Last week Fintech News, a digital news provider out of Singapore, launched their Vietnam Fintech Report 2020. The report examines the Fintech space in Vietnam, looking at current penetration within the country’s population and the startup scene as well as pointing out specific fintech companies to watch. You can download the Vietnam Fintech Report 2020 here. Be warned, however, that the form announces that you are downloading the Fintech Vietnam Startup Map 2020. This is a mistake on their part and by filling out the form you are really downloading the report, so don’t worry.

Before diving into the Fintech scene itself, the report looks at some basic financial information about Vietnam. Of the 97.4 million people living in the country, only about 30% of them are bank customers, though 45% have mobile phones and 57% have access to the internet. This means there is a huge portion of the population that is not currently using financial–let alone technological–resources.

The report did not report that the per capita GDP was only 2,700USD in 2019, an average of a little over 200 USD a month per person. Nor did it mention that nearly 70% of the wealth of Vietnam is controlled by the richest 30% of the population. While I don’t know the economics or math to figure out specific numbers, this suggests that a large portion of Vietnam–much of the number of unbanked citizens–is barely making enough money to escape the international definitions of poverty. For that population the costs of accessing mobile or internet apps is such that the use of Fintech is prohibitive. With that in mind, the potential for Fintech growth may not be as large as the report makes it out to be.

Despite the deceptive optimism of the report’s initial numbers, the growth of Fintech startups in the last five years has been tremendous. In 2015 there were a total of 39 startups in Vietnam. The report does not say how many of these were actually founded in 2015 or earlier. In both 2019 and 2020 to date there have been a total of 124 startups founded. The report does not provide a total for Fintech providers that includes more mature companies that have exited the startup phase.

The majority of companies in Fintech in Vietnam, however, are in the B2C payments sector. This sector accounted for 31% of all Fintech startups in 2020. The next most active sector is P2P lending with 17% of the startups. Other sectors accounted for from 2% to 13% of the startup scene in 2020. The report briefly mentions the regulatory environment for startups in Fintech, but only briefly. It is important to note that the only sector that actually has any real regulation is the payments sector–perhaps explaining the proliferation of startups there–while the remaining sectors are mainly unregulated (see the post from last week on e-wallet regulations here). The government has announced a regulatory sandbox program but it has yet to implement it and it is unclear exactly how the process of transforming from unregulated Fintech startup to regulated Fintech provider will occur (see our special alert on the regulatory sandbox here).

Funding in the Fintech space accounts for 36% of all Fintech startup funding in ASEAN. At a reported 435 million USD between 2019 and 2020, with two or three major investments accounting for most of the money, Vietnam is well placed to secure its position as second in ASEAN for securing startup funding in Fintech companies.

M&A and strategic cooperation are increasingly important in the industry. With major international acquisitions in the last two years and global banks partnering with local payments providers, Vietnam’s Fintech is a major lure for foreign investment dollars. This will be further aided by the fact that the Government has likely dropped a proposal to limit foreign ownership to 49% in e-payment companies. This means that the doors are wide open for foreign dollars in at least the payments sector if not other areas of Fintech.

In addition to international banking partnerships, local banks are important partners in the payments sector.The report sites an unnamed official with the State Bank of Vietnam who said that:

“In Vietnam, 72 percent of financial technology firms choose to cooperate with banks in their business and service delivery, instead of entering a direct competition.”

It is unclear whether this number includes international banks. It is possible that the other 28% are partnered with international financial institutions. This would, admittedly, put them in competition with local banks, but it does not delineate the number of startups seeking to provide independent payment services.

The report continues to examine remittances, ride-hailing, and P2P lending without actually making any important statements on those sectors. Much of the report is spent in examining the top e-wallet firms and making recommendations to watch 15 startups for the future.

In general the report is useful and provides a decent snapshot of the Fintech startup community in Vietnam. As I pointed out above, however, the potential for growth is exaggerated as isolated from other relevant economic data and the lack of analysis of mature players–there being no definition of “startups” against which to distinguish–suggests that the report isn’t truly a full picture of the sector. It is also sparse on conclusions, a one page introduction providing some data that isn’t contained elsewhere and drawing some inferences from the presented charts later on. Despite these shortcomings, it is a document worth looking at. Again, you can check out the full report here.

For help with Fintech regulation and startup incorporation from licensing to tax to corporate governance and everything in between, contact your lawyer on staff or get in touch with us on our website at www.indochinecounsel.com.