Opportunities in Vietnam Fintech Arena

Fintech is disrupting Vietnam’s financial services ecosystem.  In a country which, according to EY Vietnam,⁽²⁾ 41% of the population are unbanked, there are numerous challenges and opportunities for the fintech sector, with the government aiming to reduce cash transactions to 10 per cent and increase bank accounts in the population by 70 per cent by 2020.⁽³⁾

According to Solidiance⁽³⁾, although the country’s bank penetration is consistently growing, it still trails other Southeast Asian nations in the region, with Thailand and Malaysia having an unbanked population number at 14 per cent and 8 per cent respectively in 2017. As Vietnam catches up with other neighbouring countries, increasing internet and smartphone penetration, improvements in  telecommunication infrastructure (3G & 4G), and growing income levels from the middle-class have significantly given rise to opportunities in Vietnam’s fintech space.

Among the three different fintech product segments – digital payment, personal finance, and corporate finance – digital payment solution leads the fintech service market share at 89 per cent. However, personal and corporate finance is expected to grow at a faster rate through 2025.

The country’s rapidly increasing e-commerce sector with its growing order value has contributed to popularizing intermediary payment platforms and digital payment services, laying a solid foundation for the easy adoption of fintech’s digital environment. Additionally, the volume of online shopping users is currently around 35.4 million.  This is anticipated to increase to some 42 million users, accounting for 42.5 per cent of the projected population by 2021 with the average online spend growing from US$62 to $96.  Cash on Delivery – which dominates current online shopping is expected to be replaced by digital payments and other modern payment methods, opening up opportunities in the fintech arena⁽¹⁾.

In order to facilitate financial inclusion, Solidiance⁽³⁾ cites the following barriers which need to be addressed in order to bring the unbanked population into the financial ecosystem:

1. Lack of regulatory clarity

• The National Payment Corporation of Vietnam (NAPAS) is currently the sole channel for all payment transactions
• Peer-to-peer (P2P) lending is not fully legalized and is currently only limited to banks and credit institutions

2. Management knowledge constraints

• Limited operational and management capabilities, especially for startups.
• Solidiance reports that some 70 per cent fail in the first year of operation. Thus, guidance from senior investors with relevant experience is vital.

3. Capital limitation

• Vietnam fintech companies are largely lacking capital resources to implement their business plans.
• Series A funding dominates 70% of the deal count in Vietnam

4. Awareness and trust issues

• Building a strong brand and reputation is quite costly, which requires time and effort, especially for startups
• In some cases where a new business segment is introduced, trust can be slow to build. Customers need to be educated about the benefits of the facility so that they can become familiar with high-tech products such as Grabpay, Timo or MoMo.

Vietnam’s fintech market is estimated to increase from US$4.4 billion in 2017 to $7.8 billion by 2020. Driven by a rapidly expanding economy, digital-savvy population with increasing access to smartphone and internet services, supported by improvements in telecom infrastructure and a supportive regulatory environment.

While there are challenges and barriers, these in turn can be viewed as some of the key stepping stones where solutions need to be found in order to create the necessary infrastructure and consumer sentiment which can support and facilitate this burgeoning valuable sector.