In order to minimize the gap with other countries in the region in terms of financial inclusion, Vietnam’s government has approved a financial scheme for the development of non-cash payments in Vietnam effective from 2016-2020. The plan aims to reduce the ratio of cash transactions to 10%, reaching 70% banked accounts by 2020, and the progress was already visible in 2019.
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The significantly higher proportion of unbanked citizens provides opportunities for players in Vietnam’s fintech industry to fill in the market gap. Fintech can leverage rising bank penetration to accelerate value-added services, as underbanked populations are also key drivers to take advantage of users’ unmet needs from traditional financial services.
Vietnam’s fintech market had reached USD 9 billion in transaction value in 2019 and is expected to grow to USD 22 billion by 2025. According to our recently updated report, “Unlocking Vietnam’s Fintech Growth Potential”, fintech applications will further penetrate Vietnam’s financial ecosystem and establish themselves as key go-to services across digital payment, personal finance, and corporate finance solutions, supported by a large potential tech-savvy user base, active start-up and investment community, increasingly supportive regulatory framework, and robust enabling environment.
Digital Payment Leads the Fintech Market
Among different fintech product segments, the digital payment solution is currently leading with 85% market share. Some of the prominent players in the market include Momo, WePay, Moca, VNpay, and BankPlus, among others.
Vietnam’s digital payment landscape is increasingly competitive, drawn by a range of macro and industry factors such as low banked ratio, fixed transaction fees, rising banking penetration, surging smartphone and internet penetration, and burgeoning e-commerce sector with the expected 42 million users or 43% of the population by 2021.
Emerging Segment: Personal and Corporate Finance
Although digital payment is currently leading in terms of players and investment, personal and corporate finance is expected to grow at a faster rate through 2025.
With a more affluent population seeking convenience and cost-saving lifestyle, personal finance solutions are increasingly growing in Vietnam. With the average 6.4% GDP growth in the 2000s, growing income levels from Vietnam’s middle-class have accelerated consumption. Increasing outward migration and rising remittance inflows, with 32% CAGR from 2010-2019, has also generated a strong impact on modern money transfer services.
Meanwhile, SMEs and start-ups play a critical part in driving corporate finance to be the fastest growth rate among fintech segments in the country. The rising establishment of new enterprises, with 54,000 market entrants in the first five months of 2019, has driven the demand for resources and capital. Therefore, Fintech solutions can help ensure adequate capital sourcing for start-up businesses, together with SMEs to facilitate and accelerate growth.
Government’s Role to Build the Future of Fintech
The government plays a crucial role in facilitating a conducive environment for fintech to flourish. In order to support fintech start-ups and facilitate the ecosystem, the Fintech Steering Committee was established in March 2017 by Central Bank and the National Payment Corporation.
Furthermore, to address legal loophole, new circular - Circular No. 23/ 2019 which amended and supplemented several related articles were issued and effective from 7 January 2020. Particularly, customer identification and verification (KYC) and individual’s monthly transaction limit of VND 100 million (~USD 4.3K) is requested by the government to closely monitor the payment transaction as well as protect users in using e-wallet solution.
The government of Vietnam has also put more effort to support and promote Vietnam as a tech hub in the region through some associations and programs, including NATIF, NATECD, SIHUB, FIRST, IPP, and Nafosted. Download the full report here to learn more.