There has been a lot been said since Prime Minister Vuong Dinh Hue brought forward his plans to make Vietnam a cashless society by 2020. Yes, it’s another project that has the finishing date of 2020. The difference to this one, is it actually has a fighting chance to both come to fruition, and also benefit the people that need it the most.
The main part of the project is to have a minimum of seventy-percent of people who are over the age of fifteen to have a bank account. This will enable families to pay for their utilities, shopping and daily life expenses without having to use cash. It should also help in getting rid of all the VND1,000 and VND2,000 notes that I have bundled up in a box.
It has bigger implications on the whole fabric of Vietnam. As we have all seen, the tightening of banking restrictions in regards to cash transactions and foreign currency transactions were implemented for two different reasons. Primarily, the control of paper money, and therefore increased taxation revenues, and secondly, linked to this is the lessening of reliance on the gold and black markets.
Money laundering is also a lot easier to track when you have a network of banks, businesses and detection teams on the search for the layering, integration and placement of “cleaned” funds. It is much easier to do this when everyone has bank accounts. Also, on the individual level, it is a whole lot safer than having cash and gold lying about your house.
One aspect that people do not talk about is that this will enable the combatting of corruption. Not just the high level frauds that have been publicised, but the daily corruption that puts a spanner in the works and slows everything down. It has worked in a lot of places that are nowhere near as up to date with banking technology.
The M-Paisa mobile money app has been used in Afghanistan for some time, and two anecdotes from there show the power of not using cash.
53 policeman were using it as a trial for their salaries and thought that they had been paid too much. In actual fact they had been paid correctly, but with taking out the middleman, they received their full salaries without their bosses skimming off the top.
Things got worse for the top brass when it the program was rolled out and it was found out that one-in-ten people that were being paid, didn’t actually exist. The same system used in Kenya found that police officers wouldn’t take bribes using the system as it was logged to their own mobile telephone numbers.
From micro financing, to combating corruption, a cashless society is a step forward in the right direction for an economy that is still classified as developing. The benefits of moving toward this style of economy will lead to a quicker catching up with regional leaders like Singapore. Let’s hope it stays on track.
Paul McLardie is a partner at Total Wealth Management. Contact him at Paul.email@example.com