Vietnam’s credit card market heats up with big players

Last week, South Korea’s Lotte Card officially took part in the Vietnamese card market after receiving a license from the State Bank of Vietnam to establish and operate its Lotte Finance Vietnam Co. Ltd as a finance company in the country.

Under the license issued on September 19, Lotte Finance Vietnam, which has charter capital of VND600 billion (US$25.5 million), is allowed to provide various financial services, including consumer lending and credit card issuance.

With the license, Lotte Finance Vietnam has become the first Korean financial company to be permitted to issue credit cards in Vietnam.

According to statistics, shares of the country’s credit and debit card market are currently in the hands of big domestic banks such as Vietcombank, BIDV, VietinBank, Sacombank and Techcombank, of which by the end of last year, Vietcombank still held the leading position.

However, experts forecast that change is on the horizon as the market has seen the participation of more players, from Vietnamese and foreign finance companies to foreign banks and medium Vietnamese banks.

Shinhan Bank, for example, is also set to become one of the top three credit card issuers in Vietnam for the next three years while FE Credit and Home Credit, the country’s two leading consumer finance companies, are also stepping up credit card offers with many incentives and promotions.

Amidst the higher competition, card issuers have recently offered many incentives and promotions to attract customers, such as low fees, refunds at shopping centers and gifts.

Some issuers have even extended the time limit for free interest rates to 55 days from the 45 days applied by most other issuers.

Issuers have also simplified procedures for card opening, providing online services and at-home services to lure customers.

The fierce competition has also benefited customers. For example, a person with a monthly income of VND7-8 million (US$298-340) can now easily gain a credit card, which can help them spend dozens of millions of VND.

Lucrative land

Together with a young and rapidly growing urban population, the growth of internet retailing has created a favorable environment for financial cards to flourish in Vietnam. Young consumers are quicker to adapt to new payment methods such as using financial cards and are making the switch from cash to card transactions.

Nguyen Thu Ha, chairperson of the Vietnam Card Association under the Vietnam Banking Association, said that from both the macro-economic and banking perspective, the domestic card market is considered very strong given the rising incomes among the country’s 93 million people, rapid economic growth and improving legal system.

Digital payment leader VISA has recently also reported that it has experienced strong electronic spending growth in Vietnam, with the number of transactions on its network in the first half of this year surging by 45 percent year-on-year and payment volume up nearly 37 percent.

Vietnam now has about 10,000 places that accept card payments, concentrated in big cities like Hanoi and Ho Chi Minh City and other major tourism sites.

According to reports from the central bank, the country had 141.59 million financial cards by the end of the second quarter this year, up 7.3 percent against early this year. Of the total, more than 90 percent were debit cards, meaning other kinds of cards, including credit cards, accounted for a very small proportion.

Meanwhile, investing in credit cards brings in large profits for issuers because interest rates of the loans are higher than that of other loans. Besides, they can earn money from fees such as annual fees, cash withdrawal fees and late payment penalty fees.