With a population of over 86 million, Vietnam’s rapid
adoption of electronic payments is transforming it into one of the
most dynamic cards and payment markets in the Asia-Pacific region.
Although debit dominates, there are opportunities for credit card
players too, as Victoria
Amid the global economic slump, the
Asia-Pacific region has been regarded as the powerhouse for growth
and prosperity, on the back of a decade of investment and
transformation, and the emergence of a sizable and rapidly growing
middle class consumer segment. Although countries such as China and
India are acknowledged as the frontrunners, Vietnam is regarded by
the global banking industry as one of the most fertile growth
hotspots in the world, particularly for cards and electronic
Certainly, its fundamentals seem strong. With
a population of 86.1 million, Vietnam’s economy is one of the
strongest in the Asia-Pacific region, and over the last decade its
GDP growth rate has remained consistently strong, nudging the 8.5
percent mark at the end of 2007. Although GDP for 2008 fell to 6.2
percent, estimates for 2009 predict a growth rate of between 5 and
5.2 percent due to the effect of economic stimulus schemes recently
implemented by Vietnam’s government. Vietnam’s entry into the World
Trade Organisation in 2007 has underpinned its growth potential,
helped by inflows of foreign direct investment, which in 2008
reached $11.5 billion.
Vietnam’s economic growth has boosted job
creation and household incomes, and propelled a greater number of
previously unbanked people into the realm of financial services.
Vietnam’s GDP per capita has subsequently risen from $724.6 in 2006
to $1,024 in 2008. Even though Vietnam remains a vastly
underpenetrated financial services market, economic growth is
boosting the numbers of people gaining access to bank accounts.
According to the State Bank of Vietnam, as of
2008 around 15 million individual bank accounts were in existence,
representing a penetration rate of 17.4 percent, compared to 13
percent at the end of 2007 and 10 percent in 2006.
However, the majority of accountholders
comprise affluent individuals and they are mostly concentrated in
the major urban locations of Ho Chi Minh City and Hanoi. Over 70
percent of Vietnam’s population live in rural areas. But, helped by
a relatively strong economic backdrop, poverty rates are declining.
Between 1993 and 2006, 42 percent of the population (35 million
people) crossed the poverty threshold, which resulted in the
percentage of people living under the national poverty line falling
from 58 percent in 1993 to 16 percent by 2006. The year 2007 saw
that figure fall to 14.2 percent.
Consequently, as more people and businesses
are brought into the financial mainstream, the usage of cash is
decreasing, falling to 14 percent of total liquidity by June 2009,
compared to 19 percent in 2005, surpassing the 18 percent target
set by the State Bank of Vietnam to be achieved by 2010.
Card usage trends
From the launch of the first bank card in Vietnam in 1996, the card
market has grown to reach more than 17 million payment cards in
issue by June 2009. Nearly 1.1 million of that figure are
international credit and debit cards, a 74 percent increase
compared to 2007, with international bank cards issued by 16 out of
40 issuers in the country.
Over 90 percent of retail payments are made
with cash, and the vast majority of card transactions in Vietnam
are ATM withdrawals. The total value of ATM card transactions in
2008 reached VND69 trillion ($4 billion), up 32 percent compared
Behind this growth in payment card usage lie
many factors, including increasing per capita income, payment
infrastructure modernisation and deployment, and an influx of
foreign banks who have brought with them technology innovation and
But perhaps the most important factor is the
role that Vietnam’s government has played in mandating that salary
payments for state employees be made through bank accounts, which
has led to a boom in ATM and debit card usage. As of June 2009,
over 1.13 million people received their salaries via bank
Although the number of credit cards is less
than one-tenth that of ATM and debit cards, Vietnam is displaying
good growth potential for consumer credit, with Standard Chartered
Bank, which in August 2009 received a licence to set up a wholly
foreign-owned bank, noting that consumer credit accounts for only
5-7 percent of the country’s total credit market, compared to 30-40
percent in other countries.
Visa’s research into the market reveals that,
in 2008, only 88,000 people (or 1 percent) out of the entire
population of 86 million were using Visa credit cards, with a total
transaction turnover of $115 million. The percentages of people
using Visa cards are much higher in other Asia-Pacific countries –
68.5 percent in Singapore, 10.6 percent in Thailand and 20.3
percent in Malaysia.
Obviously, in a society where only a small
proportion of the population is classed as banked, and where most
people still rely on cash payments, credit cards have been targeted
primarily at high net worth and affluent individuals and those who
frequently travel abroad – or those who can afford to offer
collateral on secured credit cards.
Credit card growth is likely to lag far behind
growth in debit card usage, not least for the fact that Vietnam
lacks a comprehensive credit bureau infrastructure, and the irony
of wealthier consumers having little need for extended credit
lines. The burgeoning Vietnamese banking sector is still finding
its way when it comes to risk management, bad loans and navigating
around card regulations.
However, with the influx of foreign issuers
like HSBC and Standard Chartered, more refined marketing and risk
management initiatives could reach out to a greater number of
consumers in the years to come.
Fees a bone of contention
The issue of fees is also a
hindrance to growth. Vietnam has a much higher proportion of banks
that charge for purchases made with credit and debit cards – 50
percent, compared to only 10 percent of banks in Cambodia, which
despite having a much smaller card base has more card usage
It is ATM fees that are a serious bone of
contention in Vietnam. Although POS numbers at shopping locations
are rapidly increasing, and are mostly free, Vietnam’s legacy of
cash usage means that cardholders prefer to make ATM withdrawals to
pay for purchases.
Despite strong opposition from cardholders,
banks in the country implemented ‘off-us’ ATM fees in mid-2008,
justifying them on the basis that banks need to cover expenses and
investments in their ATM networks. In January 2009, Vietcombank and
Bank for Investment and Development of Vietnam (BIDV) began
charging VND3,000 (or $0.18) per withdrawal, with account
information and receipts costing VND1,650.
The levying of ATM fees is controversial as an
increasing number of salaries (particularly public sector employee
salaries) are being credited through bank accounts, leaving account
holders with no option but to pay the charges if they wish to
access their money.
Banks have also been criticised given the fact
that they have access to huge capital volumes held in cardholder
current accounts – typically, most banks require that accounts have
minimum balances of between VND50,000 and VND100,000. There are
also monthly account management fees of typically VND1,000.
However, banks have responded by saying that
given the rapid growth of the card and payment industries in
Vietnam, cardholders have enjoyed card services free of charge
since 2004, and that now is the time for them to take fees on the
Undeterred by consumer criticism, Vietnamese
banks are forging ahead with incentives aimed at getting more
cardholders to use ATMs – Techcombank recently launched a
promotional campaign that rewards every ATM transaction, be it cash
withdrawal, statement request, account transfer and other services,
with an ATM receipt advertising incentives, special offers or
discounts from merchants such as KFC and Mobile World.
Interoperability a stumbling
The big stumbling block to further
growth in non-cash payments is interoperability between Vietnam’s
different banks and their respective ATM networks, which until
recently were not interconnected, meaning that cardholders could
not use their cards at rival bank ATMs.
Given that each ATM can cost a bank anywhere
between $20,000 and $30,000 to install, Vietnamese banks have
chosen instead to forge ATM-sharing alliances to increase the
number of existing ATMs available to customers and boost card
Although Vietnam’s banking industry has set a
target of having one ATM for every 3,000-5,000 customers, the
actual figure falls well short of that objective, currently
standing at one ATM per 20,000 customers. Compare this to the US
where there is one ATM per 769 customers and it is clear that
expanding ATM access is the key priority for Vietnam’s banking
To overcome the lack of interoperability, the
State Bank of Vietnam has issued a series of regulations governing
the card sector, some of which cover the development ATM
interconnectivity and the establishment of a central card switching
centre. The Vietnam National Financial Switching Joint Stock
Company (Banknetvn) was chosen as the core entity to be turned into
a unified card payment switching network.
Banknetvn was established in mid-2004
comprising several state and private sector banks. Banknetvn was
founded with the objectives of setting up a national financial
switching system interconnecting all payment card systems in
general and all ATM/POS systems of Vietnam’s banks. At the end of
2007, Banknetvn and Smartlink, the other major payment switching
network, signed an agreement on interconnection of the national
Smartlink was established in 2007 by
Vietcombank and 15 other banks. It has now expanded to include 25
banks, and handles an average of 400,000 transactions per day which
are conducted at more than 2,500 ATMs and 15,000 POS locations
nationwide. In 2008 Smartlink connected its ATM system to that of
Visa as well as ATMs of its member banks in order to cut costs and
The reach of Smartlink expanded in 2008 with
the signing of an agreement with Vietcombank and China UnionPay
(CUP), allowing Chinese CUP cardholders to make card transactions
in Vietnam at over 1,000 POS locations and 1,100 ATMs of
EMV, e-wallet and mobile
In any burgeoning card culture,
fraud on magnetic stripe cards will eventually provoke a chorus of
pleas to migrate to EMV technology. Statistics from 2007 show the
level of payment card fraud in Vietnam stood at 0.15 percent of
total card payments, a much higher level than the global average of
Despite this, Vietnamese banks are so far
reluctant to fully embrace EMV, citing costs and logistical
hurdles. In August 2009, mindful of increased incidences of ATM and
card skimming, the State Bank of Vietnam began the process of
drawing up a road map for EMV migration.
However, the costs involved in upgrading POS
and ATM networks and replacing magnetic stripe cards is deterring
some banks from participating in EMV migration – there is also the
matter of persuading customers to pay a fee (typically around $2)
to replace their magnetic stripe cards with EMV cards.
Some banks such as Vietcombank and BIDV are
beginning the process of rolling out EMV-enabled cards, recognising
the need to reassure cardholders about the safety and security of
card transactions. As of June 2009, there were around 28,000 chip
cards in circulation, representing just 0.16 percent of all cards
in issue. Around 13,500 POS terminals and 2,000 ATMs have also been
configured to accept chip cards.
The spread of mobile phone and internet access
is also having an effect in bringing a greater number of people
into the world of financial services.
At the end of July 2009 Vietnam had over 90
million mobile phone subscribers, a rise of 73 percent from the
year-ago period, while fixed line users numbered 16.2 million, up
by 26 percent. There were over 22.6 million internet users and 2.6
million broadband internet subscribers.
More recently, the State Bank of Vietnam has
given permission for non-credit institutions to roll out e-wallet
services to enable online e-commerce transactions. The State Bank
is requiring all e-wallets to be identified and deposits and
withdrawals made through payment service suppliers. The State Bank
is supervising a pilot period in which some issuers have been given
permission to supply e-wallet services. If the trial is successful,
such services will be rolled out nationwide.
In June 2009, VietUnion, an online payment
services provider, signed an agreement with Agribank, VietinBank,
Sacombank and NaviBank to use the e-wallet service Payoo. The Payoo
service, which has been running on a pilot basis by the State Bank
of Vietnam, will allow consumers to shop online without submitting
credit card details or personal bank information.
Customers will be able to register their
e-wallet accounts at one of the four banks participating in the
project and transfer funds from a banking account to a Payoo
account via mobile or online.
However, momentum for alternative payment
methods remains limited given that they are used by a fraction of
Techcombank’s alliance with HSBC,
which has a 20 percent stake in its Vietnamese partner, has helped
it to accelerate its card development plans.
Over the past three years, HSBC personnel have
been moved into key positions at Techcombank, including the co-head
of card and consumer finance centre and the head of retail credit
risk management. Techcombank’s card issuance began in 2003 with the
‘F@stAccess’ ATM card, and in 2006 it launched multi-functional
savings accounts and its first Visa-branded card. By 2007 it had
issued more than 200,000 cards, a rise of 150 percent compared to
In 2008, Techcombank launched a Visa-branded
credit card, co-branded credit and debit cards with Vietnam
Airlines incorporating loyalty rewards, and also joined the
Smartlink and Banknetvn ATM networks. By June 2009, Techcombank had
over 700,000 cards in issue.
Vietcombank had issued nearly 21,000
credit cards and 900,000 debit cards in 2007, growth of 118 percent
and 50.8 percent respectively compared to 2006, which drove its
market share in credit cards and debit cards to 19.3 percent and
27.5 percent respectively.
Its international credit card turnover rose by
34.1 percent, accounting for 26 percent of nationwide market share,
while debit card turnover rose by 62.4 percent compared to 2006.
Payment volume via Vietcombank’s POS terminals for credit cards
issued by other banks rose by $66.4 million or 17.2 percent
compared to 2006, accounting for 57.6 percent of market share.
By 2008, the bank had a market share of 24
percent in domestic debit cards and 29.1 percent in international
credit cards. Having launched EMV debit cards in 2008, in 2009,
Vietcombank became the first bank in Vietnam to issue EMV-enabled
In 2005, ACB signed an agreement
with Standard Chartered, under which Standard Chartered became a
shareholder in ACB. This coincided with ACB carrying out an IT
modernisation plan which included the replacement of card
transaction processing systems and installation of ATMs.
By 2008, ACB had partnered with American
Express on traveller’s cheque services and had implemented JCB card
acceptance. In March 2009, ACB and Standard Chartered announced the
launch of a co-branded credit card, and in August 2009, ACB, having
already joined with the Banknetvn network, connected its ATM system
to that of Smartlink, allowing customers using domestic Smartlink
debit cards issued by all bank members to withdraw cash and check
account balances at all ATMs of ACB.
By the end of 2008, Vietinbank’s
total number of issued cards stood at 2.3 million ATM cards, with
900,000 new customers in 2008 alone, and nearly 9,000 credit cards,
a rise of 94 percent from 2007, giving it a total card market share
of 17 percent. Card payment volumes rose by 40 percent from 2007 to
reach VND626 billion.
During the past two years, new functionality
and services have been added to Vietinbank’s card portfolio,
including mobile phone payments linked to bank cards, utility bill
payments, train ticket payments through the Banknetvn system, and
expansion of ATM access through other banks.
In October 2008, Vietinbank launched two
international premium credit cards in both Visa and MasterCard
formats. Among the E-Partner ATM card range is the Pink women’s ATM
card, which comes with a host of benefits and rewards such as a
complementary gift cards and a catalogue of women-orientated
merchandise such as cosmetics.
In November 2008, Vietinbank in conjunction
with VNPay launched the VNMart E-Wallet service, enabling all
E-Partner cardholders to put money from their ATM card accounts
into VNMart E-wallets via the VNTop-up service.
ANZ has been present in Vietnam
since 1993 and was fully incorporated in the country in 2008. In
that year, it rolled out the first mobile banking service in the
Aside from offering Visa-branded debit cards,
in August 2009 ANZ launched a Visa-branded credit card which comes
with a 45-day interest-free grace period and a low annual fee
(annual fees are not charged in the first year). In tandem with the
credit card launch, it also launched a loyalty programme known as
ANZ Spot, which offers discounts at leisure and travel
Agribank launched card operations in
2003 and in 2005 launched the Success debit card, which numbered 2
million as of 2008, a growth of 63 percent compared to 2007, and
driving Agribank’s market share to 19 percent.
On average, Agribank is issuing around 62,000
cards per month.
As of 2008 the bank had over 1,200 ATMs, a
growth of 49 percent compared to 2007, and it also joined the
Banknetvn and Smartlink schemes.
Over 2009, Agribank is aiming to issue 1.5
million cards to drive its market share up to 20 percent and expand
the number of ATMs to 1,702, along with migrating from magnetic
stripe cards to EMV technology.
Dong A Bank
In August 2009, Dong A Bank (also
known as Eastern Asia Bank) began issuing Visa classic and gold
credit cards aimed at affluent individuals. The classic card is
available to customers with a minimum income of VND4 million per
month and has a maximum credit limit of VND70 million.
Earlier in 2009, Dong A Bank’s credit card
unit became an independent entity held by shareholders, with VNBC
providing interconnectivity solutions, business consultancy and
e-banking equipment. The move also heralded Dong A Bank becoming a
manufacturer of its own ATM units, in a move designed to reduce its
dependence on foreign ATM manufacturers who provide the vast
majority of ATM units in Vietnam.