The Government has considered non-cash payment a solution to make a breakthrough in foreign investment attraction in Vietnam, meeting the requirements of international economic integration. Recently, the number of smart card users for shopping and other transactions has increased sharply, around 300 per cent against 2000, it remains much lower than other countries in the region or the world with Visa-based payment accounting for only 0.18 per cent of Vietnamese people’s individual expenditures.
Cash – a main payment instrument
The State Bank of Vietnam (SBV) is seeking solutions to reduce cash used in transactions and cash transactions. At a seminar entitled ‘Non-cash payment in the governmental sector: trade card solutions’ held in Hanoi recently by the SBV and the VISA Group, benefits of the use of cards were discussed. This has been considered as a solution for promoting non-cash payment in Vietnam in the future.
Dennis Ng, director of governmental services of the VISA Group, introduced an example that average costs of cash-based transaction of governmental agencies in world was US$97 for placing orders, identifying suppliers, signing purchase contracts, receiving and checking orders, receipts and bills, collating differences, keeping bills in files, agreeing with suppliers on payment before keeping in account books. In the mean time, each card-based transaction costs around US$19, time for card-based transactions is reduced by 90 per cent against cash-based transaction. Furthermore, the use of cards is safer and helps increase tax revenues, thus helping reduce unofficial activities of the economy.
Bui Quang Tien, head of the Department of Payment of SBV, said that the volume of cash used for payment in Vietnam remained huge, accounting for between 20 and 23 per cent of total payment instruments. Transactions by the public and some enterprises are implemented on the basis of cash payment. In governmental sectors, over 90 per cent of salaries of are paid in cash. Also, expenditures of the governmental sectors are in cash. Therefore, it is difficult to control expenditures.
20 million cards will be issued by 2010
Tien said that Vietnam’s target was to reduce the volume of cash in total payment instruments to around 15 per cent by 2010, with 25 million individual accounts. Accordingly, most expenditure from budget and periodical public transactions will be implemented with cash payment. Ninety per cent of transactions among enterprises will be implemented with account transfer. Also, in 2010, Vietnam wills strive to have 20 million cards and 70 per cent of trade centres, hotels, supermarkets, public transport means accepting card-based payment. To that end, there will be the only national switch system, capable of linking all ATMs (automated teller machines) and local POS (points of sales). At present, Vietnam has a total of 1,800 ATMs with 2.687 million cards.
However, the difficulty is a lack of a legal system to catch up with the factual development, and the law on Electronic Transaction and regulations on card-based payments remains weak. The number of points accepting cards for payment remains low. According to a survey by the VISA Group, only 48 per cent of luxury hotels, 10 per cent of restaurants and one per cent of supermarkets in Vietnam accept card-based payment. Furthermore, the cost of card-based payments remains high. In particular, many people still prefer cash-based to card-based payment.
A governmental agency to pilot trade cards
SBV expects that part of governmental agencies will be assigned for piloting the use of trade cards for 12 months. This will provide a better understanding about card-based payment before the payment method is multiplied in all State and governmental agencies in co-operation with the VISA Group.
Vietnam’s card-based payment development strategy for the 2006-2010 period is to pay salary via accounts for the sectors, whose staff members are paid by budget. This method will be applied according to each concrete period and enterprises are encouraged to pay their workers and staff members via accounts. At the same time, expenditures of budget-funded sectors will be controlled with cash payment limits and requirements for non-cash payment. Also, economic measures will be taken to encourage the private sector and people not to use cash for their payments.
To that end, according to SBV, the Government should perfect the legal system and policies on the management of card-based payment system, the development of co-operation for the service, in particular regulations on the management of card-based payment service providers. Investment will be concentrated on developing infrastructure facilities and technology, increasing convenience of ATMs and payment cards, and improving marketing activities of card service providers. More importantly, the Government should issue regulations on the establishment of a national switch centre for linking up card-based transactions of various banks.
Lan Anh
Vietnamese
