A woman withdraws cash at an ATM booth. Commercial banks are developing technology to expand mobile banking services and encourage more users, with ATMS seen as playing a lesser role during the next several years. — VNS Photo Doan Tung

HCM CITY (Biz Hub)— Most banking transactions in Viet Nam, around 80 per cent, will be one through mobile devices in the next five years, says Le Thanh Tam, CEO of International Data Group (IDG) ASEAN.

Tam, who is also CEO of IDG Global Solutions Vietnam and MRD Joint-stock Company, told the Vietnam Financial Times that Internet banking services will rank second behind mobile banking, while transactions using Automatic Teller Machines (ATMs) will reduce significantly in the coming years.

Wikipedia describes mobile banking as a system that allows customers of financial institutions to conduct a number of transactions through devices like mobile phones or personal digital assistants.

It says mobile banking "differs from mobile payments, which involve the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an electronic funds transfer at point of sale payment."

Tam attributed the development of the mobile banking to the recent explosion in the use of smartphones.

"By December 2012, there were 121.7 million mobile phones in the country, more than one for each Vietnamese citizen," he said, adding, "this is a rather high rate compared with some neighbouring countries."

In comparison with other countries that also use mobile payment services, Viet Nam has enough conditions as well as advantages to develop payment services for residents of rural and remote areas who cannot easily access traditional banking services, Tam said.

At present, most commercial banks in the country have not been able to fully tap the potential of rural markets, thus creating opportunities for intermediate payment services like mobile banking, internet banking, mobile payment and Automatic Tellers Machines(ATM)/ Points of Sales (POS) to develop, he said.

Since 2008, the State Bank of Viet Nam has allowed nine institutions specialising in supply of intermediate payment services to offer e-wallet services via the internet and mobile phones in order to meet the demand for e-transactions and the transfer of small amounts of money.

A digital wallet refers to an electronic device that allows an individual to make e-commerce transactions, including purchasing items online with a computer or using a smartphone to purchase something at a store.

By the end of 2012, the total number of e-wallets that had been issued by these nine organisations climbed to over 1.3 million, with the number of transactions reaching over 16 million worth nearly VND5.83 trillion.

Non-cash payment

In December 2011, the Prime Minister approved Decision No.2453 that aimed to boost non-cash payments through the banking system and further popularise them during the 2011-15 period.

Under the plan, the Vietnamese market will have 250,000 points of sale (POS) installed that can handle about 200 million transactions per year.

Market analysts say that Viet Nam has great potential to realise this target since 70 per cent of its working age population do not use modern payment services.

According to data compiled by the World Bank, only about 30 per cent of Vietnamese people of working age, mostly in major cities and provinces, are able to use modern financial and payment services.

However, these modern financial and payment services have only been developed based on individual accounts of customers at credit institutions.

This means that people in rural and remote areas who do not have individual accounts cannot reach these services, said Nghiem Thanh Son, deputy director of the State Bank of Viet Nam's Payments Department.

As of March this year, 48 of the 52 registered organisations had issued 57.1 million cards. Most of them, 93.6 per cent, were debit cards.

Forty-six commercial banks have installed 14,300 ATMs and 101.400 POS that accept payment by cards. Over 76,000 POS belonging to 720 bank branches have been connected with 20,600 units that accept card payment (credit/debit) cards.

Over the last few years, credit institutions such as the Social Policies Bank, Agriculture and Rural Development Bank and People's Credit Fund together with some other financial organisations have taken measures to expand and diversify financial products, especially for people who live in rural and remote areas.

Tam said, however, that the banks should update and acquire the latest technology to improve their management ability and meet customers' demand, to mention their ability to control risk and handle huge amounts of data. — VNS