Toward a Cashless Economy

2:15:18 PM | 12/6/2019

To adopt a comprehensive national financial strategy, electronic payment will be one important pillar that contributes to the successful implementation of this strategy. The next period will require attention to the trend of digitizing banking services and putting customers at the center. Customers can continuously access and use the service anytime, anywhere on a variety of mobile devices.

Increased use of electronic payments

The development of Vietnam's banking system in recent years has facilitated many customers to access banking services, hence increasing the use of electronic payment, contributing to reducing cash use in the economy.

In the opening speech in Banking Vietnam 2019, Mr. Nguyen Kim Anh, Deputy Governor of the State Bank of Vietnam (SBV), said, comprehensive finance not only had great significance for socio-economic development but also was an important premise for the country’s sustainable growth. Vietnam is making efforts to build and move towards the implementation of the comprehensive National Financial Strategy. This is also one key task that the Government has assigned the SBV to implement in 2019.

By the end of the first quarter of 2019, cashless payment activities of the Vietnamese banking industry have achieved remarkable results.

Specifically, according to SBV’s statistics, the inter-bank electronic payment system has handled 37,325,000 transactions with the value of VND20,691 trillion (up 22.99% in quantity and 17.84 % of the value over the same period of 2018); as many as 18,668 automated teller machines (ATMs) and 261,705 point of sale (POS) machines have been installed nationwide with POS available at distribution chains, retail, large hotels, medical facilities, hospitals, schools.

Besides, the number and value of domestic payment transactions of bank cards continued to increase, reaching 65 million transactions with a total transaction amount of VND171 trillion (up 18.45% in quantity and 18.82% in value over the same period of 2017); the number and value of financial transactions via the Internet increased by 68.8% and 13.4% respectively over the same period in 2018; the number and value of financial transactions via mobile phones increased by 97.7% and 232.3% compared to the same period in 2018.

The non-cash payment activity in the public sector has also been continuously promoted and expanded; the Internet Based Purchasing System (IBPS) has completed the inter-bank electronic payment connection at 63 provincial State Treasury; about 50 commercial banks have completed connection with the electronic tax payment system of the General Department of Taxation in 63 provinces /cities.

Payment by QR code, also known as one touch, has been used by organizations to promote payment via mobile phones. So far, 16 banks are providing this payment service, the whole market has 30,000 points to accept QR code payments.

Recently, seven banks including Vietcombank, VietinBank, BIDV, Agribank, Sacombank, TPBank and ABBank have officially announced the launch of domestic chip cards. This card conversion is considered an inevitable trend of regional and international countries in the face of increasing technology crime. In addition, it is also an advanced technology solution in providing non-cash payment products to customers.

Many challenges

However, achieving the goal of comprehensive financial development and promoting the cashless economy are not easy to implement in the short term and will face many challenges.

According to Mr. Nghiem Thanh Son, Deputy Director General of the Payment Department of SBV, the non-cash payment still has limitations, for example: Technical infrastructure for electronic payment activities is not synchronized and is only available in cities and urban areas. These services cannot be accessed by people living in remote areas such as mountainous and faraway regions. Some small and medium enterprises still face difficulties in accessing credit capital.

Besides, most people have a habit of using cash as they still use their cash because of their hesitation, being afraid to learn and fear of risks. These have prevented consumers from accessing electronic payment forms.

Therefore, to promote comprehensive finance and develop electronic payment in the next period, we should pay attention to the trend of digitizing banking services, putting customers at the center, thus customers can continuously access and use the banking services anytime, anywhere on a variety of mobile devices.

The context of Industry 4.0 also requires financial-banking institutions to boldly invest, apply modern technologies, new solutions, and innovative models in order to prevent network security risks and protect customer confidentiality, and promote smart data exploitation and analysis to understand customers, thereby providing safe and convenient products and services meeting customers’ needs.

Representatives of banks also proposed that the State Bank should have policies to develop agent system 24/7 soon. At the same time, there must be unified policy and connection of integrated data system, from which new banks can provide services to people.

Ms. Nguyen Thi Hien
Deputy Director of the Banking Strategy Institute, SBV

Non-cash payments in Vietnam have made remarkable advances and received wide recognition. As of November 2018, the proportion of cash in circulation on the total means of payment reached 11.5% - down more than 2.5% compared to the figure of 14.02% in 2010.

The level of using non-cash payment facilities is also increasing. The strongest growth is attributed to mobile banking and internet-banking channels, but the transaction value is low compared to the total payment value (15%).

In addition, compared to many countries in the region, the proportion of adults with bank accounts in Vietnam is still very limited, which requires solutions to improve.

Ms. Tran Thu Huong
Director of Retail Banking and Strategy, Vietnam International Bank (VIB)

Government policy is one of the most important factors to ensure broad coverage of non-cash payment trends in Vietnam.

Changing customers' habits, expanding the coverage of e-commerce in neighboring provinces/cities, improving the payment process are the first important factors to help improve the customer experience, thereby developing a wide range of non-cash payment approaches in Vietnam.

In addition, there should be a mechanism to encourage Fintech companies to develop utility applications integrating with the bank's system

Thu Ha