Incredible potential in reach for fintech

August 13, 2021 | 08:00
Fuelled by generous amounts of venture capital, Vietnam’s fintech landscape is flying high on Singaporean investors’ agenda, promising to offer more innovative customer value propositions than traditional banks.
Vietnam wants the majority of citizens to have an e-account by 2025, Photo: Shutterstock
Vietnam wants the majority of citizens to have an e-account by 2025. Photo: Shutterstock

Vietnamese payments provider VNLife – parent company of VNPAY – last week confirmed that it has secured $250 million from the investors General Atlantic and Dragoneer Investment Group.

Niraan De Silva, VNLife’s managing director, said that the fresh investment valued the company at well over $1 billion. He also said the proceeds will be used to strengthen its fintech business, as well as its online travel and retail software units. However, the company is still years away from an initial public offering, according to Nikkei Asia.

De Silva also noted that VNLife, in comparison to international peers such as Visa and Mastercard, is more profitable because of its focus on selling services to businesses.

The potential for cashless payments in Vietnam is vast, according to Visa’s Consumer Payment Attitudes Study 2021.

Besides VNLife, GIC also owns 2.55 per cent stake in state-owned Vietcombank – one of Vietnam’s largest lenders. The Singaporean sovereign wealth fund also accelerates the latest digital banking services and fintech trends in Vietnam through its Vietcombank investment.

Likewise, Vietnam’s major e-wallet company MoMo is allegedly reported raising additional capital from international private equity funds, particularly from Singaporean financiers.

The e-wallet successfully raised $100 million in January from a group of investors including Warburg Pincus, Goodwater Capital LLC, Kora Management, and others. MoMo is racing to expand its suite of services, branching out into areas like motorcycle insurance and consumer loans.

Elsewhere, last week’s latest draft decision on the national strategy for the development of the digital economy and society to 2025 has set a firm target on digital identity and cashless payments. By 2025, around 80 per cent of Vietnamese citizens will have an e-account with the non-cash payment rate reaching 50 per cent. Besides this, the rate of non-cash payments for electricity and water bills would be around 75 per cent, and 90 per cent of points of sale will adopt cashless payment options.

Given the rapid digitalisation observed in recent years and the government’s policies towards financial inclusivity – combined with the State Bank of Vietnam’s policies of strengthening banks’ balance sheets – the current situation provides a unique mix where Vietnamese banks can keep growing rapidly and increase profitability by introducing innovative financial products to reach out to traditionally cash-based sectors of the economy, according to Alexander Gold, CEO of Bankograph.

“About 70 per cent of Vietnam’s population are in need of financial services as they are unbanked or under banked, which creates excellent opportunities for Singaporean fintechs,” Gold said. “Bankograph is pioneering buy now pay later options as a platform for banking partners and will focus on launching these services with multiple banking partners in Vietnam in 2021.”

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 networking in Vietnam have given us an advantage, while other investors have had to watch from the sidelines.”

1982 Ventures’ Vietnamese portfolio spans affordable mortgage and property financing options, consumer friendly payments, and a digital investment platform that aims to make investing more accessible to Vietnamese people.

“Now more than ever we are seeing higher quality Vietnamese deals. We expect our portfolio to have a significant allocation to this country, and the next set of Southeast Asian unicorns will come from the fintech space,” Krivokopich said.

“Fintech is complex and focus is key. The seed stage is the most attractive to invest in Southeast Asia from a risk-adjusted returns basis and presents the largest opportunity. Historically, the best performing Southeast Asian funds had been seed funds with less than $100 million in assets under management,” he explained.

The venture capital ecosystem has positively developed, and venture capital funds have already raised larger funds, focusing on series A and B investments.

“The fintech opportunity in Vietnam has an incredible potential,” Krivokopich believed. “The support and promotion of digital payments by the government is going to unlock additional opportunities to build more fintech businesses that not only help to address financial inclusion issues but also build a new layer of infrastructure to strengthen the finance system.”

“In short, we are watching all fintech segments but are very keen on the entire payment value chain, digital banking, and lending, as well as some other sectors,” he added.

By Luu Bui

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