Korean investors contest Vietnamese consumer finance

Lotte’s “whole-package” strategy

Recently, Techcombank has approved the main contract and other transaction documents related to the sale of a 100-per-cent stake in Techcom Finance. The prospective acquirer is Lotte Card, a subsidiary of Lotte Group. If the deal is approved, Lotte Card will be the first Korean card company in Vietnam to offer instalment loan services and consumer credit cards.

At present, consumer lending is considered extremely lucrative, bringing about a trillion dong profit for financial companies in Vietnam, of which FE Credit is an outstanding example.

However, Nguyen Duc Vinh, VPBank’s general director (the parent bank of FE Credit), admitted that the consumer lending market has been saturated. In particular, while cash loans still see positive growth, lending via credit cards is inevitably emerging as the new trend. This is also the strategic direction that FE Credit is pursuing.

According to State Bank of Vietnam (SBV), even though transactions via credit cards remain modest, card purchases have been increasing rapidly, especially as the government is enthusiastically pushing its scheme on non-cash payments.

This is definitely a good time for Lotte Card to enter the Vietnamese credit card market. Moreover, the company also has the giant customer base of Lotte Group to rely on, building on the corporation’s more than 10 years of presence in Vietnam.

Can Van Luc, a banking expert, said that given the financial capability of South Korean investors, Lotte Card will surely expand its scale of operations in Vietnam.

Threatening invasion

Apart from Lotte Card, numerous other financial investors from South Korea are looking for opportunities in the Vietnamese financial market. So far, since the beginning of the year, three more Korean banks have entered into official cooperation with domestic banks and insurance companies in the country.

Given their excellent services and open lending policies, Korean banks and financial firms are likely to threaten the market share of domestic banks.

Specifically, in July 2017, Daegu Bank signed a comprehensive cooperation agreement with OCB. Prior to that, Korea Development Bank (KDB) signed a similar agreement with BIDV, while Woori Bank Vietnam signed a cooperation agreement with Vietnam Post Insurance Corporation (PTI).

Currently, there are two of the eight wholly foreign owned banks in Vietnam are held by South Korean firms, namely Shinhan and Woori Bank.

In addition, many other large banks in South Korea have established branches and representative offices in Vietnam, such as KEB Hana, Industrial Bank of Korea, Kookmin, Busan and Nonghyup. Banks from South Korea are ranked number one among foreign investors present in the banking sector of Vietnam.

Furthermore, regarding the corporate lending segment, large Vietnamese banks might lose customers to their Korean counterparts.