Can Vietnam’s Fintech Sector Fulfil Its Immense Potential?

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By Samantha BarnesInternational Banker

“Vietnam is considered a land of opportunity for the fintech industry due mainly to its young population, high economic growth rate and the expanding adoption of digital devices in the country,” a Woori Financial Group official said at the launch of its Digital Innovation Lab (DINNOlab ) in Hanoi in late April, with officials from Korea’s Financial Services Commission (FSC), Vietnam’s central bank (State Bank of Vietnam, or SBV) and the Embassy of the Republic of Korea in Vietnam in attendance. “The DINNOlab Vietnam Centre plans to support Korean startups’ partnership(s) with leading fintech companies in Vietnam while aiming to discover new business models.” The sheer fact that Vietnam was chosen by this financial-services giant—the largest bank in South Korea—as the preferred strategic location for this important testbed for financial technology (fintech) in Southeast Asia is particularly telling and underscores the rapidly growing appeal of the country possesses as an exciting fintech hub.

With the emergence of a tech-savvy middle class and the resolute backing of a distinctly supportive government, Vietnam is transforming itself into an attractive destination for fintech investment. According to the automated financial services firm 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 lofty valuation of $18 billion this year.

A joint report from Google and Temasek, moreover, showed that Vietnam had the fastest-growing digital economy in Southeast Asia in 2022, registering a phenomenal annual growth rate of 28 percent, while research from the State Bank of Vietnam revealed that the number of fintech companies in the country had sprouted from 39 at the end of 2015 to more than 150 firms in 2021. A separate report from UOB (United Overseas Bank) in 2022, meanwhile, counted more than 200 fintech firms operating in Vietnam across various market segments.

It should come as no surprise, then, that recent years have seen companies and investors clamoring to increase their exposures to the burgeoning Vietnamese fintech space. Through its local affiliate JB Securities Vietnam (JBSV), for example, another Korean financial-services major, JB Financial Group, partnered with Infina, a leading Vietnamese financial platform focused on asset management with around 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 overseas fintech firms.

“We expect cooperation with a prospective Vietnamese fintech company will further help us to head in the right business direction,” JBSV’s chief executive officer, Kim Doo-yoon, said upon signing the deal in Hanoi. His Infina counterpart, James Vuong, added that the cooperation would “set an example for joint prosperity in Vietnam that has a high growth potential”. Vuong, meanwhile, affirmed that Infina was pleased to work with “a financial services company that is highly trusted by customers” and that JB Financial Group’s expertise in finance and relevant digital technology was a crucial factor in the decision to proceed with the partnership. “We anticipate JB Financial Group will not only expand business in Vietnam but also take us with them as it continues to set a foothold in other countries.”

Konsentus, a global leader in open-banking advisory services and trust infrastructures, has teamed up with SAVIS, one of Vietnam’s leading suppliers of digital products, services and solutions to key sectors such as financial services, government, healthcare and telecommunications, aiming to accelerate the proliferation of open banking in Vietnam. “Our international footprint and in-depth understanding of global open banking ecosystems has enabled us to streamline processes and develop a framework tailored to local Vietnamese market requirements,” Konsentus’s executive vice president of strategic market development, Jim Wadsworth, said of the partnership. “Vietnam is a burgeoning economy, but 44 percent are still unbanked, and 70 percent 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 on its open banking journey.”

“Open banking can enable economic growth and social development. It provides a comprehensive view of all financial data to customers and enables businesses to access a wider range of financial services. Banks cooperate with third-party providers to optimize the user experience when using financial products and services,” SAVIS’s chief technology officer, Van Hoang Nguyen, also stated. “With (the) open banking ecosystem, consumers can execute direct payments to merchants from their bank accounts, eliminating the necessity for card-based transactions. Konsentus has been a crucial partner in understanding global best practice and defining the appropriate structure for the Vietnamese market. We are sure that what we’ve delivered together is tailored for the market and will set the country up for future success.”

The payment sector shines brightest within Vietnam’s fintech ecosystem, with e-wallet facilities and contactless payments having ridden the wave of the country’s e-commerce boom. And with Statista estimating a whopping threefold increase in mobile-wallet users from 24.7 million in 2021 to around 67.6 million in 2026, it is clear why much of the global funding is flocking to this particular segment. “The consistent growth of the digital economy and the rise of e-commerce and cross-border trade platforms underpin the foundational factors for the Fintech growth in Vietnam, which was dominated in 2022 by digital payments and consumer lending,” the “Advance of Fintech in Vietnam (2023)” report from professional-services firm Acclime Vietnam noted.

The boom payments has also been robustly supported by Vietnamese authorities, with the central bank signing a memorandum of understanding (MoU) in February to develop its cross-border payment-service system in concert with five other ASEAN member countries, seeking to bolster 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 heavily.

Indeed, Hanoi has been instrumental in facilitating the growth of Vietnam’s thriving fintech industry. In 2021, for instance, the government approved a two-year pilot program allowing customers with mobile-phone accounts to make payments for small-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 Programme, which established formal targets for Vietnam’s digital economy of a 25-percent share of gross domestic product (GDP) by 2025 and a 30-percent share by 2030 (significantly above the General Statistics Office’s (GSO’s ) 2022 estimate of 15.41 percent), the considerable growth of the domestic fintech sector is widely anticipated. “Fifteen percent is still considered a high figure because Hanoi economy’s scale is large with GRDP of VND1.2 quadrillion,” according to Dau Ngoc Hung, head of the Hanoi statistics office. “In other words, 15.4 percent is lower than 30 percent, but the absolute value is high.” The Ministry of Information and Communications (MIC) has also set a target of increasing the usage of Internet Protocol version 6 (IPv6) to 65 percent to 80 percent by the end of this year, which would position Vietnam among the world’s top eight for IPv6 usage.

The government has devised a new regulatory framework for fintech, with the first-ever draft of a regulatory sandbox issued in 2020. This was followed by the SBV’s March 2024 launch of a new draft decree for a regulatory sandbox for Vietnam’s banking sector, which proposes a comprehensive sandbox programme framework for financial technology that would include eligible solutions, eligibility criteria for service providers and requirements for participation.

All that said, however, problems remain in realizing these lofty ambitions, not least the sobering plunge in recent investments into Vietnam’s fintech companies—an 84-percent decline from $227 million in 2022 to $35.3 million across just eight funding rounds in 2023, according to data from tech-focused investment platform Tracxn. The funding slowdown was largely attributed to the lack of late-stage funding rounds, as well as neither a single $100-million round nor a unicorn emerging throughout the year.

Nonetheless, a more upbeat 2024 and beyond is widely anticipated for Vietnam’s fintech sector. “The Vietnam fintech market is expected to grow at a higher rate in the coming years. Its growing tech-savvy young population and digitization are expected to accelerate growth in this region,” Tracxn stated in a press release. The report also noted key spots amid 2023’s gloom, including alternative lending, which witnessed a 50-percent surge in total funding from the $11.4 million raised in 2022 to $17.1 million in 2023.

A Mordor Intelligence report, moreover, projected stellar growth for Vietnam’s fintech market in terms of transaction value from $16.62 billion in 2024 to $41.76 billion by 2029, at a compound annual growth rate (CAGR) of 20.23 percent during the forecast period. “Vietnam is one of the most promising and untapped fintech markets, with a rapidly growing market for technology companies supporting digital banking, digital payments, blockchain, and cryptography,” the report noted. “Fintech startups and traditional banks are investing in digital banking solutions to offer customers seamless and personalized banking experiences. Digital banks like Timo, Toss, and M Service’s eMonkey have gained traction by providing innovative features and user-friendly interfaces.”