The impacts of fintech on financial inclusion – current status and solutions for vietnam

A researcher, Ryu also pointed out that the effectiveness of using Fintech to accelerate financial inclusion is limited by the ability of people to access internet and their capacity to

Rationale of the study

Financial inclusion has long been a key objective for the United Nations and World Bank, aimed at enhancing the financial sector in underdeveloped and developing countries Access to financial services is viewed as a crucial indicator of a nation's financial empowerment and a strategy to alleviate poverty Despite its significance, debates persist regarding the definition, measurement, and methods for achieving financial inclusion across various nations with differing circumstances These complex issues make financial inclusion a highly discussed topic among researchers, policymakers, and the general public.

Financial technology (Fintech) has emerged as a promising solution to enhance financial inclusion by addressing key challenges in the financial system, such as geographical barriers, risk management, and fraud detection However, the rise of Fintech also poses potential downsides, including the risk of increased unemployment as companies may reduce their workforce for efficiency Additionally, the effectiveness of Fintech in promoting financial inclusion is hindered by limited internet access and the ability of individuals to utilize technological devices Furthermore, in many regions, the legal framework has not evolved alongside Fintech advancements, exposing users to risks from high-tech crime.

The pros and cons of using Fintech to accelerate financial inclusion have become even more obvious during the time of Covid-19 pandemic Technologies

Online work, mobile money, and ATMs have enabled the financial system to function during lockdowns However, in underdeveloped regions with unstable or limited internet access, individuals face challenges in utilizing financial services This lack of access diminishes the effectiveness of the financial system and adversely impacts the overall economy.

Vietnam is emerging as a promising player in the Fintech market, with projections estimating its value to reach $18 billion by 2024, according to Asiaone (2023) The Ministry of Planning and Investment reports that the country boasts around 200 Fintech organizations, with over 66% of adults owning at least one payment account and an average of 0.9 smartphones per person However, a study by Vietnambanker in late 2022 highlighted challenges, revealing a low percentage of workers skilled in information technology and a lack of specialized financial knowledge, which could hinder the development of Fintech services (Yuric A Hannart, 2023) Additionally, while Vietnam has an internet coverage of approximately 73.2%, many individuals in remote areas remain unaware of Fintech services like mobile money and digital transfers, with some not even holding a bank account (Yuric A Hannart, 2023).

A study conducted at the end of 2022 revealed that less than 40% of individuals in remote areas of Vietnam can access a financial institution within 15 minutes, compared to 90% in larger cities (Trinh Thi Phan Lan, 2022) This disparity highlights the critical need for financial institutions in rural regions of an economy that still heavily relies on cash Additionally, financial literacy poses a significant challenge, as the same study found that 62.5% of participants lacked the knowledge to open a bank account independently and did not understand fundamental concepts such as inflation and interest rates.

3 compound interest rate, only 25% of the members had confidence that they can transfer money through bank counters or online apps (Trinh Thi Phan Lan, 2022)

Financial inclusion and Fintech have gained significant attention in recent years; however, there is a notable lack of research examining the impacts of Fintech on financial inclusion, both positive and negative Most existing studies tend to focus on theoretical frameworks rather than providing empirical evidence from specific countries or regions This gap in empirical research undermines the relevance of proposed solutions, as they often overlook the unique circumstances of different nations Therefore, this study aims to explore “THE IMPACTS OF FINTECH ON FINANCIAL INCLUSION – CURRENT STATUS AND SOLUTIONS FOR VIETNAM,” with the goal of gathering evidence and offering tailored solutions for Vietnam's financial landscape.

The aim of the research

This research explores the current state of Fintech and financial inclusion in Vietnam, drawing on theories and findings from previous studies It examines the utilization of Fintech products within Vietnam's financial system and employs modeling techniques to analyze the impact of Fintech on enhancing financial inclusion.

The research focuses on the ASEAN + 3 group, consisting of 13 countries, to explore the benefits and challenges of utilizing Fintech for enhancing financial inclusion It aims to propose policies and solutions tailored to Vietnam's specific conditions The study is guided by four key questions that drive its investigation.

- What are the theoretical theories of Fintech and financial inclusion?

- The real state of Fintech and financial inclusion in Vietnam

- How does Fintech impact on financial inclusion in the group ASEAN + 3?

- What are solutions can be proposed to maximize the benefits and minimize the risks of using fintech to accelerate financial inclusion?

Subject and scope of the research

The research will focus studying on the impacts of Fintech on financial inclusion in Vietnam

The research will be limited in the financial system of Vietnam with the timeline from 2011 to 2021.

Research method

This research employs a comparative and synthetic approach, alongside empirical evidence, to analyze the effects of Fintech on financial inclusion over the past decade It utilizes reliable data and evidence gathered from trustworthy sources to support its findings.

The comparative method involves analyzing one or more objects across different time periods or geographical locations In this thesis, the author examines data on financial inclusion in Vietnam alongside several other countries from 2011 to 2021 The goal is to identify the disparities in financial inclusion between Vietnam and these nations, ultimately leading to the development of tailored solutions.

The synthetic method consolidates findings from previous research to extract key insights that will underpin the author's thesis Specifically, the author aims to create a financial inclusion index informed by the works of Sarma (2008) and Park & Mercado (2015), alongside the principal components analysis from Camara & Tuesta (2014).

Empirical evidence method is the progress of collecting and analyzing evidence to confirm or deny one or several hypotheses In this case, the thesis uses

5 secondary data collected from various sources such as World Bank, International Monetary Fund, Fintech Weekly or other articles.

Research overview

This research aims to address the existing gap in literature regarding Fintech and financial inclusion While numerous studies have explored definitions, measurements, and the effects of Fintech on financial inclusion, most have primarily focused on theoretical frameworks without empirical evidence from regression models to elucidate their relationship Additionally, many studies overlook the potential negative impacts of Fintech on financial inclusion Therefore, it is essential to conduct new research that investigates this relationship, offering solutions to enhance the positive effects of Fintech while mitigating its adverse consequences on financial inclusion.

Research structure

The main content of the research will be devided into four main parts:

THEORETICAL BASIC AND LITERATURE REVIEW

Theorical basic about Fintech

The term "Fintech," which has garnered significant attention in recent years, can be traced back to the 19th century, indicating that financial technology has existed for over a century Despite its long history, a universal definition of Fintech remains elusive (The Payments Association, 2020) This section will explore various definitions of financial technology as provided by researchers, international organizations, and governments, while also delving into the detailed history of Fintech.

Fintech refers to an industry that enhances the efficiency of the financial system by leveraging modern technologies rather than disrupting traditional frameworks Key technologies driving Fintech include artificial intelligence, blockchain, the Internet of Things, big data analytics, and advanced mobile communications like 5G, with 6G on the horizon Over the years, Fintech has broadened its scope to encompass a diverse array of financial services and products, including mobile transfers, risk management, cybersecurity, bill payments, financial education, stock trading, and cryptocurrency development The rapid evolution and adaptability of Fintech make it a vital solution for improving the efficiency of the financial system and promoting financial inclusion.

Organizations and governments’s definitions of Fintech

Numerous researchers and international organizations, including the World Bank, International Monetary Fund, and Bank for International Settlements, have provided a variety of definitions related to Fintech Additionally, the rapid development of Fintech at the national level highlights its growing significance in the financial landscape.

The rise of Fintech has necessitated regulatory measures to manage financial systems and national economies Consequently, numerous countries have established at least one official definition to serve as a foundation for legal matters related to Fintech Table 1 presents various definitions of Fintech from international organizations and government entities.

Table 1: Organization's definitions of financial technology

Fintech is a technological advance capable of innovating the provision of financial services

Fintech is a technology that has contributed to not only the innovation in the financial sector but also the emerge of new business models

Fintech is the application of digital technologies for financial services

Fintech is defined as innovations in financial technology

National Economic Council of USA 2017

Fintech is the act of combining innovative business models and technologies to enable, enhance the financial system

His Majesty’s Treasury of UK 2016

Definition of Fintech is Technology- based systems used to provide financial services and products

Source: Noted in the table

Fintech is widely recognized as a collection of technological innovations in financial services, yet there remains no universally accepted definition among researchers, organizations, and nations In this thesis, Fintech will be defined as the application of technologies within the financial system To gain a deeper understanding of Fintech, the upcoming sections will explore its history and the essential platforms that support the Fintech industry.

Fintech, which has garnered significant attention in recent years, actually has a history spanning over a century, dating back to before World War I The evolution of Fintech is categorized into three distinct eras, progressing from Fintech 1.0 to the current Fintech 3.0.

- Fintech 3.0: From 2008 to the present

The initial phase of Fintech dates back to before World War I, marked by the advent of global communication services like the telegraph and Morse code Renowned economist J.M Keynes highlighted that technological advancements enabled individuals to place orders and invest in distant businesses from the comfort of their homes This era culminated in significant innovations, including the introduction of computers, credit cards, and ATMs, further transforming the financial landscape.

The transition from Fintech 1.0 to Fintech 2.0 was marked by the introduction of groundbreaking technologies like computers and ATMs, which significantly accelerated the evolution of the financial technology sector This era witnessed key milestones that continue to influence the Fintech landscape today.

- 1967: The introduction of computers and ATMs

Fintech plays a crucial role in enhancing the efficiency of the financial system The introduction of computers significantly reduced paper usage in finance, minimizing data loss risks and accelerating the digitization process (Fintech Weekly, 2016).

Since its introduction in 1969 at Chemical Bank in Rockville Centre, New York, ATMs have revolutionized the banking industry and remain a crucial component of the financial system today With the expansion of ATM networks and improved connections between financial institutions, individuals can now perform essential transactions—such as withdrawing cash, making deposits, and paying bills—using just one ATM card, eliminating the need to visit a bank branch.

- 1980: The first online banking service was offered

When utilizing financial services, two primary concerns are the speed of access to products and the associated security risks, which are often interconnected In December 1980, United American Bank in Tennessee addressed these issues by launching a secure computer system for its customers (Evan, 2017) This system, priced at $25 to $30 per month, enabled customers to perform transactions on a more secure platform, effectively minimizing security threats while enhancing transaction speed.

- 1971-1973: The foundation of NASDAQ and SWIFT

In 1971, NASDAQ marked a significant milestone in the evolution of Fintech 2.0 by becoming the world's first electronic stock market, representing a pivotal shift from traditional physical trading to digital trading.

During this era of financial technology, governments and organizations are actively working to establish an international regulatory framework The rapid pace of digitization and globalization poses significant challenges in ensuring the protection of all participants within an interconnected financial system.

The aftermath of the 1987 market crash highlighted the need for a robust legal framework to protect market participants, as existing regulations were inadequate In response, significant efforts were made to regulate increasingly interconnected global financial systems through initiatives like The Single European Act and the 1992 Maastricht Treaty (Giglio, 2021) However, the legal frameworks established during the second phase of Fintech were often limited, inconsistent, and lacking coherence across different countries, paving the way for the evolution into the third stage of the financial system.

The year 2008 marks a significant turning point in the evolution of Fintech, transitioning from 2.0 to 3.0, primarily due to the Global Financial Crisis During the Fintech 2.0 era, innovations like ATMs and online banking transformed financial transactions by reducing the physical connection between customers and service providers, while also increasing the data collected by financial institutions, raising concerns about trust and confidence in the system The crisis resulted in a staggering loss of over $10 trillion and left more than 30 million people unemployed, with many attributing the downturn to banks' risky investments in real estate and a decline in public trust In response, stricter regulations were implemented to oversee bank assets and enhance the accountability of financial institutions, including mandatory stress tests and recovery plans However, the erosion of trust prompted consumers to seek alternatives to traditional financial services, paving the way for the emergence of innovative Fintech solutions, notably cryptocurrencies, beginning with the launch of Bitcoin.

Theorical basic about financial inclusion

Financial inclusion is a widely discussed concept among researchers, politicians, and citizens, defined by the World Bank as the ability of individuals, businesses, and households to access essential financial products and services—such as transactions, payments, credit, and insurance—at a reasonable cost The European Commission emphasizes that financial inclusion encompasses not only access but also the actual use of these services, highlighting the need for improvements in the legal system, economy, and environment to facilitate this usage In Vietnam, the State Bank defines financial inclusion as the provision of appropriate financial services to all economic members, particularly the lower-income class, aiming to enhance job creation, capital flow, savings, and overall economic growth.

Financial inclusion refers to providing disadvantaged groups with access to the financial system, as highlighted in the foundational study by Leyshon and Thrift (1995) According to Franklin Allen and Co (2012), financial inclusion encompasses the use of formal accounts, which can yield numerous benefits for individuals and communities.

Vietnamese researchers Van, Huong, and Ha define financial inclusion as the process of ensuring that individuals from all social classes are prepared to utilize and benefit from the financial system.

This research interprets financial inclusion as the advancement of making financial systems accessible, available, and usable for individuals, irrespective of their social status or income level.

Financial inclusion and its counterpart, financial exclusion, have gained significant attention, especially in the wake of the Covid-19 pandemic This period highlighted the widening gap between high and low-income individuals and countries, underscoring the urgent need to address financial disparities.

Research on financial exclusion has been conducted across various countries, including China, Australia, the UK, and Poland Despite inconsistencies due to differing economic conditions and research timelines, a consensus exists that financial exclusion refers to the inability of individuals and social groups to access certain segments of the financial system For this study, financial exclusion will be defined as the challenges faced by individuals in accessing mainstream financial services, such as bank accounts and money transfers.

1.2.2 Common indicators of financial inclusion

Over the years, defining and measuring financial inclusion has proven challenging due to the lack of a universal definition Consequently, establishing a definitive measurement for financial inclusion remains elusive Various researchers and organizations have proposed different approaches to create effective measurement frameworks Most studies agree that financial inclusion should be assessed based on the accessibility and usage of financial services and products However, there are primarily two perspectives on how to measure these indicators.

The second approach to measuring financial inclusion focuses on the suppliers of financial services and products, as highlighted by Tran Thu and Dao Hong Nhung (2020) This perspective emphasizes the importance of understanding the supply side in addition to the demand side, which represents the financial users.

Research by Kunt & Klapper (2012), foundational to the World Bank's Global Findex Database, emphasizes the measurement of financial service inclusion through the percentage of citizens with bank accounts and their usage for transactions like bill payments and savings This study focuses primarily on the accessibility and usage of financial services rather than the broader concept of financial inclusion, which encompasses accessibility, availability, and usage (Tran Thu & Dao Hong Nhung, 2020) Additionally, Gortsos and Panagiotidis (2017) propose that financial inclusion should be evaluated across three key dimensions: access to financial services, the utilization of these services, and the quality of the services and products offered.

Financial inclusion indicators typically focus on the availability of financial services and products, including the number of banking institutions and ATMs, as well as the volume and value of loans A study by Amidzic and Co (2014) assessed financial inclusion by calculating the density of ATMs and financial institutions in specific areas This research, which analyzed data from 35 countries, quantified financial inclusion by measuring the number of ATMs and financial institutions per 1,000 km² and the proportion of individuals with access to financial services, such as bank accounts.

1.2.3 The benefits of financial inclusion

Achieving financial inclusion and reducing financial exclusion is a primary objective for many countries worldwide, driven by the numerous advantages associated with access to financial services and products This section highlights key benefits of financial inclusion, emphasizing its critical importance in fostering economic growth and improving individual livelihoods.

Most individuals, regardless of their financial status, rely on at least one source of income, such as wages, sales, or unemployment benefits Access to financial services like bank accounts and ATM cards is essential for securely storing money By saving in a reputable financial institution, families can reduce the risk of theft and benefit from interest accumulation, providing an additional source of funds for depositors (FINCA, 2017).

Utilizing financial services and products like savings accounts enables individuals to better prepare for future uncertainties, such as job loss or maternity leave (FINCA, 2017) The importance of saving and future planning becomes even more critical during unforeseen events, including financial crises and the recent Covid-19 pandemic.

More businesses can be set up and increase competition

A significant barrier to business establishment and competition in the market is the lack of adequate capital, making financial inclusion essential for addressing this issue Banks and financial institutions play a crucial role by providing lending programs and connecting lenders with borrowers, particularly benefiting small and medium enterprises (SMEs) This increased access to capital fosters competition among companies, driving innovation and enhancing product quality as businesses strive to capture a larger market share.

Financial inclusion plays a crucial role in alleviating poverty and reducing unemployment by providing disadvantaged groups with greater access to financial opportunities By enabling the poor and unemployed to engage in business ventures with accessible insurance services, they can take on calculated risks (Cole et al., 2013) This access not only allows individuals to increase their income through savings, stock trading, and other investment avenues but also fosters overall economic growth and stability within society.

DATA, MODEL AND METHODOLOGY

Research data source

This study aims to examine the impact of Fintech on financial inclusion across 13 countries in the ASEAN + 3 group, utilizing empirical evidence To efficiently gather data, secondary data sources are preferred over primary data, as they are more time- and cost-effective (Bryan, 2012) Given the macroeconomic nature of the research, which spans a decade and involves extensive data from multiple countries, employing primary data collection methods like surveys or questionnaires is impractical.

Secondary data is gathered from trustworthy sources, including international organizations like the World Bank and the International Monetary Fund, as well as government databases, reputable companies, and scholarly articles and research conducted by credible authors Each source is accurately cited with the author's or organization's name and the year of publication, ensuring the transparency and reliability of the research.

Model and hypotheses used in the thesis

This section outlines the proposed model and hypotheses addressing the relationship between Fintech and financial inclusion, following the discussion of data and methodology The model is built upon the frameworks established by Sarma (2012), Camara & Tuesta (2014), and further enhanced by Park & Mercado (2018).

FI = 𝜷 𝟎 + 𝜷 𝟏 *GDPgrowth + 𝜷 𝟐 *Credit + 𝜷 𝟑 *Ft-infra + 𝜷 𝟒 *Ft-eco + ε (1)

The detail about the variables of the model will be explained below while the sources of the data will be given in later chapter:

- FI: Financial inclusion index An index that is used to measure the state of financial inclusion of countries

GDP growth is a key indicator for assessing economic expansion across countries This metric, combined with the domestic credit provided by the financial sector as a percentage of GDP, helps to elucidate the variations in fintech development and financial inclusion among nations, reflecting the influence of their financial systems and overall economic conditions.

- Credit is used as the representation of the financial sector of countries

- Ft-infra and Ft-eco are used to estimate the infrastructure and ecosystem that serve as the platform for the advancements of Fintech in countries

- ε represents variables that are not included in the model

The research aims to test two hypotheses based on the proposed model, with a detailed discussion of the data and methodology to follow in the next chapter.

- H1: Fintech has impacts of the index of financial inclusion of countries

- H2: The impacts of Fintech vary based on the state of economies.

Variables description

Financial inclusion is a crucial metric for assessing the health of an economy, leading to various efforts to define it and identify suitable measurement indicators Typically, the evaluation of financial inclusion relies on two primary approaches: demand-side indicators and supply-side indicators, both of which have been thoroughly discussed in earlier chapters.

This research aims to measure a Financial Inclusion Index (Fi index) using a multidimensional approach inspired by the studies of Sarma (2008), Carmara & Tuesta (2014), and Tran Thu & Dao Hong Nhung (2020) The index will be calculated by evaluating three key subindices: access to the financial system, availability of financial services and products, and the usage of these services and products.

The formula of FI index is: 𝑭𝑰 𝒊 = 𝝎 𝟏 ∗ 𝑫 𝒊 𝒂 + 𝝎 𝟐 ∗ 𝑫 𝒊 𝒂𝒗 + 𝝎 𝟑 ∗ 𝑫 𝒊 𝒖 + 𝜺 𝒊 (2)

- FIi is the financial inclusion of index of country i

- 𝑫 𝒊 𝒂 , 𝑫 𝒊 𝒂𝒗 , 𝑫 𝒊 𝒖 represent the accessibility, avaiability and usage dimension of country i respectively

Financial inclusion refers to the accessibility of essential financial services, such as bank accounts, money transfers, and insurance, allowing individuals to participate fully in the financial system This concept is measured by the extent to which a financial system can accommodate a large number of users, indicating that easy access to basic services is crucial In this research, the author utilizes the frameworks proposed by Sarma (2008, 2016) and Nguyen Thi Truc Huong (2020), analyzing data from deposit accounts in commercial banks and financial institutions, as well as mobile money accounts, to assess the accessibility of the financial system The inclusion of mobile money accounts is particularly relevant due to the growing reliance on mobile technology in global finance The two primary indicators examined are the number of deposit accounts held with commercial banks.

1000 adults, the number of deposit accounts with credit unions and credit cooperatives per 1000 adults and the number of mobile money accounts per 1000 adults, respectively

In a financial system, it's crucial to provide customers with accessible transaction points, including offices, branches, and ATMs, as highlighted by Sarma (2016) Despite the increasing preference for digital transactions, maintaining a network of physical locations remains essential, as many users still prefer visiting these sites for various services such as opening accounts, depositing money, seeking investment advice, and reviewing their accounts.

For the purpose of estimating this dimension, the author will use the indicator the number of commercial banks branches, the number of credit unions and credit

30 cooperatives and the number of ATMs per 100,000 adults to measure this dimension

The initial analysis included the metric of mobile money agent outlets per 100,000 adults; however, due to insufficient data from the IMF or World Bank, the author decided to exclude this indicator to ensure the accuracy and reliability of the findings.

Financial inclusion encompasses not only the accessibility and availability of financial services but also the usage dimension, which assesses how customers engage with these services While accessibility refers to the ease of accessing financial products and transaction points, the usage dimension reveals the actual utilization of these offerings This aspect is particularly important for evaluating financial inclusion in economies like Vietnam, where a significant number of inactive accounts exist Many customers open multiple accounts across different banks or financial institutions but tend to actively use only one or two Understanding this usage pattern is crucial for improving financial inclusion strategies, as highlighted in the studies by Beck et al.

In their studies, Lenka & Bairwa (2016) and Sarma (2016) identified credit and deposits as key components of the financial system To analyze this aspect, the author focuses on two primary indicators: Outstanding Deposits (% of GDP) and Outstanding Loans (% of GDP) Additionally, similar to the previous section on availability, this thesis will exclude mobile money transactions value (% of GDP) as an indicator due to insufficient data availability across many countries.

Variable Full description Source of data

- Deposit accounts with commercial banks

The number of deposit accounts with commercial banks per 1000 adults in the country

Financial access survey of IMF

-Deposit accounts with credit unions and credit cooperatives

The number of deposit accounts with credit unions or cooperatives per

Financial access survey of IMF

- Mobile money accounts Number of mobile money accounts per 1000 adults

Financial access survey of IMF

- Number of commercial banks branches

Number of commercial banks branches per 100,000 adults in the country

Financial access survey of IMF

- Number of credit unions and credit cooperatives branches

The number of credit unions and credit cooperatives per 100,000 adults in the country

Financial access survey of IMF

Teller Machines (ATMs) per 100,000 adults

Financial access survey of IMF

- Outstanding deposits (% of GDP) Outstanding deposits with commercial banks, credit unions and cooperatives (% of GDP)

Financial access survey of IMF

- Outstanding loans (% of GDP) Outstanding loans from commercial banks, credit unions and cooperatives (% of GDP)

Financial access survey of IMF

Source: Cỉted in the table

The independent variables in this research are derived from the studies of Park & Mercado (2018) and Tran Thu & Dao Hong Nhung (2020), encompassing GDP growth, credit, financial infrastructure (Ft-infra), and financial economy (Ft-eco), with ε representing additional factors; the rationale for selecting each variable was detailed in the preceding chapter.

Countries are classified into various groups based on their annual GDP growth and the level of domestic credit provided by the financial sector, helping to assess the state of financial inclusion and the impact of Fintech on it (Park & Mercado, 2018; Tram Thu & Dao Hong Nhung, 2020) This classification utilizes data from the World Development Indicators database published by the World Bank.

The Ft-infra index assesses the fintech infrastructure of various countries by utilizing three sub-indices: the Mobile index, which measures the percentage of adults with mobile devices relative to the total population; the Internet index, focusing on each country's internet network; and the Electricity index, which evaluates differences in electric coverage among nations This methodology is based on the research conducted by Tran Thu and Dao Hong Nhung in 2020, with data sourced from the World Development Indicators database of the World Bank, similar to the datasets used for GDP growth and income level indices.

Ft-eco is the measurement of the ecosystem that supports the Fintech industry

In their 2020 research, Tran Thu and Dao Hong Nhung evaluated the ecosystem using two key indicators: Start-up Attractiveness, which assesses the appeal of a country's start-up environment, and the Innovation Index, reflecting each country's innovation level This study will retain both indicators while incorporating updated data from 2021, utilizing the World Bank for the Start-up Attractiveness index and the Global Innovation Index database for the Innovation Index.

When analyzing the development of any industry, including Fintech, it's essential to consider not only infrastructure and ecosystem but also factors like customer demand, the number of companies, and their contribution to the country's GDP However, these factors can be influenced by external elements such as the industry's lifespan, marketing strategies shaped by company resources, and cultural contexts, making them unreliable for regression models Consequently, the author adopts the approach of previous researchers Tran Thu and Dao Hong Nhung, focusing on infrastructure and ecosystem as key indicators for analysis.

The development of Fintech is significantly influenced by a country's infrastructure, particularly its internet coverage, electricity availability, and access to smart devices (Ryu, 2018) A robust infrastructure facilitates the growth of the Fintech industry Additionally, the ecosystem, which encompasses the collaboration between government and Fintech companies, plays a crucial role in enhancing the sector Key indicators of this ecosystem include the attractiveness of the business environment and the level of innovation, reflecting the talent pool within the country, both of which are essential for fostering Fintech development.

The data of the model will be collected for 13 countries in the ASEAN + 3 group, including: Brunei, Cambodia, China, Indonesia, Japan, Korea, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam

IMPACTS OF FINTECH ON FINANCIAL INCLUSION

Overview of Fintech in Vietnam

As the data for 2022 is currently unavailable, this thesis will utilize data from 2021 and earlier years The analysis will concentrate on three key aspects: the Fintech market in Vietnam, the infrastructure supporting it, and the ecosystem that fosters Fintech development These focal points are derived from prior research conducted by Park & Mercado in 2018 and Tran Thu.

The report named Fintech ASEAN 2021 that was conducted and published by PricewaterHouseCoopers showed that the Fintech markets of ASEAN countries in

In 2021, the total investment in the industry surged to 3.5 billion USD, marking a nearly threefold increase from 2020 and over 200 times the funding received in 2012, which was only 14 million USD, according to Statista Vietnam ranked third, attracting 11% of the total investment; however, it still lags significantly behind Singapore and Indonesia, which received 44% and 29% of the investment, respectively, as noted in the Vietnam Fintech Report 2021.

Figure 1: Fintech investment of ASEAN countries

In 2021, the investment landscape saw a total of 167 deals, marking a 32% increase from the previous year Singapore and Indonesia led the way, accounting for 49% and 18% of the deals in the Fintech sector, respectively Meanwhile, Vietnam and Malaysia each contributed 9%, together falling short of Indonesia's second-place position.

Vietnam ranks third in investment value and deals, but still trails behind leading Fintech markets like Indonesia and Singapore Notably, in 2020, Vietnam was not among the top investment countries, yet it surged to third place with an 11% share in 2021 Additionally, the number of investment deals rose from 3% of 126 in 2020 to 9% of 167 in 2021, highlighting significant market growth.

Vietnam's Fintech market has experienced significant growth in recent years, with a notable rise in the number of companies and startups specializing in financial technologies According to the Vietnam Fintech Report 2021, the surge in Fintech startups reflects the industry's expanding landscape and innovation potential.

SingaporeIndonesiaVietnamPhilippinesThailandMalaysia

Between 2017 and 2021, the fintech sector in Vietnam experienced remarkable growth, expanding by approximately 255% from 44 companies to 156 (Vietnam Fintech Report, 2021) The payment services segment emerged as the largest, capturing a 24% market share, followed closely by personal lending at 14.9% Additionally, the rise of the Buy Now Pay Later service has transformed consumer financing, allowing customers to make purchases and pay over time after an initial payment Research & Markets predicts that the Buy Now Pay Later market in Vietnam could grow at an impressive average rate of 71.5% annually (Vietnam Fintech Report).

The rise of Buy Now Pay Later services can be attributed to the demands of Gen Z, who prefer immediate purchases over waiting for their paychecks like previous generations This growing market has attracted numerous startups and established companies, including Fundiin, Reepay, Atome, and Movi Fundiin is currently seeking capital to expand its operations in Vietnam, while Atome offers a payment model that divides purchases into three installments, with the first payment made upfront and the subsequent payments due in 30 and 60 days Additionally, Momo and TPBank have collaborated to launch a digital wallet featuring a credit limit of 5 million VND.

3.1.2 The infrastructure of Fintech in Vietnam

To effectively analyze the Fintech landscape, it is crucial to consider not only investment values and domestic products but also the underlying infrastructure, including mobile device accessibility and internet coverage In Vietnam, over 70% of the population uses the internet, with 145.8 million mobile accounts, 95% of which are linked to smart devices Additionally, a report from Appota highlights that Vietnam ranks among the top 12 countries globally for the lowest internet prices and is second in Southeast Asia for the fastest internet speeds.

In an attempt to be more specific about the state of Fintech infrastructure in Vietnam, the next part will bring the data of Vietnam and some other countries

Percentage of individuals own a mobile phone:

Table 3: Percentage of individuals own a mobile device

The data reveals that Vietnam has a remarkably high percentage of mobile phone ownership, consistently exceeding 100% over the past decade, with a low of 128% in 2017 This indicates that, on average, every individual in Vietnam owned at least one mobile phone, showcasing significant technological adoption that surpasses China and closely follows Singapore, renowned for their innovations (Van Hoa, 2023) However, fluctuations in ownership rates were observed, with only about 73.5% of adults owning smartphones by the end of 2021, according to the Telecommunications Authority of Vietnam (TinTuc article, 2022) This highlights the ongoing challenges for Vietnamese authorities to enhance mobile device usage to promote financial inclusion in the country.

Internet coverage over population in Vietnam

The rise of mobile devices has significantly impacted the growth of Fintech, as reliable internet coverage is essential for the effective functioning of most Fintech products and services.

Percentage of individuals own a mobile device

Table 4: Percentage of internet coverage over population

In just over a decade, Vietnam's internet coverage surged by over 200%, increasing from 35.07% of the population in 2011 to 74.21% in 2021, surpassing the average for East Asia and the Pacific, though still trailing behind Thailand's 85.27% Despite 74.21% indicating that one in four people in Vietnam remained without internet access, this significant growth reflects a crucial milestone in expanding internet access in the country Additionally, a report by Vnetwork revealed that by the end of 2021, approximately 95% of internet users accessed the web via mobile devices, highlighting the strong correlation between mobile phone development and internet coverage This progress marks a vital step towards enhancing financial accessibility for citizens across Vietnam.

YearPercentage of internet coverage over population

Table 5: Electricity coverage over population

Among the three indicators used to assess Fintech infrastructure, electricity access stands out as the most significant Over the past decade, Vietnam has achieved widespread electricity access earlier than the global average, as well as that of East Asia & the Pacific and lower middle-income countries This robust electricity network serves as a critical foundation for Fintech development in Vietnam, as mobile phones and internet connectivity rely heavily on a reliable power supply to function effectively.

Figure 2: Sources of electricity in Vietnam, 2021

Vietnam's power network boasts comprehensive electricity coverage and a diverse range of energy sources, minimizing reliance on any single source Coal energy constitutes the largest portion at 32.2%, followed by hydro energy at 28.5% and renewable energy at 27% A 2021 report from Vietnam Electricity highlights a decline in coal energy production from 122 million kWh in 2020 to 118 million kWh in 2021, while renewable energy generation surged nearly threefold, increasing from 12 million kWh to 31 million kWh If this trend continues, Vietnam could achieve a power network primarily fueled by renewable energy, which would reduce pollution and enhance network stability, as wind and solar energy are virtually limitless resources.

Vietnam boasts a promising Fintech market, characterized by a growing number of Fintech companies and an expanding range of innovative products for consumers The country's robust infrastructure, including widespread internet access, mobile device usage, and reliable electricity, supports this growth Nevertheless, significant improvements are needed to enhance the Fintech industry further and create a more conducive environment for its development.

CoalHydroRenewableTurbineOilImportOthers

45 attract more investment, raising the rate of mobile devices owned by individuals and the coverage of internet in the country

3.1.3 The ecosystem of Fintech in Vietnam

The Fintech industry has received a lot of attention from the government of Vietnam despite it is only in the beginning phase of development (Tapchinganhang,

In 2022, the government implemented various initiatives to foster the growth of the Fintech industry, establishing a regulatory framework that balances oversight with support Key measures include verdict 844, aimed at enhancing the startup ecosystem, and ongoing tests by the State Bank of Vietnam to bolster Fintech development (Nguyen Trung Anh, 2019).

Research results

To enhance research efficiency, the author aims to calculate a financial inclusion index independently rather than relying on previous studies Notably, Sarma (2008) developed an index for 45 countries using three dimensions similar to this thesis, while Park & Mercado (2018) expanded this to 151 countries This research will build upon these foundations to provide a comprehensive analysis of financial inclusion.

50 be 13 countries in the group ASEAN + 3 The detailed steps and the results, including regression results will be presented and explained below:

3.2.1 Standardized the small indicators of each dimension

The initial step in the standardization of indicators involves presenting data on a scale from 0 to 1, where 0 signifies the absence of a specific indicator and 1 indicates its complete presence This approach facilitates easier comparisons between countries and across different years.

The accessibility dimension indicators reveal significant variations across countries and over time Notably, Brunei excels in the availability of deposit accounts with credit unions and credit cooperatives, boasting the highest score of 1,000 adults However, it falls short in mobile money accounts per 1,000 adults Similarly, Japan and Korea display contrasting performances in these accessibility metrics.

China excels in bank deposit and mobile money accounts but lags in credit union indicators This disparity is influenced by the advanced banking systems of Japan and South Korea, which held assets worth approximately $21 trillion and $3.725 trillion, respectively, by the end of 2021 Notably, China's scores have dramatically shifted; it initially had poor performance in deposit accounts and strong mobile money scores over the first six years, but in the last four years, there has been a significant increase in deposit accounts and a decline in mobile money scores Similarly, countries like Malaysia, Thailand, and Vietnam show stronger performance in commercial bank deposit and mobile money accounts compared to credit union and cooperative deposit accounts throughout the observed timeline.

China's financial system faces challenges in availability due to its large population, resulting in a lower ratio of bank branches and ATMs per 100,000 adults compared to other countries In contrast, Japan and Korea excel in this aspect, demonstrating a higher number of financial access points throughout the research period.

Several ASEAN countries, including Brunei, Indonesia, Singapore, and Thailand, show good scores in accessibility indicators, but struggle to maintain stability over the years In contrast, Myanmar, the Philippines, and Vietnam rank lower, with Vietnam's highest accessibility score at only 0.087 for credit union branches, while other scores hover between 0 and 0.07 This situation raises serious concerns for Vietnam, which ranked 6th among 10 ASEAN countries in GDP by the end of 2021 and is projected to reach a nominal GDP of $682 billion by 2027, according to IMF data.

Singapore consistently ranks highest in outstanding deposit and loan ratios over GDP among 13 countries studied, followed closely by Japan, China, and Korea In contrast, Myanmar shows the lowest scores, often near zero, while Vietnam performs better than several countries, including Thailand, indicating an increasing reliance on formal financial institutions for deposits and credit However, two critical factors must be considered: the disparity in GDP values among countries and Vietnam's instability in maintaining financial service usage rates over the past decade In 2021, Vietnam's GDP was approximately 366 billion USD, about 72% of Thailand's, suggesting that despite higher deposit and loan ratios, Vietnam's actual figures may still lag behind Thailand's Additionally, fluctuations in both standardized and original financial metrics throughout the research period highlight the challenges posed by varying growth rates.

52 the government to predict the state of the financial system in the future and propose the suitable policies to archive certain goals in economic year (Appendix 4)

Following the normalization of the sub-indicators, the subsequent step involves estimating each dimension using the normalized indicators Utilizing the PCA method and the previously mentioned formula, the author calculated the relative variances or weights of each indicator, as well as the index for the dimensions.

The PCA results indicate that deposit accounts with commercial banks and credit unions significantly influence financial inclusion accessibility, accounting for 48.5% and 36.6% respectively, while mobile money accounts contribute less due to their nascent development in countries like Laos, Myanmar, the Philippines, and Vietnam The reliance of mobile money accounts on stable internet, electricity, and mobile device usage poses a disadvantage compared to traditional accounts, which can be accessed without these requirements This challenge is exacerbated by low internet and electricity availability in some regions, limiting the effectiveness of mobile money in enhancing accessibility Notably, Brunei and China scored higher in this dimension during the research period but lacked consistency over time, unlike Japan, Korea, and Singapore, whose overall scores, although lower, demonstrated greater stability.

Over a decade of research, Japan and Korea maintained a stable financial inclusion margin of approximately 0.2, while Singapore's scores fluctuated between 0.18 and 0.2 In contrast, Vietnam exhibited an unstable growth rate in financial accessibility, ranking lower in comparison to its peers However, despite this instability, Vietnam showed an overall increase in its financial inclusion score from the beginning to the end of the study period, indicating positive progress in the country's financial inclusion efforts.

The analysis of the availability dimension of the financial inclusion index across 13 countries revealed significant disparities among various indicators The PCA conducted using SPSS indicated that the branches of commercial banks and credit unions contribute 56% and 29% to this dimension, respectively, while the number of ATMs per 100,000 adults accounts for only 15% This inequality can be attributed to the relatively small variation in the number of commercial banks and credit unions, which ranged from 22 to 30 units over the past decade In contrast, the differences in ATM availability between countries are substantially larger, being at least 7 to 10 times greater This large variance diminishes the effectiveness of the ATM indicator in representing the availability dimension, thereby lowering its overall weight The total scores for the availability dimension were calculated for all 13 countries using a weighted average formula and are presented in the accompanying table.

The top countries in this dimension include Brunei, Japan, Korea, Indonesia, and Singapore, with scores ranging from 0.4 to 0.8 over the years Japan, Korea, and Singapore are recognized as prominent global financial centers, while Indonesia, a developing nation, boasts a significant GDP of 1,186 billion USD as of the end of 2021, representing 0.53% of the world economy (World Bank, 2021).

Brunei, despite having a less robust economy compared to its ASEAN + 3 counterparts, benefits from a small population of under 500,000, resulting in a higher ratio of financial branches and ATMs per 100,000 adults (World Bank, 2021) In contrast, Vietnam exhibits the lowest financial service scores within the group, with a decade-high of only 0.05, and a noticeable decline in performance from 2012 to 2021 This trend indicates an unequal distribution of financial services in Vietnam, highlighting the urgent need for targeted solutions to enhance the efficiency of its financial system in the future (Appendix 3).

Availability is a crucial aspect of financial inclusion, reflecting the usage of financial services through the ratio of outstanding deposits and loans to a country's nominal GDP over time Analyzing this dimension using Principal Components Analysis in SPSS revealed that outstanding deposits and loans contribute 80.73% and 19.27% to the overall score, respectively The lower weight of outstanding loans is likely due to significant disparities among countries, with outstanding loan measurements often exceeding 100%, while outstanding deposits show much less variation This variance affects the indicator's weight, as some countries have not fully integrated loans into their financial systems In terms of standardized scores, Singapore excels with five years scoring 1 point and others above 0.8, while Myanmar ranks the lowest among the 13 countries studied This disparity is expected, given Singapore's status as a leading financial center, where outstanding deposits and loans have consistently surpassed 133% over the past decade, contrasting sharply with Myanmar's performance.

While China, Japan, and Korea may not have the highest overall scores, they excel in outstanding deposits and loans relative to GDP, indicating effective financial service utilization In comparison, Vietnam, despite lower standardized scores, demonstrates strong financial usage, with outstanding deposits and loans exceeding 100% of GDP during the research period This suggests that Vietnam has maintained a solid rate of financial service utilization, particularly as its GDP has significantly increased However, there was a notable decline in scores from 2020 to 2021, primarily attributed to the impact of the Covid-19 pandemic, a trend also observed in other countries such as Thailand, the Philippines, Malaysia, Korea, and Japan.

Result discussion

The regression analysis confirms that Fintech significantly influences financial inclusion across 13 countries Notably, in high-income countries, there is a positive correlation between the Fintech ecosystem and financial inclusion, while the relationship with Fintech infrastructure is negative Conversely, in lower and higher middle-income countries, both infrastructure and ecosystem variables exhibit positive relationships with financial inclusion, with higher beta values observed in the higher middle-income group compared to the lower middle-income group.

Recent studies indicate a notable alignment between this thesis and previous research on financial inclusion Notably, findings from Samara (2008) and Pard & Mercado (2018) highlight that countries recognized as global financial centers, such as Japan, Korea, and Singapore, exhibit higher levels of financial inclusion Additionally, earlier works by Ozili (2018) and Gomber et al (2016) affirm the positive influence of Fintech on financial inclusion, while also acknowledging the challenges associated with its rapid integration Furthermore, a study by Vietnamese researchers Tran Thu & Dao Hong Nhung (2022) utilized a regression model to establish a positive correlation between Fintech and financial inclusion, mirroring the conclusions of this research.

The chapter concludes that the regression model confirms both hypotheses of the thesis, demonstrating that Fintech significantly impacts financial inclusion, with varying effects across countries based on income levels It highlights Vietnam's current financial inclusion status as being relatively low compared to other nations in the study Despite being in its early stages, Vietnam's Fintech sector shows promise due to improving internet and electricity infrastructure, government support, and a growing pool of talent and startups The upcoming chapter will propose solutions to enhance financial inclusion and Fintech development in Vietnam, address limitations for future research, and provide a concluding overview.

SOLUTIONS, LIMITS OF THE RESEARCH

Orientations for Fintech and financial inclusion

Building on the previous chapter's findings that Fintech significantly influences financial inclusion, particularly varying by income levels, this section proposes strategic recommendations for governments and financial institutions To enhance financial inclusion and leverage the benefits of Fintech, targeted actions and policies should be developed that address the unique needs of different income groups.

4.1.1 Orientation to develope Fintech in Vietnam

The Vietnamese government has acknowledged the crucial role of Fintech in shaping the future of finance and has implemented supportive policies to foster the industry's growth and development in recent years.

Establish committee relating to Fintech

On March 16, 2017, the Governor of the State Bank established a Fintech committee to develop a framework tailored to Vietnam's unique conditions (Dinh Bao Ngoc, 2022) This committee aims to facilitate communication between the government and Fintech companies, enabling both parties to collaboratively address challenges and enhance the quality of the Fintech industry in Vietnam Additionally, the committee is tasked with formulating strategies for the deployment of Fintech products, implementing them in controlled areas before nationwide application.

Tax incentives for Fintech companies

The Vietnamese government is actively promoting the Fintech industry by establishing a dedicated committee and framework, alongside offering tax incentives to attract both foreign and domestic companies As outlined in Decree 41 of 2016, businesses operating within the Fintech sector benefit from reduced business taxes, fostering a more conducive environment for growth and innovation in the industry.

66 in order to boost the development of Fintech, with the reduction is about 3 to 5% comparing to normal companies (Dinh Bao Ngoc, 2022)

4.1.2 Orientation for financial inclusion in Vietnam

The government has implemented a financial inclusion strategy aimed at 2025, with a vision extending to 2030, to ensure that all citizens and businesses have access to affordable financial services and products This initiative emphasizes the importance of providing these services through trustworthy and registered organizations.

The government aims for at least 80% of adults to have accounts at financial institutions, with 25-30% actively saving money It also targets a 25% annual increase in cashless transactions Additionally, the goal is to ensure that 250,000 small and medium enterprises obtain credit from commercial banks or other financial institutions Insurance revenue is expected to contribute 3.5% to the nation's GDP, while 70% of adults are projected to have a credit history recorded in the State Bank's system.

Recommendations to connect Fintech and financial inclusion 66 1 Encourage the use of blockchain in finance

4.2.1 Encourage the use of blockchain in finance

Blockchain technology extends beyond cryptocurrencies like Bitcoin, offering potential solutions to global corruption challenges that hinder economic growth By implementing blockchain on a large scale, it can transform the financial sector, streamline business operations, and create new opportunities for those at the grassroots level This innovative technology enhances transaction speed, reduces paperwork, and promotes secure data exchange Companies worldwide, such as Disberse, are actively exploring practical applications of blockchain to improve funding distribution processes.

67 provide transparency in how funds are spent using blockchain There are other examples such as BitPesa, Banqu, and UCash in Kenya, Indonesia, and India as well

In Vietnam, there is a notable absence of companies dedicated to leveraging blockchain technology to combat corruption and enhance efficiency in the financial system It is crucial for the government to incentivize both domestic and foreign investments in blockchain to foster greater financial inclusion, given its diverse applications Potential solutions include implementing tax reductions, promoting fair competition through effective regulation, and organizing technology contests to provide a platform for innovators and startups to showcase their products.

4.2.2 Microfinance can be used to increase access

A significant portion of the global population, particularly in developing countries, encounters barriers when attempting to access financial services like loans, deposit accounts, or credit cards Vulnerable groups, including women, low-income individuals, and the unemployed, struggle to integrate into an inclusive financial system due to insufficient collateral, unstable income sources, and overall financial instability Fortunately, microfinance presents a promising solution to these challenges, offering a pathway for financial inclusion and empowerment.

Microfinance is a financial service designed to provide small loans, known as microcredit, to unbanked and underserved individuals or households (Protium, 2023) These loans can be utilized for various purposes, including business ventures, education, healthcare, and home construction Unlike traditional loans, microfinance loans typically involve smaller amounts and often do not require collateral By offering these financial solutions, microfinance empowers users to overcome barriers associated with conventional credit, reducing their reliance on high-interest informal loans for their financial needs.

4.2.3 Establish framework to protect customers

In developing countries like Vietnam, customers in the financial system often face potential abuse and unfair treatment from service providers Recent investigations revealed that employees of commercial banks have been pressuring customers to purchase insurance products to access other financial services This practice not only strains customers' financial resources but also erodes their trust in financial institutions As a result, customers may hesitate to engage with providers for essential services such as deposit accounts, loans, and credit cards, fearing issues related to asymmetric information and the misuse of their personal data for fraudulent activities, terrorism, or money laundering.

To mitigate risks and uphold customer trust, the roles of government and authority figures are crucial They must establish a legal framework that safeguards customers, particularly those with low incomes, and implement measures to deter financial institutions from acting against customer interests Additionally, it is essential to develop a reliable response system that allows customers to report any illegal or irresponsible activities by commercial banks and other financial institutions.

4.2.4 Attract the talent and push the demand for Fintech

Talent is a crucial factor in the development of the Fintech industry in Vietnam, where a significant shortage of skilled workers poses a challenge A survey by Vietnambanker reveals that while over 90% of the labor force possesses professional skills in finance, many lack expertise in the Internet of Things and have inadequate foreign language skills (Yuric A Hannart, 2023) Addressing this skills gap can be achieved through scholarships from colleges and universities, as well as by fostering technology competitions within the country.

Customer demand is essential for the success of Fintech; even the best products cannot thrive without customer awareness If consumers are unaware of these offerings, the industry's potential for development remains limited.

69 can enhance the demand for Fintech products by hosting discussions with Fintech developers, implementing targeted marketing programs, and showcasing the application of Fintech in government agencies as exemplary models for public adoption (Dinh Bao Ngoc, 2017).

4.2.5 Increase the use of biometric data in the system

Biometric data is a transformative Fintech technology that enhances financial inclusion by utilizing unique physical characteristics—such as fingerprints, facial recognition, and DNA—to verify transactions This innovation addresses a common challenge faced by users of financial apps: the difficulty of remembering multiple PINs and passwords, streamlining the authentication process and improving user experience.

With the integration of biometric data, users can easily verify transactions using their fingerprints or facial recognition, eliminating the need to remember complex identification numbers Additionally, the global infrastructure of the internet, electricity, and smart devices allows many financial institutions to offer online verification, providing convenience for customers who may not be able to visit physical branches.

In Vietnam, many commercial banks offer digital apps that enable customers to open accounts and access essential banking services without visiting a physical branch These apps provide various verification methods, including biometric options and traditional passwords or PIN codes, allowing users to choose their preferred security measure However, face recognition technology can sometimes lead to frustrating experiences if users struggle to position their devices correctly To enhance user experience, banks should consider improving facial recognition processes, possibly through advanced artificial intelligence Additionally, while biometric data enhances security, it also raises concerns about potential theft and misuse for illegal activities such as fraud and cybercrime.

Understanding customer demand is essential for all companies, including those in the Fintech sector Businesses must clearly identify their target audience to effectively tailor their products and services.

To develop a market-appropriate strategy, it's essential to understand how much potential customers are willing to pay for 70 different products (Imane Adel, 2023) This analysis can be achieved through customer surveys, leveraging secondary data from previous companies, or collaborating with venture capital firms in the country.

Limitations of the study

Every research study has its limitations, making it essential to identify these constraints for future investigations By acknowledging the study's limits, authors can pave the way for subsequent research aimed at addressing these gaps and enhancing the body of knowledge in the field.

This research utilizes secondary data sourced from established databases like the International Monetary Fund and the World Bank, rather than collecting information through direct methods such as surveys or interviews The primary advantage of using secondary data is the significant savings in time and resources, while a notable drawback is the potential lag in data relevance For instance, the most recent data available for this study is from 2021, which is two years behind the current year of 2023 This delay may lead readers to draw inaccurate conclusions due to the outdated nature of the information.

In research involving regression models, sample size plays a crucial role in determining the significance of results Generally, larger sample sizes yield more meaningful insights In this study, the author's inability to obtain data from other comparable countries limited the analysis to 13 nations within the ASEAN + 3 group, resulting in a sample of 130 units over a decade Although this sample size is substantial and the SPSS results remain significant, the author hopes for future data updates that would allow for an increased sample size and improved research quality.

Despite the global prominence of Fintech and financial inclusion, there is a notable scarcity of research that comprehensively addresses both topics Most existing studies tend to focus exclusively on either Fintech or financial inclusion, neglecting the interconnection between them Additionally, while some research offers theoretical insights into the impacts of financial inclusion or the advantages of Fintech, empirical evidence remains limited This gap in previous research has posed significant challenges for the author, particularly in defining Fintech and financial inclusion and in determining effective methods for measuring financial inclusion.

As a Vietnamese researcher, the author faced challenges in reading and interpreting studies conducted by foreign researchers, despite prior knowledge in various subjects This difficulty may hinder the author's research capabilities, impacting both the understanding of literature and the accuracy of English spelling.

Chapter 4 descirbe the orientations of the government of Vietnam regarding the development of Fintech and the state of financial inclusion in the country It can be seen that the government has deeply focused on the both areas with committee being established to control Fintech or financial inclusion The government also try to finish the framework for Fintech industry in order to better monitor the industry without hindering the developing process They also use the tax incentives to encourage companies from in or outside of the countries investing in Fintech market of Vietnam and attract more startups talent Vietnam also enacted the strategy with clear aims about financial inclusion with the timeline up to 2025, the strategy can act as a guildline, a direction that the government use to monitor how success they are in improving financial inclusion Finally, the chapter also includes suggestions and recommendations to improve the positve impacts of Fintech and reduce the negative effects on financial inclusion, focusing on building a legal framework, attracting more talent in the industry, increasing the use of biometric data or microfinances

This thesis investigates the effects of Fintech on financial inclusion across 13 countries, utilizing empirical evidence, regression models, and PCA methods The findings indicate that Fintech significantly influences financial inclusion, with varying impacts based on the income levels of the countries studied Additionally, the research highlights both positive and negative effects of Fintech on financial inclusion and offers tailored solutions for Vietnam to enhance the benefits while mitigating the drawbacks.

The research has limitations related to participants' experience and literacy levels, which may affect the accuracy and effectiveness of the proposed solutions The author encourages teachers and interested readers to provide feedback and recommendations to enhance the quality of future research conducted by themselves or other researchers.

Country Year GDPGrowth Credit Infra Eco FIIndex

2 Standardizations and dimension score (Accessibility dimension):

3 Standardizations and dimension score (Availability dimension):

4 Standardizations and dimension score (Usage dimension):

5 Model summary of high-income countries:

Table 15: Model summary of high-income countries

1 0.876 0.768 0.741 0.064 1.533 a Predictor: (Constant), GDPGrowth, Credit, Infra, Eco b Dependent variable: FIIndex

6 ANOVA result of high-income countries:

Table 16: ANOVA result of high-income countries

7 Coeficient table of high-income countries:

Table 17: Coefficient table of high-income countries

8 Model summary of higher middle-income countries:

Table 18: Model summary of higher middle-income countries

1 0.59 0.351 0.34 0.13 1.53 a Predictor: (Constant), GDPGrowth, Credit, Infra, Eco b Dependent Variable: FIIndex

9 ANOVA result of higher middle-income countries:

Table 19: ANOVA result of higher middle-income countries

10 Coefficient table of higher middle-income countries:

Table 20: Coefficient table of higher middle-income countries

11 Model summary of lower middle-income countries:

Table 21: Model summary of lower middle-income countries

1 0.695 0.483 0.436 04 1.620 a Predictor: (Constant), GDPGrowth, Credit, Infra, Eco b Dependent Variable: FIIndex

12 ANOVA result of lower middle-income countries:

Table 22: ANOVA result of lower middle-income countries

13 Coefficient table of lower middle-income countries:

Table 23: Coefficient table of lower middle-income countries

1 Adam Hardy (2022), Investors Don’t Trust Crypto, But They’re Buying It Anyway, retrieved on 18 th April 2023, from < https://www.theolympian.com/money/trust-in-crypto-low/ >

2 Ali Al-Lawati (2022), Fintech Ecosystem, retrieved on 30 th April 2023, from < https://www.linkedin.com/pulse/fintech-ecosystem-ali-al-lawati/?trk=public_post- content_share-article >

3 A Leyshon, S French, P Signoretta (2008), ‘Financial exclusion and the geography of bank and building society branch closure in Britain’, Transactions of the Institute of British Geographers, 33(4), 447-465

4 Andreas Fuster, Matthew Plosser, Philipp Schnabl and Vickery, James Vickery

(2019), ‘The role of technology in mortgage lending’, Review of Financial Studies,

5 Anubhav Agrawal (2019), Does Work Environment Impact Innovation?, retrieved on 17 th May 2023, from < https://www.linkedin.com/pulse/does-work-environment- impact-innovation-anubhav-agrawal/ >

6 Arner, Barberis, Buckley (2015), ‘The Evolution of Fintech: A New Post-Crisis Paradigm?’, SSRN Electronic Journal, 47(4), 1271-1319

7 Ashenafi & Dong (2022), ‘Financial Inclusion, Fintech and Income Inequality in Africa’, Fintech and sustainable finance, 1(4), 376-387

8 Barberis (2011), Psychology and the Financial Crisis of 2007-2008, retrieved on

22 nd April 2023, from < https://papers.ssrn.com/sol3/papers.cfm?abstract_id42463 >

9 Baur & Quaquebeke (2017), The blockchain does not eliminate the need for trust, retrieved on 21 st April 2023, from < https://theconversation.com/the-blockchain- does-not-eliminate-the-need-for-trust-86481 >

10 B Ren, L Li, H Zhao, Y Zhou (2018), ‘The financial exclusion in the development of digital finance - a study based on survey data in the Jingjinji rural area’, The Singapore Economic Review, 63(01), 65-82

11 Camara & Tuesta (2014), ‘Measuring Financial Inclusion: A Multidimensional Index’, BBVA Research Paper, 14 (36)

12 Cole Shawn, Giné Xavier, Tobacman Jeremy, Topalova Petia, Townsend Robert,

& Vickery James (2013), ‘Barriers to Household Risk Management: Evidence from India’, American Economic Journal: Applied Economics, 5(1), 104–135

13 Daniel McAuley (2015), What is fintech, retrieved on 17 th March 2023, from < https://medium.com/wharton-fintech/what-is-fintech-77d3d5a3e677 >

14 Derin Cag (2022), How Fintech Ecosystems Democratize the Financial Landscape, retrieved on 14 th May 2023, from < https://fintechmagazine.com/editorial/how-fintech-ecosystems-democratise- the-financial-landscape >

15 Do Hoai Linh (2018), Đừng chỉ nhìn thấy cơ hội mà quên đi những rủi ro và thách thức của Fintech, retrieved on 28 th April 2023, from < https://cafef.vn/dung-chi-nhin-thay-co-hoi-ma-quen-di-nhung-rui-ro-va- thach-thuc-cua-fintech-20180403000909478.chn >

16 E Horska, M Szafranska, R Matysik-Pejas (2013), ‘Knowledge and financial skills as the factors determining the financial exclusion process of rural dwellers in Poland’, Agricultural Economics, 59(1), 29-37

17 Eswar Prasad (2021), Governments must help manage the risks of fintech, retrieved on 16 th May 2023, from < https://shorturl.at/krwY9 >

18 European Parliament (2019), Fintech (financial technology) and the European Union, European Union

19 Evan Sparks (2017), Nine Young Bankers Who Changed America: Thomas Sudman, retrieved on 20 th March 2023, from

< https://bankingjournal.aba.com/2017/06/nine-young-bankers-who-changed- america-thomas-sudman/ >

20 Ferdinando Giglio (2022), Fintech: A Literature Review, retrieved on 3 rd April

2023, from < https://ccsenet.org/journal/index.php/ibr/article/view/0/46484 >

21 Financial Stability Board (2019), Fintech, Switzerland

22 FINCA (2017), 5 Reasons Why Financial Inclusion Matters, retrieved on 15 th

April 2023, from < https://finca.org/blogs/financial-inclusion-matters >

23 Fintech Times (2021), New Insight from EPA on How Fintech Can Tackle Financial Exclusion, retrieved on 19 th April 2023, from < https://thefintechtimes.com/new-insight-from-epa-on-how-fintech-can- tackle-financial-exclusion/ >

24 Fintech weekly (2016), FinTech Definition, retrieved on 17 th March 2023, from

25 Firstlight (2018), Why Connectivity Is the Key to Embracing Fintech, retrieved on 7 th May 2023, from < https://www.firstlight.net/why-connectivity-is-the-key-to- embracing-fintech/ >

26 First U.S.ATM opens for business (2009), retrieved on 17 th March 2023, from < https://www.history.com/this-day-in-history/first-atm-opens-for-business >

27 Franklin Allen, Asli Demirguc-Kunt, Leora Klapper, Maria Soledad Martinez Peria, ‘The Foundations of Financial Inclusion: Understanding Ownership and Use of Formal Accounts’, Policy Research Working Paperá 6290

28 Frost, Jon, Leonardo Gambacorta, Yi Huang, Hyun Song Shin, & Pablo Zbinden

(2019), ‘BigTech and the changing structure of financial intermediation’, Economic

29 Garry Kranz (2022), What is 6G? Overview of 6G networks & technology, retrieved on 17 th March on 2023, from

< https://www.techtarget.com/searchnetworking/definition/6G >

30 Glossary of Terms (2015), Fintech Ecosystem, retrieved on 15 th May 2023, from

< https://www.meetbunch.com/terms/fintech- ecosystem#:~:text=FinTech%20is%20short%20for%20Financial,of%20one%20hel p%20further%20another's >

31 G Amidzic, A Massara, & A Mialou (2014), ‘Assessing Countries’ Financial Inclusion Standing: A New Composite Index’, IMF Working Paper, 14 (36)

32 Ha Hue (2022), Cuộc khủng hoảng kinh tế năm 2008 đã ảnh hưởng như thế nào đến thế giới và Việt Nam, retrieved on 3 rd May 2023, from < https://infina.vn/blog/khung-hoang-kinh-te-2008/ >

33 His Majesty’s Treasury (2016), UK Fintech – On the cutting edgeá London

34 HYPERLEAD (2022), Vietnam Fintech market report 2021, retrieved on 7 th

2023, from < https://advertisingvietnam.com/hyperlead-bao-cao-thi-truong-fintech- viet-nam-2021-p19903 >

35 International Monetary Fund (2023), Financial access survey, retrieved on 8 th

2023, from < https://shorturl.at/vNPRS >

36 Jagtiani and Lemieux (2018), ‘Do fintech lenders penetrate areas that are underserved by traditional banks?’, Journal of Economics and Business, 100, 43-54

37 Jiapin Deng & Liu Yanchu (2022), Does digital finance reduce the employment in the finance industry? Evidence from China, retrieved on 23 rd April 2023, from < https://doi.org/10.1016/j.frl.2022.102994 >

38 Johannes Ehrentraud, Denise Garcia Ocampo, Lorena Garzoni and Mateo Piccolo

(2020), Policy responses to fintech: A cross-country review, retrieved on 23 rd April

2023, from < https://www.bis.org/fsi/publ/insights23.htm >

39 K Lauer & T Lyman (2015), ‘Digital Financial Inclusion: Implications for Customers, Regulators, Supervisors, and Standard-Setting Bodies’, Brief Note, February, CGAP

40 Khera & Ogawa & Sahay (2021), Measuring Digital Financial Inclusion in Emerging Market and Developing Economies: A New Index, retrieved on 14 th April

2023, from < https://shorturl.at/hnMU4 >

41 Maja Pejkovska (2018), Potential negative effects of Fintech on the financial services sector Examples from the European Union, India and the United States of America, retrieved on 18 th April 2023, from < https://core.ac.uk/outputs/161429545 >

42 Mike Elgan (2023), How Falling Crypto Prices Impacted Cyber Crimes, retrieved on 14 th May 2023, from < https://securityintelligence.com/articles/cryptocurrency-crash-falling-cyber- crime/ >

43 Mohammad Asif, Mohd Naved Khan, Sadhana Tiwari, Showkat K Wani & Firoz Alam (2023), ‘The Impact of Fintech and Digital Financial Services on Financial Inclusion in India’, J Risk Financial Manag, 16(2), 122

44 National Economic Council (2017), A Framework for Fintech, Washington D.C

45 National Innovation Center (2023), Vietnam innovation and technology investment 2023, retrieved from 16 th 2023, from

46 Neelam & Bhattacharya (2022), Financial Technology Solutions for Financial Inclusion: A review and future agenda, retrieved on 24 th April 2023, from

47 Newtopia (2021), Fintech Infrastructure: All you need to know + examples, retrieved on 1 st May 2023, from < https://newtopia.vc/fintech-infrastructure-venture- capital/ >

48 Nguyen Thi Truc Huong (2020), ‘Measuring financial inclusion: A composite FI index for the developing countries’, Journal of Economics and Development, 1859-

49 Nguyen Trung Anh (2019), Hệ sinh thái Fintech tại Việt Nam, retrieved on 28 th April 2023, from < https://tapchinganhang.gov.vn/he-sinh-thai-fintech-tai-viet- nam.htm >

50 N.M Argent, F Rolley (2000), ‘Financial exclusion in rural and remote New South Wales, Australia: a geography of bank branch rationalization, 1981–1998’,

51 OECD (2018), Financial Markets, Insurance and Private Pensions: Digitalisation and Finance

52 Ozili, P K (2020), ‘Financial inclusion research around the world: A review’,

53 Ozili (2021), Big data and artificial intelligence for financial inclusion: Benefits and issues, retrieved on 23 rd March 2023, from < https://shorturl.at/esKM5 >

54 Park, C Y., & Mercado, R (2015), ‘Financial Inclusion, Poverty, and Income Inequality in Developing Asia’, Asian Development Bank Economics Working Paper

55 Park, C Y., & Mercado Jr, R (2018), ‘Financial Inclusion: New Measurement and Cross-Country Impact Assessment’, Asian Development Bank Economics Working Paper Series, 539

56 Peter Englisch & Johannes Rettig (2022), The PwC EMEA Private Business Attractiveness Index 2022, last accessed 5 th 2023, from

57 P T H Van, T T T Huong, & V T T Ha (2018), ‘Kinh nghiệm phát triển tài chính toàn diện tại một số quốc gia trên thế giới’, Banking Science & Training Review,

58 Resolution Foundation (2014), In brief: Financial exclusion, London

59 Roshni Khatri (2022), Role of Fintech in Accelerating Financial Inclusion, retrieved on 16 th May 2023, from < https://shorturl.at/hnNP4 >

60 Ryu, Hyun-Sun (2018), ‘Understanding Benefit and Risk Framework of Fintech Adoption: Comparison of Early Adopters and Late Adopters’, Proceedings of the 51st

Hawaii International Conference on System Sciences, 3864–3873

61 Sarma, M (2008), ‘Index of Financial Inclusion–A measure of financial sector inclusiveness’, Centre for International Trade and Development, School of International Studies Working Paper, Jawaharlal Nehru University, Delhi, India

62 Sharmista Appaya (2021), On fintech and financial inclusion, retrieved on 25 th

March 2023, from https://blogs.worldbank.org/psd/fintech-and-financial-inclusion >

63 State Bank of Vietnam (2019), Hoàn thiện chính sách quản lý Fintech: Đảm bảo lợi ích hợp pháp cho người dùng, Hanoi

64 Storm2 (2023), The Role of Venture Capital in Fintech Innovation, retrieved on

3 rd May 2023, from < https://shorturl.at/CIX14 >

65 Sumit, Agarwal, Qian, Wenlan, Yeung, Bernard Y & Zou Xin (2019), ‘Mobile wallet and entrepreneurial growth’, AEA Papers and Proceedings, 109, 48–53

66 S Athey, I Parashkevov, V Sarukkai & J Xia (2016), Bitcoin Pricing, Adoption, and Usage: Theory and Evidence, retrieved on 17 th April 2023, from < https://www.gsb.stanford.edu/faculty-research/working-papers/bitcoin-pricing- adoption-usage-theory-evidence >

67 Tok & Heng (2022), Fintech: Financial inclusion or exclusion, retrieved on 18 th

April 2023, from < https://www.imf.org/en/Publications/WP/Issues/2022/05/06/Fintech-Financial-

68 Tran Thi Khanh Ly (2019), Tài chính toàn diện tại Việt Nam - đánh giá từ góc độ tiếp cận tài chính của cá nhân, retrieved on 19 th 2023, from < https://thitruongtaichinhtiente.vn/tai-chinh-toan-dien-tai-viet-nam-danh-gia-tu-goc- do-tiep-can-tai-chinh-cua-ca-nhan-25451.html >

69 Tran Thu & Dao Hong Nhung (2020), Fintech’s impacts on financial inclusion, retrieved on 17 th March 2023, from < https://shorturl.at/pzIL9 >

70 Trinh Thi Phan Lan (2022), ‘Giáo dục tài chính cho trẻ em hướng tới phổ cập tài chớnh quốc gia’, Banking Science & Training Reviewá 191, 11-17

71 Trinh Thi Quynh Nhu (2019), Accessing financial inclusion in Vietnam, retrieved on 15 th March 2023, from < https://shorturl.at/iyU34 >

72 Triodos Investment Management (2019), Fintech: A Game Changer for Financial

73 Vietnam: Can it become the Fintech Mecca of the east (2023), retrieved on 15 th

March, 2023, from < https://shorturl.at/ipqzX >

74 World Bank (2021), Global Findex Database, Washington D.C

75 World Bank (2023), Global Financial Inclusion, Washington D.C

76 World Intellectual Property Organization (2022), Global Innovation Index 2021, Australia