The number of fintech companies have increased rapidly in Vietnam in recent years as the industry has high growth potential while the government encourages cashless transactions.

Vietnam’s fintech market is expected to reach US$7.8 billion in 2020.

The competition in the Vietnamese fintech market is becoming tough, with forecast that only a few big players, with financial support from foreign investors to gain the highest number of customers, can thrive in this crowded market.

NextPay Holdings, which has been recently set up by a merger between e-wallet service VIMO and point-of-sale startup mPOS, aims to raise US$30 million from foreign investors as it seeks an upper hand in the Vietnamese fintech market in the context that a major shakeup in the local fintech industry is on the way.

 According to Nguyen Hoa Binh, chairman of NextPay, now is a good time to merge it up and raise a bigger round to dominate the Vietnam market in the next three years.

The fintech industry has a small profit margin, Binh explained, forecasting that in the next two or three years, up to 70 percent of the fintech payment companies in Vietnam will be shut out from the market as the competition in the market heats up.

 Sharing the same view, Marc Einstein, chief analyst at Japan-based IT research and advisory company ITR, told the media that companies in Southeast Asia are seeking to hop on the wave created by the success of Chinese digital payment giants AliPay, operated by Alibaba Group Holding, and WeChat Pay, run by rival Tencent Holdings.

 It's very much a gold rush as only a few players will ultimately be successful in a country like Vietnam, Einstein said, noting it will be a bloodbath with only one winner, maybe two at a maximum.

 Under the fierce competition, the market has also seen MoMo, the most popular e-wallet in the country, raise US$100 million from US private equity firm Warburg Pincus this year with the aim of gaining a bigger market share, following previous investments of US$25 million from Standard Chartered and US$3 million from Goldman Sachs.

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 The number of fintech companies have increased rapidly in Vietnam in recent years as the industry has high growth potential while the government encourages cashless transactions. Reports from the Vietnamese central bank showed the number of fintech companies in the country rose from 40 to almost 100 in 2016-2018.

 The country has 29 licensed non-bank payment intermediary services as of February, besides more than 40 banks providing mobile payment services.

 According to a report on Vietnam’s fintech growth potential released by APAC-focused consulting firm Solidiance, Vietnam’s fintech market is expected to reach US$7.8 billion in 2020.

 Varun Mittal, ASEAN fintech leader at assurance, tax, transactions and advisory services provider Ernst & Young, said that Vietnam has become one of the highest potential markets for fintech development thanks to the golden population structure with a large number of population using smart phones, as well as high consumption growth and low unemployment rate.

 In addition, Vietnam’s government also plays a crucial role in facilitating a conductive environment for fintech to flourish. The National FinTech Steering Committee advises the government on the development of financial services ecosystem, including a legal framework to ensure market growth.

 Government associations such as the National Technology Innovation Fund and other accelerators and incubators have also made the effort to address current difficulties to support and promote Vietnam as a tech-hub in the region by providing valuable opportunities for start-ups in R&D, capital, and professional expertise.

 As the country aims to move towards a cashless society, the government also targets to reduce cash transactions to 10 percent and increase bank accounts in the population by 70 percent in 2020.