Financial Technology companies, or fintech, is considered by many to have taken the world by storm. Fintech has been disrupting financial industries by shaping new habits and preferences for many financial product's consumers.
The fintech trend is also occurring in Vietnam's financial industry. Fintech in the country is seen by many as an opportunity to reach out to unbanked population of Vietnam as it offers an easy alternative payment method, which still accounts for more than half of its population. Fintech can also be utilized by banking institutions to increase its penetration due to the value it offers to the population. Vietnam's fintech market is expected to grow to USD 7.8 billion in transaction value by 2020.
Our report, titled Unlocking Vietnam's Fintech Growth Potential, found that several factors help the rising of fintech transformation in Vietnam's financial industry. The government's plan in reducing cash transactions of all payments and unbanked citizens to only 30% of the population by 2020 is hoped to pave a way towards an increasingly cashless society. Fintech's ability to reduce key pain-points that are met in most traditional financial services is expected to encourage the unbanked population to try out the financial service.
Smartphones and internet penetration across Vietnam, combined with technological breakthrough, have assisted the quick growth of fintech in the country. The introduction of low-priced 4G service and smartphones will also provide the necessary means for digital payment and other fintech services.
According to our report, Unlocking Vietnam's Fintech Growth Potential, among different fintech product segments, digital payment solution is leading the Vietnam market. With an estimated 12.8% growth rate, digital payment will account for 70% of fintech industry by 2025. It is also leading the fintech industry in terms of investment and players. The landscape are now being more competitive, due to a range of macro and industry factors. Aligning to government's plan of fintech application in the country, regulatory initiatives are also being implemented to support digital payment.
Vietnam is forecasted to have 6.3% of GDP growth, showing an increase of affluent population with a high demand for convenience and cost-saving lifestyle. Digital personal finance offers solution for these populations, resulting in the appealing growth of digital personal finance solutions and market. The unbanked of Vietnam are also being reached as a market for the personal finance solutions. Technological innovation and improvement, which ease the adoption of financial services, also helps fintech to acquire this unbanked market. Our report forecasts that personal finance segment will reach 31.2% growth rate.
Conventional corporate finance services in Vietnam leaves multiple market gaps and industry segments untapped. Fintech in Vietnam successfully finance local SMEs and startups, who play an important role in Vietnam's economy and growth. This helps corporate finance to be the fastest growing fintech segments in Vietnam with projected 35.9% growth rate.
Although Vietnam's fintech industry may seem very promising, fintech players must face a series of challenging key barriers in the market. Lack of regulatory clarity has hold down many fintech and e-commerce innovation in Vietnam, even though the government are making ways to support the fintech. Many regulatory framework are unclear and not being specific, making startups hesitate to scale or raise funds from investors. Startups and fintech also have an inability to raise funds, making them unable to compete with high-profile multinational firms. Alongside that, management knowledge constraints and trust issues from stakeholders should be tackled by Vietnam's fintech in order to dominate the market. Only when all these obstacles are getting cleared out, Vietnam fintech sector can maximize their growth potential.
Gain more insight in our full report, Unlocking Vietnam's Fintech Growth Potential.Download White Paper