Fintech, or financial technology, is disrupting Vietnam’s financial services ecosystem. Solidiance’s latest white paper, “Disruption by fintech: Transforming Vietnam’s Financial Services Ecosystem,” explores key drivers and current trends of fintech adoption in Vietnam, the key barriers, and the future outlook of the market. 

According to the report, the fintech market reached $4.4 billion in 2017 and is estimated to accelerate by $7.8 billion in 2020 due to rising bank penetration. 

As the country aims to move towards a cashless society, Vietnam’s government aims to reduce cash transactions to 10 per cent and increase bank accounts within the population by 70 per cent in 2020. 

Trends in Vietnam’s fintech space

Although bank penetration in Vietnam is consistently growing, it still trails other Southeast Asian nations in the region. The number of people with bank accounts in Vietnam was only 59 per cent in 2017 while Thailand and Malaysia's numbers were 86 per cent and 92 per cent respectively in the same year. Vietnam is catching up with its neighboring 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, which are digital payment, personal finance, and corporate finance, digital payment leads the fintech service market share at 89%. However, personal & corporate finance is expected to grow at a faster rate through 2025. 

Vietnam’s burgeoning e-commerce sector with its growing order value has further promoted intermediary payment platforms and digital payment services. Currently, there are around 35.4 million online shopping users and it is expected to quickly rise to about 42 million, accounting for 42.5% of the projected population by 2021. The average spend of $62 online will grow to $96 by 2021 and cash on delivery, the major means of payment, is expected to be replaced by digital payments and other modern payment methods bringing ample opportunities for fintech firms to tap into.

Key barriers limiting the progress of fintech in Vietnam

Although fintech has garnered considerable market attraction, barriers still persist. Challenges including lack of regulatory clarity, capital limitation, management knowledge constraints, and trust issues must be observed in Vietnam’s financial services industry.

● At present, the National Payment Corporation of Vietnam (NAPAS) is the sole payment service provider for fintech and e-commerce innovation in Vietnam

● Peer-to-Peer lending platforms are growing but only banks and credit institutions in Vietnam are legally permitted to operate in the lending business

● Many local fintech companies are largely lacking capital to implement their business plans

● Operational and management capabilities are hindered by knowledge constraints, especially for fintech start-ups

● Building a strong reputation around an unknown brand like a start-up can take a while to build and may take significant investment, time, and energy. 

Supporting fintech innovation in Vietnam

Vietnam’s government plays a crucial role in facilitating a conducive environment for fintech to flourish. The FinTech Steering Committee, which was established in March 2017, advises the government on the development of the financial services ecosystem, including a legal framework to ensure market growth. Government associations such as The National Technology Innovation Fund (NATIF) and other accelerators and incubators have also made the effort to address current difficulties in order to support and promote Vietnam as a tech-hub in the region by providing valuable opportunities for start-ups in R&D, capital, and professional expertise. 

With a large potential tech-savvy user base, an active start-up and investment community, increasingly supportive regulatory framework, and a robust enabling environment, fintech applications will further penetrate Vietnam’s financial ecosystem and establish themselves as key go-to services across digital payment, personal finance, and corporate finance solutions.

Solidiance is a corporate strategy consulting firm focused on Asia. Solidance advises CEOs on make-or-break deals, defines new business models and accelerates growth in Asia. Solidiance’s expertise is focused on the industrial, automotive, technology, and healthcare sectors with 13 offices in Asia in Abu Dhabi, Bangkok, Beijing, Beirut, Ho Chi Minh City, Jakarta, Kuala Lumpur, Manila, New Delhi, Yangon, Shanghai, Singapore (HQ), and Sydney. They also have client liaison offices in Germany and the United States.

VN Economic Times