However, during this extremely difficult phase, the financial industry has shown immense resilience and still maintains growth largely due to a strong shift towards online payment methods. This opinion has been shared and discussed a lot recently by financial experts both globally as well as within the country.
Growth of e-commerce
The above view of financial experts is consistent with the development and growth of the financial market in Vietnam. After many years of promoting non-cash payment methods the results are still not as expected, even though this form of payment witnessed amazing growth and popularity during lengthy periodic social distancing phases since April 2020.
Data shows that in the first twenty days of the month the whole country implemented Directive No. 16/CT-TTG, and the average transaction value through the inter-bank electronic payment system increased by 8.85%. During the last four months of 2020, domestic payments via bank cards increased by 26.2% in quantity and 15.7% in value; and payments via internet channels increased by 3.2% in quantity and 45.7% in value. In particular, payments via mobile phones increased by 189% in quantity and 166.1% in value, as compared to the same period in 2019.
This positive growth continued until the end of November 2020, when the number of payment transactions via mobile phones reached about 1,044 million transactions with value of nearly VND 10.900.000 bn, an increase of 118.5% in quantity and 121% in value, as compared to the same period in 2019. The number of payment transactions via the internet reached nearly 421.8 million with value of around VND 24.600.000 bn, up by 10.8% in volume and 24.4% in transaction, as compared to the same period in 2019.
According to the latest statistics published by the State Bank of Vietnam, by the end of April 2021, transactions via the internet channels increased by 65.9% in quantity and 31.2% in value; transactions via mobile phones increased by 86.3% in volume and 123.1% in value; and transactions via QR Code channels increased 95.7% in quantity and 181.5% in value.
Some statistics show that during the time of the Covid-19 pandemic, many people had access to cashless payment methods for the first time. For example, in 2020 the number of registered users of Momo e-wallet were 23 million, an increase by nearly two times compared to 2019. In 2020, the number of transactions of Momo e-wallet crossed 403 million transactions, with transaction value of about USD 14 bn, an increase by 3.5 times compared to 2019.
In 2020, the number of new openings for bank cards also increased sharply. Domestic card online payment transactions through the Vietnam National Payment Services Joint Stock Company (NAPAS) also grew quite well compared to 2019, with the number of transactions increasing by about 185% and the transaction value increasing by around 200%.
The pandemic is being seen as a catalyst for explosive growth of mobile apps usage. Many people agree that the growth of the non-cash payment field has grown vastly during the Covid-19 pandemic. The pandemic has made many people more afraid to use paper currency because cash is being believed to be one of the factors that can spread the infectious disease. Moreover, as many businesses have had to close down and people have to accept strict social distancing, it is much more convenient to order for supplies online and pay online for almost all goods and services.
Decline in cash payments
Vietnam has currently around 79 payment service providers offering services via the internet, besides also 44 service apps via mobile phones. Other than these, many payment institutions are also connected to e-commerce exchanges.
In the first quarter of 2021, the growth rate of total value of e-commerce transactions increased by 5.5 times compared to the fourth quarter of 2020. Accordingly, non-cash payment channels via cards and e-wallets also increased due to the fear of using paper currency by consumers. Moreover, before this trend took off, e-commerce platforms had combined with payment units to deploy dual incentives for users to prioritize electronic payments, which added to the push for non-cash payment popularity.
According to a report by the Vietnam E-commerce Association (VECOM), the Covid-19 pandemic has had a profound and deeply lasting impact on the economy and society, including e-commerce platforms. Vietnam's e-commerce is expected to grow by about 15% and reach a scale of about USD 13.2 bn. During the Covid-19 pandemic, the online payment industry has continued to grow strongly. In only the first six months of 2020, businesses recorded an increase of 81% in domestic card payments and sales through e-commerce channels.
However, although non-cash payment methods have changed significantly, this change has only occurred mainly in urban areas, focused more on technology savvy young people. Although cash payments have declined, they are still the main form of payment. Therefore, despite the growth of the non-cash payment system, more efforts are still needed to establish its wide scale usage.
Currently, the legal framework to meet the requirements for new business models and products and services based on technology for non-cash payments is also being promoted. For example, the State Bank of Vietnam has just completed a draft for a new Decree on non-cash payments and developed a Decree on a controlled trial mechanism for Fintech activities in the banking sector to submit to the Prime Minister for promulgation of Project to develop non-cash payment for the 2021 to 2025 period, with a pilot implementation of mobile money.
According to Ms. Pham Chau Loan, Deputy Head of Digital Channel Development of Partners of Vietcombank, the Covid-19 pandemic has had a strong impact on consumer behavior which is seeing a radical shift. At this time, many people are working from home and hence have limited contact with the outside world.
In such a situation, non-cash payment methods solve many problems. These methods are now being considered as solutions to save the economy in the future, and for consumer activities to continue to flow continuously and conveniently as normal in future. In 2020, many economies saw sudden negative growth, but Vietnam's GDP growth remained positive at 2.91%, which was partly due to the growth of e-commerce platforms and e-payment methods.
