Asian Development Bank - ADB Ventures

Southeast Asia’s widespread smartphone adoption rates coupled with its massive economic growth has resulted in a mushrooming of tech startups across the region. Southeast Asia’s growth rate is almost double the world’s average of three percent, with countries like Vietnam scoring even more than double (7.1%) the global average according to The World Bank. As such, it comes as no surprise that tech startups are blossoming here and there.

While early startups focused on filling other verticals like ride-hailing and commerce needs such as Grab and Gojek, these have quickly branched out in recent years into the e-wallet space. The move to fintech is a concerted effort by many aspiring startups to fill the gap in access to financial services — as many Southeast Asian people and SMEs remain unbanked, instead choosing to transact through more traditional means.

It is estimated that around half of Southeast Asia’s 650 million people still do not possess a bank account, while around 450 million people do not have access to lending services. Given the differences in regulation and culture across the 10 Southeast Asia countries, fintech startups have looked to smart partnerships with brick-and-mortar banks and other financial institutions to get off the ground.

For Vietnam, inward remittances from its four million-strong diaspora globally have placed Vietnam in the top 10 countries receiving remittances from abroad. Remittances totalled a whopping US$12 billion in 2015 alone. Successful tech startups in Vietnam primarily engage in e-commerce, fintech, and online services, and now the country is home to the third-largest startup ecosystem in Asia, populated by 3,000 startups.

Since 2016, the Law on Technology Transfer has made it easier for local startups to access tech from abroad and the Decree 38-ND-CP provides additional legal protections to startups and provides increased access to state funding.

Fintech Challenge Vietnam categories

With this supportive regulatory backdrop and a thriving ecosystem, the Fintech Challenge Vietnam — spearheaded by ADB Ventures, the ventures arm of the Asian Development Bank — is a unique chance for fintechs to scale quickly in the local market with support from the State Bank of Vietnam and some of the country’s largest financial services providers.

This second edition of the programme calls on startups from around the world to craft solutions to 11 “challenges” Vietnamese financial players face across three categories: Big Data & AI-enabled Analytics, Financial Services Outreach, and Cyber Security.

In the Big Data category, challenges include the balancing of enriching customer data without violating data privacy, leveraging non-traditional credit data to improve credit scoring models, leveraging alternative data for identity verification, and channeling Big Data & AI to craft micro insurance and micro-investment products.

Under Financial Services Outreach, the challenges include encouraging customers to use mobile banking channels and improve customer experience, educating communities with low financial literacy on financial management, developing user-friendly financial products for unbanked or under-banked communities, and making cashless payment solutions convenient to use for consumers and financially attractive for merchants.

The Cyber Security aspect of the programme calls for startups to address challenges such as how to evaluate transactions to enable effective monitoring and detect unusual/abnormal activities, preemptively detect, identify, and predict financial cyber threats and cybercrime. Lastly, this aspect of the programme seeks to leverage technology to develop a secure and traceable exchange of customer information among authorised users.

Startups with solutions that serve to improve financial inclusion are also invited to apply by the September 25 deadline. Top fintechs will receive funding for their pilot programmes, as well as an opportunity to build networks with strategic and technology decision-makers at the country’s leading commercial banks.

ADB Ventures’ Role in Fintech Challenge Vietnam

ADB Ventures has already, via its Mekong Business Initiative (MBI), launched nine corporate innovation and accelerator programmes focusing on travel tech, fintech, agritech, smart city solutions, and female entrepreneurs in Cambodia, Laos, Myanmar, and Vietnam.

Dominic Mellor, who designed the MBI and now heads ADB Ventures, says the Fintech Challenge Vietnam builds on these previous programmes while staying true to ADB Ventures’ goal to generate a sustainable impact on climate, gender, and inclusive growth.

“Our Impact Labs aggregate demand for technology in specific industry verticals like finance. We identify a handful of large corporate partners and uncover opportunity statements where their bottom-line technology innovation needs intersect with opportunities for sustainable development impact. Then we source startup technologies from all over the world and introduce them as potential solution providers to our corporate partners.

“Similarly, the Fintech Challenge Vietnam is helping banks source fintechs for greater financial inclusion. These fintech solutions help banks reach more customers with an expanded portfolio of financial products and services while giving SMEs, women, remote, and rural populations better access to finance,” Mellor enthused.

ADB Ventures also runs an interrelated SEED programme that makes funding available for pilot partnerships between the corporate partners and startups it has matched up.

“One reality in emerging markets is that corporates are risk-averse. A proof-of-concept trial in combination with a market pilot could be costly and involves risk. Our SEED program provides capital to de-risk the pilot phase, allowing new tech to be deployed and scaled faster,” Mellor explained.

Thriving on partnerships and solutions

For the Fintech Challenge Vietnam, ADB Ventures has aggregated opportunity statements from four leading commercial banks (TP Bank, UOB, Vietcombank, and VietinBank) and telco payments platform Viettel, all in partnership with the Vietnam’s financial regulator, the State Bank of Vietnam. Now, ADB Ventures is looking for fintechs from all over the world to introduce to these corporate partners as potential solution providers.

To help de-risk investments for corporates, ADB Ventures and its investment partner VinaCapital Ventures, have earmarked up to US$500,000 in SEED pilot funding. Another sponsor, Mastercard, will send two winning fintechs to attend and pitch at Mastercard’s customer event at the 2019 Singapore FinTech Festival.

Asian Development Bank - ADB Ventures

Following the close of applications on September 25, shortlisted fintechs will be announced on September 30. These fintechs will then have the opportunity to pitch at a Demo Day on 7 November in Hanoi, which will then be followed by pilot testing from November 19 to February 20, 2020.

“The Demo Day audience will include representatives of the State Bank of Vietnam, commercial bank and telco executives, investors, and leading accelerators managers. A panel of independent judges will award cash prizes to three growth-stage and three early-stage fintech companies,” Mellor said.

He further explained that the Fintech Challenge Vietnam is looking for fintechs that can help corporate partners ‘do well by doing good.’

“Your application should show not only how your fintech solution promotes financial inclusion, but also how it can add value to our corporate partners’ operations,” he said.

Interested startups can apply here. All application details are available on the official Fintech Challenge Vietnam website.

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Featured photo by Asian Development Bank.

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