Widespread adoption of digital payments taking hold

Nguyen Dang Hung, head of the VietFintech Club and deputy CEO of National Payment Corporation of Vietnam (NAPAS), highlighted Vietnam’s rapid growth in the payment sector over the past five years, aligning with global digital transformation trends.

Widespread adoption of digital payments taking hold, illustration photo/ Source: freepik.com

Speaking at a seminar on intermediary payment services last week, Hung noted that the market saw approximately 3.5 billion cashless transactions in 2023, with a total value exceeding $2.64 trillion.

QR code transactions surged, reaching around 183 million transactions, a 170 per cent increase compared to 2022. The total value of these transactions was approximately $4.64 billion, marking a 74 per cent on-year growth. Online payments hit about 210 million transactions, a 15 per cent rise from 2022, with a total transaction value of $6 billion. Additionally, 145.79 million cards were in circulation, with total card payment sales in 2023 exceeding $72 billion, an 18 per cent increase from the previous year.

In the card payment sector, cash withdrawal transactions still outnumber payment transactions, but the gap has been narrowing, especially in 2023. Despite the overall increase in card payment volumes over the years, there was a decline in 2023.

Hung expressed hope that the government and the State Bank of Vietnam (SBV) will soon introduce a clearer and more comprehensive legal framework to meet consumer needs and support the payment market’s development.

“NAPAS is currently the sole card switching organisation in the market. Previously, several technology companies proposed allowing more providers to increase competition and reduce user fees. With the current technology infrastructure, many tech firms are capable of participating in this service,” Hung shared.

According to data from the SBV on mobile money development in June 2024, Vietnam has achieved 9.13 million mobile money accounts, established nearly 1,900 business points, nearly 275,600 payment acceptance units, and facilitated 128 million transactions valued at around $191 million. In the first half of 2024, QR code payment transactions grew by 104.2 per cent in volume and 99.6 per cent in value compared to the same period in 2023.

Le Anh Dung, deputy director of the Payment Department at the SBV, stated that Vietnam’s payment intermediary market has developed rapidly with instant payment systems and the widespread adoption of QR codes, cross-border e-commerce, and digital platforms.

“Digital commerce and cross-border e-commerce play crucial roles in driving these changes,” he said. “The legal framework for this sector has been continuously updated and improved, significantly benefiting payment service providers in promoting cashless payments.”

Dung also pointed out that, as of June 30, 48 out of 50 payment intermediary organisations provided e-wallet services, with over 34 million active e-wallets, accounting for 59 per cent of the 58 million activated wallets.

Despite this rapid development, the market faces significant challenges. Global economic difficulties, technological competition among banks and payment intermediaries, and increasing fraud and scams are key issues.

“The rise in fraud and scams demands substantial investment in security technologies,” Dung noted. “However, banks and payment intermediaries are investing heavily in technology to improve customer experience and ensure robust security.”

At the seminar last week, experts from NAPAS, MoMo, Viettel, FPT Pay, and Visa shared solutions to promote electronic payments in Vietnam. These included leveraging shared technical infrastructure, developing inclusive finance through technologies like AI, big data, and machine learning, and enhancing fraud detection and consumer protection measures.

Regarding the e-wallet segment, the departure of Grab-backed e-wallet Moca in early July, attributed to strategic restructuring, highlights the intense competition in Vietnam’s fast-growing payment market.

“As Moca’s market share is redistributed, major players like MoMo, Zalopay, Viettelpay, and VNPay are vying to attract former Moca users,” an industry expert said. “On the other hand, traditional banks are enhancing their technological capabilities to compete with e-wallets.”

Despite offering a comprehensive ecosystem that includes shopping and entertainment services and financial services, Vietnamese e-wallets have yet to successfully raise customer awareness about the integrated conveniences available on their platforms.

“Financial services like insurance, savings, and investments will be the next direction for e-wallets in Vietnam. Leading this trend are MoMo and ZaloPay. In the past two years, both e-wallet applications have actively diversified their partner networks and invested in financial startups,” the expert observed.

According to a February report from FiinGroup, e-wallet transactions have consistently achieved double-digit growth, with a compound annual growth rate of 80.4 per cent in transaction volume and 83.5 per cent in transaction value from 2018 to 2023.

“Despite this robust growth, intermediary payment service providers face the challenge of maintaining customer loyalty amidst significant promotional costs, often resulting in negative profits for leading companies,” FiinGroup said.

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