The ultimate guide to Vietnam fintech

  • Vietnam is a promising market for fintechs given its combination of low financial inclusion and high tech sophistication
  • Funding access has improved. The ecosystem is skewed to payments and lending. Insurtech and investech are underdeveloped
  • Key growth strategies include lifting technology investment, introducing new products and forging strategic partnerships
The ultimate guide to Vietnam fintech

This report is part of our series on the opportunities and risks for fintechs in emerging markets.

Vietnam is one of the fastest-growing emerging markets and ranks at the top of our fintech financial inclusion scorecard. Almost two-thirds of adults do not have a bank account; debit card and credit penetration lag regional peers and 90% of online purchases are still paid in cash. On the other hand, mobile phone and internet penetration levels are high, and there is a strong local technology skill base (for example, 40% of the country’s exports are in high-tech goods). Given these characteristics, we think Vietnamese fintechs can deliver good growth.

Investors also appear to be recognising this huge opportunity; Vietnam attracted 36% of fintech funding flows to Southeast Asia in 2019, second only to Singapore. There have also been a few large funding rounds more recently, such as MoMo (US$100mn) and Fvndit (US$30mn).

In this report we discuss: the fintech opportunity in Vietnam; the current fintech landscape; funding trends; how the central bank is promoting digital finance; the success factors and plans of fintechs; and the key challenges limiting fintech growth. We also look at 113 Vietnamese fintechs and profile some of the most interesting companies driving the growth of the sector.

Vietnam presents an ideal blend of low financial penetration and high tech sophistication

Vietnam has a tech-savvy population, as indicated by the high number of cellular subscriptions (equivalent to 141% of the population), and strong high-tech exports (40% of total manufactured exports versus just 5% for EM peers). Internet access is also incredibly cheap.

However, rates of financial inclusion are currently poor and well below its EM peers, with below-average bank account penetration (31% versus 44% for peers) and limited access to bank branches and ATMs. For these reasons, Vietnam remains a predominately cash-based economy. Even for online purchases, c90% are settled through cash on delivery, the highest proportion within Southeast Asia.

We think the combination of a strong domestic technology skills base and the low penetration of the formal financial sector presents an ideal environment for fintechs to thrive.

Financial and tech sophistication - Vietnam versus peers

Vietnam’s fintech product mix

The fintech landscape in Vietnam is dominated by payments and lending firms, which together account for over two-thirds of the total fintech population, compared to a 57% average across other emerging markets. The insurtech and investech segments, in particular, seem underdeveloped. Challenger banks/ neobanks have started to emerge, though we think only four are currently in operation.

Vietnam's fintech ecosystem

Fintech funding is growing strongly

According to Do Ventures, fintech funding has grown strongly over the past few years, with US$340mn invested in 2019 compared to US$108mn in 2018 and just US$11mn in 2017. Funding fell back to US$22mn in H1 20 due to the pandemic, but looking at global trends we expect that the numbers would have grown since then.

In support of this view, there have been some high-ticket funding deals subsequently, notably MoMo’s US$100mn funding round in January 2021 and eLoan operator Fvndit raising US$30mn in September 2020. Do Ventures' most recent VC survey indicates that Vietnam remains the preferred investment destination within Southeast Asia over the next twelve months.

Fintech funding in Vietnam

The regulatory environment for fintechs is improving

The regulatory framework for Vietnamese fintechs is still in its early stages of development and the government is actively involved in devising policies for various segments of fintech. But the regulators do at least appear supportive of bringing digital financial services to the mass market.

We summarise some of the recent steps taken by regulators below:

  • Steering Committee on Financial Technology. This Committee was formed in 2017 by the State Bank of Vietnam (SBV) and advises the Central Bank Governor about the solutions required to develop the ecosystem, including building an appropriate legal framework.

  • Easier Know-Your-Customer rules. After recent regulatory changes, it is no longer necessary for financial institutions to hold physical meetings when opening new accounts; all procedures can be carried out digitally/ remotely.

  • Dropping the proposed foreign ownership cap. In November 2019, the government announced a draft decree to cap foreign ownership of digital payments companies at 49%; however, after listening to public opinion, this plan was scrapped. It is worth highlighting that many of these firms are loss-making and therefore benefit from foreign capital.

  • Some key regulatory initiatives are underway. The State Bank of Vietnam has set the goal of issuing a regulatory framework for key technologies (like e-KYC, Open API, big data, artificial intelligence, blockchain etc.) by 2025.

  • Regulatory sandboxes are being launched in seven different fintech sectors, including payments and peer-to-peer lending. This would allow fintechs to test their business models and help regulators to develop an appropriate regulatory framework.

Key success factors for Vietnam fintechs

Our survey of 24 Vietnamese fintechs identified the following factors they attribute to their success:

Strategic partnerships help fintechs to diversify their product mix, improve their service quality, and expand their client base. For example, Vaymuon, a leading P2P lending platform, has partnered with VietinBank Insurance to offer borrowers an insurance product that provides cover against unforeseen events during the period of the loan. Other fintechs that benefit from strategic partnerships include Moca, VTC Pay and Interloan.

Secure and seamless execution. Security is one of fintech customers’ major concerns as the incidence of cybercrime is rising in tandem with digitalisation. Fintechs are actively looking for ways to mitigate these risks, for example, the leading mobile wallet operator MoMo uses state-of-the-art technologies like two-factor authentication, automatic application lock, secure SSL/TLS standard transmission, and international card number encryption (tokenisation) to protect its customers. Other local fintechs attributing their success to the reliability and security of their platforms include Finhay, Ibox and Paytech.

Product quality is a broad term that includes factors like ease-of-use, product innovation and speed of service. For example, Zalopay, a mobile wallet run by the country’s leading messaging app, mentions familiarity, trust, and convenience as its key value propositions. Some other Vietnam fintechs that benefit from better product quality include Truemoney and Lendbiz.

Vietnam fintechs' key success factors

Vietnam fintechs’ top plans

Our survey of 16 Vietnamese fintechs identified the following strategies they are looking to execute:

Investment in technology is the top strategic priority for Vietnam fintechs. Continuous investment in technology ensures that consumers get the best available features most securely and conveniently. Some fintechs planning to invest in technology include MoMo, Finhay and Interloan.

Introducing new products. The Vietnam fintech landscape is currently very focused on payments and lending. Therefore, fintechs are actively looking to diversify and differentiate their offerings by introducing new products, both within their sector and in new sectors. Some Vietnamese fintechs planning to expand their product base include Lendbiz, Smartnet and OnOnPay.

Entering strategic partnerships could help fintechs deliver on their growth objectives by giving preferential access to customers and products. Some fintechs planning to form partnerships in the future include Yolo, Weedigital and Fundiin.

Vietnam fintechs' future plans

Key challenges for Vietnam fintechs

There are a few key challenges that Vietnam fintechs will need to overcome to achieve their full potential:

Lack of consumer trust in digital channels. 90% of e-commerce payments in Vietnam are settled through cash-on-delivery. This is because customers do not trust sellers and deliverers. However, a rising awareness of mobile wallets and the more secure methods deployed by fintechs are supporting the growth of digital payments; the pandemic has also accelerated this growth trend.

The regulatory framework is underdeveloped but improving. As discussed earlier, Vietnam’s regulatory framework is evolving rapidly. But in much of the fintech landscape, the regulatory landscape remains unclear, which creates a hurdle for any mass roll-out. That said, progress is being made; we expect that over the next few years the regulatory framework for fintechs should become more definitive.

Partnership challenges arising from weak legacy technology infrastructure. The infrastructure of many banks and other financial institutions in Vietnam is based on outdated legacy systems with underdeveloped payment systems, customer credit data, legal enforcement mechanisms etc. On the one hand, this is one of the reasons for the country’s low banking penetration, which creates the big top-down opportunity for fintechs. However, it also creates execution challenges for fintechs as they seek to partner with traditional organisations to deploy best-in-class products.

Five Vietnamese fintechs to watch

MoMo (Payments)

MoMo is Vietnam’s biggest e-wallet company, with over 20mn mobile wallets; it aims to reach 50mn by 2023. It processes cUS$14bn in annual transaction value. MoMo began as a peer-to-peer (P2P) payments company via a mobile wallet app, but has since expanded its offering into airtime top-ups, bill payments and merchant payments, with c100,000 payment points nationwide. It has also built a credit-scoring system that could allow it to expand into digital lending. Its investors include Standard Chartered, Goldman Sachs and Warburg Pincus. The company has announced that it plans to list its shares by 2025.

Nextpay (Payments)

Nextpay is the product of a merger between e-wallet service provider Vimo and point-of-sale startup mPOS, both of which were founded in 2014 by the incubator NextTech. Nextpay provides exposure to both the payments infrastructure opportunity in Vietnam (over 40,000 POS deployed) and a consumer-oriented mobile wallet business (1.5mn wallet users in 2019). Nextpay plans to expand to Indonesia and Myanmar and is looking to list its shares by 2022.

Zalopay (Payments)

Zalopay launched in 2017 and is a mobile payments app that sits within Zalo. Since its introduction in 2012, Zalo has become the most popular messenger app in Vietnam, with more than 100mn users worldwide (in 2019). This close linkage gives ZaloPay a big advantage over its competitors. Zalopay could ultimately mimic the success of WeChat Pay in China, which operates on a similar model. As per Cimigo, Zalopay is one of the country’s three most popular e-wallets, accounting for 90% of the market (the others being MoMo and Moca).

VayMuon (Lending)

VayMuon is a digital P2P lending platform founded in 2017. By the start of 2020, the company had successfully connected more than 2 million borrowers to 400,000+ individual lenders, with a monthly growth rate of 20%. VayMuon has also expanded to three other regional markets: Thailand, Myanmar and Cambodia. VayMuon is continuously investing in technology to deploy automation in credit assessment & scoring. It has also partnered with NganLuong, a leading payments gateway company, to increase its product offering to merchant loans, advanced salary loans, supply chain financing and SME funding.

Kilimo Finance (Lending)

Kilimo Finance, launched in 2019, is Vietnam’s first agricultural FinTech startup. It provides an online marketplace for farmers to buy farm inputs like fertilizers, crop protection, equipment at favourable prices. Kilimo Finance also acts as a lending platform that connects farmers to banks through its app. Banks can finance farmers using automated credit scoring and loan origination software, which can target specific products. According to its CEO, Kilimo plans to partner with large agricultural input suppliers. It has already signed partnerships with the IDH Farmfit Fund and USAID, which will guarantee up to 50% of loan principal. For now, the firm’s main focus is on supply chain finance for crops and livestock production.

Some other interesting fintechs outside of payments and lending include Finhay (Investech), Timo (Neobank) and Inso (Insurtech).

Acknowledgements: The authors thank Rabail Adwani for his assistance with this report

Appendix: the fintech universe in Vietnam

In the table below we provide a comprehensive list of 113 fintechs that are active in the country.

Vietnam fintech landscape

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