Fintech the key to a modern digital banking strategy
Fintech is gaining popularity around the world as Southeast Asia, including Viet Nam, becomes a target for fintech’s global expansion.
On the cusp of the Fourth Industrial Revolution, with the rapid development of Blockchain technology, Artificial Intelligence (AI), the Internet of Things and Big Data, financial technology (fintech) has created a groundbreaking change in the financial industry, introducing a whole new shopping experience to consumers.
Fintech has evolved into a global wave. Many fintech companies have developed new business models and new products, bringing greater access to financial services.
The global fintech sector raised US$57.9 billion in the first half of 2018, surpassing last year’s record number. Investment in fintech companies in Asia hit $16.8 billion, only behind Europe’s $26 billion, according to data compiled by Traxcn, the US’s largest startup platform.
After achieving success domestically, a number of large fintech companies (primarily from China, Japan and South Korea) have set their sights on countries within Southeast Asia.
With a large population, relatively similar macroeconomics and large underbanked populations, the region is seen as a stepping stone to further global expansion.
According to the ASEAN Fintech Census 2018, 87 responding companies said they have plans to expand beyond their current markets.
Speaking at the Korea ICT Day 2018 in Ha Noi this week, Nguyen Toan Thang, general secretary of the Viet Nam Banks’ Association said Việt Nam is a potential market for fintech development given its big population and the high percentage of people accessing the internet and using mobile phones.
"According to the latest statistics, about 46 million people have access to fintech and this number will continue to increase rapidly in the future,” Thang said. “Viet Nam is a potential market for both local and international fintech businesses."
He emphasised effectively employing fintech was key for banks to maintain and improve their competitive edge in the transition to digital banking.
One in three fintech companies are engaged in the payment sector, which grows to more than 54 per cent if money transfer or remittance is included, according to the ASEAN Fintech Census 2018.
The development of fintech is in line with the Government’s push towards national digitisation and its promotion of non-cash payments.
According to the Viet Nam’s banking sector, the Government aims to reduce the ratio of cash to less than 10 per cent of total payments and less than eight per cent by 2025.
Blockchain is the digital and decentralised ledger technology that records all transactions without the need for a financial intermediary like a bank.
With outstanding advantages in transparency, reduced transaction costs, faster transactions, traceability and security, this technology is expected to create a wave of startups in the finance and banking sector, which was previously known to require a lot of capital to penetrate, said Nguyen Dang Trieu Thien, CEO of LINA Network, which provides blockchain solutions to a wide range of business sectors.
“The application of blockchain technology in fintech covers most of the financial sector including deposits, settlements, money transfers, insurance, consumer lending, trade finance, risk management, forex and securities transactions,” Thien said.
“Besides supply chain management applications, LINA Network is trying to build a platform that supports settlement and transactions between parties using blockchain to increase transparency,” he said.
The company is cooperating with foreign partners, expanding to ASEAN markets in Laos and Thailand and moving to other Asian markets such as Japan and South Korea.
At the Korea ICT Day 2018, the Fintech Centre Korea signed memoranda of understanding with four Vietnamese institutions including Vietnam Fintech Club, Southern Blockchain Research Institute, Viet Nam Internet Association and Vietnam Silicon Valley.