Viet Nam’s fintech market is estimated to increase from US$4.4 billion last year to $7.8 billion by 2020, driven by rising bank penetration, according to research of Solidiance.

According to the white paper “Unlocking Viet Nam’s Fintech Growth Potential” released recently by the APAC-focused consulting firm, Viet Nam’s fintech market is poised for growth thanks to surging internet and smartphone penetration, burgeoning e-commerce sector, an increasingly supportive regulatory environment, and improvements in telecom infrastructure.

Fintech is disrupting Viet Nam’s financial services ecosystem. As the country aims to move towards a cashless society, Viet Nam’s Government targets to reduce cash transactions to 10 per cent and increase bank accounts in the population by 70 per cent in 2020.

Although bank penetration in Viet Nam is consistently growing, it still trails other Southeast Asian nations in the region. Viet Nam’s ratio of banked citizens only reached 59 per cent in 2017 while Thailand and Malaysia accounted for 86 per cent and 92 per cent respectively in the same year. As Viet Nam catches up with other neighbouring countries, increasing internet and smartphone penetration, improvements in telecommunication infrastructure (3G & 4G), and growing income levels from the middle-class have significantly given rise to opportunities in Viet Nam’s fintech space.

Among the three different fintech product segments - digital payment, personal finance, and corporate finance - digital payment solution leads the fintech service market share at 89 per cent. However, personal and corporate finance is expected to grow at a faster rate through 2025.

Viet Nam’s burgeoning e-commerce sector with growing order value has further promoted intermediary payment platforms and digital payment services. Currently, there are some 35.4 million online shopping users and it is expected to accelerate to some 42 million, accounting for 42.5 per cent of the projected population by 2021. The average spend of US$62 online will grow to $96 by 2021 and Cash on Delivery - the major means of payment - is expected to be replaced by digital payments & other modern payment methods, signifying ample opportunity for fintech firms to tap into.

According to Solidiance, although fintech has garnered considerable market attraction, barriers persist. Challenges including lack of regulatory clarity, capital limitation, management knowledge constraints, and trust issues must be observed in Viet Nam’s financial services industry. At present, the National Payment Corporation of Viet Nam (NAPAS) is the sole payment service provider for fintech and e-commerce innovation in Viet Nam. Peer-to-Peer lending platforms are growing but only banks and credit institutions in Viet Nam are legally permitted to operate in the lending business.

Furthermore, many local fintech companies are largely lacking capital resource to implement their business plan. Operational and management capabilities are hindered by knowledge constraints, especially for fintech start-ups. Building a strong reputation around an unknown brand like a start-up can be slow to build and may take significant investment, time, and energy. — VNS