Vietnam has been a country with a steadily improving economy. In a region marked with high economic growth, Vietnam today finds itself competing with growing labour markets in Indonesia while countries like Singapore and Thailand boast of developed markets. But despite such competition between different ASEAN member states, Vietnam has been a steadily developing country. So much so that it often finds itself in lists of fastest emerging economies within Asia. (https://www.verdict.co.uk/vietnams-economy-fastest-growing-in-asia/). Its economy saw a 6.8 percent increase in the gross domestic product (GDP) – higher than the government’s initial target of 6.7 percent – making it one of the fastest growing economies in Southeast Asia.
The countries rapid growth today is partly spurred by its growing working population which is increasingly finding opportunities in formal workspaces. Owing to investments into education, health, and skill building initiatives, many in the current generation are taking up active entrepreneurship opportunities and venturing into areas traditionally not associated with the Vietnamese economy. One such example has been the advent of the finance and fintech sectors in the country.
This keeps in line with global trends. According to Pricewaterhouse Cooper's report, over the past four years, fintech startups have globally attracted over $40 Bn in investments. There has also been a growing trend of traditional, legacy institutions like JP Morgan partnering and acquiring fintech startups that are agile, digital-first companies and are able to bring in new ideas and products tweaked to meet the modern day demand. The report noted that within the Asia-Pacific region, investments saw nearly $15 Bn in fintech investments over a period of two months alone. Such a rapid rise of the fintech sector in some of the most populated and labour intensive regions in the world is sure to cause ripples. And by the looks of it, Vietnam isn’t far behind.
A study projected that the potential of Vietnam's fintech market’s size will reach over $4.4 Bn in 2017 and was projected to reach over the collective size of $7.8 Bn by 2020. This was attributed to several factors, including high internet and smartphone penetration rates in urban centers, increased popularity of e-wallets, rising income and consumption, and a growing e-commerce sector.
By some estimates, the digital payment solutions comprise 89 percent of the fintech market in Vietnam. In addition, reports project the rise of personal and corporate finance sectors that will further boost the digital presence of finance companies and will lead to the start of more fintech companies. This growth can also be attributed to the result of government initiatives to prepare the country for a more digitally ready future; a key component of which remains the government's push to move away from cash-based transactions. In a statement announced recently proposed plans to reduce cash dependence across shopping malls, grocery stores, and distributors to less than 10 percent by 2020. These all would lay concrete future steps for the country fintech sector to grow.
Indicative of a larger shift
Today the growth of the fintech sector is reflective of the larger shift within the ASEAN to a more digitally driven economy. Even within the country, government initiatives are increasingly taking shape to build a workforce of the future.The government is pushing to meet a goal of one million private businesses by 2020, up from around 500,000 in 2018. By opening the market and enabling the free flow of technology and talent, the country aims to hit the right mark when it comes to tapping into the potential of their working population.
The growth of the middle class and the growing number of internet users as a result of rapid development has spurred on the digital economy. Vietnam currently has 54 percent of its population on the internet and the number is expected to grow further in the coming years. The government there has also outlined plans to consolidate the growth of the digital economy by introducing various initiatives. Vietnamese Prime Minister Nguyen Xuan Phuc recently added in a forum discussion that there are plans in place to invest in modernising the national information infrastructure system and connectivity while developing a smart industry based on digital technology. In addition, the country remains attractive as a startup location and a talent pool for larger companies due to the abundance of low-cost, high-tech talent, engineers and coders.
Can low attrition rates be maintained?
Today Vietnam has a large young population who have had access to digital services and may themselves be characterized by being highly digitized and make strong use of the Internet. Although traditional companies might still face high attrition rates that are indicative of an economy undergoing change, Vietnam has been able to curb its overall attrition rates to 8 to 9 percent. This is greatly beneficial when one takes into consideration the fact that countries with a larger working population like India face an average attrition rate of over 19 percent, often hampering growth. A major reason for such low attrition rates in Vietnam, in addition to strong work ethic, can be partly attributed to how effectively companies have been able to tap into growing ‘digital potential’ within the region and provide employees a chance to have long fulfilling careers. Many companies are able to do so by tapping into favorable talent and business conditions.
But while the demand for fintech services grows to provide a boost to fintech companies, access to the right talent remains key to their success. In addition, the country faces a low attrition rate that benefits employers as many can now invest in the long term growth of the employee and as retention rates rise, companies can make the best of talent coming into the newly established sector. But such low attrition rates among a workforce that has traditionally been marked with loyalty and robust work culture, might soon face the test of changing demographic preferences. n Vietnam, employees are in abundance with more than 290 universities offering IT and engineering training and, according to the World Economic Forum, Vietnam has over 100,000 students earning undergraduate and graduate degrees in engineering each year. It remains key to see whether booming startup sectors like fintech are able to maintain their pace of growth retain key talent in the years to come.