Cash, not plastic, remains the Vietnamese way

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Card payments are still small in Vietnam as cash remains by far the most popular method of payment in the country

In a fashion shop in Hanoi's Nguyen Du Street, where French clothes and accessories are sold to middle-class customers, credit cards like Visa and Master are accepted, but few people use them.

The shop owner said it is mainly foreigners who pay by card.

"Until a year ago card payments made up 0.5 percent of our total revenues. It has increased, but is still low, at some 5 percent."

In Vietnam, people continue to prefer to pay cash, even for big-ticket items like motorbikes and cars, though more and more merchants are accepting plastic, especially modern shopping outlets.

By September, 46 banks had issued more than 60 million cards and signed up some 94,000 merchants, according to the State Bank of Vietnam.

Euromonitor International, a company involved in strategy research for consumer markets, said in a recent report that cash remains by far the most popular method of payment in Vietnam, which remains one of the smallest card markets worldwide.

Many people prefer to use cash for payments even when they have credit or debit cards due to the country's long attachment to cash, it explained.

Vietnamese still view card payments as rather inconvenient due to the modest infrastructure and inexperience in handling transactions, it said.

Furthermore, the widespread existence of small retailers who usually do not accept cards means that cash is more widely accepted.

The failure to promote cards by banks and retailers to raise consumer awareness means the preference for cash would remain strong, the report concluded.

This year Euromonitor expects cash to account for 75 percent of all consumer payments.

Phan Lan Phuong, 28, an accountant at a construction firm in Hai Ba Trung District, said she has four bank cards, but seldom uses them.

"I see no benefit in making card payments," she said. "I use my cards mainly to draw cash."

Nguyen Duc Vinh, the CEO of VP Bank, said only big merchants like supermarkets, restaurants, and hotels are signed up to accept cards, but even they are not too interested.

Some merchants want to keep their revenues secret, and therefore do not encourage non-cash payments, he said.

Some cardholders do not know how card payments work, others are afraid of risks in using them, he said.

The staff at many merchant establishments are not trained in accepting cards, and so often face problems and customers have trouble making payments, he added.

Dinh Anh Huan, deputy general director of mobile phone retailer The Gioi Di Dong, said his company receives some VND10 billion (US$0.48 million) worth of card payments each year, to a just 3 percent of sales.

A saleswoman at fashion shop Giovanni in Hanoi's Vincom Tower said 10 percent of her customers pay by card.

Big potential

Euromonitor International said financial cards and payments would see growth in the coming years.

This is partly due to an initiative from the government encouraging state-owned companies to pay salaries through banks.

An increasing trend of westernization among young Vietnamese means young consumers prefer to leave their money in the bank instead of keeping it at home.

Banks, which are struggling with sluggish credit growth, have turned to other incomes such as card service fees and interest on card payments.

Since August many banks have been encouraging credit card holders to spend more by offering discounts on  purchases.

Vietinbank, Vietcombank, Asia Commercial Bank, and TienPhong Bank are among the largest partly-private lenders encouraging credit card spending, while HSBC and state-owned Agribank have also jumped on the bandwagon.

Asia Commercial Bank credit card holders can get discounts of 5-50 percent at restaurants belonging to the Khaisilk group and fashion brands like Burberry, Salvatore Ferragamo, and Polo Ralph Lauren.

Nguyen Hung, general director of the Hanoi-based TienPhong Bank, said the group of customers that use credit cards is small but their contribution to banks' revenue is not small.

Vietnam hopes to reduce cash payment to below 11 percent of total transactions, and have some 250,000 card-accepting merchants and 200 million transactions per year by 2015.

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