The State of FinTech in Vietnam, a conversation with Christian König

FinTech technologies have disrupted, without doubt, the financial sector. In the last few years we have witnessed the introduction of new business models and of new ways to customer relation in a traditional sector. Financial institutions have seen the need of being digitally transformed and the necessity of adapting themselves to a new customer.

Everyday we can read news about this sector. Global events around the world, traditional financial institutions who acquires talent and technology by buying startups and forecast analysis that indicate FinTech is not a passing trend.

All these reasons were enough for us to keep an eye on this trend around some of the emerging markets of our route. Everyone knows that Singapore is the FinTech capital in this area, however is not negligible the growth potential of other countries in the Southeast Asia.

We have the opportunity to ask some questions regarding the Vietnamese FinTech ecosystem to Christian König, founder of fintechnews.sg and now one of the promoters of FinTech community in Vietnam.

FinTech in Vietnam State of Art

If we compare the FinTech ecosystem in Vietnam with other Southeast Asia economies, we can say that it is still a little inmature and a small ecosystem. Despite its small size, FinTench in Vietnam is attracting great attention and is one of the growing trends in terms of investment in the country.

Currently the market has about 30 players, if we only consider those founded in Vietnam. Nevertheless, there are positive future perspectives for this trend. The Asian FinTech startups have had a record year in 2015 in terms of investment. As you can see in the chart below, 4.5 billion US dollars has been invested on a total of 130 deal in this regions, with China and India on top.

Q: You have more than 10 years of experience in investment banking. So, according to your experience, what will be the role of FinTech in emerging markets, like Vietnam?

Christian König: Vietnam has many Digital natives. Most Vietnamese are between 15 and 35 years old and here we have a very high mobile penetration. The young generation is very tech savvy.

Around 40 Million Vietnamese have now access to internet which is about 44% of the population and 52% of the mobile users are already using Smartphones. If you walk around the streets in Hanoi or Saigon you will see also many people using smartphones. Apple recently even announced that Vietnam is one of the fastest growing markets market for iPhone sales.

Like 1 year ago nobody know here about Fintech. Recently, we did our 2nd Fintech Meetup in Saigon and 100 people wanted to attend.

So Fintech is pretty much new here and there is not yet any Ecosystem. But we will soon see a lot of activities. We are just about to wake up. We already have seen the 1st Digital Only Bank with Timo and Momo (a digital wallet) was funded with 28 million USD. A lot of Venture Capitalist and investors are now eyeing Fintech in Vietnam.

Q:We read your first report about the fintech ecosystem in Vietnam. But, how is the fintech ecosystem in Vietnam compared to another countries of south east Asia?

Christian König: Most of the players are in the mobile payment sector, which is traditionally the start in Fintech. However, you do not need 20 mobile payment providers and all this is still excluding Samsung, Apple Pay, Google, Facebook Pay etc. And most of these players even do not have yet a state bank license.

Credit card use is here only around 3 to 4% and on your bank Vietnamese account you get like 8% interest rate. This is pretty much unique.

And there is still no player in Insurtech and Investment and no real player in Remittance. Especially the Remittance market (around 14 billion USD every year!) could boost FinTech in Vietnam and could be the next big thing. USA to Vietnam is one of the top 3 remittance bridges in south east asia. This give opportunities for Fintech Startups to disrupt traditional money transfer players such as Moneygram. If they will be able to cut the money transfer fees to Vietnam, Vietnam’s GDP growth could growth even more.

Keys points of Vietnamese market for FinTech startups

• Young Population: The population of Asian economies is mainly young. In the case of Vietnam, we are talking about the 58% of  population are Digital Natives. A young population characterized by being highly digitized and make a strong use of Internet.

• High Mobile Penetration: Vietnam mobile penetration exceeds 145%, representing 62% and 63% in the age groups of 15-25 and 25-35 years respectively. However, the preferred activities to do from smartphones are Social Networks (46%) and finding content (45%). Making purchases through mobile devices represents a 6%  and banking transaction a 4% (last position).
• A Growing Middle Class: According to Nielsen Research Vietnam the middle class in this country will increase to 33 million people in 2020 (aprox.). The highest expected growth in Southeast Asia.
• Low bancarized population: Vietnam is a market that transacts mainly in “cash”. The “cash-on-delivery” payment method is the most commonly accepted. Thus, we find that Vietnam a population must still learn to trust in online payment.

Q:From your experience, what are the main challenges for Vietnam Fintech startups in the coming years?

Christian König: It is like in every market. The Banks and Telcos will also wake up. The first 2 years they will mostly just watch the scene and then put all the effort into the activities which makes sense.

Also big international player will eye Vietnam and Apple, Samsung, Google, Facebook, Alibaba, etc… could enter the market which will make it hard for small Vietnamese Fintech Startups.

Vietnam could learn a lot from other markets. For example in Switzerland also many startups startet with mobile payment solution. Then the big banks did the same and the startup were gone. The problem with startups is that they have a limited money and time horizone.

Advises for VCs

Q:What advice would you give to others VC regarding Vietnam Fintech market?

Christian König: In general I am not really bullish here on mobile payment. There are so many startups in this field and in the end not all will survive (see Switzerland case). Also you need to have a state bank license. In general the Vietnamese market is very tricky and you need to understand the culture. The power of collaboration is not yet really well known in Vietnam and its all about trust here. Without strong local partners it will be difficult.

Also, most people do not trust banks and online banking which might give room for a big player such as Facebook.

Many entrepreneurs here are also very young. So I personally would invest in a FinTech company here if they understand the power of collaboration and B2B, if they have experienced mentors and understand the compliance and law. Moreover, they must understand how to do smart marketing and they must be able to sale (Techies cannot sell! and Vietnamese are mostly not good sellers). Most entrepreneurs here are therefore also really weak in pitching and PR.

Resources to follow closely the FinTech scene in Vietnam

• Infographic about the FinTech ecosystem in Vietnam
• First report about FinTech in Vietnam
• IFC Report de about E- and M-Commerce and
  Payment Sector Development in Vietnam
• Top FinTech startups to watch in Vietnam
• FinTech Vietnam MeetUp
• Bitcoin Saigon
• FinTech Vietnam News