According to PricewaterhouseCoopers the World Bank Group (WBG), estimates that 2 billion or 42% of the global adult population does not have access to basic financial services. [They] believe that addressing the un(der)banked community, which is largely located in Asia Pacific, presents sizeable opportunities for both startups and corporates. This is especially valid as cell phone penetration expands, providing the avenue for financial technology services to the un(der)banked population.
According to the World Bank global cell phone penetration is extensive with 5.5 billion people above 14 years old having close to 5 billion mobile phones. Out of the total mobile phones we have an approximation of 2.5 billion smartphones users. Mobile connectivity will continue to grow with Asia continuing to drive a large part of that growth as global economic power shifts from mature markets to emerging economies.
This connectivity and cell phone penetration are key components of the central drivers of Vietnam’s fintech industry.
Reaching a transaction value of US$4.4 billion in 2017, Vietnam’s fintech market is expected to grow to $7.8 billion by 2020, according to research of Solidiance.
Contributing factors of surging internet and smartphone penetration, the burgeoning e-commerce sector, an increasingly supportive regulatory environment and improvements in telecom infrastructure have created fertile ground for the Southeast Asian country. As a result, the market is poised for growth, according to the white paper “Unlocking Vietnam’s Fintech Growth Potential” released recently by the APAC-focused consulting firm.
The country’s cashless society focus is the perfect foil for the advancement of fintech as a disruptive force in Vietnam’s financial services ecosystem: Vietnam’s government has set its sights on reducing cash transactions to 10 per cent and achieving a 70 percent increase in the population’s bank accounts in 2020, opening the door of opportunity for fintech offerings.
Further opportunity lies in the fact that although there is a continuous increase in the country’s bank penetration, Vietnam still trails other Southeast Asian nations in the region. While Vietnam’s achieved 59 percent bank penetration in 2017, Thailand and Malaysia achieved for 86 per cent and 92 per cent respectively in the same year.
However, this is about to change. Increased internet access and smartphone penetration, improvements in telecommunication infrastructure (3G & 4G), and growing income levels from the burgeoning middle-class are enabling the Southeast Asian country to catch up with its neighbours. Additionally, these components are set to facilitate new opportunities in Vietnam’s fintech space.
Vietnam’s internet penetration reached 52% of the population in 2016 while smartphone ownership accounted for 72% in urban areas and 53% in rural areas. This makes Vietnam one of the fastest growing adopters of smartphones in Southeast Asia. The introduction of 4G in the country – along with lower-priced smartphones and service costs – will also act as enablers and provide the necessary means for digital payment and other fintech services.
Among the three different fintech product segments – digital payment, personal finance, and corporate finance – digital payment solutions currently lead the fintech service market share at 89 percent. However, this is expected to change, with personal and corporate finance projected to grow at a faster rate through to 2025.
Vietnam has an expanding e-commerce sector with growing order value, which has further promoted intermediary payment platforms and digital payment services. Currently online shopping users is around 35.4 million. This is expected to increase to some 42 million, accounting for 42.5 per cent of the projected population by 2021. The average spend of US$62 online will grow to $96 by 2021, while the current “Cash on Delivery” means of payment is expected to be replaced by digital payments and other payment technology options, opening up a plethora of opportunities for innovative fintech firms.