Vietnamese buy into interest-free credit for durables

In early October, when HCMC lifted Covid-19 restrictions, Ngoc Nhu decided to buy a new refrigerator and opted for an eight-month installment plan with zero interest. She had to pay VND1.3 million (US$56) a month.

She says: “I have a fridge I like for just a small sum of money. The debt will be paid off in over half a year”.

The buy now, pay later option is becoming an increasingly popular way to shop in Vietnam.

According to a recent report by Research & Markets, the gross merchandise value under this form will increase from $207 million in 2020 to $697.1 million this year and over $4.7 billion in 2028.

Ngoc Nhu recently bought several products using installment plans, mainly electronic household appliances. “Usually when I buy something worth over VND5 million, I look for deferred payment with zero percent interest,” she says.

FE Credit and Home Credit, which between then hold the lion’s share of the installment plans market in Vietnam, claim to have around 12 million customers each.

Many firms ranging from small fintech companies to large financial institutions entered the installment payment market last year.

In August, e-wallet MoMo announced a tie-up with TPBank to launch a postpaid wallet that gives users a loan of up to VND5 million.

Last week, Nikkei reported that Japanese bank Mizuho would lay out $170 million for a stake in M-Service, the owner of MoMo.

The installment market in Vietnam saw rapid growth over the past year, mainly thanks to young customers and the development of e-commerce.

Many buy now, pay later startups have appeared, including Fundiin, Reepay, Atome, LitNow, and Movi.

According to Research & Markets’ second quarter report, the pandemic has changed consumers’ payment behaviors and is reshaping the payment landscape in Vietnam.

It is expected that the growing attractiveness of the market will attract global players in the next three or four quarters.