Great room for growth
Twenty years ago, Vietnamese consumer finance barely existed. Since then, the sector has experienced rapid growth. Between 2010 and 2020, the industry enjoyed an unprecedented annual growth rate of 33.7%, exceeding the overall national credit sector growth level of 17.3%.
The importance of consumer finance to the broader Vietnamese economy cannot be overlooked, especially when 70% of Vietnamese adults are currently unbanked or underbanked and the young, open-minded and tech-savvy middle-class segment is growing very fast, expected to reach 56 million people by 2030. The Vietnamese government sees consumer finance companies (Fincos), who are serving those unbanked or underbanked customers, as a critical positive force to help drive greater financial inclusion and to accelerate economic growth.
The market comprises 16 Fincos, all licensed and regulated by the State Bank of Vietnam (SBV). However, 80% of the market is shared by three main players. The sector is also witnessing more and more M&A activities amongst many additional regional players, as a vehicle to enter this growing market.
Cash loans still account for 60% of the total portfolio. Consumer durables loans and vehicle loans have seen a negative trend in recent years, while credit cards have recorded double-digit growth. This coincides with other Fincos’ plans to boost credit card offerings as a cash loan alternative, following SBV’s direction.
Established in the Czech Republic in 1997, Home Credit was widely regarded as a pioneer in Vietnam, laying the foundations for the country’s consumer finance market when the company started its operation here back in 2008. Now it is the second-largest operator in Vietnam, present in all 63 provinces nationwide and serving more than 13 million customers.
Since its early days, with the vision to be the partner of choice for customers’ daily financial needs, Home Credit has developed a reputation as a role model for introducing disruptive and innovative products to the Vietnamese market, centered around responsible lending and tech-driven solutions, and viewed as the ‘Most Desired Brand’ in the market.
Home Credit has maintained a best-in-class NPL ratio, thanks to a strict responsible lending approach as well as a digitalized, robust risk management system.
Digital Innovation in facing Covid-19
The Covid-19 pandemic has brought about a permanent and massive surge in the adoption of digital technologies. During Vietnam’s numerous lockdowns, citizens turned to the internet for solutions to the challenges they faced. A significant number embraced new digital services; 41% of all digital service consumers were new (higher than the Southeast Asian average), with 94% of these new customers stating they planned to continue using those services post-pandemic1.
Consumer finance companies are now under pressure to accelerate their digitalization plans. Local and foreign-owned FinTech businesses have begun to emerge in greater numbers as well. More innovative and disruptive products and services are being quickly rolled out into the market.
Mobile apps and simple online processes are amongst the key strategic priorities of Fincos. With the boom in e-commerce and digital payment, Buy Now Pay Later (BNPL) has also become a popular approach adopted by many FinTech and traditional operators. Add to this a new mobile money pilot scheme backed by major Telco operators and there is likely to be even greater competition in the market in the future.
Regulators are watching these developments closely and working on a special sandbox scheme to trial new business models, technologies, and products.
Driven by the promise of making customers feel good and the core nature of a market pioneer, Home Credit has quickly accelerated its push for various digitally transformational initiatives. These include virtual credit cards, online BNPL, a revamped Mobile App, QR code payments and a 24/7 virtual assistant, leveraging the strength of an advanced data analytics and AI system.
“Many business leaders I meet often tell me how excited they are by the opportunities for growth in Vietnam. They are absolutely right, it’s a dynamic, thriving market with a huge amount of potential. It is our role in the consumer finance sector to open doors to greater financial and digital inclusion, especially amongst the growing young and tech-savvy middle-class, hence, unlocking enormous opportunities for the population and the economy. We know that our customers are always demanding more flexibility, innovation and opportunities to engage. It’s up to us to continue to deliver on that.”, explains Annica Witschard, CEO of Home Credit Vietnam.
In addition, Environment, Social and Governance (ESG) principles guide the business direction of the Home Credit. At the end of 2021, Home Credit Vietnam was awarded a certificate of merit by SBV for its contributions to the prevention of Covid-19.
Source: HERE
Author
Home Credit Vietnam