Financial Technology (“Fintech”) is one of the fastest growing business sectors globally, with Vietnam at the forefront of Fintech growth. Fintech targets a diverse customer base, from individuals, to enterprises, banks, non-government organisations (NGO), public authorities, and so forth.
Fintech has become an integral part of financial activities for individuals, starting with traditional activities usually undertaken by banks such as payments, lending, wealth management, and Point-Of-Sale (POS), and continuing with new business models developed through introduction of new technologies such as blockchain, insurtech and digital banking.
In Vietnam, fintech companies received $410 million, or 36% of the total global capital invested into Southeast Asia’s Fintech economies, between January and September of 2019, only behind Singapore. This further outlines the foreign investors’ consistent interest in the Fintech business in Vietnam.
Vietnam’s fintech startups
Vietnam’s fintech startup landscape more than tripled in size between 2017 and 2020, growing from 44 startups in 2017 to now 118 startups, according to a new report produced by Fintech News Singapore. Payment remains the biggest segment, representing 31% of all fintech startups.
As of October 2020, Vietnam was home to 39 licensed non-bank payment services providers, with the five biggest e-wallets being MoMo, Payoo, Moca, ZaloPay and ViettelPay.
Statistics from the State of Bank of Vietnam (SBV) revealed that as of 2019, there were 4.2 million e-wallet users out of the country’s population of 100 million people, implying that despite a rather crowded and highly competitive local payment sector, there are still plenty of growth opportunities.
While Vietnam’s payment startups continue to grow and attract investors’ interest, the strongest growth was actually recorded in peer-to-peer (P2P) lending and the crypto/blockchain space. These two segments saw the number of startups rise from less than 5 in 2017 to more than 15 startups in 2020.
The past three years also saw the emergence of insurtech, digital banking and small and medium-sized enterprises (SMEs) financing, three segments that were non-existent in 2017.
Despite notable traction and strides, Vietnam’s fintech sector remains nascent when compared to neighboring Singapore for example, and segments including data/credit/scoring management, and crowdfunding are still unrepresented.
Key trends
The Vietnamese fintech sector is largely comprised of players operating under a business-to-consumer model, making the underdeveloped business-to-business (B2B) market poised for growth.
At the same time, Vietnamese banks are accelerating their digital transformation, with a growing number of them adopting a partnership approach to enable rapid innovation. This provides B2B startups with plenty opportunities to support incumbents in their digital efforts.
The collaboration between Vietnam International Bank (VIB) and Weezi Digital in 2017 to launch a mobile payment app, the partnership between VietinBank and Opportunity Network in 2018 to offer the bank’s clients access to a digital business matchmaking platform, and the partnership between VPBank and ride-hailing startup Be Group announced last year to develop a digital financial services offering called beFinancial.
Ride-hailing giants’ expanding foothold in financial services with players like Grab, Be Group and Fastgo are all providing e-wallet services. Most recently, Indonesian startup GoJek announced a significant push into Vietnam’s financial sector, acquiring local payment startup WePay to secure an e-wallet license.
In the fintech sector, these so-called “super apps” are rapidly gaining ground, leveraging their advanced tech platforms and expertise to deliver cheap and convenient digital financial services to the masses.
Below is an analysis of selected prominent Fintech activities in Vietnam from a licensing, commercial and legalistic perspective, covering business conditions as well as licensing procedures:
- Payment Intermediary Services, including:
- Electronic Payment Gateway Services
- E-Wallet Services
- Peer-to-Peer Lending (P2P Lending)
Electronic Payment Gateway Services
Electronic Payment Gateway Services are services providing technical infrastructure to connect between the payment acceptance units (the Sellers) and banks (where the Purchasers have owned their payment account), in order to assist customers to make payments in e-commerce transactions, electronic bill payments and other electronic payments.
The platform acts like a bridge between the purchaser and the seller in electronic transactions, enabling clients to make non-cash payments quickly and conveniently, and keep their personal information secure.
In Vietnam, some of the more popular electronic payment gateway service providers include:
- https://vnpay.vn/
- https://www.payoo.vn/
- https://www.smartlink.com.vn/
- https://www.nganluong.vn/vn/home.html
Electronic wallet service (e-Wallet service)
Pursuant to Decree 101/2012/ND-CP of the Government, an E-wallet service is regulated where “a provider of payment intermediary services provides a client with a nominal electronic account on an information carrier (such as electronic chip, mobile phone sim, computer, etc.) that enables the client to store a sum of money in the form of deposit equivalent to the sum of money transferred from the customer’s payment account at a bank to a secured payment account of the provider of digital wallet service with the ratio of 1:1.”
E-wallets in Vietnam are growing widely and are used to pay for goods and services at supermarkets, convenience stores, e-commerce websites (such as Shopee, Lazada, Tiki), or other applications and software (such as Grab, Spotify, Delivery Now). At the same time, e-wallets are supported by incentivised users due to frequent promotions, discounts and points accumulation.
Popular e-wallet service providers in Vietnam include:
Peer-to-peer lending
In addition to the foreign investments flow into the Payment Intermediary Services sector, peer-to-peer lending (P2P Lending) is a widely used service enabled by the growing digital market transformation where all monetary transactions are supported by technology. That being said, despite of the rapid, global development of this new financial service, in Vietnam the relevant regulations and laws governing businesses which facilitate peer-to-peer lending (P2P Lending Companies) are still limited.
Until this day, there is no legal definition for “P2P lending” in any relevant Vietnamese legal document, or any specific decree and or circular which regulates the activities of companies (local-invested and foreign-invested) providing P2P platforms/apps in Vietnam.
More developments are expected in the near future on the back of favorable regulations. These include the forthcoming fintech regulatory sandbox as well as a legal framework for digital assets and cryptocurrencies.