An Overview of Vietnam Consumer Finance in 2021

After a year of hardship due to the COVID-19 pandemic, the Vietnam consumer finance market dropped to 10.7% growth. Various factors, such as customers with affected income due to the pandemic, intense competition, changing dynamics, and tightening regulations, exert pressure on the market’s growth.

Despite these, consumer finance succeeded in securing more than 20% of the country’s loan book. Consumer finance in Vietnam was hit hard by the pandemic, but recovery is likely.

Product Composition

In terms of product category, cash loans remain the largest contributor to the growth of the consumer finance market in Vietnam. 

At most finance companies in Vietnam, the modest growth of cash loans is driven by simple lending procedures, low associated expense, as well as rising need for cash in times of economic uncertainty.

At the same time, installment loans experienced negative growth. The negative growth could be attributed to the reduced purchasing power and market saturation.

The only segment that experienced double-digit growth is the credit card. This segment, however, will soon have intense competition as more players are planning to penetrate the segment.

Regulatory Updates

To manage the lingering effect of the COVID-19 pandemic on the economy, the State Bank of Vietnam has issued supported policies to address customers and finance companies affected by the pandemic.

The latest regulation from SBV regulates exemption and reduction of interest rate, debt rescheduling, as well as debt classification assisting customers who are affected by COVID-19.

Vietnam has a 3-year roadmap on the cash loans disbursement reduction. 2021 is the first year Circular No. 18/2019/TT-NHNN (the regulation that stipulates the roadmap) is implemented. 

2021 is also the year where the transition into chip-based cards starts as stipulated under Circular No 22/2020/TT-NHNN.

Key Trends in Vietnam Consumer Finance Market

There are three key trends in the consumer finance market in 2021. First, the acceleration of digital transformation, which is prompted by the COVID-19 pandemic.

Second, the booming of digital payment and the launch of mobile money brought challenges and opportunities for finance companies, especially for their credit card segment.

Third, mergers and acquisitions, which emerged as the game-changer to boost the future growth of the market.

Changing Consumer Behavior

Besides affecting the consumer finance market, the COVID-19 pandemic also changes Vietnam consumer behavior. The most significant change is the need for digitalization in every aspect of life. 

This forces companies, including financial companies, to undergo digital transformation and provide services to consumers online, leaving behind the brick-and-mortar approach.

Priorities shift is another change in consumer behavior. As consumers face uncertainties due to the pandemic, consumers shift their priorities to necessity goods. 

This is proven by the increase in agricultural products and poultry sales in 2020. This trend still continues to 2021 and there are no signs of it slowing down. 

As consumers shift their priorities to necessity goods, luxury goods and discretionary spending have fallen.

In general, Vietnamese consumers’ are receptive to online shopping and e-commerce. Consequently, companies operating in the country must reroute their strategy from brick-and-mortar stores to online channels.Vietnam consumer finance market experienced various setbacks due to the COVID-19 pandemic. However, despite the setbacks, the market continues to grow although not as fast as the pre-pandemic level.

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