Cities must go cashless to go smart

Cities like Hanoi and Ho Chi Minh City could see billions added to their budgets through cashless payments, Photo: Le Toan

When wearable digital payments company Tappy Technologies Ltd. showcased its new contactless payment solution for everyday expenses at the Visa Asia-Pacific Security Summit in May, it mesmerised attendants with how digital payment functionality can now be embedded into traditional timepieces and jewellery. Money is now literally sitting on the wrist or a finger of a consumer, readily available on the go.

“We embed a very flexible chip, which is waterproof and certified by all the payment card schemes, inside the form factors that you can see here [there was a plethora of watches, wristbands, and bracelets on display] – everything here is a payment device. So when you go to the store for a coffee and you’re wearing this nice watch – not a smart watch, it’s a regular watch – you’d just need a tap and that’s it, payment’s done!” said Suboor Ahmed, vice president of business development at Tappy, on the sidelines of the summit.

“It’s seamless, frictionless, and the whole beauty of it is that people don’t even know that there is a payment chip inside [your watch],” he added.

While such payment technology is yet to be widely known in Vietnam, it is expected to soon rise in popularity among the younger generations and even the elderly, who, according to Ahmed, can have a replacement strap embedded with a near-field communication (NFC) chip to their original watch that they inherited from their grandparents to start making payments at certain card merchant readers.

Wearable digital payments, together with other forms of contactless payments that have been developed across the globe, are indeed paving a digital path for Vietnam to stride towards becoming a cashless nation.

The Vietnamese government has been pursuing this objective by setting the clear objective of trimming cash below 10 per cent of the total payment means by 2020, as per the government’s Decision No.2545/QD-TTg approving the development scheme for non-cash payments in Vietnam for the 2016-2020 period.

Eager to go cashless

Switching from a cash-oriented to a non-cash economy should not only be the quest of only the government, but also of each individual and the business community.

In a previous interview with VIR, the leader of a foreign bank branch in Vietnam noted that if it was only the State Bank of Vietnam’s (SBV) goal to go cashless, it would take a long time to steer the nation onto that route. “To me, it is like everything else in life, there is a push and there is a pull. I am a big believer that the pull is always a stronger influence than the push. Push is good, and that is what the regulator is doing. Pull comes from people like you and me who do not want to carry cash.

“That’s the pull, and the change in Vietnam will only be as quick as people are willing to adopt this change and the technology,” the bank leader said.

The banker is probably right, as, if it was not for the people and the consumers choosing to go cashless, the regulators alone would not be able to push the nation towards this cashless goal, let alone develop whole smart cities.

Vietnamese consumers, in a report entitled ‘Rise of the Digitally Engaged Consumer’ incorporated in the fourth annual Visa Consumer Payment Attitudes Survey conducted in July-August 2017, were found to be the most confident among the neighbouring countries when it comes to going cashless for three consecutive days, with 57 per cent of local participants saying they felt confident on the go, the highest percentage ahead of the Philippines (51 per cent), Indonesia (47 per cent), and Singapore (42 per cent).

The report, which was based on a survey of 4,160 consumers, including 517 from Vietnam, representing the online population of seven Southeast Asian markets, also revealed that some 43 per cent of consumers in the region expect their country to be completely cashless by 2024, with 68 per cent across the board saying that they are rather confident of going completely cashless for a full day, while 45 per cent said they can do so for three days.

“This is a testament to the effectiveness of a robust payment infrastructure that supports each country’s vision to become a digital nation,” wrote the Visa report. “As Southeast Asia inches towards a cashless future, we expect consumers to have a greater appetite for more innovative payment solutions to meet their needs. Together with our partners, we hope to continue creating endless possibilities and opportunities for consumers to go completely cashless, and enjoy the seamless, reliable, and secure purchase experience everywhere they go.”

The pursuit of convenience

It may take a bit longer for cashless payments in the form of wearable devices to actually gain popularity in Vietnam, but the country has made itself ready to go digital, knowing the benefits awaiting.

Deputy general director of Retail Banking at TPBank Dinh Van Chien said that digitalisation is sweeping through the local banking system, with advanced technologies now taking centre stage in many bank functions and operations. “The banking sector has gone through an extreme makeover, particularly as digital payment solutions with chip cards are replacing magnetic stripe cards and contactless and mobile payments are gaining popularity.”

“Given the opportunity to leapfrog with technologies, customers have quickly welcomed and got acquainted with new advanced payment methods,” said Chien. “The digital approach that many banks are adopting can solve many issues, including withdrawals, deposits, and payments. The convenience and coverage of digital solutions have undeniably helped change the cash-centric habits of customers.”

It is not only everyday payments that are digitalised, tax and custom payments are also set to receive a face-lift, as the Ministry of Finance has called for co-operation between banks and tax and customs departments to enhance administrative formalities, speed up the customs clearance process, and streamline the collection of the government budget.

The target is to collect 80 per cent of tax payments in cities through banks and enable treasuries in all cities and provinces to have cashless payment systems by 2020, as per Decision No.241/QD-TTg approving the plan for intensifying payment for public services, including tax, power, water, and more, via banks.

For instance, last year HSBC Vietnam signed a co-operation agreement with the General Department of Vietnam Customs to launch an e-customs payment platform that allows HSBC customers to experience a more convenient customs payments process online.

“In partnership with the local government, we provide our clients with an online payment platform that can help save time, cut down on paper, and improve their operational processes. We launched e-tax payment, e-customs payment, and the Evolve platform in Vietnam and received good response from enterprises,” said Winfield Wong, country head of Wholesale Banking at HSBC Vietnam.

What digital payments provide to the individual, businesses, and the Vietnamese government will go beyond simply transitioning from physical money to digital payments, as it will catalyse economic growth in the near future, as per a study titled ‘Cashless Cities: Realising the Benefits of Digital Payments’ conducted by research firm RoubiniThoughtLab and commissioned by Visa. In particular, the results of the study estimated that relying more on electronic payments, such as cards and mobile payments, could yield a net benefit of up to $470 billion per year across the 100 cities surveyed – roughly the equivalent of 3 per cent of the average GDP for these cities.

Hanoi, as one of the subjects of this study, saw some particularly strong potential gains from going cashless, including an extra $600 million a year. The city’s employment could jump an extra 3.5 per cent, while wages and productivity would rise by 0.2 per cent. Hanoi’s GDP is also predicted to grow by 36.4 basis points.

Ho Chi Minh City, likewise, could expect $2.3 billion in total gains, with both consumers and the local government to receive $700 million each, while businesses could get up to $900 million in estimated net benefit. Employment in the city could soar by 3 per cent, while productivity and wages could each rise by 0.2 per cent. The biggest city of Vietnam could also anticipate a GDP increase of 33.1 basic points.

“The use of digital technologies, from smartphones and wearables to artificial intelligence and driverless cars, is rapidly transforming how city dwellers shop, travel, and live,” said Lou Celi, head of RoubiniThoughtLab. “Without a firm foundation in electronic payments, cities will not be able to fully capture their digital future, according to our analysis.”

“While Vietnam is still a heavily cash-oriented society, we are seeing very positive moves across the board from consumers, merchants, and the government, with attitudes towards electronic payments now better than ever before,” said Sean Preston, Visa country manager for Vietnam, Cambodia, and Laos. “Visa fully supports the SBV’s roadmap for non-cash payments by 2020 and is committed to driving the adoption of electronic payments and expanding acceptance to ensure that the transition to a cashless economy is both efficient and smooth.”