Creating Momentum for Fintech Development in Vietnam

11:47:10 AM | 2/7/2019

In the past 2-3 years, the penetration of technology into the financial sector (Fintech - Financial technology) is considered a popular trend in the global context of Technology 4.0 and changing online customer behaviors (including shopping, entertainment and social networking), according to a report released by Vietnam Report Joint Stock Company.

Impressive growth

According to the Payment Department under the State Bank of Vietnam (SBV), in the first quarter of 2019, domestic card-based payment transactions increased by 18.45% and internet-based financial transactions surged 66% year on year. Electronic payment, especially via mobile phones, also grew strongly in both quantity and value of transactions, rising by 97.75% and 232.3%, respectively.

According to Vietnam Report survey of commercial banks operating in Vietnam, 100% of banks said that they intend to cooperate with Fintech companies to advance toward the goal of cashless payment. Some successful models such as Uber, Grab, Alibaba and Amazon are applying payment technology linked to banks.

Beside Fintech companies, many big corporations have jumped into this game to take advantage of their existing users. Zion - a subsidiary of VNG Group - launched the ZaloPay electronic wallet that works together with its previous 123pay payment gateway, integrated with 70 million users of Zalo Chat community. Vietnam Branch of Garena Group - Vietnam eSports - launched TopPay e-wallet with over 20,000 points of transaction nationwide and TopPay downloads on Google Play Store already exceed 100,000. GrabPay payment service is also running promotions across Southeast Asia to take advantage of Grab’s 27 million users here.

Being developed on information and telecommunications technology systems, requiring no branches and transaction locations like conventional banks, products and services provided by Fintech companies are attracting a wide range of customers, not only customers who use traditional financial services but also customers who have limited access to financial services due to procedural barriers or distance, like people living in rural, remote, or island areas.

Main actors in the Fintech ecosystem include Government, businesses and financial institutions. These actors contribute their own strengths to Fintech while simultaneously enjoying benefits from Fintech.

In Vietnam, besides Fintech payment, some startup businesses initiated other types of Fintech such as pooling capital (e.g. FundStart, Comicola, Betado and FirstStep), online loan services (e.g. LoanVi and Trust Circle), money transfer (, personal finance data management (e.g. BankGo, Money Lover, Mobivi), online pawn (e.g. F88). Needless to say, Fintech is a potential field in Vietnam due to population size and comparative advantages of human resources active in information technology field. However, except for Fintech payment, the legal framework for other Fintech fields is not complete to ensure sustained market entry and sustainable business development.

Controlling Fintech with care

The Fintech development makes cash flow management of the Government and the State Bank of Vietnam more complicated. Vietnam is expected to have nearly 100 Fintech companies, resulting in requirement for a complete regulatory framework for them. At the same time, the SBV should also have documents to adjust and supplement principles of international payment and money transfer, regulations on provision of intermediary payment services to minimize financial risks that may occur.

There are still concerns about financial security and customer information security. Online payment or mobile payment will promote a cashless economy but security and confidentiality is a concern for users, especially in the context of rising fraud and bank account theft.

The Fintech trend is certain. Banks are increasingly forced to join this very fast-expanding platform to meet customer needs in spite of their limited technology, capital and personnel. Although large commercial banks have enough money for this, they have to weigh up expenses, profits and strategic priorities in 2019.

In fact, in the past years, the State Bank of Vietnam has proactively approached this issue and held talks with Fintech businesses in order to promptly remove obstacles and facilitate their market penetration.

While many countries in the region and in the world have special interests and give specific policies, plans and actions to promote and support the sustainable development of Fintech businesses, the SBV Governor issued Decision 328/QD-NHNN dated March 16, 2017 on establishment of the Steering Committee and the Support Group for Fintech under the SBV. This committee consists of members from SBV departments. It is responsible for advising and proposing to the Governor solutions for banking Fintech companies in order to build development strategies and plans in line with the Government's guidelines and orientations; perfect the legal framework, ecosystem, and management mechanisms to facilitate these businesses to develop effectively and healthily.

Huong Giang