Vietnam’s economy is currently thriving; and yet, a good chunk of the population remains unbanked. Without a banking account, these people will be unable to access financial services such as loans and insurance. This state is known as ‘financial exclusion’.
Companies have been trying for the past few years to find a solution for this issue. Vietnam has a rather high internet penetration rate; sitting above the average of Southeast Asia. Additionally, roughly three-quarters of the adult population of Vietnam owns a smartphone. Fintech developers have noticed these trends and spotted and opportunity to help provide financial services to the financially excluded.
The country has a relatively young population with approximately 60 per cent of Vietnamese citizens falling between the ages of 15 and 54. This means that the majority of the country consists of the age group that are most likely to take out loans for homes or business start-ups. As such, Vietnam is ripe for the adoption of fintech, especially in peer-to-peer (P2P).
P2P lending removes the middleman from the process of borrowing money, but also carries with it greater risks for the creditors than in traditional lending institutions. Interest rates for P2P loans typically stands between 10 and 20 per cent, making it attractive for people looking for investments with high returns. This type of borrowing skips over the physical property to be pledged as security, allowing anyone with a smartphone to borrow money conveniently online.
The global P2P market is estimated to be worth US$490 billion in 2020. By then, Vietnam’s own P2P market is expected to be US$7.8 billion, almost doubling from US$4.4 billion in 2017 according to estimates by APAC-focused consulting firm Solidiance. Currently, there are over 40 P2P lenders operating within Vietnam; several of which are prominent due to their size and reach.
While P2P lending can create many socioeconomic benefits, it also comes with potential risks and presents itself as a channel for criminal activities. That is particularly worrying in Vietnam because the sector is currently unregulated. However, Vietnam is taking gradual steps toward regulating the sector through the development of pilot programmes.
Certain P2P lending platforms have already begun making a name for themselves. VayMuon arrived fairly late to the game, but this has not affected its popularity by much due to catering to small, short-term loans. Tima, on the other hand, provides all sorts of consumer loans, from funds for students to mortgages and vehicle loans. Companies such as HuyDong and Lendbiz have also branched out to the P2P market, albeit catering more towards businesses rather than consumers.
This new P2P lending trend is not limited to Vietnam alone. Signs are showing that SEA as a whole are keen on the idea. P2P has already proven itself in the region as a popular alternative financing option for SMEs. The very fact that investment in the region’s startups tripled from US$2.52 billion in 2016 to US$7.86 billion in 2017 is a testament of the vast potential in Southeast Asia’s FinTech startups.