Regulations Hinder Growth Of Digital Payments In Vietnam

Regulations Hurt Vietnam Digital Payments Growth

Vietnam wants to be a cashless society, according to a report in Financial Times, but bank regulations are hindering the country’s ability to do so.

The problem isn’t a lack of investment in the sector, or cash flow to grow market share for companies in the field – it’s the restrictive rules on e-wallets created by the State Bank of Vietnam.

The government recently set a goal to reduce cash transactions in urban households in half by 2020. However, because of the regulation issue, Vietnam is behind other countries in the ASEAN 5, and there’s no change in sight unless regulations change.

The main point of contention is a 2014 central bank rule that requires digital wallet accounts to be tied to a bank account held by the same person. So, if a consumer doesn’t have a bank account in Vietnam, he can’t get an e-wallet.

In the last year, compliance has tightened up, too, because of a crackdown on illegal gambling mostly paid for with anonymous digital wallet transactions.

The Vietnamese don’t like the regulation, which is dissuading the adoption and spread of cashless payments in the country. Momo, which has 10 million users and is the most popular digital wallet company in Vietnam, said it was freezing wallets with no associated bank accounts on Jan. 1.

Ride-hailing company Grab had to apologize publicly for introducing an e-wallet that forced its users to register a bank account.

Registration is also hampered by internet banking, which in Vietnam is an add-on service that carries a monthly fee and is disliked by retail account holders.

The bank account requirement works better in China, where 80 percent of people have bank accounts. In Vietnam, though, only 31 percent of adults have a bank account, which means the ceiling is low for new digital wallets.

Some FinTech companies have been lobbying the government for a change, and there are signs that the government may be listening. The central bank in Vietnam wants to look into allowing direct cash top-ups for digital wallets, something that would distance the sector from the bank account requirement.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.