest of the market was considered “unstable”. Losses with startups in general and Fintech in particular were not difficult to predict, especially when these firms often chose to exchange profits for market share.
Zion Joint Stock Company, a member of VNG Corporation, was granted a payment intermediary license from the beginning of 2016 and then appeared on the market with ZaloPay E-Wallet. Two years after its debut, the losses rose exponentially. According to VNG’s annual report, in 2017, Zion reported a loss of over 21 billion dong. The losses increased nearly six times in 2018, reaching more than 133 billion.
Momo, the top of number of user in Vietnam, accumulated losses of more than 1 trillion dong by the end of 2018. The rate of increase in the loss of this E-Wallet was approximately the same as the rate of revenue increase. The most recent year Momo lost more than 440 billion dong, nearly double that of 2017.
According to the 2017 and 2018 financial statements, Momo’s net cash flow from operating activities was negative hundreds billion dong each year. And almost all of the capital is offset by financial activities.
However, this situation also opens opportunities for new “players” to join the market through M&A deals.
For large firms that build ecosystem development model, owning a payment platform is obligatory. The recent investments in intermediary payments are mostly derived from firms that have own ecosystems.
Grab, a transportation network app appeared in Vietnam since 2014 has expanded its business to many services, including delivery and delivery of food. VinID, loyal customer care programme, applies to the VinGroup’s ecosystem products and services such as shopping, consumption, relaxation, health, education, food and entertainment, etc. SEA (old name Garena) became a shareholder of VNPay since the end of 2016, also a major shareholder of Foodya platform for evaluation and ordering.
Besides, another reason for participation is the ability to reshape the market. Due to the small scale, the payment intermediary market is also assessed as “being fragmented” because there is not a single unit with a strong enough ecosystem to attract the majority of customers to themselves. Each E-Wallet almost tries to find a separate market segment. According to Buzzmetrics research, 60 percent of customers go to Momo because of promotions, 70 percent use Viettelpay for transfers, and Airpay is 100 percent for ordering.
This opens up opportunities to become a market leader with large companies with great financial potential. However, this competition is predicted to be as fierce as other areas such as e-commerce.
“To develop electronic payments, each firm must have a distinct strength and ecosystem, in which customers will choose the best and most suitable service”, vice President of Momo said, and when developing large enough, the payment market is only enough for two to three firms to provide services.
