Growth of the Vietnamese Fintech Industry and its Implications

Among the Internet economy, e-commerce has recently emerged as the most dynamic sector. E-commerce GMV in Southeast Asia more than quadrupled from 5.5 billion USD in 2015 to 23 billion USD in 2018 with an annual growth rate of 62 percent over the period. Vietnam, along with Indonesia, is considered the fastest growing country in the e-commerce. The size of the Vietnamese e-commerce market sharply increased from 400 million in 2015 to 2.8 billion USD in 2018 and is expected to reach 15 billion USD in 2025. Besides e-commerce, the online media, online travel and online transportation and food delivery markets are promising, projected to expand significantly from 2.2 billion USD, 3.5 billion USD, and 500 million USD in 2018 to six billion USD, nine billion USD and two billion USD by 2025, respectively. The growth of the Internet economy including e-commerce is closely related to the demand for fintech. For example, digital payments are essential to the growth of the Internet economy. In Vietnam, only one in four e-commerce customers is shown to use digital payments because cash is traditionally favored and cash on delivery is widely accepted on major e-commerce platforms. However, this type of cash payment in e-commerce markets could cause friction between providers and consumers and incur additional costs. To this end, digital payment solutions are on the rise. In additional to digital payments, demand for various fintech solutions is expected to rise further, allowing for new types of transactions and investments as new business models based on the Internet and mobile have emerged.