Ant Financial Services Group takes a stake in Vietnam’s eMonkey. The deal is not yet formally announced (reportedly because of anti-China sentiment in Vietnam), but according to news sources, Ant Financial (the parent company of Alipay) has acquired a sizeable stake (less than 50%) in eMonkey (a Vietnamese mobile wallet) and will likely have a significant influence over this business in terms of bringing new products to market and increasing use cases. The deal size is not yet disclosed. In Southeast Asia, Ant Financial already has joint ventures in Thailand (Ascend Money), Philippines (Mynt), Indonesia (Emtek) and Malaysia (Touch‘n Go).
A different strategy to its South Asian expansion. Over the past few years, Ant Financial has invested actively in South Asia, buying stakes in Paytm (India), Easypaisa (Pakistan) and bKash (Bangladesh). All these names are market leaders in their countries and had already gained considerable market share. However, in the case of Vietnam, the target company (eMonkey) is a small operator; there are much bigger players in the market, notably MoMo. We think the choice of eMonkey could be because of potential restrictions over foreign ownership, with MoMo already having equity investment from foreign banks including Standard Chartered and Goldman Sachs. This deal would give Ant Financial access to Vietnam’s attractive market (large population, growing per-capita income) and also signal confidence that it can build a market-leading position from the investment. Note that the State Bank of Vietnam has proposed a 49% foreign ownership cap, but there is currently no official limit to foreign ownership in this sector.
What could Ant Financial bring to the Vietnamese payments industry? Vietnam’s mobile wallet industry is growing at a rapid pace. Total mobile wallets currently range from 4-10mn out of a total population of around 100mn, according to differing sources, so there is still a lot of room for growth. We think Ant Financial, through its extensive international experience, will increase use cases of mobile money in Vietnam and ultimately will look to build a complete payment ecosystem by onboarding e-commerce merchants. That said, this is likely a challenging goal given that MoMo has already built a strong and growing ecosystem; it currently has more than 100,000 merchants/payment points and a presence in all 63 provinces.
Implications for the Vietnam banking sector. Banking penetration in Vietnam is low, with only 30% of adults having an account at a financial institution while mobile penetration is high with total cellular subscriptions at 147% of total population (World Bank data). In our view, this indicates that future growth in financial inclusion is likely to be driven by mobile money operators, while traditional banks could see their market share shrink in the long term. We think banks such as VPB and HDB, which are focused on retail credit, could also face increased competition as mobile money tends to expand from payments to retail credit, as is happening in Kenya.