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Payments 2025 and beyond: Evolution to revolution

Six macro trends shaping the future of payments in Vietnam

Even before COVID-19, there has been evidence of a steady shift to digital payments for goods and services. Accelerated by the pandemic, payments are becoming increasingly cashless. 

As one of the rising economies of Southeast Asia (SEA), Vietnam holds great potential for e-payment to flourish. The total transaction value of this segment is projected to reach USD15 billion in 2021 along with an expected annual growth rate of 15.7% by 2025. With only 30% of Vietnamese adults using digital banking services, there is room for growth. Increasing the utilisation of these services, including digital payments, will help Vietnam realise this potential much quicker. 

For digital payment services to make an impact, industry players need to first understand the global megatrends re-shaping the future of payments, before beginning to future-proof their businesses.

Six macro trends shaping the future of payments in Vietnam

Inclusion and trust

Digital currencies

Digital wallets and
booming super-apps

Payment rails

Cross-border payments

Financial crime

Inclusion and trust: More accessible and convenient banking

Financial inclusion in developing countries, like Vietnam, will continue to be driven by mobile devices and access to affordable, convenient payment mechanisms. According to a survey conducted by Visa nearly a third of Vietnamese consumers already use digital banking for purchases and transfers. Both Vietnamese banks and payment service providers, especially fintech companies, have leveraged on this to expand their digital portfolio and capabilities.

In the quest of greater inclusion, the Government in March 2021 approved a two-year pilot programme of Mobile Money. The programme is designed to serve the unbanked and underbanked mobile users in remote areas - allowing users to pay for small-value good and services via their mobile phone account, bypassing the need for traditional banking system.

Digital currencies: Lower transaction fees, facilitating cross-border payments

SEA is firmly advancing the development of digital currencies. PwC's recent publication “CBDC Index Report - Focus: Asia region” highlights the most advanced retail CBDC project in the world is Bakong of Cambodia. Launched in 2020, Project Bakong is expected increase financial inclusion among Cambodians in rural areas. They now can transact through digital wallets, displacing the need for proximity to traditional banks. With such expected benefits, the race to conduct CBDC use case testing and the development of necessary regulations will intensify in the region.

Vietnam may join the regional peers in the race toward CBDC. The recent announcement of Directive 942 tasked the State Bank of Vietnam (SBV) to research the pilot use of 'virtual money' for the next three years. While no official timeline has been set, it is interesting to see how local policy makers will take this initiative forward. 

Digital wallets and booming super-apps: Increased customer convenience and choice

In Vietnam, the e-wallet market continues to boom. According to a recent survey, 85% of respondents have at least one e-wallets or payment apps, while 71% use these apps at least once a week. 

With more than 40 e-wallet providers, the Vietnamese market has been quite crowded over the last few years. Accounting for 90% of the market share are the leading 3 e-wallets: Momo, Moca and ZaloPay, leaving little to no room for other providers. Even so, the big names are now struggling as they fail to show their competitive advantages over traditional banks whose mobile apps are catching up to e-wallet’s functionalities. Gaining a competitive advantage in the future might push for a mega consolidation of digital wallet providers into few leading regional and local super-apps dominating the market.

Payment rails: Digitalisation-led interoperability and enhanced functionalities

Vietnam is in the process of developing its own National QR code framework. The National Payment Corporation of Vietnam (NAPAS) recently launched VietQR - a common brand identity for QR code payment and transfer services processed through the network of NAPAS and 14 member banks, payment intermediaries and partners both inside and outside the country.

On the commercial side, open banking APIs will bolster B2B payments in the region. By allowing real time processing and exchange of rich messaging, open banking APIs is expected to disrupt traditional bank payment rails, and transform the way B2B payments are made today.

“Buy now, Pay later” (BNPL) is a relatively new but rapidly growing industry in Vietnam. Unlike traditional cards, the ability to easily set up a BNPL account and enjoy interest-free installments suggests the anticipated shift from card usage to BNPL schemes. 

Cross-border payments: Real-time retail and commercial transactions

Domestic real-time payment infrastructures are establishing cross-border linkages for both retail and commercial payments. As SEA strives for greater progress in economic integration, we expect to see the introduction of coherent policies and regulations related to cross-border payments. 

For instance, Vietnam and Singapore on June 2, 2021 agreed to establish a Technical Working Group on the platform for digital partners, moving towards the signing of a Digital Economy Agreement (DEA). This agreement will help Vietnam establish frameworks and rules for digital trade thus enabling local companies to connect digitally with countries in the region such as Singapore more seamlessly.

Financial crime: Stronger defences in cyberspace

Countries in SEA face salient threats from the non-bank financial service entrants who are new to the system and need to quickly comply with stringent regulations. Based on Kaspersky’s IT Security Economics 2020 survey, Indonesia, Thailand and Vietnam suffered the most phishing attacks in the region in 2020. As Vietnam’s digital economy is forecasted to hit USD 52 billion by 2025, businesses will face an increase in more sophisticated cyber threats and attacks. 

Vietnam has increased its ranking in the Global Cybersecurity Index (GCI) in 2020, coming in 4th among 11 ASEAN countries and 7th in Asia-Pacific. But more can be done to enhance cybersecurity. Increased sharing of information among intergovernmental or public-private partnerships will enable greater financial transparency resulting in stronger defences against financial crime.

Preparing for tomorrow: PwC’s 4Rs framework

The way forward for key payment players:

Repair
Rethink
Reconfigure
Report
  • Leverage process utilities to process non-differentiated services like ATM offering
  • Reimagine physical cards issuance
  • Ensure digital first approach in business models
  • Diversify into value-added services, like data protection services
  • Leverage cloud technology to store data while ensuring cloud security to deal with potential risks (i.e. protection for data encryption, server, application and database)
  • Invest, acquire and deploy real time and rich payments - sunset legacy rails
  • Use super-apps as new distribution and customer acquisition channels
  • Develop APIs to bring innovation in the commercial payment space
  • Enhance security and verification for all users within and outside the organisation (e.g. introduce zero trust framework)
  • Share information on consortium basis the incidents of fraud and anti-money laundering (AML) data analytics, to combat financial crime
  • Share latest technological advances in detecting and preventing financial crime
  • Report rapid outcomes of investigations of suspicious activities (e.g. real time transaction reporting)
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  • Not applicable
  • Reimagine customer payment experience. Create seamless omni-channel and opti-channel experience
  • Re-evaluate effort required to bring benefits of decentralised finance to masses
  • Leverage technology and experience to drive customer primacy - increase mindshare
  • Set systems for efficiency and interoperability with other payment services in the market
  • Leverage open banking to enhance value-creating services and products
  • Share insights gathered from consumer data on unmet needs and consumer trends
  • Share measures to ensure data privacy and security (e.g. stronger governance framework for use of data)
  • Report on sustainable practices

This includes including digital wallets, super-apps, etc.

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  • Enhance security features in mobile phones to prevent fraud, data theft/leaks, malware (e.g. use multi-factor authentication or biometric technology to authenticate payments)
  • Periodically audit the credit risk profiles of customers who engage in financing services
  • Assess potential of accepting and exchanging CBDCs to drive adoption
  • Study upcoming payment trends and competitors closely to regularly upgrade payment offerings
  • Reimagine the compromise between customer convenience and exposure to cyber-criminals
  • Unification of payment infrastructure to enable cross-border, cross-currency transactions and acceptance
  • Strengthen payment offerings for commercial clients, like extending BNPL services to SMEs for supply chain financing
  • Build AML transaction monitoring capabilities to examine multiple scenarios with changing instrument rails available over payments
  • Share efforts to protect consumer and merchant data
  • Maintain update on regulatory evolution and agile ways to respond
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  • Enable foreign payment methods that overseas customers prefer in store (e.g. enable AliPay and WeChat Pay)
  • Adopt new age financing methods (i.e. BNPL) for consumers
  • Pivot from using static QR codes to dynamic QR codes to enhance the payment experience and security
  • Reimagine ways to manage costs of cross-border payments at each step of payment value chain
  • Identify up-and -coming payment trends overseas and consider adopting it to the local context
  • Introduce new technologies in stores to enable frictionless and invisible payments (e.g. cashierless store technology, biometric payments)
  • Invest in data protection services to handle consumers’ information responsibly
  • Digitise B2B payments to speed up commercial transactions along the supply chain and eliminate manual processes
  • Roll out educational campaigns to lower the barriers for consumers to adopt new payment methods

This includes merchant service providers, third-party processors and terminals, etc.

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  • Adjust fees charged on each transaction to make it more affordable for SMEs
  • Provide omni-channel integrated payment services for B2C and B2B transactions
  • Shore up cybersecurity defences as payments organisations are targets with rich data
  • Assess developments in the industry, consumers’ payment behaviours and gaps in current processing tools to innovate new payment tools to enable more frictionless experiences (e.g. biometric technology)
  • Reimagine cybercrime as a combination of cybersecurity and fraud
  • Upgrade systems to allow for alternative authentication methods and the generation of dynamic QR codes
  • Develop technology to support emerging CBDC opportunities
  • Develop an inclusive operating model with built-in threat intelligence to support a more efficient and less intrusive fraud / cyber / AML checks
  • Report on efforts to ensure data security (i.e. how data is stored, processed and transmitted)
  • Report on measures and progress to support greater merchant inclusion

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Get in touch

Vo Tan Long

Partner, Consulting Services Leader / Chief Digital Officer, PricewaterhouseCoopers Consulting Vietnam

Tel: +84 24 3946 2246, ext. 1606

Dinh Hong Hanh

Partner, Financial Services Consulting, PricewaterhouseCoopers Consulting Vietnam

Tel: +84 904 178 556

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