Ambitions escalate for fintech sandbox

Fintech apps could thrive in Vietnam as its cashless sector is set to expand exponentially. Photo: Shutterstock

The government issued Resolution No.100/NQ-CP on September 6, approving the proposal on controlled testing mechanisms for fintech, particularly in the banking sector.

The government assigned the State Bank of Vietnam (SBV) to assume the prime responsibility and coordinate with relevant ministries and agencies to gather opinions of state members and submit these to the government by the end of 2021.

The experimental regulatory sandbox for fintech has captured the attention of many businesses. A leader of the SBV’s Payment Department told VIR earlier this year that after the government’s conclusion, the central bank will launch a decree.

The fast-paced development of technology has given rise to many disruptive fintech apps. However, it also raised complicated questions about how these should be regulated. Regulatory bodies have faced enormous challenges in management and supervision of fintech businesses due to risks of money laundering, terrorist financing, and general concerns regarding security, information confidentiality, and unauthorised thereof.

According to KPMG Vietnam, the government is taking initiatives to promote fintechs. “Vietnam lacks regulations that sufficiently stimulate capital markets, leading to slower growth of the wealth management segment. Its fintech, the regulatory landscape is also in the early stages of development. However, the Vietnamese government has been stepping up efforts to put in place the necessary framework for the adoption of fintech and the facilitation of technology enablers,” KPMG noted.

The government has included a fintech regulatory sandbox in many master plans, including the strategy for developing IT in the banking sector. The SBV, under the guidance of the government, is set to launch a pilot sandbox for fintechs imminently. The areas that are likely to participate in the sandbox are payments, credit, peer-to-peer (P2P) lending, customer identification support, and other banking services. This will enable fintechs to directly test innovative products and services in a closely controlled environment and reach end markets faster.

Germany’s market research firm Statista stated that transaction values in Vietnam’s digital payments reached $11.61 billion in 2020. By 2025, this figure is slated to reach $26.4 billion. Meanwhile, the number of digital payments in Vietnam will grow from 45.6 million in 2020 to 70.9 million in 2025.

Fintech dedicated to cashless payments could avail themselves of this sector, as Vietnam’s cashless sector is predicted to grow exponentially in the future. Furthermore, except for intermediary payments, fintech activities are not yet regulated by legal documents.

Nguyen Anh Cuong, CEO and co-founder of Fundiin – a buy now, pay later fintech – told VIR, “Our customer value proposition will be paid off in a transparent and friendly environment. For instance, at Fundiin, we care and focus on values that we create for consumers. That’s why we are working hard to provide our service at zero cost to consumers. The introduction of sandbox fintech will be an impetus for us to thrive.”

Tran Viet Vinh, CEO of Fiin Ratings – focusing on credit ratings – believed local fintechs would enjoy the vast benefits of the sandbox. “P2P businesses will have the opportunity to develop fair and square thanks to the new decree,” Vinh said.

Data from the SBV revealed that Vietnam currently boasts more than 100 P2P lending companies, such as Tima, Trust Circle, Vay Muon, Lendmo, Wecash, and InterLoan, with some originating from China, Russia, Singapore, and Indonesia.

Some Chinese P2P companies have cashed in on the legal loopholes and created unfair competition with cut-throat interest rates affiliated to loan sharks.

Besides non-cash payments and traditional financial services, the increasing appetite of investment from retail and inexperienced investors have also spurred great demands for fintech, particularly trading apps and micro-investment apps.

There had been a huge rise in micro-investments in Vietnam. According to the State Securities Commission of Vietnam, over 100,000 new stock accounts were opened monthly in the first half of 2021. The daily trade volume of the Vietnamese stock exchange has reached around $1 billion, 3-4 times higher than the average value of the years before.

Notwithstanding, micro-investments are nascent, just appearing a few years ago. With their relating to minimum investment requirements, flexibility, and speed of transaction handling, some investment apps such as Finhay, Tikop, and Infina are growing with unprecedented speed.

Manh Tra, product director of Tikop, an advanced tech platform to bridge micro and small investors to financial institutions and companies said, “Fintech will absolutely shape the micro-investment industry for years to come. Fintech outplays the traditional model in terms of advanced tech, flexibility, and revenue models. With no physical and geographical barriers, any prospective customer can open an account and start to invest their money.”

Vinh of Fiin Ratings added, “The new legal framework would lay a foundation for diverse fintech sectors, such as P2P lending, blockchain, payments, and many more. As a result, increasing appetite from local and foreign investors would further spur greater advancement for Vietnam’s fintech bandwagon next year.”