Fintech changes financial landscape

Vietnam can be very proud of these first-generation fintechs and, in the years to come, it can expect further innovative financial solutions, both from local and international fintech startups, to help it achieve a financial inclusion goal and nurture a fintech ecosystem.

A tale of the first runner-up

While the grand prize of the first ever Fintech Challenge Vietnam 2017-2018 (FCV) has found its deserving winner last week in Weezi Digital, a local fintech that thrives on biometric solutions; the first runner-up, KIU Global, is also an interesting case, considering how far it has come from the initial idea to a financial solution that addresses the needs of both banks and customers.

KIU founder and CEO Steven Landman shared with VIR on the sidelines of the recent Vietnam National Fintech Day that it took him about a year to research and interview some 600 small- and medium-sized enterprises (SME) on his own before he could decide to give birth to an innovative fintech product like KIU.

“The solution was based on a problem that I learnt about from most of the SMEs I spoke to. I then designed the technology platform and it took another three years to actually develop the technology.

“We realised that SMEs have no collateral and also no credit history. So what we did was develop a technology that makes it easy to collect data on the SME, from accounting all the way to inventory management and sales. And in turn, we built a credit scoring engine using artificial intelligence and other factors that allow us to generate a credit score in under 10 seconds,” said Landman adding that, “We had found out that some 57% of the 600 SMEs in the region, after interviewing, were not able to get a loan.”

KIU is a cross-border B2B e-commerce platform with integrated enterprise resource planning (ERP), logistics, and lending, aimed at serving SMEs across Southeast Asia.

Partnering up with Hanoi-based VIB through the FCV competition, KIU now receives investment in terms of marketing from the bank, based on a profit-sharing model.

“We use banks as our reselling channel. We’re in six countries and we have at least two bank partners in every country,” he said.

KIU’s solutions, according to Tran Nhat Minh, VIB deputy CEO and CIO, are just what banks need in order to facilitate their lending to the SME community. Thanks to KIU’s ERP product on a US$7 monthly plan that an SME can sign up for, banks will have accurate and trustworthy data on the SME, to help them with the credit lending decision.

Weezi Digital, KIU, Wecash, Enablecode, Instant.vn, and Tradle are the cream of the crop among over 140 fintech companies, both from Vietnam and overseas, that signed up in the FCV competition, fortunate enough to have their voices heard and acknowledged by policymakers, investors, and industry experts. They will help promote the development of Vietnam’s fintech ecosystem through their innovative financial solutions.

Big dreams

One of the judges at the FCV, Buncha Manoonkunchai, senior director of the financial technology department at Bank of Thailand, said that he sees great prospects on the country’s fintech horizon. “Vietnam’s fintech has shown strong potential in terms of innovation. And even though the infrastructure is not here yet, the ideas and the way they [fintech participants] think are so advanced. That kind of thing can lead to faster growth of the economy.

“We think that through collaboration between the ASEAN countries, we can make fintech a useful tool to improve financial services for people across countries. It’s crucial for ASEAN countries as a whole,” Manoonkunchai said in an interview last week.

One could even anticipate a cross-border fintech ecosystem for ASEAN countries. ASEAN countries are geographically close and are closely linked with one another, but one country alone may not have sufficient resources for a technology platform. As such, a collaboration in fintech areas between countries, according to Manoonkunchai, could help Vietnam fulfil its financial inclusion goal and promote financial co-operation between Thailand and Vietnam, by using standards like standardised QR codes, for instance.

Local vs. foreign fintech

A borderless fintech ecosystem seems attractive. However, for a young fintech ecosystem like Vietnam, domestic fintech startups may suggest that the government come up with some kind of protection to further promote the growth of the sector.

In the view of Viet Linh Nguyen, head representative of Banque de France’s regional office in Japan, whether it is a local or a foreign fintech, when it comes to innovating financial solutions to address the country’s needs, the fintech itself is working toward the country’s best interest.

While being unable to comment on the policy of each country to protect or not protect homegrown fintechs, Nguyen said what he has seen during the FCV forum is that “the ideas are just to answer needs” and “those needs are very national and very specific”.

“There is a mix. There are very specific domestic needs where you have to have an intimate knowledge of the country and its situation, and these needs can only be met by national players. And then there are situations which are a bit broader, for which you can have partnerships, mentors, economies of scale, transfers of technology, and collaborations, and in these situations you can import some foreign fintechs, either because it’s too costly to do at home or there is no local fintech yet.

“To me, it’s not a question of national versus someone else coming in, it’s more that some are national, some are partnerships, and some are, for the time being, foreigners with some contacts in the country, trying to answer a need which is not answered by companies in Vietnam,” he said.

Imported fintech

Local banks have long realised the importance of financial solutions and digital banking to improve their operations and customer experience, evident in the mass investment in technologies that banks have claimed at their recent annual general shareholder meetings. Yet banks can still be a bit slow in reacting to or adopting these innovations, as per accounts of KIU’s Landman, or even be hesitant to partner up with fintech companies per se. Should they continue moving in slow motion, they could leave the market segment open for foreign players who are seeking to expand their networks in Vietnam.

Malaysia-based CIMB, which received its licence to operate in Vietnam in 2016, is expected to bring its digital bank to Vietnam and other Southeast Asian countries as soon as this year, as part of its attempt to expand throughout the region on a cost-saving measure. Singapore’s UOB is looking to do the same.

Chua Chek Ping, UOB’s executive director and head of strategic alliances and fintech, told VIR that digital banking is the right trajectory for the bank to expand in Vietnam, and it is currently working on a number of financial solution initiatives for the market.

“For UOB, we’re particularly dedicated to Vietnam, and since UOB has gotten the local [incorporate], this allows us to expand a little bit further, but we’re not going to be able to open that many branches in Vietnam. We have a Ho Chi Minh City branch now and potentially, we’re looking for a couple more,” said Chek Ping.

“But with such a vast geography, for UOB to be able to be involved in the banking and financial sector in Vietnam to support the whole community, we definitely will look at digital solutions, for instance bringing digital banking into Vietnam or bringing fintech solutions to support our growth strategy in Vietnam. To be able to support the local market and to be relevant, UOB will have to customise the solutions to the needs of local customers in Vietnam, whether it be working with local fintechs and local companies to develop localised solutions or using our existing solutions and customising them for Vietnam. I believe it will be a combination of both,” Chek Ping added.