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Vietnam's Cashless Economy Shift: Insights

General Report January 12, 2025
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TABLE OF CONTENTS

  1. Summary
  2. Current State of Digital Payments in Vietnam
  3. Fintech Innovations and Their Influence
  4. Digital Finance Competition Landscape
  5. Government Initiatives and Financial Inclusion
  6. Challenges and Future Considerations
  7. Conclusion

1. Summary

  • Vietnam is experiencing a rapid shift towards a cashless economy, driven by technological adoption and innovative financial solutions. The growth of digital payment methods such as bank apps and e-wallets—Moca being a significant player—highlights the changing consumer preference moving away from cash. The Gross Transaction Value (GTV) for digital payments is projected to reach $149 billion in 2024, marking an 18% increase year-over-year. Innovations in fintech, including the rise of 'buy now, pay later' services and digital lending, further underscore the evolving landscape. Meanwhile, traditional banks are enhancing their digital capabilities to stay competitive, as seen in the expansion of mobile banking apps. Government initiatives, including the National Financial Inclusion Strategy, aim to broaden financial access across the population, reinforcing the shift towards digital finance. However, cybersecurity threats and financial literacy pose ongoing challenges that need addressing to support this transition.

2. Current State of Digital Payments in Vietnam

  • 2-1. Consumer preferences for digital payment methods

  • According to a recent survey conducted in Vietnam, 37% of respondents indicated that they used bank apps for their most recent purchases, making it the most popular digital payment method. This was followed by e-wallets, utilized by 31% of participants, while only 18% used bank cards. The reliance on cash transactions has significantly diminished, with only 15% of respondents opting to use cash, demonstrating a clear shift in consumer preference towards digital payment solutions.

  • 2-2. Growth of digital payment transaction value

  • The gross transaction value (GTV) for digital payments in Vietnam reached US$149 billion in 2024. This figure marks an 18% year-over-year growth, according to the 2024 e-Conomy SEA report. The significant increase in transaction value underscores the rapid adoption of digital payment methods across the country.

  • 2-3. Impact of smartphone adoption and internet penetration

  • The widespread adoption of smartphones and increased internet penetration have played crucial roles in the transition to a cashless economy in Vietnam. These technological advancements have broken down traditional barriers associated with cash reliance, fostering a thriving fintech landscape and facilitating greater consumer access to digital financial services.

3. Fintech Innovations and Their Influence

  • 3-1. Emergence of buy now, pay later (BNPL) services

  • The 'buy now, pay later' (BNPL) services have seen significant adoption in Vietnam, with transactions surging by 113% in 2023, reaching a volume of US$2.34 billion. This growth indicates a notable shift towards flexible payment solutions among Vietnamese consumers, reflecting an evolving landscape in digital finance.

  • 3-2. Expansion in digital lending and wealth management

  • Digital lending has emerged as a prominent sector within Vietnam's fintech landscape, achieving a loan book balance of US$6 billion in 2024, marking a 49% year-over-year increase. Additionally, the wealth management sector has experienced growth, with the number of domestic stock trading accounts rising to 7.2 million in 2023, projected to exceed 8.7 million in 2024, signifying increased engagement in financial investments.

  • 3-3. Growth of the fintech ecosystem and wealthtech companies

  • The fintech ecosystem in Vietnam has expanded remarkably, featuring 220 solutions as of 2024. The sector includes 16 wealthtech companies, a 129% increase from previous years, indicating a robust growth trajectory. Payment services broadly dominate the market, comprising 48 companies and holding a market share of 21.8%. This diversification is driven by advancements in digital technology, enhancing accessibility to financial services and fostering improved financial inclusion across the country.

4. Digital Finance Competition Landscape

  • 4-1. Rise of traditional banks and their digital capabilities

  • Vietnam's digital finance landscape is experiencing a transformation where traditional banks are becoming prominent amid increasing competition. As of Q4 2023, traditional bank mobile apps secured a collective penetration rate of 23%, indicating a significant rise in their digital capabilities. This rise aligns with findings from the State Bank of Vietnam (SBV) that estimates at least 96% of banks have developed digital transformation plans. Moreover, by the end of 2022, the Vietnamese banking sector had invested over VND 15 trillion (approximately USD 617.6 million) in enhancing these digital services.

  • 4-2. Competition among digital wallets and payment platforms

  • The competition in Vietnam's digital finance scene has intensified as the e-wallet market booms, with major players like MoMo and ZaloPay maintaining top spots, but showing declines in penetration rates, from 68% to 62% and from 54% to 45%, respectively, between Q4 2022 and Q4 2023. The intense competition among at least 40 e-wallet providers has led to challenges for these platforms as they struggle to differentiate themselves from traditional banks, which are enhancing their mobile app functionalities to meet customer needs.

  • 4-3. Impact of new entrants like Apple Pay on the market

  • The introduction of Apple Pay to the Vietnamese market in August 2023 significantly impacts competition among digital payment services. By Q4 2023, Apple Pay recorded a 7% penetration rate and has been integrated with major local banks such as ACB, MB, and Vietcombank. Its launch not only sparked competition with local and regional e-wallet providers but also with other tech giants such as Samsung Pay and Google Pay, further diversifying consumer choice in digital payment options.

5. Government Initiatives and Financial Inclusion

  • 5-1. National Financial Inclusion Strategy and its objectives

  • Vietnam launched its National Financial Inclusion Strategy in 2020, aiming to increase the percentage of adults with bank accounts to 80% by 2025. The strategy is designed to ensure that individuals and enterprises, particularly low-income and vulnerable groups, as well as micro, small, and medium-sized enterprises (MSMEs), have access to basic financial products and services such as payment, money transfers, saving, credit, and insurance. It targets the establishment of financial service offices in at least 50% of communes nationwide and ensures that 25-30% of adults have savings accounts at credit institutions. Furthermore, the plan aims to boost the number of non-cash transactions by 20-25% annually.

  • 5-2. Regulatory sandbox for fintech solutions

  • The State Bank of Vietnam (SBV) has introduced a regulatory sandbox to pilot select fintech solutions. This initiative, which has gone through seven iterations since 2023, focuses on three key areas: credit scoring, open application programming interfaces (APIs), and peer-to-peer (P2P) lending. This sandbox will allow innovations to be tested in a controlled environment and is expected to last a maximum of two years, promoting the development of fintech in Vietnam.

  • 5-3. Government programs promoting digital financial literacy

  • The Vietnamese government has implemented various programs to enhance digital financial literacy among its citizens. Initiatives such as the 'Smart Money' and 'Tomorrow Bankers' campaigns aim to raise consumer awareness and facilitate access to financial services. These programs are significant in promoting an understanding of digital payments and improving financial capabilities, especially in rural areas where traditional banking services may be less accessible.

6. Challenges and Future Considerations

  • 6-1. Cybersecurity threats and defenses in digital finance

  • Vietnam's digital economy is predicted to reach USD 52 billion by 2025, bringing with it a rise in sophisticated cyber threats. In 2020, Vietnam experienced a significant influx of phishing attacks, ranking near the top along with Indonesia and Thailand. Though Vietnam ranked 4th among ASEAN countries and 7th in the Asia-Pacific in the Global Cybersecurity Index (GCI) in 2020, more efforts are necessary to improve cybersecurity. Enhancing cybersecurity defenses requires increased collaboration between public and private sectors to ensure higher financial transparency and protection against financial crime.

  • 6-2. Barriers to financial literacy and access

  • Despite the rapid growth of digital payments in Vietnam, financial literacy remains a significant barrier. Currently, only 30% of Vietnamese adults utilize digital banking services, indicating a substantial opportunity for improvement in financial education. Programs aimed at enhancing financial literacy are essential for increasing the adoption of digital payment methods, thereby facilitating a smoother transition to a more cashless economy.

  • 6-3. Sustainability of the cashless transition

  • The sustainability of Vietnam's cashless transition hinges on various factors, including consumer trust, the inclusivity of payment solutions, and the overall reliability of digital financial services. While the government has initiated programs such as the Mobile Money pilot to increase access for unbanked populations, continuous improvement in service delivery and innovation is necessary. The market is currently dominated by e-wallet providers like Momo, Moca, and ZaloPay, which together account for 90% of the market share. To maintain momentum, these providers must compete effectively against traditional banks that are expanding their digital capabilities.

Conclusion

  • The evolution towards a cashless economy in Vietnam is marked by significant technological advancements and increased consumer adoption of digital payment platforms, including Moca and Apple Pay. The National Financial Inclusion Strategy is pivotal in propelling this shift, aiming for wide financial accessibility by 2025. Despite these advancements, Vietnam faces notable challenges such as cybersecurity threats and gaps in financial literacy. To address these, collaboration between the public and private sectors is essential. Digital wallets like Moca must innovate continuously to differentiate themselves amidst tightening competition from traditional banks upgrading their digital services. Future prospects are promising if financial products become more inclusive and trusted. To fully realize a cashless society, enhancements in digital infrastructure, strong regulatory frameworks, and increased literacy efforts are crucial, ensuring that the benefits of financial technology reach all segments of Vietnamese society.

Glossary

  • Moca [Digital wallet]: Moca is a digital wallet service in Vietnam, previously owned by Grab, that allows users to make payments and transfers. Despite achieving considerable usage in the past, it has experienced declining penetration rates due to increased competition from traditional banks and other digital wallets.
  • Apple Pay [Mobile payment service]: Apple Pay is a mobile payment and digital wallet service by Apple Inc. that enables users to make payments in person, in iOS apps, and on the web. Launched in Vietnam in 2023, Apple Pay has quickly entered a competitive market with established local e-wallets and has gained a notable penetration rate.
  • National Financial Inclusion Strategy [Government initiative]: The National Financial Inclusion Strategy is a government initiative launched in Vietnam aimed at increasing access to financial services for all citizens, particularly targeting low-income and rural populations. Its goal is to ensure that 80% of adults have a bank account by 2025.

Source Documents