Vietnam’s fintech industry growth is a model for Southeast Asia

A man uses his phone in Ho Chi Minh city Vietnam at night

The Vietnamese government is playing a central role in the country’s emergence as a fintech hub. Their stance as a facilitator can serve as a model for the region.

By Diesel C.

According to a recent World Bank report, the number of Internet users across Southeast Asia has exploded since 2011. However, 90% of those Internet users hail strictly from five countries; Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. 

As for the number of fintech incubators, accelerators and innovation labs across Southeast Asia, two countries stand out. Singapore leads the race with 52 incubators followed by Vietnam with 24

Vietnam’s rise from fintech outlier to thriving startup hub was not a foregone conclusion. With 70% of the population now using the internet, the population is coming online at a similar rate to regional neighbours like the Philippines (60%) and Malaysia (81%). 

ASEAN's estimated number of fintech incubators by country

Yet Ho Chi Minh City and Hanoi are emerging as fintech and technology breeding grounds. In 2019 investment poured into Vietnam’s fintech sector. The nation took just 0.4% of ASEAN’s total fintech investment in 2018. In 2019, it hauled in 36%, with venture capitalists flocking to Vietnam’s peer-to-peer (P2P) lending, credit scoring and mobile payments industries. 

Venture capital funding by country as a percentage of Southeast Asia's total fintech investment

According to the Institute for Development and Research in Banking Technology at Vietnam National University, as much as 70% of the fintech organisations in Vietnam are startups funded by foreign investors. 

The government has been helpful to startups

The Vietnamese government wants to push the country towards a cashless society and bring banking services to individuals and businesses in rural areas. To achieve these aims, it has implemented forward-thinking policies to foster growth in the fintech sector. 

The Law on Technology Transfer introduced in 2016 has facilitated Vietnamese startups’ access to technology from oversees. The Ministry of Science and Technology’s National Agency for Technology, Entrepreneurship and Commercialisation Development (NATEC), also established in 2016, has provided training and mentorship to fledgeling startups. 

Tax breaks for companies operating in hi-technology sectors and in special technology zones are also ensuring more money is being funnelled back into new startups. 

Fintech startup numbers have risen dramatically

The number of financial technology companies in Vietnam has grown from around 40 in 2016 to 154 today.  

According to a survey by the Banking Technology Development Research Institute (BTI) at the National University of Ho Chi Minh City, 37 work with digital payments, 25 in P2P lending and 22 in blockchain and crypto and remittance.

In the face of such strong growth in the Vietnamese fintech sector, international organisations are revising their market forecasts. Vietnam’s fintech market was initially expected to reach a value of US$7-8 billion by 2020. Experts now predict the market will hit US$9 billion. 

Vietnam’s banks and startups are working together

Vietnam’s success has been defined by the establishment of symbiotic relationships between banks and fintech startups. Around 72% of fintech startups are working in partnership with banks. 

In working with fintech firms, banks have been able to make significant improvements to the products and services on offer.  Phạm Xuân Hòe, deputy director of the Banking Strategy Institute under the State Bank of Vietnam, estimates that through working partnerships with fintech firms, banks increased internet banking payments by 19.5% in 2018. 

Banks see value in collaborating with fintech firms

Vietnam is building the fintech landscape of tomorrow

With strong projected growth figures and an expanding middle class, investors see the long-term potential in Vietnam’s fintech sector. 

The Vietnamese population is expected to reach 105 million by 2030, a 14% growth on 2014 levels. Increased per capita incomes and a population surge make for perfect investment environments. 

The Vietnamese government has been laying the foundations for the fintech landscape of tomorrow. It has introduced science, technology, engineering and maths (STEM) courses into the curriculum. Children in the second grade are now exposed to computer science classes. By the fourth grade, many will have developed basic software development and programming skills. 

In addition to investing in the homegrown talent of tomorrow, the Vietnamese government has taken steps to entice Vietnamese residing and working overseas back to Vietnam. 

Visa requirements on Vietnamese dual nationals have been relaxed, and there have been tax incentives afforded to returnees. 

There are strong indications that the government’s efforts are paying off. In 2015 alone some 12,000 Viet Kieu, as returning Vietnamese are affectionately known, returned to Vietnam’s shores. Many of these were entrepreneurs or qualified professionals who took on key positions at local firms or founded a company on their return. 

Vietnam has shown investors it is committed to backing innovation. It has strongly indicated its intention to lay the building blocks required for a thriving and prosperous fintech sector by investing in the minds of tomorrow and taking steps to create a large talent pool of young, technically-savvy, capable candidates. There is no reason why Vietnam won’t continue to expand its footprint on the region’s fintech map and emerge as a major player in the region’s fintech landscape, serving as a model for other regional players with lofty fintech aspirations.