The fintech in vietnam

MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMIC UNIVERSITY INSTITUTE OF BANKING FINANCE TOPIC THE FINTECH IN VIETNAM Subject English for Banking Finance Lecture Mr Phung Thanh Quang Class NHCO111[.]

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMIC UNIVERSITY INSTITUTE OF BANKING - FINANCE

TOPIC : THE FINTECH IN VIETNAM

Subject: English for Banking Finance

Lecture: Mr Phung Thanh Quang

Class: NHCO1110

Team: Nguyen Thi Thu Thuong (Leader)_11165030

Tran Thi Cam Hoa_11161912

Vu Thi Thuy Quynh_11164438

Tran Thi Mai Huong_11162282

Hà Nội, tháng 9, năm 2018

I What is fintech? 3

II The object of Fintech 3

1 Financial institutions 3

2 Fintech companies 3

3 Customers 3

4 Main product groups 4

III Fintech services 4

1 Cryptocurrency 4

2 Bitcoin 4

3 Blockchain 4

4 Ethereum 5

5 Disruptive innovation 5

6 Regtech 5

7 Insurtech 5

8 Initial coin offering 6

9 Open banking 6

10 Robo-advisor 6

11 Unbanked/underbanked 6

12 Financial inclusion 6

13 Smart contracts 7

14 Accelerators 7

IV Fintech in Vietnam 7

V Solutions 8

VI Strengths 9

1 Market resources 9

2 ADB's companion 10

VII weaknesses 10

1 Technology in Vietnam has not caught up with international technology 10

2 Security is the second weakness 10

3 Legal issues in fintech management 11

VIII Opportunities 11

IX Challenges 12

I What is fintech?

If you've ever paid for something with your phone, transferred money using an app, or checked your bank statement online, then you've already part of a multi-billion dollar industry It's called fintech, and it's changing economies around the world Fintech

is short for financial technology - seems simple, right? Well, the term fintech includes a huge range of products, technologies, and business models that are changing the financial services industry It refers to everything from cashless payments, to crowdfunding

platforms, to robo-advisors, to virtual currencies

Financial technology (FinTech or fintech) is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. FinTech is a new industry that uses technology to improve activities in finance The use of smartphones for mobile banking, investing services and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public.So everytime you donate to someone's Kickstarter campaign - that's fintech Or if you transfer money to someone using Venmo - that's also fintech

II The object of Fintech

1 Financial institutions

An important entity in the financial sector, these institutions are increasingly cooperating with Fintech companies as they recognize the importance of technology At the same time, these institutions also invest directly in Fintech companies or research activities to actively capture new technologies and occupy the market

2 Fintech companies

Independent companies operating in the field of information technology provide new products and services in the financial sector Customers of these companies may be end users, and may be financial institution

3 Customers

Users of financial services products in general With new technology applications, customers are the ones who benefit the most from the competition between companies, financial institutions as well as from new technology gadgets

4 Main product groups

Fintech products are usually divided into two groups: the first is consumer products, digital tools and other technologies to improve the way individuals borrow, manage money, fund startups; the second group: Back-office technology products to support the operation of Fintech and financial institutions

Fundamentally, in addition to common services such as payment, lending, money transfer, Fintech also offers more extensive services such as crowd-funding, peer to peer lending Personal Finance, Insur-Tech, Crypto Blockchain, Data Management, and more

III Fintech services

1 Cryptocurrency

A cryptocurrency is a decentralized digital currency which uses encryption - the process of converting data into code - to generate units of currency and validate transactions independent of a central bank or government.Bitcoin and ether are the most common form of digital currencies But there are other forms of virtual cash, such as Litecoin, Ripple and Dash (i.e "Digital Cash")

2 Bitcoin

'Bitcoin' – a term we're more used to hearing even in mainstream finance – is the first and one of the most prominent cryptocurrencies used by traders in the world of fintech.It all began when an unknown person(s), under the pseudonym Satoshi Nakamoto, designed bitcoin as a peer-to-peer (P2P) payment network without the need for governance by any central authority In an introductory white paper introducing the virtual currency, Nakamoto defined bitcoin as: "A purely peer-to-peer version of electronic cash (which) would allow online payments to be sent directly from one party

to another without going through a financial institution."

3 Blockchain

Blockchain is a form of distributed ledger technology (DLT) This means that it maintains records of all cryptocurrency transactions on a distributed network of computers, but has no central ledger It secures the data through encrypted 'blocks'.Various blockchain experts believe the technology can provide transparency for

a multitude of different industries, not just the financial services The original blockchain

network was created by bitcoin-founder Nakamoto to serve as the public ledger for all bitcoin transactions

4 Ethereum

Ethereum is another type of blockchain network It was proposed by a 19-year-old Russian-Canadian programmer, Vitalik Buterin, in 2013.Ethereum differs to the original blockchain in that it is designed for people to build decentralized applications These are applications which allow users to interact with each other directly rather than having to

go through any middlemen, Buterin said, explaining the project in 2014

5 Disruptive innovation

Disruptive innovation happens whenever new technologies alter the way markets operate.Though not exclusively a fintech term, it is often used to describe events in the financial services where technological developments force financial institutions to rethink their approach to the industry

6 Regtech

Regulatory technology (regtech) is technology which helps firms working in the financial services industry meet financial compliance rules One of the main priorities of regtech is automating and digitizing Anti-Money Laundering (AML) rules which aim to reduce illegally obtained income, and Know Your Customer (KYC) processes which identify and verify the clients of financial institutions to prevent fraud The U.K.'s Financial Conduct Authority was the first governmental regulator to promote the term Regulators like the FCA are working with regtech firms on a range of different applications, including AI and machine-learning, to improve the efficiency of compliance

in the financial services and cut costs

7 Insurtech

Insurtech is a subset of fintech which relates to the use of technology to simplify and improve the efficiency of the insurance industry A report by consulting giant Capgemini and non-profit insurance industry body Efma last month found that traditional insurance firms are facing increasing competitive pressuredue to the emergence of a number of insurtech start-ups

8 Initial coin offering

An initial coin offering (ICO) is a crowdfunding measure for start-ups that use blockchain It involves the selling of a start-up's cryptocurrency units in return for cash ICOs are similar to initial public offerings (IPOs), where the shares of a company are sold

to investors for the first time But ICOs differ to IPOs in that they deal with supporters of

a project rather than investors, making the investment more similar to a crowdfunding experiment Last month China banned ICOs over concerns that the practice is not regulated and can be opened up to fraudsters

9 Open banking

Open banking refers to an emerging idea in the financial services and fintech which stipulates that banks should allow third party companies to build applications and services using the bank's data It involves the use of application programming interfaces (APIs) - codes which allow different financial programs to communicate with each other

- to create a connected network of financial institutions and third party providers (TPPs)

Proponents of open banking believe that an "open API ecosystem" will allow fintech start-ups to develop new applications such as mobile apps to allow customers greater control over their bank data and financial decisions

10 Robo-advisor

Robo-advisors are platforms that automate investment advice using financial algorithms.They limit the need for human investment managers, thereby dramatically reducing the costof managing a portfolio

11 Unbanked/underbanked

The "unbanked" or "underbanked" are those who do not have access to banks or mainstream financial services.Various fintech companies have developed products aimed

at addressing this portion of society, providing them with digital-only solutions to open

up their access to the financial services.The Federal Deposit Insurance Corporation (FDIC) estimates that there are 10 million unbanked or underbanked American households

12 Financial inclusion

Financial inclusion refers to fintech solutions that provide more affordable finance alternatives to disadvantaged and low-income people who, like the

unbanked/underbanked, may have little to no access to mainstream financial services This is one of the most important areas for fintech companies that operate in developing markets

13 Smart contracts

Smart contracts are computer programs that automatically execute contracts between buyers and sellers Smart contracts are often blockchain-based and can save huge amounts of time and costs involved in transactions which usually require a human

to execute them.In Ethereum for example, the contracts are treated as decentralized scripts stored in the blockchain network for later execution

14 Accelerators

Accelerators, also known as "seed accelerators", are programs enacted by financial organizations to mentor and work with fintech start-ups.Fintech accelerators can be either privately or publicly funded, with several programs being run by big banks, from the U.K.'s central bank, the Bank of England, to the multinational private bank Barclays

IV Fintech in Vietnam

In recent time, the term “Fintech” has emerged as one of the most searched

keywords in the Vietnam market

Vietnam has the population of 90 million, many in young generation, 80-90% of the population use the Internet These numbers are the main reason why experts think that Vietnam may become a potential Fintech market

According to statistics in February 2017, after eight years of testing (2007 - 2015), the intermediary payment service was officially licensed and more than 40 enterprises have been operating in the field of Fintech in Vietnam

According to the Topica Founder Institute, in 2016, the total value of Fintech startup deals in Vietnam is $129 million, representing 63% of the total start-up sales

At present, the most developing side of Fintech in Vietnam is payment However, the fear of using virtual payment methods leads to some disadvantages Think of the two prominent names in Vietnam Fintech: MoMo and Payoo They have invested heavily in the physical trading system For now, MoMo owns more than 4000 transaction points spread across 45 provinces and Payoo has nearly 5000 payment branches across the country

In addition to the Fintech companies, many corporations, large companies have also jumped into this game to take advantage of the number of available users By the end

of December 2016, Zion, a subsidiary of VNG, launched ZaloPay e-wallet running parallel to the 123-pound payment gateway, integrating the community of 70 million Zalo chat users

Garena gaming service and Grab call service have also entered the payout market Last March, Garena Vietnam’s eSports affiliate launched the TopPay e-wallet with more than 20.000 outlets Nationwide and Play Store TopPay downloads exceeded 100.000 GrabPay payment services are also running promotions across South East Asia to take advantage of the 27 million users

Regarding the banking system, Tienphong Bank is an indispensable name with the application of technology in customer service with online transaction centers, virtual assistant – chatbot, …

Lazada’s HelloPay payment channel, after being acquired by Alibaba in April

2016, was incorporated into Alibaba’s AliPay system and moved into Southeast Asia

According to financial experts, the FinTech’s market in Vietnam will be a

playground for big players in the fields of finance, technology and Internet services The existing start-ups in the market are actually the backyard of some of the big guys or have the investment from Capital Venture

V Solutions

With the opportunities and challenges that FinTech Vietnam market is having, businesses need to choose the right direction for themselves To refer the learning

experience from FinTech-developed markets such as Cambodia, Kenya is probably one

of the first things that Vietnamese businesses can consider

In addition, in terms of policy and legislation, the government plays a pivotal role

in paving the way for Fintech to develop

In Vietnam, the Government does not have specific sectoral regulations on

business activities, except payment intermediaries Fintech types such as peer-to-peer, automated investment management, virtual currency trading, call for community funds,

do not yet have a legal mechanism that corresponds to the face of the business that banks and business desire

According to the lawyer Nguyen Van Loc, Chairman of LP Group, there are three things the government needs to do now and synchronously to develop Fintech in the country:

Allows testing of new Fintech models;

Supplement specific regulations at the decree and circular levels for FinTech activities

Study appropriate models for a roadmap to issue regulatory documents as well as

to ask organizations and associations to draft a road map for Fintech for the next 10 years

Obviously, this new trend needs a lot of action from both the government and investors to realize and develop FinTech in a deep way in Vietnam market in order to bring a revolution in liquidity in particular and finance in general for business and consumer

VI Strengths

1 Market resources

Pham Xuan Hoe, Deputy Director of the Banking Strategy Institute, pointed out the fact that Vietnam accounts for 70% of the population and 60% uses mobile phones at

a very low level TS Co Van Luc, Senior Advisor Chairman of BOM, Director of BIDV Bank School also shared, IT is changing lives rapidly Currently, Vietnam has about 44%

of the population using the Internet, 143 million mobile subscribers, more than 30 million facebook users This trend has created opportunities and challenges for the banking system as well as opportunities to improve competitiveness, reduce costs, increase advertising and sales; At the same time, it poses challenges in terms of investment finance, human resources management, technology exploitation and operational risk (especially technological risk)

According to Forbes magazine, if successful, this will boost the financial technology market because many startups have built solutions and services for banking, electronic wallet or online payment

"Over the next 10 years, Vietnam will become a leading player in developing solutions for the financial industry in the region," said expert Michael Sieburg

2 ADB's companion

ADB has supported the development of the banking and finance sector in Vietnam since the 1990s In particular, ADB has worked with the Government of Vietnam to develop a legal framework and strategy for microfinance development to 2020 In addition to traditional microfinance, ADB supports the Government of Viet Nam in developing a comprehensive financial strategy that enhances access to financial and banking services for businesses and people Facing the strong development trend of FinTech, ADB, through the Mekong Business Initiative (MBI) funded by the Australian Government and ADB, has supported the SBV to explore the development trend of FinTech and experience managing FinTech businesses in Australia, Singapore, Hong Kong At the same time, in 2017, with the support of ADB, a number of surveys and dialogues with FinTech businesses, preliminary evaluations of FinTech's ecosystem in Vietnam have been carried out, providing the basis for initial For researching and developing the legal framework for FinTech's operations in Vietnam

VII weaknesses

1 Technology in Vietnam has not caught up with international technology.

Nevertheless, Vietnam still has many things to do By 2014, World Bank data show that only 31% of adults in Vietnam use bank transfers The main cause of this situation is the high cost of services, too many paperwork, payment services are not friendly to consumers and especially investors are not interested in this market

2 Security is the second weakness

Security concerns have led retail banks not to adopt digital technology and business models That affects the popularity of fintech in Vietnam market

Security issues are a priority Since the Internet has appeared, information security has been paid attention Security is enhanced as the Internet plays an increasingly important role in the lives of businesses, industries, and the emergence of the IoT concept Equifax, the consumer credit agency, has made data available for nearly 143 million US customers stolen, a major example of a major concern for even the largest companies For this reason, companies need to spend a lot of financial resources to increase security, especially fintech-related security to increase customer trust and protect the company against unwanted risks