<article>Asian e-commerce and fintech companies are on a buying spree in Vietnam to tap the unbanked two-thirds of its population by investing in local payment-licensed firms.</article>

Asian e-commerce and fintech companies are on a buying spree in Vietnam to tap the unbanked two-thirds of its population by investing in local payment-licensed firms.
The fragmented market is creating a fair playground for both local and overseas companies, as well as existing and new players, to gain a leading position. Vietnam has more than 40 payment companies but there is still no clear winner in sight.
In addition to the increasing interest from the VCs, many foreign firms are seeking to partner with Vietnamese digital payment services provider, following a spate of acquisitions and other deals in the last couple of years.
This portal has learnt that the State Bank of Vietnam (SBV) is scrutinising the issue of new e-payment licences, which also means investors looking to tap the Vietnamese market might be bidding higher for licensed operators.
A total of 26 payment gateway operators have been licensed by November 2, said the local central bank. Of these 26 businesses, three are controlled by the SBV, and state-owned enterprises Vietinbank and Electricity of Vietnam. Half of the others used to be or continue to be backed by foreign investors, according to data compiled by DEALSTREETASIA.
<a href="https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg"><img loading="lazy" decoding="async" class="aligncenter size-large wp-image-110610" src="https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg?resize=640,321" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg?resize=1024,513 1024w, https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg?resize=300,150 300w, https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg?resize=768,385 768w, https://media.dealstreetasia.com/uploads/2018/11/payment-in-Vietnam_1.jpg?w=1142 1142w" sizes="(max-width: 1024px) 100vw, 1024px" data-recalc-dims="1" /></a>
Licensed payment firms which attracted foreign investment
Several overseas players have taken control of their Vietnamese counterparts, including NTT Data which <a style="color: #000080;" href="https://www.dealstreetasia.com/stories/ntt-data-takes-over-vietnamese-fintech-firm-vietunion-45410/">acquired 64 per cent of Payoo</a>, the first licensed e-payment firm in Vietnam, South Korean investors’ 65.8 per cent acquisition of VNPT EPay, and <a style="color: #000080;" href="https://www.dealstreetasia.com/tag/alibaba/">Alibaba</a>’s Thailand-based affiliate Ascend snapping up 90 per cent of 1Pay.
In addition, Malaysia’s MOL purchased 50 per cent equity interest in Nganluong.vn but has exited recently to its founders, Nguyen Hoa Binh, chairman of NextTech – the company behind Nganluong.vn, confirmed to DEALSTREETASIA.
Meanwhile, Chinese behemoths and Southeast Asian unicorns have drawn Vietnam clearer in their expansion maps. If Alibaba has Lazada and 1Pay, <a style="color: #000080;" href="https://www.dealstreetasia.com/tag/tencent">Tencent</a> is a strategic investor in <a style="color: #000080;" href="https://www.dealstreetasia.com/tag/vng-corporation">VNG</a>, reportedly holding more than 30 per cent in the biggest Vietnamese Internet firm which owns ZaloPay. Earlier in 2018, Tencent-backed JD.com acquired a stake in Tiki, an affiliate of VNG, to gain a footprint in the digital payment arena.
JD.com said Vietnam was amongst its strategic markets in Southeast Asia. “We have invested in partnerships in Thailand, Vietnam and Indonesia, and believe that these markets have great potential, and that our expertise and experience will help us win in these countries,” said Ling Chenkai, Vice President of JD.com.
He said these markets had several similarities as China had several years ago and huge mobile usage, which well positioned the firm to take its best practices and technology to the region.
Gaining a local licence as a foreign entity might be tough, even as Singapore-based Sea Limited has succeeded with Esports in Vietnam, Chenkai asserted that partnership was a good way to have insights on the local market and get prepared to kick off the business at the fastest speed.
Along with Sea, the Vietnam online payment scene has recently heated up with the strategic investment by <a style="color: #000080;" href="https://www.dealstreetasia.com/tag/grab/">Grab</a> in e-wallet operator Moca, which secured a licence in 2016.
Grab Financial’s head of Vietnam, Nguyen Tuan Anh, commented: “Why are so many players drawn to this market? With more mobile phones than bank accounts, apps that consumers trust and use daily are in an ideal position to drive the adoption of cashless payments.”
However, Tuan Anh believes mobile payment players in the country have found the market challenging due to 90 per cent of the daily transactions still being conducted in cash.
“In a country with little cashless adoption such as Vietnam, it is more crucial than in other countries to provide features tailored to local consumer needs. One example, in a heavily banked country like Singapore, the majority of consumers pay for their mobile data postpaid via subscription. In Vietnam, most users rely on topping up their mobile data prepaid,” he pointed out.
<h3>Local majors in the game</h3>
Payment companies account for some 60 per cent of Vietnamese fintech companies, according to SBV. The fintech sector, which attracted record $129 million venture capital and private equity investments in 2016, is projected to reach $7.8 billion by 2020, according to research firm Solidiance.
The likes of Grab, Tencent and Alibaba might be the biggest winners in Southeast Asia as a big market, but in single countries like Vietnam, they are facing aggressive innovation by local players.
These deep-pocketed overseas investors might need to watch out for a local player called VinID, a unit under diversified conglomerate <a style="color: #000080;" href="https://www.dealstreetasia.com/tag/vingroup/">Vingroup</a>.
Vingroup, which earlier announced its plan to become a technology group, has invested $104 million in the 80:20 VinID joint venture, and is learnt to have hired a bunch of people in the local startup space to lead its tech team. Vingroup has also been known for its aggressive M&amp;A and business diversification. Most recently, a source close to telecom operations spoke to DEALSTREETASIA that the billionaire-led company was eyeing to acquire telco Gtel.
“Vingroup is very aggressive, the possibility of buying a licensed payment firm is just a matter of time,” said Mai Duy Quang, vice president of the Vietnam Software and IT Services Association.
Due to the vast majority of people being unbanked, fintech is also threatening to disrupt the banking system. Banks will lose between $13.1 billion and $15.5 billion in value to non-bank operators by 2022, a Morgan Stanley report found.
But that is what has prompted banks to innovate. Last year, Vietinbank introduced BankPay. Its peer VPBank has supported digital bank Timo and recently launched another, Yolo.
“Banks, which had their advantage in the old days, are realizing that they need to focus on the daily transactions that customers do, and collaborate with the ecosystem,” Shameek Bhargava, VPBank’s head of digital banking, said in a recent interview.

The fragmented market is creating a fair playground for both local and overseas companies, as well as existing and new comers, to gain a leading position. Even as Vietnam has more than 40 payment companies, there has not yet a clear winner in this space.

Asian firms own stakes in half of Vietnam’s licensed payment services

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