Van is a first-year university student in Hanoi, Viet Nam, who recently moved to the city from rural Northern Viet Nam. She relies partly on money from her family and is not currently financially independent, and much like her classmates, she is extremely tech savvy.
When my university class advisor monitor told me that using Vi Viet to pay my tuition fees would give me a discount, I decided to try it.
Van discovered that the Vi Viet e-wallet was well designed and convenient to use. It could also be used for online shopping and money transfers to conveniently send/receive funds to/from her family. However, as a student who tends to be more price sensitive, she shares that which e-wallet services she uses ultimately depends on who offers the best discounts and promotions.
Just like her classmates, mobile phones play a significant role in Van’s everyday life. On a national level, mobile penetration has reached 147 percent in Viet Nam, presenting financial service providers with a new channel to deliver affordable financial services. LienVietPostBank (LVPB) therefore developed the Vi Viet app, the first e-wallet launched by a bank in the country, to provide a simple and convenient digital platform tailored to meet the specific demands and requirements of low-income women in Viet Nam. As almost 70 percent of women lack bank accounts in Viet Nam (Findex, 2017), a large extent of them in low-income and rural areas, this presents an untapped market opportunity through the use of new technologies and payment gateways being developed in the country.
With this opportunity in mind, LVPB applied for a matching grant from the United Nations Capital Development Fund (UNCDF) Shaping Inclusive Finance Transformations (SHIFT) in ASEAN programme under the ‘Fostering Innovative Business Models for Women’s Financial Inclusion’ Challenge Fund window in April 2016. After a competitive selection process, the project was approved by SHIFT ASEAN’s Investment Committee and initiated in September 2016 with a committed investment of US$ 875,000 from LVPB matched with a US$ 325,000 grant from UNCDF.
Throughout implementation, LVPB faced various challenges, although not in providing access for low-income and rural women to an affordable and convenient e-wallet and payment gateway, but for their clients to actively use it after signing up.
Overview of the E-wallet Market in Viet Nam
Digital financial services like e-wallets have emerged as an important driver of financial inclusion. This is especially true in Viet Nam, where the high mobile penetration rate means that many people already have the technology required to use these services. The e-wallet offers a low-cost way to provide everyone, including the unbanked, with greater access to financial services. Since the e-wallet can be conveniently accessed via one’s mobile phone at any time, clients no longer need to travel physically to a branch to carry out transactions, saving them valuable time. Thus, the e-wallet overcomes two specific barriers that keep populations out of formal financial systems, namely the lack of infrastructure and inconvenience of traditional banking, to promote financial inclusion.
The government has set ambitious targets for financial inclusion particularly through digital means, including to reach 80 percent of adults owning a bank account by 2025, and to reduce cash transactions to less than ten percent of all market transactions by 2020. With the proliferation of mobile solutions for financial inclusion in recent years, ViViet is one of over 20 e-wallets now available in Viet Nam.
However, access to these services has not translated into use. Globally, about two-thirds of the world’s mobile money accounts are dormant, and while there has been an explosion of mobile solutions offered, there are common issues and barriers in increasing the use of these solutions. The same can be seen in Viet Nam where cash still dominates as consumer’s preferred method to settle transactions – according to the Ministry of Industry and Trade, 80 percent of Vietnamese prefer to use cash for daily transactions. Even if there are a multitude of services available, consumers have yet to adapt to the cashless payment solutions available.
After the launch of Viet Nam’s first e-wallet Momo in 2014, other players including Bankplus, VTC Pay, WePay, Vimo, Ngan Luong and Payoo launched their solutions in the following years. The Vi Viet e-wallet was then later launched by LVPB with SHIFT ASEAN's support in 2017. However, the e-wallet market has failed to reach a breakthrough with none of the players dominating the market.
In order to gain more customers, e-wallet providers have been running various price promotion campaigns including discounts on the first payment through the e-wallet or providing a gift amount for new customers. Some e-wallets, including Vi Viet, offer promotions on cinema tickets or other services and customers sign up to utilize the promotion and afterwards do not use the e-wallet until the next promotion emerges. The most common usage of e-wallets in the country is to top-up phone credits; usage rate remains low for other connected financial services and payment gateways.
Three of the reasons for the low uptake of e-wallet services include a prevalent preference for cash, low penetration of e-wallet payment services amongst merchants in the country, and lack of interoperability between e-wallets. The strong preference for cash is pervasive even amongst more digitally savvy customers who use e-commerce platforms. A study conducted by Q&Me in November 2018 found that 80 percent of respondents indicated cash-on-delivery as the preferred payment method, as compared to a mere six percent indicating e-wallet as their preferred method.
For merchants, while some street vendors have begun to accept e-wallet payments, some complain that it is inconvenient and extra time is spent verifying the transaction. The challenges surrounding accepting e-wallet payments, coupled with customers’ preference for cash, has therefore contributed to the low uptake by merchants on a national level – Q&Me’s recent 2019 study on mobile payment usage in Ho Chi Minh and Hanoi showed that all major e-wallets, except for the market leader Momo, are hardly accepted at popular convenience stores and supermarkets. While better than its competitors, Momo is still not accepted at four of the 20 sampled retail chains.
On the policy front, Viet Nam has taken several measures to transform the country from a cash-based to cashless economy. Starting with public services, the government has stipulated that all schools and hospitals in urban areas will go cashless by 2020. It also abolished the daily transaction limit of VND 20 million (US$ 854) for personal e-wallets in an effort to increase transactions, such as those involving electronic products and tourism services. Such efforts are a push to encourage greater usage of digital financial services and e-wallets in the country. This switch to cashless payments has further been significantly accelerated by the COVID-19 pandemic. A recent report found that since the outbreak, the total number of non-cash payment transactions via the State Bank of Viet Nam’s finance switching system has increased by 76 percent compared with the same period last year.
However, the lack of interoperability between e-wallet platforms persists in Viet Nam. E-wallets are generally closed looped ecosystems, which prevents users from transacting with clients of a different platform and limits the extent of a particular e-wallet’s usability at retail outlets. In response, the market is beginning to witness its first signs of market consolidation, such as the 2019 merger of e-wallet service VIMO and point-of-sale (POS) startup mPOS to form NextPay.
Government policies have yet to tackle interoperability, which has great potential to drive the uptake of e-wallets. For example, in India, the Reserve Bank of India (RBI) has extended the Unified Payments Interface, which traditionally supports inter-bank transactions, to allow for interoperability between e-wallets. This policy is projected to drive growth in India’s prepaid industry by five times within two to three years.
Additionally, in Myanmar, UNCDF has launched the microfinance institutions (MFI) Integration Platform project, which aims to connect Myanmar’s citizens to the National Payment System, either directly or through the MFI Integration Platform. This will help to facilitate digital loan repayment and disbursement and, in the long-run, build a fully enabled interoperability scheme for transactions such as bulk disbursements, peer-to-peer, and merchant payments among all categories of digital financial service providers.
Overview of LienVietPostBank’s ViViet e-Wallet
The Vi Viet e-wallet provides a simple and convenient digital platform tailored to meet the needs of low-income women in Viet Nam. To get started, clients simply need a mobile phone number to register for the e-wallet. They also have the option to sign up for a bank account by providing their ID number. Clients can then carry out basic e-wallet money transfers and payment services and, if they opt to sign up for a bank account, access a full array of banking services including low-cost access to savings and micro-loans for women and women businesses. The product is designed with the specific needs of women in mind; for example, the e-wallet does not charge a service fee for internal transfers or cash-in and cash-out transactions since women tend to conduct smaller financial transactions.
The e-wallet ecosystem of services is designed to be easily accessible. Clients can for example tap into LVPB’s extensive network of agents, transaction points and post offices in 63 cities and provinces to carry out transactions. UNCDF had emphasized to the State Bank of Viet Nam to allow postal offices to offer financial and agent services, which played an integral part in enabling LVPB to build their network of service touchpoints. This regulation has also been included in Viet Nam’s national financial inclusion strategy, to which UNCDF provided technical assistance to develop.
A network of female agents, as owners of minimarts and groceries, has been created to expand the distribution of the e-wallet, which also provides these female shop owners with an additional source of income. Clients with a smartphone can also use the Vi Viet application for added convenience.
To ensure that the e-wallet is responsive to the needs of women LVPB partnered with Viet Nam Women’s Union (VWU) when Vi Viet was launched to provide free financial literacy workshops to clients. These workshops complemented the product by raising awareness about cashless transactions and formal banking services for rural women.