|Alibaba and “40 thieves” move in on e-payments|
At the start of 2018, the CEO of a Vietnamese commercial bank said that he was already planning to roll out a payment app after the Lunar New Year. “Competition is heating up, so we have to pull out all the stops,” he said.
The throne that Vietnamese banks now sit on is being shaken every day, as 25 e-wallet apps and several overseas firms are fighting their way into Vietnam’s booming financial market. In November 2017, Alibaba guru Jack Ma made headlines in the country by launching Alipay, a mobile and online payment platform, also signing a partnership agreement with the National Payment Corporation of Vietnam.
Only three days later, Alibaba’s competitor WeChat Pay made its debut in the country by shaking hands with domestic partner Vimo. Both Alipay and WeChat Pay are Chinese success stories, which means they are well-equipped to compete against Vietnamese fintech firms and commercial banks.
At first, Alipay and WeChat Pay will serve only the three million annual Chinese visitors in Vietnam. However, as Vietnam is a market with great potential for expansion, future plans to target Vietnamese consumers are surely on the horizon for these Chinese giants. In fact, Alipay is already researching a major Vietnamese fintech firm, possibly for partnerships or acquisitions. This is also a common strategy for Alipay and WeChat Pay in other markets in the region.
However, the battle goes beyond Alipay and WeChat Pay. Marketing specialist Vu Kim Hanh stressed that aside from Alibaba, Vietnam will welcome “40 other thieves” that may include American tech giants like Amazon, Facebook, Google, and Apple.
Tran Thanh Nam, co-founder and CEO of mobile payment service Moca, admitted that Vietnamese fintech firms are “highly sensitive” of Alipay, WeChat Pay, or Apple Pay, as these are major competitors. These heavyweights have a global brand name, ample cash in hand, a strong cash flow, insurance benefits, and, most importantly, a well-rounded ecosystem for users.
To add fuel to the fire, Malaysia’s second-largest bank CIMB recently revealed that it would open a digital bank in Vietnam in early 2018.
As Industry 4.0 makes its waves in Vietnam, a big question has emerged: How can domestic banks and fintech firms compete? Can they win consumers’ hearts competing against these global giants?
There have been many questions about the impressive expansion rates of Alibaba, Tencent, or Amazon in Southeast Asia. Their reach has quickly gone beyond e-commerce to payment services.
Vu Kim Hanh emphasises cheap prices as an “old trick” for these tech firms. Alibaba and WeChat Pay conquered Southeast Asia by running huge discount programmes, which include free delivery to buyers’ home addresses. This tactic has helped the two Chinese firms compete against other players in the market.
When in Vietnam, Alibaba’s Jack Ma was asked about his plans to boost e-commerce in the country. The Chinese billionaire said, “I sell a bottle of water for $2 online, instead of for $10 for the same bottle at brick-and-mortar stores.” To consumers, this is a great deal that they cannot ignore.
To do this, Alipay needs a complete ecosystem, ranging from e-commerce websites to logistics services. This is very challenging for Vietnamese firms, as their services (even for commercial banks) are scattered and not united under any one system.
Moca’s Tran Thanh Nam admitted that he cannot run huge discount programmes, as the service charges of fintech firms are already very low. Even if services are free, it can still be hard to attract consumers.
Other players note that Vietnam is not an easy conquest for Alipay or any other tech giant. A leader of a commercial bank said that Vietnamese consumers are quite unique in their behaviour, as shown in the fact that most of them use smartphones all day for social media and messaging, but still prefer to pay in cash. “Consumers’ aversion to card payment is a real challenge for anyone in the fintech industry here, including tech companies from overseas,” he said.
The banker added that if fintech firms want to use promotional discounts as their main strategy, they may need “an awful lot of money”.
In addition, Vietnam has yet to develop a legal framework for the fintech industry. This legal grey area is something tech firms from overseas will have to deal with when they operate in Vietnam.
It should be noted that all fintech firms, Vietnamese and overseas, have to open an account at a local bank when they start operations. This gives banks an advantage in the battle.
Nguyen Dinh Thang, deputy CEO of LienVietPost Bank, said that the Vietnamese government may choose to welcome foreign tech giants, but still nurture the young fintech firms in the country. This is to protect Vietnam’s tech industry while still honouring commitments to global integration.
Singapore is an example to follow. As the country is being targeted by various foreign firms such as Amazon or Alipay, this nation’s government has proactively forked out millions of US dollars to help domestic firms update their digital know-how. The country also protects its local merchants, fostering them to fight back against foreign competitors.
As foreign fintech giants may try to buy out domestic firms, Vietnamese fintech players need an immediate survival kit. In terms of technology, Vietnamese banks and fintech firms do not lose out to any foreign competitor, but what they lack is a conductor who can streamline all of these scattered services into one ecosystem. If all Vietnamese players can team up, their combined power can be strong enough to compete with foreign fintech rivals.
It is obvious that competition is not the only way to go in this battle. Some commercial banks have already planned to co-operate with Alibaba or Tencent, even Facebook. This is one way for Vietnamese banks to access the huge customer database and ecosystem run by these tech giants.
All in all, no matter how Vietnamese banks and fintech firms choose to address rising competition, all players need full support from the legal system. It is crucial for Vietnam to finalise its legal framework, a step that can boost the entire fintech industry and benefit millions of Vietnamese consumers.