Going Global: doing business in Vietnam

Vietnam, a country of 95.54 million people in Southeast Asia, was projected to lead the region in GDP growth in 2020. According to the Asian Development Bank, as of June 2020 the GDP growth rate forecast for 2020 is 4.1% and jumps to 6.8% in 2021. While there are numerous factors for Vietnam’s strong growth, its excellent handling of the COVID-19 pandemic — at this time, it has no reported deaths to the disease — helps ensure the country is keeping the economic momentum going.

Key factors driving the economy include high domestic demand, a strong manufacturing and processing industry, and high foreign direct investment (FDI). The signing of the Trans-Pacific Partnership (TPP) and an EU free trade agreement helps position the country for further growth, as does the government prioritizing training as well as investment in advanced technology and manufacturing. With a relatively low-cost labor force, a young working population and a domestic middle class that has expanded by over 20 million people since 2012, Vietnam is well positioned for long-term continued growth.

Vietnam quick stats

Numbers from multiple sources including Statista and Internet World Stats.

New digital opportunities

Fintech

In 2014, the State Bank of Vietnam (SBV) issued a circular to guide intermediary payment services. Since then, 32 non-bank fintech entities have opened up various types of electronic payment, money transfer and wallet services. Among various other rights and responsibilities, the guidance includes the need to “check, authenticate, update full and accurate information of customers registering to use the services.”

The sector is attracting significant investment, pulling in 36% of the ASEAN region funding for the first three quarters of 2019. Two payment fundings stand out, with MoMo raising $500 million and VNPAY getting $300 million.

Vietnam sees electronic payments and other fintech initiatives as key enablers for increasing transparency and the National Financial Inclusion Strategy. The country has passed both Singapore and Malaysia in the use of non-cash payments, with the number of mobile transactions growing by 98% year-over-year at the end of Q1 2019. According to Allied Market Research, “the Vietnam mobile payments market is projected to reach US$70.9 billion by 2025, up from US$16 billion in 2016.”

eCommerce

While relatively underdeveloped when compared to the region, eCommerce is rapidly gaining traction in Vietnam. If the current annual growth rate of 30% continues, the market size could hit $33 billion by 2025, making it the third largest in Southeast Asia. Three operators — Tiki, Sendo, and Thegioididong — that only operate in Vietnam are already among the top 10 eCommerce platforms in Southeast Asia. The growth in the sector is attracting investment, as well as bringing in competition; Amazon entered the market in 2019.

According to cross-border payment solution provider Payoneer:

• 71% of eCommerce transactions in Vietnam take place on desktop computers
• 18% of purchases are made on a mobile device
• 9% of purchases are made on a tablet or other internet-enabled device

Many analysts suggest that improvements in delivery times, control over counterfeit goods, more availability to credit cards and better protections of personal information would propel the growth of the sector even more.

AML/KYC in Vietnam

The Financial Action Task Force (FATF) — the global money laundering and terrorist financing watchdog — considers Vietnam in compliance with its AML guidelines. “Vietnam has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in October 2010. Vietnam is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process.”

Electronic Know Your Customer (eKYC) verification procedures are new to the country, with the first bank KYC solution available in June 2020. The requirement for physical presence to verify individuals was a significant obstacle to adoption of many financial products, including banking; only 63% of Vietnamese adults have bank accounts and many of those that do have accounts don’t use the services extensively.

However, there does seem to be pent up demand, as a 2017 IDG Vietnam survey found that 81% of customers want eBanking services. With quicker and easier sign-up processes, as well as the more convenient access to services and lower costs of delivery, the conditions are ripe for a boom in online banking.

The introduction of eKYC will also help other financial services prosper. From prepaid cards to insurance, investing in mutual funds to business loads, the entire Vietnam financial marketplace is on the verge of dramatic change as financial institutions proceed with digital transformation initiatives.

Regulatory framework

Vietnam does seem to be open to new technology possibilities; Deputy Prime Minister Vương Đình Huệ stated that “authorities must quickly have access to new business models, and at the same time, enhance supervision to discover and deal with any legal violations related to the activities.”

In a United Overseas Bank survey on fintech in the ASEAN region, “Vietnam was praised by some interviewees for its efforts to promote and to regulate the FinTech industry. They noted that the State Bank of Vietnam has started a FinTech Steering Committee to support the establishment of such firms in the country.”

In the World Bank Group Doing Business 2020 report, Vietnam ranked 70 out of 190 countries. According to a Vietnam Briefing analysis on the topic, “Vietnam has proactively improved its business and investment environment for foreign companies … (and) made noteworthy improvements in making it easier for businesses to access finance and run day-to-day operations.”

According to global law firm DLA Piper, “there is not a single comprehensive data protection law in Vietnam. Instead, regulations on data protection & privacy can be found in various legal instruments.” The Law on Cybersecurity requires onshore and offshore service providers to store data of Vietnamese users in Vietnam.

Expanding to Vietnam

Vietnam is an exciting and quickly growing market. Consider that, as the World Economic Forum puts it, “with such rapid economic growth, the country grew from one of the poorest countries in the world to a comfortably middle-income one.”

As the growth continues at one of the fastest paces in the world, the opportunities continue to develop. With new eKYC procedures it will become even easier to attract and service Vietnamese consumers.

With Trulioo GlobalGateway, you can instantly verify identities and businesses in Vietnam. GlobalGateway also covers surrounding ASEAN countries, including Brunei, Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore and Thailand. Contact your account manager for details or, if you’re not an existing Trulioo customer, please contact Sales for a demo.