The fintech market of Vietnam is predicted to reach US$7.8 billion by the year 2020, representing a 77 percent increase over three years.
Solidiance, a consultancy firm focusing on the Asia-Pacific region, has compiled data predicting that Vietnam’s fintech market, which was worth US$4.4 billion in 2017, is expected to reach US$7.8 billion by the year 2020. This is an astonishing 77 percent increase over just three years, according to the Vietnam Investment Review.
The rapid rise of the fintech market in Vietnam is made possible in no small part by the Vietnamese government’s remarkable efforts in tailoring regulations to increase banking penetration from 59 percent to 70 percent in 2017, and to shift to a non-cash payment economy with a target cash to total liquidity ratio of less than 10 percent by 2020. All these are in line with the United Nation’s goal of promoting financial inclusion to all sectors of the population.
Additionally, the Vietnamese government founded the State Bank of Vietnam’s Steering Committee on Financial Technology in 2017 with the purpose of promoting the growth and development of fintech companies in Vietnam. This is an acknowledgement by the Vietnamese government that fintech will play a crucial role in the transformation of the current financial landscape towards a more inclusive, digitized one. The committee designs programs with a focus on peer-to-peer lending (P2P), e-payments, electronic Know Your Customer (e-KYC), open application programming interfaces (Open API) and blockchain technology.
Other favourable conditions that are spurring the development of the fintech market in Vietnam are its vibrant e-commerce sector, which had 35.4 million users with an average spending of US$62 in 2017, and which is predicted to reach 42 million users with an average e-commerce spending of US$96 by 2021. This boom in e-commerce activity paired with the government’s efforts to bolster digital payments to reduce reliance on cash payments will naturally stimulate the development and adoption of fintech solutions.
Further still, Vietnam’s young population (60 percent under 35 years old), which is very technology savvy, coupled with the country’s high levels of smartphone penetration (72 percent) and Internet penetration (52 percent) make it one of the fastest adopters of smartphones and Internet (at low cost) in the region of Southeast Asia. All these factors together provide Vietnam the required infrastructure that is needed for fintech services, even for those in the more remote rural areas.
For Vietnam’s fintech market in 2017, digital payment solutions make up the bulk of the market at around 89 percent, with personal finance (9 percent) and corporate finance (2 percent) accounting for the rest of the total market volume. However, in the coming years personal finance and corporate finance are predicted to expand significantly faster than digital payment solutions and will account for 24 percent and 6 percent of the total fintech market volume by the year 2025, respectively.
From the macroeconomic viewpoint, the rise of fintech in Vietnam is spurring the transformation of its financial landscape towards a more efficient, effective financial market that has more diversified products on offer for more people and companies at more competitive, lower prices. The evolution of Vietnam’s financial market, which is becoming increasingly more efficient at allocating the necessary funds to households and businesses, will only bring prosperity to its economy in the long run and help it grow and expand to even greater heights.