Here's why foreign bank ownership cap is a boon for Vietnamese fintech

Investors may tie up with fintechs instead of banks.

The policy limiting foreign investors from owning more than 30% in Vietnam’s banking sector could provide a boost to the country’s nascent fintech sector as investors could instead forge partnerships with fintechs in order to penetrate the state-dominated industry, reports Vietnam Net. 

With the government directing its efforts towards strengthening the local banking sector, there have been reports that the administration is limiting or even halting the issuance of new foreign bank licenses in a bid to encourage takeovers and M&As, in effect beefing up the local lenders through consolidation.

In response to narrower market access, foreign investors are looking for ways to tap into Vietnam’s banking market especially as more than half of the population remains unbanked. 

South Korean investors are amongst those looking for opportunities to invest in local fintech companies on top of plans to invest in the country’s banking sector, Michael DC Choi, deputy general director of the Korea Trade-Investment Promotion Agency (KOTRA) told VN.

Big time players like Shinhan Banks and KEB Hana are reportedly eyeing opportunities for investments in the local fintech scene as a way to add value to their products and service offerings.

Also read: Can foreign lenders break Vietnamese banks' legacy problem? 

Foreign lenders could take a page out of homegrown fintech players like Weezi Digital, KIU, Wecash, Enablecode, Instant.vn, and Tradle that have forged partnerships with local banks like BIDV, Vietnam International Bank (VIB), TPBank, VietinBank, Vietcom- bank, and VPBank in order to accelerate their digital banking strategies.

“When the government decides to divest state shares in a state-owned bank or commercial banks that desire to increase their charter capital, the foreign investors can take the opportunity to increase their holdings there or take over the whole corporation should it be allowed,” said Tran Dinh Dung, head of the Underwriting and Financial Advisory Department at Saigon-Hanoi Securities.

Photo from Ngô Trung - Own work, CC BY-SA 3.0