|Vietnam has grand ambitions in the field of digital economy |
Vietnam has set ambitious targets for the next five years, with the digital sector to account for 30 per cent of GDP by 2030.
In the 2021-2025 period, Vietnam is aimed to hit an average annual GDP growth rate of 6.5-7 per cent; a level of $4,700–5,000 in per capita GDP by 2025; a ratio of over 25 per cent for processing and manufacturing industry in GDP; a ratio of 20 per cent for digital economy in GDP; a rate of over 6.5 per cent in the increase of labour productivity, and a ratio of 45 per cent for total factor productivity in economic growth by 2025.
“Officials want 80 per cent of the population to have online payment accounts by 2025, according to the government’s post. That’s also when they want half of e-commerce transactions - many of which are still conducted in cash - to go cashless,” Bloomberg commented on these ambitions.
Vietnam’s digital economy is relatively modest, just 8.2 per cent of GDP.
At the same time, the Vietnamese government has set a firm target that online shopping will account for 10 per cent of retail sales in the nation, and around 50 per cent in Hanoi and Ho Chi Minh City by 2025.
Local authorities are sticking to their target of reducing cash-based payments, thus creating a transparent, digitally-led economy by increasing cashless payments for public services and improving the regulatory framework for fintech through a sandbox mechanism.
The Vietnamese government’s latest draft national strategy for the development of the digital economy and society by 2025 has set a firm target on digital identification and cashless payments.
Accordingly, by 2025, around 80 per cent of Vietnamese citizens will use digital paymentmethodswith the non-cash payment rate reaching 50 per cent. Besides this, around 75 per cent of water and electricity bills would be paid through a non-cash payment alternative, and 90 per cent ofpoints of sale will adopt cashless payment options.
Moreover, mobile transactions in Vietnam are expected to increase by 300 per cent between 2021 and 2025, led by strong growth in mobile payments, as revealed in the second edition of the Fintech and Digital Banking 2025 (Asia-Pacific) IDC InfoBrief, commissioned by Backbase.
According to a study published by Google, Temasek, and Bain & Company at the end of last year, Vietnam’s digital economy is forecast to grow to $52 billion by 2025, an annual 29 per cent increase from 2020, It noted that Vietnam’s e-commerce market value reached around $12 billion in 2020, ranking after Indonesia, Thailand, and Singapore. Between 2016 and the first half of 2020, investors funnelled $1.9 billion into Vietnam’s online sector. The report also showed that the digital economy in Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand (the largest economies in the region) could reach $300 billion by 2025.
Yuan Fang, director of Southeast Asian investment at BAce Capital, a fintech-focused venture capital fund backed by Ant Group and Alibaba said, “Last year, BAce capital only invested in the Singaporean and Malaysian markets. This year, we are paying more attention to the Vietnamese market. We really value companies and entrepreneurs who work to create value for consumers and society.”
“There’s still a lot of room for improvement in the e-payment and fintech industry in Vietnam. Credit growth and banking penetration rate are still low while many people are not able to enjoy the benefits of cashless payments. The fintech industry is still in its infancy and we are very positive about its future growth,” Fang said, adding that Vietnam can apply the story from China to drive its digital economy.
Scott Krivokopich, managing partner from 1982 Ventures, a Singapore-based venture capital firm focusing on early-stage fintech in Southeast Asia, told VIR, “Vietnam is a core market for us. We have been able to execute strong investments, and our fintech expertise and network in Vietnam have given us an advantage, while other investors have had to watch from the sidelines.”