Growing the adoption of BNPL providers in Vietnam

The BNPL fintech segment has promising, new prospects in Vietnam. What is the biggest challenge of BNPL?

Nguyen An Son, head of Project Development for the Centre for Informatics and Digital Technology at the Ministry of Industry and Trade’s Department of E-commerce and Digital Economy

Consumers using BNPL payments, similar to instalments via credit card or through financial companies, are consumers who borrow an amount equivalent to the value of the item and then repay it. A payment is committed between the consumer and the bank or a financial company.

The difference here is that because traditional payment services often do not have enough data, they can only verify the borrower through the documents they provide, such as proof of income or property. BNPL uses a large database to score consumers for that loan. The larger the database, the more accurate the scoring.

The emergence of this new form of payment will contribute to making the market, especially the retail market, become vibrant and developed.

The scale of the e-commerce retail market in Vietnam in 2021 will reach $13.7 billion and is expected to increase to $16.4 billion in 2022. With a growth rate of about 20 per cent per year, the room for BNPL to develop is huge. However, the general difficulties of the e-commerce industry will also affect BNPL.

The first is that the cash-on-delivery (COD) rate remains high at about 73 per cent in 2021. The remaining 27 per cent of non-cash payments are done by people who are familiar with this form and have stable income is stable, so they may not be interested in this form of BNPL.

So the challenge will be how to make the consumers who are using COD turn to using other non-cash payment methods, including BNPL.

Secondly, the BNPL form will be effective in high-value orders from $200 or more. The number of orders in this range only accounts for about 43 per cent of the market. This will also affect the scale and development space for BNPL.

To overcome these difficulties, BNPL service providers have to solve the issue of consumer confidence. When consumers have confidence that this form of payment is safe and convenient, following the provisions of the law, other problems I believe will be removed.

Vietnam’s legal system is not yet clearly defining how BNPL approaches should be used. What can be done to solve this?

For the e-commerce industry, there are currently no clear regulations on payment activities through BNPL. However, as I mentioned above, BNPL is still a consumer loan, so it is necessary to comply with the provisions of current laws on lending activities.

Personally, I think that the emergence of a new form of payment and the acceptance of consumers is a positive thing and it will contribute to helping the e-commerce market reach the target of having half of all payments carried out with non-cash methods by 2025 according to the prime minister’s Decision No.645/2020/QD-TTg on the national e-commerce development master plan for the 2021-2025 period.

Regarding policies that are being finalised, the Department of E-commerce and Digital Economy also follows the plan of the government, not only updating and perfecting the legal framework but also seeking important solutions and infrastructure to enhance consumer confidence in e-commerce.

The above layer has been and will be completed by us in an open direction so that businesses can connect and exchange data and provide transaction assurance services for consumers. This will help BNPL activities solve the problem of consumer confidence when using the service.

What are some of the industries that could see the biggest growth in BNPL?

BNPL activities are strongly developing in electronics, electrical appliances, and high-value products. Therefore, I think BNPL will also have the strongest growth in the coming years in this category.

However, consumers aged 18-26 have a high ability to use BNPL today and are also very interested in educational and entertainment products.