The prolonged COVID-19 pandemic has unexpectedly created “golden” conditions for the financial industry to accelerate digital transformation and shift to cashless payments.
However, mobile payments need to be implemented soon to reduce the disparity between urban and rural areas. They can also be an effective payment channel in supporting people in remote and isolated areas.
In addition to online shopping, people can also pay for their electricity, water, telecoms and even hospital fees through banking accounts or e-wallets.
Related: COVID-19 is speeding up Vietnam’s digital transformation. Here’s how!
Since the outbreak of COVID-19 in early 2020, the number and value of transactions through non-cash payment methods have increased sharply compared to the previous period, according to Can Van Luc, a banking and finance expert.
In the first half of 2021, non-cash payments increased by 30-40 percent in transactions and by 70-80 percent in value.
Despite the sharp increase, it was undeniable that cash payments were still popular in Vietnam because consumption habits as well as payment coverage had not reached rural and remote areas, Luc said.
In Vietnam, cash payment methods in e-commerce still accounted for the highest rate at 28 percent, followed by money transfers at 26 percent, e-wallets 21 percent and credit cards 14 percent.
Meanwhile, worldwide, payments via e-wallet accounted for the largest proportion at 44.5 percent, followed by credit cards with 22.8 percent.
The use of cash as a popular payment method in Vietnam was considered both a challenge and an opportunity for involved parties.
To serve Vietnam’s 30 million Gen Z consumers and 4 million small businesses, TNEX, a Vietnam-based digital bank – is combining financial and lifestyle needs into one app. So far, TNEX offers free everyday banking for individuals and businesses.
“We would all agree that the hardest part of digitization is the culture of people. We need to look at how do we give them the right talent because talent leads to a mindset as well leads to a culture.” said Bryan Carroll, CEO of TNEX at 2021 SEA Digital Week.
The Government in March approved pilot application for Mobile Money, which allows the use of mobile-phone credit to pay for small-value goods and services.
The pilot application for mobile money services aims to contribute to the development of non-cash payments, improving the access and use of financial services, especially in rural, remote, border and island areas.
Viettel, VNPT and MobiFone are the three telecom operators that submitted applications for a pilot license to deploy Mobile Money. However, more than five months since issuing the decision, Mobile Money has not been implemented, largely due to the prolonged impact of COVID-19.
At a forum on developing non-cash payments recently held by the International Data Group, deputy director of MobiFone Digital Service Centre Pham Minh Tu said that MobiFone was still in the process of completing procedures and applying for a license to launch the product.
Mobile Money targets unbanked customers. Based on the advantage of widespread networks in remote areas, telecom providers could fill the gaps that banks have not yet penetrated.
“There was still much room for the development of cashless payment in Vietnam, but it would be rocky. Cashless transactions are currently concentrated mainly in urban areas” Tu said.
Also read: What are the key trends of Vietnam’s digital banking in the next normal?
Meanwhile in rural areas, which account for about 60 percent of the population, non-cash payment has not been popular, leaving room for development.
According to Tu, if Mobile Money is exploited, it would make a change and upgrade society, reducing the gap between urban and rural areas. People in rural areas could sell their products through payment tools and e-commerce.
However, experts have also said the development of Mobile Money or non-cash payment methods in Vietnam still faces many challenges. The most important thing now is to change people’s consumption habits through financial education programs as a pillar in implementing a comprehensive financial development strategy.
On the other hand, the Government also needs to complete the legal corridor for the digital economy and government, including digital finance.
In addition, it is necessary to continue to upgrade the information technology system and digital infrastructure in remote areas, raise awareness and increase consumer confidence.
The Government also needs to develop an open banking system with stronger cooperation among commercial banks, Fintech and payment intermediaries, according to Vietnam News Agency.