Vietnam's digital transformation
It's a bold vision for a digital future: Vietnam is aiming for its digital economy to account for 30% of GDP by 2030. To make this a reality, the government has embarked on an ambitious program for businesses to ramp up their digital transformation.
The program will help enterprises, cooperatives and household businesses with their digital efforts through a multifaceted approach.
This is a fantastic effort by the government to bring business leaders, financial institutions and technology experts to harness the potential of digital innovation. It also provides a critical opportunity for the Vietnamese economy.
Not only will businesses strengthen their technological approach and strategies, but there will be incentives to digitize their business, administration, and production activities from 2021 to 2025, and training, consultancy and access to digital solutions.
The timing couldn't be better. With a population of 97 million, the Internet penetration in Vietnam is high, standing at 70% and increasing by 6.2 million in a single year. The nation is set to see its mobile transactions increase by 300% between 2021 and 2025 due to the strong growth anticipated in mobile payments.
Covid-19 has accelerated the shift toward digitization for many businesses across the country. It has highlighted the importance of technology and digital transformations to the evolution of organizations across all sectors - particularly in banking. One of the most significant changes that technology has successfully leveraged during the crisis is how society currently interacts with financial services and pays for goods and services.
As the pandemic rages on, people are traveling less and staying home during lockdowns and avoiding handling cash to minimize the spread of the virus.
This lifestyle change prompted by the pandemic has led to heightened demand for seamless, contactless payments. Around 80% of Vietnamese consumers predict an increase in their use of cashless payments and a diminishing reliance on cash.
The ability to offer simplified payments has a profound impact on individuals, businesses and economic development, especially as we continue to battle a global crisis. By making it easy to spend, share and save money, people can take financial control of their lives while mitigating the risk of infection through the use of cash. And the easiest way to simplify payments is through a mobile phone.
Until now, traditional banking services have failed to bring millions into the formal economy. Commonly cited barriers to accessing financial services have positioned formal accounts as too far to access, too expensive to use, or too complicated to open because of documentation requirements. As a result, about 69% of the adult population in Vietnam are unbanked.
However, with 68 million Internet users, Vietnam is one of the nations with the highest such rates in the Asia-Pacific region. Internet usage is mainly mobilebased, thanks to the high smartphone penetration rate. This trend has helped financial technology to boom in the country, with e-wallets becoming a highly popular and competitive space.
Banks have caught on to this opportunity, and most of them now offer similar services as e-wallets, but will have to find a way to differentiate themselves from the competition. That is why many of the top banks are looking at the potential of new technology to help customize services, especially during the pandemic, when people are isolated at home and need to pay for things remotely.
More than ever, the banks striving to maintain a lead in this highly competitive environment are investing in innovations that can facilitate cross-institutional payments and enable customers to send or receive money digitally while enhancing the efficiency and security of the payment system. They can also harness the power of data to personalize their services even further.
The shift toward digital has been given a further boost by the government's approval of the pilot application for Mobile Money, which would enable small-value goods and services to be paid for by mobile phone credit. The pilot aims to develop non-cash payments and improve the access and use of financial services in less accessible areas.
However, despite this approval six months ago, the impact of the Covid-19 pandemic has delayed the implementation, although telecom operators Viettel, VNPT and MobiFone have already applied for pilot licenses to deploy the initiative.