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Vietnam builds a cashless ecosystem

As Vietnam heads towards a cashless economy and with mobile phones being ubiquitous, the adoption of mobile money next month is predicted to lure local and foreign firms into the field.

Promoting non-cash payments is a priority task for the Vietnamese government. It aims to have cashless transactions exceed one-third of all transactions nationwide in the coming months.

The Minister of Information and Communications, Nguyen Manh Hung, has confirmed that mobile money will officially be deployed on a national scale from next month.

As such, Vietnam’s vast tech-affine, young population and nearly 100% mobile subscription rate would help a string of companies, including international ones, to rack up users as well as revenue in the market.

A press release quoted an industry analyst say that with the State Bank of Vietnam (SBV) not imposing a foreign investment cap and with an already booming ecosystem of fintech in Vietnam, the potential for foreign telecom operators and investors to provide mobile money services is immense.

Under Article 3.13 of the draft amendments to Decree No.101/2012/ND-CP issued in 2012 on non-cash payments, mobile money means electronic money issued by an intermediary payment service provider providing telecommunications services and identifying customers through a mobile subscriber database.

The draft decree put an explicit threshold of 49% on foreign ownership in intermediary payment service providers. This aimed to attract foreign funds but also ensure the active participation of Vietnamese enterprises. However, after due review, the SBV has decided to scrap this suggestion as it believes that foreign investment has played a key role in the formation of the domestic payments landscape since providers heavily rely on technology.

Limiting foreign ownership would hamper foreign investment in the e-payment sector and fintech in general.

Given Vietnam’s high mobile penetration rate and large unbanked population, mobile money could bring basic financial services to those living in remote areas.

State-owned VNPT and military-run Viettel have been licensed by the SBV to implement mobile money services, while MobiFone is waiting for the approval. A national database has also been built for issuing personal identification numbers, as well as adopting e-KYC (electronic Know-Your-Customer).

The Deputy-General Director of VNPT noted that Vietnam has immense potential in terms of mobile money deployment as phone subscriber density has reached 100% of the population.

He said that it only takes one month for the agency to roll out the service in the market after getting the license. VNPT will launch the service at its 100,000 selling points nationwide, promoting cashless payment as subscribers are increasingly turning to e-commerce.

Mobile money will reach new heights if local authorities approve small-sized financial transactions to purchase goods and services, the release stated.

Viettel Group’s Deputy-General Director announced that the group has been in full throttle to launch the new service right after receiving the license.

Accordingly, Viettel has developed the necessary infrastructure for service provision from rural to urban areas, with more than 50,000 points of sales and 200,000 transaction points nationwide.

The government official urged ministries, agencies, and localities to actively push for non-cash payment methods, as OpenGov reported.

SBV was asked to review and complete a legal framework for non-cash payment and e-payment and submit a draft decree on non-cash payment to the government.

It is also responsible for designing and applying KYC solutions to promote the access and use of retail payment services while strengthening inspection and supervision of money laundering and terrorist financing to ensure the effectiveness and security of non-cash payment and e-payment.

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