Outline the growth of the vietnam fintech market discuss thepotential impacts of fintech development on the vietnamese financialmarket from your arguments

Trang 1 UNIVERSITY OF ECONOMICS AND LAWFACULTY OF BANKING AND FINANCE❖❖❖FINAL ESSAY CURRENCY TECHNOLOGY AND ELECTRONICPAYMENT SYSTEMTopic:Outline the growth of the Vietnam Fintech market

UNIVERSITY OF ECONOMICS AND LAW

FACULTY OF BANKING AND FINANCE

❖❖❖

FINAL ESSAY CURRENCY TECHNOLOGY AND ELECTRONIC

PAYMENT SYSTEM

Topic:

Outline the growth of the Vietnam Fintech market Discuss the potential impacts of Fintech development on the Vietnamese financial market From your arguments, which specific measures should the Vietnamese authorities take to support the development of Fintech in the future?

Teaching instructor: Lê Đức Quang TúGroup of students: Student ID:

1 Nguyễn Đức Minh Tấn K194141745

2 Nguyễn Việt Thường K194141754

3 Nguyễn Vũ Thiên K194141750

4 Hà Mỹ Duyên K194141719

Table of Contents

1 Abstract 2

2 Introduction 2

3 Introduction to Fintech and Fintech's products 2

3.1 Introduction to Fintech 2

3.2 History of Fintech in Vietnam 3

3.3 Fintech Ecosystem in Vietnam 4

3.2.1 Outstanding e-wallet products 5

3.2.2 Blockchain products 5

3.2.3 B2C E-commerce 6

3.2.4 Smart savings accumulation products 7

3.2.5 P2P lending 7

4 Potential impacts of Fintech development on Vietnam's financial market 7

4.1 Characteristics of Vietnam's financial market 7

4.2 Fintech market development in Vietnam 8

4.3 Potential impacts of Fintech development on Vietnam's financial market 10

5 Recommendations for competent authorities in Vietnam to make to support the future development of Fintech 14

6 Conclusion 16

References: 17

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1 Abstract.

Vietnam is a potential nation in developing its economy, especially

in the process of transaction and thriving the Fintech market Nowadays,there are many Fintech products which have been launched and widelyapplied to the Vietnamese financial market, especially e-wallets,Blockchain products, and e-commerce platforms In recent years, thisboosting has had a strong impact on microfinance and the transformation

of traditional commercial banking Although Fintech has had certainpotential influences on the financial market, the development of this sectorstill exists in barriers in Vietnam Through this article, we propose somesupporting measures such as establishing a sequential legal framework,investing in infrastructure, developing education, and introducing policies

to encourage the growth of the Fintech industry

2 Introduction

The industrial revolution 4.0 is the potential and motivation for thedevelopment of digital technology in many fields, especially the financialsector Moreover, Asia is at the main digital transformation process and theapplication of technology services and the financial sector’s products Theparticular proof is that there are more and more businesses using newtechnology and it becomes a trend in the new era Therefore, the term

"Fintech" gradually became popular and attracted by many countries,especially Vietnam

In Vietnam's financial market, the fast development of Fintech hashelped the providers diversify their financial services and providecomfortable experiences to customers Thanks to Fintech, people haveinvented many digital financial products and models such ascrowdfunding, e-wallets, digital banking, cashless payments, peer-to-peerlending, Blockchain, etc having fundamentally changed the way manyfields operate, of which Finance - Banking is affected the most

3 Introduction to Fintech and Fintech's products.

3.1 Introduction to Fintech.

Instantly, Fintech is a term known with many meanings and there is

no particular definition for it, we can know generally that Fintech standsfor the word “Financial Technology” Fintech works by applying moderntechnologies to create new products and speedier experiences, moreautomatically and more transparently for financial services such aspayment, money transfer, loans, insurance, etc and so it is especiallydeveloped in the industry of Finance - Banking

In accordance with the Financial Stability Board (2021), Fintech isapplying new technologies to renew financial services From thisapplication, we can positively change the financial market by creatinghigh-tech products, processes, or even advanced business models in thenear future The appearance of Fintech has created new points andovercome many disadvantages of traditional products, requiring traditionalbusinesses and banks to change their awareness, modernize technologiesand services to meet the needs of the times

3.2 History of Fintech in Vietnam.

Since 2005, with the establishment of VTPay, an online paymentservices provider, is considered the first Fintech firm in Vietnam (Tam andHanh, 2018) However, the popularity and acceptance of Fintech at that.

time was not high Beginning from 2015 to now, Fintech became the mostinteresting point of discussion and was well-known widely, even turninginto a trend that was noticed by investors and the community in thefinancial field in two downtowns: Hanoi capital and Ho Chi Minh city

In 2005, the digital development was focused and there were initialsteps to enter the Vietnamese market By 2007, there were manydevelopments in the field of mobile payments, promoting theestablishment of these service providers In 2011, Fintech developmentgained a remarkable achievement when launching a Personal FinanceManagement application 2013 was the year many products were launchedinto the market The most prominent is Blockchain Technology, followed

by data management, POS and the first crowdfunding website In 2014, thefirst P2P lending and comparison sites were the result of a legacy ofprevious technologies The introduction of digital banking marked animportant milestone of Fintech development in 2015 In 2016, there were

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many Fintech companies participating in the market, these companies areactively looking for capital The period 2017 - 2021 is the period topromote the development of Fintech products in terms of payment andfinancial management Blockchain and AI will become the newdevelopment trend of Fintech in this period.

3.3 Fintech Ecosystem in Vietnam.

The Fintech Vietnam ecosystem currently has about 154 activecompanies divided into main segments: Payment, P2P Lending, DigitalBanking, Wealth management, Crowdfunding, Credit Scoring,Blockchain/Crypto, Comparison, POS, Insurtech

In Vietnam, fintech has the potential to grow and attract investment,particularly from investment funds Electronic payment is the leadingsegment today The second place belongs to the field of P2P lending Otherfintech fields, such as credit scoring, wealth management, and personalfinance, are also in the early stages of development and have a lot of roomfor expansion Currently, there are 47% startups in the field of paymentservices, accounting for the highest proportion in the region This segmenthas always attracted many investors and has become the trend of countrieswith an early growing Fintech market

Milian et al (2019) and Lee and Shin (2018) stated that “we will beable to generally divide the products within the Fintech sector into 2categories consistent with customers The initial class is businesses withthe aim of focusing on lending segments, typically financing startups,overdraft loans, personal loans, personal financial management orspecialized companies provide financial services to general consumers.The other class is served for Fintech startups and financial institutions thatwork smoothly and productivity which is called back-office technologycorporations.”

Fintech is bringing many suitable conveniences with the boosting oftechnology 4.0 such as electronic payments, public services, supply chainmanagement, etc with typical products like: E-wallet, Blockchain, B2C E-commerce

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3.2.1 Outstanding e-wallet products.

In the past few years, Momo, ViettelPay and ShopeePay are the 3largest firms having market capital in the payment sector Although, thedifferences between them are enormous (Ví MoMo, 2020)

All E-wallets perform the same non-cash payment function: paybills, top up cards, buy train tickets, etc Momo's convenience products areconsidered to be diverse and meet the need of the customer's experiencesuch as: game events (Blackjack, Momo Jump, Momo City, etc.), postpaidwallet, lucky bag, etc These e-wallets are a powerful support tool forincreasing market share of the e-commerce industry, making purchasesfaster, safer, and more convenient E-wallet payment helps people enjoyvarious discounts resulting in being more attracted to this product Sincethen, E-wallet continuously and positively affected the consumptionbehavior and cash habits of Vietnamese

3.2.2 Blockchain products.

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Financial services account for over 87 percent of all Blockchainapplications in Vietnam (Lê Thanh Nguyệt and Phùng Duy Quang, 2020).

If we take advantage and broaden the range of applications, blockchainwill offer the potential to thrive and break existing limitations

L/C transaction: Blockchain is progressing strongly and has the

potential in the future in the Vietnamese market The Letter of Credit (L/C)

is one of blockchain's outstanding products Now, this product is beingapplied in the banks creating effective payment, bringing potentialinvestment opportunities to businesses In particular, MBBank,VietinBank, and BIDV have successfully issued interbank letters of credit

on the Contour network In accordance with research by Trần Thị HuyềnTrang (2021), letters of credit on Contour's platform help customers enjoymany advantages such as transparency and security of their information,ensuring integrity from the issuance stage to the presentation of recordshas helped to minimize the risk of property appropriation when makinginternational payments and saving related transaction expenses such asinformation exchange, filing, etc

3.2.3 B2C E-commerce.

Fintech has remarkably contributed to the development of B2C commerce in Vietnam Fintech provides easy-to-use e-wallets and onlinepayment options, reducing cancellation rate from customers (Nguyễn ThuHiền, 2021) By adding vouchers for prepayment, users will enjoy morepayment incentives and discounts, hence, they will enjoy and buy more one-commerce platforms While Lazada, Tiki partnered with Momo, ZaloPayand Viettel Pay to diversify payment methods for customers, Shopee stillhas exclusive rights to pay with ShopeePay since both are from the sameparent company The eM wallet and ShopeePay are payment solutionsexclusively for Lazada and Shopee e-commerce platforms The eM wallet

e-is me-issing a lot of customer attraction leading to being forgotten, Lazadausers will choose to pay through Momo and ZaloPay more RegardingShopeePay, due to the monopoly of payment, customers only receiveincentives when paying through ShopeePay, it is quite outstanding, has alarge number of users and is more popular than the eM wallet

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3.2.4 Smart savings accumulation products.

In the last years, there have been a variety of revolutionaryproducts that have attracted many limited capital investors and theseproducts have thrived strongly in the smart savings market, creating apassive income for Vietnamese clients (who do not have much knowledgeand experience in financial investing) is FinHay This product has manydiversified investment portfolios to meet the abilities of each user, eachmascot such as “Cò trắắng, Rùa Hoàn Kiếắm, Trâu nước, Voi r ng, Sao la”ừwill have different interest rates and risks, helping clients to be proactivewith the capital they hold and be flexible with investments whoseduration is adapted to clients' cash flow For example, “Trâu nước” will beable to get a loan over 2 - 6 years, hence it is difficult for clients who donot have backup savings to invest in this portfolio, investments withdrawnbefore maturity will be subject to much fees

3.2.5 P2P lending.

And the outstanding product when it comes to Fintech is peer lending Peer to peer lending (P2P) is seen as an improved product inthe lending process A special feature here is that through an intermediaryplatform, which is P2P, the borrower will get a loan directly from thelender This intermediary platform takes profits based on the costs thatthe borrower or lender pays to the platform

peer-to-The benefits of P2P are that it is easy, fast, free from 3rd partyinterference and does not need to do complicated paperwork Besides,borrowing interest rates on this platform are also quite low Therefore, it

is competitive compared to the traditional lending of commercial banks.The companies featured in this platform are Timo, Growth Wealth,VayMuon or TrustCircle

4 Potential impacts of Fintech development on Vietnam's financial market.

4.1 Characteristics of Vietnam's financial market.

The financial market has always played an important role inproviding capital, as a place to trade assets on the market This is thebackbone of the national economy It also acts as an intermediary tocoordinate excess capital from individuals with idle money to those inneed of working capital In the recent financial markets, Commercialbanks are still holding a large proportion in the capital market (VĂN

PHƯỚC, 2018) Simultaneously, this source of capital is tending to increasemedium and long-term loans; decrease short-term loans Besides, thestock market strongly develops and it is also an ideal place to become achannel for large businesses to appeal for funds in the market However,our country’s financial market still exists many limitations due to severalcore reasons such as unclear information, inflexible capital sources, lack ofinfrastructure, etc Meanwhile, Covid-19 has slowed down the growthmomentum of the financial market Based on the research of Đ t (2020)ạ ,the pandemic weakened Vietnam's economy, the export and domesticindustries have been severely negatively impacted leading to a significantdeficit in the excess capital in the society, credit growth slowed down,banks had to pay careful attention in regulating loans and optimizing baddebts In addition, the complicated pandemic also indirectly negativelyaffects banks and financial markets The sharp decline in foreigninvestment funding, the unwillingness of customers to hold cash, andabnormal market price fluctuations are also the main reasons for theinstability of Vietnam's financial market

4.2 Fintech market development in Vietnam.

Vietnam is one of the potential markets in the formation stage, thegrowth rate in the Fintech field is strong within the region Currently,about 64 million Vietnamese, which means 60% of the population, usemobile devices with the Internet connection, ranked 6th in Asia and thePacific region, and ranked in the top 13 over the world (Nguyếễn Thu Hiếền,2021) In addition, Vietnam has a young population, an early Internetapproach, and technological knowledge (Nguyen, 2020) Those thingshave directly boosted the growth of the new Fintech sector like

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exchanging goods on e-commerce platforms, paying via the Internet, etc.These are the main factors for the Finance - banking system to base onthe Fintech platform to become extraordinarily explosive within the futureand the present.

Recognizing that development abilities, Vietnam Fintech market hasreceived extensive attention not only by domestic but also foreigninvestors In 2019, the report of United Overseas Bank (2019) indicatesthat Fintech capital investment in Vietnam is only lower than Singapore,about 36% of total investment in the Fintech start-up sector acrossASEAN, an increase of 0.4 % compared to 2018 Also, according to Fintechnews, by the end of 2020, the increase in the number of Fintechcompanies is about 3 times – about 44 companies to about 123companies spanning many different industries in 3 years from 2017 to

2020 Additionally, YCP Solidiance also forecasts that by 2025 the Fintechmarket will be able to grow from 9 billion USD to 22 billion USD compared

to 2019

The Fintech market has had many signs of progress and differs fromthe early years of joining Vietnam Although Fintech develops multi-