The latest F88 pawn store opened on Hanoi’s Hoang Hoa Tham Street on April 26, bringing the startup’s store numbers to 50 in five cities and provinces in Vietnam: Hanoi, Hai Phong, Bac Ninh, Thanh Hoa, and Bac Giang.

Mr. Phung Anh Tuan, CEO of F88, said that with the investment from Mekong Capital’s Mekong Enterprise Fund III (MEF III) in January, he expects to expand even further. 

“We will have about 300 stores nationwide by 2020,” he said. 

“F88 will become the No.1 pawn service provider in the country regarding market share and brand name, and we expect to list on the stock market.”

In explaining the investment in F88, Mr. Chris Freund, Partner at Mekong Capital, said it was because of its four co-founders and their openness to learning and applying best practices. 

Each of the four founders brings different but relevant skills. 

“This is a formula that has worked well for us in the past, in companies such as MobileWorld and Golden Gate,” he said. 

“F88 is also a pioneer in building a professional business model in the pawn market, which has a lot of growth potential.” 

Professional performance

F88 was the first professional pawn chain in Vietnam, launched in 2013, and restructured and reorganized its business activities last year. 

Though it’s yet to release figures for 2016, Mr. Tuan said that F88 sees optimistic signs and its activities are proceeding according to plan. 

He also believes the company has adopted a specific development strategy and its professional staff provide quality service to customers. 

“We are confident of extending our model to all cities and provinces in Vietnam,” he said.

Because its business model differs dramatically from other financial institutions and banks, it doesn’t consider them competitors. 

Customers have property, like motor cars, motorbikes, laptops, and phones, among other things, that they can use as collateral to take out loans. 

Loans are generally quite small, with a term of less than 30 days. 

But their needs are immediate. F88 therefore must compete with traditional pawn shops by offering professional and prestigious services, which traditional pawnshops can struggle with. 

The service improvements it’s made since the investment have received positive feedback from customers. Ms. Hong Phuc, a student at University of Social Sciences and Humanities (USSH), sought to borrow VND50 million ($2,200) to open a coffee shop but found bank procedures to be quite complex, so she headed to F88. 

After taking an asset valuation, F88 lent her the money. “I was surprised, because I have never looked favorably at pawn shops,” Ms. Phuc said. 

“F88 changed my thinking with their friendly services and credibility.”   

Half a year after its investment, Mekong Capital is also quite satisfied with F88’s business activities. 

“F88 has made huge progress in terms of building a capable and highly motivated management team, automated and optimized its processes, and enhanced customer satisfaction, which converts into strong brand awareness and higher traffic,” Mr. Freund said. 

Mr. Tuan has selected convenient locations for the new F88 stores. Its accurate asset assessment, secure asset sealing, and fast and friendly service have helped customers place more trust in F88 than traditional pawn shops.

His target is to change old ideas in Vietnam about pawn services. “Borrowing money by using assets as collateral is perfectly legitimate,” he insisted. 

This is the first time the business model has existed professionally in Vietnam, so the competition is not heated, and if it can improve its scale as well its professional services, F88 can become a leader in the sector. 

Though the potential is clear, it can’t be denied that there are also challenges to overcome, given society’s view of pawn shops. 

F88 is therefore working hard to build a brand, improve service quality, and change customer mindsets. To 2020, Mr. Tuan said, “we will extend the types of collateral put forward based on market demand.” 

Moving forward

Mr. Freund said that the strength of F88 is in providing reliable, convenient, friendly, and fast services to customers in urgent need of cash. He also, however, pointed to limitations compared to other types of lenders, in particular preconceptions within society. 

“The company will need to maintain persistent efforts to change this stereotype, proving that with its transparent, reputable, and safe management procedures and excellent customer services it can improve the pawn service market and make a positive contribution,” he said. 

VN Economic Times