Cash remains king in Vietnam but credit card issuers are predicting an imminent boom in the card market with the number of Vietnamese cardholders potentially growing by 10 times the current number of nearly one million.
Nguyen Thu Ha, chairperson of the Vietnam Card Association under the Vietnam Banking Association, said from both the macro-economic and banking perspective, the domestic card market is considered very strong given the rising incomes among the country’s 82-million people, rapid economic growth and improving legal system.
Increasing tourist arrivals and the influx of money remitted home by overseas Vietnamese would also facilitate credit card growth, Ha said at a conference touting the potential for electronic payments in Hanoi last week.
So, in theory things look great for the Vietnamese payment card industry. Let’s see if this is confirmed by a systemic Resistance to Shocks analysis. In other words, instead of analyzing, for example, a single bank issuing credit cards, we will analyze a total of forty banks as a system. The analysis has been performed using publicly available data. The data in question is the following (number of parameters is 35, all data is relative to 2016):
Total number of cards
Number of Domestic Debit cards
Number of International Debit cards
Number of Domestic Credit cards
Number of International Credit cards
Number of Domestic Prepaid cards
Number of International Prepaid cards
Number of Other Cards
Total Cards Revenue
Domestic Debit Card Revenue
International Debit Card Revenue
Domestic Credit Card Revenue
International Credit Card Revenue
Domestic Prepaid cards Revenue
International Prepaid cards Revenue
Other Cards Revenue
Total Card Payment Revenue
International Card payment revenue at card accepting units
International Card payment revenue at ATMs
Domestic Card payment revenue at card accepting units
Turnover of Cash Advances by Domestic Cards at POS
Domestic Card payment revenue at ATMs
Number of ATM until 31/12/2015
Number of ATM until 31/12/2016
Number of POS 31/12/2015
Number of POS until 31/12/2016
Revenue spending at the Card Accepting Unit
Contract Payment Revenue
Other Domestic Cards Revenue
International Card Payment Revenue at Card Accepting Units
Online Payment of International Cards at Card Accepting Units
Domestic Card Payment Revenue at Card Accepting Units
Online Payment of Domestic Cards at Card Accepting Units
The corresponding Complexity Map is illustrated below:
The analysis reveals a very high Resistance to Shocks (RtS), namely 95.6%, which corresponds to a five-star rating. It is interesting to note that this situation hinges on the following parameters: number of ATM, cash withdrawals, number of international debit cards. Basically, the first four parameters are responsible for nearly 38% of the overall state of health of the system. Any policies aiming at improving or strengthening the payment card industry in Vietnam should target these parameters first.
The complete ranking of parameters in terms of how they impact the situation is reported in the chart below (values are in %).
It is also interesting to analyze the system of forty card issuing banks. The Complexity Map, based on the above data per bank, is illustrated below:
Again, the RtS rating is very high, a staggering 99% with a five-star rating. One must remember, however, that this is an analysis based on payment cards data alone. The curious thing is that the degree of interdependency of this system of forty banks is 87%. This is extremely high. If one looks at the map one realizes that it is very dense. What this comes down to is quite evident – every bank is correlated to almost every other bank. This is not good if the system is exposed to a shock as its effects would propagate very quickly throughout the entire network.
In terms of systemic risk, the banks which are situated at the top of the bar chart shown below are the ones that are most exposed (values in %).
The banks which are exposed the most when it comes to systemic risks are Eximbank, Maritime bank, Ocean bank, VPBANK and CBBank. In case of a shock, these banks will be most vulnerable. In fact, note that they are also the hubs of the Complexity Map, i.e. they have the largest number of inter-dependencies with the other banks.
Based on the 2016 revenue and systemic exposure of each bank, the footprint (weight) of each bank on the system is indicated below (VBANK has a value of 1 as it has the highest revenue and is taken as reference).
What is evident is that VPBANK is critical to the system (i.e. payment card industry). It has the highest revenue, which, combined with a high systemic exposure (number 3 in the previous ranking) turns it into a hub. Any actions, aiming at the improvement, or growth of this particular sector, should be targeted at the banks at the top of this chart.