Vietnam has experienced rapid economic growth over the past three decades, with approximately 45 million people lifted out of poverty between 2002 and 2018. The country’s GDP also increased by 2.7 times during that time period, and projections from economic forecasters estimate that the country’s digital economy will top US$43 billion by 2025.

Yet despite these impressive economic figures, financial inclusion remains low in Vietnam, with just 30.8% of the adult population holding a bank account with a licenced institution as of 2020. The country also still has a relatively high proportion of the population living below the poverty line.

Greater financial inclusion can reduce inequality

Increasing financial inclusion is widely accepted to foster economic growth by boosting employment and reducing poverty, which is why the Vietnamese government ratified the National Financial Inclusion Strategy earlier this year. The strategy has an ambitious goal of having at least 80% of the population ‘banked’ by 2025, and aims to facilitate better access to basic financial services, including payment services, savings accounts and credit facilities. People on low incomes, those living in rural and remote areas, and micro, small and medium enterprises (MSMEs) are a particular focus of the strategy.

Technological innovation driving financial inclusion

Technological innovation, which has resulted in rapid, continuous change in the financial services sector, is one of the key drivers of financial inclusion across Southeast Asia. These technological innovations include new forms of online payment, most notably e-wallets, which have experienced phenomenal growth in the region, and other new digital banking products that incorporate AI (artificial intelligence), data analytics and cloud technology to provide a personalised customer experience. The fact that these services are all available via smartphones has meant that they have been incredibly popular in Vietnam, which has a relatively young and very tech-savvy population. Vietnam experiences high smartphone ownership and internet penetration across the country, enabling faster roll out and take up of these innovative services.

The Vietnamese government and regulators are also positive forces of change in financial inclusion in the country, with Prime Minister Nguyen Xuan Phuc this month approving a two-year Mobile Money pilot project that will enable people to make low value, in-country purchases via their mobile phones. Enabling payments via mobile phones is sure to stimulate the cashless economy further, and enhance financial inclusion for millions of people.

Vietnam bank TNEX leading the way in cloud banking

While some traditional banks in Vietnam, and across Southeast Asia more generally, have been reluctant to move forward digitally, choosing instead to ‘stay the course’ and pour further resources into their bricks and mortar banking approach, others are taking a more proactive approach to joining the digital banking revolution.

An example of a bank responding to the changing landscape is the new digital-only bank TNEX, launched by Vietnamese commercial bank MSB in 2020 – during the pandemic – which has been designed to cater for Vietnam’s ‘youth market’ of Millennial and Gen Z consumers (to get an idea of the size of this market, projections have Vietnam’s Gen Z population reaching 15 million by 2025). TNEX offers to make life simpler for its customers by streamlining all of their financial needs into one app. Impressively, TNEX is able to offer free everyday banking for individuals and businesses, the first Vietnamese bank to do so.

Cloud technology enabling financial inclusion

Cloud banking technology, such as that used by TNEX, is more agile, significantly cheaper to implement, and enables rapid speed-to-market – with new products launched in weeks, rather than the years that traditional core banking technology requires. These key benefits allow banks, e-wallet providers and telcos to service customers much more cost-effectively, which in turn empowers them to offer services at a reduced cost (or, like TNEX, at no cost) to consumers. This means these financial service providers are able to appeal to a wider customer base, particularly those population segments that have been traditionally excluded from formal financial services. The continued growth in adoption of cloud banking products and services in Vietnam, particularly e-wallets, will undoubtedly have a positive impact on financial inclusion in the country.

It is an incredibly exciting time for Vietnam’s banking and financial services industry, and we look forward to seeing the positive impact that greater financial inclusion will have on the wider Vietnamese community.

By Minh Pham, the General Manager Vietnam, at Mambu, the cloud banking platform.

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