By Michael Tatarski
As with many other sectors in Vietnam, the country’s fintech – a portmanteau of finance and technology – market is witnessing rapid growth.
IN 2017, THERE WERE JUST 44 domestic fintech startups, a number that hit 118 in 2020, with payment platforms making up the largest share, at 31%. The country is now home to 39 licensed non-bank payment service providers, including household-name e-wallets such as MoMo, Payoo and Moca.
Despite this market expansion, as of 2019, the State Bank of Vietnam (SBV) said that there were only 4.2 million e-wallet users nationwide, highlighting the huge expansion potential given the country’s population of 98 million.
“It’s a growing market, and there is a huge opportunity for penetration,” said Kalidas Ghose, vice chairman and CEO of FE Credit. “There is a very young, digitally native population, digital adoption rates are sky-high, affluence is improving, and Vietnam is one of the fastestgrowing retail markets in the world. All of the factors for fintech growth are here.”
This is evident through investment trends, with the Vietnamese fintech startups Infina and Mfast recently raising US$2 million and US$1.5 million respectively through a mix of foreign and domestic investors.
“I see a lot more people joining the fintech world,” Ghose said. “I see younger Vietnamese taking a shortcut and building tech solutions for problems that Vietnamese people face, so we will see more home-grown platforms that are relevant in the context of the Vietnamese market.”
One of the earliest, and largest, players in Vietnam’s fintech sector is NextTech, which was founded in 2009. They have created several different platforms, and are a leader in terms of payments accepted by merchants.
“Over the last five years, fintech in Vietnam has been evolving quite fast,” said Nguyen Hoa Binh, founder and chairman of NextTech. “There is more popularity, and almost all of the new fintech models seen around the world are available in Vietnam, though some of the business models are still in their early stages.”
Binh believes payment services will present the most fintech opportunities in the near future, while also cautioning that fintech lending is currently a trouble spot.
“The repayment power of customers has been badly impacted by the pandemic, and lending companies are also shy about lending out,” he explained. “And the market is also being exploited by Chinese peer-to-peer lending companies that come to Vietnam and do payday loans at cutthroat rates, which has negatively impacted the public perception of fintech.”
He argues that the Vietnamese government needs to quickly regulate peer-to-peer lending.
Ghose added that more work on the regulatory side is needed across the board, and there are lessons to be learned from other regional countries.
“Some of the regulations we see around efforts to promote fintech in Singapore, the Philippines and Indonesia probably need to come to Vietnam in order to provide encouragement, for example creating a regulatory sandbox,” he said. “There’s been a lot of talk and I think regulators are open to it, but some regulations that we thought would be implemented have maybe been slowed down by Covid-19.”
In fact, the SBV announced in 2020 that it would create a regulatory sandbox for fintech this year, but that has yet to occur. The sandbox would include seven fintech sectors: payment, credit, peer-to-peer lending, customer identification support, open application programming interface, techbased solutions, and other banking support services.
Furthermore, according to Ghose, banks, insurance companies and other financial institutions need to be more willing to try new technologies and provide support to startups during their growth phase: “Obviously they’re a little worried about regulatory compliance and the stability of startups, but we need to see an ecosystem of investors and financial institutions working hand-in-hand to support the ecosystem.”
Moving forward, both Binh and Ghose see great promise for fintech in general in Vietnam.
“I think that in the next five years, the fintech sector will become more popular,” Binh said. “And I think banks here will take lessons from banks in the US or China, which have been a little bit slow on fintech, and be more proactive. Companies like PayPal and Alipay have taken the lead elsewhere, but banks will act differently here.”
“I see much more regulatory support and more financial institutions, like our company, being open to providing a testing ground or providing support to these fintechs,” Ghose added. “The future of fintech in Vietnam is undoubtedly bright, and a bit of impetus from the various stakeholders will make it even brighter.” [C]
