Cash is still king for Vietnam’s merchants – and this startup wants to change that

After spending most of his career in the semiconductor industry, Huan Nguyen was looking for a change. He left the semiconductor business and began looking to play a role in addressing some of the difficulties Vietnam was facing as an emerging market.

“I was looking at the challenges in Vietnam and at the fact that the people were [still] using cash,” he explains. “Cash is still king [today].”

In 2013, Vietnam was still a developing economy in Southeast Asia. Its startup ecosystem was in its infancy, and the fintech sector was still nascent.

Nguyen was particularly interested in creating an ecosystem to facilitate cashless payments – something that would help retailers transact payments more effectively and increase their operational efficiency.

That led him to start the payments technology firm Kootoro in 2015, where he currently serves as chairman.

Vending for the future

Kootoro’s first product was its mobile wallet, the Toro Wallet. Users create accounts on it using their phone numbers, and they can connect their Toro Wallet to credit cards or bank accounts in order to make cashless transactions. The app also comes with a loyalty program, which gives users access to promotions such as discounts on their purchases.

“We wanted to do the fundamentals,” explains Nguyen. In his view, the mobile wallet served as a base upon which Kotooro has laid the groundwork for its payments technology ecosystem.

Kootoro’s team at its office in Ho Chi Minh City / Photo credit: Kootoro

In 2017, it rolled out its next product: vending machines. The vending machines were launched partially to drive adoption of the Toro Wallet by providing additional avenues where users can apply the promotions they receive through the loyalty program. They also helped address a gap in the Vietnamese market regarding quick, convenient, and safe access to food and beverages.

Nguyen was inspired to go down the vending machine route by Japan, which has a ratio of one vending machine for every 23 people.

“Vietnam’s cities are just as dense [as Japan’s], if not denser,” he says, “but at that point, there were no vending machines [in the cities yet] so there was an opportunity there.” Kootoro currently has numerous vending machines in Ho Chi Minh City, installed in locations such as universities, malls, and even in street alleys, and it sees a “healthy” number of transactions each day, Nguyen adds.

While Kootoro’s vending machines accept all forms of payments – including cash and e-wallet services like SmartPay, VNPay, and ZaloPay – it has an extra feature to get customers into Kootoro’s ecosystem.

One of Kootoro’s vending machines in Ho Chi Minh City / Photo credit: Kootoro

Customers can purchase items from Kootoro’s vending machines with cash and have the change sent to their Toro Wallet just by keying in the phone number connected to their account. This addresses a problem Vietnam has faced with providing change for vending machines due to a lack of coins in circulation. It also creates an avenue for unbanked individuals to use the Toro Wallet.

One POS to do it all

According to Nguyen, Kootoro’s two most important people are “the consumer and the merchant.” So after the success of its vending machines, the company launched its point-of-sale (POS) system ToroG in 2018 in order to tackle the challenges faced by merchants when facilitating cashless payments.

Nguyen had observed what was happening with cashless payment adoption in India and felt that a similar situation could happen in Vietnam.

In India, many merchants – especially smaller mom-and-pop shops – face difficulties accepting cashless payments due to the hassle and high transaction fees involved. Some Indian retailers had actually begun using POS systems to accept cashless transactions, but then backtracked and returned to cash as these systems added friction to their business processes instead of streamlining them.

ToroG was rolled out in a bid to nip these merchant adoption issues in the bud. The system can process any kind of cashless payment, from credit cards to mobile wallets, enabling merchants to manage all transactions from a single platform, says Nguyen. Kootoro doesn’t charge merchants for using its service, which makes it accessible to smaller businesses. Instead, the company generates revenue through transaction fees and cooperating with payment partners.

It’s also capable of facilitating more than just payment transactions.

“Aside from payments, people can use it to manage orders and inventory. We even have an in-built loyalty program that merchants can tap into, and a voucher management system,” explains Nguyen. “We do everything so that merchants can focus on what they do best: selling.”

The ToroG POS machine / Photo credit: Kootoro

ToroG also comes with a sales reporting platform that can generate insights on the state of a business based on the transactions it records. For example, it can highlight to a mom-and-pop store which products sell better than others so that they can order more of the popular items and less of the poorer-selling ones.

It’s also a wireless POS system, which means that staff can bring the POS to customers in order to receive payments.

“Some customers don’t entrust their credit cards to the staff [since they have to] bring them to the back to conduct payments with the POS,” explains Nguyen.

This wireless system allows for greater transparency, as customers can check that the amount reflected on the POS machine is accurate before approving payment – something that could also help facilitate the rise of cashless transactions in Vietnam.

From offline to online

While ToroG is mostly used by offline retailers at present, the next step on Nguyen’s agenda is using it to facilitate payments for online deliveries. This was sparked by conversations he and his team had with couriers and delivery drivers who have to deal with the Vietnamese’ preference for cash on delivery (COD).

COD is still the most common mode of payment in Vietnam for online purchases due to concerns around payment security.

As a result, many couriers need to ensure that they have cash on hand in order to conduct such transactions. Running out of change often necessitates a detour back to the office in order to pick up more money.

And when big-ticket items are involved, it creates a different set of problems. Some couriers reject jobs if the items in question are expensive as they don’t want the responsibility of dealing with large amounts of cash.

“With ToroG, we can enable cashless payments for COD,” Nguyen explains. Couriers will be able to carry around the POS machine and accept different payment methods on the spot for delivered purchases – a step that could lead to a broader shift away from cash-based transactions.

The road ahead

Nguyen’s vision for Kootoro is to create an entire payments technology ecosystem that will make digital payments easy and accessible for everyone.

But the road ahead is a bumpy one: Fintech is a competitive space, and the real challenge, in Nguyen’s view, lies in educating customers and merchants to get them on board with digital payments.

“Many companies roll out promotions and such in order to get people to use their services, but then people just move on to whoever has the better deal,” he says. “The trick is to find a balance and to offer real value.”

The company aims to do so through a process of collaboration and education. “We want to be a partner to the merchants, to give them this push and motivation to get on board,” explains Nguyen. Additionally, Kootoro is looking to tackle the real needs faced by consumers and merchants by developing products that address the key pain points they face.

Ultimately, his ambitions are not restricted to just Vietnam. His goal is to see the company’s machines all around the world.

“We want to become a global player,” Nguyen says.

Headquartered in San Jose, California, Kootoro is a payments technology firm operating in Vietnam that aims to fundamentally transform the way retailers transact business.

Its newest offering, the ToroG POS system, aims to be an all-in-one solution to drive the adoption of cashless transactions among merchants in Vietnam. Learn more about ToroG here.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.