Mobile money is a cashless money storage and payment service by using a mobile phone account. Instead of transacting through bank accounts, consumers access mobile money using their mobile subscriptions.
Cashless payment is fast taking root in Vietnam owing to the speed and convenience for users and the positive effect it has on economic growth. There are two ways cashless payments can be conducted:
1. Through the use of e-wallets: For e-wallets, users need a bank account to transfer their money from the bank to the e-wallet to then make transactions using the e-wallet. The e-wallet acts as a storage for money. This is the primary way mobile money is stored and used in Vietnam.
2. Through the use of mobile money: For mobile money, users need a registered mobile phone account to make payment. Mobile money is faster and more convenient as compared to e-wallets, especially for unbanked and underserved populations. Find out more details about the benefits of mobile money as mentioned in the previous article.
According to the World Bank Group’s Vietnam Development Report 2019, about 90% of e-commerce consumers in Vietnam still use cash payment for online shopping - significantly higher than Indonesia and Malaysia where cashless payment users account for a quarter of the market. This shows the urgency in developing cashless payment services in Vietnam.
According to statistics in December 2019, about 90% of Vietnam's population use mobile phones while only 63% of adults have a bank account. The unbanked population typically live in rural, remote and isolated areas where access to banking services is more difficult as compared to access to telecommunications services as the telecommunications network is now widely distributed across the country. Mobile money is being promoted to encourage the use of cashless payments for users in rural areas as poor access to banking services mean that rural populations will not be able to use e-wallets. Small transactions such as parking, buying vegetables or regular payments for utilities, education fees, health care, etc. can be conducted quickly through mobile money. This will facilitate e-commerce, agro-commodity exchanges, promote online public services, thereby enabling rural populations to access a greater variety of goods and services at a competitive cost and allowing them to sell their products directly to a larger market. This will help to boost economic growth especially in rural areas.
Mobile phone subscribers who want to use mobile money must have accurate information that is registered with the telecommunication carriers. The authentication of the identity of mobile money applicants is handled through telecommunications carriers. This requires telecommunications providers to have information technology facilities to authenticate applicants’ identity. Major telecommunications companies in Vietnam are currently busy completing the standardization of subscriber information to build their capability to do so. In addition, electronic accounts identified via mobile phone must be stored on the safe and secure system to prevent loss of all data and money if the phone is lost. This requires the network operator to have a secure technology system to store and protect all data. Now, the three largest carriers in Vietnam are Viettel, VNPT and MobiFone, already have plans for the deployment of mobile money that can be implemented once the government approves the necessary regulations on mobile money.
Vietnam's regulations related to mobile payments can be found in Circular No. 39/2014/TT-NHNN and draft amendments of Circular No. 39/2019 providing guidance on services provided by payment intermediaries. The government has also issued Resolution No. 02/NQ-CP of the Government to promote cashless payments to improve the business environment and boost national competitiveness in 2020. Primary responsibility is assigned to the State Bank to coordinate with the Ministry of Justice and relevant agencies to study and propose guidance for a pilot using telecommunications accounts for low-value payments (i.e. mobile money service) with the aim for cross-border payment activities to be conducted using mobile money by Q4 2020. The State Bank also directs credit institutions to invest and develop payment infrastructure; strengthen security, data confidentiality, ensure the legal interests of customers; deploy and apply the achievements of the 4.0 Revolution in payment service as soon as possible.