Installment plans and consumer credit are ways to boost sales of affordable and mid-range mobile phones. Therefore, this segment is vulnerable to financial fluctuations.
By being supported with installment payments, ordinary users can easily make spending decisions for mobile products. However, tight credit policies and interest rate hikes by financial companies make it difficult for customers to purchase and upgrade their phones.
According to major retailers, this is a barrier to entry for low- to mid-income customers who rely heavily on installment purchasing. As a result, part of the revenue for low-cost smartphones is affected.
Depends on installment
According to MWG’s report, the company that owns the retail chains The Gioi Di Dong and Dien May Xanh, customers in the low-income segment are having difficulty accessing consumer loans through installment plans. This is one reason why the revenue of the largest electronics retailer in Vietnam has decreased by 32% compared to the same period.
Besides The Gioi Di Dong, this is a common problem for many retailers in the cheap smartphone segment. More expensive phone models are not affected by this issue because users in higher-income segments are less affected by macroeconomic conditions. At the same time, high-income groups are more easily supported by demonstrating their financial capabilities.
Previously, The Gioi Di Dong collaborated with F88 financial company to support customers who do not meet credit standards to purchase products through installment plans. However, this relationship ended in early March when F88 was investigated by authorities.
This is also a common issue in the market from late 2022 to early this year. According to Dang Thi Minh Nga, Director of the Product and Other Services Division of the FPT Shop system, the number of phones sold through installment plans at the system has decreased.
In addition, the maximum loan amount for an individual has been reduced, and the minimum down payment has increased. These factors have become a barrier that prevents users from buying phones as desired.
“Most of the customers who buy phones from me choose to pay by installment to optimize costs. But now, most financial companies such as HD Saison, FE Credit, Home Credit, Shinhan Finance… are stricter in approving applications. Therefore, the number of buyers has decreased significantly,” said Mr. B.P., a smartphone retailer in Vung Tau city.
Limiting the impact
According to Zing’s report, the dependence on installment payments is higher at large agent groups. Dang Thi Minh Nga revealed that the usage rate of this service at regular agents remained at 30-50% before being restricted from consumer loans.
Meanwhile, the figures at small and medium agent groups ranged from 10-20%. Thanks to this, these systems temporarily limit the impact of the overall situation. In addition, compared to the tense period at the end of 2022, the recent period has seen improvements in the approval of applications and credit limits have been expanded, gradually restoring.
“Credit tightening is a general market situation that has been taking place since late 2022. However, from the beginning of this year, financial companies have been operating steadily,” said a media representative of a mobile agent in Ho Chi Minh City. According to this person, the approval rate for installment purchases has now been restored to 60-75%.
On the other hand, new support solutions have also been introduced to temporarily address difficulties in approving installment purchases.
“At present, we have combined with third parties, expanded buy-now-pay-later installment tools, and approved mobile loans. Companies are working with lending, payment, and support partners to help customers shop during this period,” said Nguyen Kim Duc, Director of the retail division of Hoang Ha Mobile.