Fintech
Will Vietnam’s fintech sector realize its immense potential?
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From Samantha Barnesinternational banker
“Vietnam is considered a land of opportunity for fintech, mainly due to its young population, high economic growth rate and the increasing adoption of digital devices in the country,” an official from Woori Financial Group said at the launch of its Digital Innovation Lab (DINNOlab) in Hanoi in late April, attended by officials from the Financial Services Commission (FSC) of Korea, the Central Bank of Vietnam (State Bank of Vietnam, or SBV) and the Embassy of the Republic of Korea in Vietnam. “DINNOlab Vietnam Centre plans to support the partnership of Korean startups[s] with leading fintech companies in Vietnam, aiming to discover new business models.” The mere fact that Vietnam has been chosen by this financial services giant, South Korea’s largest bank, as the preferred strategic location for this major financial technology (fintech) testing ground in Southeast Asia is particularly significant and underscores the rapidly growing attractiveness the country has as an exciting fintech hub.
With the emergence of a tech-savvy middle class and the unwavering support of a pro-government, Vietnam is turning into an attractive destination for fintech investment. According to automated financial services firm Robocash, Vietnam’s fintech sector is experiencing the highest growth rate in the Association of Southeast Asian Nations (ASEAN) region after Singapore and is expected to reach a lofty valuation of $18 billion this year.
A joint report by Google and Temasek also showed that Vietnam had the fastest-growing digital economy in Southeast Asia in 2022, recording a phenomenal annual growth rate of 28 percent, while research by the State Bank of Vietnam revealed that the number of fintech companies in the country increased from 39 at the end of 2015 to more than 150 companies in 2021. A separate report by UOB (United Overseas Bank) in 2022, meanwhile, counted more than 200 fintech companies operating in Vietnam across various market segments.
It should come as no surprise, then, that in recent years, companies and investors have been clamoring to increase their exposure to Vietnam’s burgeoning fintech space. For example, through its local affiliate JB Securities Vietnam (JBSV), another major Korean financial services provider, JB Financial Group, has partnered with Infina, a leading Vietnamese financial platform focused on wealth management with approximately 1.3 million customers and 500,000 monthly active users. This is a key move under JB Financial’s new growth model, which focuses on strategic investments for mutual growth with domestic and foreign fintech companies.
“We expect that cooperation with a potential Vietnamese fintech company will further help us move in the right direction of business,” JBSV CEO Kim Doo-yoon said at the signing of the agreement in Hanoi. His Infina counterpart James Vuong added that the cooperation “would be an example of joint prosperity in Vietnam, which has high growth potential.” Vuong, meanwhile, said that Infina was pleased to work with “a financial services company that customers trust highly” and that JB Financial Group’s expertise in relevant finance and digital technology was a crucial factor in the decision to move forward with the partnership. “We expect JB Financial Group to not only expand business in Vietnam, but also take us with them as they continue to establish a foothold in other countries.”
Konsentus, a global leader in open banking advisory services and trust infrastructure, has partnered with SAVIS, a leading Vietnamese provider of digital products, services and solutions for key industries such as financial services, government, healthcare and telecommunications, to accelerate the proliferation of open banking in Vietnam. “Our international presence and deep understanding of global open banking ecosystems have enabled us to streamline processes and develop a framework tailored to the needs of the local Vietnamese market,” said Jim Wadsworth, executive vice president of strategic market development at Konsentus, about the partnership. “Vietnam is a growing economy, but 44 percent still lack a bank account and 70 percent still live in rural or remote areas. Open banking can support financial inclusion and the broader digital transformation agenda. Konsentus looks forward to supporting Vietnam on its journey to open banking.”
“Open banking can foster economic growth and social development. It provides customers with a comprehensive view of all financial data and enables businesses to access a wider range of financial services. Banks are working with third-party providers to optimize the user experience when using financial products and services,” said SAVIS CTO Van Hoang Nguyen. “With [the] open banking ecosystem, consumers can make direct payments to merchants from their bank accounts, eliminating the need for card-based transactions. Konsentus has been a crucial partner in understanding global best practices and defining the appropriate framework for the Vietnamese market. We are confident that what we have delivered together is tailored to the market and will set the country up for future success.”
The payments sector is the brightest in Vietnam’s fintech ecosystem, with e-wallet facilities and contactless payments riding the wave of the country’s e-commerce boom. And with Statista estimating a massive three-fold increase in mobile wallet users from 24.7 million in 2021 to around 67.6 million in 2026, it’s clear why much of the global funding is pouring into this particular segment. “The steady growth of the digital economy and the rise of e-commerce and cross-border trading platforms underpin the fundamental drivers of Fintech growth in Vietnam, which was dominated by digital payments and consumer lending in 2022,” noted the “Advance of Fintech in Vietnam (2023)” report by professional services firm Acclime Vietnam.
The payments boom has also been strongly supported by Vietnamese authorities, with the central bank signing a memorandum of understanding (MoU) in February to develop its cross-border payment services system in concert with five other ASEAN member countries, seeking to enhance the strength of its regional payment connectivity and improve the convenience, transparency, speed and cost of cross-border transactions. The MoU focuses primarily on cross-border payment connectivity for retail transactions, with quick response (QR) codes and instant payment services taking center stage.
Indeed, Hanoi has been instrumental in facilitating the growth of Vietnam’s burgeoning fintech sector. In 2021, for example, the government approved a two-year pilot program that allows customers with mobile phone accounts to make payments for low-value transactions for goods and services, money transfers, top-ups, and withdrawals without having to have a bank account, smartphone, or internet connection. It was aimed at remote rural areas to encourage greater financial inclusion and promote a cashless society. Given its successful adoption across the country, the government passed a resolution in November 2023 extending the service until the end of 2024.
Given the launch of Hanoi’s National Digital Transformation Program, which has set formal targets for Vietnam’s digital economy of a 25 percent share of gross domestic product (GDP) by 2025 and a 30 percent share by 2030 (significantly above the General Statistics Office’s forecast). [GSO’s] (Estimated 2022 at 15.41 percent), the remarkable growth of the domestic fintech sector is widely expected. “Fifteen percent is still considered a high figure because the scale of Hanoi’s economy is large with a GRDP of 1.2 quadrillion VND,” according to Dau Ngoc Hung, head of Hanoi’s statistics bureau. “In other words, 15.4 percent is less than 30 percent, but the absolute value is high.” The Ministry of Information and Communications (MIC) has also set a target of increasing Internet Protocol version 6 (IPv6) usage from 65 percent to 80 percent by the end of this year, which would place Vietnam among the top eight in the world for IPv6 usage.
The government has devised a new regulatory framework for fintech, with the first-ever draft of a regulatory sandbox issued in 2020. This was followed by the SBV launching a new draft decree for a regulatory sandbox for Vietnam’s banking sector in March 2024, which proposes a comprehensive framework for the fintech sandbox program that would include eligible solutions, eligibility criteria for service providers, and participation requirements.
That said, however, there remain challenges in realizing these lofty ambitions, not least the troubling collapse in recent investment in Vietnam’s fintech companies: an 84 percent decline from $227 million in 2022 to $35.3 million in just eight funding rounds in 2023, according to data from tech-focused investment platform Tracxn. The funding slowdown has largely been attributed to a lack of late-stage funding rounds, as well as the absence of a single $100 million round or unicorn emerging over the course of the year.
However, a more optimistic 2024 and beyond is widely expected for Vietnam’s fintech sector. “Vietnam’s fintech market is expected to grow at a faster pace in the coming years. Its growing young tech-savvy population and digitalization are expected to accelerate growth in this region,” Tracxn said in a press release. The report also highlighted key points amid the gloom of 2023, including alternative lending, which saw a 50 percent increase in total funding from $11.4 million raised in 2022 to $17.1 million in 2023.
A report by Mordor Intelligence also predicted a stellar growth for Vietnam’s fintech market in terms of transaction value from USD 16.62 billion in 2024 to USD 41.76 billion by 2029, at a compound annual growth rate (CAGR) of 20.23 percent during the forecast period. “Vietnam is one of the most promising and unexplored fintech markets, with a rapidly growing market for technology companies that support digital banking, digital payments, blockchain, and cryptography,” the report noted. “Fintech startups and traditional banks are investing in digital banking solutions to provide customers with seamless and personalized banking experiences. Digital banks such as Timo, Toss, and M Service’s eMonkey have gained traction by providing innovative features and intuitive interfaces.”