1006 analyzing the impact of fintech on joint stock commercial bank for foreign trade of vietnam 2023

INTRODUCTION

Summary

The speed of the fourth industrial revolution has been quickly growing in recent years, and we can witness how it is affecting a wide range of sectors and areas Therefore, the financial and banking industry was not an exception, it receives significant changes throughout the years The birth of big data (Big Data), the Internet of Things (IoT), and artificial intelligence (AI) have led to the emergence of new services to maximize the industry's potential But Fintech stands out above all and plays an important role in the bank system.

The term Fintech emerged after the financial crisis of 2008 as a combination of finance and technology We may look at the number of established and operating Fintech firms to highlight the outstanding development of Fintech in Vietnam in particular According to data from Statista (a reputable German organization specializing in collecting market and consumer data), there are 188 Fintech companies operating in the Vietnamese market as of September 2021, which is significantly less than many ASEAN countries such as Singapore (more than 1150 companies), Indonesia (more than 510 companies), and Malaysia (more than 370 companies) However, the number of Vietnamese Fintech firms still growing continuously in 2017 (112 companies), 2018 (144 companies), 2019 (169 companies), and 2020 (181 companies) according to Statista.

Because of the growing number of Fintech businesses, competition between them is unavoidable This competition is not only between Fintech companies but also with commercial banks, and one of the institutions impacted by the Fintech wave is the Joint Stock Commercial Bank for Foreign Trade of Vietnam (hereafter referred to as Vietcombank) As one of the top banks in Vietnam, Vietcombank always captures market trends and launches various banking technology products. Identifying how the influence of Fintech may assist Vietcombank and other banks in developing a plan to respond to rivals or a strategy for collaboration and development of banking technology in 2022, as well as maintaining current

As a result, I decided to choose the topic "ANALYZING THE IMPACT OF FINTECH ON JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE

IN VIETNAM." as my graduation thesis.

Research objectives

The overall purpose of this research is to analyze the impact of Fintech on Vietcombank and find out the relationship between Vietcombank and Fintech. Therefore, gives some proposing development options

First of all, analyze Fintech development status in Vietnam to determine which sectors or which applications of Fintech are the main strengths

After that, it is necessary to take a close look at Vietcombank's development status, especially in the banking technology sector before Fintech appeared to highlight the impact after Fintech appeared.

Next, find out the specific impacts of Fintech, then determine the actions of vietcombank when affected by Fintech.

Finally, provide specific development solutions to benefit both the Fintech industry and Vietcombank.

Research questions

We can determine the primary questions that need to be addressed based on the objective of the research:

Question 1: What is the connection between Fintech and commercial banks?Question 2: What would Vietcombank be like with and without Fintech?Question 3: What impacts does Fintech have on Vietcombank?

Subjects and the scope

The subjects: The impact of Fintech on Joint Stock Commercial Bank for

• Space: The research focuses on Joint Stock Commercial Bank for

Foreign Trade of Vietnam and various Fintech companies to identify the impact and the connection between them.

• Time: Data from Fintech companies and Vietcombank will be collected over multiple different periods of time.

Methodology

The qualitative research method is the major approach employed in this article based on the study subject.

Descriptive statistical methods and data collecting are used to synthesize data from the Vietnamese financial market, Fintech businesses, and Vietcombank to determine the operating condition of these domains.

The study strategy of comparing data over time allows us to see how Vietcombank and Fintech firms have changed over time From then, the evolution of both can be witnessed, laying the groundwork for Fintech's effect on Vietcombank.

Analytical methodologies are utilized to examine the impact of Fintech onVietcombank.

Research contribution

The research has contributed to systematizing the theoretical basis related to the relationship between commercial banks and Fintech firms The findings of the research have the potential to broaden the corpus of knowledge in finance while also laying the groundwork for future research papers.

The findings of this study can assist Vietcombank in particular and commercial banks, in general, define future development plans, particularly in the banking technology area, allowing them to keep up with the global development trend.

Literature review

Based on the process of searching and gathering information on similar studies, I realize that this is one of the new research topics and that finding similar and reputable studies is still a challenge As a result, the background for this study is established by reviewing related and existing papers on the impact of fintech on commercial banks in Vietnam and throughout the world Therefore, some articles about Fintech and banks are selected and given in this section.

The impact of fintech on commercial banks was determined as a "two sides of the coin" when it can help reduce the operating cost and improve efficiency but can also, put the development of banks into danger (Tien Phat Pham et.al., 2021) At first, there were some studies pointed out that Fintech firms sparked competition and placed pressure on banks (Vives, 2017; Omarini, 2018; Goldstein et al., 2019), especially because Fintech may produce a wide range of new services and products based on existing bank products (Omarini, 2018), as well as interfering with the connection between banks and their consumers via a variety of information sources (Vives, 2017).

However, about the relationship between Fintech and commercial banks, although it literally appears that the two sides will compete, but the relationship between banks and Fintech startups actually can appear to be solely one of collaboration and mutual promotion (Cortna & Schmukler, 2018; World Bank

Group, 2018; Ohene-Afoakwa & Nyanhongo, 2017) Many studies have shown thatFintech essentially has benefitted banks in improving their core service

5 implementation procedures (Navaretti et.al., 2017; Cortna & Schmukler, 2018) Even so, Fintech still cannot generally replace the entire banking system in a major way due to the fact that many fintech services need the use of a bank account (Cortna &Schmukler, 2018).

Research structure

Include the reason for choosing the topic, the objectives, and the questions of the research In addition, methodology; subject, and scope are also listed Finally.The research’s contribution as well as the literature review.

THEORETICAL BASIS ABOUT FINTECH AND JOINT

Theoretical basis about Fintech

Fintech is a phrase that is made up of two different terms “Financial” and

“Technology”, it was defined as the use of cutting-edge information and a creative business model, combines with automation technologies to improve the original financial services (Vives, 2017; Cortna & Schmukler, 2018; Dung Pham Quang et.al., 2022; Kagan, 2020) It is frequently referred to as the "new marriage" of financial services and information technology in today's world (Arner et.al., 2015) The concept of Fintech has been formed for a long time and has gone through many different stages and periods (Arner et.al., 2015) These stages are:

• FinTech 1.0 (1866-1967): From analogue to digital

• FinTech 2.0 (1967-2008): Development of Traditional Digital

• FinTech 3.0 (2008 – present): Democratizing Digital Financial Services

• Fintech 3.5: The Examples of Asia and Africa

But critically, Fintech became more known after the 2008 financial crisis, when at that time, certainty and transparency were essential factors for the operation of banks in particular and the financial market in general.

Nowadays, Fintech spans a variety of sectors and businesses, including education, retail banking, nonprofit fundraising, investment management, and many more Fintech also encompasses the creation and usage of digital currencies like bitcoin (Kagan, 2020).

Fintech's operating segment is divided into 5 main segments including: (i) payments, clearing, and settlement; (ii) deposits, lending and capital raising; (iii) insurance; (iv) investment management; and (v) market support (Financial Stability Board, 2017).

It is a tool to make online payment activities faster and more convenient. Usually, e-wallets will link to a user's bank account for the purpose of completing transactions on e-commerce platforms and other platforms The special feature that makes the popularity of e-wallets lies in the convenience, users can transfer money to relatives and friends faster via e-wallets as well as pay electricity and water bill It also allows users to make inquiries about account balances, in order to better control fluctuations in their accounts In particular, when shopping and paying through e- commerce platforms with suitable e-wallets, users can receive promotions and discounts Today, the number of e-wallets in the world is increasing gradually, including PayPal, Google Wallet, Alipay, etc In Vietnam currently, there are also some popular e-wallets such as MoMo, Zalo Pay , AirPay,…

Bitcoin is one of the hot keywords in the financial industry today and when it comes to Fintech, people will always think of Bitcoin Developed by Satoshi Nakamoto in 2009 as open-source software, Bitcoin is considered as a virtual currency used in online transactions with unique features such as anonymous and fee- free transactions, as well as not controlled by a central bank Bitcoin is increasingly known as the world's largest cryptocurrency by market value.

Crowdfunding is a form of funding projects through the internet In other words, businesses, especially startups through crowdfunding can call for investment from the community, any individual with money can invest Crowdfunding helps businesses get a source of capital without having to borrow This is also an opportunity for startups to promote their projects and products Prominent platforms dedicated to Crowdfunding can be mentioned as Kickstarter or IndieGoGo.

Is a new type of loan developed with the aim of connecting borrowers and lenders directly without going through an intermediary at all Peer-to-peer lending usually takes place online, so fees are minimal compared to traditional lending services Peer-to-peer lending institutions and businesses often store information about loans in a digital form, Big Data is also applied to collect information about borrowers and lenders.

As a branch in the ecosystem of Fintech, Insurance Technology, also known as InserTech InsurTech involves applying concepts such as big data (Big Data), artificial intelligence (AI), and the internet of things (IoT) to the insurance industry. Insurance companies through the analysis of consumer behavior, demographics, medical data and biometrics, etc will create an ecosystem of insurance types suitable for a wide range of users Some organizations in the field of Insurtech must be mentioned such as Inso, Opes, Papaya,

About Fintech development around the world, as of June 29th, 2021, based on the Global Fintech Index, the top 10 Fintech countries have been announced In which, the US is at the top, followed by the United Kingdom and Israel, Singapore and Australia are the only two Asian representatives in the top 10 (Findexable, 2021).

Table 2.1 Top 10 Fintech countries in the world as of June 29th, 2021

(Source: Global Fintech Index, Findexable 2021)

As a consequence, many Fintech startups in the mentioned countries have been established and some of them have now become Fintech giants in the world possessing extremely high values such as:

Stripe (USA): Stripe is known as the largest Fintech company in the world at the moment when it is valued at about $ 95 billion The company was founded by brothers John Collison and Patrick Collison in 2010 Besides, in 2021, Stripe has officially surpassed Elon's SpaceX to become the most valuable private startup.

Klarna (Sweden): Stokholm-based payments company Klarna, was founded in 2005 and is currently run by billionaire Sebastian Siemiatkowski The company currently has nearly four million monthly active users in the US and nearly 90 million users globally.

Nubank (Brazil): One of the largest Fintech banks in Latin America, founded in 2013 by David Vélez, the bank is currently headquartered in São Paulo, Brazil. Nubank is also one of the leading fintech businesses in Latin America with over 40 million customers Nubank operates under the Neobank model - a kind of direct bank that operates online without the need for a traditional physical branch network.

When it comes to Southeast Asia, Fintech is one of the fastest expanding technology sectors Therefore, the number of Fintech startups also grows In particular, Singapore and Indonesia are home to many startups with a value of 1 billion USD or more, also known as "unicorns".

Theoretical basis about commercial bank

According to the Law on Credit Institutions No 47/2010/QH12, “Commercial bank is a type of bank where all banking activities are carried out” (Clause 3, Article

4 of the Law on Credit Institutions 2010) such as receiving deposits, issue certificates of deposit, promissory notes, bills, bonds to mobilize domestic and foreign capital,grant credit, open payment accounts for customers, provide payment facilities,provide payment services (Article 98 of the Law on Credit Institutions 2010) This is one of the oldest types of banking since the concept of banking was born On the other hand, a commercial bank is an intermediary financial institution with a significant position in the economy in general and the financial market in particular (Dang Van Dan, 2016).

From the beginning, money has been known as a tool for payment and exchange of goods since time immemorial And also thanks to money, the exchange of goods took place smoothly, from which the development of society brought people's needs to new heights, money became more important and the deposit- taking service was born from there to serve the rich Initially, merchants used to send money to jewelers in gold shops, but jewelers often made loans with high- interest rates. Therefore, with the capital in hand, the merchants set up their own banks with the main purpose of short-term financing for working capital And from there, the first form of commercial banking was born.

2.2.3 The role of commercial banks

Provide capital for the economy

Today, the boundary between commercial banks and other intermediary banks is increasingly shortened, but commercial banks still retain their own position due to the amount of currency that the commercial banking system has which can be generated through lending and payment activities, this amount of currency pens contributes significantly to the money supply of the economy as well as has a great influence on the monetary policy of the central bank.

Commercial banks are always a place where businesses can borrow capital to invest, improve and maintain equipment and machinery in production The fact that banks provide capital for businesses means that banks have improved the position of businesses in competition in the market.

Can be used as a tool to adjust the development direction of the economy.

Besides providing capital to the economy, commercial banks can also be used by the state bank as a tool to adjust the direction of the economy's development.Specifically, when the state wants to encourage a specific industry to grow, the state bank will ask commercial banks to offer appropriate incentives such as reducing interest rates when borrowing, extending loan terms, as well as loosening lending conditions for enterprises in the industry that is being encouraged by the state to develop.

An agreement allowing an organization or individual to use a certain amount of money, or a commitment to enable the use of a certain amount of money on the basis of payback, is referred to as a credit extension There are many types of credit applied by banks based on loan purpose, loan term, repayment method, creditworthiness, and credit origin such as lending, discounting, financial leasing, factoring accounting, bank guarantee, and other credit-granting operations.

• Lending: The customers can be individuals and businesses, the bank is the lender and the borrower (individuals or businesses) is obliged to repay the property (including money or goods) borrowed from the bank including the initial amount and interest when due.

• Bank guarantee: There are many types of bank guarantee applied by banks based on the form of use (conditional guarantee and unconditional guarantee), method of release (direct guarantee, indirect guarantee, confirmed guarantee, and co-guarantee), purpose of use (payment guarantee, loan repayment guarantee, bid guarantee, warranty guarantee,…).

• Factoring: Factoring is a type of credit given to businesses by banks in exchange for the acquisition of receivables originating from the purchase and sale of products Therefore, the bank will lend money to companies that are involved in manufacturing, business, and commerce.

When it comes to banks, lending is one of the main activities of the bank, and so in order to have a secured loan source, the bank needs to have deposits from customers to ensure the profitability of lending activities When customers deposit at a bank, a profitable fund is created after many weeks, months, and years based on the interest rate offered by the bank There are various types of deposits at banks which are demand deposits, time deposits, savings deposits and other types of deposits.

• Demand deposits: A demand deposit is a sort of savings that does not have a set deposit period or balance and can be withdrawn at any time for any amount according to demand The most liquid account a consumer may open is a demand deposit account.

• Time deposits: A term deposit is an amount of money that a consumer deposits at a bank for a certain period of time Therefore, this sum will earn interest based on the interest rate offered by the bank at the time of deposit.

• Savings deposits: An individual's savings are put in a bank with the goal of earning interest on a regular basis called savings deposits This term includes demand deposits and time deposits.

One of the ways credit institutions and banks raise money is by issuing valuable papers For the purpose of raising capital in Vietnam and abroad, banks can issue valuable papers such as: certificates of deposit, promissory notes, bills, and bonds,…

Open a payment account for customers.

According to the Law on Credit Institutions No 47/2010/QH12, “Payment account is a customer's demand deposit account opened at a bank to use payment services provided by the bank.” (Clause 22, Article 4 of the Law on CreditInstitutions 2010) Opening a payment account for a customer means creating a bridge between the bank itself and the customer to enable the bank to provide services such as making checks, bank cards, letters of credit, and other payment services, etc The process of opening a payment account is carried out step by step as well as attached to the regulations (on subjects, age, application for account opening, ) set by the State bank of Vietnam.

Discount: Discount is the purchase by the bank with a term or with a reserve of the right to recourse to valuable papers that are not yet due for payment of the customer.

Rediscount: It is the rediscounting of valuable papers that have been discounted before the payment due date.

Monetary brokerage: A business in which a bank is an intermediary responsible for arranging banking and business activities between credit institutions and financial institutions.

The relationship between Fintech and commercial banks

The competitive relationship between the two sides has been predicted before, when Fintech has the ability to upgrade traditional banking and financial services, attracting customers Therefore, direct competition with commercial banks is possible If Fintech becomes a competitor to the bank, the main areas of competition will be payment and money transfer due to the introduction of e-wallets that integrate many new features as well as offer many promotions for users

In addition, in lending activities, peer-to-peer lending (P2P Lending) is also one of the challenges that banks need to keep an eye on when customers can access this lending method without too much understanding of finance In addition, the peer-to-peer lending process is faster than the lending process at banks because peer- to-peer lending businesses create a direct connection between borrowers and lenders without having to go through an intermediary.

Through the above examples, it can be seen that the advantages of Fintech companies are flexibility, cost reduction, and ease of access but still bring high efficiency Thus, causing banks to set digital transformation goals and participate in the technology race to compete.

Besides competing directly with Fintech companies, banks can choose to cooperate with their own competitors when this option can both meet the digital transformation goals of banks, and can help banks reduce competitive pressure and approach customers of Fintech companies, expanding the bank's influence.

In recent years there has been a surge in the number of financial institutions, aka banks, starting to partner up with Fintechs (Shnaider, 2021) Currently, most commercial banks in Vietnam choose to agree to shake hands with Fintech companies According to the State Bank of Vietnam in 2020, up to 82% of commercial banks agree to have cooperation strategies with Fintech to diversify financial services for customers.

Similarly, up to 72% of Fintech companies choose to cooperate with banks in doing business and providing services, instead of participating in a competition, only14% of Fintech companies develop new services and 14% are ready to compete with banks (Banking Strategy Institute, 2019).

THE IMPACT OF FINTECH ON JOINT STOCK

Fintech's operation status in Vietnam

In 2021, out of 83 countries around the world that are focusing on developing Fintech, Vietnam ranks 70th in the rankings (Table 3.1), behind other Southeast Asian countries like Thailand (55th), Philippines (53rd), Malaysia (46th), Indonesia (43rd), and Singapore (4th) (Findexable, 2021) Besides, Ho Chi Minh City and Hanoi are also at the bottom of the ranking in Southeast Asia (Table 3.2).

Table 3.1 Ranking of Fintech countries in Southeast Asia as of June 29, 2021

Region ranking World ranking Country

(Source: Global Fintech Index, Findexable 2021)

Table 3.2 Ranking of Fintech cities in Southeast Asia as of June 29, 2021 Region ranking

(Source: Global Fintech Index, Findexable

From there, it can be seen that Vietnam is lagging behind other countries in the same region in particular and in the world in general However, the increasing population of Vietnam and the increase in the GDP are one of the factors that help businesses focus on investing in Fintech in Vietnam In addition, the growth inInternet connection of 0.8% along with 70.3% of internet users making connections from mobile phones in 2021 is also driving forces to stimulate the birth of Fintech startups Besides, with the capital poured into Fintech in Southeast Asia growing over the years from 2017 to 2021, and peaking at 3.5 billion USD in 2021 (Chart 3.1),Vietnam is still in the group of countries that receive the attention of domestic and foreign investors Therefore, Vietnam is still trying to accelerate Fintech development through the production of many Fintech startups In short, Vietnam is still one of the potential markets to invest in Fintech.

Chart 3.0.1 Total investment in Fintech and number of Fintech deals in

Although when compared with other countries in the region, the number of

Fintech startups in Vietnam is still quite small, but it is still increasing over the

^ Total fundings (millions USD) ^^^^^MTotal deals

180160140120100806040200 years As of September 2021, Vietnam currently has 188 Fintech companies (Chart 3.2) operating flexibly in various fields such as: Mobile Payment, p2p Lending, Bitcoin / Blockchain, Point of Sale, Crowdfunding, Wealth Management, Credit Scoring / Data Management, Comparison Sites, Digital Banking, SMEs Financing, Insurtech (Table 3.3).

Chart 3.0.2 Number of Fintech companies in Vietnam from 2017 to 2021

Table 3.3 Vietnamese Fintech companies by sector

ZaloPay, ZingPay, VNPT Pay, VTC Pay, VNPay, VinID, Vimo, Viettel Pay, Napas, MoMo, FPT, AirPay,… p2p lending

ATM Online, Avay, Cashwagon, Doctor Đồng, FinFan, Finizi, Finrei, Finso,Gutina, Interloan, Moneybank, Tima,VayMuon, Movi,…

Vinex, VBTC Bitcoin, Verichains, TomoChain, Utop, Remitano, Fiahub, Cash2VN, Bitcoin Vietnam, BAP,…

Point of Sale (POS) bePOS, Ibox, Ocha, Sapo, Speed POS,…

Betado, Comicola, FundingVN, Fundstart, Fundme.vn,…

Finhay, Finhome, Money Lover, Movi, mPayVN, Stockbook, Wowmelo,…

Credit Scoring / Data Management Algo Platform, Compliy, FiinGroup,

Comparison Sites ebaohiem, GoBear, SmartBuddy,

Digital Banking Timo, Wee Digital,…

SMEs Financing eLoan, Dragonlend, Kim An Group,

Insurtech Inso, Opes, Papaya, Save Money,

3.1.3 Fintech development trend in Vietnam.

The year 2021 witnessed the unexpected development of Fintech despite being affected by the Covid-19 epidemic from previous years The main segments that are trending in Vietnam are the payment and peer-to-peer (P2P) lending segments when these two segments account for 31% and 17% of Vietnam's Fintech market,respectively (Chart 3.3) Blockchain technology and cryptocurrencies are still evolving While the remaining segments such as digital banking, insurance,crowdfunding, etc., account for a relatively small proportion when they are still in the early stages of development and have not yet been popularized in the VietnameseFintech market.

Chart 3.0.3 Contribution of Fintech services in Vietnam in 2021

3.1.4 Fintech investment activities in Vietnam

Before entering the Vietnamese market alone, Southeast Asia has achieved a record of FinTech investment capital Specifically, investment capital in the Fintech sector of the ASEAN region was 3.5 billion USD in the first 9 months of 2021, already 3 times higher than the previous year In which, Vietnam ranks 3rd in Southeast Asia in Fintech funding, attracting 2 out of 13 large funding rounds The first and second positions belong to Singapore and Indonesia respectively as companies from these two countries continue to attract the strongest capital in

ASEAN In particular, Fintech companies based in Vietnam have witnessed a strong recovery in the capital Specifically, Vietnam was only able to mobilize $3.32 million in 2017 and $3 million in 2018 However, in 2019, investment capital jumped to $401.5 million Despite being affected by the pandemic, in 2021, FintechVietnam will still call for a capital of 388 million USD Besides, the number of deals in Vietnam also shows an increasing trend over the years, from 4 deals to 15 deals in 2021 (Chart 3.4).

Chart 3.0.4 Number of Fintech deals in Vietnam from 2016 to 2021

As mentioned, with the popularity of the electronic payment segment in Vietnam, MoMo and VN Pay are e-wallets that own a large number of users as well as raise a huge amount of capital from investors through capital call rounds. Specifically, in 2021, the company that owns the VN Pay payment service, VNLife, has just announced that it has raised $250 million in a Series B funding round from

US investors such as General Atlantic and Dragoneer Investment Group along with with the participation of PayPal Ventures and EDBI and current investors GIC and SoftBank Vision Fund 1.

In the case of MoMo, the largest e-wallet in Vietnam, the company successfully raised $100 million in a round series D, accounting for nearly 77.5% of the total investment value of the whole Vietnamese startup market Not stopping there, at the end of 2021, MoMo announced that it had raised $200 million in capital from foreign investors such as Mizuho, Ward Ferry, Goodwater Capital, and Kora Management in the 5th round of funding (Series E).

Through the above data, it can be seen that Vietnam is currently a potential market for Fintech development Although the concept of Fintech has been introduced to Vietnam for a while, the startup market in the Fintech field has never shown any signs of cooling down when every year, the number of new companies always increases, contributing to expanding Fintech's influence on the people But on the contrary, mutual competition between startups is inevitable, especially when there are too many startups sharing the same Fintech field, creating a certain disparity between companies and between sectors of Fintech Therefore, this has both negative and positive effects on the Fintech playing field of startups.

Fintech fields always have their own unique characteristics, there are areas that have not been popularized and have not been exploited too deeply such as crowdfunding, credit score, comparison, etc are typical examples In the fields mentioned above, there is currently not a company or enterprise that has shown outstanding development But these fields can still develop in the right direction if there are appropriate investment strategies as well as the creativity of the young

Table 3.4 Fintech deals in Vietnam in 2021

Unit: USD generation of startups As for the already popular fields such as payment, the opportunity for further development is still there as the number of Vietnamese people who know how to use smartphones and the internet is increasing as well as the age of access to technology is getting younger and younger Therefore, businesses participating in the field of electronic payment can take advantage of the available strengths to accelerate development In short, all areas of Fintech are observed by many financial institutions, including traditional banks, in order to make the most accurate investment decisions.

Based on the record capital that the ASEAN region in general and Vietnam, in particular, have called for over the years, it can be seen that the Vietnamese Fintech market can still stand even when the economy is affected by the Covid-19 pandemic With the maintenance of huge capital from investors for companies like MoMo and VNPAY as well as an increasing number of deals received investment, Fintech Vietnam has the opportunity to achieve more impressive numbers in the future For MoMo, the most used e-wallet today, has achieved certain achievements at home and abroad Even in 2019, Vietnam's MoMo wallet has also entered the top

50 Fintech companies in the world announced by KPMG and H2 Ventures Besides, MoMo also succeeded in calling for the capital of hundreds of millions of dollars. Online Mobile Services Joint Stock Company (M_Service), the company that owns the MoMo e-wallet, is a typical example of companies and businesses in the same industry having the motivation to call for investment to develop.

From the factors mentioned above, it can be concluded that Fintech in Vietnam is in a period of strong growth, the efforts are remarkable and are considered to have the potential to reach the world in the future Although compared to the common ground in the world, Vietnam is still being left behind by countries such as China, Singapore, the United States, etc But with supportive policies and regulations of the government in the field Of the Fintech sector,

Vietnam will become a potential investment playground for investors when there is a number of Fintech fields have not been significantly focused on and exploited.

3.1.5 Fintech development orientation of the State of Vietnam

Witnessing the growth of Fintech, the Vietnamese Government has developed strategies to help Fintech develop in the right direction.

On July 20th, 2017, The State Bank of Vietnam organized the conference

“Fintech – the trend of development and recommendation” in Hanoi to propose orientations and plans for the field of Fintech.

This was followed by the appearance of a Regulatory Sandbox in the Fintech sector, which has been researched by the State Bank since 2019 However, the Decree on this mechanism was just limited to the banking sector and was waiting for approval at that time.

Vietcombank banking technology in the early stages

In the era of technology development, not only Vietcombank but almost all banks in Vietnam began to realize the importance of digital transformation Banks have actively researched and tested new technologies to apply to their business operations and improve customer experience Most banks are investing in digital transformation, considering digital banking as a top priority and so is Vietcombank.

The time when the concept of Fintech really emerged was after the 2007-

2008 Global Recession Therefore, Vietcombank's moves to develop banking technology before the emergence of Fintech should be listed and analyzed to create a premise to evaluate the impacts that Vietcombank will receive after Fintech is popular in Vietnam This is also the answer to the question “What would Vietcombank be like with and without Fintech?”.

The birth of VCB-Online

In 2001, Vietcombank launched the Internet Banking service VCB - Online, this was also the first time this type of service appeared in Vietnam, especially when the Internet was only available in Vietnam in 1997 At that time, VCB - iB@nking (formerly VCB - Online) created the first impressions of the banking industry, adding convenient payment channels for customers to popularize information technology and the internet to people at that time The birth of VCB - Online also created a turning point for the banking industry, creating a premise for many other commercial banks in Vietnam to boldly invest in developing e-banking services.

The birth of the Connect 24 service

In 2002, Vietcombank started providing Connect 24 service to customers opening personal accounts This service includes the implementation of an automated transaction system (ATM Connect 24) and a Connect 24 card so that customers can make transactions at ATMs without having to go directly to Vietcombank branches This is one of the most basic banking technologies at the moment.

The birth of Vietcombank - Cyber Bill Payment (V-CBP) service

In 2003, Vietcombank launched Vietcombank - Cyber Bill Payment (V- CBP) service that allows customers who own Vietcombank accounts or Connect 24 cards to pay phone bills, water bills, Internet charges, and insurance fees as well as payment of purchase fees at supermarkets and shops.

Strengthening the Vietcombank transaction network

In 2004, Vietcombank strengthened its connection to the ATM system with 8 other banks, including the Bank for Foreign Trade of Laos By the end of the year, Vietcombank expanded its ATM network by installing 400 more ATMs At the same time, adding new utilities to VCB - Online such as statements, card information access, and payment.

Continue to expand the utilities on the available services

In 2005, Vietcombank issued international debit cards in cooperation with MTV and MasterCard, and credit cards in combination with American Express and Vietnam Airlines to help satisfy the needs of different customer groups. Vietcombank deployed domestic and international factoring services, at that time, it was considered one of the most widely used trade finance tools.

The birth of mobile phone inquiry service - SMS Banking

In 2006, Vietcombank put into use the inquiry service via Mobile phone - SMS Banking, notably, the number of customers using these services reached 5000 even though this service was only launched in December 2006.

Through the development steps in Vietcombank's banking technology in the period 2001-2006, it can be seen that the technologies Vietcombank brought at that time were basic technologies and were too familiar to customers at the present time. When comparing these early technologies with Fintech applications that appeared in

2008, the difference can be seen, Vietcombank's 2001-2006 technologies are still quite basic but they are the foundation for creating Vietcombank's current technologies after Finetch's appearance made an impact on the banking industry.

Relationship between Vietcombank and Fintech

Through most of the impacts from Fintech on Vietcombank and vice versa, we can see that the relationship between the two sides is a mutually beneficial cooperation when many e-wallets are simultaneously linked with Vietcombank.

Currently, Vietcombank has linked with a total of 16 e-wallets in Vietnam(Table 3.5) and this number will probably increase in the future Notably, the cooperation between Vietcombank and Online Mobile Joint Stock Company (M_Service), the company that owns the largest e-wallet in Vietnam (MoMo) to perform small value money transfer services in rural areas and villages.

In 2020, Vietcombank announced cooperation with EPAY Service Joint Stock Company to deploy deposit and withdrawal services with EPAY e-wallet, promoting non-cash payment services Customers can top up money from the Vietcombank account to the EPAY e-wallet or vice versa Most importantly, Vietcombank is free to use this service for all customers.

At the end of 2021, Vietcombank also announced that customers can make deposits/withdrawals from customers' e-wallets at VNPAY through payment channels of Vietcombank and VNPAY The condition to use the service is to register for VNPAY's e-wallet and register for the VNPAY e-wallet deposit and withdrawal service linked to the customer's payment account opened at Vietcombank And like most of the e-wallets that Vietcombank has cooperated with, the transaction fee is free.

Table 3.5 List of E-wallets directly linked with Vietcombank

Vietcombank debit card Payment account

MOCA (GrabPay by MOCA) ShopeePay

Cooperation with fintech companies will generally benefit Vietcombank, but Vietcombank still maintains a competitive relationship through the development of card services (competitors of e-wallets), the birth of VCBPAY ( e-wallet developed exclusively by Vietcombank), and the popularity of VCB-Mobile B@nking.

According to the above statistics (Chart 3.9), it can be seen that Vietcombank's card sales are currently leading the market, creating a chance for Vietcombank to compete with e-wallets Moreover, Vietcombank's launch of VCBPAY e-wallet has partly demonstrated Vietcombank's competitive intention.

Besides, VCB-Mobile B@nking is also a competitor to e-wallets when integrating many features such as fast money transfer, service bill payment, QR Pay, Phone top-up, etc The advantages of Vietcombank's mobile banking platform are there when the service fees of some e-wallets are still higher than cards and the places which accept payments using wallets are still low.

Vietcombank can also compete with the P2P Lending segment For P2PLending, Finetch's competitors are traditional lending and credit cards at banks.Specifically, when looking at the surface of P2P Lending, we can see that this is a quick and easy form of lending, but behind it is the risks when P2P Lending operates through an online trading platform Therefore, the Ministry of Planning andInvestment believes that, due to the current legal framework in Vietnam, there are no specific regulations for P2P Lending activities And that is Vietcombank's competitive advantage, traditional lending transactions at banks are not as fast as P2PLending but still achieve the bank's safety when lending to customers through careful review steps.

The impact of Fintech on Vietcombank

3.4.1 The impact of Fintech's technological advancement

Fintech's diverse applications are affecting almost all areas of the whole financial - banking system Although it has only been established for more than 10 years, Fintech's products have completely changed the appearance, system, and methods of traditional financial transactions In fact, banks are currently facing a lot of challenges brought by Fintech Most of the traditional business operations such as lending, payment, money transfer, personal finance, insurance, etc of Vietcombank and other commercial banks have also been affected by these advanced applications.

Fintech has the advantage of speed and simplicity as well as giving users control and decision in financial transactions and investment activities While traditional transaction activities of Vietcombank still depend on office hours and most transactions require the presence of both the bank and the customer at Vietcombank's branch This view is gradually being replaced by the development of Fintech, forcing Vietcombank to race for digital transformation Therefore, Vietcombank identifies technology and digitization as key factors to remain competitive with Fintech companies.

Being affected by Fintech's superiority in technology, Vietcombank was forced to participate in the technology race to compete, Vietcombank has made moves to deal with the development of Fintech such as the launch event of VCBDigibank (a digital banking service) on July 16, 2020, in Hanoi This is a completely new type of digital banking based on a combination of online transaction platforms and replacing the bank's previous Internet Banking and Mobile Banking services,which can be used on all devices that have an internet connection The launch of theVCB Digibank service helps Vietcombank improve the weaknesses of their traditional banking services Transactions of customers become more convenient and are no longer limited in time and space but still ensure security Besides,Vietcombank also launched many other types of digital banks such as VCB DigiBiz and VCB Cashup for businesses and organizations respectively to diversify customers.

Although it was only launched in 2020, the number of customers using VCB Digibank has grown strongly over the years According to Vietcombank's statistics, in the first 11 months of 2021, there were nearly 2.5 to 3.5 million transactions with a value of between VND 18 and 36 trillion per day Notably, most of the transactions on digital channels are individual customers, accounting for 97% of the total number of transactions Due to the Covid-19 epidemic in recent years, the speed of application of Vietcombank's digital banks has been accelerated In addition, at the end of 2021, Vietcombank announced the application of a policy of waiving all money transfer fees and service maintenance fees for all individual customers using VCB Digibank.

An E-wallet or you can call an online wallet is an online payment service that allows users to use the money in their wallet to buy goods or pay fees at e- commerce websites, while also allowing money transfer, top-up, withdrawal money, track transaction history,… E-wallet has a high safety program and always ensure both the right of both customers and sellers The E-wallet was conceived in 2008 which was expected to help buyers and sellers connect quickly Just a smartphone, wifi, and an account can pay anytime, anywhere The e-wallet's formal activity is linked to the available account budget, then funds from the account budget to the wallet and uses it One of the most special marks on the payment market in the past 5 years has been the emergence of e-wallets.

Because of the convenience and speed of use plus the strong development ofFintech in the payment segment, leading to the birth of more and more e-wallets The number of e-wallets has increased from 6 (2015) to 39 (2020) Currently, theVietnamese market has about 43 e-wallets and non-bank payment intermediaries officially licensed to operate, this number has increased 7 times compared to 2015(Chart 3.5) Some e-wallets such as MoMo and ZaloPay have become popular and familiar to people because there are promotions for users when making payments.

Chart 3.5 Number of E-Wallets in Vietnam from 2015 to 2021

(Source: The State bank of Vietnam, 2021)

These new competitors are the driving force for banks to compete, andVietcombank is no exception, but the emergence of e-wallets also creates many opportunities for cooperation to expand the bank's scale and coverage Therefore, in addition to competing with e-wallets, banks can choose to cooperate with e-wallet

(Source: Author's own summary) developers Basically, e-wallets are operating under the mechanism where users transfer money from a bank account to a payment account More specifically, e- wallets need to be linked with bank accounts, which makes an impact on banks when giving banks the advantage of expanding customers and taking advantage of an existing payment ecosystem , connecting with e-commerce platforms such as Shopee, Lazada, Tiki, etc.

Not stopping there, e-wallets, in addition to the impact on banks as mentioned above, are also affected by the banks Specifically, when e-wallet operators accept cooperation with banks, this will create conditions to expand the scope of money transfer for users, giving e-wallets a variety of banks that the user can choose to pay. This can be called a positive interaction between electronic wallets and banks, a mutually beneficial cooperation, especially in the context of complicated epidemics, contactless payments are becoming more common and necessary It can be seen that at the present time, for the e-wallets that have resonated in the market such as VNPAY, MoMo, ZaloPay, etc., they are all associated with more than 20 banks, and in which there are big banks in Vietnam (Chart 3.6).

Chart 3.6 Number of banks that five popular e-wallets in Vietnam have linked

With the above positive effects, Vietcombank is certainly not out of the race to cooperate with e-wallets As mentioned, the cooperation between a bank and an e- wallet requires the association of the bank card and that e-wallet Therefore, in order to prove that the impact of e-wallets on Vietcombank is different from that of other banks, Vietcombank's bank card market share and bank card sales market share must have remarkable highlights

In 2021, Vietcombank ranked third in terms of the number of cards issued and circulated with 15.1 million cards, accounting for 14% (Chart 3.7) Regarding debit cards, Vietcombank ranked 4th in the market with a 15% market share (Chart 3.8) Through the above data, it can be seen that the number of Vietcombank cards, although not ranked first, is still in the top group of the market share

Chart 3.7 Bankcard market share in Vietnam in 2021

VietinBank ■ BIDV ■ Vietcombank MB ■ Others

Chart 3.8 Domestic debit card market share in Vietnam in 2021

■ VietinBank ■ Agribank ■ BIDV ■ Vietcombank ■ DongABank ■ Others

Vietcombank completely dominated the market in terms of card sales and domestic debit card sales Specifically, Vietcombank continued to lead with a 23% market share of domestic debit card sales (Chart 3.10), and Vietcombank was also the leading bank in card sales with an 18% market share (Chart 3.9).

Chart 3.9 Market share of card sales in Vietnam in 2021

■ Agribank ■ Vietinbank ■ BIDV ■ Sacombank ■ Others

Chart 3.10 Market share of domestic debit card sales in Vietnam in 2021

■ Vietcombank ■ Agribank ■ BIDV ■ Vietinbank ■ DongABank ■ Others

Not stopping there, Vietcombank continued to lead in the number of POS terminals (POS) with 45,825 POS in circulation, accounting for 24% market share in

Chart 3.11 Market share of POS card acceptance points

■ Vietcombank ■ BIDV ■ Vietinbank ■ Agribank ■ Sacombank ■ Others

Through the above data, it can be seen that Vietcombank's card market share is in the top 3 in the country but leads in terms of usage, proving that the number of users and the frequency of card usage by customers are always guaranteed, showing the popularity of Vietcombank cards Besides, the Vietcombank card acceptance network is still covering the market Thus, it can be concluded that when Vietcombank links with e-wallets, the efficiency level is remarkable because the key to this combination is the link between e-wallets and bank card accounts . Moreover, Vietcombank is a special partner that is directly linked with e-wallets such as VinID Pay, Vietcombank card users will receive special promotions From there, proving the difference with other banks in the situation that all banks cooperate with e-wallets.

Behind Finetch's outstanding advantages are technologies such as Big Data, Artificial Intelligence (AI), and the Internet of Things (IoT), With the development of technology in the 4.0 era and the online world expanding day by day, tools and platforms such as IoT, Big Data, and AI become more and more popular, thereby transforming the banking industry to develop in the Vietnamese market in particular and in the world in general Banks can take advantage of Fintech's supporting technologies to apply new features in financial services as well as develop their own technology products With each type of technology above, there will be separate impacts for banks.

For Vietcombank, the bank often applies Artificial Intelligence intensively.Artificial Intelligence (AI) will be such a program that in an arbitrary world will cope not worse than a human (Dobrev, 2012) AI is also referred to as the ability of machines to perform human tasks The power of AI lies in providing accurate analytics and automatically generating innovative solutions Banks can leverage this ability of AI to analyze customer habits and needs to provide suitable services. When AI is integrated into banking services, customer self-service is also formed.

The causes behind the impacts

3.5.1 Covid-19 epidemic and e-commerce platforms

The reason for the impact of e-wallets on Vietcombank comes from the development of e-wallets themselves and non-cash payment methods Besides, Covid-19 is also a factor that makes these payment methods more popular, indirectly leading to the popularity of e-wallets.

Contactless payment took the throne when the Covid-19 epidemic broke out in Vietnam from 2020 to the present The first case was detected on January 23,

2020, so 2019 is the time when Vietnam has not yet been affected by the disease. The payment market at the time of 2019 has many notable signs such as: the number of customers using the COD (Cash On Delivery) payment method still accounts for a significant proportion with 26%, card payment is still dominating the market with 31%, e-wallets have also gained a foothold with 15% (Chart 3.13) Through the above data, we can see that the rate of using cash is still quite high because people have not been introduced to other payment methods, also at this time the Covid-19 epidemic has not yet broken out, so the application of contactless payment methods has not been focused.

Chart 3.0.53 Proportion of payment methods in shopping online in Vietnam

■ Card ■ Cash ■ Banks transfer ■ Digital wallets ■ Others

During the outbreak of the epidemic in 2021, according to statistics from the Vietnam National Payment Joint Stock Company, about 1.86 billion non-cash payment transactions worth 23.6 billion VND were made in 2021, an increase of 169% and 164% respectively compared to 2020 and 2019 (when there was no outbreak of the disease) Thereby, we can see that the social distancing order has helped contactless payment methods take the throne, indirectly creating favorable conditions for e-wallets to be known by more people.

The development of e-commerce platforms

The development of e-commerce platforms is also the reason for the formation of consumers' non-cash payment habits Customers can enjoy incentives when paying by credit or debit card, thereby creating a habit of buying and paying cashless With e-commerce platforms developing their own e-wallets, and applying for more promotions when using them, customers will have the mentality to use e- wallets not only on e-commerce platforms but also learn and use other e-wallets to enjoy more promotions when paying bills for daily living As a result, the popularity of e-wallets is expanding.

Fintech appeared, causing banks to pay special attention to the supporting tools for Fintech such as AI and Big Data, the origin of these tools is from the industrial revolution 4.0 If the first technology services of Vietcombank in the 2001-

2006 period were products born from the industrial revolution 3.0 (the period when the Internet and digital were gradually popularized with people), then the technologies Vietcombank developed after Fintech appeared are the result of the industrial revolution 4.0.

Industry 4.0 was first introduced to the world in 2015 by Klaus Schwab, executive chairman of the World Economic Forum The core elements of digital in this revolution will be: Artificial Intelligence (AI), the Internet of Things (IoT) and Big Data These are considered inventions created from industry 4.0 that have the ability to completely change the way businesses operate Therefore, when Fintech is supported by these tools, Fintech applications can have the ability to change the face, system and traditional methods of financial transactions in the banking industry.

3.5.3 The absence of a legal and regulatory framework for Fintech

The cooperation between banks and Fintech companies will be complete if the gaps in policy and legal basis for the interaction between banks and Fintech companies are filled The lack of a specific legal and regulatory framework for Fintech is the culprit for risks that Vietcombank may have to face.

Currently, in Vietnam, there is no complete legal framework specifically for the Fintech sector This is the reason for the emergence of cyber risks and compliance risks Specifically, cybercriminals can disregard penalties from the law to commit crimes, negatively affecting Fintech companies, banks, and customers on both sides.

The absence of regulations on user data protection creates the poor quality of the customer data system in the market The lack of a legal framework for Fintech also affects Fintech companies in reducing compliance risks from staff.

The reason for the delay in the issuance of regulations comes from the characteristics of Fintech It is difficult to create an appropriate legal framework when a too strict law willinhibit creativity, which is one of the essential factors when developing Fintech On the contrary, if the law that is too loose, the above risks will not be controlled.

SOLUTIONS AND RECOMMENDATIONS

Solutions

Improve and upgrade the IT system (to deal with “the Incomplete information technology system”)

As we know, not only Vietcombank but also banks in Vietnam have their own sources of customer information, so this upgrade is also essential for the bank to be able to deal with the risk of stealing user information We can see in real life that the phone number of the user is not properly managed will greatly affect the user (spam messages, telemarketing, phone scams, etc.) Regarding possible risks to customers, although Vietcombank has a risk warning section on the bank's website, it is not enough to ensure that customers are not hacked To deal with cyber risks, banks need to disseminate knowledge about products and services to users to limit risks in transactions For new users, banks need to integrate specific instructions and signs of fraud in apps like VCB Digibank and VCBPAY.

Vietcombank also needs to focus on the maintenance of ATMs and shorten the time between maintenance to bring a smooth experience for customers For errors appearing on VCB Digibank, Vietcombank needs to notify the system upgrade a few hours in advance so that customers can rest assured that the application is not faulty.

Improve the quality of human resources (to deal with “Limited human resources for digital transformation”)

On the human resource side, there will be a need to refine and supplement the number of bank employees Vietcombank is currently competing with other banks in terms of high-quality human resources in the IT segment, Vietcombank can attract and select excellent individuals by offering an attractive reward, salary, and benefits.

The bank also needs to pay attention to deploying a human resource development strategy for the current staff This strategy focuses on high-tech factors and most importantly, knowledge of Fintech

Create a separate legal framework for Fintech (to deal with “There are still risks

The cause of the risk is the lack of regulations, so it is necessary to push the regulatory authorities to come up with appropriate policies to solve this problem.

The formation of a Fintech-specific legal framework is one of the things that banks, Fintech companies, financial institutions, etc need most at the moment because this legal framework can solve a lot of problems such as: banks can safely cooperate with Fintech companies; Fintech companies can get the bank's trust in cooperation; the government can control Fintech development to ensure the industry is on the right track A suitable legal framework can protect the interests of customers when at risk, creating peace of mind for Fintech companies

Recently, the Government issued Resolution No 100/NQ-CP approving the proposal to develop a Decree on a Regulatory Sandbox for financial technology (Fintech) activities in the banking sector But this is not yet an official legal framework for digital banking and Fintech This is just a platform, a program to establish a legal framework for Fintech.

When a Regulatory Sandbox is introduced, it will take time to test it, and more time to have a draft of the legislation That's why the Government now needs a lot of time to make the provisions of the law So this process needs to be fastened to meet the need of not only Fintech companies but also commercial banks in Vietnam.

Recruiting and training human resources (to deal with “Lack of human resources specialized in Fintech”)

To achieve the goal of bringing Vietnamese Fintech to develop in the region and the world, it is necessary to look deeply into Fintech companies, specifically the human factor Fintech companies can compete for IT human resources by offering attractive salaries to attract good individuals.

All Fintech companies need to do is prioritize the quality of human resources rather than the quantity of human resources because Fintech's characteristics are novelty and technology What Fintech companies need is creativity and breakthrough, not an abundant labor force but no expertise.

Fintech companies also need to train their current human resources, to have specialized knowledge, and understand what they are contributing to the company. The most important is still understanding about modern applications to financial services Besides, good ethics is also a necessary factor to limit compliance risks in the company.

Exploiting Fintech areas that have not yet popular through in Vietnam (to deal with “Only thrive and focus on a few areas”)

In order to stimulate the Fintech industry in Vietnam to develop, it is necessary to have equal development among companies and across sectors Fintech development speed will be accelerated if all segments of Fintech develop strongly and evenly Therefore, active Fintech companies can participate in the remaining areas in order to expand their influence Fintech startups can also look at the market and try new fields in Vietnam The government can provide policies to support and encourage investment in promising financial technology projects.

Recommendations

Continue the digital transformation (to promote “Having a clear policy and direction for technology development ”)

Despite some early successes, Vietcombank must overcome the following obstacles in order to continue pushing digital transformation:

• Having the ability to create more new business models and new competitive advantages

• Looking for human resources specializing in digital transformation in the banking industry

• Deeper application of 4.0 technologies (cloud computing, big data, artificial intelligence, blockchain)

• Completing the legal framework for digital transformation to catch up with development requirements.

Besides, legal issues also need to be mentioned for smooth digital transformation There are currently not many decisions made by the regulator about digital transformation, these include decisions such as:

Decision No 749/QD-TTg dated June 3, 2020, on approval of "National digital transformation program to 2025, orientation to 2030"

Resolution No 02-NQ/DUK dated 07/06/2021 of the Executive Committee of the Party Committee of the Division, Implementing digital transformation at enterprises and units in the central business sector until 2025, with orientation to 2030

Decision 810/QD-NHNN dated 11/5/2021 on the plan for the digital transformation of the banking sector to 2025, orientation to 2030

In the process of digital transformation, it is necessary to create a trust for customers when using digital banks by promoting products and services to the community to expand market share.

New technologies are not necessarily needed to be too fussy in terms of process and usage, but rather focus on ease of access The transaction process through fintech services should be designed to be easy and convenient for customers.

At the same time, add more utilities to suit the general needs of customers as well as consider which utilities are really necessary to reduce maintenance costs.

A successful and complete digital transformation is when a bank overcomes the challenges mentioned above, thereby bringing great values in terms of customer experience, employee engagement and, of course, financial efficiency.

Considering cooperation with Fintech companies is necessary (to promote

Having a good reputation in the market will help Vietcombank easily realize cooperation deals, especially with Fintech companies Therefore, banks need to be more active in strengthening cooperation with Fintech to expand the bank’s influence to find more customers and maintain the reputation

The bank's ability to attract new customers and retain old customers will also be significantly improved if there is a diversification of products and services when applying Fintech Moreover, cooperation can help Vietcombank avoid strategic risks, Cooperation strategies with Fintech companies should be carefully considered by the bank's leadership before deciding to cooperate In addition, banks themselves also need to increase investment, upgrade technology infrastructure, and enhance system security to expand their market more.

Expanding the Fintech ecosystem and influence (to promote “Fintech technology and ecosystem”)

As mentioned, Fintech has the advantage of a variety of services and can be applied to a wide range of industries Therefore, besides banks, Fintech companies can also cooperate with diverse industries to expand the influence of financial technology Vietnamese Fintech should also learn from the development of Fintech in other countries such as Singapore, the USA, China, etc To be able to exploit the full potential of all segments in the Fintech ecosystem.

Continue to cooperate with banks (to promote “ Have a source of potential customers”)

Fintech companies can take advantage of their own source of potential customers plus technological advantages to attract investors and cooperate relationships with banks Since then, added many new sources of customers from businesses that Fintech companies have cooperated with.

For Fintech companies, strengths are technologies that users can use easily,but have little experience in the financial - banking sector, and their reputations are not big enough to be able to expand the market quickly, especially in Vietnam.Therefore, in order to bring their products to more people, banks are the factors that help Fintech companies do that On the banking side, the banks have gained prestige among the people, creating a large network of activities and a huge source of customer data, most importantly, most commercial banks in Vietnam are digitally transforming and some of the bank's strategies cannot be completed without financial technology.

In chapter 4, the author has based on the actual development situation ofFintech Vietnam and Vietcombank in chapter 2, combined with the impact ofFintech on Vietcombank in chapter 3, to be able to give some solutions to solve the weaknesses and recommendations to promote strengths of both Fintech andVietcombank In addition, general recommendations for the Government and management units are also given to improve and develop Fintech in Vietnam.

The development of technology along with the widespread application of advances of the industrial revolution 4.0 to social life has brought unprecedented changes in both breadth and depth of all fields, blurring the lines between the real world and the virtual world Fintech is one of the children of the industrial age 4.0. And looking back at what Fintech has shown over the years, from the introduction of accessible services such as P2P Lending, Mobile Payment, Digital Banking, etc to services that improve social life such as Insurtech, Wealth Management,… Fintech has really changed people's lives.

The change that Fintech brings also has specific effects on banks in Vietnam and Vietcombank is one of them From promoting banks in digital transformation to cooperating for joint development with banks, Fintech has really proven its birth with a purpose, and Fintech has absolutely the potential to completely change its face of it the financial services sector in the future It can be said that in about 5, or

10 years, people will see Fintech as a part of social life.

The thesis clearly outlines the basic theories of Fintech, services and applications of Fintech in the banking and finance industry, the thesis also outlines the current situation of Fintech's operations in Vietnam, to assess any aspect of Fintech that has an advantage and the ability to affect commercial banks in Vietnam in general and Vietcombank in particular Through that, the author proposes solutions and recommendations for Fintech and Vietcombank, most importantly,enhancing the cooperation between the two parties The author hopes that this thesis can be considered as a reference for further research purposes.

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(2018) Fintech and banking Friends or foes? Friends or Foes.

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Bankers without Borders The World Bank.

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1 Hà Thị Kim Dung và Nguyễn Thúy Quỳnh 2020, ‘Sự bùng nổ của các doanh nghiệp Fintech, cơ hội và thách thức cho các ngân hàng tại Việt Nam’, Tạp chí khoa học và công nghệ, số 06 (tháng 12/2020), trang 151-156.

2 Lê Thị Tuyết Hoa, Ngô Sỹ Nam, Đặng Văn Dân và Dương Thị Thùy An

2016, Thị trường tài chính và các định chế tài chính, NXB Kinh tế, TP Hồ Chí Minh.

Number of E-Wallets in Vietnam from 2015 to 2021

(Source: The State bank of Vietnam, 2021)

These new competitors are the driving force for banks to compete, andVietcombank is no exception, but the emergence of e-wallets also creates many opportunities for cooperation to expand the bank's scale and coverage Therefore, in addition to competing with e-wallets, banks can choose to cooperate with e-wallet

(Source: Author's own summary) developers Basically, e-wallets are operating under the mechanism where users transfer money from a bank account to a payment account More specifically, e- wallets need to be linked with bank accounts, which makes an impact on banks when giving banks the advantage of expanding customers and taking advantage of an existing payment ecosystem , connecting with e-commerce platforms such as Shopee, Lazada, Tiki, etc.

Not stopping there, e-wallets, in addition to the impact on banks as mentioned above, are also affected by the banks Specifically, when e-wallet operators accept cooperation with banks, this will create conditions to expand the scope of money transfer for users, giving e-wallets a variety of banks that the user can choose to pay. This can be called a positive interaction between electronic wallets and banks, a mutually beneficial cooperation, especially in the context of complicated epidemics, contactless payments are becoming more common and necessary It can be seen that at the present time, for the e-wallets that have resonated in the market such as VNPAY, MoMo, ZaloPay, etc., they are all associated with more than 20 banks, and in which there are big banks in Vietnam (Chart 3.6).

Number of banks that five popular e-wallets in Vietnam have linked

With the above positive effects, Vietcombank is certainly not out of the race to cooperate with e-wallets As mentioned, the cooperation between a bank and an e- wallet requires the association of the bank card and that e-wallet Therefore, in order to prove that the impact of e-wallets on Vietcombank is different from that of other banks, Vietcombank's bank card market share and bank card sales market share must have remarkable highlights

In 2021, Vietcombank ranked third in terms of the number of cards issued and circulated with 15.1 million cards, accounting for 14% (Chart 3.7) Regarding debit cards, Vietcombank ranked 4th in the market with a 15% market share (Chart3.8) Through the above data, it can be seen that the number of Vietcombank cards,although not ranked first, is still in the top group of the market share

Bankcard market share in Vietnam in 2021

VietinBank ■ BIDV ■ Vietcombank MB ■ Others

Domestic debit card market share in Vietnam in 2021

■ VietinBank ■ Agribank ■ BIDV ■ Vietcombank ■ DongABank ■ Others

Vietcombank completely dominated the market in terms of card sales and domestic debit card sales Specifically, Vietcombank continued to lead with a 23% market share of domestic debit card sales (Chart 3.10), and Vietcombank was also the leading bank in card sales with an 18% market share (Chart 3.9).

Market share of card sales in Vietnam in 2021

■ Agribank ■ Vietinbank ■ BIDV ■ Sacombank ■ Others

Market share of domestic debit card sales in Vietnam in 2021

■ Vietcombank ■ Agribank ■ BIDV ■ Vietinbank ■ DongABank ■ Others

Not stopping there, Vietcombank continued to lead in the number of POS terminals (POS) with 45,825 POS in circulation, accounting for 24% market share in

Market share of POS card acceptance points

■ Vietcombank ■ BIDV ■ Vietinbank ■ Agribank ■ Sacombank ■ Others

Through the above data, it can be seen that Vietcombank's card market share is in the top 3 in the country but leads in terms of usage, proving that the number of users and the frequency of card usage by customers are always guaranteed, showing the popularity of Vietcombank cards Besides, the Vietcombank card acceptance network is still covering the market Thus, it can be concluded that when Vietcombank links with e-wallets, the efficiency level is remarkable because the key to this combination is the link between e-wallets and bank card accounts . Moreover, Vietcombank is a special partner that is directly linked with e-wallets such as VinID Pay, Vietcombank card users will receive special promotions From there, proving the difference with other banks in the situation that all banks cooperate with e-wallets.

Behind Finetch's outstanding advantages are technologies such as Big Data, Artificial Intelligence (AI), and the Internet of Things (IoT), With the development of technology in the 4.0 era and the online world expanding day by day, tools and platforms such as IoT, Big Data, and AI become more and more popular, thereby transforming the banking industry to develop in the Vietnamese market in particular and in the world in general Banks can take advantage of Fintech's supporting technologies to apply new features in financial services as well as develop their own technology products With each type of technology above, there will be separate impacts for banks.

For Vietcombank, the bank often applies Artificial Intelligence intensively.Artificial Intelligence (AI) will be such a program that in an arbitrary world will cope not worse than a human (Dobrev, 2012) AI is also referred to as the ability of machines to perform human tasks The power of AI lies in providing accurate analytics and automatically generating innovative solutions Banks can leverage this ability of AI to analyze customer habits and needs to provide suitable services. When AI is integrated into banking services, customer self-service is also formed.

In the case of Vietcombank, the impact of AI prompted Vietcombank to create an AI-integrated money transfer service called VCBPAY on August 20, 2018, this new service belongs to Vietcombank's Mobile Banking ecosystem and can also be considered as an e-wallet developed exclusively by Vietcombank Along with the functions of an e-wallet, VCBPAY is integrated with a virtual assistant – ChatBot, just need to speak up, the chatbot assistant equipped with AI technology will help complete transaction requests.

Thanks to AI, Vietcombank can launch a project to invest in the AI ChatBot solution system in customer care activities Specifically, on March 2, 2022, with the cooperation from FPT IS, Vietcombank's key project was implemented to open up a 24/7 automated communication channel to increase interaction with customers, at the same time reducing the load on Contact Center activities at Vietcombank.

Vietcombank's purpose when making moves to apply AI is to serve the goal of becoming the No 1 Bank in digital transformation in Vietnam, leading the region's digital transformation banks as well as the number 1 bank in terms of digital transformation and customer satisfaction.

For Big Data, Vietcombank considers this an important factor in managing banking data According to the Quantitative Team of Vietcombank, data accounts for a large proportion (about 70%) of the bank's operations, so Vietcombank is interested in using Big data for business purposes Specifically, Big Data will be a tool to help Vietcombank analyze existing problems in the bank as well as in the market, thereby offering appropriate business strategies and solutions.

With the influence of Big Data, Vietcombank established a Quantitative Group specializing in data analysis for business operations In addition, Vietcombank also hired the world's largest consulting organization to guide the customer scoring model, and perform data analysis steps, and data analysis processes professionally.

If it is said that the relationship between banks and Fintech companies is two sides of the same coin, surely the impact of Fintech on commercial banks is also divided into two opposite directions Besides promoting banks to develop technology, cooperate with banks to expand customers, etc Fintech also makes banks face many difficulties.

From the beginning, Fintech has made it difficult for banks to maintain current operating models, threatening profitability In case banks do not agree to cooperate with Fintech companies, competition will occur and losing market share in competition with Fintech companies will lead to negative impacts for banks.

Although it considered cooperation with Fintech necessary, at the time when Fintech had just appeared, Vietcombank had already suffered strategic risks from Fintech, creating a premise for future cooperation solutions with Fintech.

Vietcombank aims to be the No 1 bank in terms of digital transformation inVietnam and the region as well as the first in customer satisfaction Therefore,strategic risks from Fintech have a great influence on banks Especially whenVietcombank is always under the pressure of being one of the big banks in Vietnam and wishes to maintain that position when Finetch develops.

Fintech has pushed Vietcombank to race in technology, and launch new services, and these services all require an Internet connection, thereby indirectly creating network risks The advent of digital banking services such as VCBDigibank, VCB DigiBiz, VCB Cashup, etc All serve the common goal ofVietcombank of digital transformation, but it comes with security challenges when risks arise Banks always pay attention to this type of risk because cyber risk can arise in all operational contexts, and affects many entities (customers, banks, and partners).

Cybersecurity concerns appeared from the fact that banking data systems have been invaded and stolen to commit acts that damage the assets of banks and customers Forms of cyber attacks can be mentioned such as: defrauding money through bank accounts, impersonating Vietcombank bank employees, sending fake Vietcombank links, and creating websites impersonating Vietcombank Therefore, Vietcombank's development of digital banking means accepting network risks.

Through the above effects, we can see the "maturity" of Vietcombank in technology development If in 2001, Vietcombank was just starting to issue a payment system using cards and transferring/withdrawing money by ATM, then in the period 2010 to 2021, Vietcombank already possessed superior technologies The key to this growth is partly due to the presence and promotion of Fintech as well as the creativity of Vietcombank's technology development team.

Illustrating the impact of Fintech

VCB Digibank VCB DigiBiz VCB Cashup

3.5 The causes behind the impacts.

3.5.1 Covid-19 epidemic and e-commerce platforms

The reason for the impact of e-wallets on Vietcombank comes from the development of e-wallets themselves and non-cash payment methods Besides, Covid-19 is also a factor that makes these payment methods more popular, indirectly leading to the popularity of e-wallets.

Contactless payment took the throne when the Covid-19 epidemic broke out in Vietnam from 2020 to the present The first case was detected on January 23,

2020, so 2019 is the time when Vietnam has not yet been affected by the disease. The payment market at the time of 2019 has many notable signs such as: the number of customers using the COD (Cash On Delivery) payment method still accounts for a significant proportion with 26%, card payment is still dominating the market with 31%, e-wallets have also gained a foothold with 15% (Chart 3.13) Through the above data, we can see that the rate of using cash is still quite high because people have not been introduced to other payment methods, also at this time the Covid-19 epidemic has not yet broken out, so the application of contactless payment methods has not been focused.

Chart 3.0.53 Proportion of payment methods in shopping online in Vietnam

■ Card ■ Cash ■ Banks transfer ■ Digital wallets ■ Others

During the outbreak of the epidemic in 2021, according to statistics from the Vietnam National Payment Joint Stock Company, about 1.86 billion non-cash payment transactions worth 23.6 billion VND were made in 2021, an increase of 169% and 164% respectively compared to 2020 and 2019 (when there was no outbreak of the disease) Thereby, we can see that the social distancing order has helped contactless payment methods take the throne, indirectly creating favorable conditions for e-wallets to be known by more people.

The development of e-commerce platforms

The development of e-commerce platforms is also the reason for the formation of consumers' non-cash payment habits Customers can enjoy incentives when paying by credit or debit card, thereby creating a habit of buying and paying cashless With e-commerce platforms developing their own e-wallets, and applying for more promotions when using them, customers will have the mentality to use e- wallets not only on e-commerce platforms but also learn and use other e-wallets to enjoy more promotions when paying bills for daily living As a result, the popularity of e-wallets is expanding.

Fintech appeared, causing banks to pay special attention to the supporting tools for Fintech such as AI and Big Data, the origin of these tools is from the industrial revolution 4.0 If the first technology services of Vietcombank in the 2001-

2006 period were products born from the industrial revolution 3.0 (the period when the Internet and digital were gradually popularized with people), then the technologies Vietcombank developed after Fintech appeared are the result of the industrial revolution 4.0.

Industry 4.0 was first introduced to the world in 2015 by Klaus Schwab, executive chairman of the World Economic Forum The core elements of digital in this revolution will be: Artificial Intelligence (AI), the Internet of Things (IoT) and Big Data These are considered inventions created from industry 4.0 that have the ability to completely change the way businesses operate Therefore, when Fintech is supported by these tools, Fintech applications can have the ability to change the face, system and traditional methods of financial transactions in the banking industry.

3.5.3 The absence of a legal and regulatory framework for Fintech

The cooperation between banks and Fintech companies will be complete if the gaps in policy and legal basis for the interaction between banks and Fintech companies are filled The lack of a specific legal and regulatory framework for Fintech is the culprit for risks that Vietcombank may have to face.

Currently, in Vietnam, there is no complete legal framework specifically for the Fintech sector This is the reason for the emergence of cyber risks and compliance risks Specifically, cybercriminals can disregard penalties from the law to commit crimes, negatively affecting Fintech companies, banks, and customers on both sides.

The absence of regulations on user data protection creates the poor quality of the customer data system in the market The lack of a legal framework for Fintech also affects Fintech companies in reducing compliance risks from staff.

The reason for the delay in the issuance of regulations comes from the characteristics of Fintech It is difficult to create an appropriate legal framework when a too strict law willinhibit creativity, which is one of the essential factors when developing Fintech On the contrary, if the law that is too loose, the above risks will not be controlled.

3.6 Strengths and weaknesses exist in Vietcombank and Fintech

3.6.1 Strengths of Vietcombank and Fintech

Having a clear policy and strategy for technology development

Even before Fintech appeared in Vietnam, Vietcombank's development goal was digital transformation, and after fintech appeared, digital transformation was even more focused Vietcombank's desire for digital transformation has created cooperation and competition with Fintech companies and with other Vietnamese commercial banks.

Vietcombank's strategic orientation to 2025 and vision for 2030 is to maintain its position as the No 1 Bank in Vietnam (Vietcombank, 2022) Vietcombank's digital transformation efforts are demonstrated through major awards from prestigious domestic and regional assessment organizations For example, the VCB Digibank Digital Banking application received the Vietnam Digital Transformation Award 2021 for the Typical Digital Transformation Product - Solution category organized by the Vietnam Digital Communications Association (VDCA) Not stopping there, in 2020, VCB-Mobile B@nking is rated as the best digital banking application in Vietnam awarded by The Asian Banker, demonstrating the same popularity among Fintech competitors.

Having a clear policy and technology development orientation helps Vietcombank easily approach and cooperate with Fintech companies as well as develop its own technology products to increase competitiveness with Fintech companies themselves.

Vietcombank's growth is not only reflected in the leading card market share, but also in the leading position in profit in recent years, specifically in 2020 and 2021,Vietcombank's pre-tax profit is always at the top, ranked first in Vietnam's banking industry with 23.050 billion VND (in 2020) and 27.389 billion VND (in 2021) (Chart 3.14) Besides, Vietcombank is also considered as the unit with the largest brand value in the banking industry in Vietnam (Forbes Vietnam, 2021).

Chart 3.14 Top 10 banks with the largest profit before tax in 2020 & 2021

(Source: Annual reports of banks, 2021)

Top 10 banks with the largest profit before tax in 2020 & 2021

(Source: Annual reports of banks, 2021)

With stable operation and a large number of customers, Vietcombank has always been considered a large and important partner for Fintech companies In addition, having a market and reputation is always an advantage in attracting Fintech companies to negotiate cooperation.

The strength of Fintech companies in developing relationships with Vietcombank has always been technology Some Fintech companies can use the advantage of technological advancement to compete directly, or some companies use this advantage as a tool to attract investment and partnership banks.

In Vietnam today, the Fintech ecosystem includes more than 10 fields and can be expanded in the future, so the number of Fintech companies will definitely increase over the years, serving the cooperation needs of Vietcombank.

Have a source of potential customers

There are cases where customers have not been exposed to banking services but have been exposed to Fintech services before, this is a separate source of customers of Fintech organizations If the cooperation relationship happens, Vietcombank will be added a new source of customers.

For example, in the field of P2P Lending, customers are usually those who do not have much financial knowledge, and do not fully understand the lending process at Vietcombank, they come to this loan method because of its speed The loan process is quick and the loan regulations are also loosened Although Vietcombank has not cooperated with P2P Lending companies, in other fields, potential customers are always available On the contrary, the cooperation will also bring Fintech closer to Vietcombank's customers.

3.6.2 Weaknesses of Vietcombank and Fintech

The incomplete information technology system

Systems such as ATM Vietcombank still have errors affecting customers' transactions In addition, VCB Digibank's digital banking service sometimes still encounters problems due to an error recorded on the e-banking channel, possibly due to overloaded transmission lines leading to network congestion Moreover, the customer information system is still at risk of being stolen, leading to advertising messages and calls or showing signs of spam.

Problems with the information technology system at Vietcombank are barriers to cooperating or competing with Fintech companies The reason comes from the fact that the bank has not paid too much attention to the periodic maintenance of the transaction systems, and has not upgraded the customer data system and the network security system to protect such data.

Limited human resources for digital transformation

In addition to technology, the human factor also plays an important role in digital transformation To be in the position it is today, Vietcombank must have had a stable human resource in terms of quantity and quality However, at present, Vietcombank's human resources specializing in digital transformation and understanding Fintech knowledge are still limited, creating challenges for banks.

The reason is due to the fast development of Fintech, making banks in Vietnam, not only Vietcombank, not adapt and prepare in time for the appearance of new competitors or partners Since then, the human resource specialized in the Fintech field at Vietcombank is still in the forming stage.

Because the core nature of Fintech is technology and online, everything is deployed on the Internet platform, so it is difficult for Fintech companies to escape the risks mentioned in section 2.1.5 (Strategic risk, operational risk, cyber risk, compliance risk) The boom of Fintech is undeniable, but the development comes with risks that will affect the cooperation relationship of some Fintech companies with banks Banks will be concerned about information security when shaking hands with Fintech.

The main reason for this situation comes from the lack of a legal and regulatory framework for Fintech in Vietnam Therefore, with the absence of the current legal framework, many banking and Fintech cooperation activities are facing difficulties to operate effectively If the legal framework is not clear, the bank may not be ready to provide Fintech applications to the customer.

Also, the delay in creating a Fintech regulatory framework stems from the digital element of Fintech Regulatory agencies are very cautious about the concept of digital due to the decisions taken may affect network security and information security.

Lack of human resources specialized in Fintech

Not only Fintech, but almost all fields in Vietnam are also thirsty for information technology resources By 2021, Vietnam will still need 450,000 human resources in the information technology industry Meanwhile, the current number of programmers in Vietnam is only about 430,000 (TopDev, 2021) In more detail, Out of more than 55,000 IT students graduating each year, only about 16,500 students (30%) meet the skills and expertise that businesses need (TopDev, 2021).

Competing for quality human resources is a challenge for Fintech, because this field has only become popular in Vietnam in recent years, so it is still quite new, Therefore, finding human resources specialized in Fintech is still a challenge.

Only thrive and focus on a few areas

Currently, Fintech in Vietnam is developing based on the explosion of two main areas, Payment and P2P Lending (Chart 3.3) Therefore, some remaining segments have not been focused and the number of prominent companies in these segments is still quite small The diversity in the Fintech ecosystem is there, but not all areas in the Fintech ecosystem are popular in Vietnam Therefore, banks are limited in choosing potential Fintech segments to cooperate with.