Statistics show that, every second, Vietnamese people use at least one Fintech (financial technology) service. This is a great opportunity for businesses to invest in this field and in fact, many investors have been more serious when putting money into the Vietnamese Fintech market.

Great opportunity from the market

In the middle of last year, the auditing firm KPMG and HSBC released a report on emerging startups. According to the report, the Asia-Pacific region, led by China, is the region where Fintech has the fastest growth rate.

For Vietnam, many organizations consider that there is still a great opportunity. Thanks to the population structure, vibrant online commerce activities and developed network infrastructure, the potential in the field of consumer finance is also very large because the percentage of population accessing the banking channel is still quite low.

According to a report by Robocash Group, an online lender, Vietnam is one of the leading countries in the ASEAN region in terms of fintech funding, second only to Singapore.

Accordingly, 93% of all venture capital investments in Vietnam are directed to the e-wallet and cryptocurrency segment. Every second, Vietnamese people use at least one Fintech service. The demand for digital services, including transactions, payments and wallets among Vietnamese people is remarkable. This is a young and promising market, with a valuation that has increased from USD 0.7 to 4.5 billion since 2016.

With the current investment flow, it can be seen that there are two trends: the increase in investment in the subprime customer segment, followed by the emergence of financial institutions or large corporations.

In particular, the subprime customer segment is clearly shown through the orientation of investing in buy now pay later (BNPL) activities or services for businesses and individual business households.

Research and Markets statistics show that BNPL payments in Vietnam have grown quite strongly, with a CAGR of 45.2% in the period 2022-2028. The total value of goods through BNPL in the country is estimated to increase from USD 496 million in 2021 to over USD 1 billion in 2028.

So far, though, BNPL hasn’t made a significant hit, perhaps because credit cards are becoming more popular and accessible as well as consumer lending finance companies are expanding product and range. On the other hand, dependence on subprime lenders and partners will be a big challenge for this model in Vietnam.

Another development is that it seems that the trend of “indiscriminate” application investment is decreasing, instead, there is more seriousness coming from investment funds and financial institutions.

There are still legal barriers

Not only fintechs but also banks are also entangled in the legal story. According to a report on digital transformation of the banking sector in Ho Chi Minh City at the beginning of 2023, although banks have deployed many digital-based services and digital banking, digital-based lending services are performed in lowest level of these services.

The reason is because the process of providing loan services has to go through many steps, requiring a lot of information about customers, but banks do not have enough database as well as legal basis to strongly deploy the service. Therefore, this service is mainly used to grant low-value credits to a small number of trusted customers.

In general, Fintech in Vietnam still faces a lot of legal problems. Circumventing the law in related activities cannot make fintechs go a long way, especially in the context of current difficulties in raising capital.

At a press conference earlier this year, a representative of the State Bank of Vietnam said that it had submitted a draft decree on the experimental legal framework of financial technology in the banking sector. This draft is being finalized on the basis of comments from ministries and branches for re-submission as soon as possible.

Henry Tran – VienamCredit