Consumer finance groups aspire to consolidate position

August 31, 2022 | 12:17
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Foreign-backed consumer finance companies are diversifying their scope of activities to capture a larger and more lucrative market share in Vietnam.

E-commerce platform Tiki last week signed a strategic cooperation agreement with LOTTE Finance, a consumer finance player from South Korea, to launch a buy now, pay later (BNPL) service in September. When making purchases on Tiki and opting for LOTTE Finance’s BNPL, consumers can pay in instalments for 2-3 months without interest.

Consumer finance groups aspire to consolidate position
Consumer finance groups aspire to consolidate position-illustration photo/

“Through BNPL services, we hope to bring Vietnamese customers convenient and safe financial and consumer services,” said Kim Jong Geuk, general director of LOTTE Finance.

“At the same time, LOTTE Finance aspires to consolidate the dominant position and become a real game-changer in Vietnam’s market.”

Earlier in July, Tiki also inked a similar cooperation agreement with Home Credit to launch its Home Paylater service on the platform.

As a subsidiary of Shinhan Card, Shinhan Finance Vietnam is dedicated to improving its reputation as the top customer-support financial institution in Vietnam by using the Shinhan Card technology platform in tandem with its financial offerings.

Earlier this month, Shinhan Finance also launched a consumer loan product exclusively for Tiki merchants with simple disbursement procedures.

Accordingly, sellers do not need to prove their income with Shinhan Finance. Based on sales revenues from the Tiki system, Shinhan Finance will grant a credit limit of up to VND100 million ($4,350), applicable to sellers with at least six active months.

“We acknowledge that the e-commerce business in Vietnam is rapidly expanding and playing a significant role in bolstering the country’s economy,” said Kim Chul Soo, director of Product Development at Shinhan Finance. “Henceforth, we are teaming up with Tiki to assist sellers with easier, flexible capital access. Shinhan Finance boasts a strong financial potential, with tailor-made advanced products and services.”

Shinhan Bank, the largest foreign lender in Vietnam in terms of assets, acquired a 7 per cent share of Tiki in May. Its affiliate Shinhan Card, which holds the consumer finance unit, is in charge of the remaining 3 per cent.

Meanwhile, consumer lender Home Credit has also been pushing for a price tag of $2-2.5 billion for its outlets operating in Indonesia, Vietnam, the Philippines, and India.

Last week, Bloomberg revealed that negotiations between Mitsubishi UFJ Financial Group (MUFG), Japan’s largest financial institution, and Home Credit’s assets in two Southeast Asian countries are at an advanced stage.

Accordingly, MUFG emerged as the potential bidder for the firms after outbidding competitors. A total of $500 million or more may be the estimated worth of Home Credit’s assets in Indonesia and the Philippines.

People familiar with the matter stated that although Home Credit anticipated to include countries like Vietnam and India in the deal, most prospective buyers were more interested in negotiating the sale of individual markets.

To offset low loan rates and weak development at home, the three largest Japanese lenders of MUFG, SMFG, and Mizuho have been active purchasers outside Asia in recent years.

In the meantime, MSB and other potential foreign investors have finished the evaluation for FCCOM, MSB’s consumer finance subsidiary, in May but there are still requirements to be discussed including loan portfolio, employees, the State Bank of Vietnam’s clearance of legal papers, and payment terms.

Nguyen Hoang Linh, CEO of MSB, stressed that this tie-up deal would generate between VND1.8-2 trillion ($78-87 million) in profit for the bank.

Meanwhile, Japanese retail corporation AEON Group is reportedly the most potential partner for MSB. Since 2020, AEON has planned to explore the consumer finance ecosystem in Vietnam. It was rumoured that AEON’s retail business may stand to gain from the BNPL approach if a new consumer financing section was approved.

Elsewhere, HDBank and VPBank, the two parent banks of the two largest consumer finance businesses HDSaison and FE Credit, were given the task of lending VND20 trillion ($869 million) to employees at the behest of the government and the central bank. This programme is also backed by the Vietnam General Confederation of Labour in a bid to repel black credit in rural areas.

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By Linh Huong

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