The fintech in vietnam

MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMIC UNIVERSITY INSTITUTE OF BANKING - FINANCE TOPIC : THE FINTECH IN VIETNAM Subject: English for Banking Finance Lu Lecture: Mr Phung Thanh Quang ận Class: NHCO1110 n vă Team: Nguyen Thi Thu Thuong (Leader)_11165030 th Tran Thi Cam Hoa_11161912 ạc sĩ Vu Thi Thuy Quynh_11164438 n uả Q Tran Thi Mai Huong_11162282 lý Hà Nội, tháng 9, năm 2018 nh Ki tế Contents I What is fintech? II The object of Fintech Financial institutions .3 Fintech companies 3 Customers Main product groups III Fintech services .4 Cryptocurrency Bitcoin Blockchain .4 Ethereum .5 Disruptive innovation Regtech Insurtech Initial coin offering Open banking Robo-advisor .6 11 Unbanked/underbanked .6 12 Financial inclusion 13 Smart contracts 14 Accelerators .7 Fintech in Vietnam n vă V ận IV Lu 10 Solutions VI Strengths th Market resources ADB's companion 10 VII weaknesses 10 Technology in Vietnam has not caught up with international technology 10 Security is the second weakness 10 Legal issues in fintech management .11 VIII Opportunities .11 IX Challenges 12 ạc sĩ n uả Q lý nh Ki tế I What is fintech? If you've ever paid for something with your phone, transferred money using an app, or checked your bank statement online, then you've already part of a multi-billion dollar industry It's called fintech, and it's changing economies around the world Fintech is short for financial technology - seems simple, right? Well, the term fintech includes a huge range of products, technologies, and business models that are changing the financial services industry It refers to everything from cashless payments, to crowdfunding platforms, to robo-advisors, to virtual currencies Financial technology (FinTech or fintech) is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. FinTech is a new industry that uses technology to improve activities in finance The use of smartphones for mobile banking, investing services and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public.So everytime you donate to someone's Kickstarter campaign - that's fintech Or if you transfer money to someone using Venmo - that's also fintech II The object of Fintech Financial institutions Lu ận An important entity in the financial sector, these institutions are increasingly cooperating with Fintech companies as they recognize the importance of technology At the same time, these institutions also invest directly in Fintech companies or research activities to actively capture new technologies and occupy the market n vă Fintech companies th ạc Independent companies operating in the field of information technology provide new products and services in the financial sector Customers of these companies may be end users, and may be financial institution sĩ uả Q Customers n Users of financial services products in general With new technology applications, customers are the ones who benefit the most from the competition between companies, financial institutions as well as from new technology gadgets lý nh Ki tế Main product groups Fintech products are usually divided into two groups: the first is consumer products, digital tools and other technologies to improve the way individuals borrow, manage money, fund startups; the second group: Back-office technology products to support the operation of Fintech and financial institutions Fundamentally, in addition to common services such as payment, lending, money transfer, Fintech also offers more extensive services such as crowd-funding, peer to peer lending Personal Finance, Insur-Tech, Crypto Blockchain, Data Management, and more III Fintech services Cryptocurrency A cryptocurrency is a decentralized digital currency which uses encryption - the process of converting data into code - to generate units of currency and validate transactions independent of a central bank or government.Bitcoin and ether are the most common form of digital currencies But there are other forms of virtual cash, such as Litecoin, Ripple and Dash (i.e "Digital Cash") Bitcoin ận Lu 'Bitcoin' – a term we're more used to hearing even in mainstream finance – is the first and one of the most prominent cryptocurrencies used by traders in the world of fintech.It all began when an unknown person(s), under the pseudonym Satoshi Nakamoto, designed bitcoin as a peer-to-peer (P2P) payment network without the need for governance by any central authority In an introductory white paper introducing the virtual currency, Nakamoto defined bitcoin as: "A purely peer-to-peer version of electronic cash (which) would allow online payments to be sent directly from one party to another without going through a financial institution." n vă ạc th sĩ Blockchain Q n uả Blockchain is a form of distributed ledger technology (DLT) This means that it maintains records of all cryptocurrency transactions on a distributed network of computers, but has no central ledger It secures the data through encrypted 'blocks'.Various blockchain experts believe the technology can provide transparency for lý nh Ki tế a multitude of different industries, not just the financial services The original blockchain network was created by bitcoin-founder Nakamoto to serve as the public ledger for all bitcoin transactions Ethereum Ethereum is another type of blockchain network It was proposed by a 19-year-old Russian-Canadian programmer, Vitalik Buterin, in 2013.Ethereum differs to the original blockchain in that it is designed for people to build decentralized applications These are applications which allow users to interact with each other directly rather than having to go through any middlemen, Buterin said, explaining the project in 2014 Disruptive innovation Disruptive innovation happens whenever new technologies alter the way markets operate.Though not exclusively a fintech term, it is often used to describe events in the financial services where technological developments force financial institutions to rethink their approach to the industry Regtech ận Lu Regulatory technology (regtech) is technology which helps firms working in the financial services industry meet financial compliance rules One of the main priorities of regtech is automating and digitizing Anti-Money Laundering (AML) rules which aim to reduce illegally obtained income, and Know Your Customer (KYC) processes which identify and verify the clients of financial institutions to prevent fraud The U.K.'s Financial Conduct Authority was the first governmental regulator to promote the term Regulators like the FCA are working with regtech firms on a range of different applications, including AI and machine-learning, to improve the efficiency of compliance in the financial services and cut costs n vă ạc th Insurtech sĩ Insurtech is a subset of fintech which relates to the use of technology to simplify and improve the efficiency of the insurance industry A report by consulting giant Capgemini and non-profit insurance industry body Efma last month found that traditional insurance firms are facing increasing competitive pressuredue to the emergence of a number of insurtech start-ups n uả Q lý nh Ki tế Initial coin offering An initial coin offering (ICO) is a crowdfunding measure for start-ups that use blockchain It involves the selling of a start-up's cryptocurrency units in return for cash ICOs are similar to initial public offerings (IPOs), where the shares of a company are sold to investors for the first time But ICOs differ to IPOs in that they deal with supporters of a project rather than investors, making the investment more similar to a crowdfunding experiment Last month China banned ICOs over concerns that the practice is not regulated and can be opened up to fraudsters Open banking Open banking refers to an emerging idea in the financial services and fintech which stipulates that banks should allow third party companies to build applications and services using the bank's data It involves the use of application programming interfaces (APIs) - codes which allow different financial programs to communicate with each other - to create a connected network of financial institutions and third party providers (TPPs) Proponents of open banking believe that an "open API ecosystem" will allow fintech start-ups to develop new applications such as mobile apps to allow customers greater control over their bank data and financial decisions 10 Robo-advisor ận Lu Robo-advisors are platforms that automate investment advice using financial algorithms.They limit the need for human investment managers, thereby dramatically reducing the costof managing a portfolio n vă 11 Unbanked/underbanked ạc th The "unbanked" or "underbanked" are those who not have access to banks or mainstream financial services.Various fintech companies have developed products aimed at addressing this portion of society, providing them with digital-only solutions to open up their access to the financial services.The Federal Deposit Insurance Corporation (FDIC) estimates that there are 10 million unbanked or underbanked American households sĩ uả Q 12 Financial inclusion n lý Financial inclusion refers to fintech solutions that provide more affordable finance alternatives to disadvantaged and low-income people who, like the nh Ki tế unbanked/underbanked, may have little to no access to mainstream financial services This is one of the most important areas for fintech companies that operate in developing markets 13 Smart contracts Smart contracts are computer programs that automatically execute contracts between buyers and sellers Smart contracts are often blockchain-based and can save huge amounts of time and costs involved in transactions which usually require a human to execute them.In Ethereum for example, the contracts are treated as decentralized scripts stored in the blockchain network for later execution 14 Accelerators Accelerators, also known as "seed accelerators", are programs enacted by financial organizations to mentor and work with fintech start-ups.Fintech accelerators can be either privately or publicly funded, with several programs being run by big banks, from the U.K.'s central bank, the Bank of England, to the multinational private bank Barclays IV Fintech in Vietnam In recent time, the term “Fintech” has emerged as one of the most searched keywords in the Vietnam market ận Lu Vietnam has the population of 90 million, many in young generation, 80-90% of the population use the Internet These numbers are the main reason why experts think that Vietnam may become a potential Fintech market n vă According to statistics in February 2017, after eight years of testing (2007 - 2015), the intermediary payment service was officially licensed and more than 40 enterprises have been operating in the field of Fintech in Vietnam th ạc According to the Topica Founder Institute, in 2016, the total value of Fintech startup deals in Vietnam is $129 million, representing 63% of the total start-up sales sĩ n uả Q At present, the most developing side of Fintech in Vietnam is payment However, the fear of using virtual payment methods leads to some disadvantages Think of the two prominent names in Vietnam Fintech: MoMo and Payoo They have invested heavily in the physical trading system For now, MoMo owns more than 4000 transaction points spread across 45 provinces and Payoo has nearly 5000 payment branches across the country lý nh Ki tế In addition to the Fintech companies, many corporations, large companies have also jumped into this game to take advantage of the number of available users By the end of December 2016, Zion, a subsidiary of VNG, launched ZaloPay e-wallet running parallel to the 123-pound payment gateway, integrating the community of 70 million Zalo chat users Garena gaming service and Grab call service have also entered the payout market Last March, Garena Vietnam’s eSports affiliate launched the TopPay e-wallet with more than 20.000 outlets Nationwide and Play Store TopPay downloads exceeded 100.000 GrabPay payment services are also running promotions across South East Asia to take advantage of the 27 million users Regarding the banking system, Tienphong Bank is an indispensable name with the application of technology in customer service with online transaction centers, virtual assistant – chatbot, … Lazada’s HelloPay payment channel, after being acquired by Alibaba in April 2016, was incorporated into Alibaba’s AliPay system and moved into Southeast Asia According to financial experts, the FinTech’s market in Vietnam will be a playground for big players in the fields of finance, technology and Internet services The existing start-ups in the market are actually the backyard of some of the big guys or have the investment from Capital Venture Lu Solutions ận V n vă With the opportunities and challenges that FinTech Vietnam market is having, businesses need to choose the right direction for themselves To refer the learning experience from FinTech-developed markets such as Cambodia, Kenya is probably one of the first things that Vietnamese businesses can consider ạc th sĩ In addition, in terms of policy and legislation, the government plays a pivotal role in paving the way for Fintech to develop uả Q n In Vietnam, the Government does not have specific sectoral regulations on business activities, except payment intermediaries Fintech types such as peer-to-peer, automated investment management, virtual currency trading, call for community funds, lý nh Ki tế not yet have a legal mechanism that corresponds to the face of the business that banks and business desire According to the lawyer Nguyen Van Loc, Chairman of LP Group, there are three things the government needs to now and synchronously to develop Fintech in the country: Allows testing of new Fintech models; Supplement specific regulations at the decree and circular levels for FinTech activities Study appropriate models for a roadmap to issue regulatory documents as well as to ask organizations and associations to draft a road map for Fintech for the next 10 years Obviously, this new trend needs a lot of action from both the government and investors to realize and develop FinTech in a deep way in Vietnam market in order to bring a revolution in liquidity in particular and finance in general for business and consumer VI Strengths Market resources Lu ận Pham Xuan Hoe, Deputy Director of the Banking Strategy Institute, pointed out the fact that Vietnam accounts for 70% of the population and 60% uses mobile phones at a very low level TS Co Van Luc, Senior Advisor Chairman of BOM, Director of BIDV Bank School also shared, IT is changing lives rapidly Currently, Vietnam has about 44% of the population using the Internet, 143 million mobile subscribers, more than 30 million facebook users This trend has created opportunities and challenges for the banking system as well as opportunities to improve competitiveness, reduce costs, increase advertising and sales; At the same time, it poses challenges in terms of investment finance, human resources management, technology exploitation and operational risk (especially technological risk) n vă ạc th sĩ uả Q n According to Forbes magazine, if successful, this will boost the financial technology market because many startups have built solutions and services for banking, electronic wallet or online payment lý nh Ki tế "Over the next 10 years, Vietnam will become a leading player in developing solutions for the financial industry in the region," said expert Michael Sieburg ADB's companion ADB has supported the development of the banking and finance sector in Vietnam since the 1990s In particular, ADB has worked with the Government of Vietnam to develop a legal framework and strategy for microfinance development to 2020 In addition to traditional microfinance, ADB supports the Government of Viet Nam in developing a comprehensive financial strategy that enhances access to financial and banking services for businesses and people Facing the strong development trend of FinTech, ADB, through the Mekong Business Initiative (MBI) funded by the Australian Government and ADB, has supported the SBV to explore the development trend of FinTech and experience managing FinTech businesses in Australia, Singapore, Hong Kong At the same time, in 2017, with the support of ADB, a number of surveys and dialogues with FinTech businesses, preliminary evaluations of FinTech's ecosystem in Vietnam have been carried out, providing the basis for initial For researching and developing the legal framework for FinTech's operations in Vietnam VII weaknesses ận Lu Technology in Vietnam has not caught up with international technology Nevertheless, Vietnam still has many things to By 2014, World Bank data show that only 31% of adults in Vietnam use bank transfers The main cause of this situation is the high cost of services, too many paperwork, payment services are not friendly to consumers and especially investors are not interested in this market n vă Security is the second weakness Security concerns have led retail banks not to adopt digital technology and business models That affects the popularity of fintech in Vietnam market ạc th Security issues are a priority Since the Internet has appeared, information security has been paid attention Security is enhanced as the Internet plays an increasingly important role in the lives of businesses, industries, and the emergence of the IoT concept Equifax, the consumer credit agency, has made data available for nearly 143 million US customers stolen, a major example of a major concern for even the largest companies For this reason, companies need to spend a lot of financial resources to increase security, especially fintech-related security to increase customer trust and protect the company against unwanted risks sĩ n uả Q lý nh Ki tế 10 Legal issues in fintech management Successful business models in the world are also being introduced into Vietnam such as peer lending, social network behavioral credit, crowd funding, investment (Robo Invest), floor Bitcoin, Blockchain, but there is no legal corridor for these activities According to a recent survey conducted by ADB-MBI's Fintech businesses, Fintech firms also said that "unsuitable or unregulated regulations" are the biggest barriers for Fintech businesses bravely invest in development VIII Opportunities ận Lu A report published in February 2016 by EY commissioned by the UK Treasury compared seven leading FinTech hubs: the United Kingdom, California, New York City, Singapore, Germany, Australia and Hong Kong It ranked California first for 'talent' and 'capital', the United Kingdom first for 'government policy' and New York City first for 'demand' Large market are continue opened from developed countries to developing countries Take part in fintech not too late less barriers to entry than other industrial field Learn from other countries which have success in fintech field.Examples of the first option could be online document scanning or biometric identification technologies with the help of artificial intelligence and machine learning.The second option could be the issuing of an electronic national identity, such as the one promoted by the eIDAS regulations of the European Union (European Commission, 2014), or the equivalent of a financial identity issued by consortiums of banks, such as the BankID initiative in Information security in the realm of FinTech 61 Sweden (BankID, 2003) Such eID solutions will obviously increase the level of trust toward the customer, making it possible for FinTechs to offer more advanced services with less risk In this case, secure identification, which is a vital part of the information security domain, becomes the business enabler and the competitive advantage for a company that decides to implement it Initiatives such as the eIDAS might bring an end to the potentially insecure, untrustworthy, and errorprone process of account sign-ups with a username and password Driven by regulations again, it is very possible that 2018 will bring the proliferation of cybersecurity insurances (The Economist, 2014) Four main use cases for cloud services in the corporate world, and FinTech companies take advantage of all of these options.The first is the usage of cloud services directly as part of the FinTech product, such as data center and data hosting providers The second is for business-specific online solutions, such as credit card processors in the case of financial companies The third is for enabling or fully operating supporting business functions, such as human resources, sales, marketing, accounting, etc Finally, n vă ạc th sĩ n uả Q lý nh Ki tế 11 the fourth is the usage of cloud services as a means for the employees to work and collaborate more efficiently, such as email providers, project management tools, or monitoring services IX Challenges Finance is seen as one of the industries most vulnerable to disruption by software because financial services, much like publishing, are made of information rather than concrete goods In particular blockchains have the potential to reduce the cost of transacting in a financial system. While finance has been shielded by regulation until now, and weathered the dot-com boom without major upheaval, a new wave of startups is increasingly "disaggregating" global banks. However, aggressive enforcement of the Bank Secrecy Act and money transmission regulations represents an ongoing threat to FinTech companies ận Lu The attacks against financial services are more organized According to the 2017 Verizon Data Breach Investigations Report (DBIR), the industry with the most security data breaches during 2016 has been that of the financial services (471 breaches), even though it was not the industry with the highest number of security incidents (998 incidents) (Verizon, 2017) The DDoS attack against Brian Krebs on September 2016 revealed the explosion of IoT devices in the world and how they can easily be abused to launch attacks The Mirai botnet was not the first of its kind, but it was the first where its author published the software’s source code publicly for anyone to copy, edit, and improve (US-CERT, 2016) It is therefore very probable to come across clones of the Mirai botnet The biggest driver and at the same time challenge in today’s business landscape is the need for speed—the ever-more aggressive “time to market” business plans.The overall software design and system architecture is not considered, making it not only less secure, but also more difficult to maintain and scale in the future The fast-moving world of FinTech If Vietnam doesn’t participate soon and quickly, we will lag behind.A company needs to make its resources available from anywhere, but at the same time make sure that only authorized people have access to them, and only after they have properly been identified and authenticated It also needs to educate its employees about using company resources and equipment (such as the computer network and systems) in a responsible manner in order to avoid leaking information to places that not fulfill the company’s security, legal, and compliance requirements Information security improvements might also take place as a matter of competition between FinTechs and traditional financial institutions Under the scope of n vă ạc th sĩ n uả Q lý nh Ki tế 12 PSD2, financial service providers are expected to cooperate so that they can exchange data for the benefit of their customers The issue of trust will become relevant, and how financial service providers can better safeguard these data ận Lu n vă ạc th sĩ n uả Q lý nh Ki tế 13