Vietnam’s internet economy continues to exhibit significant growth. Latest figures from Vietnam’s Ministry of Information and Communications released on 27 April 2022 revealed impressive progress in Q1 of this year, with digital economy earnings of over US$53B, an average growth rate of 15%. This growth complements the country’s concerted efforts to embed digitalisation in inclusive development strategies. All localities and provinces have already set up steering committees on digitalization to accelerate digital transformation efforts at the grass-root level.
With programmes and strategies for digital transformation, developing the digital government and improving the digital economy and society, Vietnam is today home to one of the region’s most vibrant fintech and digital finance scene. According to the State Bank of Vietnam (SBV), the number of fintech companies in the country has grown from just about 40 in 2016 to over 150 in 2021. Tech companies, big and small, are working across the entire ecosystem: from traditional services such as payments, lending, SME financing to newer sectors such as insurtech and crypto. The government has also stepped up efforts to advance financial inclusion through driving adoption of digital financial services through initiatives such as the National Financial Inclusion Strategy and Decision No. 1813/QD-TTg on non-cash payments.
At the workshop “Pathways to Financial Inclusion”, we discussed how the financial inclusion agenda in Vietnam could be furthered and accelerated. We also had the privilege of having Dr. Do Thi Bich Hong, Director at State Bank of Vietnam’s (SBV) Banking Strategy Institute (BSI) deliver a presentation on the country’s National Financial Inclusion Strategy, and the outcomes of it after 2 years of being in effect.
Presenters, and speakers include:
- Dr. Trần Thị Hồng Minh, President of CIEM
- Dr. Vũ Tiến Lộc, TFGI Advisor and National Assembly Member
- Dr. Nguyen Dinh Cung, Former Director of CIEM
- Mr. Phạm Xuân Hòe, General Secretary of Vietnam Financial Leasing Association (VFLA)
- Mr. Nguyễn Quốc Hùng, General Secretary of Vietnam Banks Association (VNBA)
- Dr. Do Thi Bich Hong, State Bank of Vietnam’s (SBV) Banking Strategy Institute (BSI)
- Dr. Ming Tan, Executive Director of TFGI
- Matin Mohdari, Strategy Director of TFGI
- Melissa Tan, Research Fellow of TFGI
Key insights from the discussion:
- Alignment in definitions and expectations can enable a coordinated response. At the moment, the Vietnamese terms to describe “inclusion” in financial inclusion and “inclusive” in inclusive development are different. Aligning the terms can increase appreciation for how the goals are interrelated, so as to develop and implement policy interventions that adequately address all the gaps and challenges.
- Digital innovation enabled through mobile devices has advanced financial inclusion in Vietnam. Access to quality data through the online-to-offline relationship between digital platforms and its customers via mobile devices has opened new ways to assess credit risks and create new lines of products for those previously underserved. Digitalisation has also allowed for fractionalization of almost every type of transactions, including payments, loans, and insurance. DIgital inclusion efforts have also allowed embedded finance to take off, making banking more convenient and accessible.
- Good progress has been made thus far on expanding access of financial services to the population, but more targeted efforts can be done to accelerate inclusion. These include improving legal frameworks (around micro-financing services), expanding provider networks beyond urban areas, enhancing access to financial services especially amongst underserved segments such as farmers (for things like agriculture insurance products), investing in financial infrastructure, and improving financial education.
- Financial literacy and education are vital to driving financial inclusion. Financial literacy can have a positive effect on fintech adoption. Financial literacy not only predicts consumer trust in digital financial service (DFS) providers, but also usage of non e-wallet DFS products (loan, investment, and insurance), according to an upcoming research by TFGI. Beyond promoting adoption of digital financial services, financial literacy is also important to ensure public safeguarding while legal frameworks on consumer protection are being developed.
- Regulations that strike a balance between protecting consumers and encouraging innovation not only advance financial inclusion and digital transformation, but also build trust in financial institutions and providers. The State Bank of Vietnam is considering creating a regulatory sandbox to pilot six fintech solutions as part of the government’s concerted effort to simultaneously promote innovation and expand the current regulatory framework on financial technology (fintech) and DFS activities in the country. However, it was noted that establishing regulatory frameworks for every development in the digital economy could be limiting and counter-productive, especially during early days and nascent stages of experimentation.