The State Bank of Vietnam (SBV)’s recent regulation on converting from magnetic cards to chip cards is considered a key solution in promoting non-cash payments in Vietnam. This was also the main topic of discussion at the “E-payment Ecosystem Development Forum 2019” with the theme “Motivation by Chip Technology”, co-hosted recently by the SBV’s Payment Department, the National Payment Corporation of Vietnam (NAPAS), and Vietnam Economic Times.

Towards chip technology

Ms. Dang Tuyet Dung, Visa Country Manager for Vietnam and Laos (Photo source from VISA)

Chip technology, also known as semi-conductor chip technology, supports the development of numerous industries and accelerates the expansion of non-cash payments in many countries and territories around the world. According to Ms. Dang Tuyet Dung, Visa Country Manager for Vietnam and Laos, globally, contactless use is strong at high-transaction volume merchants with low average ticket sizes: food and groceries, quick-service restaurants, pharmacies, and transport, but in contactless mature markets it is increasingly becoming the payment mechanism for all transactions.

Vietnam could learn a lesson from neighboring Malaysia, since it completed the transition to chip cards from magnetic stripes early this year. Explaining why Malaysia has been a pioneer in introducing the world’s first EMV (Europay, MasterCard, and Visa) contactless card and mobile migration, Ms. Dung said its government has mandated the move, with joint efforts from issuers, inquirers, and merchants.

In Vietnam, converting domestic payment cards from magnetic to chip cards is one of the key solutions for the banking industry approved by the Prime Minister in the Scheme for the Development of Non-cash Payments in Vietnam in the 2016-2020 Period, as SBV Deputy Governor Nguyen Kim Anh told the forum. More than 20 banks and six companies in Vietnam are now providing chip cards, and by the end of the first quarter in 2020 the figures are expected to be 26 banks and ten companies.

Solutions for Vietnam

SBV figures reveal that transaction value via points of sales (POS) increased 36.5 per cent year-on-year in 2019 to date, while the number of bank cards hit 96.4 million and the number of ATMs topped 19,000. These are considered solid foundations for the greater use of e-payment methods such as mobile banking and internet banking.

Despite the remaining challenges for the transition from swipe cards to chip cards in Vietnam, according to the SBV, though a major hurdle is the huge investment needed, the country has indeed been quite ready to speed up the transition as many banks have done so this year and will continue the process in the years to come to ensure greater security. During this journey, leading card and payment organizations have been actively supporting local banks in their transition.

Since the application of chip cards would help Vietnam avoid card crime, Visa has encouraged the country to move directly to dual interface cards and mobile/wearables (that support contactless payments) instead of a two phased migration - first to contact and then to dual interface - which other markets have undertaken. Costs have also come down substantially, so this also makes good business sense.

Besides reducing risks from theft or fraud, chip cards can also store large amounts of information and be used to pay for transport and public services, like in developed countries. EMV contactless is fast becoming the preferred payment mechanism for the transport and transport-adjacent segments (expressway tolls, parking, etc.).

In July, Visa and the Ho Chi Minh City Department of Transportation (DoT) signed an MoU to deliver smart mobility. Visa intends to work with the city’s DoT to explore the opportunity to upgrade the legacy closed-loop payment system by adopting open-loop EMV contactless technology for all transportation networks.

Vietnam thus joins countries like Singapore, Australia, the UK, and the US in enabling contactless EMV transactions in transport. “This is the first step Visa has taken to enable smart mobility in Vietnam,” Ms. Dung said. “We hope to introduce contactless EMV payments at more public transport operators as well as for toll and parking soon.”