Innovative functions create additional value for consumers © Photo Credit: lassedesignen - stock.adobe.com

Innovative functions create additional value for consumers

Local applications like Zalo, BeeTalk and VietTalk as well as WeChat and WhatsApp add US$6.4 billion of consumer surplus in Vietnam and drive local value creation across businesses and sectors

Vietnam is one of the strongest growing global economies, with increasing internet penetration and digitization spurring this growth. In particular, Rich Interaction Applications (RIAs) play a critical role in this success as they offer innovative functions helping their users to interact more efficiently than via traditional methods. This results in a consumer surplus of US$6.4 billion (VND145 trillion) in 2018.

RIAs comprise applications such as Facebook Messenger, LINE, Skype, WeChat and WhatsApp, as well as Vietnamese applications such as Zalo, BeeTalk and VietTalk which have become increasingly popular means of personal and business interaction. As these applications offer an increasing number of functions, consumers use them more frequently and intensively, not only for communication, but also for other forms of interaction including dedicated third-party service providers (e.g. ride-sharing, food delivery), real-time translation and payment. The variety of functions on offer enables consumers to use RIAs for a large number of tasks that would otherwise have not been possible, or where the traditional means have additional costs associated with them.

Against this backdrop, the present study is the first to assess the consumer surplus added by RIAs as well as their contribution to GDP in Vietnam. All of the benefits stemming from RIA usage are a result of the high levels of competitive innovation that has driven product and feature development and expansion among RIAs.

Based on a representative survey of internet users in Vietnam, this study finds that RIA usage saves, on average, 242 minutes per week per user. Using the average annual income in Vietnam (VND60,792,000), this translates to an annual consumer surplus of an average of US$145 (VND3.3 million) for each user of RIAs in Vietnam.

Furthermore, the present study applies the findings of an earlier study to the case of Vietnam to examine the GDP impact of RIAs and finds that, in Vietnam, a 10% increase in their usage increases GDP by US$39 billion over the 16 years from 2000 to 2015.

Beyond the economic impact measured in consumer surplus and GDP, RIAs create substantial local value in Vietnam that is not reflected in the figures above. First and foremost, RIAs are instrumental in creating employment opportunities for Vietnamese people, in sectors ranging from retail to tourism. In particular, RIAs tend to lower barriers to entry for entrepreneurs and enable otherwise underrepresented groups to participate in the trade of goods and services. Our report highlights that female entrepreneurs and so-called "mumpreneurs" appear to benefit disproportionately from RIAs as they enable quick interaction with customers independent of their location.

RIAs can also increase efficiency of processes in the healthcare sector. For instance, Jio Health is a service enabling voice and video interaction with a doctor. This process not only cuts costs for patients but also facilitates the treatment process by storing all important data in one place.

The findings of the present study also show that (local) RIAs employ Vietnamese people and upgrade the potential for innovation in the country’s ICT sector with Zalo, an RIA founded in Vietnam and used regionally, playing a profound role in this context. Its wide reach and user engagement, as well as its wide range of functions, have attracted the interest of significant marketing campaigns by global brand owners such as Unilever. BeeTalk, Mocha and VietTalk are further examples of a thriving and extremely innovative app economy in Vietnam.

To prolong and amplify the success of the existing technology ecosystem, a flexible and forward-looking policy approach is required. Overly prescriptive regulations cannot adapt to a fast-changing economic and digital environment. The group of applications explored in the present study ‒ RIAs ‒ are a particularly pertinent example of these rapid innovation cycles. Globally, RIAs evolve very quickly, adding new functions to reflect consumer demand. The local RIAs in Vietnam follow the same pattern. The most prominent and comprehensive example in terms of the number of functions is Zalo, which directly competes with other local RIAs, such as BeeTalk, Mocha or VietTalk, as well as with global players like Facebook Messenger, iMessage, LINE, Threema, WeChat and WhatsApp.

If overly prescriptive regulation precludes the Vietnamese market from certain functions, then the potential for local applications to compete on a global level may be hampered. Furthermore, since the added value of RIAs for consumers is strongly linked to their functions, a prescriptive regulatory environment may equally preclude Vietnamese consumers from benefiting from such functions.

The study is available for download.

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