Favourable conditions for fintech sector surge in Vietnam in next two years

02 May 2018 Consultancy.asia

Like elsewhere around the globe, the financial industry of Vietnam is in the midst of serious disruption, with the local fintech market expected to push from $4.4 billion last year to $7.8 billion by 2020.

With an unbanked population still trailing well behind that of some of its Southeast Asian neighbours, and one of the fastest growing smart-phone adoption-rates in the region, the fintech sector of Vietnam is poised for explosive growth – rising by as much as a third in the next couple of years according to a new industry report from Asian-centric strategy firm Solidiance.

Citing underbanked populations as the key driver for non-bank institution capitalisation, the report notes the current banking figure of Vietnam at just 59% of its citizens, compared to a rate of 89% in Thailand and 92% in Malaysia. Yet, with a government strategy in place to reduce the ratio of cash-payments by 10% in the country between 2016 to 2020, the ambitious target is to raise the banking population figure to 70% - a nearly 40 point jump on the 31% of 2014.Current state of Vietnam’s financial ecosystemThat the increase in Vietnam’s banking population is coinciding with that of the country’s smartphone and internet penetration rates augers well for a ready and disruptive fintech sector which can capture market-entry banking customers ahead of traditional banking institutions. The growth potential is further supported by a young and rising tech-savvy middle class, as well as a burgeoning ecommerce scene.

As it stands, the local internet penetration rate has now cracked more than half of the population, rising from 44% in 2013 to 52% three years later at a CAGR of 7%, while the smartphone per capita figure among urban users rocketed from 20% to 72% over the same period – equating to a CAGR of 58% and some 35 million current estimated users all told. According to a recent research report from Nielson, the figures last year stood at 84% smartphone holders in key cities and 68% in rural areas.Internet and Smartphone users in VietnamFurther, the country’s current number of online shoppers is expected to grow from roughly 35 million to 42 million enthusiastic adopters by 2021 – or over 40% of the projected population – with average spends predicted to rise from $62 to $96. Cash on delivery, as the current major form of payment, will likely give way to digital and other modern payment methods over this period.

Indeed, digital payment solutions already account for 89% of the fintech services in the Vietnamese market, ahead of personal (9%) and corporate (2%) financial services – although the latter are projected to lead Digital Payments (12.8%) in compound annual growth rates to 2025, with the Corporate and Personal Finance segments pegged at respective rates of 35.9 and 31.2 percent.Fintech Product Segmentation in VietnamYet, while the fintech market is primed for growth, the Solidianace white-paper suggests the industry still faces certain local barriers – such as the lack of regulatory clarity, capital limitations, management knowledge constraints, and ongoing awareness and trust issues as to new players in the non-traditional banking realm. Further, start-ups and established providers alike will have to contend with fierce market competition.

Still, with a number of overlapping forces, the future looks bright for fintech in Vietnam. “With a large potential tech-savvy user base, active start-up and investment community, increasingly supportive regulatory framework, and robust enabling environment, fintech applications will further penetrate Vietnam’s financial ecosystem and establish themselves as key go-to services across digital payment, personal finance, and corporate finance solutions,” the consulting firm concludes in the report.

Beijing and Tokyo emerge as serious tech hub rivals to Silicon Valley

12 April 2019 Consultancy.asia

As Silicon Valley struggles with a number of institutional issues, the location of the world’s top tech-hub may ultimately change – with Beijing and Tokyo emerging as serious contenders according to a survey conducted by KPMG.

Now into its seventh edition, KPMG’s Technology Industry Innovation Survey quizzed over 700 global tech executives on their thoughts on the future industry landscape – revealing that for the first time more than half of the respondents (58 percent) believe Silicon Valley will no longer be the technology innovation center of the world in just four years from now, with Beijing and Tokyo seen as two possible usurpers.

“Many factors affect a city’s perception as an innovation hub, including favorable government policies and incentives, accelerators, tech parks, corporate investment, state-of-the-art infrastructure and, in all cases, at least a few highly successful and wildly popular success stories,” said Peter Laco, an Executive Director at KPMG in Slovakia, of the previous survey.Top contenders for the next world-leading technology innovation hubWhile New York remains the most touted hot-spot among respondents, Beijing and Tokyo landed in the second and third spots as likely contenders for the global tech-hub crown, with seven Asian cities featuring among the top dozen; Shanghai (in equal 5th, but overtaken by Beijing), Taipei (in joint-5th as a notable riser), Singapore and Seoul (at 7th and 8th) and Hong Kong, which rounded out the top dozen. Shenzhen, meanwhile, has dropped outside the top 20.

With access to talent and quality infrastructure remaining key attributes for a successful hub, the report states that, despite all the positive business factors present in Silicon Valley, “an escalating cost of living, questions about diversity and corporate cultures, high business taxes, an overmatched infrastructure, and even increasing scrutiny into data privacy and other business practices are contributing to the perception that Silicon Valley may not continue to dominate.”

Still, the US (which also featured seven cities among the top 20) as a whole is still considered the country expected to produce the most disruptive technologies in the coming years, maintaining its top spot ahead of China despite a narrowing of the gap by two percentage points on last year (to 23 percent against 17 percent). The UK meanwhile has gained some separation on Japan in fourth, while Singapore, South Korea and India appear among the top ten.Countries that show the most promise for disruptive technologyTo gain further insight into the likelihood of a burgeoning tech-hub reaching the peak of the global pecking order, KPMG analysed the results of the survey against a range of other city indices, including A.T. Kearney’s 2018 Global Cities report and Mercer’s Quality of Living rankings – identifying Singapore as the most consistent Asia Pacific performer across the board, with Tokyo, Seoul, and Hong Kong lagging in a variety of areas.

“The belief that Silicon Valley will be displaced as the leading hub underscores the continuing decentralisation of technology innovation, spurred by investment in other cities and regions globally, as well as contributing factors in Silicon Valley,” says Tim Zanni, KPMG’s global technology sector leader. “Even when faced with pressing issues that call for funding, cities and countries are carving out significant investment to become a technology innovation hub due to an expected broad economic impact.”