The fast-growing FinTech market in Vietnam holds great market potential for technology companies that support digital banking, digital payments, block chain, and cryptography. Since 2008, the FinTech industry of Vietnam has seen rapid growth in three segments:
- Online Payments
- Peer-to-peer Lending
- Crowd Funding
The Startup panorama of the Vietnam FinTech industry has almost tripled between 2017 and 2020. From 44 startups in 2017, it has grown to 123 startups in 2020 – according to a new report by FinTech Information Singapore. The FinTech market in Vietnam has three main product segments, namely :
- Digital Payments
- Personal Finance
- Corporate Finance
Some of the key factors that have led to the growth of the FinTech Industry in Vietnam are:
1. Government Support for FinTech Innovation in Vietnam
The government of Vietnam has led significant support for innovation in FinTech over the last few years. Government agencies such as the National Technology Innovation Fund and The FinTech Steering Committee have made efforts to create a conducive environment for FinTech startups. Various accelerators and incubators have also stepped in to grant capital, R&D and professional expertise to FinTech startups in Vietnam. In order to minimize the gap of financial inclusion, as compared to other countries in the region; Vietnam’s government has approved a financial scheme for the development of non-cash payments in Vietnam effective from 2020.
2. Emerging Segments: Personal & Corporate Finance
Personal loan and corporate finance are set to be high-growth segments in terms of players and investments, in the FinTech industry of Vietnam. As the income levels of Vietnam’s middle class population rises, there is increased consumption, rising remittance inflows and increasing outward migration. This has led to a rise in the demand for personal finance solutions or personal loans online. People are easily able to get personal finance options and online loans on their fingertips through various FinTech Apps providing personal finance services like unsecured loans, investments and fund transfer.
On the other hand, increasing startups are fueling the growth of the corporate financing solutions. With as many as 54,000 market entrants in the first five months of 2019, the demand for resources and capital is rising. FinTech companies are happy to provide them.
3. Digital Payments
Digital payments in Vietnam are leading with 85% market share among the three product segments. With top FinTech companies entering the fray, Vietnam’s digital payment market is quite competitive, drawn by macro and industry factors like low banked ratio, fixed transaction fees, rising banking penetration, increasing smartphone and internet penetration and the growing e-commerce sector.
4. Vietnam is Building a Futuristic FinTech Landscape
Investors around the world see immense growth potential in the Vietnamese FinTech sector. Increasing per capita incomes and the rising population make Vietnam a perfect environment for investment in FinTech. The Vietnamese government has been making various efforts for building a robust base for the growth of Vietnam’s FinTech landscape such as –
- Introduction of science, technology, engineering and mathematics (STEM) courses in school curriculums
- Children are exposed to computer science as a subject for learning from second grade and by fourth grade they develop basic programming and software development skills.
- Relaxation of visa requirements and tax incentives for Vietnamese dual nationals, to invite overseas Vietnamese experts in FinTech companies abroad, to return and work with the FinTech industry of Vietnam.
With a growing tech-savvy user base, a thriving startup ecosystem, conducive business environment and availability of capital, Vietnam is set to be a model for FinTech Industry growth in Southeast Asia. As more and more FinTech applications penetrate Vietnam’s financial system, they are bound to become the primary service for digital payments, personal finances and corporate finance solutions.
By showing an unparalleled commitment for innovation, Vietnam has established the foundation for a strong FinTech sector. They have not only promoted the growth of FinTech startups today, but also invested in the minds of tomorrow to create a talent pool that can fulfill the need for a technically capable workforce for the FinTech sector in future. In future, Vietnam is likely to expand its FinTech power and emerge as a model to emulate for the rest of the economies in Southeast Asia, who are also keen to build their FinTech industries.
Words by Lily Tran