The prolonged COVID-19 pandemic has unexpectedly created "golden" conditions for the financial industry to accelerate digital transformation and shift to cashless payments

More than 40,000 Viettel employees participated in its Mobile Money pilot.
The use of Mobile Money is expected to promote cashless payments.
— Photo courtesy of Viettel

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.

Nguyễn Thu Hiền in Hà Nội’s Hoàng Mai District has become familiar with online shopping, payment and home delivery since the start of the pandemic.

She receives her goods after being disinfected at a reception desk in her building, while having no face-to-face contact with delivery men.

Hiền told Việt Nam News that online shopping helped her save time and reduced the risk of infection compared to cash payment. In addition, online payments are convenient when paying large amounts.

“In the context of COVID-19, I get a lot of promotion codes from sellers in cooperation with payment units such as charge-free payments, cashback and price reduction. This helps me save a considerable amount when shopping online,” she said.

In addition to online shopping, people can also pay for their electricity, water, telecoms and even hospital fees through banking accounts or e-wallets.

Cấn Văn Lực, a banking and finance expert, said 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.

In the first half of 2021, non-cash payments increased by 30-40 per cent in transactions and by 70-80 per cent in value.

Despite the sharp increase, it was undeniable that cash payments were still popular in Việt Nam because consumption habits as well as payment coverage had not reached rural and remote areas, Lực said.

Citing data from FIS Global Payment, he said that in Việt Nam, cash payment methods in e-commerce still accounted for the highest rate at 28 per cent, followed by money transfers at 26 per cent, e-wallets 21 per cent and credit cards 14 per cent.

Meanwhile, worldwide, payments via e-wallet accounted for the largest proportion at 44.5 per cent, followed by credit cards with 22.8 per cent.

The use of cash as a popular payment method in Việt Nam was considered both a challenge and an opportunity for involved parties, he said.

According to Nguyễn Minh Tâm, deputy general director of Sacombank, there is still plenty of room for cashless payment. The number of payment accounts in Việt Nam is currently over 100 million.

However, people often open a bank account just to withdraw cash via the ATM. Small business households and traders as well as customers still mainly pay in cash.

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 licence 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, Phạm Minh Tú, deputy director of MobiFone Digital Service Centre, said that MobiFone was still in the process of completing procedures and applying for a licence 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.

Tú said there was still much room for the development of cashless payment in Việt Nam, but it would be rocky. Cashless transactions are currently concentrated mainly in urban areas.

Meanwhile in rural areas, which account for about 60 per cent of the population, non-cash payment has not been popular, leaving room for development.

According to Tú, 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 Việt Nam still faces many challenges. The most important thing now is to change people's consumption habits through financial education programmes 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. — VNS