Bank versus the digital economy

04-Jan-2019 Intellasia | Dien dan Doanh nghiep | 6:00 AM Print This Post

“Hot steam” of the digital economy is heating the financial market, especially retail banking with the highest temperature.

One of the heat waves that banks have to pay special attention to is the inflow of capital into Finance technology companies (Fintech). If being sluggish, banks may be “overtaken” by Fintech.

Pressure from future Fintech “unicorns”

According to estimation, about $290 million were invested into Fintech in Vietnam from the end of 2016 to 2018. This figure is absolutely small compared to Foreign Direct Investment (FDI) capital of about $20 billion invested into Vietnam currently, but it is expected to grow very rapidly in the next 1-2 years. Accordingly, capital flows into Vietnam Fintech may reach $2-3 billion by 2020 and Vietnam will become a vibrant place to attract Fintech capital in Southeast Asia.

In fact, in Vietnam, besides VNG Corporation, a technology group with a capitalisation of $1 billion, we do not have many technology start-ups that can absorb a large amount of capital. In the near future, Don Lam, head of VinaCapital, said that since the Vietnamese banking system has not developed in depth, the Fintech group could become new “unicorns”. The reason is that Vietnamese banks tend to operate in the traditional model and are slow to catch up with technology.

Don Lam and Vinacapital said that they not only established a technology investment company with a capital of $100 million, focusing on investing in two important areas, i.e. Fintech and Logistics, but also actively select potential start-ups to invest capital with an unspecified investment period.

Meanwhile, not consider ding an investment company for Fintech, but Mekong Capital competes with the banks and finance companies through its investment in F88the only pawn start-up company that has foreign capital in the market. With additional capital from Ireland investment fund, F88 reached the value of $43.5 million, aiming to lend one trillion dong in the coming year.

The founder of F88, Phung Anh Tuan, said that the average loan amount of the company is only about 10 million dong, which is “very small” and banks does not care.

No demand is small!

Reacting on the trend of lending to consumer with small loans of 10 million dong, many banks said that although this “segment” used not to be focused by banks, that was the story before 2018.

Since this year, the digital economy and the trend of digital banking have forced credit institutions to rethink, especially about the retail banking development model with increasingly expanding ecosystems.

One example is Yolo digital banking of Vietnam Prosperity Joint Stock Commercial Bank (VPBank), which has cross over the limit of a digital wallet to become a digital banking system providing a package of full services to customers.

In the other direction, Hochiminh City Development Joint Stock Commercial Bank (HDBank) has deployed loans for customers to buy Vietjet air tickets, via HD Saison. Cash flow from HD Saison was paid at the “gate” of HDBank, to buy products or services belonging to HDBank’s exclusive ecosystem, which is an example that shows in the era of financial digitisation, not a small amount of money and any small idea can be “ignored”.

So is the digital bank in 2018 able to become a new service “berth” for retail banking towards corporate customers and small and medium enterprises (SMEs)? The answer is probably less fun than personal finance, when in the digitalisation race, serving organisations customer seems to be more difficult. Most still have not achieved the right digital bank. Even Omni Channel of Orient Joint Stock Commercial Bank (OCB) catching attention of the market over the previous year, but still has not been effective enough for trust from the business community.

Challenges, pressures, heat of the digital economy for the banking system, obviously will be hotter in the near future.


Category: Finance, Vietnam

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