For Vietnamese fintech start-up MoMo, the important thing to profitable the battle in opposition to Seize, Sea and different rivals for the nation’s 100m customers could also be a easy cup of espresso.
Earlier than Vietnam’s newest Covid-19 lockdown, the Ho Chi Minh Metropolis-based firm ran promotions with among the nation’s greatest espresso chains, together with Highlands Espresso, a fast-growing model with greater than 300 retailers. MoMo customers bought a reduction for utilizing the app to position and pay for an order that they then picked up at a scheduled time. The promotion was designed to present them a style of the comfort of the all-in-one app.
Nudging Vietnamese customers to make use of MoMo for even small purchases is a part of the corporate’s technique to get the app “on the primary web page of their iPhone”, in keeping with an individual near the corporate. The pondering is that, in a rustic the place 80 per cent of commerce remains to be offline, shopping for a cup of espresso is an inexpensive and customary sufficient transaction that it’s going to encourage customers to open the app every day — and even a number of occasions a day. That, in flip, may enhance the possibilities of their utilizing MoMo’s different choices, reminiscent of shopping for film tickets, ordering meals supply, reserving flights or enjoying video games.
The various portfolio of providers helped drive income at MoMo even through the present Covid wave, chief govt Tuong Nguyen stated in an interview.
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“We constructed a reasonably balanced enterprise . . . so we had been assured that even within the very worst case, we’ll preserve at the very least 70 per cent [of revenue] of a standard month,” he stated. “However after all we needed to continue to grow, so we targeted on altering the dangers to alternatives.”
MoMo, quick for Cellular Cash, launched in 2013 and has develop into Vietnam’s greatest e-wallet. Being an early mover gave it time to domesticate relationships with tens of 1000’s of offline shops and join them with the expertise to switch cash between financial institution accounts. As we speak, it claims 60 per cent of Vietnam’s cell funds market, processing an annualised $14bn value of transactions for greater than 25m customers, in keeping with the corporate.
The rise of MoMo, nonetheless, has drawn in abroad rivals, serving to flip Vietnam into certainly one of Asia’s best fintech markets. Dozens of corporations, together with south-east Asian tech giants Sea and Seize, have entered the house and are burning money to accumulate customers. Analysts predict only a few will survive the battle, not simply in opposition to one another but additionally in opposition to related providers from banks and telecommunications companies.
“The market might ultimately consolidate into two or three gamers,” stated Takahiro Suzuki, managing accomplice at Genesia Ventures and a longtime investor in Indonesia and Vietnam. “However the traders behind them have very deep pockets. So long as the cash retains flowing in, many corporations can coexist. It’s a painful battle.”
That battle appears set to accentuate. VNLife, an operator of cell pockets VNPay backed by SoftBank Group’s Imaginative and prescient Fund, stated in July it raised $250m from Basic Atlantic, Dragoneer Funding Group, PayPal Ventures and others.
MoMo, which stated in January that it raised $100m from a gaggle of traders together with US personal fairness fund Warburg Pincus, is already contemplating elevating extra capital, in keeping with individuals conversant in the matter.
Along with increasing its community of shops that settle for the app, MoMo is racing to broaden its suite of providers, branching out into areas reminiscent of motorbike insurance coverage and shopper loans. It has acquired a software program firm to hurry up product growth. Extra offers could also be on the horizon if, like different fintech giants in Asia reminiscent of China’s Ant Group and India’s Paytm, it pushes to evolve from a funds enterprise right into a full-fledged digital financial institution.
Vietnam has certainly one of south-east Asia’s oldest start-up industries — on-line gaming firm VNG, which now runs the nation’s hottest messaging app, was based in 2004. However the nation was ultimately overshadowed by its greater neighbour, Indonesia, the place SoftBank and different traders are pouring a whole bunch of hundreds of thousands of {dollars} into native start-ups. The surge in Sea’s share value and the forthcoming US itemizing of Seize, which plans to go public through a merger with a particular objective acquisition firm, have helped draw broader investor curiosity to the area.
Vietnam’s $340bn financial system can also be smaller than that of Indonesia, in addition to these of Thailand and the Philippines. However traders say its fintech sector is especially interesting for a number of causes. Vietnam has one of many area’s highest cell phone penetration charges at round 80 per cent of the grownup inhabitants, however a comparatively low variety of financial institution branches per capita. Regulators have proven assist for fintech, handing e-wallet licences to dozens of corporations. That mixture has created fertile floor for start-ups seeking to ship monetary providers through smartphone.
Advocates additionally say the Covid-19 pandemic has eased a bottleneck for fintech to take off. Persuading shops to embrace cell wallets has been a troublesome process as a result of homeowners are sceptical of getting to pay a payment to cell pockets suppliers somewhat than accepting money. However Vietnam’s lockdown restrictions have prompted them to search for methods to achieve customers by way of the web.
“We’re simply at this inflection level, and our view is it’s going to occur a lot sooner than individuals assume,” stated a US fund supervisor. “Smartphone penetration is excessive, so there’s a base of customers. Now, there are retailers who’re coming on-line.”
MoMo was nicely positioned to seize the windfall. Based in 2007, it was a distributor of cell phone top-up playing cards till it noticed a chance to reap the benefits of rising cell phone penetration. The corporate launched a cash switch app for characteristic telephones and reassigned part of its agent community, which beforehand bought the top-up playing cards, to its funds enterprise. The app ultimately grew widespread amongst younger city customers as extra of them swapped their characteristic telephones for smartphones.
The issue now, which MoMo executives acknowledge, is that the app’s success has helped appeal to a flood of formidable opponents into the market.
The most important rivals embrace Tencent Holdings-backed VNG, which has been increasing its fee service ZaloPay.
ZaloPay’s “very massive aggressive benefit” is its hyperlink to Zalo, the nation’s hottest chat app, stated Huy Pham, co-ordinator at RMIT College Vietnam’s FinTech-Crypto Hub. In China, Tencent used its giant WeChat consumer base to roll out a fee service, which rapidly grew into one of many two dominant e-wallets in its dwelling nation.
Seize, in the meantime, has partnered Moca, a neighborhood cell funds firm, and made it the primary fee possibility for its ride-hailing and meals supply providers. Singapore-based Sea, the gaming and ecommerce firm, has launched funds providers in Vietnam, too. Sea additionally operates Now, certainly one of Vietnam’s hottest meals supply apps.
MoMo believes it may possibly beat competitors by locking in espresso chains and comfort shops. Younger customers use them extra continuously than procuring on-line or hailing a automotive, stated an individual near the corporate. “You need to go from somebody who’s utilizing month-to-month to weekly to every day, to 2 to a few occasions a day, as a result of the minute you go to weekly, you develop into a loyal consumer that doesn’t churn,” stated Manisha Shah, MoMo’s chief monetary officer.
Loyalty is low, Pham stated. Many Vietnamese obtain a number of wallets, pulling up whichever has the perfect low cost for the shop the place they’re procuring. The problem is getting customers to proceed utilizing an app with out lavish promotions. Is that doable? Pham thinks not. He requested his 40 college students in a single fintech class if they’d maintain utilizing e-wallets with out reductions. All stated no.
So he’s extremely sceptical that any however the greatest e-wallets can be round in 5 years.
“We’ve got to query why they exist,” he instructed Nikkei Asia. “They exist as a result of a number of years in the past the cell banking system was not nicely developed.” However now banks provide many of the identical providers as e-wallets, which must discover a method to differentiate themselves, Pham added.
Including to the menace is a telco pilot programme begun in 2021 that lets residents add cash to their telephones after which make purchases without having a checking account.
Analysts say an enormous potential danger for your complete sector is regulation. Fintech start-ups have grown partly because of a beneficial regulatory atmosphere. The central financial institution says there are 34 e-wallets in Vietnam, although simply 5 have a significant stage of traction. However sensing a rising menace from fintech corporations to the monetary system has led some nations to step up scrutiny. Chinese language regulators have cracked down on Jack Ma’s Ant Group. In Indonesia, the central financial institution briefly stopped issuing new e-wallet licences, leading to essentially the most well-funded corporations shopping for corporations that have already got one.
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One other hurdle comes from Vietnam’s guidelines on preliminary public choices. Vietnamese corporations itemizing abroad want approval from the Vietnam securities regulator, whereas the home inventory market is small and caps foreign-ownership percentages. In 2017, VNG signed a memorandum of understanding with the US inventory change Nasdaq to discover a list there, however VNG has been silent on its progress since. Traders say VNLife could also be among the many first e-wallets to listing, with MoMo following swimsuit, however the path stays unclear. Each corporations say they don’t have any plans go public within the close to future.
The subsequent few months will most likely be key in figuring out who will survive the shakeout.
“You’re combating for that house in your iPhone on the primary web page, proper?” stated one investor. “As a result of nobody makes use of 5 wallets.”
A model of this text was first revealed by Nikkei Asia on August 6 2021. ©2021 Nikkei Inc. All rights reserved
