Fintechs reshape the financial system

Fintechs reshape the financial system

The rise of fintechs

Tran Thanh Nam, CEO of mobile payment platform Moca, said he and his fintech startup had to make their way through hard times over the past five years in order to reach their current success. They were officially licensed by the central bank in 2016 and have just signed a co-operation agreement with their 11th banking partner for their mobile payment product.

“Out of these banks, we have three state-owned ones, all of them among the four largest state-owned banks in Vietnam, joining us. These are some of the results that we’ve been longing for. For a fintech startup that is capable of surviving through the first two or three years of operation, it’s something to be proud of,” Nam said.

“We started off some 10 years ago and, although the technologies and our knowledge at the time may not have been as advanced as they are now, we persevered in the face of those who doubted that we could achieve anything as a fintech firm. Now we can see that the products and services we developed really added value to the market,” he shared. “We have confidence in what we do.”

Meanwhile, mobile wallet and payment app MoMo got great validation when it received some $28 million worth of investment from Standard Chartered Private Equity and Goldman Sachs back in 2016. Like Moca, MoMo allows its customers to load cash to their accounts and make payments using their smartphone.

“The digital payment ecosystem in Vietnam is developing at an accelerated pace both at the issuing and acquiring ends. We find this collaboration between fintechs and banks has delivered superior value to Vietnamese clients, creating an exciting space, and we have been actively participating in the development of this ecosystem, as reflected by our investment in MoMo’s e-wallet,” said Harmander Mahal, head of Retail Banking at Standard Chartered Vietnam.

Moca and MoMo are just two of the numerous fintechs that have dared to think outside the box. By venturing to create financial solutions to address the needs of both the market and customers, they demonstrate confidence in the mobile payment market and the development of the fintech industry in Vietnam.

Governor of the State Bank of Vietnam (SBV) Le Minh Hung, when remarking upon one of the very first large-scale fintech competitions – the Fintech Challenge Vietnam (FCV) held in late May – stressed that thanks to the flexibility of their operations and the advanced fintech solutions that they have introduced to the market, fintech companies are indeed rejuvenating the local banking and financial system, seeking to enhance customer experiences while delivering no-nonsense products.

According to Pham Tien Dung, head of SBV’s Payment Department, there are around 80 fintech companies currently operating in Vietnam in various subsectors, including payments, loan application or financing, blockchain, money transfers, and biometric solutions.

“In 2016 and 2017, the total investment into local fintech companies was reported at roughly $129 million – a rather modest figure,” he said.

Citing consulting firm Solidiance, Dung noted that the value of Vietnam’s fintech market reached $4.4 billion in 2017 and could potentially grow to $7.8 billion in 2020.

Visa country manager Sean Preston (middle) addresses Visa’s Everywhere Initiative event for startup fintech firms

Guide to success

The Moca mobile payment app can be regarded as one of the most innovative ideas to become a reality. Perhaps it was Nam’s background as a banker that guided him to success, as the lack of experience and knowledge of the industry has posed an issue for many other fintechs.

After some fintech challenges like the FCV and the recent launch of Visa’s Everywhere Initiative (VEI) in Vietnam, fintech startups themselves and industry experts believe that if fintechs were to be guided or advised properly and professionally by banks, experts, and investors, their pathways to success would be safer and faster.

At Visa’s VEI event held in Ho Chi Minh City last month, Lertad Supadhiloke, CEO and co-founder of Sellsuki, the winner of VEI 2018 in Thailand, shared that the programme – which commissions startups to solve payment and commerce challenges, providing a chance for them to enhance their own fintech innovations to meet industry needs – has influenced their thinking on how to create payment solutions for their network of over 1,000 merchants in Thailand.

“By providing access to Visa’s application programming interface and hugely knowledgeable business and technical teams, we are now able to form a roadmap for actionable development and a marketing strategy to innovate in the financial space with confidence,” said the CEO of the solution firm that helps filter merchants’ inboxes and collect bank transfers and credit card payments from customers.

“We are now planning to talk to both fintech companies and financial institutions to develop a payment solution that is suitable for our merchants – which are both online-first and offline-to-online small- and medium-sized enterprises, as well as some larger firms – to adjust in the new social-first e-commerce space,” added Supadhiloke.

According to Sean Preston, Visa country manager for Vietnam, Cambodia, and Laos, in addition to the cash prize, VEI offers mentorships for startups as well as digital commerce solutions and expert consultations with Visa. Not only this, but the entrepreneurs taking part will have the benefit of exposure to the issuer and merchant ecosystem as well as pro-active support from Visa to elevate their value propositions in Vietnam and beyond.

“Taking a broad view, VEI is the starting point for lasting partnerships and the opportunity for startups and Visa to innovate together. Startups can expect increased attention from the press and other sources as they engage with one of the world’s leading payment companies, which can help to open more doors for them now and in the future,” said Preston in an interview with VIR.

Practical experience and knowledge, as Preston stressed, may still be some of the areas in which Vietnamese fintechs need the most support.

“Vietnamese fintech startups have a lot of great ideas, but at the same time, need to have the skillsets to turn these ideas into real-life projects that work. New knowledge is constantly explored every day, especially in the fields of finance and technology.

“This is one of the reasons why VEI was launched this year in Vietnam: taking Visa’s 60 years of experience and expertise and leveraging great minds in our organisation to provide practical and top-of-the-industry mentorship to budding Vietnamese entrepreneurs to help them in their journey to success,” he added.

More to come

Apart from having several areas for their products and services to be showcased, fintechs in Vietnam can additionally count on the upcoming Regulatory Sandbox Framework SBV is currently working on, which will then be submitted to the prime minister. Fintechs will be allowed to test their innovative financial products and services under SBV’s close supervision, prior to being officially introduced to the market, to minimise any potential risks to customers and related parties.

“Ensuring there is consistent open dialogue between ecosystem enablers and regulators is a crucial building block to ensuring a vibrant fintech ecosystem. SBV has been very supportive of events like FCV to enable collaboration between startups and banks,” said Varun Mittal, leader of EY ASEAN Fintech.

As Mittal told VIR, being a smaller country with fewer legacies could even help Vietnam build its next-generation fintech ecosystem at a much higher speed, with much less complexity.

While payment solutions have gained in scale in the local market, accounting for some 47 per cent of total fintech startups, Mittal said that fintechs can further enable a wide area of opportunities. Fintech startups can be helpful to the country, he added, if they stick to keys areas such as financial inclusion, micro-insurance, and micro-saving.