In recent time, the term “FinTech” (Financial Technology) has emerged as one of the most searched keywords, in which related to the financial sector in the Vietnam market. This article is expected to give some basic information about this trend as well as the development situation of FinTech in Vietnam in general.
Fintech – the Status of Development
Normally, FinTech is a term for the industry that provides financial services on technology platforms. Currently, according to the 2017 Global FinTech report from PwC, the survey is based on 1308 people (CEO, director, head of IT, digitization, technology, senior managers from 71 countries in the world), 82% expect FinTech’s organization to grow in the next 3-5 years; 77% expect Blockchain to be applied as part of the financial services in 2020; 20% expect the annual ratio: ROI (net profit/cost ratio) in projects related to FinTech will be increased.
The report also points out that business man, developers, and industry experts believe that FinTech’s development can bring certain risks associated with their company’s development. This ratio is up from 83% to 88% in just one year from 2016 to 2017. Below is a chart to show the percentage of FinTech’s products and services that customers are willing to work together. The leading field is Payment, followed by Transfer Funds, Personal Finance, Personal Loans, Traditional Deposits / Savings, Insurance, Health Management.
In this year, capital inflows into FinTech are forecast at about $ 150 billion, whereby CEMC, a US enterprise in equipment business industry, has released six forecasts of trends that Fintech should focus on research and development, including:
- Focus on building the trust of customer: During the current twilight period, to have the trust of customer is one of the prerequisites for business development;
- Shopping habits change from offline to online;
- Mobile trends continue to grow: With the increasing of using mobile devices, the focus on developing platform for mobile will enable Fintech to deliver a better user experience.
- Blockchain: With this trend, the business can conduct transactions and verify online immediately.
- The level of safety continues to improve: Customer data is always the bait of hackers, so it is necessary to protect perfectly customer data.
- More interaction with customer: FinTech has allowed many people access to information about the previous products/services. For example, online banking has allowed customers to open accounts with lower balances and no cost savings.
The FinTech battle is more and more excited. In this time, Facebook allows users to send money via Messenger using TransferWise system and Gmail now also allows users to send money to each other via the mobile version.
The trend of FinTech Development in Vietnam
The population of Vietnam is about 90 million, most of them are in young generation, 80-90% of the population use the Internet. These numbers are the main reason why experts think that Vietnam may become a potential FinTech market. However, the fact is that only 30% of the population uses bank cards and the number of credit card use only stops at 3%. This is an opportunity for many companies to fill the gap or replace the remaining market banks.
According to statistics released in February 2017, the State Bank of Vietnam said from nine units testing intermediary payment services in 2007, eight years later (2015), this service was officially licensed and the number of enterprise in FinTech is 20, more than 40 enterprises have been operating in the field of FinTech in Vietnam. Follow to Pham Thanh Duc – Managing Director of MoMo, with the momentum of technology development at present, Vietnam should have had 20 million mobile payment users and trading volume reached 25 billion USD, based on the estimation from China. However, the actual number seems to be a far from this estimation.
According to the Topica Founder Institute, in 2016, the total value of Fintech startup deals in Vietnam is $ 129 million, representing 63% of the total start-up sales. In particular, the deal was invested 28 million dollars from Standard Chartered Private Equity Fund and Goldman Sachs Bank into M_Service Joint Stock Company, the owner of electronic MoMo wallet.
FinTech’s advantage is small loans (because in many countries, banks often ignore small borrowers because of consumer credit risks). In fact, at present, the Vietnam market is developing on the payment side of services with transfers of less than 5 million VND (based on postal surveys, UN reports and SmartLink – Payment intermediary, now merge into Banknet).
However, disadvantages in the Vietnamese market is the fear of using virtual payment methods, so the two prominent names in Vietnam FinTech are MoMo and Payoo have invested heavily in the physical trading system. For now, MoMo owns more than 4000 transaction points spread across 45 provinces and Payoo has nearly 5000 payment branches across the country.
MoMo’s goal is to reach 11,000 outlets nationwide, while Payoo is focused on paying for electricity, water, and television bills and expanding the connection with the transportation business, tourism in order to diversify the range of services. And especially not focused on the mobile application segment. “There are two main reasons why we do not promote this channel at the moment: Firstly, online services are not enough to attract the majority of users on the Internet. Secondly, Payoo also provides Internet banking and mobile banking services to its partners, and the competition in a market is not large enough to create benefits”, Ngo Trung Linh, General Director of VietUnion said.
In addition to the FinTech companies, many corporations, large companies have also jumped into this game to take advantage of the number of available users. By the end of December 2016, Zion, a subsidiary of VNG, launched ZaloPay e-wallet running parallel to the 123-pound payment gateway, integrating the community of 70 million Zalo chat users.
Garena gaming service and Grab call service have also entered the payout market. Last March, Garena Vietnam’s eSports affiliate launched the TopPay e-wallet with more than 20.000 outlets. Nationwide and Play Store TopPay downloads exceeded 100.000. GrabPay payment services are also running promotions across South East Asia to take advantage of the 27 million users.
Regarding the banking system, Tienphong Bank is an indispensable name with the application of technology in customer service with online transaction centers, virtual assistant – chatbot, …
Lazada’s HelloPay payment channel, after being acquired by Alibaba in April 2016, was incorporated into Alibaba’s AliPay system and moved into Southeast Asia.
According to financial experts, the FinTech’s market in Vietnam will be a playground for big players in the fields of finance, technology and Internet services. The existing start-ups in the market are actually the backyard of some of the big guys or have the investment from Capital Venture.
With the opportunities and challenges that FinTech Vietnam market is having, businesses need to choose the right direction for themselves. To refer the learning experience from FinTech-developed markets such as Cambodia, Kenya is probably one of the first things that Vietnamese businesses can consider.
Looking back on the experience of the above countries, the biggest motivation can be that users boldly get acquainted with the virtual payment service is the ability to transfer money to friends and family. Some effective marketing policies can be described as: “hardships” such as the “lucrative battle” (WeChat Pay and Alipay – China), enjoying high-interest rates on existing accounts in e-commerce accounts…
In addition, in terms of policy and legislation, the government plays a pivotal role in paving the way for FinTech to develop. In Cambodia, Wing could not have grown up so well if it had not benefited from advances such as the issuance of a special bank license and tax collection on behalf of the state. In Kenya, the government holds 35% of M-Pesa’s Safaricom operating company and sets up rules for users to register.
In Vietnam, follow to the lawyer Nguyen Van Loc, Chairman of LP Group, the Government does not have specific sectoral regulations on business activities, except payment intermediaries. Fintech types such as peer-to-peer, automated investment management, virtual currency trading, call for community funds, etc. do not yet have a legal mechanism that corresponds to the face of the business that banks and business desire.
Flow of Loc, there are three things the government needs to do now and synchronously to develop Fintech in the country:
- Allows testing of new Fintech models;
- Supplement specific regulations at the decree and circular levels for FinTech activities.
- Study appropriate models for a roadmap to issue regulatory documents as well as to ask organizations and associations to draft a road map for Fintech for the next 10 years.
Obviously, this new trend needs a lot of action from both the government and investors to realize and develop FinTech in a deep way in Vietnam market in order to bring a revolution in liquidity in particular and finance in general for business and consumer.