What are the biggest long-term challenges for e-wallets to be profitable?
Dr Nguyen Thanh Binh: To come out on top of the war of financial attrition, e-wallets need to balance the growth of their user base and the implementation of a sustainable business model. They need to develop more value-adding ecosystems that can attract and make users willing to pay for the services they provide. Given the current strong competition of e-wallets offering cashless payments, it may be difficult for e-wallets to increase payment transaction fees while expanding their user base. Instead of focusing on charging fees to become profitable, e-wallets could morph into fintech companies and provide a wide range of financial services, such as lending, wealth management and insurance, similar to what Alipay and Ant Group have been doing in China.
Dr Pham Nguyen Anh Huy: One of the biggest problems with e-wallet providers is that they fail to show clear advantages over traditional banks in the long run. Most services offered by e-wallets such as fast money transfer or utilities and e-commerce payment are now included in mobile apps offered by traditional banks. Bank apps might have to catch up with e-wallets on a number of other services, but this can be easily solved via mergers and acquisitions. I think e-wallets need to go back to the original idea of replacing a traditional wallet: a wallet is not only used for payments and holding different bank cards, but also to store other things such as loyalty cards, membership cards and business cards.
What does the future hold for e-wallets in light of recent regulatory changes?
Dr Doan Bao Huy: The State Bank’s Circular 23/2019/TT-NHNN, which took effect from January this year, requires that the monthly e-wallet transaction value per customer and service provider not exceed VND100 million. This seems reasonable as the average daily transaction is around VND230,000 to 274,000, according to market research firm Cimigo. However, with the linkage between e-commerce platforms and e-wallets (such as between Tiki and Momo or Zalopay, Shopee and Airpay, and Lazada and eMonkey), the current regulation can hinder e-wallet users from paying for home appliances and electronics products priced at dozens of millions of VND, hence eliminating associated transaction fees earned by these e-wallet providers.
In addition, the Vietnamese government has recently given a green light to a mobile money pilot project. Mobile money generally performs the same function as e-wallets, but it does not need to link to a bank account like the latter. This new announcement allows the top three biggest mobile networks - VNPT, Viettel and Mobifone - to step into the e-payment industry and reach the unbanked population. Together with their advantages in capital, infrastructure and customer awareness, their presence will certainly increase the competition in the industry.
Dr Nguyen Thanh Binh: In June 2020, the State Bank of Vietnam released a draft decree on the regulatory sandbox for fintech activities. This is opening the door for fintech companies, such as e-wallets, to experiment more with innovative financial products that benefit the Vietnamese financial market.
E-wallets that are allowed to operate in the sandbox can experiment with innovative technologies and receive timely feedback from the regulators, thus reducing the risks of tapping into unregulated fields and ending up rejected by the regulators. Since the e-wallets in the sandbox will need to comply with certain regulatory requirements (such as transaction limits, number of customers, and location), they might slow down their market expansion compared to when they operate outside of the sandbox. However, the growth will be more stable and sustainable as the companies will gradually comply with the regulatory requirements.
Story: Ngoc Hoang