Even beggars use QR codes when cash is less in circulation.

Recently, when I translated a section of an article by Thomas Friedman, author of "The World Is Flat," and posted it on Facebook, telling the story of beggars in major Chinese cities using QR codes on their begging bowls so passersby could swipe their cards when giving money, many comments suggested that even Friedman was dazzled by Chinese media's technological advancements.

However, I believe that the goal of reducing the use of cash is an inevitable trend for all civilized societies in the 21st century, not just Chinese society.

Vietnam, despite being a "startup nation," is aiming for approximately 90% of its population to be cashless by 2020. Policymakers believe this will quickly propel Vietnam to become one of the first countries worldwide to adopt digitalization in monetary transactions, alongside Belgium, France, and Canada.

"Only cash disbursements are available for loans under 100 million VND."

QR code

In his nearly half-hour speech at the APEC conference in Da Nang, the leader of the world's number one economy, US President Donald Trump, repeatedly emphasized "fair and open trade." He also mentioned in relation to inequalities in global trade, including "currency speculation." One solution to curb "currency speculation" is to "reduce cash transactions."

Indeed, as of September 2017, only one Asian country, South Korea, was among the top 10 countries with the least use of cash.

The plan for developing cashless payments in Vietnam for the period 2016-2020 was approved by Prime Minister Nguyen Xuan Phuc with the goal of reducing the proportion of cash in total payment methods to less than 10% by the end of 2020.

Challenge

In reality, achieving such a feat is very difficult, because despite a large population (95 million), rural people account for 63.5% and their income is still relatively low (US$6,400 per person based on purchasing power parity and approximately US$2,200 at current exchange rates).

Economist Alan Phan once wrote: “I remember a famous IT tycoon concluding that the number of mobile phone users in Vietnam had grown impressively by 36% annually over the past five years, reaching 68 million people, or about 80% of the population. This young expert concluded that Vietnam's IT future must be bright and will surpass countries like China, India, and the Philippines… These are naive conclusions about the reality of society. A young person who spends all day loitering in cafes or bars will not contribute anything to creativity or dynamism, just as farmers with mobile phones do not change the face of rural areas today” (e-book “Vietnamese Economy: A Different Perspective”, page 16).

However, if people see the convenience, they will adopt it. For example, when Uber entered Vietnam nearly three years ago, many people thought using the service would cost them money, but now millions use it, especially with Uber motorbikes. It's important to reiterate here: Government agencies must abandon the habit of interfering with or protecting vested interests, which hinders development.

"Vietnam is moving towards becoming a cashless society," sounds like a pipe dream, but in the age of Industry 4.0, that feat is not impossible to achieve. Furthermore, this path may be long, or very long, but importantly, it is being pursued in parallel with other forms of cash usage and is encouraged by the government through policies prioritizing cashless transactions. For example, travel companies are currently offering 10-20% discounts to tourists who pay for their travel online.

Benefits for development

Some analysts argue that currently 90% of transactions in Vietnam are based on cash, and this has become a logistical nightmare: printing money, transporting money, exchanging money, counting money... in large quantities, given that the Vietnamese dong has one of the lowest exchange rates in the world (2017: Nearly 23,000 VND to 1 USD).

In the future, it is highly likely that less cash will circulate. (Illustrative image)

Using cash naturally presents several problems. Transporting cash is very expensive and requires security; cash is unsanitary because it passes through so many hands, making it susceptible to corruption, bribery, illegal business practices, theft, or robbery, sometimes even causing misfortune for those who possess it. Recently, the number of cash robberies at banks has increased significantly, to the point that PN News on September 28, 2017, ran a shocking headline: "2017 - The Year of Daring Bank Robberies in Vietnam." The article stated: "While bank robberies were rare before, a series of bank robberies occurred before the end of 2017, causing widespread public concern."

Furthermore, Vietnam ranks "high" in the corruption index, so the government must find solutions to encourage citizens, businesses, and officials to reduce or eliminate the use of cash in financial transactions and payments.

I have often heard former President Truong Tan Sang, while still in office, call on citizens and organizations, enterprises, and companies to increase the use of bank accounts. He believed that it was also one of the tools to make the sources of money transparent.

Another important issue is that cash itself cannot generate wealth. By keeping cash under your pillow instead of in a bank or non-bank institution, that money will be eroded by inflation, causing the currency to lose value. Therefore, one viable financial solution is to put cash into circulation through financial instruments that can help the poorest people escape poverty. For example, allowing pensioners to freely invest for profit.

Finally, in a country like Vietnam, which is striving to restructure its social welfare system while facing the challenge of an aging population that is "getting old before it gets rich," digital platforms and information technology are good methods to use public investment effectively and directly benefit the people.

Fear of cryptocurrencies

To achieve the goal of up to 90% cashless transactions, innovative payment methods will also be developed in rural areas, financial inclusion will become a top priority, and at least 70% of those over 15 years old will have bank accounts by 2020.

Over the past seven years, the number of bank accounts has increased impressively. Of course, an increase in accounts doesn't mean that account holders stop using cash. But it is also the first step in encouraging people to use cashless methods such as credit cards, e-wallets, e-banking, Momo, PayPal, etc.

Furthermore, with 254,000 digital points of sale deployed nationwide and 38.3% of the adult population owning a smartphone, Vietnam has the necessary infrastructure for cashless payments.

However, many hurdles remain to overcome if the 2020 goal is to be achieved. The most important of these is convincing those accustomed to using cash. In all types of transactions—business-to-business, customer-to-business, or even business-to-government—cash remains the preferred method of transaction.

A prime example of this challenge is online payments, a function that has been in use for many years. Despite its ease of use and clear advantages over many manual payment processes, only 4.5 million people (or 18.47% of the population) have chosen this payment method to date.

Similarly, 90% of urban adults own at least one credit card, but only 15% of them use their cards to make payments in retail settings.

Ultimately, the issue boils down to trust. Despite the inherent risks of carrying cash, most people still consider it a safer option given their understanding of online transactions. It's really a matter of habit, as many say: A physical banknote smells better than an invisible number online, even if the value is the same.

The fear of "virtual currency," or rather, the psychological aspect, remains a significant obstacle to a more transparent, healthy, and civilized economy as it moves away from cash.

According to Tran Ngoc Chau/chinhphu.vn