Financial Institution Fintech in Vietnam: From Theory to Practice

June 4, 2024

Based on the foundation of three major tools: advances in information technology, Big Data processing technology, the rapid development of e-commerce, and the digital economy, Fintech operates similarly to financial companies with specific characteristics. So, the current question is whether Fintech companies can be considered a new economic sector. Can they be considered financial institutions? This research partially answers these questions.


Concept of Financial Institution

To answer these questions from a theoretical perspective, it is necessary to review the basic concepts of a financial institution. According to Nguyen Van Ngoc (2006), a financial institution is a type of enterprise established by the government or privately according to statutory laws, conducting business activities related to finance. These are economic organizations acting as intermediaries to transfer investment capital in the economy from lenders to borrowers under contract terms signed in accordance with statutory laws. The role of financial institutions is reflected in the following tasks:

  • Control the flow of money in the economy: With the function of transferring capital from lenders to borrowers under signed contract terms, institutions must control the capital flow process and the efficiency of borrowed capital.
  • Savings in transactions: Through the support of financial institutions, investors enjoy incentives during the borrowing process and have tools to control the operation of borrowed capital, thus minimizing transaction costs and risks.
  • Establish a quick and efficient payment mechanism: Commercial banks and credit organizations, as financial institutions, provide borrowers with transparent payment terms and effective payment tools, ensuring the economy operates smoothly.
  • Risk limitation: A large number of institutions in the economy provides investors with a diverse range of products and services, reducing investment risks by avoiding putting all investments in one basket.

In a market economy, financial institutions are divided into two types:

  • Intermediary financial institutions: Organizations that act as intermediaries with the task of borrowing to lend. These institutions mobilize idle capital in society to lend to individuals and businesses for development, promoting economic efficiency and capital flow.
  • Semi-intermediary financial institutions: Organizations acting as brokers between capital supply and demand. These organizations do not create financial assets but facilitate the transfer of financial assets from sellers to buyers.

Concept of Fintech

According to PwC (2016), Fintech is an intersection of financial services and technology. Here, startups and new market entrants use technology to improve and innovate products and services provided by traditional financial institutions.

According to IOSCO (2017), Fintech describes innovative business models and emerging technologies capable of transforming the financial services industry. These models often provide one or more types of financial services through automation and the use of the internet.

Thus, the term Fintech involves the innovative application of advanced technology in finance, designing and providing digital financial products and services. Fintech startups use technological advances to improve financial services such as payment processes, fraud prevention, financial planning, asset management, lending, and fundraising.



With the rapid advancements in the information technology industry and the shift towards the Fourth and Fifth Industrial Revolutions, technological products have formed the basis for Fintech’s development. Concurrently, global e-commerce and the digital economy have made significant leaps, providing Fintech with tools to direct services efficiently and securely.

Regarding financial products, the development of the internet and the emergence of ATMs have laid the groundwork for non-cash payments. Consequently, Fintech has provided products such as e-wallets, e-banking, budget management, stock investment, installment credit, digital currency, and blockchain technology.

In Vietnam, the concept of Fintech appeared in 2015 with a few financial service companies. According to Statista, before 2015, Vietnam had nearly 50 companies, and by 2017, there were more than 94 companies in the Fintech field, spurred by economic growth and advances in information technology.

Vietnamese Fintech companies have developed electronic payment applications and platforms for online money transfers, bill payments, online shopping, and other financial services. These companies have made services more convenient, changing how users access and use financial services. The State Bank of Vietnam reported that QR Code payments in 2022 increased by over 225% in quantity and 244% in value compared to 2021. In the first nine months of 2023, non-cash payment transactions increased by 49%, internet transactions by 603%, mobile transactions by 608%, and QR Code transactions by 105%. By the end of 2022, there were over 371 million registered and used Mobile-Money accounts, with nearly 89 thousand business points and 153 thousand payment acceptance units. Additionally, the Vietnamese market had approximately 120 million e-wallets, with 3.3 trillion VND maintained in e-wallets for payments. It is estimated that by 2025, the payment sector in Vietnam will continue to grow strongly at a rate of 19% per year.

The rapid development of Fintech companies in Vietnam and the explosion of customers using Fintech services have shown the following achievements:

  1. The Vietnamese Fintech market is developing rapidly and steadily, with superior financial services compared to traditional forms, attracting more customers. Financial companies and commercial banks are gradually adopting Fintech products to expand and establish their market presence, reducing the need for physical branches and thereby cutting costs.
  2. The Vietnamese Fintech market has attracted significant interest from domestic and international investors. Many investors have funded projects of renowned global Fintech companies entering the Vietnamese market. Investments in the Vietnamese Fintech market have reached hundreds of millions, potentially billions, of USD, indicating the market’s strong appeal and explosive growth.
  3. With advances in digital technology and better Big Data processing, Fintech services have improved security.
  4. Fintech has created new business models, transforming traditional financial service channels and products, fostering the emergence of startups and new services.
  5. The application of new technologies like Big Data, Blockchain, biometric identification, and electronic customer identification helps financial institutions collect accurate data, improve customer analysis, enhance service quality, and reduce transaction costs and technical infrastructure expenses.
  6. Fintech services significantly impact economic development in remote areas, providing opportunities for startups and small and micro-enterprises to access essential capital, even for customers facing procedural or geographical barriers.
  7. With information technology advancements, Fintech services operate 24/7, providing customers with convenient transaction and payment options, including international transactions.

From the roles and tasks of each financial institution and the practical operations of Vietnamese Fintech companies, it is clear that Fintech enterprises fully meet all the responsibilities of financial institutions. Additionally, Fintech products meet specific customer requirements quickly, transparently, effectively, and securely, proving their suitability as financial institutions.

Challenges and Limitations

Despite the rapid development of Fintech in Vietnam, several issues need to be addressed:

  1. High risk of cyber-attacks: Since Fintech relies heavily on technology, there is a high risk of cyber-attacks, potentially compromising customer data. High-tech solutions have dual aspects: significant contributions to development and severe consequences if issues arise.
  2. Legal framework lagging behind: The fast-paced development of Fintech services means regulatory frameworks may not keep up. While Fintech products are innovative, ensuring they comply with legal regulations is challenging, leading to potential fraud and loss of public trust.
  3. Market share reduction for traditional banks: The rise of Fintech companies has reduced the market share of commercial banks and financial institutions. The risk measures for Fintech products need time to be verified.
  4. Impact on employment: With the trend towards “paperless” financial institutions and banks, there is a significant reduction in the workforce. Meeting these demands requires high skill levels from employees, which the current education system may not fully support.
  5. Uneven development: Fintech companies in Vietnam’s economy are not uniformly distributed, mainly concentrating in certain areas.

Reasons include:

(i) Incomplete legal framework: Starting with Decree No. 101/2012/ND-CP on non-cash payments, the government adjusted regulations with Decree No. 80/2016/ND-CP allowing non-bank organizations licensed by the State Bank to provide intermediary payment services. The Governor of the State Bank also issued Circular No. 39/2014/TT-NHNN and later Circular No. 23/2019/TT-NHNN with detailed provisions on intermediary payment services. Recently, the government has taken proactive steps to manage and support the Fintech sector, such as Decision No. 316/QD-TTg approving a pilot implementation for using telecom accounts for small-value payments, Circular No. 16/2020/TT-NHNN amending Circular No. 23/2014/TT-NHNN allowing e-KYC technology for small transaction accounts, and Circular No. 06/2023/TT-NHNN allowing electronic means for small-value loans. The government also issued Resolution No. 100/NQ-CP approving the proposal to develop a Decree on controlled pilot mechanisms for Fintech in the banking sector. The State Bank is preparing solutions to promote innovation.

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