Banks partner with fintechs to create a common ecosystem

03-Dec-2021 Intellasia | Nhip cau Dau tu | 5:02 AM Print This Post

MobiFone has become the first mobile operator to be allowed to pilot the provision of Mobile Money service nationwide. Vietnam Airlines has just launched the VNAMall e-commerce platform with more than 300 products imported from the countries which the airline flies.

These two events show that the strong dynamics in e-commerce as well as online payment, mobile payment, etc. are changing day by day in Vietnam. The pandemic has also contributed to accelerating digital application in Vietnam as well as across the Asean, with a large shift to digital financial service channels as a vital element of these organisations.

Assessing the digital transformation process of the banking industry, deputy Governor of the State Bank of Vietnam (SBV) Pham Tien Dung said that 95 percent of credit institutions (CIs) have had, are building or are planning to develop a digital transformation strategy. Currently, about 80 banks are implementing Internet Banking services, 44 banks are providing Mobile Banking services, etc. In the first nine months of 2021, payments via mobile channel increased by 76.2 percent in quantity and 88.3 percent in value; while payments via the Internet channel increased by 51.2 percent in quantity and 29.1 percent in value.

“A digital payment ecosystem has been formed over the time with the connection of digital banking services to other digital services in the economy, providing a seamless experience in all areas for digital service users,” said Dung.

According to the SBV, the specific targets set by 2021 are to have 50 percent of adults using e-payment services, 70 percent of customer transactions completed through digital channesl, 50 percent of loan disbursement decisions of commercial banks and finance companies for small loans and personal consumer loans digitised.

These goals are set on the basis that Vietnam’s digital economy is supported in terms of policy. For example, the decree on the controlled testing mechanism for financial technology (fintech) activities in the banking industry (Fintech Sandbox) or the decision to pilot the use of telecommunications accounts to pay for small-valued services (Mobile Money).

This policy has created the opportunities for fintechs to boom in Vietnam. According to the FinTech in Asean in 2021 report by United Overseas Bank (UOB), PwC Singapore and Singapore Fintech Association (SFA), Vietnam-based fintech companies have raised more than 388 million US dollars, equivalent to nine percent of the total 167 deals in the Asean in the first three quarters of 2021.

Alliance in financial solutions

Notably, the trend of banking and fintech cooperation in Vietnam is becoming more and more exciting, many investment projects of banks in fintech start-ups have been effective with the coverage of embedded finance. For example, CIMB bank and Finhay announced a cooperation in issuing CIMB Finhay co-branded CIMB Finhay cards on Finhay application. Previously, MoMo also partnered with Tien Phong Commercial Joint Stock Bank (TPBank) to deploy a post-paid package which allow e-wallet users to borrow right on the application.

In addition, the trend of embedded finance is also growing with the lead of large retail systems. Mobile World has announced the plan to develop financial utilities integrated into its system. Meanwhile, Masan Group is strongly developing synchronous financial utilities in WinMart stores after acquiring this system (VinMart) from Vingroup.

In the face of this trend, Tran Cong Quynh Lan, deputy general director of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), said that banks must have solutions to integrate non-cash payment services into shopping and consumption activities so that people can pay their bills in the simplest and most convenient way. The embedding of online payment solutions into digital applications of fintechs, goods and service providers, and e-commerce platforms therefore needs to be promoted, and continuously innovated and expanded.

Once this embedded financial framework is fully built, it can be indefinitely replicated thanks to the existing fintech infrastructure. Statistics of the SBV pointed out that 72 percent of fintech companies have linked with banks in Vietnam, only 14 percent develop new services and 14 percent are ready to compete with banks.

According to Bruce Delteil, Managing director of McKinsey & Company Vietnam, the strong growth of fintech companies has also contributed to improving the customers’ access and use of digital financial services. According to a survey of McKinsey & Company, 80 percent of Vietnamese customers use digital banking at least once a month, 56 percent of customers are willing to use other financial solutions from fintech companies, and 70 percent of respondents said that they are willing to buy products online. Bruice Deteil forecast that “currently, the digital ecosystem in Vietnam is developing and the scale will increase from about 50 million US dollars to 100 billion US dollars in the coming years.”

According to Pham Anh Tuan, member of the Board of directors, Head of Banking Technology Modernisation Board at Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), banks are very willing to cooperate with fintech companies, because the partnership with fintechs will create diversity of digital banking ecosystem. It even helps banks run a long way in the digital race. Nguyen Quoc Hung, general Secretary of the Vietnam Banking Association, also said that banks need to work with fintechs to create a common ecosystem, taking advantage of each other’s strengths in improving customer experience.

 

Category: Finance, Vietnam

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