Consumption is the driving force to promote growth, develop production and create jobs for the economy. Therefore, consumer finance firms in Vietnam still have a lot of room to exploit, but must solve the problem of reducing risks as well as increasing people's confidence.

It is necessary to focus on developing technology platforms
for consumer loans. Source: Internet 

A market of 100 million people with a rapid increase of income

According to the State Bank of Vietnam's statistics, up to now, there are 22 financial companies licensed to operate with 13 branches, 43 representative offices and 53,516 service introduction points in all 63 provinces and cities. By 2020, consumer credit debts in general reached 1.8 million billion, accounting for 20% of loans of the economy. For consumer finance companies in particular loans are about 130,000 billion dong with more than 30 million customers. Experts said this was an impressive figure for the fledgling consumer finance in Vietnam.

Assoc. Prof. Dr. Dinh Trong Thinh said about 47% of Vietnamese people participate in borrowing money, but only 18.5% borrow from credit institutions and official financial institutions, the rest borrow from relatives, friends or "black credit". Therefore, the development potential of consumer finance in Vietnam is huge with a population of nearly 100 million people, a high and stable economy and rapid growth in per capita income.

However, the fact that Vietnam's consumer finance market is still small and the developed market still focuses on a few large companies, of which the three largest companies account for more than 75% of market share. Therefore, experts said financial companies should review and adjust their business strategy and develop new business models in line with market trends during and after the pandemic, focusing on credit risk management and cost reduction to optimise operations, balance between risk and interest rates accordingly.

Digitalisation reduces risk

Recognising the above problems, financial companies have made significant changes, especially in the use of technology to provide loan management and services. Because obviously, promoting consumer lending will create many risks if it is not well controlled purpose and object.

For successful digital transformation, Nguyen Manh Khang, Director of Information Technology Division of MB SHINSEI Finance Company Limited (Mcredit), said it took time to change people's minds and approach people. If a consumer finance company coordinated with a telecom company to approach people, producing better service products, people would know about the financial services company and the number of customers would increase.

On the new technology of finance companies, Mcredit representative shared that most of consumer finance firms applied technology in providing services, assessing customers' potential and managing loans. Control risks when customers register online by verifying their identity via eKYC, and also by phone number, ID number and digital signature of customers. Advanced technology also helped to classify debts, the debt collection stage; the user's application also had a repayment schedule for customers to track together, ensuring the increase of customers which actively pay debts.

In addition, Nguyen Manh Khang said that about three years ago, banks talked about the story of competition with financial technology companies (fintech), peer-to-peer lending (P2P), but recently, this view had changed. According to Khang, the current issue was that building an ecosystem, so MCredit still went hand in hand with fintech, P2P, and banks.

With a similar approach, FE CREDIT has also been working with many partners and leading Fintech companies such as MyCash Fintech, EY, Vymo and UBank to optimise the application and building a new digital ecosystem. Due to the impact of the Covid-19 pandemic, mobile lending applications such as FE Mobile or $NAP help customers make transactions and procedures anytime, anywhere. So far, FE CREDIT has completed construction of an information technology system of online lending services for more than 230,000 loans, an average of 350 loans per day through the $NAP application.

To reinforce the foundation, according to experts, the management agencies should improve the legal corridor in the management and supervision of financial companies; creating conditions for small and medium-sized financial companies to develop, in order to increase their competitiveness through attracting capital from foreign investors, receiving international preferential capital; at the same time, to focus on developing technology platforms for consumer loans, reducing costs, coordinating to develop new business models such as fintech, P2P and mobile money.