Vietnam Technology Channel

Chinese Tech Giants Eyeing VN e-Payment Services

The two technology giants Alibaba and Tencent are speculated to be making their moves to penetrate the Vietnamese e-payment market.

Jack Ma, CEO of Alibaba Group, attended a briefing last Monday about the developing e-commerce and mobile payment at Vietnam Electronic Payment Forum 2017 in Hanoi. The CEO will also attend the 2017 APEC Economic Leaders' Meeting Week in Danang. As there is a great potential in the Vietnamese fintech and electronic payments sector, Jack Ma is probably looking for a way to enter the market, sources said.

Electronic or online payment methods in China are completely replacing cash payments as most people use their phones to pay for their daily shopping needs. According to a report conducted by Analysis International, a Beijing-based consulting company, the total value of third-party mobile payment transactions reached $3.460 billion in the middle kingdom in the second quarter of 2017.

The two giants in particular – Alibaba and Tencent, are making up 92% of the mobile payment market in China. Alipay, Alibaba’s mobile payment service, takes the lead with 53.7% of the market, while Tencent Finance’s Wechat Pay accounts for 39.1%.

Yuebao, a mobile deposit and investment platform developed by Jack Ma, has become the world’s largest monetary fund with a total capital surpassing $170 billion. It has become a direct threat to the traditional Chinese banking industry. It receives money from Alipay accounts, paying higher interest rates than the banks’ average lending rates, making Alipay a huge idle fund with more than 300 million users allowing customers to easily transfer and withdraw any amount of money at any time in a few steps. After its launch, Yuebao has attracted 100 billion yuan from more than 29 million customers in just six months. It then offered loans to both businesses and individuals with attractive negotiable interest rates.

Prior to this, Alibaba spent $1 billion acquiring Lazada, a leading online shopping channel currently operating in Singapore, Malaysia, Thailand, the Philippines, Indonesia, and Vietnam. A year later, in April 2014, HelloPay—Lazada’s online payment service—was successfully merged with Ant Financial, Alibaba’s online mobile payment platform. According to the markets where Lazada operates, HelloPay then changed its name to Alipay Singapore, Alipay Malaysia, Alipay Indonesia, and Alipay Philippines.

Jack Ma also plans to spend $1.5 billion investing in Grab, which is “stirring up” the Vietnamese market. Since June 2016, Alipay has cooperated with Grab by allowing Chinese tourists visiting Singapore and Thailand to pay for Grab via Alipay. According to Grab, this allows Chinese travellers to freely pay in yuan without having to worry about foreign exchange rates.

Alipay is shaking up the market and is becoming a real threat to the financial industry in Southeast Asia.

Penetrating in the Vietnamese market is evidently Alibaba’s ambition. A subsidiary of Alibaba is said to have applied for payment authorisation in Vietnam, but has not been granted one yet. Payment intermediaries are conditional business lines which are subject to strict conditions as assessed and licensed by the State Bank of Vietnam, according to Vietnamese laws.

It does look like that Alipay is trying to enter Vietnam through the backdoor. To date, the group has tried to acquire Lazada and Grab to penetrate the Vietnamese market in particular and the ASEAN in general.

Tencent, on the other hand, has also made quite moves. The strategy of Alibaba’s main rival is pursuing is the acquisition of e-commerce platforms to set foot in the electronic payments market by its main service Wechat Pay. Wechat now has 938 million users each month and its payment platform has been launched in Europe, Southeast Asia, and Africa.

In Vietnam, Garena, a subsidiary of Tencent, now occupies a large market share in the gaming industry and is turning to e-commerce. Most recently, Sea (Garena renamed) bought an 82 percent stake in Foody.vn for $64 million. Sea has also expanded its e-commerce and online payment services with the introduction of Shopee and AirPay. To date, Shopee receives around 2.7-3.6 million orders every month, equivalent to 100,000 orders per day and is on the way to catch up with Alibaba’s Lazada Vietnam.

Many believe that Tencent’s payment application seeks to penetrate Vietnam through the e-commerce channel and will expand into the financial sector after securing a firm position. Particularly, Wechat Pay will follow millions of Chinese tourists to Vietnam each year.

This strategy of Chinese tech giants penetrating Vietnam, given the realities in China, Europe, ASEAN countries, and Africa, has seriously depressed Vietnam’s corporate banks as they are afraid that Alibaba and Tencent will seize and manipulate the Vietnamese financial market in the coming time.

VietinBank's deputy general director – Tran Cong Quynh Lan said, “Let’s imagine Wechat or Alibaba or even both of them pouring tens of millions of dollars into the Vietnamese financial market, accepting massive losses to launch attractive promotion programmes, even willing to forego service charges in the first two to three years. Then, what will be the future of the payment sector in Vietnam? $10 million or $100 million is clearly not a big deal for Wechat or Alibaba to increase market share.”