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Outdated law binding fintech start-ups' growth

According to Solidiance Consultancy, transactions on Vietnam’s fintech market could nearly double to US$7.8 billion in 2020 from $4.4 billion last year.

VNS talks with Han Ngoc Tuan Linh, chairman of the board of Vietnam Silicon Valley (VSV) – a leading accelerator investing in early stage start-ups in Vietnam.


Vietnam Silicon Valley Chairman Han Ngoc Tuan Linh. VNS Photo Chi Lan


What do you think about the competitors at the Fintech Summit this year?

There was a Fintech Challenge Vietnam last year in which the competitors were already mature and looking for ways to expand their business from their home countries to Vietnam.

Meanwhile, some teams at the summit this year were in the very early stage with their products still on trial, and other had yet to prove if there was actually a market for their products.

Such difference is actually a very good sign. If a start-up initially develops overseas and then grows to Vietnam, it will make the country become a business branch. We could see at the summit that those who are living overseas see Vietnam as a highly potential market with a great start-up ecosystem. At the summit, there was a ratio of 50:50 of Vietnamese and foreigners looking to start-up in Việt Nam. It was very different to previous years.

VSV has been accompanying Vietnamese fintech start-ups for the last six years. How has the field developed?

The Vietnamese fintech market is still in its early stages, particularly because of the sensitivity of directly dealing with the banking system and the law. Any creative solutions they want to experiment will unavoidably involve financial laws.

For that reason, the establishment of a ‘sandbox’ by the State Bank of Viet Nam (SBV) is of utmost importance. The SBV has set up a team to work on creating that sandbox.

A few years ago, most fintech start-ups have been spin-offs of domestic companies who had lots of money and wanted to have their own fintech business branch, but more and more fintech entrepreneurs have been sprouting up and that is a promising sign.

Regarding the quality of fintech start-ups, they are restrained from their true potential due to the field’s sensitivity. There are many sources of information that start-ups cannot access and thus lack the much needed information to design the best model for their businesses.

So legal issues are what is holding back the Vietnamese fintech community?

Basically it is the biggest challenge. The SBV set up a special task force in charge of fintech about three years ago and one of its missions is to develop the sandbox system.

Sandbox, or the regulatory sandbox, is a pilot economic model or a pilot business model in which companies register to operate following new rules and be free of existing legal bindings. In other words, it will allow start-ups to experiment new things that are yet regulated in the law.

To put it simply, sandbox is like a special economic zone but not in a physical form.

Apparently It is not easy to create a sandbox so the model is still up in the air right now.

Lack of capital is the same issue that fintech and all start-ups face. But what is interesting is that pitching in some cases is the easier part for fintech start-ups because fintech is one of rare fields where it has more interested investors than start-ups.

Investments from South Korea into Vietnamese start-ups dramatically surged in the first half of 2019, toppling those from Japan and Singapore which were the biggest investors in 2017-2018.

Could you tell us about this new investment wave?

Most big South Korean groups already have investments in either early start-ups or slightly later at the venture capital stage in Vietnam. We can count names like Lotte, Welcome and GS which made their investments through a fund. Some bigger financial groups like Hana and Mirae Asset tend to set up their own subsidiary companies in Vietnam to invest.

South Korean groups are looking to expand in Vietnam and are looking at fintech start-ups. Working with a fintech start-up which knows the market well might help them enter Việt Nam more easily. Additionally, fintech start-ups can provide more innovative financial solutions than conventional banks.


Unofficial statistics show there are nearly 150 fintech businesses operating in Vietnam, with a majority providing payment gateways. Other fields include blockchain applications, digital wallets and peer-to-peer lending.
Up to 30 non-bank financial institutions have been approved by the State Bank of Viet Nam to serve as payment intermediaries.
Fintech is a rare field where a number of Vietnamese start-ups are recognised globally. E-wallet start-up Momo has made it onto the world’s top 100 fintech companies while Money Lover is the most downloaded expense manager application.



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