Google Wallet Arrives in Vietnam’s Fintech Sector Scene

Google has announced that the Google Wallet mobile app will now be available in Vietnam.

The announcement sees Google Wallet join a long line of fintech apps all vying for a slice of Vietnam’s US$14 billion fintech market.

And it’s not just in payments that fintech solutions are taking off. A number of mobile apps aimed at stock market trading and investing, along with money lending, have all come online in recent years.

Fintech is undeniably booming in Vietnam, and the momentum with which it is driving forward, for a relatively nascent industry, shows little sign of slowing down.

Vietnam’s fintech industry in numbers

ONE Robocash analysis in May this year found that the market was expected to reach USD 18 billion by 2024. This represents a huge demand for fintech services in the burgeoning Southeast Asian nation.

Alongside this finding, Robocash also reported that of venture capital invested in Vietnam, 93 percent in 2021 was aimed at digital payments.

It also found that fintech companies in Vietnam flourished between 2016 and 2021. In five years, the number of operators increased by a whopping 84.5 percent.

However, there was a marked decrease in market participants from 11 per year to just two. This could be a sign that the market may reach peak saturation. However, it could also be a sign that major players in the sector have strengthened their grip on what Vietnamese fintech users want and need. New entrants, as such, need to be knowledgeable operators with a good understanding of how Vietnam’s fintech sector works.

What is driving the growth of Vietnam’s fintech sector?

Vietnam is a huge growth market for fintech. Over 75 percent of the population has internet access, and this is set to rise to 82 percent by 2025 or close to 7 million extra people.

On top of that, Vietnam has a relatively young and tech-savvy population. According to the Ministry of Communications, 73.5 percent of Vietnam’s population currently use smartphones. It estimates that this figure will rise to just over 82 percent by the end of 2022.

Furthermore, a digital transformation of the Vietnamese economy is at the top of the government’s agenda. The national digital transformation program launched last year sets out key targets for digital banking to be achieved by 2025. These include:

• 50 percent of banking operations must be entirely online,
• 50 percent of the population to have a digital current account, and
• 70 percent of customer transactions must be done through digital channels.

That said, despite digital banking, little regulation has been developed to manage the fintech sector.

Fintech regulation in Vietnam

Vietnam’s approach to the proliferation of fintech and digital assets has been steady and cautious. To speak of, there is very little fintech-specific regulation. However, there are a number of regulations in other sectors that may be relevant to fintech operators.

For example, Decree 101/2012/NĐ-CP, issued in 2012 and covering non-cash payments, can be applied to fintech payment providers, although it is not specifically mentioned.

Develop a fintech sandbox

In order to take advantage of the opportunities provided by fintech, the government is taking steps towards creating a fintech sandbox.

This sandbox will be a testing ground for credit organizations and financial institutions to develop new technologies, for regulators to assess the risks and benefits of fintech for the consumer, to reduce the risks consumers face when using fintech products, and to determine which regulatory authorities which will be responsible for regulating the sector.

This will be something similar to sandboxes in other Southeast Asian nations such as Singapore, Thailand or Malaysia.

That said, although a draft decree outlining a possible fintech sandbox program has been circulated, it could still take some time before it is approved.

The Status of Cryptocurrencies and Digital Assets

Cryptocurrencies, for all intents and purposes, are not legal in Vietnam.

The State Bank of Vietnam (SBV) has been very clear on this, in an official dispatch in 2017 which states that:

“Virtual currency in general, and Bitcoin and Litecoin in particular, are not currencies and are not legal tender according to the provisions of Vietnamese law. The issuance, delivery and use of virtual currency in general and Bitcoin, Litecoin in particular … as currency or means of payment is prohibited .”

The letter further points out that the use of cryptocurrencies as a tender may constitute an “administrative violation” and perpetrators may be fined.

Peer-to-peer lending

Peer-to-peer lending is also mostly unregulated. Although there have been some hints that this may qualify as credit activity, in which case a license from the SBV may be required.

In particular, in the aforementioned draft decree for a sandbox mechanism, a provision has been made to explore peer-to-peer lending services.

Foreign investment in fintech in Vietnam

Although there are extensive restrictions on foreign direct investment in financial institutions and credit organizations in Vietnam, there are none specific to fintech. This is as long as the functions of fintech are not covered by other laws.

To be clear, an app like Google Wallet only acts as an intermediary between a financial institution or credit organization. It doesn’t actually give credit.

In light of this, foreign investment has flowed into the sector in recent years – this may also be partly why Vietnam’s fintech sector has grown so large so quickly.

The future of Vietnam’s fintech sector

Despite increased competitiveness in Vietnam’s fintech sector, Google Wallet shows that there is still room for new players.

Although there is a lack of regulation, with a government eager to digitally transform the economy, any regulation that develops in Vietnam is likely to be beneficial to the sector.

Furthermore, as the population of young tech-savvy Vietnamese continues to grow, and smartphone penetration spreads further, the fintech sector is likely to continue to boom as well.