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Fintech for Promoting Financial Inclusion in Vietnam:
Fact Findings and Policy Implications
Le Thanh Tam
National Economics University, Hanoi, Vietnam
Le Nhat HANH
University of Economics, Hochiminh City,Vietnam
Abstract
Financial inclusion has been considered as enabler for 7 of the 17 Sustainable Development
Goals. With the development of industrial revolution 4.0, fintech is the key driver for financial
inclusion, in both developing and developed countries. The roles of fintech for financial inclusions
are clear, focusing on providing all financial services with lower costs, wider and better access
(24/7). In Vietnam, legal framework on fintech has been developed, the fintech steering committee
has been set up, and Vietnam is preparing the national financial inclusion strategy. In
implementation, the fintech market is still young, but almost 40 companies have joined with
increasing transaction volumes and high growth rate. The opportunities for fintech in Vietnam are
huge, from demand side, infrastructure, and the market gap. However, the challenges still
remained, coming from its nature, legal framework, small transaction and active clients ratio, and
the low awareness of people on fintech for financial inclusions. The recommendations to fintech
companies, commercial banks, State Bank of Vietnam, and other stakeholders have been proposed
for better fintech utilization in promoting financial inclusion.
Key words: Fintech, financial inclusion, digital finance
Address Correspondence to: Le Nhat Hanh – University of Economics, Hochiminh City. Vietnam
Email: [email protected]
Business & Social Sciences Journal (BSSJ)
Volume 3, Issue 1, pp. 12-20
(P-ISSN: 2518-4598; E-ISSN: 2518-4555)
January 2018
Business & Social Sciences Journal (BSSJ) 12
1. Introduction
Financial inclusion has been one of the key priorities for many developing countries, as it has been identified
as an enabler for 7 of the 17 Sustainable Development Goals defined by United Nations. With the
development of industrial revolution 4.0, the application of digital technology for providing financial
services (also called fintech) has become the key driver in promoting financial inclusion. The G20
reaffirmed its commitment to implement the G20 High-Level Principles for Digital Financial Inclusion
(World Bank, 2017). Therefore, digital finance has been the opportunity and the methods for developing
countries in reaching financial inclusion with the shortest and most efficient way.
Vietnam is one of developing countries strongly committed with financial inclusion, with strong
infrastructure for digital finance (internet, smartphone) and golden aged population. The government has
requested State Bank of Vietnam and other related agencies to develop the National Financial Inclusion
Strategy; fintech steering committee has been set up in March 2017. Some digital finance activities have
been carried out in Vietnam since 2011 (Economic Times, 2017). However, few problems remain such as
insufficient legal framework, the potential risks of default, and the low awareness of people on financial
inclusion have hidden the development of financial inclusion in Vietnam. Therefore, this paper is aimed to
(i) summarize the importance of fintech for financial inclusion; (ii) analyse the legal framework and actual
operations of fintech in Vietnam, assessing the opportunities and challenges of this activity; and (iii)
propose some recommendations for better application of fintech for promoting financial inclusion.
2. Literature review on concepts and roles of fintech for promoting financial inclusion
According to World Bank (2017), financial inclusion means that “individuals and businesses have access
to useful and affordable financial products and services that meet their needs – transactions, payments,
savings, credit and insurance – delivered in a responsible and sustainable way”. From ADB (2017)
viewpoint, financial inclusion means that “all segments of a population – even those with the lowest
incomes – can access formal financial products and services. The financially excluded comprise both the
unbanked and the underbanked”. CGAP (2017) consider financial inclusion as “households and businesses
have access and can effectively use appropriate financial services. Such services must be provided
responsibly and sustainably, in a well regulated environment”.
Financial inclusion has been becoming one of priority for policymakers, regulators and development
agencies globally with the two milestones: (1) identified as an enabler for 7 of the 17 Sustainable
Development Goals defined by United Nations; (2) The G20 committed to advance financial inclusion
worldwide and reaffirmed its commitment to implement the G20 High-Level Principles for Digital
Financial Inclusion. From 2010 to now, more than 55 countries have committed to financial inclusion, and
more than 30 have either launched or are developing a national strategy (World Bank, 2017a).
Digital finance – the application of digital technology to finance (or fintech) is considered as one of key
pillars to financial inclusion, because of its significant roles to promoting financial inclusion in five key
aspects as followed (ADB, 2017a):
• Enable fast, low-cost, and convenient customer identification and verification processes – especially
when powered by unique national identification numbers, a realtime verification infrastructure, and
supporting regulatory frameworks such as tiered know-your-customer (KYC) schemes.
•Meaningfully alter the economics of the supply side by addressing last-mile distribution and servicing
issues through low-cost, widespread, digitally-enabled points of physical access such as mobile phones
and point-of-sale (POS) devices.
• Prevalent throughout the payments value chain and ecosystem. Digital government-to-person (G2P)
payments and remittance flows can create the initial momentum for electronic payments, thereby
supporting the development of viable supply-side business cases. These can be sustained and further
developed through person-to-all (P2All) 4 payments systems combined with interoperable networks
and open application programming interface (API) platforms.
Authors: Tam & Hanh 13
• Significantly enhance access to credit by using alternative sources of data, such as payment
transactions and telecoms data, as well as analytics. These improve customer profiling, credit risk
assessment and fraud detection.
• Savings can be mobilized digitally through alternative, lower-cost origination and distribution
channels and more-convenient product designs, such as mobile wallets connected to savings accounts
and intuitive goal-based savings products. An easy KYC and onboarding process can also contribute.
In World Bank (2017b) analysis, the role of fintech is also presented by easing up financial services
for efficiently and effectively promoting financial inclusion.
Figure 1: Fintech for promoting financial inclusion
Source: World Bank (2017b).
These roles of fintech are more vital, as the industrial revolution 4.0 allows fintech companies to create
more favorable access to the banking- financial services, added more value for customers in using the
services with lower cost and faster time. Developing on the basis of information technology and
telecommunication without needing a network of branches and transaction offices, the fintech services and
products could reach a huge number of people, especially the ones in the rural & remote areas who are
facing difficulties to access formal/traditional banking services (Nguyen Kim Anh, 2017).
3. Fact findings of fintech for promoting financial inclusion in Vietnam
3.1 Legal framework of fintech for promoting financial inclusion
Vietnam has set up the basic regulations for digital finance, including non-cash payments and intermediary
payment services (e.g. digital wallet services) since 2010. The Overall plan for digitalizing payments were
initiated in the promotion of e-commerce in Vietnam with the Prime Minister’s Decision No. 1073/QD-
TTg in 2010 on approving the master plan on e-commerce development during 2011-2015; and the
Government Decree No. 52/2013/ND-CP on e-commerce.
In November 2012, the Government of Viet Nam issued Decree 101/2012/ND-CP directing the issuance of
regulations for non-cash payments. Circular 36/2012/TT-NHNN and Circular No. 39/2014/TT-NHNN
were eventually issued in December 2014, providing guidelines for intermediary payment services. On July
1, 2016. Decree 80/2016/NC-CP was issued amending Decree 101. Subsequently, Circular No.
20/2016/TT-NHNN was issued amending Circular No. 39.
The digitalizing payment ideas are clearly stated in the Government Decree No. 101/2012 on non-cash
payment and Decree No. 80/2016 amending the Decree No. 101 above. Of which, non-cash payment can
be carried out by both credit institutions (including microfinance institutions) and intermediary service
Business & Social Sciences Journal (BSSJ) 14
providers who have licenses from the State Bank. The plan for implementing Government Decree No.
101/2012 has been made further steps by the State Bank of Vietnam (SBV) Circular No. 39/2014/TT-
NHNN on intermediary payment services. Government also limit transactions paid in cash in the
Government decree No. 222/2013/ND-CP to promote more non-cash payment (e.g. no cash payment for
organizations using State budget source, securities transactions via Stock Exchanges, enterprise capital
contributions and purchases – articles 4,5,6)1.
In addition to issuing regulations, SBV has set up the Fintech Steering Committee in March 2017, including
all key personnel in SBV functional departments and National Payment Corporation of Vietnam (NAPAS).
This committee is responsible for formulating and submitting to SBV Governor the annual action plan of
the Committee; advising Governor the solutions to complete the ecosystem including a legal framework to
facilitate the performance and the development of Fintech companies in Vietnam in line with guidance and
orientation of the Government; discussing and submitting to SBV Governor several crucial substances
relating to strategy, plan for accelerating the development of Fintech in Vietnam, and conducting other
tasks as authorized by SBV Governor (SBV, 2017a).
The Government also requests SBV to be the key player (working with other stakeholders) in formulating
the National Financial Inclusion strategy. In this strategy three key pillars are: diversified financial products
& services; enhanced capacity of financial institutions; consumer protection and financial literacy (Ha Xuan
Dinh, 2017). Fintech is one of the most important methods in dealing with all these key pillars.
3.2 Fintech transaction volumes and providers in Vietnam
Although fintech is quite new in Vietnam (the oldest fintech firm was established in 2005 – named
VTPay)2, the transaction volumes are significant with various and potential providers to come. As per
Statista (2017), Vietnam fintech transaction amount is estimated to reach US$ 7,259 millions in 2017, with
annual growth rate of 17.5% in period 2017-2021. The largest segment is “digital payment” with total
1 Following are some of the salient features of these regulations that are relevant to the digital
finance issue:
(i) Types of intermediary payment services include (SBV circular No. 39, article 2): Two types: service of
provision of electronic payment infrastructure (include financial switch service; electronic clearing
service; electronic payment gateway service); and support service for payment services (include cash
collection and cash payment services; support service for wire transfer; digital wallet service).
(ii) Banks, MFIs, PCFs are allowed to provide non-cash payment services (money transfer, payment
authorization) to clients who may or may not have payment accounts (Decree 101: Article 3, Section 3
and Article 14, Sections 3 and 4).
(iii) Non-bank organizations may apply for an SBV license to provide intermediate payment services (e.g.
digital wallets), with the following requirements: Certificate of business registration or establishment
license issued by competent state authorities; Charter capital of 50 billion VND; and required human
resource and technical infrastructure for the provision of the intermediary payment service as prescribed
by the SBV. (Circular 39 Article 4, Section 2 and Decree 101, Article 15, Section 2)
(iv) Intermediary payment service providers must comply with the internal rules and regulations of the SBV
on risk management, electronic banking operations, money laundering, guarantee of safety and security
of IT systems and the establishment, use and archive of electronic documents as provided for in the Law
on electronic transactions (Circular 39, Article 7).
(v) Digital wallet service providers must open a payment guarantee account, which shall at any time contain
the total balance of e-money of all clients (Article 3, Sec. 6). .
(vi) Digital wallet service providers are not allowed to: issue more than one digital wallet to a payment
account of a bank client; extend credit to customers using digital wallet; and pay interest on balances of
digital wallets1 (Circular 39, Article 9, Section 1a, 1b).
(vii) Money in the digital wallets should be deposited and withdrawn (cash-in, cash-out) through the payment
accounts of customers in a bank (Circular 39, Article 9, Section 3).
(viii) Digital wallet users are required to have payment accounts in a bank. Prospective users that do not have
one yet are required to open a payment account prior to usage. (Circular 39, Art. 13, Section 1e).
However, in reality, users do not necessary to have bank accounts.
2 http://fintechnews.sg/vietnam-fintech-startups/
Authors: Tam & Hanh 15
transaction value of USD 7,252 millions (99.9%). This is one of the very few best fast growing sectors, and
one of the hottest investment trend for startups in Vietnam.
Total fintech firms in Vietnam is estimated to be almost 40, of which majority are mobile payment
(52%) with the most founded Start-ups in Vietnam.
Figure 2: Distribution of Fintech companies in Vietnam by activities
Sources: Author calculation from (Chiristian Konig, 2017), Lien Viet Post Bank (2017), Angela Scott-
Briggs (2017)
There is also a possibility of foreign fintech giants joining the Vietnamese market in the future,
such as Apple Pay, Samsung Pay, Facebook Payments, Google Wallet and Amazon Payments. However,
these penetrations have not yet done (VNS, 2017).
4. Result of selected e-wallet projects implemented in Vietnam To accelerate the mobile payment part in fintech, SBV through its Payments Department launched
three pilot programs3 to test the feasibility of using e-money and agents that will enable banks to minimize
costs in servicing low value accounts and ease accessibility of financial services to the poor and low-income
clients even in remote rural and mountainous areas. The three pilot programs are briefly described below:
Table 1: Details of 3 pilot e-wallet programs
Military Bank-Viettel Vietcombank - MOMO PG Bank- Petrolimex
Type of model Bank-led Non-bank led Bank-led
E-money issuer Military Bank MOMO - Service
provider
PG Bank
Partner Telco Viettel MOMO TelCo partner None
Link to a bank
account
Not necessary Not necessary Not necessary
E-money stored
limits
None None None
Per transaction
limit
VND 20 million None mentioned VND 20 million
Fees charged Transaction volume-
based
From VND 10k to 60k.
Volume-based; higher for
non-bank account client
Allowed cash-in
and cash out
points
10’000 Viettel transaction
offices + 20’000 mobility
agents for remittances.
4000 M-service agents 2000 Petrolimex gas
stations + 18 PG branches
and 81 transaction offices.
Transactions
allowed Money transfers and all
types of payment services.
P2P, P2B.
Money transfers and all
types of payment services.
P2P, P2B.
Money transfers - P2P.
3 Aside from the three pilot programs, Lien Viet Post Bank (LVPB) also plans to launch its e-wallet by middle of
these month. VBARRD also has a license for e-wallet but its operations is still very minimal.
10%
3%
5%
3%
8%
8%
8%
58%
Crowd funding
Lending
Data management
Comparison site
Bitcoint block chain
Personal Finance
mPOS & facilitators
Mobile payment
Business & Social Sciences Journal (BSSJ) 16
Transactions to
date About 800 billion VND
worth of transaction per
month provided to about
1 million clients.
1 million customers with
e-wallet; 1.5 million for
over the counter services
at MOMO outlets
Total volume of transaction
to date is 167 billion VND
serving about 44,000 clients
Challenges/constr
aints - Not yet sustainable and
profitable;
- Annual SBV licensing
barrier to investments;
- Banking regulations not
relevant to small
transaction clients;
- Low transaction limits
raising costs for clients.
- Not yet sustainable and
profitable;
- Annual SBV licensing
barrier to investments;
- Small and costly agent
network;
- Lack of technology
education and financial
literacy of the population.
- Not yet sustainable and
profitable;
- Annual SBV licensing
barrier to investments;
- Low transaction limits
raising costs for clients.
Source: ADB (2016).
Among these three projects, Momo is the outstanding one, and it has attracted the a lot of
mainstream attention for most recently raising capital under a Series B for US$28 million from Standard
Chartered Private Equity (SCPE) and Goldman Sachs in 20164.
In addition to these three pilot projects, Lien Viet Post Bank issued the Vi Viet e-wallet from 2011.
With the supports from UNCDF, Vi Viet e-wallet has added bank-led high value products with low-cost
access to savings and overdraft loans or micro-loans to women, apart from existing services in the market:
air-time top-ups, peer-to-peer remittance, utility bill payments, insurance premium payment, online
shopping. Up to March 2017, Vi Viet e-wallet has reached more than 1.5 millions customers, with more
than 2.1 millions transactions, with VND 2,403 billions volumes. Vi Viet e-wallet offers customers a total
of 150 services. With the potential of the biggest bank in Vietnam in term of network (34
LienVietPostBank’s owned Branches and Transaction Offices; 1,067 Postal Transaction Offices; 5,527 Vi
Viet merchants; 614 TOs of Vietnam Bank for Social Policies (VBSP); 10,000 post offices in all 63
provinces/cities of Vietnam) (Lien Viet Post Bank, 2017), this could be one of the major players in the
fintech market for payment.
5. Opportunities and challenges of fintech for promoting financial inclusion in Vietnam
5.1Opportunities
The opportunities of fintech for financial inclusion in Vietnam are enormous with high prospects.
First, from the demand side, Vietnam is considered as the very potential market for fintech because
of the following reasons: (i) Vietnam is the 14th most populous countries in the world with more than 95.2
millions, in the “golden-age” of population with 69.3 % within the age of 15-64 (World Meters, 2017), and
the very high mobile subscription rate – 142.9% of population (N.A., 2016); (ii) the proportion of mobile
smart phone penetration by age group are very high (62% for age 15-25; and 63% for age 25-35); (iii) more
and more people in Vietnam participate in mobile online activities; (iv) the remittance activities have been
developed significantly, especially the oversea remittance, which increases the demand for money transfer
overall (Chiristian Konig, 2017).
Table 2: Prosperous future of Vietnam market for fintech from demand side
Age 15-25 Age 25-35 Age 35-44 Age 45-65
Mobile/smart phone by
age
62% 63% 47% 27%
Product
information
Email checking Search Social networks
Mobile online activities 24% 38% 45% 46%
2013 2014 2015 2016
4https://www.dealstreetasia.com/stories/vietnam-fintech-app-momo-attracts-28m-from-standard-chartered-pe-
goldman-sachs-34441/
Business & Social Sciences Journal (BSSJ) 18
Most of people just consider financial services means credit services, and most of payment transactions are
still via cash.
7. Policy implications of fintech for promoting financial inclusion in Vietnam
To overcome the challenges and grasping the opportunities of fintech for better and more
effective/efficient in promoting financial inclusion in Vietnam, some recommendations to stakeholders are
proposed as below:
To fintech companies: (i) Utilizing the technology for expanding network to ensure good access
of potential customers to the e-financial services; (ii) Ensuring the high quality of services in
term of safety with reasonable costs to gain more trusts and satisfactions of customers; (iii)
Using more PR methods, particularly via worth-of-mouth, story-telling, and other promotion
campaigns to allow customers knowing about e-financial products more; (iv) Training the
agents more thoroughly and choosing the agents carefully to avoid the possible “agent-principle
problems”; and (v) compete, but the same time, cooperate with banking sector to utilize their
potential customer bases and market.
To commercial banks: (i) Taking into account the seriousness of fintech investment at the
banks; consider this as the best chance for downscaling in the mass retail market. Banks can
have a separate fintech company, a fintech subsidiary, a joint-venture with outsider, or using
other fintech companies as banks’ agents; (ii) Utilizing the current strengths of reputation,
network, customer base and equity to develop suitable fintech products for financial inclusion,
focusing on mass retail financing demands; (iii) Cooperate and coordinate with selected strong
fintech firms in developing new e-financial products for this particular market segment; (iv)
Ensuring the quality and risk management to avoid losing reputation.
To State Bank of Vietnam: (i) Improving the legal framework of fintech for financial inclusion,
particularly the agent banking, governance and management, data privacy and consumer
protection, risk management, anti-money laundry, etc; (ii) Developing the supervision and off-
site examination manuals for fintech; (iii) Making the Fintech Steering Committee and Fintech
Working Group work efficiently and effectively; (iv) Putting the fintech content as the driver
for financial inclusion in formulating and implementing the upcoming National Financial
Inclusion Strategy; and (v) accelerating the financial literacy campaign nationwide.
To other stakeholders (such as Ministry of Education and Training, Ministry of Information
and Technology, Ministry of Labor, Invalids and Social Affairs, Ministry of Agriculture and
Rural Development, and others): (i) Improving the internet and smart phone using quality; (ii)
Actively implementing and participating in financial literacy campaign via several aspects; (iii)
Utilizing social media (facebook, instagram, webs) for lowering the cost and increasing the
access of people to key information relating to financial inclusion, fintech, e-wallet, money
transfers, etc; (iii) Transfering the G2P into using all non-cash payment and encourage the final
users/beneficiaries to use e-wallets.
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Authors: Tam & Hanh 19
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Business & Social Sciences Journal (BSSJ) 20
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