Follow The Leader in Vietnam

Vietnam’s first online payment app MoMo’s head start has kept it ahead of the game, but will it maintain its lead?

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BY Cristina Morales - 03 Aug 2017

leader in vietnam

PHOTO CREDIT: Getty Images

Today’s increasingly digital Vietnam, where smartphone penetration is rapidly increasing and 52% of the country’s 95 million people are online, has led to an embarrassment of fintech riches. In the online payment sector, for instance, more than 20 players are scrambling to grab a piece of the pie.

“Too many are focusing on mobile payments,” says Christian König, digital consultant for financial products and founder of Fintech Meetup Vietnam, a community of fintech entrepreneurs, venture capitalists, and academics in the country. “Vietnam is advised to learn from other markets—nobody is using 10 different apps.”

Yet this upsurge of e-wallet and payment apps can work in the favor of those in the lead. MoMo is that leader. The three-year-old start-up, an e-wallet, has established itself as the market leader by partnering early on with banks and service providers.

“Super wallet and digital banks are converging towards each other in terms of capability and functionality,” says Varun Mittal, ASEAN FinTech lead at Ernst & Young.

M-Service, the company behind MoMo, was founded in 2007 by Minh Hien, a businesswoman who had worked as a mobile airtime distributor for years before she decided to start the company. “She saw how telecommunications spread very quickly across the country and changed people’s lives,” says MoMo vice chairman Diep Nguyen, who joined the company in its early days after working in the government. Hien then got the idea of using mobile phones to bring financial services to the rural population, Nguyen continues, explaining that though consumers in Vietnam’s urban centers have easy access to reliable banking systems, those in rural and remote areas have very little access to banks, thus keeping them heavily reliant on cash.

Building on the business models of the Philippines’ GCash and Bangladesh’s Grameen Bank, Hien and Nguyen developed a SIM card-based e-wallet in 2009, partnering with major mobile network provider Vinaphone. But as Hien and her team soon found out, this approach did not work.

Vietnam has three major telecommunications companies, and by working only with one provider, they were alienating two-thirds of the market. The SIM card’s UI and UX was difficult to navigate, and making small updates like changing the menu meant that the customer would have to purchase a SIM card with the new software installed.

Struggling desperately to stay afloat, M-Service found itself at a crossroads. “We could not keep doing business like that,” Nguyen says. “We had to change and do something new or quit.”

They decided to take a risk and develop their own e-wallet application: MoMo. In 2013, less than 20% of the population were using smartphones, and 3G was limited. “Building an app that would be dependent on 3G and smartphones was a very risky move,” Nguyen continues. “We could not say that it would be a success.”

By the time they launched their app in 2014, smartphone penetration had almost doubled. “It was excellent timing,” says Nguyen. Building trust was—and still is—the main challenge. They had to show the public that using e-wallets was safe and efficient. At a supermarket, for example, paying with MoMo only takes two seconds, versus 40 seconds with cash and 60 with a credit card. With over 200 services, users can pay for virtually anything with the app—from their utility bills to their taxi fares.

As the first of its kind in Vietnam, much of MoMo’s success can be attributed to how it has stayed one step ahead of everyone else, presenting a service to the public even before they understood they needed it. The company currently has a total of five million users. Vietnamese regulations are keeping foreign companies out of the country, giving MoMo ample time to prepare, build a better product, and increase market share. In the next few years, Nguyen and MoMo CEO Duc Pham hope that its user base will grow to 30-40 million.

As Facebook has proven, networking effects usually benefit those firms with early momentum. That is why MoMo’s current mojo may not be easily lost.

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