Hanoi (VNA) – “In Vietnam, 72 percent of financialtechnology (Fintech) firms chose to cooperate with banks in their business andservice delivery, instead of entering a direct competition,” according to anofficial from the State Bank of Vietnam (SBV).

The local banking system has made slow changes and lackedflexibility when it comes to application of new technologies, leading to highbanking fees and banking services failing to satisfy customers’ needs, said LeAnh Dung, Director of the SBV’s Payment System Department, at a nationalworkshop on Industry 4.0 and new changes in the finance – banking sector heldin Hanoi on June 12.

Meanwhile, Fintech firms are capable of providinginnovative, flexible and effective technology-based services that help reducefees and enhance customer experience, he noted.

Fintech companies, however, still lack experience in finance-bankingactivities, capital, customers and a system for internal compliance control andrisk management. Meanwhile, banks now have all of these factors, he added.

Therefore, cooperation between banks and Fintech firms isviewed as a foundation for improving financial service assess, the officialstressed. “Fintech is a fast-growing sector and a dynamic intersection betweentechnologies and financial services that reflects the impact of Industry 4.0 onthe banking and finance industry.”

Operating costs of a bank will be cut by 80 percent ifFintech is applied, said Prof. John Wong from the Paris Graduate School ofManagement, adding that thanks to Fintech, banks can reduce the numbers oftransaction offices and unnecessary ATMs; and with only a smartphone, Visa orMaster cards will be no longer needed.

Nguyen Dinh Thang, Chairman of the Board ofLienVietPostBank, pointed out three major challenges to Vietnamese commercialbanks in developing the digital banking system: legal environment, capital, andhuman resources and risk management.

The slow change of related regulations that does not keepup with the pace of technological growth has hindered the development of hightechnologies and digital banking, posing great legal risks for banks andFintech firms, he explained. At the same time, research and development of digitalbanking requires big investment while technological risks and threats ofbanking frauds remain, he added.

The SBV acknowledged these challenges and has beencontinuously investing in upgrading the local financial infrastructure toprevent cyber risks and introduce warnings and new policies on informationsecurity, Dung said.

He urged the commercial banks to strengthen systemsecurity themselves to avoid card frauds that can negatively affect theindustry’s reputation.

The Fintech industry is thriving in Vietnam with themarket value expected to increase from 4.4 billion USD in 2017 to 7.8 billionUSD by 2020, according to a report by Solidiance, a management consulting firmin the Asia-Pacific.

Amongst three segments of Fintech services, the digitalpayment leads the way, accounting for 89 percent of the local market share. Thepersonal finance and the corporate finance, meanwhile, are forecast toexperience respective Compound Annual Growth Rates (CAGRs) of 31.2 percent and35.9 percent between 2017 and 2025.

The main factors driving the Fintech development inVietnam include the Government’s plan to expand the local access to bankingservices to 70 percent by 2020; the respective increases of 52 percent and 72percent in the numbers of Internet and smartphone users in urban areas in 2016;and the growth of e-wallet services driven by the small number of bank accountholders.

The number of e-wallet users in Vietnam was estimated at 10 million people lastyear.

In addition, increasing income is leading to the expansion of the middle classand as a result, consumption is on the rise.

The growth of Fintech has been also fueled by the robust development ofe-commerce which will see the number of users hitting 42 million by 2021alongside the improvement of the country’s regulatory framework.-VNA