Fintech in Vietnam: An untapped opportunity?
Fintech presents both opportunities and threats and Vietnam is no exception
Fintech, a portmanteau of financial technology, has become a term to refer to technological innovations in the financial sector – be it improvement of financial literacy and education, banking services, e-payments and remittances, investment, financial data management, or crypto-currencies like bitcoin. In Vietnam, the word Fintech is mostly used in connection with electronic and mobile payment services, as this subsector of Fintech has the most businesses and start-ups operating in it and regularly catches the media’s attention. Currently, there are more than 20 non-bank organizations in Vietnam offering some type of an e-payment or m-payment service through their e-wallets. Among the most prominent ones are PaYoo, Moca, Momo and Airpay, with other large players entering the market – Samsung Pay, AliPay or ZaloPay.
These e-wallets are closely linked to banking services, as electronic top-ups and transactions require topping up using bank accounts and payment cards. The fact that majority of Vietnamese population remains unbanked, particularly in the rural areas, and that the Vietnamese still prefers to use cash (more than 90% of all transaction in Vietnam are made in cash) prevents a quick spread of these services. On the other hand, it also presents an untapped opportunity. Recognizing that “cash is the king”, companies have set up and are expanding their Point-of-Sales terminals, where customers can cash in and cash out their money. Payoo, which focuses on payments of utilities, together with Momo, are the pioneers in this respect, with more than 5000 and 4000 PoS, respectively. If companies, together with the Government, who has perhaps overambitious plans to make Vietnam a 90% cashless economy by 2020, succeed in making Vietnam e-pay, the change could affect businesses and consumers across the entire economy.
BDG Insight:
Mr. Van Vo Nguyen, a partner at BDG and Director of KGK, a company providing loans and insurance for consumers and small businesses, is excited about the opportunities that fintech could bring to his line of business: “If people received salaries on their e-wallets and used them for most of their expenditure, we could easily offer products and services based on clients’ data retrieved from these e-wallets and use them to disburse and collect payments. For example, if a customer wants to buy a motorbike, his or her e-wallet could be used effortlessly to do a credit check, calculate interest rates, and to collect repayment installments.”
These opportunities, however, present challenges as well. Mr. Josef Schauer, a consultant at BDG Vietnam and an ex-Microsoft advisor, sees interoperability, security and privacy as the main challenges: “Most e-wallets are built on proprietary platforms and lock consumers into the provider’s network. To be successful, e-wallets need to provide the same ease of use as credit or debit cards which are accepted at any point of service, ATM, ecommerce site and or merchant. Furthermore, it is essential to find the right balance between the ease of use and restrictions required by security measures. Mobile payment providers can learn from the lessons of the credit card industry in this regard. Last, but not least, people are often concerned about their privacy - e-wallet providers need to clearly explain to their users as to who has access to the transactional data and what it is used for to establish a trusted relationship, otherwise people will stick to cash."
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