Ho Chi Minh City, Vietnam, May 05, 2018 --(PR.com
)-- Fintech, or financial technology, is disrupting Vietnam’s financial services ecosystem. The fintech market reached USD 4.4 billion financial in 2017 and is estimated to grow to USD 7.8 billion in 2020, driven by rising bank penetration. As the country aims to move towards a cashless society, Vietnam’s government targets to reduce cash transactions to 10% and increase bank accounts in the population by 70% 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. Vietnam’s ratio of banked citizens only reached 59% in 2017 while Thailand and Malaysia accounted for 86% and 92% respectively in the same year. As Vietnam catches up with other 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 - digital payment, personal finance, and corporate finance - digital payment solution 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 growing order value has further promoted intermediary payment platforms & digital payment services. Currently, there are ~35.4 million online shopping users and it is expected to accelerate to ~42 million, accounting for 42.5% of the projected population by 2021. The average spend of USD 62 online will grow to USD 96 by 2021 and Cash on Delivery - the major means of payment - is expected to be replaced by digital payments & other modern payment methods, signifying ample opportunity for fintech firms to tap into.
Key barriers limiting the progress of fintech in Vietnam
Although fintech has garnered considerable market attraction, barriers 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.
Furthermore, many local fintech companies are largely lacking capital resource to implement their business plan. 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 be slow 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, established in March 2017, advises the government on the development of 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 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, active start-up and investment community, increasingly supportive regulatory framework, and 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.
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