The Competitive Landscape
On May 31, Moca Technology and Services Joint Stock Company (Moca) declared that it would stop opening new accounts and cease providing its e-wallet service from July 1. This decision was attributed to the need for a thorough assessment and restructuring strategy aimed at sustainable growth.
Founded by former senior employees of Microsoft, Google, and leading finance and banking experts, Moca developed a mobile application enabling users to make online or direct payments using ATM, Visa/Mastercard, and JCB cards. Moca gained prominence through its partnership with Grab, deploying the GrabPay by Moca payment method since 2018. However, as Grab expanded its partnerships, collaborating with Zalo Pay and MoMo in 2023, Moca’s exclusivity as a cashless payment method on the Grab app diminished.
The cessation of Moca’s operations underscores the intense competition and potential for elimination in the e-wallet market. Currently, around 45 licensed e-wallets operate in Vietnam, with 36.23 million active users by the end of 2023, representing 63.23% of the nearly 57.31 million activated e-wallets. Despite double-digit growth in transactions and transaction values from 2018 to 2023, the market share is predominantly controlled by giants like MoMo, Zalo Pay, ViettelPay, ShopeePay, and VNPay.
Banks have also entered the non-cash payment space, launching numerous Mobile Banking services and new-generation digital banks such as VPBank's Cake, OCB's LioBank, and BVBank's Digimi. Additionally, NAPAS and banks have introduced VietQR and the Napas247 fast money transfer service, increasing competition in QR code scanning.
Expanding services presents challenges, as many investors aim to venture into online lending. However, regulations prevent non-bank organizations from lending directly, necessitating partnerships with banks or financial companies, creating a dependency for those wanting to lend on their platforms.
Experts often describe the e-wallet sector as a "money-burning" game to acquire and retain customers. For instance, MoMo has developed extensive features and services, expanding into consumer finance, insurance, entertainment, e-commerce, and dining, aiming to become a super app. ShopeePay, linked with Shopee, offers numerous promotions to attract users, while ZaloPay similarly uses attractive promotions.
These activities require significant financial investment. Fiingroup notes that user preference for e-wallet payments often stems from the discounts and coupons offered, necessitating continuous promotional efforts and substantial costs for these companies. Consequently, leading e-wallets like MoMo and ShopeePay continue to incur large losses despite growing net revenues.
For example, MoMo's revenue reached over VND 6,000 billion in 2020, increasing by 19.5% in 2021 and by 15.9% in 2022 to over VND 8,500 billion. However, its profit after tax has been negative, with increasing losses recorded: about VND 880 billion in 2020 and 2021, rising by 30% to nearly VND 1,150 billion in 2022. Similarly, ZaloPay’s revenue in 2022 was over VND 550 billion, a 102.7% increase from 2021 and a 296.8% increase from 2020. Yet, its profit after tax was negative VND 680 billion in 2020 and more than VND 1,300 billion in 2022.
Regulatory Hurdles and Future Prospects
The story of Moca's departure from the market and the ongoing struggles of other e-wallets reveal the cutthroat nature of the industry. Companies are compelled to continuously innovate and expand their service offerings to stay competitive. MoMo, for example, has launched various services beyond payments, including consumer finance, insurance, and entertainment, aiming to become a one-stop super app. ShopeePay leverages its association with Shopee, offering users integrated services that enhance their e-commerce experience. ZaloPay, too, relies on its vast user base and frequent promotions to capture market share.
Despite these efforts, the path to profitability remains elusive for many e-wallet providers. The high costs associated with customer acquisition and retention, coupled with regulatory constraints, pose significant challenges. Non-bank organizations, for instance, cannot directly offer lending services, which limits their revenue-generating opportunities. To circumvent this, they must forge partnerships with banks or financial institutions, creating dependencies that can complicate their operations.
The regulatory landscape further complicates the situation for e-wallet companies. The 2024 Law on Credit Institutions, while addressing electronic banking activities, does not provide a comprehensive framework for digital banking, leaving a gap in regulations that could support the broader adoption of digital banking models. This regulatory ambiguity poses a risk for e-wallet companies aspiring to evolve into full-fledged digital banks.
However, some investors remain optimistic, believing that technological advancements in the financial sector will eventually enable them to transform into digital banks. They argue that as consumer preferences shift towards digital financial services, there will be greater acceptance and regulatory support for digital banking models. This optimism fuels their continued investment in the sector, despite the current challenges.
The Vietnamese e-wallet market is at a critical juncture. While the potential for growth remains high, the path to profitability is fraught with challenges. Companies must navigate intense competition, high customer acquisition costs, and regulatory constraints to succeed. As the market consolidates, only the most innovative and resilient players will survive.
For consumers, the competition among e-wallet providers translates into a plethora of options and attractive promotions. However, the sustainability of these benefits depends on the long-term viability of the companies offering them. As the industry evolves, consumers may witness a shift towards more sustainable business practices, with companies focusing on profitability rather than rapid market expansion.
In conclusion, the future of the Vietnamese e-wallet market hinges on the ability of companies to balance growth with profitability, navigate regulatory challenges, and innovate to meet the evolving needs of consumers. The road ahead is uncertain, but for those willing to adapt and invest in sustainable business models, there are significant opportunities to be seized.
