Vietnam’s Cross-Border Payments Infrastructure and ASEAN Collaboration

Vietnam’s central bank has signed a memorandum of understanding (MoU) with five other ASEAN member countries to develop a cross-border payments service system. This initiative aims to enhance Vietnam's payments ecosystem and offers significant prospects for the financial services sector.

Enhancing Regional Payment Connectivity

Vietnam is working to improve its regional payment connectivity by creating a more transparent, affordable, trackable, and faster cross-border transaction system. This goal has driven Vietnam to sign an MoU with other ASEAN states to collaborate on a mutually beneficial cross-border payments system.

In this article, we explore Vietnam’s current payment infrastructure, future developments, and the opportunities and challenges within the financial services sector. This provides valuable insights for foreign businesses and investors.

Usage Scenario

In 2021, there were nearly 24.7 million mobile wallet users in Vietnam, a number projected to almost triple to around 67.6 million by 2026, according to Statista. A Decision Lab survey in 2021 found that over three months, 70 percent of respondents used internet banking for payments, followed by 63 percent using cash, and 61 percent using an ATM card or bank transfer.

Robocash research anticipates that the Vietnamese FinTech market will reach US$18 billion by 2024. This shift towards faster and cheaper payment innovations marks a significant transformation in Vietnam’s financial services sector, as consumers and businesses demand a more robust infrastructure to support multi-currency cross-border transactions.

Details of the MoU on Cross-Border Payments

The MoU commits the Vietnamese government to develop cross-border payment connectivity for retail transactions, including quick response (QR) codes, instant payments, and other emerging payment models. This collaboration aims to enhance regional trade, investment, tourism, e-commerce, and various economic sectors.

Policy and Regulations

Vietnam has implemented several policies to support its digital transformation in the financial services sector. For instance, Decree 101/2012/ND-CP, dated November 2012, provides guidelines for non-cash payments, covering account setup, payment services, and payment systems management. Decision No. 2545/QD-TTg, dated December 2016, outlines objectives to promote non-cash payments, aiming to change payment habits, create risk management mechanisms, and improve transparency. Decision No. 316/QD-TTg, approved in 2021, allows mobile phone users to pay for low-value goods and services using their mobile accounts, marking a significant step towards a cashless society.

Despite these advancements, there is no specific legal framework in Vietnam for managing cross-border payments.

Regional Initiatives

ASEAN has proposed several initiatives to enhance cross-border payment systems, such as the ASEAN Regional Payment Connectivity (RPC) and the ASEAN Payments Policy Framework (APPF). The APPF, adopted in 2019, provides guiding principles for implementing cross-border, real-time retail payments within the region. In November 2022, central banks from five ASEAN member states signed an MoU to develop cross-border payments under the RPC initiative, aligning with the G20’s Roadmap for Enhancing Cross-Border Payments.

These efforts aim to boost economic growth, improve QR code payment interoperability, and facilitate real-time payment systems. For example, Indonesia and Malaysia implemented cross-border QR code payment linkages in May 2023.

Implications for Stakeholders

Vietnam’s commitment to cross-border payments provides opportunities for non-bank payment service providers (PSPs), domestic and foreign banks, and financial market infrastructure (FMI) companies to expand their products and services. Global consultancy EY estimates global cross-border payment flows at US$156 trillion in 2022, highlighting significant opportunities for innovation in emerging markets like Vietnam.

Traditionally, banks have dominated the cross-border payments market, but they face challenges such as high costs, lack of transparency, long settlement periods, and limited accessibility. As a result, non-bank fintech players are gaining ground by targeting underserved segments and focusing on B2B, B2C, and C2C transactions.

Future of Cross-Border Payments in Vietnam

With Vietnam having the fastest-growing digital economy in Southeast Asia in 2022, fintech firms and cross-border PSPs have a fertile foundation for achieving scale. Payment providers should identify new growth areas, develop unique value propositions, and create innovative business models to solidify their position in regional cross-border payments.

Vietnam's involvement in developing cross-border payment systems with ASEAN partners underscores its commitment to advancing its financial services sector and enhancing regional economic integration. This progress offers substantial opportunities for stakeholders in Vietnam's payment ecosystem to innovate and grow in a rapidly evolving market.