No New Fintech Companies Licensed After COVID-19, But the Competition Remains Fierce

Recently, a highly important piece of news regarding Vietnam's fintech industry was published on Cafef, one of Vietnam's leading online news platforms.

According to the report, since the COVID-19 pandemic up until now (post-2022), no new fintech companies have been granted licenses to operate in the Vietnamese market.

However, competition in the market remains extremely fierce, with more than 170 licensed fintech companies actively operating.

So, how will the race between fintech companies in Vietnam unfold, and which technological sectors will financial technology companies focus on in the near future?

Let's explore these questions with FinFan through the following article.

Causes of the Decline of Fintech in Vietnam

Fintech (financial technology) is currently in a period of decline

According to information published on Cafef, on December 13, the Vietnam Banking Innovation Summit 2024, organized by the Vietnam Banks Association and 5S Media, took place in Ho Chi Minh City.

The event attracted the participation of hundreds of experts, bank executives, and fintech professionals.

Speaking at the forum, Mr. Can Van Luc, Chief Economist of BIDV, stated that fintech (financial technology) is currently in a period of decline.

He noted that many individuals who had been working in the fintech sector have recently shifted to employment at commercial banks.

Regulatory Restrictions and Licensing Freeze

Since COVID-19, several fraudulent entities posing as multinational fintech companies have carried out scams and misappropriated the assets of many Vietnamese citizens.

The most recent and notable case involves Pho Duc Nam, who is commonly known on social media as Mr. Pips, along with his accomplices. They orchestrated a large-scale scam, defrauding innocent people and embezzling up to 5,200 billion VND from victims. This case has drawn significant public attention and highlights the urgent need for stronger regulatory oversight and consumer awareness in the fintech sector.

For this reason, the State Bank of Vietnam (SBV) has been restricting the issuance of licenses to fintech companies that do not meet regulatory standards.

To obtain a license, fintech companies must ensure strict compliance with the KYC (Know Your Customer) process as mandated by the SBV.

One of the most recent regulations requires facial recognition for KYC verification for personal transactions exceeding 10 million VND. This measure aims to strengthen security, prevent fraud, and protect consumers in the rapidly evolving fintech landscape.

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The government's issuance of new policies and regulations aims to protect user rights while also tightening the legal framework to enhance measures for cross-border anti-money laundering (AML).

These regulatory changes have had a direct impact on fintech companies in Vietnam, increasing their compliance burden and operational costs.

Fintech firms are now required to adopt stricter KYC (Know Your Customer) procedures, strengthen data security, and ensure compliance with AML regulations, which poses significant challenges, especially for smaller companies with limited resources.

Increased Competition from Banks and Traditional Financial Institutions

As of now, fintech companies in the Vietnamese market primarily focus on two main segments:

Payment Gateways: These platforms facilitate secure online payment processing for e-commerce websites, mobile apps, and businesses. They act as intermediaries between merchants and financial institutions, enabling smooth payment transactions.
E-Wallets: Digital wallets allow users to store money electronically, make payments, and transfer funds easily. Popular e-wallets like MoMo, ZaloPay, and VNPay have become essential tools for daily transactions in Vietnam, especially in the context of the growing cashless economy.

These two segments dominate Vietnam's fintech landscape, with most companies competing to improve user experience, enhance security, and increase market share in these areas.

However, the major players in the banking industry have recognized the immense potential of this market and are beginning to transform into digital banks. Backed by their strong financial resources, these traditional banks are gradually gaining a significant competitive edge in the fintech space.

At the same time, leading payment intermediaries such as MoMo, ZaloPay, and VNPay are continuously expanding their market share. Their growing dominance and technological advancements have allowed them to solidify a strong competitive advantage in the market.

This dual pressure from digital banks and large payment intermediaries is creating intense competition for smaller fintech companies, forcing them to innovate, specialize, or form strategic partnerships to stay relevant.

How Fintech Companies Are Staying Ahead in the Fierce Race

Innovation and Product Development

To increase their competitiveness in this highly competitive market, fintech companies need to adopt new technologies such as AI and blockchain into their products and services.

By doing so, they can provide customers with experiences that are “Faster, Safer, and Cost-effective”.

AI can help streamline processes, improve customer service with chatbots, and offer personalized financial solutions.

Blockchain can enhance security, transparency, and efficiency in transactions, reducing the risk of fraud and enabling faster cross-border payments.

These innovations will not only improve customer satisfaction but also help fintech companies stand out in the market by offering cutting-edge, reliable, and scalable solutions.

Develop User Experience

To provide the best service for their customers, fintech companies must not only focus on technological advancements but also enhance other aspects of the customer experience.

For example, they can implement changes in the configuration of mobile apps and websites to improve user experience and attract as many customers as possible.

Additionally, fintech companies can introduce more affiliate marketing programs and loyalty policies to increase customer retention.

These efforts help to boost competition, ensure higher customer return rates, and expand market share.

By providing a seamless and rewarding experience, fintech companies can foster long-term relationships with customers and continue to thrive in a competitive market.

What Does the Future Hold for Vietnam’s Fintech Industry?

Fintech companies should adopt some of the new payment methods that are currently trending in the market to meet the higher demands of customers, especially the GenZ generation, which has a significant impact on the market, some of them are:

Digital Banking & Neobanks:

Fully Digital Banks: Create or partner with neobanks (digital-only banks) that provide seamless banking experiences without the need for physical branches, catering to tech-savvy customers who prefer mobile-first solutions.

Banking-as-a-Service (BaaS): Leverage BaaS platforms to offer banking services without the need to build infrastructure from scratch, allowing fintech companies to expand rapidly.

Read more:

. Top 3 Digital Bank in Vietnam

. What is a NEOBank? How do NEOBanks make money?

Open Banking:

API Integrations: Integrate with banks and third-party providers through APIs to offer a broader range of services like payment processing, lending, and insurance, enhancing customer offerings.

Financial Data Aggregation: Use open banking to aggregate data from various financial institutions, enabling users to manage all their accounts and services in one platform.

E-wallets & Digital Payments:

Cashless Transactions: Invest in and expand e-wallet platforms to facilitate quick, secure, and convenient transactions, targeting the increasing trend of cashless payments in emerging markets.

Contactless Payments: Leverage contactless technology for faster and safer payment solutions, aligning with the growing preference for frictionless payment methods.

RegTech (Regulatory Technology):

KYC and AML Automation: Implement RegTech solutions to streamline Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, reducing compliance costs and mitigating risks.

Real-time Monitoring: Use AI-powered tools for real-time monitoring of transactions to detect fraudulent activities and ensure compliance with financial regulations.

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Decentralized Finance (DeFi):

Peer-to-Peer Lending and Borrowing: Integrate DeFi protocols to offer decentralized lending and borrowing options, providing users with access to alternative financial services outside traditional banks.

Yield Farming and Staking: Explore DeFi options like yield farming and staking to offer competitive returns for users investing in cryptocurrencies.

By staying current with these fintech trends, companies can not only increase their market share but also deliver more innovative, efficient, and user-friendly services to their customers, helping them stand out in a crowded marketplace.

Conclusion

While no new fintech companies have been licensed in Vietnam since the COVID-19 pandemic, the industry remains highly competitive, with over 170 companies already operating in the market.

The increased regulatory scrutiny, stricter compliance requirements, and the rapid rise of digital banking and payment intermediaries like MoMo, ZaloPay, and VNPay have reshaped the landscape.

To survive and thrive, fintech companies must adapt by embracing cutting-edge technologies such as AI, blockchain, and improving the customer experience through innovative solutions.

The future of fintech in Vietnam will depend on how well companies can navigate regulatory challenges, capitalize on emerging trends, and maintain a competitive edge in an increasingly crowded market.

This article was curated and authored by FinFan's market research and development team, alongside our marketing department.

About FinFan

FinFan is a cross-border embedded financial services company that focuses on mass disbursement, fund collection, card processing, IBAN, and digital APMs solutions, which can provide valuable input and integration on and for the same.

FinFan is already integrated with almost the world's well-known MTOs, PSPs, switch, and core fintech platforms such as Money Gram, Thunes, Qiwi, Remitly, World Remit, Bancore, PaySend, Terrapay, Ria Money Transfer (Euronet), Dlocal, Ripple, TripleA, FoMo Pay, Wings, etc.

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