Analyzing the impact of fintech on joint stock commercial bank for foreign trade of vietnam 2022

MINISTRY OF EDUCATION AND TRAININ G THE STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY PHAM MINH ĐAT ANALYZING THE IMPACT OF FINTECH ON JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF V.

M INISTRY OF EDUCATION AND TRAININ G THE STATE B ANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI M INH CITY

-

PHAM MINH ĐAT

ANALYZING THE IMPACT OF FINTECH ON

JOINT STOCK COMMERCIAL BANK FOR

FOREIGN TRADE OF VIETNAM

GRADUATION THESIS MAJOR: FINANCE – BANKING

CODE: 7340201

HO CHI MINH CITY, 2022

M INISTRY OF EDUCATION AND TRAINING THE STATE B ANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI M INH CITY

-

PHẠM MINH ĐẠT ANALYZING THE IMPACT OF FINTECH ON

JOINT STOCK COMMERCIAL BANK FOR

FOREIGN TRADE OF VIETNAM

GRADUATION THESIS MAJOR: FINANCE – BANKING

CODE: 7340201

SUPERVISOR:

Ph.D DUONG THI THUY AN

HO CHI MINH CITY, 2022

TÓM TẮT

Thế giới đã trải qua tổng cộng 4 cuộc cách mạng công nghiệp và hiện tại đang chứng kiến những ảnh hưởng của cách mạng công nghiệp 4.0 được xây dựng trên nền tảng công nghiệp số 3.0 Các công nghệ 4.0 bao gồm Artificial Intelligence (AI), the Internet of Things (IoT) and Big Data,… đã và đang tác động lên các ngành nghề ở Việt Nam, làm thay đổi cách vận hành và các mô hình kinh doanh Riêng ngành ngân hàng chịu sự tác động đến từ các công nghệ tài chính (hay còn được gọi là Fintech) do những công nghệ này có thể mô phỏng các sản phẩm và dịch vụ tài chính ngân hàng ở mức hiện đại hơn Từ đó, ảnh hưởng đến nhiều khía cạnh của các ngân hàng thương mại Việt Nam (cách thức thực hiện giao dịch, các kênh cung cấp, phân phối sản phẩm, cách thức quản trị ngân hàng, quan hệ khách hàng,…) và Vietcombank cũng không phải là ngoại lệ

Nghiên cứu này sử dụng phương pháp nghiên cứu định tính để trả lời các câu hỏi nghiên cứu và phân tích các tác động của Fintech đối với Vietcombank Nghiên cứu sử dụng các dữ liệu liên quan đến tình hình hoạt động của Fintech tại Việt Nam trong những năm gần đây, cụ thể là tình hình các lĩnh vực trong hệ sinh thái Fintech (ví dụ như ví điện tử, vay ngang hàng, công nghệ bảo hiểm,…), từ đó tìm ra lĩnh vực nào của Finetch có ảnh hưởng lớn tới ngân hàng Bên cạnh đó, các hoạt động chuyển đổi số của Vietcombank trước và sau khi Fintech xuất hiện cũng được liệt

kê nhằm làm rõ sự thay đổi trong quá trình phát triển công nghệ ngân hàng

Nghiên cứu chỉ ra rằng các tác động của Fintech lên Vietcombank được thể hiện qua những công nghệ mà ngân hàng đang áp dụng để chuyển đổi số, tác động

từ Fintech cũng tạo ra những rủi ro cho Vietcombank trong quá trình chuyển đổi số

và áp dụng các công nghệ tài chính Tổng kết lại, kết quả nghiên cứu là cơ sở để đưa ra các giải pháp và khuyến nghị dành cho Vietcombank nói riêng và các ngân hàng thương mại Việt Nam nói chung

This study uses qualitative research methods to answer research questions and analyze the impacts of Fintech on Vietcombank The study uses data related to Fintech's operations in Vietnam in recent years All the areas in the Fintech ecosystem (such as e-wallets, peer-to-peer loans, insurance technology, etc.) will be evaluated to find out which area of Fintech has a great influence on the bank In addition, Vietcombank's digital transformation activities before and after Fintech appeared are also listed to clarify the change in the development of banking technology

Research shows that the impact of Fintech on Vietcombank is reflected in the technologies that the bank is applying for digital transformation Besides, Fintech also creates risks for Vietcombank in digital transformation and in the application of financial technologies

PLEDGE

I reaffirm the thesis "ANALYZING THE IMPACT OF FINTECH ON

JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM"

is my own article and there are no copies from other authors' material

This thesis is the author's own research work, the research results are honest,

in which there are no previously published contents or content made by others

except for citations fully cited in the thesis

I will take full responsibility for my pledge

Author

Pham Minh Dat

THANK YOU

First, I would like to thank all the teachers at the Banking University of Ho Chi Minh City for providing and supporting me with the necessary knowledge during my study at the school Such knowledge is the luggage that helps me to complete the thesis

In particular, I would like to thank my instructor, Ph.D Duong Thi Thuy An, she helped me in the process of completing my thesis as well as guiding me to correct my shortcomings

I would also like to thank my family and friends who have been by my side and supported me during this time

Due to limited practical experience and time, the thesis cannot avoid errors I look forward to receiving your comments so that I can complete my thesis

Finally, I would like to wish the teachers of the Banking University of Ho Chi Minh City, have a lot of health and achieve much success in work as well as in life

Author

Pham Minh Dat

TABLE OF CONTENTS

ABSTRACT ii

PLEDGE iii

THANK YOU iv

TABLE OF CONTENTS v

LIST OF ABBREVIATIONS viii

LIST OF TABLES ix

LIST OF CHARTS x

CHAPTER I: INTRODUCTION 1

1.1 Summary 1

1.2 Research objectives 2

1.3 Research questions 2

1.4 Subjects and the scope 3

1.5 Methodology 3

1.6 Research contribution 3

1.7 Literature review 4

1.8 Research structure 5

CHAPTER II: THEORETICAL BASIS ABOUT FINTECH AND JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM 7

2.1 Theoretical basis about Fintech 7

2.1.1 The Fintech concept 7

2.1.2 Fintech ecosystem 8

2.1.3 Foreign Fintech companies 9

2.1.4 The advantages of Fintech 11

2.1.5 The disadvantages of Fintech 13

2.2 Theoretical basis about commercial bank 15

2.2.1 Commercial bank concept 15

2.2.2 History of commercial banks 15

2.2.3 The role of commercial banks 16

2.2.4 Commercial bank services 17

2.3 The relationship between Fintech and commercial banks 19

2.3.1 Competitive relationship 19

2.3.2 Cooperating relationship 20

2.4 About Vietcombank 20

CHAPTER III: THE IMPACT OF FINTECH ON JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM 26

3.1 Fintech's operation status in Vietnam 26

3.1.1 Compare to the world 26

3.1.2 Vietnam's Fintech Companies 27

3.1.3 Fintech development trend in Vietnam 29

3.1.4 Fintech investment activities in Vietnam 30

3.1.5 Fintech development orientation of the State of Vietnam 34

3.2 Vietcombank banking technology in the early stages 35

3.3 Relationship between Vietcombank and Fintech 38

3.3.1 Cooperating relationship 38

3.3.2 Competitive relationship 39

3.4 The impact of Fintech on Vietcombank 40

3.4.1 The impact of Fintech's technological advancement 40

3.4.2 The impact of e-wallets 41

3.4.3 The impact of 4.0 technologies 47

3.4.4 The risks from Fintech 49

3.5 The causes behind the impacts 51

3.5.1 Covid-19 epidemic and e-commerce platforms 51

3.5.2 The Fourth Industrial Revolution 52

3.5.3 The absence of legal and regulatory framework for Fintech 53

3.6 Strengths and weaknesses exist in Vietcombank and Fintech 54

3.6.1 Strengths of Vietcombank and Fintech 54

3.6.2 Weaknesses of Vietcombank and Fintech 56

CHAPTER IV: SOLUTIONS AND RECOMMENDATIONS 61

4.1 Solutions 61

4.1.1 Solutions for Vietcombank 61

4.1.2 Solutions for Fintech companies 62

4.2 Recommendations 64

4.2.1 Recommendations for Vietcombank 64

4.2.2 Recommendations for Fintech companies 66

OVERALL 68

REFERENCES 69

LIST OF ABBREVIATIONS

IoT Internet of Things

AI Artificial Intelligence

Fintech Financial Technology

Vietcombank Joint Stock Commercial Bank for Foreign Trade of Vietnam ASEAN Association of South East Asian Nations

E-wallet Electronic wallet

P2P Lending Peer-to-peer Lending

Insurtech Insurance Technoloy

AML Anti-money Laundering

CFT Counter-Finance Terrorist

SWIFT Society for Worldwide Interbank Financial

Telecommunication SMEs Financing Small and Medium Enterprise

ATM Automatic Transaction Machine

SMS Short Messaging Service

LIST OF TABLES

Table 2.1 Top 10 Fintech countries in the world as of June 29th, 2021 10

Table 2.2 Vietcombank's current business operations 22

Table 3.1 Ranking of Fintech countries in Southeast Asia as of June 29, 2021 26

Table 3.2 Ranking of Fintech cities in Southeast Asia as of June 29, 2021 26

Table 3.3 Vietnamese Fintech companies by sector 28

Table 3.4 Fintech deals in Vietnam in 2021 32

Table 3.5 List of E-wallets directly linked with Vietcombank 38

LIST OF CHARTS

Chart 3.1 Total investment in Fintech and number of Fintech deals in ASEAN from

2017 to 2021 27

Chart 3.2 Number of Fintech companies in Vietnam from 2017 to 2021 28

Chart 3.3 Contribution of Fintech services in Vietnam in 2021 30

Chart 3.4 Number of Fintech deals in Vietnam from 2016 to 2021 31

Chart 3.5 Number of E-Wallets in Vietnam from 2015 to 2021 42

Chart 3.6 Number of banks that five popular e-wallets in Vietnam have linked 43

Chart 3.7 Bankcard market share in Vietnam in 2021 44

Chart 3.8 Domestic debit card market share in Vietnam in 2021 44

Chart 3.9 Market share of card sales in Vietnam in 2021 45

Chart 3.10 Market share of domestic debit card sales in Vietnam in 2021 45

Chart 3.11 Market share of POS card acceptance points 46

Chart 3.12 Illustrating the impact of Fintech 50

Chart 3.13 Proportion of payment methods in shopping online in Vietnam 2019 51

Chart 3.14 Top 10 banks with the largest profit before tax in 2020 & 2021 53

CHAPTER I: INTRODUCTION 1.1 Summary

The speed of the fourth industrial revolution has been quickly growing in recent years, and we can witness how it is affecting a wide range of sectors and areas Therefore, the financial and banking industry was not an exception, it receives significant changes throughout the years The birth of big data (Big Data), the Internet of Things (IoT), and artificial intelligence (AI) have led to the emergence of new services to maximize the industry's potential But Fintech stands out above all and plays an important role in the bank system

The term Fintech emerged after the financial crisis of 2008 as a combination

of finance and technology We may look at the number of established and operating Fintech firms to highlight the outstanding development of Fintech in Vietnam in particular According to data from Statista (a reputable German organization specializing in collecting market and consumer data), there are 188 Fintech companies operating in the Vietnamese market as of September 2021, which is significantly less than many ASEAN countries such as Singapore (more than 1150 companies), Indonesia (more than 510 companies), and Malaysia (more than 370 companies) However, the number of Vietnamese Fintech firms still growing continuously in 2017 (112 companies), 2018 (144 companies), 2019 (169 companies), and 2020 (181 companies) according to Statista

Because of the growing number of Fintech businesses, competition between them is unavoidable This competition is not only between Fintech companies but also with commercial banks, and one of the institutions impacted by the Fintech wave is the Joint Stock Commercial Bank for Foreign Trade of Vietnam (hereafter referred to as Vietcombank) As one of the top banks in Vietnam, Vietcombank always captures market trends and launches various banking technology products Identifying how the influence of Fintech may assist Vietcombank and other banks

in developing a plan to respond to rivals or a strategy for collaboration and

development of banking technology in 2022, as well as maintaining current successes

As a result, I decided to choose the topic "ANALYZING THE IMPACT OF FINTECH ON JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE

IN VIETNAM." as my graduation thesis

1.2 Research objectives

Overall Objectives:

The overall purpose of this research is to analyze the impact of Fintech on Vietcombank and find out the relationship between Vietcombank and Fintech Therefore, gives some proposing development options

Next, find out the specific impacts of Fintech, then determine the actions of vietcombank when affected by Fintech

Finally, provide specific development solutions to benefit both the Fintech industry and Vietcombank

Question 3: What impacts does Fintech have on Vietcombank?

1.4 Subjects and the scope

The subjects: The impact of Fintech on Joint Stock Commercial Bank for

Foreign Trade of Vietnam

The scope:

 Space: The research focuses on Joint Stock Commercial Bank for

Foreign Trade of Vietnam and various Fintech companies to identify the impact and the connection between them

 Time: Data from Fintech companies and Vietcombank will be

collected over multiple different periods of time

The study strategy of comparing data over time allows us to see how Vietcombank and Fintech firms have changed over time From then, the evolution

of both can be witnessed, laying the groundwork for Fintech's effect on Vietcombank

Analytical methodologies are utilized to examine the impact of Fintech on Vietcombank

1.6 Research contribution

Theoretical contributions

The research has contributed to systematizing the theoretical basis related to the relationship between commercial banks and Fintech firms The findings of the

research have the potential to broaden the corpus of knowledge in finance while also laying the groundwork for future research papers

Practical contribution

The findings of this study can assist Vietcombank in particular and commercial banks, in general, define future development plans, particularly in the banking technology area, allowing them to keep up with the global development trend

1.7 Literature review

Based on the process of searching and gathering information on similar studies, I realize that this is one of the new research topics and that finding similar and reputable studies is still a challenge As a result, the background for this study is established by reviewing related and existing papers on the impact of fintech on commercial banks in Vietnam and throughout the world Therefore, some articles about Fintech and banks are selected and given in this section

The impact of fintech on commercial banks was determined as a "two sides

of the coin" when it can help reduce the operating cost and improve efficiency but can also, put the development of banks into danger (Tien Phat Pham et.al., 2021)

At first, there were some studies pointed out that Fintech firms sparked competition and placed pressure on banks (Vives, 2017; Omarini, 2018; Goldstein et al., 2019), especially because Fintech may produce a wide range of new services and products based on existing bank products (Omarini, 2018), as well as interfering with the connection between banks and their consumers via a variety of information sources (Vives, 2017)

However, about the relationship between Fintech and commercial banks, although it literally appears that the two sides will compete, but the relationship between banks and Fintech startups actually can appear to be solely one of collaboration and mutual promotion (Cortna & Schmukler, 2018; World Bank

Group, 2018; Ohene-Afoakwa & Nyanhongo, 2017) Many studies have shown that Fintech essentially has benefitted banks in improving their core service implementation procedures (Navaretti et.al., 2017; Cortna & Schmukler, 2018) Even so, Fintech still cannot generally replace the entire banking system in a major way due to the fact that many fintech services need the use of a bank account (Cortna & Schmukler, 2018)

1.8 Research structure

CHAPTER I: INTRODUCTION

Include the reason for choosing the topic, the objectives, and the questions of the research In addition, methodology; subject, and scope are also listed Finally The research‟s contribution as well as the literature review

CHAPTER II: THEORETICAL BASIS ABOUT FINTECH AND JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

Include the theoretical basis about Fintech and commercial banks Therefore, linking to the introduction of the Joint Stock Commercial Bank for Foreign Trade of Vietnam

CHAPTER III: THE IMPACT OF FINTECH ON JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

Includes assessments of Fintech's operating status in recent years to identify highlights in Fintech development At the same time, give an assessment of Vietcombank's technology field In addition, the impacts of Fintech on Vietcombank are also listed and reasons are given

CHAPTER IV: SOLUTIONS AND RECOMMENDATIONS

Give some instances of fintech development in different nations Following that, provide some recommendations to the State and commercial banks in general,

as well as Vietcombank specifically

SUMMARY CHAPTER I

In Chapter I, the author gives the readers an overview of the thesis which includes the research summary, objectives, questions, contribution, and structure Moreover, this chapter also includes the subjects and the scope which go along with the methodology and the literature review

CHAPTER II: THEORETICAL BASIS ABOUT FINTECH AND JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM 2.1 Theoretical basis about Fintech

2.1.1 The Fintech concept

Fintech is a phrase that is made up of two different terms “Financial” and

“Technology”, it was defined as the use of cutting-edge information and a creative business model, combines with automation technologies to improve the original financial services (Vives, 2017; Cortna & Schmukler, 2018; Dung Pham Quang et.al., 2022; Kagan, 2020) It is frequently referred to as the "new marriage" of financial services and information technology in today's world (Arner et.al., 2015) The concept of Fintech has been formed for a long time and has gone through many different stages and periods (Arner et.al., 2015) These stages are:

 FinTech 1.0 (1866-1967): From analogue to digital

 FinTech 2.0 (1967-2008): Development of Traditional Digital Financial Services

 FinTech 3.0 (2008 – present): Democratizing Digital Financial Services

 Fintech 3.5: The Examples of Asia and Africa

But critically, Fintech became more known after the 2008 financial crisis, when at that time, certainty and transparency were essential factors for the operation

of banks in particular and the financial market in general

Nowadays, Fintech spans a variety of sectors and businesses, including education, retail banking, nonprofit fundraising, investment management, and many

more Fintech also encompasses the creation and usage of digital currencies like bitcoin (Kagan, 2020)

Fintech's operating segment is divided into 5 main segments including: (i) payments, clearing, and settlement; (ii) deposits, lending and capital raising; (iii) insurance; (iv) investment management; and (v) market support (Financial Stability Board, 2017)

2.1.2 Fintech ecosystem

E-wallet

It is a tool to make online payment activities faster and more convenient Usually, e-wallets will link to a user's bank account for the purpose of completing transactions on e-commerce platforms and other platforms The special feature that makes the popularity of e-wallets lies in the convenience, users can transfer money

to relatives and friends faster via e-wallets as well as pay electricity and water bill

It also allows users to make inquiries about account balances, in order to better control fluctuations in their accounts In particular, when shopping and paying through e-commerce platforms with suitable e-wallets, users can receive promotions and discounts Today, the number of e-wallets in the world is increasing gradually, including PayPal, Google Wallet, Alipay, etc In Vietnam currently, there are also some popular e-wallets such as MoMo, Zalo Pay , AirPay,…

Cryptocurrency - Bitcoin

Bitcoin is one of the hot keywords in the financial industry today and when it comes to Fintech, people will always think of Bitcoin Developed by Satoshi Nakamoto in 2009 as open-source software, Bitcoin is considered as a virtual currency used in online transactions with unique features such as anonymous and fee-free transactions, as well as not controlled by a central bank Bitcoin is increasingly known as the world's largest cryptocurrency by market value

Crowdfunding

Crowdfunding is a form of funding projects through the internet In other words, businesses, especially startups through crowdfunding can call for investment from the community, any individual with money can invest Crowdfunding helps businesses get a source of capital without having to borrow This is also an opportunity for startups to promote their projects and products Prominent platforms dedicated to Crowdfunding can be mentioned as Kickstarter or IndieGoGo

Peer to Peer Lending (P2P)

Is a new type of loan developed with the aim of connecting borrowers and lenders directly without going through an intermediary at all Peer-to-peer lending usually takes place online, so fees are minimal compared to traditional lending services Peer-to-peer lending institutions and businesses often store information about loans in a digital form, Big Data is also applied to collect information about borrowers and lenders

Insurance Technology

As a branch in the ecosystem of Fintech, Insurance Technology, also known

as InserTech InsurTech involves applying concepts such as big data (Big Data), artificial intelligence (AI), and the internet of things (IoT) to the insurance industry Insurance companies through the analysis of consumer behavior, demographics, medical data and biometrics, etc will create an ecosystem of insurance types suitable for a wide range of users Some organizations in the field of Insurtech must

be mentioned such as Inso, Opes, Papaya,

2.1.3 Foreign Fintech companies

About Fintech development around the world, as of June 29th, 2021, based

on the Global Fintech Index, the top 10 Fintech countries have been announced In which, the US is at the top, followed by the United Kingdom and Israel, Singapore and Australia are the only two Asian representatives in the top 10 (Findexable, 2021)

Table 2.1 Top 10 Fintech countries in the world as of June 29th, 2021

(Source: Global Fintech Index, Findexable 2021)

As a consequence, many Fintech startups in the mentioned countries have been established and some of them have now become Fintech giants in the world possessing extremely high values such as:

Stripe (USA): Stripe is known as the largest Fintech company in the world at

the moment when it is valued at about $ 95 billion The company was founded by brothers John Collison and Patrick Collison in 2010 Besides, in 2021, Stripe has officially surpassed Elon's SpaceX to become the most valuable private startup

Klarna (Sweden): Stokholm-based payments company Klarna, was founded

in 2005 and is currently run by billionaire Sebastian Siemiatkowski The company currently has nearly four million monthly active users in the US and nearly 90 million users globally

Nubank (Brazil): One of the largest Fintech banks in Latin America, founded

in 2013 by David Vélez, the bank is currently headquartered in São Paulo, Brazil Nubank is also one of the leading fintech businesses in Latin America with over 40

million customers Nubank operates under the Neobank model - a kind of direct bank that operates online without the need for a traditional physical branch network

When it comes to Southeast Asia, Fintech is one of the fastest expanding technology sectors Therefore, the number of Fintech startups also grows In particular, Singapore and Indonesia are home to many startups with a value of 1 billion USD or more, also known as "unicorns"

For Singapore, the country has a strong financial industry presence, thanks to having the right factors for the development of financial technology such as investor ecosystem, appropriate government regulations, etc With outstanding government, infrastructure and digital capabilities, Singapore has spawned many potential Fintech startups Some of them are Distributed Ledger Technologies (founded in 2017), Endowus (founded in 2019), ShopeePay (founded in 2018), TranSwap (founded in 2017),

As for Indonesia, which is said to have the most developed economy in Southeast Asia, the adoption of new lending options, and cryptocurrencies have been favorably promoted Some of the prominent Fintech startups in Indonesia are Akulaku (founded in 2014, headquarters: Jakarta), Ovo (founded in 2017, headquarters: Jakarta), and Payfazz (founded in 2016, headquarters: Jakarta) …

In the rest of Southeast Asia, such as Malaysia, the Philippines, and Thailand, there are also potential Fintech startups such as MoneyMatch (founded in

2015, headquarters: Kuala Lumpur, Malaysia), Mynt (established in 2015, headquarters: Taguig, Philippines), Sunday (founded in 2017, headquarter: Bangkok, Thailand),…

2.1.4 The advantages of Fintech

Fintech was created as a result of technological advancements, thus it will undoubtedly have several advantages over traditional financial products and banks

Therefore, Serving the needs of consumers in the fastest and most convenient way, anytime and anywhere with a variation of services

Financial popularity

Despite the fact that smartphones have been available for a long time and that the number of individuals who own and know how to use them is growing, the percentage of adults who hold bank accounts remains low As a result of the growth and understandability of technology, Fintech serves to raise people's awareness and knowledge of financial services, delivering banking services to more clients, and popularize finance for people Besides, with the increasing accessibility of users to online sales channels to buy goods, Fintech applications help shoppers access more convenient payment methods, making the adaptation to Fintech increase in daily life

Diversity in financial products

Products developed with Fintech intervention are upgraded with many features In addition, traditional banking activities have been improved as well, in particular , Fintech companies may assist banks in upgrading traditional services in

a variety of ways Resulting in many product variations, diversifying financial services, and the creation of a Fintech product ecosystem in order to meet the ever-changing and diversified demands of consumers

Innovation in financial products

Fintech products and services help to speed up customer service by decreasing transaction times and lowering transaction costs From there, help improves the performance of individuals and businesses can benefit from Fintech Banks, after shaking hands with Fintech companies, can apply Big Data and AI, to

be able to collect customer information, thereby releasing appropriate products For instance, smartphone apps like MoMo make it easier for users to manage their costs and revenue by maintaining transparency while remaining effective and simple to

use, making them fit for the current technological era Also, the combination of mobile technology and Fintech will create an intersection where many different bank cards or accounts can be accommodated

Create opportunities for startups

Fintech's emergence also heralds the birth of many new Fintech businesses, all of which are highly valued owing to human creativity and technology advancement Many Fintech firms have raised financing and achieved remarkable success in recent years Especially at the end of 2021, Fintech is considered to be the field with the largest number of big startups in the world With the effect of the technological wave, it is clear that more and more startups will emerge in the future, both in Vietnam and throughout the world

2.1.5 The disadvantages of Fintech

Aside from the apparent benefits, the emergence of fintech also brings potential concerns, which will have a direct impact on both traditional banks and new fintech businesses entering the financial industry There are still issues to be addressed, such as safety threats (which include strategic risk, operational risk, cyber risk, and compliance risk), regulatory frameworks, and so on

Strategic risk

Strategic risks stem from the expansion of banking services developed by non-bank businesses as well as large Fintech companies Since then, banks are affected, forming risks affecting profits With Fintech companies taking advantage

of advanced technology to create a turning point in the financial product race (low cost, high efficiency, suitable for many customers) Not only banks, but financial institutions could also be negatively impacted, and the risk of losing large chunks of the market is possible

Operational risk

The risks from outside the system tend to increase If banks have the intention to cooperate with Fintech, banks also have to be ready to face those risks Specifically, when new products and services are released, complexity in the provision of financial services is also formed, making it difficult to manage and control operational risk For banks that choose to cooperate with third parties or Fintech companies, the level of complexity will increase and transparency will decrease in linked transactions

Cyber risk

Fintech is associated with the emergence of new technologies and business models, which means that there will be cyber risks in case the sanctions do not catch up with the trend In the case that there is a cooperation relationship between organizations in the market, the level of loss will increase if security risks are threatened To prevent possible threats, a special security system is needed, especially when cyber risk is the type of risk that can arise in all operational contexts

Compliance risk

The emergence of Fintech will make it more difficult to ensure that the regulations on anti-money laundering (AML: Anti-Money Laundering) and countering the financing of terrorism (CFT: Counter-Finance Terrorist) are fully met Compliance risks in the Fintech sector are also related to privacy data and cyber risks In addition, with the development of Big Data, the risk of non-compliance with data and privacy regulations may increase due to the emergence of partnerships with fintech enterprises and competition for customers

Limitations in human resources

With Fintech starting as a new industry in the technology era, Fintech startups need to have a solid foundation not only in their operations but also in their

human resources The limitation in quality as well as quantity in human resources can make Fintech companies face operational risks, giving customers a bad experience

The legal framework has not been thoroughly developed

The fact that financial technology brings convenience to users is undeniable, but along with it comes new problems of risks, threatening the stability of the financial system Therefore, there is definitely a need for legal intervention to come

up with appropriate regulations and rules Currently, in Vietnam, there is still no complete and complete legal framework for the Fintech segment Besides, creating

a suitable legal framework comes with many problems For example, a regulatory framework that is too tight and rigid can stifle innovation, while a regulatory framework that is too loose can harm the stability of the financial system

2.2 Theoretical basis about commercial bank

2.2.1 Commercial bank concept

According to the Law on Credit Institutions No 47/2010/QH12,

“Commercial bank is a type of bank where all banking activities are carried out” (Clause 3, Article 4 of the Law on Credit Institutions 2010) such as receiving deposits, issue certificates of deposit, promissory notes, bills, bonds to mobilize domestic and foreign capital, grant credit, open payment accounts for customers, provide payment facilities, provide payment services (Article 98 of the Law on Credit Institutions 2010) This is one of the oldest types of banking since the concept of banking was born On the other hand, a commercial bank is an intermediary financial institution with a significant position in the economy in general and the financial market in particular (Dang Van Dan, 2016)

2.2.2 History of commercial banks

From the beginning, money has been known as a tool for payment and exchange of goods since time immemorial And also thanks to money, the exchange

of goods took place smoothly, from which the development of society brought

people's needs to new heights, money became more important and the taking service was born from there to serve the rich Initially, merchants used to send money to jewelers in gold shops, but jewelers often made loans with high-interest rates Therefore, with the capital in hand, the merchants set up their own banks with the main purpose of short-term financing for working capital And from there, the first form of commercial banking was born

deposit-2.2.3 The role of commercial banks

Provide capital for the economy

Today, the boundary between commercial banks and other intermediary banks is increasingly shortened, but commercial banks still retain their own position due to the amount of currency that the commercial banking system has which can

be generated through lending and payment activities, this amount of currency pens contributes significantly to the money supply of the economy as well as has a great influence on the monetary policy of the central bank

Connecting businesses and markets

Commercial banks are always a place where businesses can borrow capital to invest, improve and maintain equipment and machinery in production The fact that banks provide capital for businesses means that banks have improved the position

of businesses in competition in the market

Can be used as a tool to adjust the development direction of the economy

Besides providing capital to the economy, commercial banks can also be used by the state bank as a tool to adjust the direction of the economy's development Specifically, when the state wants to encourage a specific industry to grow, the state bank will ask commercial banks to offer appropriate incentives such

as reducing interest rates when borrowing, extending loan terms, as well as loosening lending conditions for enterprises in the industry that is being encouraged

by the state to develop

2.2.4 Commercial bank services

Credit extension

An agreement allowing an organization or individual to use a certain amount

of money, or a commitment to enable the use of a certain amount of money on the basis of payback, is referred to as a credit extension There are many types of credit applied by banks based on loan purpose, loan term, repayment method, creditworthiness, and credit origin such as lending, discounting, financial leasing, factoring accounting, bank guarantee, and other credit-granting operations

 Lending: The customers can be individuals and businesses, the bank is

the lender and the borrower (individuals or businesses) is obliged to repay the property (including money or goods) borrowed from the bank including the initial amount and interest when due

 Bank guarantee: There are many types of bank guarantee applied by

banks based on the form of use (conditional guarantee and unconditional guarantee), method of release (direct guarantee, indirect guarantee, confirmed guarantee, and co-guarantee), purpose of use (payment guarantee, loan repayment guarantee, bid guarantee, warranty guarantee,…)

 Factoring: Factoring is a type of credit given to businesses by banks

in exchange for the acquisition of receivables originating from the purchase and sale of products Therefore, the bank will lend money to companies that are involved in manufacturing, business, and commerce

Receive deposit

When it comes to banks, lending is one of the main activities of the bank, and so in order to have a secured loan source, the bank needs to have deposits from customers to ensure the profitability of lending activities When customers deposit

at a bank, a profitable fund is created after many weeks, months, and years based on

the interest rate offered by the bank There are various types of deposits at banks which are demand deposits, time deposits, savings deposits and other types of deposits

 Demand deposits: A demand deposit is a sort of savings that does not have a set deposit period or balance and can be withdrawn at any time for any amount according to demand The most liquid account a consumer may open

is a demand deposit account

 Time deposits: A term deposit is an amount of money that a consumer deposits at a bank for a certain period of time Therefore, this sum will earn interest based on the interest rate offered by the bank at the time of deposit

 Savings deposits: An individual's savings are put in a bank with the goal of earning interest on a regular basis called savings deposits This term includes demand deposits and time deposits

Issuance of valuable papers

One of the ways credit institutions and banks raise money is by issuing valuable papers For the purpose of raising capital in Vietnam and abroad, banks can issue valuable papers such as: certificates of deposit, promissory notes, bills, and bonds,…

Open a payment account for customers

According to the Law on Credit Institutions No 47/2010/QH12, “Payment account is a customer's demand deposit account opened at a bank to use payment services provided by the bank.” (Clause 22, Article 4 of the Law on Credit Institutions 2010) Opening a payment account for a customer means creating a bridge between the bank itself and the customer to enable the bank to provide services such as making checks, bank cards, letters of credit, and other payment services, etc The process of opening a payment account is carried out step by step

as well as attached to the regulations (on subjects, age, application for account opening, ) set by the State bank of Vietnam

Discount: Discount is the purchase by the bank with a term or with a reserve

of the right to recourse to valuable papers that are not yet due for payment of the

customer

Rediscount: It is the rediscounting of valuable papers that have been

discounted before the payment due date

Monetary brokerage: A business in which a bank is an intermediary

responsible for arranging banking and business activities between credit institutions

and financial institutions

Derivatives: Derivatives are financial products that are priced depending on

variations in the value of the underlying assets such as exchange rates, interest rates,

foreign currency, currencies or other financial assets

Other services: In addition to the aforementioned activities, there are more

such as payment services, security services for customer assets; letters of credit; and foreign remittance,…

2.3 The relationship between Fintech and commercial banks

2.3.1 Competitive relationship

The competitive relationship between the two sides has been predicted before, when Fintech has the ability to upgrade traditional banking and financial services, attracting customers Therefore, direct competition with commercial banks

is possible If Fintech becomes a competitor to the bank, the main areas of competition will be payment and money transfer due to the introduction of e-wallets that integrate many new features as well as offer many promotions for users

In addition, in lending activities, peer-to-peer lending (P2P Lending) is also one of the challenges that banks need to keep an eye on when customers can access this lending method without too much understanding of finance In addition, the

peer-to-peer lending process is faster than the lending process at banks because peer-to-peer lending businesses create a direct connection between borrowers and lenders without having to go through an intermediary

Through the above examples, it can be seen that the advantages of Fintech companies are flexibility, cost reduction, and ease of access but still bring high efficiency Thus, causing banks to set digital transformation goals and participate in the technology race to compete

2.3.2 Cooperating relationship

Besides competing directly with Fintech companies, banks can choose to cooperate with their own competitors when this option can both meet the digital transformation goals of banks, and can help banks reduce competitive pressure and approach customers of Fintech companies, expanding the bank's influence

In recent years there has been a surge in the number of financial institutions, aka banks, starting to partner up with Fintechs (Shnaider, 2021) Currently, most commercial banks in Vietnam choose to agree to shake hands with Fintech companies According to the State Bank of Vietnam in 2020, up to 82% of commercial banks agree to have cooperation strategies with Fintech to diversify financial services for customers

Similarly, up to 72% of Fintech companies choose to cooperate with banks in doing business and providing services, instead of participating in a competition, only 14% of Fintech companies develop new services and 14% are ready to compete with banks (Banking Strategy Institute, 2019)

2.4 About Vietcombank

When it comes to the banking business in Vietnam, it's difficult not to mention Vietcombank, one of the country's major banks, one of the Big 4 banks, and a consistent industry leader And behind that is the tumultuous history of Vietcombank

After being separated from the Foreign Exchange Department under the State Bank of Vietnam, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (formerly Bank for Foreign Trade of Vietnam) was officially established

on April 1, 1963 At that time, Vietcombank was the leader of the banking industry

in economic development, supporting the country against invaders during wars Vietcombank did business in the field of foreign affairs after becoming a state-owned commercial bank in 1990, right after the Council of Ministers approved the project to renovate banking operations Three years later, Vietcombank joined SWIFT (international payment organization), and was an official member of the Asian Bankers Association in 1995 On June 2, 2008, after successfully implementing the equitization plan through the initial public offering of shares, Vietcombank operated as a joint stock commercial bank

Over the past 58 years of construction and growth, Vietcombank has made important contributions to the stability and development of the country's economy, promoting its role as a key external bank, effectively serving the economic development in the country, while creating important influences on the regional and global financial community From a specialized bank serving the external economy, Vietcombank today has become a versatile bank operating in many fields, providing customers with a full range of leading financial services in the field of commerce international; in traditional activities such as capital trading, capital mobilization, credit, project financing as well as modern banking services: foreign currency trading and derivatives, card services, banking electronic…

The mission and vision of Vietcombank are to become the No 1 Bank in Vietnam, one of the 100 largest banks in Asia, one of the 300 largest banking and financial groups in the world, and one of the 1000 largest listed companies in the world contributing to the development of Vietnam Therefore, the Strategic goals for 2025 will be:

 No 1 in terms of profit and non-credit income

 Leader in customer experience

 No 1 in retail and investment banking

 Leading in the quality of human resources

 Leading in digital banking

 Best Risk Management

Vietcombank's core values are always associated with Innovation, Continuous, Caring, Connected, Individual, and Secure

 Innovative: Bring real value to customers

 Continuous: Development towards the goal of expanding the customer portfolio

 Caring: Taking Thoughtfulness - Dedication to customers as a striving criterion

 Connected: Widely connected to build a national bank comparable to the region and the world

 Individual: Always strive to find the difference on the basis of the highest quality and value

 Secure: Promote safety and confidentiality to maximize the interests

of shareholders and customers

 Vietcombank services

Table 2.2 Vietcombank's current business operations

Personal

• Account

• Savings & Investment Cards

• Transfer & Receive Money

• Personal loans Enterprise

• Payment service

• Check service

• Automatic salary payment

• Billing payment

• Guarantee service

• Loan service

• Leasing finance

• Domestic and foreign bond issuers

• Foreign currency trading

to significant changes and Vietcombank is not out of the race to adapt to the trend Vietcombank has foreseen the adjustments and improvements that need to be made, especially as customers become more and more proficient in using technology products

The relationship between Fintech and banks is always a topic of interest when for many banks, Fintech is a partner, but conversely, many banks see Fintech

as a competitor and a challenge that needs to be overcome to stiff competition So for Vietcombank, how does Fintech affect, and are those impacts a springboard for Vietcombank's development or a pressure test for Vietcombank to win back customers?

SUMMARY CHAPTER II

In this chapter, the author summarizes the basic theories about Fintech and commercial banks as well as gives an overview of Vietcombank From there, it helps readers have a preliminary view of the nature, role as well as products and services of Fintech and commercial banks, thereby seeing the similarities between the two parties to create a premise to analyze the impact of Fintech on Vietcombank (a commercial bank) in Chapter 3

CHAPTER III: THE IMPACT OF FINTECH ON JOINT STOCK

COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

3.1 Fintech's operation status in Vietnam

3.1.1 Compare to the world

In 2021, out of 83 countries around the world that are focusing on developing Fintech, Vietnam ranks 70th in the rankings (Table 3.1), behind other Southeast Asian countries like Thailand (55th), Philippines (53rd), Malaysia (46th), Indonesia (43rd), and Singapore (4th) (Findexable, 2021) Besides, Ho Chi Minh City and Hanoi are also at the bottom of the ranking in Southeast Asia (Table 3.2)

Table 3.1 Ranking of Fintech countries in Southeast Asia as of June 29, 2021

(Source: Global Fintech Index, Findexable 2021)

Table 3.2 Ranking of Fintech cities in Southeast Asia as of June 29, 2021 Region

From there, it can be seen that Vietnam is lagging behind other countries in

the same region in particular and in the world in general However, the increasing

population of Vietnam and the increase in the GDP are one of the factors that help

businesses focus on investing in Fintech in Vietnam In addition, the growth in

Internet connection of 0.8% along with 70.3% of internet users making connections

from mobile phones in 2021 is also driving forces to stimulate the birth of Fintech

startups Besides, with the capital poured into Fintech in Southeast Asia growing

over the years from 2017 to 2021, and peaking at 3.5 billion USD in 2021 (Chart

3.1), Vietnam is still in the group of countries that receive the attention of domestic

and foreign investors Therefore, Vietnam is still trying to accelerate Fintech

development through the production of many Fintech startups In short, Vietnam is

still one of the potential markets to invest in Fintech

Chart 3.0.1 Total investment in Fintech and number of Fintech deals in

ASEAN from 2017 to 2021

(Source: United Overseas Bank, 2021)

3.1.2 Vietnam's Fintech Companies

Although when compared with other countries in the region, the number of

Fintech startups in Vietnam is still quite small, but it is still increasing over the

years As of September 2021, Vietnam currently has 188 Fintech companies (Chart

3.2) operating flexibly in various fields such as: Mobile Payment, p2p Lending,

Bitcoin / Blockchain, Point of Sale, Crowdfunding, Wealth Management, Credit

Scoring / Data Management, Comparison Sites, Digital Banking, SMEs Financing,

Insurtech (Table 3.3)

Chart 3.0.2 Number of Fintech companies in Vietnam from 2017 to 2021

(Source: United Overseas Bank, 2021)

Table 3.3 Vietnamese Fintech companies by sector

Mobile Payment

ZaloPay, ZingPay, VNPT Pay, VTC Pay, VNPay, VinID, Vimo, Viettel Pay, Napas, MoMo, FPT, AirPay,…

p2p lending

ATM Online, Avay, Cashwagon, Doctor Đồng, FinFan, Finizi, Finrei, Finso, Gutina, Interloan, Moneybank, Tima, VayMuon, Movi,…