Although Vietnam remains a cash-dominant economy, evidences suggest that digital and mobile payments are rapidly growing. According to Harmander Mahal, head of retail banking at Standard Chartered Bank Vietnam, the rise of e-commerce in Vietnam is paving the way for development of digital payments.
Mahal said, quoted by Vietnamnet Bridge:
“I think e-commerce/card-not-present (CNP) platforms are the biggest engine of growth for electronic payments in Vietnam, driven by very high smartphone and mobile device penetration and one of the highest per-capita time spend on social media in Southeast Asia.”
E-commerce is growing on Vietnamese consumers, who happen to be among the most frequent online shoppers in Southeast Asia. According to the Visa Consumer Payment Attitudes Study 2017, 84% of the 517 Vietnamese respondents said they shopped online at least once a month, behind only of Thailand with 85%.
Singapore-headquartered Lazada, owned by Alibaba, is the e-commerce leader in Vietnam. Founded in 2012 by Rocket Internet, Lazada sells inventory from its own warehouses and also allows third-party retailers to sell their products. The company operates in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Lazada customer care officer Vu Ngoc Lam claims more than 31 million visits every month.
Alibaba injected an extra US$2 billion into Lazada in March, underscoring the firm’s “confidence in the future success of Lazada’s business and the growth prospect of the Southeast Asian market, a region that is a key part of Alibaba’s global growth strategy,” it said in a statement. (Ok, this means also they dont make any money yet)
Alibaba officially entered Vietnam in 2017 and claimed it had accumulated tens of thousands of business members after just half a year.
Alibaba’s maneuvers in Vietnam is part of a broader trend. The firm joins the growing list of foreign e-commerce players looking to tap into the Vietnamese market.
Chinese e-commerce firm JD.com led an undisclosed Series C investment round in Vietnam-based online retail service Tiki.vn earlier this year. The Vietnamese startup is now reportedly preparing for a Series D fundraising that is expected to raise between US$50 million and US$100 million.
Tiki.vn was founded in 2010 by online bookseller Son Tran Ngoc Thai. It has since grown into a multi-faceted e-commerce platform with 250 million page views in 2017 and accounts for about 10% of traffic on the e-commerce sites in Vietnam. Moving forward, Tiki.vn said it plans to expand its business to Taiwan.
Last week, Vietnamese C2C marketplace Sendo secured a US$51 million Series B led by Japan’s SBI Group. Daniel Kang, partner and managing director of SoftBank Ventures Korea, which participated in the round, noted Vietnam’s e-commerce sector’s “strong growth potential.”
Amazon is latest player to unveil plans enter Vietnam. In March, the US e-commerce giant partnered with Vietnam E-Commerce Association (VECOM) which, with its 140 members, forms one of the biggest groups of local online businesses.
Nguyen Dac Viet Dung, Executive Chairman and Co-Founder of Sendo, said:
“The funding would help the company to expand the C2C platform Sendo, launch the B2C marketplace SenMall, and making SenPay the leading fintech platform in Vietnam”
Rising demand for mobile payment solutions
Vietnam’s youthful population are among the keenest users of mobile devices in Southeast Asia. The country records a 73% penetration rate in unique mobile users, and a 67% penetration rate in Internet users. Between January 2017 and January 2018, Vietnam added 14 million Internet users and 79 thousand unique mobile users, according to a report by Hootsuite and We Are Social.
Smartphones are by far the most popular communication devices in Southeast Asia and are increasingly being used for banking and financial purposes. In Vietnam in particular, mobile banking is largely preferred over physical banking, according to the Visa Consumer Payment Attitudes Study 2017.
Standard Chartered’s Mahal said Vietnamese customers were increasingly looking for mobile payment solutions, and in response to rising demand, Standard Chartered has partnered with e-commerce merchants including Lazada, Tiki, Agoda, and Adayroi.
“We have also partnered with international e-commerce merchants through our global network to create a specific e-commerce proposition for our credit and debit cards holders,” Mahal said. “Today, more than 50% of our card transactions are CNP transactions.”
Foreign players have taken notice of the prospects of digital and mobile payments in Vietnam. In June, Silicon Valley’s investment fund Fenox Venture Capital confirmed an undisclosed investment in digital wallet application OnOnPay, its first investment in Vietnam.
That same month, Vietnam Payment Solution JSC (VNPay) and UnionPay International signed an agreement to cooperate on QR code payments to provide tourists from South Korea, China, and Singapore traveling to Vietnam, with more convenient digital payment options.
MoMo, a service of M_Service, remains the leading Vietnamese mobile payment platform with eight million users and 5,000 points of transaction across the country. In 2016, the startup raised a whooping US$28 million investment from Standard Chartered Private Equity (SCPE) and global investment bank Goldman Sachs.
According to the State Bank of Vietnam (SBV), the number of transactions via mobile phones over 2017’s first nine months reached 90 million, up 93% from 2016, and up 153% from 2015. The number is expected to increase sharply in 2018.
Featured image: Hanoi traffic, Vietnam, MaxPixel.net.
