Fintech
Will Vietnam’s fintech sector realize its immense potential?
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From Samantha BarnesInternational Banker
“Vietnam is considered a land of opportunity for the fintech industry mainly due to its young population, high economic growth rate and the increasing adoption of digital devices in the country,” said an official from Woori Financial Group at the launch of its Digital Innovation Lab (DINNOlab) in Hanoi in late April, attended by officials from the Korea Financial Services Commission (FSC), the Central Bank of Vietnam (State Bank of Vietnam, or SBV) and the Embassy of the Republic of Korea in Vietnam. “DINNOlab Vietnam aims to support the partnership of Korean startups[s] with leading fintech companies in Vietnam, aiming to discover new business models.” The simple fact that Vietnam was chosen by this financial services giant, the largest bank in South Korea, as the preferred strategic location for this important bank testing for financial technology (fintech) in Southeast Asia is particularly significant and highlights the rapidly growing attractiveness the country holds as an exciting fintech hub.
With the emergence of a tech-savvy middle class and the steadfast support of a resolutely supportive government, Vietnam is transforming into an attractive destination for fintech investment. According to automated financial services company Robocash, Vietnam’s fintech sector is experiencing the highest growth rate in the ASEAN (Association of Southeast Asian Nations) region after Singapore and is expected to reach a high valuation of $18 billion this year.
A joint report by Google and Temasek also showed that Vietnam had the fastest-growing digital economy in Southeast Asia in 2022, recording a phenomenal annual growth rate of 28%, while research by the Bank of State of Vietnam revealed that the number of fintech companies in the country rose from 39 at the end of 2015 to more than 150 in 2021. A separate report by UOB (United Overseas Bank) in 2022, meanwhile, counted more than 200 companies fintechs operating in Vietnam in various market segments.
It should come as no surprise, then, that in recent years, companies and investors have been clamoring to increase their exposure to Vietnam’s burgeoning fintech space. For example, through its local affiliate JB Securities Vietnam (JBSV), another major Korean financial services provider, JB Financial Group, has partnered with Infina, a leading Vietnamese financial platform focused on wealth management with approximately 1.3 million customers and 500,000 monthly active users. This is a key move under JB Financial’s new growth model, which focuses on strategic investments for mutual growth with domestic and foreign fintech companies.
“We expect that cooperation with a potential Vietnamese fintech company will further help us head in the right business direction,” JBSV Chief Executive Officer Kim Doo-yoon said after signing the deal in Hanoi. His Infina counterpart, James Vuong, added that the cooperation “would set an example of joint prosperity in Vietnam, which has high growth potential.” Vuong, meanwhile, said Infina was pleased to work with “a financial services company that has great customer trust” and that JB Financial Group’s expertise in finance and related digital technology was a crucial factor in the decision to proceed with the partnership. “We expect that JB Financial Group will not only expand operations in Vietnam, but also take us with them as it continues to establish a foothold in other countries.”
Konsentus, a global leader in open banking advisory services and trust infrastructure, has partnered with SAVIS, a leading Vietnamese provider of digital products, services and solutions for key industries such as financial services, government, healthcare and telecommunications, to accelerate the proliferation of open banking in Vietnam. “Our international footprint and in-depth knowledge of global open banking ecosystems have enabled us to streamline processes and develop a framework tailored to the needs of the local Vietnamese market,” said Jim Wadsworth, Executive Vice President of Strategic Market Development at Konsentus. “Vietnam is a booming economy, yet 44% are still unbanked and 70% still live in rural or remote areas. Open banking can support financial inclusion and the broader digital transformation agenda. Konsentus looks forward to supporting Vietnam in its open banking journey.”
“Open banking can foster economic growth and social development. It provides customers with a complete view of all financial data and allows businesses to access a wider range of financial services. Banks work with third-party providers to optimize their “user experience when using financial products and services,” SAVIS Technical Director Van Hoang Nguyen also said. “With [the] In the open banking ecosystem, consumers can make direct payments to merchants from their bank accounts, eliminating the need for paper-based transactions. Konsentus has been a crucial partner in understanding global best practices and defining the appropriate structure for the Vietnamese market. We are confident that what we have achieved together is adapted to the market and will prepare the country for future success.”
The payments sector is the brightest in Vietnam’s fintech ecosystem, with e-wallet facilities and contactless payments riding the wave of the country’s e-commerce boom. And with Statista estimating a massive three-fold increase in mobile wallet users from 24.7 million in 2021 to around 67.6 million in 2026, it’s clear why much of the global funding is pouring into this particular segment. “The steady growth of the digital economy and the rise of e-commerce and cross-border trading platforms underpin the fundamental drivers of Fintech growth in Vietnam, which was dominated by digital payments and consumer lending in 2022,” noted the “Advance of Fintech in Vietnam (2023)” report by professional services firm Acclime Vietnam.
The payments boom has also been strongly supported by Vietnamese authorities, with the central bank signing a memorandum of understanding (MoU) in February to develop its cross-border payment services system in concert with five other ASEAN member countries, seeking to enhance the strength of its regional payment connectivity and improve the convenience, transparency, speed and cost of cross-border transactions. The MoU focuses mainly on cross-border payment connectivity for retail transactions, with quick response (QR) codes and instant payment services featuring prominently.
Indeed, Hanoi has been instrumental in facilitating the growth of Vietnam’s burgeoning fintech sector. In 2021, for example, the government approved a two-year pilot program that allows customers with mobile phone accounts to make payments for low-value transactions for goods and services, money transfers, top-ups, and withdrawals without having to have a bank account, smartphone, or internet connection. It was aimed at remote rural areas to encourage greater financial inclusion and promote a cashless society. Given its successful adoption across the country, the government passed a resolution in November 2023 extending the service until the end of 2024.
Given the launch of Hanoi’s National Digital Transformation Program, which set formal targets for Vietnam’s digital economy of a 25% share of gross domestic product (GDP) by 2025 and a 30% share by 2030 ( significantly above the General Statistics Office share). [GSO’s] estimated for 2022 at 15.41%), the notable growth of the national fintech sector is widely expected. “15% is still considered a high figure because the scale of Hanoi’s economy is large, with a GDP of VND 1.2 quadrillion,” according to Dau Ngoc Hung, head of the Hanoi Statistics Bureau. “In other words, 15.4% is less than 30%, but the absolute value is high.” The Ministry of Information and Communications (MIC) has also set a target to increase the use of Internet Protocol version 6 (IPv6) from 65% to 80% by the end of this year, placing Vietnam among the top eight countries in the world for IPv6. usage.
The government has devised a new regulatory framework for financial technology, with the first ever draft regulatory sandbox issued in 2020. This was followed by the SBV launching in March 2024 a new draft decree for a Regulatory sandbox for the Vietnamese banking sector, which proposes a comprehensive financial technology sandbox program framework that would include eligible solutions, eligibility criteria for service providers and requirements for participation.
That said, however, challenges remain in realizing these lofty ambitions, not least the sobering plunge in recent investment in Vietnamese fintech companies: an 84% decline from $227 million in 2022 to $35.3 million in just eight funding rounds in 2023, according to data from tech-focused investment platform Tracxn. The funding slowdown has largely been attributed to a lack of late-stage funding rounds, as well as the emergence of neither a single $100 million round nor a unicorn during the year.
However, a more optimistic 2024 and beyond is widely expected for Vietnam’s fintech sector. “Vietnam’s fintech market is expected to grow at a higher pace in the coming years. Its growing tech-savvy young population and digitalization are expected to accelerate growth in this region,” Tracxn said in a press release. The report also highlighted key takeaways amid the gloom of 2023, including alternative lending, which saw a 50 percent increase in total funding from $11.4 million raised in 2022 to $17.1 million in 2023.
A report by Mordor Intelligence also predicted a stellar growth for Vietnam’s fintech market in terms of transaction value from $16.62 billion in 2024 to $41.76 billion by 2029, with a compound annual growth rate (CAGR) of 20.23% during the forecast period. “Vietnam is one of the most promising and untapped fintech markets, with a rapidly growing market for technology companies that support digital banking, digital payments, blockchain, and crypto,” the report noted. “Fintech startups and traditional banks are investing in digital banking solutions to provide customers with seamless and personalized banking experiences. Digital banks such as Timo, Toss, and M Service’s eMonkey have gained traction by providing innovative features and intuitive interfaces.”