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Vietnam’s cash ‘habit’ hampering economic growth, claims Deputy Prime Minister

Vietnam's economy is predominantly cash based, driven in part by the fear of fraud. The government wants that to change, and Bitcoin may provide a trustless alternative for residents.

One of Asia’s leading online retailers, Zalora, has opened show rooms throughout Vietnam. On display are mannequins adorned with clothing and accessories, for both men and women, alongside fashion essentials you would expect to find in a brick and mortar store. However, you won’t be able to purchase anything in store. Instead, consumers select products on a computer screen, and Zalora ships them. The items are paid for on delivery, in cash.

Cash On Delivery (COD) is becoming ever more pervasive in Vietnam, from big e-commerce businesses to small retail shops. The majority of these businesses use specialist forwarding services, that can not only deliver products to customers, but collect payment too. There are dozens of these service providers across the country, with many located in Hanoi, Ho Chi Minh City and Da Nang.

According to Viet Tran Quang, the Director of VTC Pay, “More than 90% of payment transactions in Vietnam are cash payments and customers prefer COD than Online payment.” VTC Pay is a subsidiary of state owned Vietnam Multimedia Corporation (VTC), and handles over 8 million daily transactions from its 21 million active customer accounts.

World Bank data from 2014 shows that approximately 31 percent of Vietnam’s population reported having bank or financial institution accounts, which is half of the global average of 62 percent.

MasterCards inaugural Safety and Security Index™, released last year, outlines two key factors driving this attachment to cash, “consumers across Southeast Asia and Greater China cited identity theft and ATM-related fraud as the top two security concerns when it comes to electronic payments.” These concerns, “do not directly stem from consumers’ own personal experiences,” Mastercard claims. They are a result of the “perceived severity of fraud based on what was reported in the media.”

At the E-Payment Forum in Hanoi last month, the Deputy Prime Minister of Vietnam, Vu Duc Dam, stated that this reliance on paper currency is creating a hurdle for economic growth. He claims that increased co-operation among ministries and sectors would reduce the pervasive use of cash, and create conditions that encourage people to use electronic payment systems.

Vu Duc Dam“This habit has hampered the country’s economic development as well as people’s living standards."

  • Vu Duc Dam, Vietnam Deputy Prime Minister

In 2014, e–commerce in Vietnam was valued at US$2.97b. This value was expected to reach about $4 billion in 2015, and $7 billion in 2017.  Despite this substantial growth, the cash “habit” in Vietnam is still overwhelmingly popular, accounting for 65 percent of total payment transactions.

Dam also highlighted payment behaviours in other countries, where up to 90 per cent of payments are electronic, which has helped increase their Gross Domestic Product (GDP) by about 1 per cent. World Bank figures show that Vietnam’s GDP reached an all time high of US$186.20b in 2014.

The Deputy Vice President also highlighted an immense opportunity for electronic transaction processes, as Vietnam has over 120 million mobile subscriptions, with more than 40 million internet users.

VTC Pay“However, changes in payment behavior of consumers and new policies, as well as the recent encouragement of government to increase non-cash transactions are factors which motivate e-payment service providers.”

  • Viet Tran Quang, VTC Pay Director

This opportunity is not being overlooked by the bitcoin community. In September last year, Bitcoin Vietnam announced the relaunch of VBTC, Vietnam’s first bitcoin exchange platform. A partnership was also announced with New-York based bitcoin remittance technology provider, BlinkTrade.

The re-launch saw vast changes to the services offered by VBTC, the most notable being the ability to deposit and withdraw cash from over 9,200 banking locations in the country, without the need for a bank account.

“These locations are all of the commercial bank branches in Vietnam. We are making use of a system, which when translated to English, means something like ‘Cash-to-ID’,” Bitcoin Vietnam Co-founder, Dominik Weil, told Brave New Coin at the time. “All we need is the ID data of the customer to send the money to the chosen bank branch, and the client can withdraw the money in cash. (With no need for a bank account.)”

Bitcoin Vietnam has since partnered with the digital currency payment processor, Coinify. “Bringing the option of receiving blockchain payments to Vietnamese merchants will dramatically improve the lack of trust and security which are swirling around legacy payment options like credit cards, Paypal and similar offerings,” the CEO of Bitcoin Vietnam, Nguyen Tran Bao Phuong, stated.

The first stage of the new partnership will be providing Vietnamese merchants with the ability to receive payments in bitcoin and 16 other blockchain currencies supported by Coinify. “These payments will be automatically converted to the Vietnamese Dong and paid out on a regular basis. Merchants can thus offer more payment options to their customers, while enjoying a fraud and risk-free payment environment,” stated the joint press release.

The newly created platform will offer integration with merchant websites and online-shops via a custom API or generic plugins. It will also offer a support Point-Of-Sale (POS) application, tailored specifically for brick-and-mortar shops. It was predicted that Vietnam would have approximately 250,000 POS terminals by the end of 2015, for over 90 million people, so the latter addition could see fruitful rewards.

Nguyen Tran Bao Phuong predicts a spillover effect from the international cooperation and mutual exchange of knowledge. The CEO of Bitcoin Vietnam believes it “will allow the domestic industry to grow and prosper along this way; paving the path for further international integration of the Vietnamese economy.”

Nguyen Tran Bao Phuong“We believe, that this is a great, and necessary, step forward for the development of the domestic market to provide Vietnamese merchants direct access to such technological top-notch solutions which will help them to accept payments in a much safer way while opening up their services to a truly global audience.”

  • Nguyen Tran Bao Phuong, Bitcoin Vietnam CEO

Over the coming months, further advanced merchant processing tools will be launched which will provide ongoing cutting-edge blockchain merchant solutions to the Vietnamese market.


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