Payments 2025 and beyond: Evolution to revolution

Six macro trends shaping the future of payments in Vietnam

Inclusion and trust: More accessible and convenient banking

Financial inclusion in developing countries, like Vietnam, will continue to be driven by mobile devices and access to affordable, convenient payment mechanisms. According to a survey conducted by Visa nearly a third of Vietnamese consumers already use digital banking for purchases and transfers. Both Vietnamese banks and payment service providers, especially fintech companies, have leveraged on this to expand their digital portfolio and capabilities.

In the quest of greater inclusion, the Government in March 2021 approved a two-year pilot programme of Mobile Money. The programme is designed to serve the unbanked and underbanked mobile users in remote areas - allowing users to pay for small-value good and services via their mobile phone account, bypassing the need for traditional banking system.

Digital currencies: Lower transaction fees, facilitating cross-border payments

SEA is firmly advancing the development of digital currencies. PwC's recent publication “CBDC Index Report - Focus: Asia region” highlights the most advanced retail CBDC project in the world is Bakong of Cambodia. Launched in 2020, Project Bakong is expected increase financial inclusion among Cambodians in rural areas. They now can transact through digital wallets, displacing the need for proximity to traditional banks. With such expected benefits, the race to conduct CBDC use case testing and the development of necessary regulations will intensify in the region.

Vietnam may join the regional peers in the race toward CBDC. The recent announcement of Directive 942 tasked the State Bank of Vietnam (SBV) to research the pilot use of 'virtual money' for the next three years. While no official timeline has been set, it is interesting to see how local policy makers will take this initiative forward. 

Digital wallets and booming super-apps: Increased customer convenience and choice

In Vietnam, the e-wallet market continues to boom. According to a recent survey, 85% of respondents have at least one e-wallets or payment apps, while 71% use these apps at least once a week. 

With more than 40 e-wallet providers, the Vietnamese market has been quite crowded over the last few years. Accounting for 90% of the market share are the leading 3 e-wallets: Momo, Moca and ZaloPay, leaving little to no room for other providers. Even so, the big names are now struggling as they fail to show their competitive advantages over traditional banks whose mobile apps are catching up to e-wallet’s functionalities. Gaining a competitive advantage in the future might push for a mega consolidation of digital wallet providers into few leading regional and local super-apps dominating the market.

Payment rails: Digitalisation-led interoperability and enhanced functionalities

Vietnam is in the process of developing its own National QR code framework. The National Payment Corporation of Vietnam (NAPAS) recently launched VietQR - a common brand identity for QR code payment and transfer services processed through the network of NAPAS and 14 member banks, payment intermediaries and partners both inside and outside the country.

On the commercial side, open banking APIs will bolster B2B payments in the region. By allowing real time processing and exchange of rich messaging, open banking APIs is expected to disrupt traditional bank payment rails, and transform the way B2B payments are made today.

“Buy now, Pay later” (BNPL) is a relatively new but rapidly growing industry in Vietnam. Unlike traditional cards, the ability to easily set up a BNPL account and enjoy interest-free installments suggests the anticipated shift from card usage to BNPL schemes. 

Cross-border payments: Real-time retail and commercial transactions

Domestic real-time payment infrastructures are establishing cross-border linkages for both retail and commercial payments. As SEA strives for greater progress in economic integration, we expect to see the introduction of coherent policies and regulations related to cross-border payments. 

For instance, Vietnam and Singapore on June 2, 2021 agreed to establish a Technical Working Group on the platform for digital partners, moving towards the signing of a Digital Economy Agreement (DEA). This agreement will help Vietnam establish frameworks and rules for digital trade thus enabling local companies to connect digitally with countries in the region such as Singapore more seamlessly.

Financial crime: Stronger defences in cyberspace

Countries in SEA face salient threats from the non-bank financial service entrants who are new to the system and need to quickly comply with stringent regulations. Based on Kaspersky’s IT Security Economics 2020 survey, Indonesia, Thailand and Vietnam suffered the most phishing attacks in the region in 2020. As Vietnam’s digital economy is forecasted to hit USD 52 billion by 2025, businesses will face an increase in more sophisticated cyber threats and attacks. 

Vietnam has increased its ranking in the Global Cybersecurity Index (GCI) in 2020, coming in 4th among 11 ASEAN countries and 7th in Asia-Pacific. But more can be done to enhance cybersecurity. Increased sharing of information among intergovernmental or public-private partnerships will enable greater financial transparency resulting in stronger defences against financial crime.