Liew Nam Soon: «The Revenue Opportunity for This Market Is Real»

Non-financial services providers are considering their own go-to-market strategy. Banks should take this as an opportunity to proactively engage these merchants, Liew Nam Soon from EY says in an interview.

In this feature interview, Liew Nam Soon, EY Asean markets managing partner, shares his perspectives about how financial institutions (FIs) can keep an eye on the untapped revenue opportunity in Vietnam following the recent release of the «Driving growth through innovation» in Vietnam roundtable white paper.

Liew Nam Soon, it was observed that banks in Vietnam have not been very «welcoming» of fintech entrants in their market, making collaborative partnership an uphill task. Why do you think that is so?

The Vietnam market is still very much dominated by domestic banks, which have quite a strong foothold in the market. Preliminary data from analysts in early 2018 shows impressive increases in profits by many banks in 2017.

«We see a lot more cross-over of start-ups from other Asean countries venturing into Vietnam»

Economists attributed the profit growth to increases in business demand for loans. Analysts also forecasted that the financial system’s capital supply for the economy is expected to grow about 19.3 percent compared with 2017. With that, it is quite apparent that the Vietnam banks still see a large part of their core business being protected and somewhat safe from major disruptions.

The Vietnam fintech ecosystem is also on a surge due to increased interest by foreign investors and a desire by the local government to boost fintech development so as to build greater financial inclusion.

Yes, we are beginning to see a lot more cross-over of start-ups from other Asean countries venturing into Vietnam. Therefore, it’s not surprising that banks are looking at them as competition at the first instance. This is also partially due to a lack of understanding and appreciation in terms of potential collaborative opportunities with them.

That said, I think there is an inevitable push on traditional banks in Vietnam to relook at their business models, think of new ways of targeting their customers and look at new customer segments as well. These could be achieved via collaboration rather than competition with high potential fintechs.

The U.S. Department of Commerce’s country briefing paper on the Vietnamese banking system estimates that approximately 75 per cent of Vietnam’s 93 million people use limited banking services, while the remaining 25 per cent have not taken advantage of banking services at all. In this regard, what do you think of the saying «people need banking services but not banks»?

The revenue opportunity for this market is very real as fintechs here make an aggressive play on payments and lending. The consumer perception of banks has shifted in that people don’t think about «the need to go to a bank for certain things». Instead, they are more likely to think about «I need to pay for this or purchase this using what».

«The focus is now on the end goal and not the process of how it is achieved»

It is now a lifestyle and needs-driven approach and there is an uptick in the adoption of non-traditional financial services platform to serve that need. Essentially, the focus is now on the end goal and not the process of how it is achieved.

What does that mean for banks?