Fintech Enabling Services in Vietnam Could Be Invested More Than 18 Billion USD in 2024 – Opportunities and Challenges for Startups
With the amount of remittances and FDI capital returning to Vietnam increasing continuously in the past few years, at the same time, Vietnam is an integrated country with many products exported to major markets of the world.
Fintech enabling services will also have more opportunities to develop in this S-shaped country. According to the Phap Luat newspaper in Vietnam, fintech enabling services in Vietnam could be invested more than 18 billion USD in 2024.
However, besides that, there are still many challenges waiting for new technology companies (fintech startups) to enter the market.
In this article, let's join FinFan in analyzing the two opposing extremes between opportunities and challenges of fintech enabling services along with the solutions that FinFan has been implementing to stay ahead of new trends as well as is to limit challenges in the industry.
What is fintech enabling service?
Fintech enabling service or embedded finance is a general concept for research and development activities to be able to apply applications that integrate financial services into other non-financial service industries.
Read more:
. Embedded Finance – Is that just an additional revenue for non-financial services?
Conditions in Vietnam to develop fintech enabling service.
To integrate financial services into non-financial industries, the following 3 conditions must be met:
1. User demands
No matter how perfect your product is, if the needs of the users in that market are not there, all your efforts are almost meaningless.
Vietnam is a developing country, and the proportion of the young population is still quite high although it has decreased slightly, the population aged 15-59 years accounts for 62.2%.
Especially the age group from 12-30 are the ones who update technology advances very quickly. Therefore, the demand for fintech services that can replace previously cumbersome and complicated banking transactions is huge.
That is the reason why, when receiving strong support from the government, fields such as payment gateways and e-wallets have developed very strongly, and Vietnam is one of the best in Southeast Asia countries that has achieved fintech startups with a capitalization of up to 1 billion USD (becoming a unicorn) like MoMo and VNPay.
By the end of 2023, the number of active e-wallets is 36.23 million (accounting for 63.23% of the total of nearly 57.31 million activated e-wallets), with the total amount of money on these wallets is about 2.96 trillion VND.
After 2 years of piloting, Mobile Money has had good growth. At the end of 2023, the number of registered accounts is nearly 6 million, of which nearly 70% are accounts registered in remote areas and islands; the total number of transactions is about 47 million, the total transaction value is over 2.4 trillion VND.
Three businesses participating in the Mobile Money pilot (Viettel, VNPT, MobiFone) have opened 11,700 business points; more than 195,000 units accept payments, creating conditions for vulnerable people in remote areas to access financial services.
2. Support from state policies and required licenses.
Fintech's starting point comes from applying technology to solve financial-related problems, this field is very tightly controlled by the state.
In Vietnam in recent years, the government has been paying great attention to issues in this field and always trying its best to support fintech companies in devising the most favorable policies for them.
This is proven by the fact that in the past 2 years, the amount of non-cash payments has increased significantly. By the end of 2023, non-cash payments reached about 11 billion transactions, an increase of nearly 50% compared to 2022, and total transaction value reached more than 200 million billion VND.
On November 18, 2023, the Government decided to extend the Mobile Money pilot period until December 31, 2024, according to Resolution No. 192/NQ-CP. In particular, the Government assigned the State Bank to preside over and coordinate with the Ministry of Information and Communications, the Ministry of Public Security, the Ministry of Justice, and relevant agencies to review, research, and report to competent authorities on the ban. issue legal documents regulating this service before May 2024. The above information was shared by Mr. Pham Anh Tuan, Director of the Payment Department, State Bank, at the press conference to deploy the banking industry's tasks in 2024.
The above impressive results are due to the fact that by the end of December 2023, the State Bank had issued licenses to provide intermediary payment services to 51 organizations that are not banks providing intermediary payment services in the market, in particular:
• financial switching services and electronic clearing services: 1 organization,
• electronic payment gateway service: 49 organizations,
• services supporting collection and payment: 49 organizations (including FinFan when we are authorized by the Central Bank - No.973 license of Foreign Currencies Acceptance and Payment),
• services supporting electronic money transfer: 14 e-wallet organizations.
3. Capital sources for implementing fintech enabling service projects.
Vietnam is located in Southeast Asia, a region that is expected to become the next dragon of Asia after North Asia with giants Taiwan, China, Hong Kong, Korea and Japan.
Therefore, this country with over 100 million people can easily attract foreign investment, especially in technology fields because the growth potential is still very large.
It is for that reason that over the past 10 years, many big companies have been investing in Vietnam in the field of fintech, especially Standard Chartered and Goldman Sachs when investing in MoMo from the Series A stage until now; or another story from Softbank Group when they invested and turned VNPay into Vietnam's second fintech unicorn.
According to the Phap Luat newspaper in Vietnam:
“(PLO) - From now until the end of 2024, it is likely that fintech companies in Vietnam will have the opportunity to call for capital from foreign investors with an amount of up to more than 18 billion USD.
That was one of the pieces of information given at the press conference about the 2nd Finovate Product Day event taking place this afternoon, March 14, organized by JobHopin Company.
This is considered a forum for financial companies and potential partners to share growth experiences and find solutions for sustainable development.
In recent years, the term Fintech (financial technology) has become increasingly popular as a method of supporting product services related to the financial and monetary sectors.
According to Nextrans' Vietnam Startup Industry Report 2022, Vietnamese fintech startups have a total investment capital of 137.9 million USD (accounting for 2.3% of the negotiated value in the region), receiving 14 investment deals (accounting for 6% of the total number of deals in the Southeast Asian fintech sector).
Assessing the potential of fintech companies in Vietnam, Mr. Kevin Tung Nguyen, founder and CEO of JobHopin shared:
"Currently, the Asian Development Bank (ADB) is still shaping Vietnam as a market The most potential in Southeast Asia. From now until the end of 2024, it is likely that fintech companies in Vietnam will have the opportunity to raise capital from foreign investors up to over 18 billion USD.
Besides, Indonesian, and Singaporean fintech investors all want to find partners in Vietnam. In budget planning, as well as recruitment, user development, investment in lending, insurance... these businesses all put Vietnam in their "sights" because they expect this to be a market most potential, fastest growing, and most profitable but with less expensive investment costs.”
Challenges for enabling fintech services in Vietnam.
The above three issues not only bring great opportunities for startups related to fintech enabling services, but they also bring significant challenges and difficulties for this industry.
Read more:
1. User demands
Although the need to use the benefits of fintech enabling services is very large, the current sad situation is that some projects pretend to be fintech to profit and deceive consumers, leading to a loss of consumer confidence. They are violently shaken when they think about thoughtful and quality fintech services (especially companies related to blockchain and cryptocurrency issues).
Hiding in the shadow of reputable organizations, affiliated with universities, or pretending to be career counseling programs, etc. is a method that many units of unknown origin are using to attract capital from investors to invest in the field of virtual currency and digital currency (crypto).
The most typical example of a financial site called Cross Finance (CrossFi) was warned by the Vietnam Blockchain Association (VBA) at the end of 2023.
According to updates from the prestigious Vietnamese newspaper - Vietnamnet:
“CrossFinance (CrossFi) illegally uses VBA images in communication activities to mobilize investment capital through the purchase and sale of a digital currency (cryptocurrency) called XFI.
Specifically, in posts on social networks (Facebook, Zalo, Telegram,...), CrossFi has identified itself as a member of VBA and is working closely with VBA's senior leaders.
Images of VBA leaders taken with CrossFi representatives are also continuously used in closed groups (Zalo, Telegram,...) to create prestige and trust of investors to mobilize capital into this XFI token.
VBA also requested CrossFi to quickly remove the above incorrect content, advertising images, and communications and make corrections for the community to know.
Besides CrossFi, according to VBA, many unlicensed exchanges and venture capital funds claiming to operate in the field of cryptocurrency and blockchain such as BingX, HC Capital,... use tactics such as "universal knowledge" with introduction" for students, in order to easily reach these audiences to promote services and attract new users.”
Read more:
Therefore, what fintech companies need to do today is not only to provide users with quality products and services but also extremely thoughtful and dedicated customer service experiences.
Only then can new users return to use the products and services and the number of monthly active users of the company providing fintech enabling services can grow stronger in the scaleup phase (from series A to series E).
2. Support from state policies and required licenses.
Because of problems related to impersonating organizations and financial fraud for personal gain, currently, the Vietnamese Government has not issued any legal documents related to cryptocurrency even though Vietnam is a country that has the highest adoption rate of this new technology.
Read more:
Besides, issues related to lending are also an extremely painful phenomenon that government agencies are considering to have appropriate policies.
According to VNEconomy newspaper:
“Mr. Duong Quoc Anh said that although the development of Fintech in Vietnam is very fast and has a lot of potential, there are still many limitations and risks for both Fintech and investors due to unclear legal regulations.
Besides, Fintechs are facing many difficulties such as a lack of human resources; large investment and operating costs; legal regulations not clear and consistent; and customer information security still has many shortcomings.
Although financial technology is currently developing very strongly, up to now, no country can claim to have a sufficient legal system in this field.
Looking at the consumer finance market, Mr. Nguyen Van Tuan, Chairman of eCap Holding, affirmed that the consumer finance market has great potential. This market potential is about 43 million billion VND, accounting for 25% of the formal financial market, the rest is the informal financial market.
From this picture, Mr. Tuan believes that the formal financial systems cannot reach all the people in need. Therefore, although informal finance has many shortcomings with high interest rates, many people still use it because of its convenience, ease of access, and suitability.
Taking an example from the early salary advance application activity that businesses are implementing, Mr. Tuan said that low-income subjects such as workers, when they have unexpected work and have not yet received their salary in the month, often borrow external credit channel like black credit with very high interest rates.
In many businesses, workers are willing to quit their jobs if they do not receive a salary advance to take care of their lives. However, in many places, businesses have difficulty meeting this cash flow. This is an opportunity for fintech businesses to fully grasp," Mr. Tuan said.”
3. Capital sources for implementing fintech enabling service projects.
Fintech is an industry that combines finance and technology, two industries that even when they are separated consume a lot of capital and budget.
According to the Phap Luat newspaper in Vietnam:
"Fintech in Vietnam also faces many challenges when the technology platform is still limited. Despite receiving strong investment in 2022, this figure is much lower than the peak recorded in 2021, showing the difficulties startups face amid a bad macroeconomic situation, as well as fierce market competition.
On the other hand, traditional banks and financial enterprises are actively looking for options to cooperate with technology companies, or invest in researching solutions to improve operations and enhance user experience."
Therefore, if you want to build a fintech enabling service application, it requires the founder to be extremely patient at the beginning and spend a lot of budgets during the scale-up period of construction.
Here is the startup journey:
Because of this, it is extremely necessary for founders of startup companies related to the above field to have prior knowledge about technology-related startup incubators and investors with expertise in the field.
That will greatly support fintech startups in developing the bootstrapping and seed funding stage market where startups really need useful advice from mentors and strategic investors in the incubator.
Read more:
[. How much do startups need from fintech investment funds in seed funding?]((https://finfan.io/en/blogs/startup-seed-funding-part-2-how-much-do-startups-need-from-fintech-investment-funds-in-seed-funding-clxml3sup003ctjbjyyuxzddz)
. What do startups need after startup seed funding?
. Top 10 investment fintech firms in Vietnam. Have they helped startups after seed funding?
. The list of top 10 global accelerators and incubators for fintech startups (sourced by FinTech Magazine and summarized by FinFan)
The solutions that FinFan has implemented to take advantage of opportunities and limit challenges in fintech enabling service.
With nearly 10 years of experience as an extension arm for fintech companies around the world in supporting them to access the Vietnamese market, FinFan always:
Update new market trends of fintech according to market demands.
Currently, FinFan is proud to be one of the units pioneering new fintech technology trends such as:
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Creating a virtual card system to support e-commerce businesses as well as travel OTAs to make international payments conveniently, quickly, and safely.
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Being the first fintech company to create an e-wallet aggregator system to link domestic e-wallets, at the same time, create a premise to connect with units to transfer money to Vietnam in a quick channel. and reach the most Vietnamese people as shown above (36.23 million users).
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Gradually research and develop products related to digital assets and blockchain and combine with international partners to promote the conversion of cryptocurrency to fiat currency and wait for future development opportunities when there are supportive policies from the State Bank. Vietnam is an integrated country and Vietnamese youth update technology extremely quickly. This has been shown through the cryptocurrency adoption index and the investment index on Binance cryptocurrency exchange in Vietnam.
Follow instructions and stay up to date with news from the government on issues related to fintech
As mentioned above, FinFan is one of 49 businesses licensed to operate in services supporting collection and payment when we are authorized by the Central Bank - No.973 license of Foreign Currencies Acceptance and Payment.
During 10 years of operation, we have always tried to be a bridge between international and domestic fintech companies on legal issues related to the above field through FinFan's Newsroom section to help them make the most appropriate decisions for market development and compliance with the directives of the State of Vietnam.
Always a bridge between international and Vietnamese fintech enabling service companies with international fintech investors.
FinFan always updates fintech startups as well as investors in the Vietnamese fintech market about the fintech industry that has been and will be developing in Vietnam and the industry's growth potential.
By being a bridge between fintech partners and domestic and foreign fintech investors, FinFan has also been finding investors who can support us not only financially but also in terms of planning a development plan as well as appropriate strategic goals for your business.
About FinFan
FinFan is a cross border embedded financial services company that focuses on mass disbursement, fund collection, card processing, IBAN, digital APMs solutions, can provide valuable input and integration on and for the same.
FinFan already integrated with almost the world's well-known MTOs, PSPs, switch and core fintech platforms as Money Gram, Thunes, Qiwi, Remitly, World Remit, Bancore, PaySend, Terrapay, Ria Money Transfer (Euronet), Dlocal, Ripple, TripleA, FoMo Pay, Wings, or Zalo.
For more information please contact us through:
🌐https://finfan.io
📞(+84) 2866 85 3317
✉ support@finfan.vn
LinkedIn: FinFan
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