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Credit card market rising alongside alternative habits
Vietnam’s domestic credit card market has significant growth potential, and promoting further it will require preferential transaction fees, expanding card usage ecosystems, and enhancing electronic payment security measures.
Le Anh Dung, deputy director of the Payment Department at the State Bank of Vietnam (SBV) revealed at last week’s seminar on domestic credit card promotion that by the end of March, the number of cards in circulation in Vietnam had reached over 150.6 million, a 3.29 per cent increase compared to the same period in 2023.
This includes more than 106.7 million domestic cards and 43.9 million international cards. “Among these, 27 banks are issuing cards using e-verification, with over 15.3 million issued cards currently active,” Dung added.
“The number of domestic credit cards in circulation by March 2024 exceeded 904,700, marking an 18.37 per cent increase from the same period in 2023, surpassing the growth rate of international credit cards at 9.53 per cent,” Dung noted.
A 2023 Visa study revealed that 56 per cent of surveyed Vietnamese users reported carrying less cash than the previous year, reflecting their proactive adoption of new financial technologies.
“In Q1/2024, domestic credit card transactions reached 1.3 million - an increase of 75.43 per cent in quantity and 89.85 per cent in value, outpacing the corresponding growth rates for international credit cards, which were 27.26 and 25.1 per cent respectively,” Dung highlighted.
However, Dung acknowledged that the number of domestic credit cards remains modest relative to the total population.
Nguyen Tan Phap, director of the Card Centre at VietinBank, said, “The main reason domestic credit cards are not yet attractive is due to several challenges in promoting their development in the local market.”
The number of commercial banks participating in the development of domestic credit cards is still very limited, he added.
“Additionally, marketing, advertising, and promotional activities to attract customers have not been sufficiently emphasised. As a result, the public has not fully accessed the product and its benefits, leading to a modest issuance compared to international credit cards,” Phap said.
Domestic credit cards struggle to compete with international credit cards in terms of usage scope, international features, and attractive benefits offered by international card organisations. Moreover, consumer habits tend to favour international card products due to their widespread acceptance, Phap explained.
To foster the growth of domestic credit cards, National Payment Corporation of Vietnam (NAPAS) needs to implement preferential transaction processing fees and fee-sharing mechanisms between banks and switching organisations.
“Additionally, the government, the SBV, and businesses should collaborate to expand the ecosystem for card usage, such as in transportation payments and regular bill payments, complemented by attractive incentives from partners to further encourage card payments,” Phap said.
To address challenges in managing risks related to fraudulent and counterfeit transactions in cashless payments, NAPAS CEO Nguyen Quang Minh proposed allowing payment service providers and intermediaries to allocate a portion of their pre-tax profits to establish a risk reserve fund for payment transactions, similar to credit activities.
“In the coming period, banks should vigorously promote the issuance of domestic cards, especially domestic credit cards. They should target public sector employees for issuing domestic credit cards and work with NAPAS to create incentive programmes for credit card usage,” he said.
Minh also noted that fee-sharing levels must be reasonable to encourage card issuance by issuers while ensuring that discount fees are acceptable to payment organisations and merchants.
“Additionally, we recommend permitting non-bank entities to independently offer merchant acquiring services. These non-bank organisations would be able to sign card payment agreements with merchants, deploy payment acceptance devices, and manage merchant risk independently,” he stated.
Dung of the SBV stressed that to continue promoting cashless payments and developing domestic credit cards in Vietnam, the SBV will direct credit institutions and relevant units to effectively accelerate cashless payments. “Credit institutions must implement robust safety and security solutions in online payments and card payments to ensure safety, prevent fraud, and enhance user trust in electronic payment methods,” he stated.
Additionally, Dung also called for credit institutions to research and develop modern, convenient, and secure cashless payment products and domestic credit cards, expand the payment infrastructure and acceptance network, and work closely with relevant parties to strengthen communication efforts.
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