Rapid Spread to Africa
The primary goal of using these technological innovations in financial services is to address the three-dimensional issue of "distance - time - cost." By providing financial services to populations excluded by traditional financial systems, fintech can deliver these services anywhere, in real-time, and at minimal cost. Digital financial services allow individuals without bank accounts to access essential financial services in real-time at affordable prices.
A comprehensive study examined the impact of information and communication technology (ICT) development on financial inclusion across 168 countries, including 48 in Africa. The findings revealed that digital technology has a significantly positive impact on financial inclusion. In particular, financial inclusion rates in Sub-Saharan Africa have increased alongside the development of digital technology.
Similarly, another study in China investigated the impact of large-scale infrastructure development on the introduction of digital finance to rural areas. The empirical results indicated that broadband infrastructure significantly contributes to bringing digital finance to rural regions.
According to research by a group of economic and financial experts, with 12% of transactions conducted by fintech in the MENA region (Middle East and North Africa), the sector is experiencing rapid growth despite being in its early stages. Establishing the necessary technological infrastructure to develop this sector, coupled with an appropriate regulatory framework, will accelerate its growth. This is because fintech has already brought substantial benefits to the economy and financial systems in the MENA region.
Cross-national studies have consistently highlighted the crucial role of fintech in accelerating financial access, filling gaps left by traditional service providers, and offering affordable financial services to the underserved. Despite this, Vietnam remains one of the countries with the lowest levels of financial inclusion, with only 31% of adults having an account at a formal financial institution. However, Vietnam is also among the emerging fintech markets in the region, with increasing digital penetration.
A study by a group of experts investigated the impact of fintech on financial inclusion in Vietnam, analyzing household living standards surveys conducted in 2018 and 2020. The results showed that Vietnamese households have limited access to formal financial services, with significant barriers for rural residents, ethnic minorities, and groups with low education and income levels.
Meanwhile, the widespread adoption of fintech products such as mobile banking, internet banking, and online payments has significantly influenced the use of savings, accounts, ATMs, and credit cards among households.
The Path Forward
To harness fintech's potential to enhance financial inclusion in Vietnam, experts have made several recommendations. These include completing the legal framework for fintech and mitigating high-risk financial services such as peer-to-peer lending, cryptocurrencies, and crowdfunding. Currently, Vietnam only has a legal framework for digital payment services, with no regulations for other digital technology services. Therefore, a comprehensive legal framework is essential to encourage fintech companies and financial intermediaries while ensuring the legitimate rights and interests of service users.
In addition to regulatory improvements, increasing financial access for people and businesses, especially those in low-income, rural, and remote areas, requires the development of information technology infrastructure in underdeveloped regions and the application of digital technology.
Moreover, ensuring that networks of financial service providers operate safely, effectively, and responsibly is crucial. This includes promoting the role of fintech companies, microfinance institutions, non-bank credit institutions, and special types of organizations such as the Social Policy Bank and the Vietnam Bank for Agriculture and Rural Development (Agribank).
Finally, the government must prioritize protecting financial service consumers in the digital age. A comprehensive consumer protection framework that is effective and suitable for the digital environment is necessary to safeguard the interests of users.
Fintech presents an unprecedented opportunity to bridge the financial inclusion gap, particularly in developing countries. However, realizing this potential requires concerted efforts from multiple stakeholders, including the government, private sector, and international organizations.
The government plays a pivotal role in creating a conducive environment for fintech growth. This involves not only establishing a robust legal and regulatory framework but also investing in digital infrastructure, particularly in underserved areas. Policies should focus on encouraging innovation while protecting consumers and maintaining financial stability.
Fintech companies, traditional financial institutions, and technology providers need to collaborate to develop innovative solutions that meet the needs of the unbanked and underbanked populations. This includes creating user-friendly, affordable, and accessible financial products and services.
International organizations and development agencies can provide valuable support through funding, technical assistance, and knowledge sharing. These entities can help build capacity, foster innovation, and ensure that the benefits of fintech are broadly shared.
The integration of technology into financial services has the power to transform economies and improve lives by making financial services more accessible, affordable, and efficient. For countries like Vietnam, the journey towards financial inclusion is challenging yet promising. By leveraging fintech, enhancing regulatory frameworks, and investing in digital infrastructure, Vietnam can ensure that financial services reach every segment of the population, fostering economic growth and reducing poverty. The future of financial inclusion lies in the collaborative efforts of all stakeholders to harness the potential of technology and create a more inclusive financial system for all.
