What’s new in this issue? This issue details how the consumer finance market has remained stable or further improved over the last year, even as finance companies have been able to achieve significant rates of return. The competitive dynamics have been thoroughly ratified with the acquisition of many finance companies by Joint Stock Commercial Banks (JSCBs), the change in the market position among CF companies, as well as the rising of new players in the market. One of the main focus of this report is the emergence of FinTech in Vietnam. Until now, FinTech in Vietnam is still at its early stage. However, we believe with a very high mobile penetration rate and change in innovative technology, FinTech will be the next big thing that challenges the existing propositions of current CF companies in the world and in Vietnam, in particular.

Consumer Finance Market in Vietnam has witnessed the fastest growth in 2015

• Following a robust surge in 2014, the consumer finance market in Vietnam has witnessed the fastest growth in 2015 with growth rate of 44.1% compared to 18% in 2014. The outstanding loan balance soared from US$10.5bn in December 2014 to US$15.12bn at the end of 2015.

• Among CF products, Housing loans and home improvement contributed the majority of consumer finance loans over the period. While home appliances & furniture experienced gains, vehicle loan gradually lost its market share.

Competitive Dynamics in Vietnam Consumer Finance Market has also changed significantly with the expansion of many CF companies and increasing competitiveness in traditional CF market

• 4 new CF entities were established by the end of 2015, adding total number of finance companies under bank up to 6 companies. VP Bank Finance Company is taking over the 1^st place from Home Credit in terms of outstanding loans.

• Rising of new type of players such as LoanVi, Mobivi, Dr. Dong, and ACS also challenges the existing positions of current CF players.

Besides, to gain the deeper understanding of the competitive dynamics, we assessed the current state of 6 key consumer finance products including motorcycle, e-bike, consumer durable goods, ICT goods, Cash Loans and Credit Cards. The key findings include:

• The demand for electronic bike is growing, especially in Hanoi and Ho Chi Minh City among the two main groups: students and the elderly.

• Consumer Appliances is expected to record a declining trend in both volume and value terms as many major products will be reaching maturity. However, the market is promising to maintain the proportion as these are necessary items in Vietnamese household.

• Credit Card is a new model being applied by FE Credit and JACCS.

•  As distinct from previous years, segments which are welcoming the new players including Furniture, Education & Healthcare loans and Agriculture Equipment loans

The increasing competitiveness of the traditional CF market in Vietnam has urged finance companies into a new customer approach - Going Digital!

• The consumer finance market has witnessed fiercer competition due to the high number of participants. Finance companies like FE Credit, Home Credit, HD Saison, and ACS needed to compete in term of interest rates and value-added services.

• By leveraging technology, online and P2P (Peer-to-Peer) lending platforms are creating competitive pressures on the savings and lending industry to become more transparent and customer friendly.

• Some new mobile wallet and payment companies aim to leverage existing infrastructure by cooperating with financial institutions: The growing strategic initiatives by major banks and start-up companies compete in the untapped online market.

• Despite its huge potential, the growing FinTech trend could be inhibited by barriers and market hesitations. The business models of many FinTech entrants require that they ramp up to millions of customers or transactions if they are to make the return on investment (ROI) work. Making their products and brand known, with limited name recognition and smaller marketing budgets, will be a challenge. Earning the trust of customers, who are wary of scams through online transactions, will be an even greater challenge.

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