During a trip to Hanoi in early 2018, Export Portal’s team experienced firsthand that large parts of Vietnam’s economy are still entirely cash-based. This leads to inefficiencies: Transactions are slow, and it’s challenging to build business models around e-commerce channels. Thus, Vietnam needs more innovation in the Fintech sector.
Opportunities: electronic payments and P2P-lending
Vietnam’s banking sector is still fairly underdeveloped. Fintechs can fill the gap and come up with more efficient payment systems. The Vietnamese government has announced the goal to reduce cash usage to 10% of all market transactions by 2020. Thus, there is government support, but it will need the private sector to take action.
In recent years, Vietnamese banks have come under stress due to rising risk provisions for non-performing loans. According to Moody’s, bad debts in Vietnam’s banking system could be as high as 15%. As a result, banks have become more cautious, and SME’s face increased barriers when applying for loans.
Fintechs could come up with solutions to provide cost-effective financing alternatives for Vietnam’s growing SME sector. Peer-to-peer lending, for example, has become more popular. According to Transparency Market Research, P2P lending will increase by 48.2% annually in the 2016-24 period. In 2019, there are already 10 Fintech firms providing P2P services connecting Vietnamese borrowers and investors.
Regulatory limbo and lack of legal security are barriers to Fintech growth
A major roadblock for the development of a Fintech sector in Vietnam is the lack of government regulation. Although the P2P lending space is growing rapidly, there are no specific laws in place governing P2P lending activities.
Vietnam has taken a “wait and see” approach to Fintech regulation, observing neighbouring countries before setting up its policies. However, following the regulatory lead of other nations will prevent Vietnam from emerging as a Fintech leader and capitalizing on the opportunities that come with it.