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How EY helped spur greater innovation in financial services for greater financial inclusivity in Vietnam

EY supported the FinTech Challenge Vietnam in partnership with Vietnamese government bodies including the State Bank of Vietnam (SBV) and Mekong Business Initiative (MBI). The program attracted 141 applicants, of which 45 were from Vietnam and 96 were foreign applicants from 27 different countries. EY’s involvement is evidence of EY’s commitments to strengthening partnerships between key players of the FinTech community and expand knowledge sharing among stakeholders in order to foster greater financial inclusivity.

  • The Better the Question

How can we spur greater financial innovation and build greater financial inclusivity in Vietnam?

To realize their full potential, FinTechs in Vietnam need a stronger, more connected ecosystem.

Vietnam has a dynamic start-up environment with many entrepreneurs and companies engaged in sectors such as payments and lending. The advent of FinTech in the country can be attributed to the country’s high internet penetration of 67% and mobile internet penetration of 64% in 2018.

However, a large percentage of the population is unbanked, with only 31% of the population of 15 years or older had having a bank account in 2017 according to World Bank Global Findex, presenting a big opportunity for FinTech to fill the void in the payments space.

Vietnam’s current FinTech landscape represents big opportunity, as 90% of transactions are conducted in cash and 75% of Vietnam’s 93 million people use limited banking services, while the remaining 25% have not taken advantage of banking services at all, which explains why 47% of Vietnamese FinTechs are only focused in payments, the highest concentration in the region.

With this opportunity in mind, several key Vietnamese stakeholders have launched initiatives to foster a conducive FinTech environment in the country.

The Vietnamese government, in January 2017, signed a policy with the aim to significantly reduce cash transactions and improve electronic payment methods by 2020. Under the plan, total cash transactions would be less than 10% of total market transactions. As part of the Vietnamese government’s socio-economic development plan, Resolution 01/ NQ-CP, dated January 2019, also includes the development of digital economy, in the fields of finance, banking, health, education, agriculture, tourism, environment and smart cities.

The FinTech Steering Committee was established by the SBV, the country’s central bank, in March 2017 to advise the government on FinTech ecosystem development, help the government in the development of a regulatory framework and to ensure growth in the industry and support FinTech innovation.

While initiatives had been launched to boost the FinTech landscape, FinTech in Vietnam had not grown to its full potential.

“FinTech companies are still small in scale and the policies and regulations for these companies are still limited. Many banks are still cautious in their decision to cooperate with FinTechs,” said Duong Nguyen, EY Vietnam Partner and Leader of Financial Service Organizations and IT Advisory Services and Vice President of the Vietnam Fintech Association (VietFinTech).1

EY wondered how we could add value to accelerate the process of building greater financial inclusivity and promote innovation in the financial services sector.

  • The better the answer

Developing the FinTech ecosystem through connecting stakeholders

EY supported financial institutions in evaluating potential FinTech partners and created an expertise sharing platform.

Spurring innovation by facilitating cooperation

The FCV, which spanned from November 2017 to May 2018, was organized by the SBV and the MBI, and funded by the government of Australia and the Asian Development Bank (ADB).

The Vietnam Banks Association (VNBA) and the Vietnam Fintech Club (VFC) are co-organizers of the program. Program partners include seven commercial banks (BIDV, Vietcombank, VietinBank, Shinhan Bank, TP Bank, VIB, VP Bank) as well as conglomerate FPT, and accelerators Vietnam Silicon Valley and VIISA.

The program aimed to spur innovation in financial services that promote greater financial inclusion in Vietnam, focusing on five fintech “verticals” that are critical for financial inclusion, including e-Payments, e-KYC, Peer-to-peer Lending, Open APIs, and Blockchain.

The program attracted 141 applicants, of which 45 were from Vietnam and 96 were foreign applicants from 27 different countries. Applications were evaluated by program organizers, co-organizers and partners.

While the SBV, ADB, and VNBA evaluated the potential impact on financial inclusion of each FinTech solution, corporate and investor partners assessed each applicant based on commercial criteria (Innovation and Relevance; Management Capacity; and Scalability & Investment Readiness).2

EY took on the role of the advisor, supporting the partner financial institutions in narrowing down their problem statements and finding the right FinTechs among the participants to solve these problems.

By equipping the financial institutions with the capability to identify potential areas of cooperation with FinTechs as well as to evaluate the FinTechs for cooperation, EY helped encourage the cooperative mindset as well as facilitate the actual cooperation itself.

Knowledge sharing for targeted ecosystem initiatives

Sponsored by EY Vietnam, the SBV and the MBI jointly hosted the FinTech Deep Dive on April 11 and 12, 2018 in Hanoi, which was an opportunity for regulators, financial institutions, FinTech practitioners and other stakeholders to share knowledge and experience, both local and international, on e-KYC and blockchain.3

100 participants including those from the National Assembly, various government agencies with an interest in FinTech, the SBV’s own Fintech Steering Committee and Working Group experts, international development agencies, as well as local FinTechs joined in the sessions.

At the FinTech Deep Dive, Varun Mittal, EY Global Emerging Markets FinTech Leader, provided an insight on how to promote FinTech ecosystems as part of a national financial sector strategy.

Other presentations include opportunities and risks in adopting e-KYC by Arpit Ratan, Co-founder and Head of Business Development at Signzy, SWIFT payment innovations and distributed ledger technology by Rahul Bhargava, Director, Payments Markets Initiatives, SWIFT APAC as well as informative sessions on Blockchain and e-KYC business models.

The presentations and discussions provided valuable input to the ongoing national dialogue about how best to develop FinTech in Vietnam.

  • The better the world works

Enhancing the ecosystem for better financial inclusion.

EY’s involvement in the FCV represents continual efforts to help enhance the FinTech ecosystem.

Out of the 141 participants, 16 finalists were chosen to pitch their solutions to a panel of banking industry players, financial experts and potential FinTech investors. Vietnamese FinTech Weezi Digital, with its biometric onboarding solution, was crowned as champion.4

Duong, who also sat on the judging panel, emphasized the importance of cooperation between banks and FinTechs.

“FinTechs is the bridge that can helps bring banking services closer to people, as they will help banks tap into the huge market of people who do not have bank accounts, but do have smartphones,” she said.

One year after the competition, 8 out of 16 FinTechs have managed to launch their solution to the market on their own or in collaboration with a financial institution.

EY Global Emerging Markets FinTech Leader, Varun Mittal painted a positive picture of what the future collaborations between FinTechs and banks could be because of the size of the potential market.

“Considering the model of financial inclusion which is needed in Vietnam, the number of potential customers that are free and untouched is so huge, the potential is there for Vietnamese start-ups and Vietnamese banks, the question is who grows and by how much,” he said.

Vietnam ranked second amongst ASEAN member states in the number of incubators, accelerators and innovation labs in the region, according to the ASEAN FinTech Census 2018. With US$129 million poured into the Vietnamese FinTech industry in 20165 and growing foreign investor interest in Vietnamese FinTech, the future of Vietnam’s FinTech sector appears bright.

With its extensive global network and FinTech expertise, EY is committed to working with industry participants as well as governments and educational institutions and ecosystem enablers to help bring about a better FinTech ecosystem and greater financial inclusivity in Vietnam.

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EY - Varun Mittal

Varun Mittal

EY Global Emerging Markets FinTech Leader, Associate Partner