Vietnam’s potential payment market is being eyed by many foreign businesses. Hundreds of millions of US dollars have been poured into Vietnamese fintech companies over the last period. A series of world famous fintechs such as Alipay, Wechat Pay, Amazon Pay, etc. have been setting foot into the country.
“Foreign investors are very interested and intend to acquire some Vietnamese good fintechs due to huge market potential”, said Varun Mital, Asean Fintech leader at Ernst & Young.
With the massive wave of foreign fintechs, many people worry that Vietnamese fintechs will be knocked out soon. However, according to Varun Mittal, this is unlikely because operations of foreign fintechs are limited in Vietnam. Such fintechs as Alipay, Wechat Pay, etc. still have to rely on Vietnamese fintechs to help Chinese tourists be able to use these applications in Vietnam.
“Foreign fintechs wanting to carry out the applications and provide services to customers in Vietnam need to have permits from the State Bank of Vietnam (SBV). I believe that the State Bank and Vietnamese government can determine the investment of foreign businesses in certain sectors”, said Varum Mittal.
So far, many banks and fintechs have overcome the initial fear and are seeking to cooperate with foreign fintechs to utilise the advantages of both sides. Nguyen Dinh Thang, Chair of LienVietPostBank believes that doors will be widely opened to Alipay, Wachat Pay, etc. to enter Vietnam. The government and the State Bank know very clearly how to open to both ensuring international commitments and not limiting the development of domestic businesses. In fact, though some foreign fintechs have set foot into Vietnam, they are only allowed to provide cross-border payment service.
“Fintechs are not banks, and they cannot occupy our “field”. Therefore, instead of being afraid, let’s think about cooperation. We are discussing about the cooperation with Wepay under Webank of Tencent group in Vietnam”, said Thang.
* Capital inflows into fintech will continue flowing strongly
Though the ability to acquire the market of foreign fintechs is unlikely now, foreign investment wave into fintech will certainly continue increasing strongly. Currently, among 78 domestic fintechs, many companies have received huge investments from foreign investors.
“At the end of this year, if the number of Vietnamese fintechs receiving investment has increased five-fold, nothing is worth surprising”, said January Bellens, Global Banking and Capital Markets leader at Ernst & Young.
According to financial experts, Vietnamese fintech market will continue booming in the near future due to huge population, technical savvy, large internet access and smartphone ownership rate, changing consumption habit, etc. while the proportion of population having bank account remains limited.
Not only foreign capital, domestic capital flow into fintech will also surge. Statistics of Ernst&Young show that so far, Vietnamese start-ups have poured $129 million into fintechs. This figure has increased very quickly because recently, banks have changed their views about fintech, toward shaking hands directly with fintechs or investing directly into fintechs.
Nguyen Thuy Duong, deputy Chair of Ernst&Young Vietnam said Ernst&Young’s survey of the banking sector in 2018 shows that banks are looking to cooperate more with fintechs instead of developing their own products or internal solutions because of such advantages as more flexible products, less investment costs, etc.
Ernst&Young’s survey in Southeast Asia shows that most fintechs face difficulties in capital mobilisation, with 60 percent of surveyed businesses expecting that there will have $1 million for the next round of capital call. The report also shows that 44 percent of banks plan to purchase technology from the third party, and 17 percent plan to acquire another fintech to use its technology.
In Vietnam, the biggest difficulty in banking-fintech cooperation is that there has not had any specific regulation about this issue. Currently, the State Bank is studying legal framework, creating pilot playground for fintechs. If this legal framework is issued, fintechs in Vietnam will certainly continue to boom and to welcome huge capital flows.
