Financial technology, or fintech, has changed the way consumers all over Vietnam deal with money. In 2019, Vietnam’s fintech industry reached USD 9 million in transaction value, and is envisioned to reach USD 22 billion by 2025.
Several factors are driving the growth of this industry, such as the government’s push to make Vietnam a cashless society and the large number of fintech services available to the country’s small-to-medium enterprises (SMEs), which have been underserved by traditional banks. However, while fintech is rapidly growing—especially amongst the sectors of digital payments, personal finance, and corporate solutions—there are still great strides to be made when it comes to addressing several key challenges that hamper the sector’s growth. This is explored in the white paper Unlocking Vietnam’s Fintech Growth Potential by YCP Solidiance.
Roadblocks to fintech success
Vietnam is currently behind other Southeast Asian countries when it comes to banking sector penetration. Compared to ASEAN neighbors like Malaysia (93%) and Thailand (91%), Vietnam’s reach is only at 63%. To address this issue head-on, the government has developed programs to get more citizens to use cashless methods and transactions.
Nevertheless, there are other problems that need to be addressed and studied before Vietnam can truly unlock its full fintech potential:
- Government restrictions (specifically Article 24, Circular 19) require all fintech transactions to pass through the National Payment Corporation of Vietnam (NAPAS). Fintech players are worried that this will limit progress and innovation in this new business sector.
- Fintech companies in Vietnam need two important things to succeed: large capital resources to help those still at the earliest stages; and management expertise from experienced senior investors. Not having these two things cause ~70% of start-ups to fail within their first year.
- Awareness and trust are issues most fintech start-ups are struggling with, as gaining the trust of consumers through education and brand-building campaigns is crucial in ensuring the success of this new business segment. However, these campaigns are costly and time-consuming.
- The rapid growth of digital makes the fintech industry particularly vulnerable to cybersecurity risks.
These issues, while intimidating, present a great opportunity to design innovative solutions, and build strong partnerships with the different stakeholders involved.
To help regulate the process and to provide support for start-ups, the Fintech Steering Committee was created in 2017 by the National Payment Corporation and the Central Bank. The committee is tasked with creating a legal framework for start-ups and to advise the government on ways to better aid fintech’s growth and development.
Several programs have also been created to provide aid and guidance for budding fintech businesses—the National Program to Support Innovative Start-up Ecosystem in Vietnam (ISEV), for instance, will run until 2025 and is focused on helping start-ups become high-growth firms through novel technologies and business models. Incubators and accelerators like Viisa and ThinkZone are also supplementing government efforts by providing financial assistance, expertise, and facilities for start-ups to grow.
While several barriers to the growth of fintech still need to be addressed, there is boundless potential for fintech’s growth and future in Vietnam. This goes for domestic and international investors as well—opportunities for M&A are abundant.
To learn more about Vietnam’s growing fintech industry and how your business can both invest in this space and address its unique issues, download our white paper here.