Google has announced its Google Wallet mobile app will now be available in Vietnam. This announcement sees Google Wallet join a long line of fintech apps all vying for a piece of Vietnam’s $14 billion fintech market.
Beyond payments, fintech solutions are also taking off in areas like stock market trading, investment, and money lending, with several mobile apps emerging in recent years.
A booming sector
Fintech is undeniably booming in Vietnam. For a relatively young industry, its momentum shows little sign of slowing.
A Robocash analysis from May this year predicted the market would reach $18 billion by 2024. This highlights the huge demand for fintech services in this burgeoning Southeast Asian nation.
Robocash also reported that in 2021, 93 percent of venture capital invested in Vietnam went toward digital payments.
Between 2016 and 2021, Vietnam’s fintech companies saw significant growth. The number of operators increased by 84.5 percent over five years.
However, there was a marked decline in new market entrants, dropping from 11 per year to just two. This could indicate market saturation or suggest established players have solidified their understanding of Vietnamese fintech users’ needs. New entrants will likely need to be savvy operators with a deep understanding of the sector.
Drivers of growth in Vietnam’s fintech sector
Vietnam is a major growth market for fintech. Over 75 percent of its population has internet access, projected to rise to 82 percent by 2025, adding nearly 7 million people.
Vietnam also has a young, tech-savvy population. According to the Ministry of Communication, 73.5 percent of Vietnamese currently use smartphones, with this figure expected to surpass 82 percent by the end of 2022.
For young, smartphone-owning Vietnamese, fintech apps offer a convenient way to manage finances. With higher disposable income and a willingness to adopt new technologies, this demographic drives demand for digital financial services. As their numbers grow, so will the customer base for fintech companies.
The Vietnamese government prioritizes the digital transformation of its economy. The National Digital Transformation Programme, launched last year, sets key digital banking targets for 2025:
- 50 percent of banking operations fully online
- 50 percent of the population with a digital checking account
- 70 percent of customer transactions through digital channels
Despite this push for digital banking, regulation for the fintech sector remains limited.
Vietnam’s fintech approach
Vietnam’s approach to fintech and digital assets has been cautious. Specific fintech regulations are scarce, though some existing regulations in other sectors may apply.
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For instance, Decree 101/2012/NĐ-CP, issued in 2012 and covering non-cash payments, can be applied to fintech payment providers, though it doesn’t explicitly mention them.
To leverage fintech opportunities, the government is moving toward creating a fintech sandbox. This sandbox would allow credit organizations and financial institutions to test new technologies, enabling regulators to assess risks and benefits, protect consumers, and determine regulatory responsibilities.
Similar sandboxes exist in Southeast Asian countries like Singapore, Thailand, and Malaysia. While a draft decree for Vietnam’s sandbox has been circulated, its approval may take time.
Cryptocurrencies and digital assets
Cryptocurrencies are not legal in Vietnam. The State Bank of Vietnam (SBV) clarified this in a 2017 dispatch:
“Virtual currency in general, and Bitcoin and Litecoin in particular, are not currencies and are not legal means of payment according to Vietnamese law. Issuing, supplying, and using virtual currency… as currency or means of payment is prohibited.”
The dispatch warns that using cryptocurrencies as payment may result in an ‘administrative violation’ and fines.
Peer-to-peer lending is largely unregulated, though it may be classified as credit activity, requiring an SBV license. The sandbox draft decree includes provisions for exploring peer-to-peer lending services.
Foreign investment in Vietnamese fintech
While foreign direct investment in financial institutions and credit organizations faces restrictions, fintech-specific restrictions are absent, provided fintech functions aren’t covered by other laws.
Apps like Google Wallet act solely as intermediaries between financial institutions and users, not providing credit themselves.
This has attracted significant foreign investment in recent years, contributing to the rapid growth of Vietnam’s fintech sector.
The future of Vietnam’s fintech sector
Despite growing competition, Google Wallet’s entry shows there’s still room for new players.
With the government keen on digital transformation, any future regulations are likely to support the sector’s growth.
As Vietnam’s young, tech-savvy population expands and smartphone penetration increases, the fintech sector is poised to continue booming.
