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Vietnam

Vietnam digital payments: On the cusp of rapid change

  • Key industry drivers are technology, government & regulator support, and foreign funding/ expertise

  • 33 licences have been issued, but the top 5 players control c80% of the market

  • We see a shakeout as the industry consolidates around the strongest and most innovative operators

Vietnam digital payments: On the cusp of rapid change
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

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Rohit Kumar
Rohit Kumar

Global Financials/Thematics

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Tellimer Research
11 May 2020
Published byTellimer Research

We think the Vietnam digital payments landscape is set for a period of rapid change, for the following reasons:

 1. Most transactions are still conducted via cash, but digital payments technology is evolving rapidly, and the government is also promoting a shift towards electronic payment media.

2. 33 payments licenses have been granted by the central bank, but the top 5 players account for over 80% of the market. As a network-based business, we see significant scope for consolidation.

3. Some of the main payments operators recently secured significant additional funding, which could accelerate their development in terms of customer acquisition and product development.

Market profile

Of Vietnam’s 75mn adults, 31% have an account at a financial institution. Per the State Bank of Vietnam, there were 18.6k ATMs at the end of 2018 and 243k card-accepting devices (POS). These metrics lag those in neighbouring markets. At c150%, the number of mobile phone subscriptions, on the other hand, is broadly on a par with ASEAN neighbours. 67% of the population has mobile broadband connectivity, which creates a viable constituency for smartphone app-based products and services.

Table 1: Vietnam market profile


VietnamIndonesiaThailandMalaysia
Account at financial institution (% of adults)30.8%48.9%81.6%85.3%
ATMs (per 100k adults)25.354.7115.146.6
Mobile subscription (% of total population)147%119%180%135%
Cashless transactions (% of total transactions)5%n/a60%90%

Source: World Bank

 

Digital payments have strong growth prospects in Vietnam

The State Bank of Vietnam has licensed 33 non-bank organisations to act as payment intermediaries in the country. As of 2017, only 5% of transactions in Vietnam were cashless (source: World Bank), which is one of the lowest figures in the region.

As further evidence for the growth potential of digital payments, a Standard Chartered study last year indicated that 90% of Vietnamese consumers preferred cash on delivery for their online purchases, a much higher proportion than other regional markets.

One of the key catalysts for growth in digital payments volumes is the increasing popularity of eCommerce transactions, through portals such as Alibaba-owned Lazada, Shopee and Sendo. Currently, cards (notably debit cards) are the main non-cash payment channel. But in rural areas in particular, card usage is still uncommon.

We note that urban centres such as Ho Chi Minh City have been promoting the use of cashless payments for utilities, hospitals and education, as well as for pension and welfare disbursements.

A further driver of cashless payments will come from the roll-out of more point of sales units. Last year, South Korean firm Alliex announced plans to invest US$700mn over a five-year period to install 600k POS units across the country in collaboration with Sacombank and Vietinbank.

Lastly, increased usage of QR-codes will also enable traders that do not have an electronic point of sale to still access digital wallet payments.

The digital payments landscape

In December 2014 the State Bank of Vietnam issued Circular 39/2014 which set out the rules under which payments service providers could operate. To date, 33 ten-year licences have been issued by the SBV, at a rate of around 1 licence every two months. We understand other companies are waiting to join the throng, including ride-hailing firm Go-Viet, which is part of the Indonesian Go-Jek empire.

 Figure 2: Vietnam digital payments landscape

Note: NextPay is formed by a merger of Vimo and mPOS
Source: State Bank of Vietnam, Tellimer Research. 

Why digital payments are important for technology firms

We think significant regional players, such as Grab (whose GrabPay division has teamed up with Moca) and Go-Jek (via its Go Viet and Go Pay divisions) believe that becoming the leading payments platform in a market/ region will give them a greater ability to cross-sell additional services to consumers. This model has been successfully pioneered by Tencent and Ant Financial in China. We note that Ant Financial recently forayed into Vietnam, via an investment in eMonkey (a digital wallet by M-Pay) adding to its portfolio of investments in South Asia (Easypaisa, PayTM, bKash).

Conglomerates are active in the digital payments space…

GrabPay has access to Grab’s service offerings such as ride-hailing and financial services (such as loans and insurance). 

NextPay is part of the NextTech Group, whose activities include mortgages, eCommerce, insurance, logistics and ride-hailing.

ViettelPay can be used on the My Go ride-hailing app, which was launched by common parent Viettel Group. 

VinGroups’ VinID subsidiary acquired MonPay last May, while media company VNG has launched ZaloPay.

 but partnerships are also blossoming

A route to improve attractiveness to customers is partnerships, which can increase the number of use cases for digital wallets and accelerate customer acquisition. As an example, Vietcombank and Viet Capital Bank have tied up with Payoo. BE Group, the ride-hailing firm, has entered into a digital financial services partnership with VPBank.

Network-based businesses tend to be concentrated

If we look at other network-based industries (eg search engines, ride-hailing apps, telecoms services, operating systems), concentration levels tend to be high. We think it highly likely that most of the 33-licensed payment companies will fail, with only a small number of firms able to develop sustainable business models. As we highlight below, c80% of the market in Vietnam is already controlled by around five operators.

Customer acquisition strategies don’t come cheap…

In order to stand out from the crowd, and gain scale, some digital wallet providers have been offering discounts of up to 30% to consumers. Merchants are also offered incentives to promote particular wallets.

...and fund-raising rounds have lifted the bar

VNPAY last year raised US$300mn from investors including Softbank and GIC, while Momo raised US$100mn. NextPay, created from the merger of Vimo and mPOS, also raised US$30mn last year. Operators with deep pockets carry a significant advantage over their peers because the industry requires significant investment to be made to acquire consumers and merchants, and to fund technology and product development.

Consolidation can be a way for sub-scale firms to stay in the game

Vimo and mPOS merged last June, creating NextPay, and used this to support a fund-raising round. The firm, which had 60k access points at the time of the merger, targets this to increase to 300k in 2023. Following its merger, NextPay claimed to control close to 15% of the POS market, with a goal of reaching 40-50% three years later. We think consolidation could be a viable strategy for other payments firms in Vietnam to gain scale and move closer to financial sustainability.

The M&A scene has also been active

Grab invested in the Moca payments platform in 2018. Last year Grab announced its intention to invest US$500mn in Vietnam over the next five years to expand its transport, food and payment networks. This was in addition to an estimated US$200mn investment in Vietnam during 2019. As highlighted above, Vingroup’s VinID acquired MonPay last year, while NextPay was also the product of a merger in 2019. We think further M&A activity is likely.

Foreign ownership restrictions likely to come into play, but only after the industry matures

Late last year the SBV floated the idea of restricting foreign investor ownership in licensed payments companies to 49%. Previously there was no limit. We understand that these plans have now been shelved, but in our view this is most likely just a temporary reprieve, with a transition to more restrictive ownership rules being more likely once these businesses become less cashflow negative.

Due to the capital-hungry nature of these businesses in the start-up phase, we think most of the digital payments companies operating in Vietnam have significant foreign ownership, notably 1Pay (Thailand’s True Money), Payoo (Japan’s NTT), VMPT EPAY (South Korea’s Global Payment Service and UTC Investment Company) and MoMo (US firms Warburg Pincus and Goldman Sachs, plus the UK’s Standard Chartered Bank).

If foreign ownership were to be restricted (bringing the industry more into line with the banking sector, and most listed Vietnamese companies), we think this would catalyse a significant shift in industry structure, with some firms raising capital locally, and others perhaps merging and seeing capital withdrawals in order to fall into line with foreign ownership restrictions. We note that in China and Indonesia, foreign ownership of the sector is restricted to 20%, and in Malaysia to 30%.

The digital payments industry is already quite concentrated

According to the SBV’s Department of Payments more than 80% of the deposits in digital wallets were controlled by five players: Payoo, Mom, SenPay, Moca and Airpay. In terms of the number of registered wallets, over 70% were in the hands of Airpay, MoMo, Senpay, Moca and VTCPay. In relation to transaction value, the main players (accounting for 95% of the total) were Payoo, Momo, Senpay, Airpay, Zalopay. Three operators rank highly across all three of these metrics, namely Airpay, Momo and Senpay.

Why digital payments are important for technology firms

We think significant regional players, such as Grab (whose GrabPay division has teamed up with Moca) and Go-Jek (via its Go Viet and Go Pay divisions) believe that becoming the leading payments platform in a market/ region will give them a greater ability to cross-sell additional services to consumers. This model has been successfully pioneered by Tencent and Ant Financial in China. We note that Ant Financial recently forayed into Vietnam, via an investment in eMonkey (a digital wallet by M-Pay) adding to its portfolio of investments in South Asia (Easypaisa, PayTM, bKash).

Conglomerates are active in the digital payments space…

GrabPay has access to Grab’s service offerings such as ride-hailing and financial services (such as loans and insurance). 

NextPay is part of the NextTech Group, whose activities include mortgages, eCommerce, insurance, logistics and ride-hailing.

ViettelPay can be used on the My Go ride-hailing app, which was launched by common parent Viettel Group. 

VinGroups’ VinID subsidiary acquired MonPay last May, while media company VNG has launched ZaloPay.

 but partnerships are also blossoming

A route to improve attractiveness to customers is partnerships, which can increase the number of use cases for digital wallets and accelerate customer acquisition. As an example, Vietcombank and Viet Capital Bank have tied up with Payoo. BE Group, the ride-hailing firm, has entered into a digital financial services partnership with VPBank.

Network-based businesses tend to be concentrated

If we look at other network-based industries (eg search engines, ride-hailing apps, telecoms services, operating systems), concentration levels tend to be high. We think it highly likely that most of the 33-licensed payment companies will fail, with only a small number of firms able to develop sustainable business models. As we highlight below, c80% of the market in Vietnam is already controlled by around five operators.

Customer acquisition strategies don’t come cheap…

In order to stand out from the crowd, and gain scale, some digital wallet providers have been offering discounts of up to 30% to consumers. Merchants are also offered incentives to promote particular wallets.

...and fund-raising rounds have lifted the bar

VNPAY last year raised US$300mn from investors including Softbank and GIC, while Momo raised US$100mn. NextPay, created from the merger of Vimo and mPOS, also raised US$30mn last year. Operators with deep pockets carry a significant advantage over their peers because the industry requires significant investment to be made to acquire consumers and merchants, and to fund technology and product development.

Consolidation can be a way for sub-scale firms to stay in the game

Vimo and mPOS merged last June, creating NextPay, and used this to support a fund-raising round. The firm, which had 60k access points at the time of the merger, targets this to increase to 300k in 2023. Following its merger, NextPay claimed to control close to 15% of the POS market, with a goal of reaching 40-50% three years later. We think consolidation could be a viable strategy for other payments firms in Vietnam to gain scale and move closer to financial sustainability.

The M&A scene has also been active

Grab invested in the Moca payments platform in 2018. Last year Grab announced its intention to invest US$500mn in Vietnam over the next five years to expand its transport, food and payment networks. This was in addition to an estimated US$200mn investment in Vietnam during 2019. As highlighted above, Vingroup’s VinID acquired MonPay last year, while NextPay was also the product of a merger in 2019. We think further M&A activity is likely.

Foreign ownership restrictions likely to come into play, but only after the industry matures

Late last year the SBV floated the idea of restricting foreign investor ownership in licensed payments companies to 49%. Previously there was no limit. We understand that these plans have now been shelved, but in our view this is most likely just a temporary reprieve, with a transition to more restrictive ownership rules being more likely once these businesses become less cashflow negative.

Due to the capital-hungry nature of these businesses in the start-up phase, we think most of the digital payments companies operating in Vietnam have significant foreign ownership, notably 1Pay (Thailand’s True Money), Payoo (Japan’s NTT), VMPT EPAY (South Korea’s Global Payment Service and UTC Investment Company) and MoMo (US firms Warburg Pincus and Goldman Sachs, plus the UK’s Standard Chartered Bank).

If foreign ownership were to be restricted (bringing the industry more into line with the banking sector, and most listed Vietnamese companies), we think this would catalyse a significant shift in industry structure, with some firms raising capital locally, and others perhaps merging and seeing capital withdrawals in order to fall into line with foreign ownership restrictions. We note that in China and Indonesia, foreign ownership of the sector is restricted to 20%, and in Malaysia to 30%.

The digital payments industry is already quite concentrated

According to the SBV’s Department of Payments more than 80% of the deposits in digital wallets were controlled by five players: Payoo, Mom, SenPay, Moca and Airpay. In terms of the number of registered wallets, over 70% were in the hands of Airpay, MoMo, Senpay, Moca and VTCPay. In relation to transaction value, the main players (accounting for 95% of the total) were Payoo, Momo, Senpay, Airpay, Zalopay. Three operators rank highly across all three of these metrics, namely Airpay, Momo and Senpay.

Figure 3: Leading mobile wallets in Vietnam 

Source: State Bank of Vietnam, Department of Payments, VnExpress

 

Key player profiles

Airpay

AirPay is the mobile wallet of Vietnam Esport JSC, and was licensed by the State Bank of Vietnam in December 2015 for providing intermediary payment services. It is one of the top 5 players in Vietnam in terms of deposits, number of wallets and transaction value. AirPay is backed by a Singapore Internet company, Sea, and also operates in other South-East Asian countries including Thailand and Indonesia.

Gpay

GPay is the latest firm to be awarded a payments licence by the SBV. The firm is a member of investment company G-Group, whose companies have a combined 20mn users across financial platforms, gaming, social networks and technology sectors. 

Founded in 2018, GPay has already reached US$50mn Gross Merchandise Value, with a presence in 42 cities and provinces in Vietnam. The firm targets more than 5mn users by 2023. Sister company, Gapo, a social network, aims to reach 20mn users by January 2021. Note that the ruling Communist party has asked domestic tech companies to provide alternatives to Facebook, which in January 2020 was accused of violating Vietnamese law in areas relating to content, advertising and taxation.

Moca

Moca is Grab’s digital wallet platform in Vietnam. Grab is SE Asia’s largest ride-hailing firm. During the course of H1 2019, payment volumes grew 150% while the number of active mobile users advanced by 70%. The firm is helping to grow the number of services that can be paid for without use of cash or a bank card, including international remittances.

MoMo Pay

Founded in 2007, M_Service’s MoMo app is an industry leader with over 10mn users. One of the key factors for its success has been its aggressive acquisition of c10k partners across consumer finance, insurance, utilities, entertainment providers, eCommerce, shopping and transportation. The platform is integrated with most local banks, as well as international payment networks such as Visa, Mastercard and JCB. Key shareholders include Goldman Sachs, Standard Chartered and Warburg Pincus.

The company has credited its success to its focus on developing the largest merchant network in the country, both offline and online.

Payoo

Payoo is owned by VietUnion, which in turn is owned by Saigon Construction Corporation and Japan’s NTT. Payoo users can access 12,000 point of sales counters across Vietnam. Payoo customers can make payments online or at physical locations, for over 200 different types of services, including rental payments, utilities and services. The company has partnerships with many local and international banks.

SenPay

Senpay is a mobile wallet operated by FPT Wallet Co. – which is owned by the Sendo e-commerce marketplace that offers more than 10 million products on its platform. SenPay received its licence from State Bank of Vietnam in 2016 and operates under the model of both an electronic wallet and an intermediary payment gateway.

ViettelPay

ViettelPay was launched in June 2018 by Viettel, the largest mobile telephone operator in Vietnam that is also active in 11 markets, with 70k employees and 2018 revenues of VND234.5trn.

Via a smartphone app, ViettelPay enables payments to companies (utilities, transport providers, airtime providers etc) and individuals (either to mobile wallets or bank accounts).

ViettelPay has close to 9mn subscribers. By year-end the company plans to integrate with more than 120k access points across the country, rising to 600k in 2025 when the company should have 26mn subscribers.

VTC Pay

VTC Pay is a subsidiary of Vietnam Multimedia Corporation (VTC), one of the country's largest corporations. VTC Pay was officially launched in 2009, obtained an intermediary services license from State Bank of Vietnam in 2016, and currently has over 3mn wallets. VTC Pay provides payment services through a network of 37 domestic banks and three international card organisations.

VNPT Pay

VNPT Pay is run by Vietnamese telco VNPT. It received its license at the start of 2016 and there are now nearly 50,000 points accepting VNPT Pay. Recently, VNPT Pay became one of four selected payments platforms to provide electronic payment services on the National Public Service Portal system. Via NPSP, customers can pay the fees and charges of public services (such as electricity, tax filing fees and so on) with the VNPT Pay e-wallet.

Zalo Pay

ZaloPay runs on Zalo, Vietnam’s largest chatting platform, with over 100mn users worldwide. The platform integrates with bank accounts to allow for cash withdrawals, purchases and money transfers. The company is backed by VNG Corporation. The company offers QR-based payments that avoid the need for dedicated POS termainals, which can be helpful in rural locations.

 

Acknowledgements

We would like to thank Anh Nguyen, Rong Viet Securities, for her help with this report.