Chip tech to support e-pay ecosystem

Dang Tuyet Dung - Country manager Visa Vietnam and Laos

As Vietnam moves towards an internet-based economy, the country has been proactively developing technological advancements. In this regard, the State Bank of Vietnam’s (SBV) recent regulation on converting magnetic cards to chip cards has been considered an important step to promote non-cash payments in Vietnam.

Chip technology is the smarter and safer approach to digital payment via credit and debit cards. Unlike cards with magnetic stripes, which carry static information about the owner’s account and card, chips produce a unique code each time a payment is being made. This code is sent to the financial institution to verify that the card being used is the same one that was issued for that account.

According to Dang Tuyet Dung, country manager for Visa Vietnam and Laos, contactless card usage is globally particularly strong at merchants with high transaction volumes and low average ticket sizes such as food and grocery, quick-service restaurants, pharmacies, and transit points. In recent years, contactless payments have increasingly become the payment mechanism for most transactions in mature markets.

Vietnam can take reference from neighbours Malaysia, which completed the transition to chip cards at the beginning of 2019. Dung shared that the Malaysian government has achieved this with a joint effort from issuers, inquirers, and merchants in the country.

As a result, Malaysia has become one of the pioneers in EMV contactless card payment. EMV, which stands for Europay, MasterCard, and Visa, is a method which processes transactions by using NFC technology, through swiping or tapping on a dedicated terminal at any merchant. The technology is similar to contact chip cards, it also supports cryptographic functions for more secure transactions than with traditional magnetic-stripe cards.

As of present, over 20 banks and six companies in Vietnam are providing chip cards for payment services. By the end of the first quarter in 2020, the figures are expected to touch 26 banks and 10 companies.

These are solid foundations in Vietnam for greater use of e-payment methods, such as mobile banking or internet banking. The SBV’s statistics revealed that transaction values via points of sale have increased 36.5 per cent on-year, while the number of active bank cards hit 96.4 million with 19,000 services ATMs.

According to the SBV, despite some remaining hurdles for the transition to chip cards in Vietnam, with the main reason being the huge investment costs, the country is nearly prepared to switch as many banks have started converting their cards in 2019. Additionally, these banks have been supported by leading card and payment organisations.

Visa has encouraged Vietnam to move directly to dual interface cards and wearables that support contactless payments, instead of a two-phased migration to contactless first, and then to dual interface. A dual interface chip card is a credit or debit card with an embedded chip that allows the card to be used in both contact and contactless transactions

Besides being a more convenient payment option, the application of such chip cards could help Vietnam to get out of the pit of card crimes by reducing the risk of theft and fraud.

Since chip cards can store large amounts of information, they can also easily be used to pay for transport and public services. In many developed countries, EMV contactless cards have become the preferred payment mechanism for transit and adjacent segments such as tolls and parking fees.

According to Dung of Visa, the company has spurred the application of EMV chip cards in Vietnam for a long time. From October 2018, all new cards issued by Visa in Vietnam were equipped with the state-of-the-art EMV contactless chip technology. Furthermore, to elevate Visa cardholders’ personalised experience with contactless payments, the company has proposed local banks to accept non-signature payments for transactions below VND1 million ($43.50).

In July 2019, Visa and Ho Chi Minh City Department of Transportation signed an MoU to further develop smart mobility. Visa intends to work with the city’s department to explore options to upgrade payment systems by adopting EMV contactless technology for all public transportation networks. Vietnam thus joins countries like Singapore, Australia, the United King, and the United States to enable contactless EMV transactions in transit.

“This is the first step Visa has taken to enable smart mobility in Vietnam. We hope to introduce EMV contactless payments at more public transport operators as well as toll and parking in the forthcoming days,” Dung said.