According to the report of CB Insights, for every 5 USD of venture capital, 1 USD was poured into fintech companies in 2021. That report shows us the strong development of this field of technology companies.
So why invest in fintech? The answer will be given by FinFan in this essay.
More money is being poured into the sector than usual. In the second quarter of 2021 alone, the industry attracted a record $34 billion in venture capital based on CB Insights.
Fintech companies were involved in 372 mergers and acquisitions in the first quarter of 2021, including 21 with a value of $1 billion or more.
In 2021, Visa invested in Tink around 1.8 billion euros – in an online payment in Sweden. In the same year, JP Morgan Chase – the biggest bank in the U.S. took an M&A deal with OpenInvest – a sustainable investment solutions company. On July 7, 2021, a London IPO valued Wise, a money transfer service, at $11 billion.
*The wave of fintech investment continued to grow fast despite the economic crisis in 2022, two of the largest global VC firms, Sequoia Capital and Andreessen Horowitz, actually backed more fintech companies in 2022 than any other category. In both cases, about 25% of their overall investments went into fintech startups.
While global fintech funding slid by 46% to $75.2 billion in 2022 from 2021, it was still up 52% compared to 2020 and made up 18% of all funding globally, proving that investors still have faith in fintech’s future.*
*Sourced by Tech Crunch
In recent years in Vietnam, our fintech has developed well and it has helped us become the third market to invest in Southeast Asia.
According to the Information Monitoring and Analysis system on the network environment (Reputa) in the report on the fintech industry in February 2023 published with the forecast of Robocas Group, Vietnam fintech market will reach $18 billion in 2024.
This is a good signal for the investors and owners of fintech companies, especially the fintech in the online payments field. Because based on the index of this report, cryptocurrency/blockchain is the most shared topic on social media, which is 17 times higher than the second one online payments.
However, cryptocurrencies have not yet been recognized by Vietnamese law and there still have had many strict regulations for this business area.
Therefore, that is a good opportunity for the online payments business model to grow faster. In the contrast, that makes this field has become cramped and difficult to enter. Since 2012, many fintech companies have invested in online payments, especially in e-wallets. However, until now, the market has already been in the hands of the big 3 e-wallets: MoMo, ZaloPay and VNPay, which have over 90% of the total users in the market.
The third and fourth places in this social discussion ranking in January 2023 are Peer-to-peer lending and digital banks or NEOBank.
Although Peer-to-peer lending has still developed potential, this business model has been strictly controlled by the state, because of its illegal matters.
Summarizing these problems, NEOBank or digital bank is the business model, which has both development potential and legal protection.
Many of the top biggest banks in Vietnam has been investing in digital banking model such as MBBank, PVComBank, Vietcombank, etc.
However, the international NEOBank model has untapped potential. Because of this, FinFan has developed with a mission of becoming the pioneer NEOBank in the Vietnam fintech market.
**Boasting some 100 cross-border e-commerce platforms, Vietnam has been ranked among the top five nations in the sector’s growth of 20% a year by eMarketer. Last year, the country’s top four platforms – Shopee, Lazada, Tiki, and Sendo – generated 135 trillion VND (5.73 billion USD) in revenues.
Meanwhile, the scale of the country’s retail e-commerce market was estimated to reach 16.4 billion USD last year, accounting for 7.5% of the country’s goods and service revenues. There were approximately 57-60 million Vietnamese people shopping online, with their spending averaging 260-285 USD.
According to the White Book on Vietnamese E-Business 2022, up to 74.8% of Vietnamese internet users purchased goods and services online, with the most consumed commodities named apparel and cosmetics, household items, and technological and electronic devices.**
With this growth of e-commerce, fintech can cooperate with it to bring modernizing and fast payments for it.
For instance, the users in Shopee, Lazada, Tiki and Sendo can choose the best way to purchase their bill on the internet by using other e-wallets or their owned e-wallet.
Amid the Covid-19 pandemic strongly breaking out in Vietnam, food delivery applications are the saviors for the dining businesses during social distancing.
People of working age often have little time, so they choose to buy food online instead of cooking it themselves. This trend can be seen most clearly in large, modern cities such as Hanoi, Ho Chi Minh City, Da Nang, and Hai Phong, where many companies in online services and high technology are concentrated.
When they buy food online, instead of purchasing with cash or credit card, they can use e-wallets like MoMo, ZaloPay, VNPay, which connect with these big Food delivery apps like Baemin, GrabFood, ShopeeFood and BeFood, to pay for their bill and also have some promotions from these e-wallets.
For those reasons, FinFan hopes that we shared the good information with investors, who want to invest in fintech in Vietnam. From now, the question: “Why invest in fintech?” has a clear answer.