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Developing the E-wallet Market to Drive Women’s Financial Inclusion in Viet Nam Learnings from LienVietPostBank Challenge Fund Investment

What you will find in this case study:

For e-wallet service providers

  • It is important to focus on customer-centric service design to encourage active usage and loyalty. For example, by tailoring products to the spending behavior of consumers and enhancing user interface design.

For regulators

  • To drive usage of e-wallets and other digital financial services, regulators can facilitate an environment to increase interoperability within (i.e. promoting increased linkage between bank and e-wallet accounts) and between different e-wallets.
  • Regulations can support the development of the wider ecosystem, such as institutionalizing the agent banking model.

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.

Key features of Vi Viet

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.

Two more stories from the field

Linh is a working professional who lives in Hanoi; she is married and in her late 30s. She takes care of the finances of the family and is well-versed in using internet banking applications. She was encouraged to use Vi Viet as her network of family and friends were also using it. Moreover, her company is a customer of LVPB and her salary is credited into this account.

Vi Viet helps Linh with her money transfers, utility payments, mobile top-ups and online savings. As someone who holds multiple bank accounts, she mentions that she hopes mobile banking applications can allow for more interoperability across different service providers’ accounts.

Trang is in her late 30s and runs a small business selling phone cards and utility top-up services in Hanoi. She was first introduced to the Vi Viet app by a LVPB customer agent and relies on him for her financial transactions with the bank as well as for troubleshooting.

She mainly uses Vi Viet for mobile top-up, paying utilities, money transfers, and cash in and cash out services. However, Trang would have preferred it if more of her customers used the Vi Viet app to make payments.

These customer stories are taken from a customer journey mapping of Vi Viet clients conducted by Columbia University in partnership with UNCDF in 2018. The following personas, including Van mentioned in the beginning, were created based on interviews representing key customer segments of Vi Viet users.

The Vi Viet e-wallet saw a high rate of uptake in its first year with 1.8 million accounts opened by the end of 2017. This gradually increased to reach a total of 2.7 million registered accounts in 2019. However, the usage rate has not matched the growth in access since the first year of launch. The number of active accounts dropped from 18.3 percent in 2017 to 2.3 percent in 2018 and to 3.4 percent in 2019.

Despite the drop in active accounts, the total number and dollar amount of transactions done on Vi Viet increased significantly from US$ 312 million in transaction value in 2017 to US$ 4.2 billion in 2019, thus indicating the presence of a loyal group of clients. The number of active Vi Viet merchant agents saw a drop from 2017 to 2018, but eventually came close to 10,000 by the end of 2019.

LVPB saw the Vi Viet e-wallet as an opportunity to expand their partnerships and better achieve financial inclusion in rural areas. Partnering with CARE International, LVPB introduced the e-wallet to Village Savings and Loan Associations (VSLAs) serving ethnic minority women in Dien Bien. LVPB is also collaborating with Xelex Technology, a tablet manufacturer targeting rural areas and farmers, to install Vi Viet on all Xelex tablets as a default application

Vi Viet e-Wallet Implementation Learnings

With its active user to registered accounts ratio at 3.4 percent, the biggest challenge for Vi Viet has been moving beyond financial service access to promote active usage. While the Vi Viet e-wallet saw an impressive uptake in the beginning, the number of active accounts has been low throughout 2018 and 2019.

SHIFT ASEAN has supported LVPB to understand these challenges in more depth to develop a mitigation strategy. For example, the customer journey mapping research conducted by Columbia University found that there needs to be a focus on customer-centric service design to encourage active usage and loyalty to the e-wallet. Preliminary research also identified the use of cash incentives and promotions to be too weak to drive behavior change and usage. To this end, a few changes can be made to improve the customer journey:

  1. better tailor products according to the spending behavior of the consumer to help differentiate Vi Viet from other apps;
  2. improve user interface design such as by simplifying password protocols; and
  3. integrate with social media to make it easier to connect with friends and increase the reach of the application.

Nevertheless, Vi Viet’s lack of interoperability remains the largest infrastructural constraint limiting its uptake. While the five largest e-wallets in Viet Nam (ie. Payoo, Momo, SenPay, Moca, and AirPay) have partnerships with over 15 banks, Vi Viet can only be linked to LVPB bank accounts. By working easily with accounts from other banks, Vi Viet can reach out to a much wider customer base, allowing users to transact with more people and therefore improving the customer experience with the e-wallet. This could help in driving continuous usage and loyalty towards Vi Viet.

At a country level, the government has an important role in creating an enabling environment for e-wallet usage. The central bank can facilitate the creation of a technological platform that enables the interoperability between different e-wallets, thus making it more flexible for Vi Viet clients to transact with clients on other platforms.

Operationally, to support e-wallet providers in delivering their services, the central bank can further support the development of the agent banking model. Allowing post offices to offer financial and agent services is a good starting point, and the State Bank of Viet Nam can build on this momentum to adopt relevant policies to expand the network of eligible agents and guide its further implementation across the country. The Vi Viet e-wallet depends on its network of agents to reach rural communities, thus, institutionalizing a model for agent-banking would allow rural clients to perform a wider range of banking services more easily, translating continuous and convenient access into active usage.

Through this, some of the key learnings are as follows:

For e-wallet service providers

  • It is important to focus on customer-centric service design to encourage active usage and loyalty. For example, by tailoring products to the spending behavior of consumers and enhancing user interface design.

For regulators

  • To drive usage of e-wallets and other digital financial services, regulators can facilitate an environment to increase interoperability within (i.e. promoting increased linkage between bank and e-wallet accounts) and between different e-wallets.
  • Regulations can support the development of the wider ecosystem, such as institutionalizing the agent banking model.

With the large number of Vi Viet accounts created to date, coupled with LVPB’s extensive network of touchpoints, the Vi Viet product continues to be an opportunity to drive e-wallet usage within Viet Nam. As such, SHIFT ASEAN is conducting two further research activities to gain insights into the access vs. usage challenges faced by Vi Viet during its implementation.

A lean data survey is being conducted in 2020 to gain an in-depth understanding of customer profiles and their behaviors, and an analysis of a Vi Viet transaction data set spanning 2017 to 2019 is being undertaken.

Preliminary Insights from Lean Data Survey

Preliminary findings from the lean data survey indicate that active customers have used the LVPB wallet multiple times (79 percent), and that they primarily use the mobile wallet for utility bill payment (electricity and water) (31 percent), followed by money transfers (27 percent) and making savings (26 percent). In terms of the demographics of Vi Viet’s customers, active users tend to come from higher income groups, where only 16 percent of customers earn a monthly income below two Million VND (US$ 86 per month). This is in line with national survey data by the State Bank of Viet Nam (2019), where only three percent of the mobile money users in Viet Nam belong to this income bracket.

This therefore underlines the access vs. usage challenge faced by mobile money operators in Viet Nam – while digital platforms have the potential to provide everyone, including the unbanked, with greater access to financial services, data reveals that actual usage remains limited amongst uneducated and low-income people. With the expected growth of digital payments amidst the COVID-19 crisis, it is important that mobile money operators tailor their services to this group of people so as to build equitable digital economies.

Further insights gleaned will be incorporated into this case study once they are finalized to facilitate learning.

COVID-19 update

Viet Nam’s approach to the COVID-19 outbreak has been touted as a successful low-cost model. There have been no COVID-related deaths and, as of June 11, only 332 infections nation-wide. Many of Viet Nam’s swift and effective public health responses have been enabled by information technology, where the country has put its high penetration of mobile phones and the Internet to great use.

The crisis has also accelerated the use of non-cash payments, where the total transactions via the State Bank of Viet Nam’s finance switching system has increased by 76 percent compared with the same period last year. UNCDF continues to work with financial service providers in Viet Nam and ASEAN to strengthen digital platforms so as to help countries reap the full benefits of digitized services, in times of crises and beyond.

About the United Nations Capital Development Fund

The UN Capital Development Fund makes public and private finance work for the poor in the world’s 47 least developed countries (LDCs).

UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

UNCDF’s financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyze participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralization, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilization.

UNCDF’s Shaping Inclusive Finance Transformations (SHIFT) in ASEAN programme is supported by the Australian Government.

Disclaimer

The views expressed in this publication are those of the author(s) and do not necessarily represent the views of UNCDF, the United Nations or any of its affiliated organizations or its Member States.