Bleak future for e-wallets

09:00 | 26/01/2019

Lack of infrastructure for mobile payment makes it difficult for e-wallets to lure away cash-on-delivery customers, even with the multitude of promotion campaigns they are running as well as collaborations with other companies and banks. Kim Oanh reports.

bleak future for e wallets
E-wallets try to gain a proper foothold in Vietnam by running extensive promotion programmes

In 2018, the e-wallet market failed to produce a long-awaited breakthrough, with no single contender emerging to dominance, despite the parade of promotions.

According to the statistics of the State Bank of Vietnam (SBV), as of November 2018, 26 non-bank institutions have been licensed to provide intermediary payment services, 20 of which offered e-wallets, including well-known names like MoMo, Bankplus, Vi Viet, VTC Pay, WePay, Vimo, Ngan Luong, and Payoo.

Heavy investments

A discount of 50 per cent on the first payment, a VND20,000 ($0.87) combo for a couple of cinema tickets, popcorn, and drinks, as well as a gift of VND300,000 ($13) on the e-wallets of new customers are all attractive offers that e-wallet providers came up with to bring customers over to their platforms.

Besides, e-wallets have a “promotion” button on their website menus that allow customers to browse and enjoy incentives more easily.

Being one of the first e-wallets in the market, Momo E-Wallet, which is owned by M-Services JSC, is one of the players spending the most money on this playground.

Last November, Momo E-Wallet launched the biggest promotion of the year to welcome its 10 millionth customer. Customers who have never connected MoMo e-wallets to their bank accounts can pay only one Vietnamese dong for one of 10 packages valued at VND1 million ($43.47) each.

Along with the war in prices, e-wallet providers also compete with each other in transaction time. Notably, Zalo Pay promises that payments go through in only two seconds.

Many think that foreign investors keep pouring money into local e-wallet providers, just to run promotion programmes. Most companies have received more foreign investment. For instance, South Korea’s UTC Investment holds a 65 per cent stake in VNPT Epay, NTT Data holds 64 per cent in Payoo, Hong Kong’s Champion Crest holds 51 per cent of Amigo Technologies JSC, Thailand’s True Money owns 90 per cent of 1Pay, and MOL Accessportal holds 50 per cent of Ngan Luong.

Last July, investment fund Fenox Venture Capital from the US’ Silicon Valley confirmed pouring capital into domestic e-wallet application OnOnPay, but the value of the deal has not been disclosed. The US fund also stated that this is its first investment in Vietnam. OnOnPay’s current investor Capii Venture also joined the call for investment.

In the same month, Vietnam Payment Solution JSC (VNPay) and UnionPay International signed an official agreement to co-operate on QR code payment. VNPay’s representative said that co-operation with UnionPay is a large step towards international payments.

In March 2016, MoMo mobilised $28 million from Goldman Sachs and Standard Chartered Private Equity (SCPE). At the end of 2017, foreign investors held only 44 per cent of MoMo’s charter capital. However, as of November 2018, this ratio increased to 64 per cent with some new names like Ganymede Holdings B.V and E-Mobile VN Investments I.

In January 2019, MoMo’s Series C fundraising round was led by an affiliate of Warburg Pincus, a leading global private equity firm and the largest private equity investor in Vietnam. The new funding equipped the company with enormous resources to significantly expand MoMo’s footprint and realise its ambition to develop millions of payments points across the country.

Nguyen Hoa Binh, founder cum chairman for NextTech Group of Technopreneurs, a group of companies pioneering into the emerging digitised commerce industry across Southeast Asia, told VIR that generally, except for promotion programmes, e-wallet providers have yet to prove the advantages of this payment method against bank cards and cash.

A segment still overlooked

Home to more than 96 million people, Vietnam is on the cusp of a mobile payment revolution, fuelled by an amalgam of factors, including a high smartphone penetration rate and the government’s vision of a cashless society.

The country’s population is young – 70 per cent are under the age of 35 – and tech-savvy, excited about a digital society. In first-tier cities like Hanoi and Ho Chi Minh City, consumers are increasingly becoming receptive to the idea of a digital society and lifestyle, thanks to the growth of e-commerce and mobile payment services.

However, in reality, the usage of e-wallets has yet to be commensurate with its potential. It is easy to see that almost all e-wallet users maintain their accounts to pay utilities, internet bills, and especially top-up their phones. A number of people use e-wallets to receive the gift for opening the account, then just keep waiting for new promotions.

In addition, according to a report published in November 2018 by Vietnamese online market research firm Q&Me, cash-on-delivery (COD) payment is still the favourite among Vietnamese people when they buy products on e-commerce platforms.

Notably, 80 per cent of the interviewed 1,050 people (between 18-35 year olds) said that they prefer COD to other payment methods. Only 8 per cent like to use their credit cards, and e-wallet got a meagre 6 per cent, only slightly more than bank transfers (5 per cent).

The reason behind the limited use of e-wallets is that numerous people do not yet feel safe using such services as they do not trust the Internet. Besides, usage depends on habits and pervasiveness: cash is accepted everywhere, while digital payments are not.

“The underlying reason of the limited use of e-wallets is that they are still an intermediary payment stage: you need to have money on a bank account. Thus, credit card payments are clearly more convenient and safer, while people also have to pay a fee for using their e-wallets,” Binh said.

It remains a question why both foreign and local companies continue to burn money to develop e-wallet payments, despite all the difficulties they are facing.

Binh’s answer to the conundrum is: “Both foreign and local players expect that they will achieve success similar to Alibaba’s AliPay and Tencent’s WeChat Pay in China. However, the problem is that Vietnam has yet to build a homogeneous, nationwide e-wallet ecosystem. Currently, different stores use different payment apps, making it impossible for consumers to use one app at any store. In other words, in Vietnam, the infrastructure for mobile payments is not yet in place.”

Meanwhile, in China, the mobile payment market is dominated by two apps, WeChat Pay and AliPay, which are used widely, from fancy restaurants and high-end designer boutiques down to street vendors, taxi drivers, and even panhandlers. Besides, paying by phone became popular in China partly because credit cards never gained the popularity they see elsewhere in the world.

Finally, e-payment is quite a promising sector, but it seems to “burn” a great deal of money to lure in new clients and launch promotion campaigns to keep up with competition.

“This e-wallet race is similar to the war of attrition in e-commerce, after which the market will gradually clean up, leaving only big names,” Binh said.

Copyright by