Vietnam’s Credit Card Market: Gradually Gaining Traction

Vietnam began to prepare for the coronavirus outbreak before most of the nations across the world. In early January 2020, temperature screening was already in place at Vietnam’s international airport, Hanoi, for passengers arriving from Wuhan, China.

With the gradual spread of the coronavirus, the government introduced several measures, such as contact tracing and strict quarantine measures.

Vietnam imposed a lockdown on 1 April 2020 and only essential movement was permitted. The Vietnamese government issued several incentives in the form of tax breaks, delayed tax payments, and land-use fees to reduce the economic impact of the mCovid-19 pandemic.

The State Bank of Vietnam cut interest rates from 6.0% to 5.0% in March 2020, followed by a further cut to 4.5% in May 2020, to help businesses recover from the impacts of the pandemic.

The use of cash for payments remains highly prevalent among Vietnamese consumers. This is due to factors such as a
high unbanked population, limited financial awareness, and inadequate payment infrastructure.

The government and other financial bodies in Vietnam are taking steps to increase financial awareness, promote electronic payments, and enhance access to banking services in the country.

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The introduction of mobile van branches in remote locations, the increasing number of digital-only banks, and the emergence of new payment card technologies such as EMV and contactless are supporting a rise in the banked population and electronic payments in Vietnam.

The card payment market is dominated by debit cards. However, banks are trying to push credit card uptake and usage by offering cards as part of bundled packages, as well as by providing various value-added benefits in the form of installment payments, reward programmes, cashback, and discounts.

The outbreak of Covid-19 affected consumer spending and in turn the payments industry in the short term. Yet usage of digital wallets and e-commerce rose to cope with the pandemic.

Debit cards remain the preferred payment card

Debit cards account for 93.3% of total payment card transaction value in 2020. At present most transactions are cash
withdrawals, but banks are encouraging the use of debit cards for payments by offering various incentives.

Debit card payments registered robust growth in terms of volume and value at compound annual growth rates (CAGRs) of 39.9% and 27.2 between 2016 and 2020.

Banks are offering various services in order to promote debit card adoption and usage in the country, including online bank account opening and contactless cards.

Marketing initiatives boost credit card adoption

Credit card adoption remains low in Vietnam at 9.0 cards per 100 individuals in 2020. However, the number of credit
card payments grew at a robust pace, increasing from 29.1 million in 2016 to 112.0 million in 2020 at a CAGR of 40.1%.

To support credit cards, banks offer various benefits in the form of cashback, reward points, and discounts. To provide flexible repayment options and further encourage usage, banks provide installment facilities enabling credit card holders to spread payments across several months.

E-commerce has continued its strong growth

E-commerce in Vietnam registered robust growth, increasing from VND109.7tn ($4.7bn) in 2016 to $13.1bn in 2020. A
large young population as well as rising internet and smartphone penetration are the key factors driving this growth.

The E- Commerce Development Plan for 2021– 25 is expected to boost the e-commerce market over the forecast period. The availability of online payment solutions that offer security and convenience – including PayPal and Samsung Pay – will also support ecommerce growth.

Banks are offering value-added services to increase prepaid card penetration

The large unbanked population in Vietnam remains a key driver behind rising demand for prepaid cards in Vietnam. To increase prepaid card uptake and usage, banks offer reward programmes, discounts, and cashback.

Siam Commercial Bank (SCB) offers the SCB M Visa prepaid card with the M Points reward programme, enabling
card holders to earn bonus points on card purchases.

Meanwhile, PG Bank offers the Flexicard prepaid card, which provides discounts on fuel purchases at more than 2,300 Petrolimex petrol stations across the country.