Mobile money: The newcomer in financial services

Mobile money: The newcomer in financial services

How does mobile money fit into the financial services sector and support the financial inclusion strategy in Vietnam?

RMIT University Finance lecturers Dr Doan Bao Huy and Dr Pham Nguyen Anh Huy shared their views on this topic.

Will the advent of mobile money drastically change the fintech landscape, considering that e-wallets and electronic banking are currently dominating this sector?

Dr Doan Bao Huy: I think the status quo of the sector will not change much because e-wallets, mobile banking applications and mobile money cater to different market segments and customers.

The goal of mobile money is to promote cashless payments widely, especially in rural and remote areas where banking services are limited. Mobile money will not interfere with banking activities because the service providers (i.e mobile network operators) are not allowed to provide loans, raise capital or pay interest on mobile money balances.

A key difference in terms of market segment is evident in the transaction limits set by the government. E-wallets focus on customers in big cities, so they have a transaction limit of VND100 million per month. Meanwhile, mobile money aims to provide non-cash payment services to customers in remote areas and thus the maximum transaction value is VND10 million per month.

I think fintech companies and banks still have room to increase the usage of their digital services. A 2019 survey by market research company Cimigo shows that even in urban areas, only 30% of people use mobile banking apps and 29% use e-wallets for payment. Latest research by Cimigo in 2020 further shows that the fastest growing population groups are children aged 0 to 12 in rural areas and people 50 years and older in cities. The youth's rapid mastering of the Internet and technology as well as the rising income of urban residents are indicators that fintech and digital banking still have a large, untapped customer base.

news-mobile-money-newcomer-in-financial-services-1 Dr Doan Bao Huy and Dr Pham Nguyen Anh Huy are members of the RMIT FinTech-Crypto Hub and lecturers in Finance at RMIT University.

While several fintech companies are playing a supporting role in the mobile money ecosystem, what advantages do telcos have as the main implementer of this service?

Dr Doan Bao Huy: An obvious advantage for telcos is that, for the time being, only three major networks are allowed to deploy mobile money (i.e Viettel, VNPT and Mobifone). Fintech companies with an existing e-wallet intermediary payment service license can technically join the mobile money pilot as service providers. However, they will need to first secure a license to establish a ground public telecommunication network that uses radio frequency, and this is not an easy task.

The telcos’ advantage is amplified by the fact that they own huge customer data, as there are on average 1.3 mobile cellular subscriptions per inhabitant in Vietnam according to a Vietnam Telecommunications Authority report from January 2020. I think fintech companies, especially those with popular e-wallet applications like Momo and ZaloPay, can join hands with telcos to improve the user experience.

The mobile network operators also prepared thoroughly before launching mobile money. Let’s take Viettel for example. It tested the service with 40,000 of its employees and is leveraging its vast experience in commercial deployment of services overseas. It is also making use of its experience with e-wallet ViettelPay, whose brand awareness reached 54%, just behind Momo (88%) and ZaloPay (63%) according to Cimigo research in 2019.

How can mobile money contribute to the universalisation of financial services in Vietnam as part of the nation’s financial inclusion strategy?

Dr Pham Nguyen Anh Huy: Financial inclusion refers to the accessibility of appropriate and timely financial products and services. However, such products and services currently offered by mobile money applications are inadequate and not really convenient for users to access.

Mobile money is now only used to pay for goods and services, and money transfers between accounts are restricted to within the same mobile network. There are also no clear policies for mobile money users to access other financial products and services (such as loans and savings) based on the merit of their transaction history. I believe that the current pilot of mobile money can increase the number of non-cash payments, especially in remote areas, but will most likely not affect the financial inclusion rate in Vietnam.

What’s the experience of deploying mobile money like in other countries?

Dr Pham Nguyen Anh Huy: According to the 2018 State of the Industry Report on Mobile Money published by GSMA, limiting the number of mobile money service providers has resulted in lower levels of investment and fewer innovative products and services (notably in Nigeria and Egypt). In addition, low levels of consumer trust and financial literacy have also created certain barriers to uptake (as in the case of Ethiopia).

One lesson that Vietnam can learn from is in Egypt, where mobile money has been combined with the nanofinance model to improve financial inclusion. This model allows mobile money users to take small-value loans, and the loan limit is based on a credit score calculated from user data collected by the telcos. However, to realise this, mobile service providers need to work closely with relevant government agencies such as central banks, credit rating agencies and fintech companies to develop a credit scoring system.

Story: Ngoc Hoang

07 April 2021

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