Vietnam’s Digital Finance Landscape: Banks Gain Ground Amidst Shifting Competition

Vietnam’s Digital Finance Landscape: Banks Gain Ground Amidst Shifting Competition

by July 4, 2024

Vietnam’s digital finance landscape is undergoing a notable shift as new players emerge, established ones fade, and traditional banks rise to prominence, a new report by Decision Lab shows.

In Q4 2022, Moca by Grab ranked as the sixth most used digital financial platform in Vietnam with an 8% penetration rate, results from a survey of more than 1,500 consumers reveal. However, by Q4 2023, Moca had slipped out of the top rankings, replaced by mobile apps from traditional banks.

These incumbents had made a strong entry, collectively achieving a 23% penetration rate and securing the fifth position, the data show.

This shift in Vietnam’s digital finance scene indicates that banks are not only responding to the challenge posed by fintech companies by enhancing their digital capabilities but also highlights a significant move towards mobile banking among customers.

Top e-wallets in Vietnam by penetration rate (%), Source: The Connected Consumer Q4 2022, Decision Labs, Feb 2023

Top e-wallets in Vietnam by penetration rate (%), Source: The Connected Consumer Q4 2022, Decision Labs, Feb 2023

It also reflects the popularity of digital finance platforms in Vietnam, which has intensified competition among service providers. Last month, Grab announced that it will cease the operations of its Moca e-wallet service starting July 01, 2024. The company stated that it reached this decision after careful assessments as part of its restructuring strategy and focus on achieving “sustainable growth.”

Enhanced competition in payments has also spurred innovation in the banking sector. The State Bank of Vietnam (SBV) estimates that at least 96% of Vietnamese banks have devised plans for digital transformation and 92% have developed Internet and mobile application services.

The Vietnam Bank for Agriculture and Rural Development (Agribank), for instance, deployed in 2022 Agribank Digital, a set of digital tools and devices designed to increase financial access in rural areas. Each Agribank Digital machine is equipped with the functions of a banking transaction office such as identification, registration of biometric information, account opening and card issuance, electronic banking services, loan application, and financial transactions.

Military Bank (MB), meanwhile, has implemented a digital transformation strategy since 2018 through strategic cooperation with IBM. This strategy revolves around a “self-servicing” and “all-in-one-app” model, and aims to create convenience and flexibility for individuals and businesses. Vu Thanh Trung, director of digital banking at MB, told the Vietnam News Agency (VNA) in December 2023 that the bank spends about US$50 million on digital transformation each year on average.

SBV estimates that the Vietnamese banking sector had invested over VND 15 trillion (US$617.6 million) on digital transformation by the end of 2022.

MoMo, ZaloPay maintain top spots, though penetrations declines

In Q4 2023, MoMo and ZaloPay remained the top digital financial platforms in Vietnam, with penetration rates of 62% and 45%, respectively, results from the Connected Consumer Q4 2023 survey show. However, these figures represent declines of 6 and 9 points from Q4 2022.

Overall, usage of the major digital financial platforms decreased between the two periods, with Viettel (-5 points), ShopeePay (-4 points), and VNPay (-2 points) also experiencing drops in their penetration rates compared to Q4 2022.

Top digital financial platforms in Vietnam by penetration rate (%), Source: The Connected Consumer Q4 2023, Decision Labs, 2024

Top digital financial platforms in Vietnam by penetration rate (%), Source: The Connected Consumer Q4 2023, Decision Labs, 2024

This came amid the entry of Apple Pay in the Vietnamese market in August 2023. Apple Pay is a mobile payment service that allows users to make payments in person, in iOS apps and on the web. It digitizes and can replace a credit or debit card chip and PIN transaction at a contactless-capable point-of-sale (POS) terminal.

At launch, majors banks in Vietnam, including ACB, MB, Sacombank, Techcombank, Vietcombank, and VPBank, supported Apple Pay and allowed their customers to apply for virtual debit cards to be added to the digital wallet. Merchants such as Adidas, LOTTE Mart, McDonald’s, Starbucks, and Shopee, among others, have also adopted Apple Pay.

The last available estimate on global Apple Pay users is that over 500 million people activated the service on their iPhones. Statista’s Consumer Insights lists the UK as the country with the highest Apple Pay penetration, followed by Canada, the US and Australia.

Apple Pay usage either for online payments or at POS in various countries worldwide as of April 2024, Source: Statista, Apr 2024

Apple Pay usage either for online payments or at POS in various countries worldwide as of April 2024, Source: Statista, Apr 2024

In Vietnam, Apple Pay achieved a 7% penetration by Q4 2023. In addition to competing against local and regional mobile payment and digital wallet services, Apple Pay is also up against platforms provided by other tech giants, including Samsung Pay, which launched in Vietnam in 2017, and Google Pay, formerly known as Google Wallet, which arrived in November 2022.

There are currently 51 non-bank institutions licensed by SBV to provide intermediary payment services in the market.

The rise of digital payments in Vietnam’s digital finance scene

Digital payments have been growing at 40% for the last four years, driven by one of the world’s fastest digital transformation rates, according to SBV. Around 90% of banking transactions are now handled through digital channels with 74.6% of adults having a bank account.

Non-cash payments have also seen significant growth, with 82 credit institutions offering Internet-based payment services and 51 offering mobile payment services as of the end of 2022, according to VNA.

According to Decision Lab’s survey, bill payments, money transfers, and QR code payments are the most used functions of digital finance platforms in Vietnam, with expense tracking and savings also being popular.

Most used functions on digital finance platforms, Source: The Connected Consumer Q4 2023, Decision Labs, 2024

Most used functions on digital finance platforms, Source: The Connected Consumer Q4 2023, Decision Labs, 2024

As of March 2023, around 3.71 million mobile money accounts had been opened, with over 70% in rural and disadvantaged areas.

Vietnam launched its National Financial Inclusion Strategy in 2020, aiming to increase the percentage of adults with bank accounts to 80% by 2025. The strategy seeks to ensure that individuals and enterprises, particularly low-income and vulnerable people, as well as micro, small and medium-sized enterprises (MSMEs), have access to basic financial products and services, such as payment, money transfer, saving, credit and insurance, in a convenient way and at affordable prices.

The plan targets having financial service offices in at least 50% of communes nationwide and ensuring that 25-30% of adults have savings accounts at credit institutions. Additionally, it aims to boost the number of non-cash transactions by 20-25% annually and to increase insurance premium income to about 3.5% of the gross domestic product by 2025.

 

Featured image credit: edited from freepik