School Papers

HANOI only about 20% of the Vietnam population

HANOI
UNIVERSITY

POUNDATION
STUDIED DEPAMENT

 

 

 

 

 

 

E-Payments
in Vietnam:

Opportunities
and Challenges

 

 

 

 

 

                                                                                              Teacher:  Ms. Nha Trang

                                                                                              Student:
Nguyen Thi Nha

                                                                                              Class:
3KT-17

                                                                                               Date:

 

 

 

 

 

ABSTRACT

E-payment system plays an important role in economic
development during the present time. This paper, based on secondary research, discusses
the influences of e-payments in Vietnam’s economy. In particular, three items
are mentioned, including the advantages of e-payment, its status in Vietnam’s
market and methods to develop a completing e-payment system. The findings of
the research illustrate that although there have been numerous advances in
promoting electronic payment system, generalizing this mean faces certain
difficulties such as the poor technology, low-skilled staff and so on. Therefore,
some recommendations are given in this paper with the hope to increase
e-payment quality.

 

 

 

 

 

 

 

 

 

 

TABLE
OF CONTENTS

 

 

 ASTRACT…………………………………………………………………………

1.    
Introduction……………………………………………………………………

     2.  Discussion of findings………………………………………………………..

2.1.
Benefits of e payments……………………………………………………..

2.2.
The status of e-payments in Vietnam……………………………………….

2.3.
The solution to promote of e-payments in Vietnam………………………..

3.
Conclusion ………………………………………………………………………

REFERENCES…………………………………………………………………….

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.
Introduction

        After a long period under a centrally
planned economy, Vietnam is now moving towards a market-oriented economy. In
recent years, the country has made significant progress in the process of
economic development. Trading transactions throughout the economy have
increased, leading to a rise in the demand for payments.  It can be clearly seen that cashless payment
contributes such numerous advantages to human beings as time savings, increased
sales and reduced transaction costs. However, currently, due to some possible
issues of it, Vietnamese people are not much gravitated toward this method. The
statistics of General Statistics Office showed that there is only about 20% of
the Vietnam population (equivalent approximately 20 million people) having bank
accounts. According to Mr Nguyen Vinh Loi, Banknetvn, the number of active
cards is only about 50% of the released quantity. The present paper focuses on
the development of the existing payment system, the internal issues and
external constraints in the development process and the solutions adopted. It
will deal in turn with the development of Vietnam’s payment system, the
challenges faced in developing the system, and, finally, the solutions
envisaged and the future orientation of the system.

 2.1. Benefits of electronic payment    

The e-payment system is defined by Sandra Wrobel-Konior
(2016) as “a way of making transactions or paying for goods services through an
electronic medium without the use of check or cash”. It is also called online
payment system.

      It can
be clearly seen that many types of cash have been issued and used all over the
world because of its numerous advantages: increased speed and convenience,
increased sales, and reduced transaction costs.

Firstly, compared to traditional payment methods such
as cash and check, e-payment is overwhelming useful and convenient that is the
greatest advantage.  E-payment helps
people flexibly pay for goods or services online at any time of day or night.
Moreover, customers do not have to queue in banks or merchant offices to wait
their turn to transact when using this e-system. Individuals can purchase products,
send money to the others at unconventional locations such as home or on road.

This leads to the second strong point of e-payment
is saving time. After completing an account on e-payment system, customers can
pay their bills in a flash. In a research study Marketwatch.com found that the
average American writing checks and mails for payment spends over 24 hours
during a year paying bills. Using e-payment system contributes to reducing the
amount of time spent on bill management or payment by about 60%.

The nominal cost of e-payments is yet another
benefit. Many merchants, vendors, and businesses make use of it with no fees or
charge to pay online. Thank to this point, individuals paying their bills
online can save hundreds of dollars per year that is quite important for many
people.

Finally, this payment method basing on encryption
may even be more secure than the old fashion day of mailing check. According to
a science article, an individual’s personal financial data is allowed to be
scrambled before it is sent electronically. Hence, by reducing the number of
people touching the payment once it leaves the payer, it also lowers the risk
of human error.

2.2.
The status of using e-payment in Vietnam

       The
financial sector in Vietnam consists essentially of the banking sector.
The State Bank of Vietnam (SBV) was the country’s monobank until 1988,
when commercial and central banking activities were separated. Financial
reform began at the end of the 1980s, extending banking services to include a
wide variety of ownership structures. Since then, a large number of financial
institutions have been established. The present banking system includes many types
of bank: state bank, state-owned commercial bank, joint-stock bank,
joint-venture bank, foreign bank branch, credit cooperative, etc. The total
number of branches and bank offices of all types amounts to over 4,500.

Despite many advances of e-payment system, applying
this method in Vietnam’s market economy still faces the challenges in
technology, legal framework and external constraints. To begin with
technological issues, the shortage of funds contributes to preventing
modernizing the payment system in many banks. The payment instruments available
and the quality of banking services do not meet the needs of customers for a
low-cost. According to Bui Quang Tien, Director of State Bank of Vietnam, the
value of cash transactions though POS is not much, especially domestic card
payment through POS. Besides, transaction types mare not abundant and the
distribution of points of card acceptance is uneven. Therefore, they focus
mainly on places to serve foreign customers with large business scale. In
addition, because the use of payment instruments is sometimes complicated, many
people prefer cash to non-cash instruments when conducting payment
transactions. The choice of payment instruments is limited and does not meet
modern requirements. The constraints of the current payment systems make it
difficult to develop new products and to offer new services which could become
an important source of fee income for the commercial banking sector.

The second serious problem needs addressing relating
to legal framework. Although a legal of framework was established for organization of
payments in the banking system, it has still not been completed and has certain
features that may restrict payment transactions through the banking system.

Finally, external constraints are also challenges
baring the development of e-payments. Vietnamese per capita income is still
low, standing at only US$ 300.
Vietnam is in the lowest per capita income group in South-East Asia. Hence, the
demand for holding deposits with banks and making payment transactions through
banks is very low. Moreover, the differences
between various types of bank, especially between foreign and domestic banks,
in terms of sophistication level, payment equipment and technology lead to
differing views on the same rules and
regulations. This makes it hard for the regulator to draw up a uniform
regulation for all types of bank without giving rise to complaints.

 

 

 

2.3.
The solution to promote of e-payments in Vietnam

 To address
those issues, authorizes have to suggest certain method to improve e-payment
system. Firstly, the modernization of the bank payment system is the focus of
attention in the strategy for developing the banking system. It tends to
concentrate on developing a modern banking sector capable of meeting the needs
of a growing economy, thereby increasing confidence in the Vietnamese banking
system. Moreover, under the system the SBV is planning to build a national
clearing center in Hanoi and to set up a clearing center in the suburbs of
Hanoi that will provide local and non-local interbank clearing and settlement
services for all payment transactions throughout the country. The second method
is completing the legal framework. Regulations governing electronic funds
transfer systems are currently being formulated. When complete, these
regulations will provide a legal and regulatory framework to underpin all
aspects of modern electronic payment operations. The Decree on Cheques will be
upgraded to a law. Finally, staff training and development are among the most
important factors that will influence the success of the payment system
development process. The training plan is focused on three
main areas: application, technology, management.

3.
Conclusion

A well-functioning payment system is necessary for
underpinning efficient financial sector development as well as increasing
confidence in the banking sector. By strengthening the operational capacities
of the banks and enabling them to provide a range of new banking products and
services to their customers, the future payment system will meet the demands of
a fast-growing, market-oriented economy.
Obviously, this will take time and greatest efforts; however, it certainly
brings more convenient lives for everyone.