Financial technology (fintech) firms offering payment-related solutions have secured the most amount of funding in Vietnam, according to the “Fintech in ASEAN: From Start-up to Scale-up” report released by United Overseas Bank (UOB), PwC, and the Singapore Fintech Association (SFA).

The report also found that Vietnam recorded a sharp increase in overall fintech funding this year, receiving 36 per cent of global funding among ASEAN countries. It received 0.4 per cent of total funding within ASEAN in 2018. The increase was attributable to two large deals: $300 million into VNPay and $100 million into Momo Pay’s Series C fundraising round. Vietnam’s large and underbanked population and high mobile and internet penetration rates were also important drivers to the increase in overall investment in local fintech firms.

The report found that the focus on payment solutions among investors was consistent with economies in the early stages of developing a fintech sector. The increase is also attributable to the government’s move towards the use of mobile payments and its support of the fintech industry through such activities as the Fintech Challenge Vietnam (FCV).

“As a bank that is strongly committed to nurturing the fintech industry in the region, we are happy to see firms in the country, particularly those in the area of payments, attracting increased funding this year,” said Mr. Harry Loh, CEO of UOB Vietnam. “Vietnam’s young and digitally-savvy population make it an attractive market for firms focusing on payment solutions, thus leading to strong investor interest in this area.”

Two in five fintech firms plan to expand into ASEAN

Of the fintech firms surveyed for the report, 40 per cent of those based outside of ASEAN have plans to make a foray into the region, with 13 per cent eyeing Vietnam.

This is also evident from the growth in the number of fintech firms in the ASEAN-6 countries, which increased from 749 to 2,590 over the last five years.

“Expanding into and within one of the world’s most diverse regions is not plain sailing for fintech firms,” said Ms. Janet Young, Head of Group Channels and Digitalization at UOB. “In order to increase their chances of success, it is important for fintech firms to find the right partner to supplement the experience, insights, and connections required to navigate the different regulatory frameworks and operating landscapes across ASEAN.”

Stamina, funding and talent enable successful expansion across ASEAN

Businesses were the main target customer segment for fintech firms (79 per cent). Among businesses, financial institutions made up half (50 per cent) of the target segment, followed by corporates (17 per cent) and small and medium-sized enterprises (12 per cent). Consumers and startups made up the rest of the target segment (21 per cent).

In addition to having the required funding, fintech firms that offer business-to-business solutions for financial institutions and corporates need to be resilient. The report found that as most large companies require multi-level approvals across different stakeholders for any new solutions they implement, fintech firms would need to ensure that they are able to meet their operating expenses over the longer waiting period.

The report also found that fintech firms in ASEAN are generally optimistic about their current and future funding needs, with almost half of those surveyed being confident of raising more than $10 million in their next funding round.

Talent, however, remains a challenge. Fifty-eight per cent of the fintech firms surveyed indicated that a lack of talent inhibited their regional expansion plans.

A total of 139 fintech firms across ASEAN were surveyed for their views on five areas: customer adoption, regulation, operations, competition from fintechs, and funding. The survey also interviewed more than 20 thought leaders from the wider fintech community for a first-hand account of the challenges they faced when scaling their business across ASEAN.