” 5.3 Billion US Dollar in Vietnam “
‘Fintech’ basically means using ‘technologies’ to do ‘financial activities’. The fintech ecosystem includes computer programs, mobile applications, or any other type of digital solutions, and of course the people who make such relationship between finance and technology possible (start-ups, investors, consumers, etc.)
Being a friendly host towards technology, Vietnam has a fairly favorable environment for fintech. In 2015, Vietnam population’s internet usage ratio is 45% (41 million out of 91.3 million). 62% of those Internet users reportedly participate in online shopping. Of the online shoppers, 48% and 11% make payment by e-banking and e-wallet respectively.
In 2016, transaction value of Vietnam’s fintech market amounts to US 5.306bn. With the compound annual growth rate (CAGR) of 21% in the next 5 years, such transaction value is expected to reach $11.366bn in 2020.
The market’s biggest segment is ‘e-payment’, accounting for $5.295bn (99%) of total transaction value in 2016. This dominance is well aligned with the fact that the majority of existing fintech start-ups in Vietnam (22/39 companies) belong to e-payment section.
“45 provinces nationwide, 1.5 Million Users”
M-Service JSC is the outstanding player with their e-wallet application called ‘MoMo’, which so far has expanded its presence to 45 provinces nationwide and amassed an approximate total of 1.5 million users. On March 2016, M-Service received $28 million investment from Standard Chartered Bank and Goldman Sachs to further develop MoMo.
Besides e-payment, other less prominent sections of fintech have their excellent representatives as well. In ‘Personal finance’ section, Timo, powered by VPBank, is the first digital-only bank in Vietnam. In the ‘Lending’ section, LoanVi is the one to watch out for; it has been fostered by Vietnam Sillicon Valley – a start-up incubating project created in 2013 by Ministry of Science and Technology.
Recently, the young fintech industry receives quite some boosts. Vietnam Fintech Club, launched on October 2015 with sponsorship from Dragon Capital and Standard Chartered Bank, provides a casual style platform for cooperation between entrepreneurs and investors. ‘Blockfin Asia 2016’, an international-level Fintech conference, also took place in Vietnam for the first time on June 15th & 16th.
” The Biggest issue, Lack of legal framework “
However, hindrances are still lying on the way. Lack of fintech-specific legal framework seems to be the biggest issue, as existing legislation only administers primary forms of financial technology like e-commerce (Law on e-transactions 2005) or e-transaction (Decree no. 52/2013/ND-CP). Without its own designated rules and regulations, fintech industry may find it difficult to advance at full force.
All in all, Vietnam will be a challenging, but correspondingly rewarding market for fintech. Finance has always been heavily regulated by the government, and the traditional brick-and-mortar banks still possess the mighty power. Thus, for foreign fintech start-ups who want to join Vietnam’s market, legal matters will be of absolute top priorities, and cooperation with traditional banks could be a useful springboard.
B&Company Hoàng Đức Trung