A bright future for Việt Nam’s consumer finance market

Consumer financing is thriving in Việt Nam, driven by a rise in demand for goods and favourable demographics, which offers opportunity for investors. According to Việt Nam’s National Financial Supervisory Commission, consumer lending grew by 65 per cent in 2017, 15 per cent higher than the previous year. The share of consumer credit in the total outstanding loans also increased from about 12 per cent in 2016 to more than 17 per cent in 2017. The market is expected to continue booming in the future.

Việt Nam News speaks with Kim Jong Geuk, General Director of Lotte Finance Vietnam Co Ltd (Lotte Finance), about the prospect of the consumer finance business in Việt Nam and the company’s business strategy in the Industry 4.0 era.

Lotte Card is taking the first steps to enter Việt Nam’s consumer finance market. What do you think of the prospect of consumer finance business in Viet Nam?

In March 2018, our parent company, Lotte Card acquired Techcom Finance. This is the first step for Lotte Card to make inroads into Việt Nam, which is considered the most attractive consumer finance market in Southeast Asia.

Việt Nam’s consumer finance market has been growing in recent years but it is still small compared to other Southeast Asian countries and has room for development. According to our market research, by the end of 2017, outstanding consumer loans were equivalent to 22 per cent of the country’s GDP and 17 per cent of the country’s outstanding loans. It is also reported that most consumer loans in Việt Nam concentrate on housing improvement, which makes the actual loans for consumer durables and consumer services much smaller than the 22 per cent of GDP. As a result, Việt Nam’s consumer finance market is behind other regional peers and growth opportunities are still there.

The market is predicted to expand faster in the future due to rises in household consumption and because of the large young population in Việt Nam.

According to a market report, the proportion of people in their 20s who have a strong desire for new technology products is expected to exceed 40 per cent of the total population. Their per capita income has also been on the rise in recent years. It is predicted that demand for consumer goods will increase together with income growth. Therefore, we can expect bright prospects for Việt Nam’s consumer finance market.

According to the media, high-tech technologies, particularly AI, big data, and fintech, are transforming consumer finance business. What will you do to leverage this technology advancement?

The application of technological advancements can be seen in all industries. The consumer finance industry, which relies on customers' experience, has been investing heavily in the development of digital platforms to improve access for consumers. New forms of financial services are also emerging thanks to technology advancements, such as Peer-To-Peer (P2P) lending.

Our company will take advantage of AI technology and big data to efficiently manage customer-related information in the most convenient way for our customers. We also want to continue developing new digital financial services which is suitable for Việt Nam based on the latest technology.

Our parent company, Lotte Card, has accumulated a lot of experience in consumer finance. Lotte Card is the first one to introduce the palm vein authentication payment solution for credit card industry in Korea. So we’re going to take advantage of the state-of-the-art technology of our parent company to develop financial products suitable for Việt Nam as well as offering our customers unique experience which can only be provided by our company.

What are the challenges for the Vietnamese market?

There are two kinds of challenges in Việt Nam.

The first is the Vietnamese consumer lending market is still dominated by banks. Banks remain the main source for lending which account for more than 90 per cent of the consumer finance market in Việt Nam.

The latest Việt Nam Consumer Finance Market 2018 report, issued by Global Information Inc, showed that banks accounted for 91.6 per cent of the consumer lending market in 2017 while finance companies made up for only 8.4 per cent. On the other hand, we also have to compete with existing finance companies and the increasing number of new entries into the market. As such, we will strive to gain a competitive advantage with our differentiated product portfolio and customer-oriented services.

Secondly, Việt Nam is still a cash-dominated society. The demand for credit cards is very low compared to Korea because of the heavy use of cash in daily life. However, I believe there will be a gradual change since the Vietnamese Government is implementing a policy to turn Việt Nam into a cashless economy by reducing cash transactions.

Market competition is becoming more intense. What will Lotte Finance bring to the market and what are your future plans in Việt Nam?

Lotte Card’s entrant into the consumer finance market will help expand access to financial services for Vietnamese people, including low-income earners. Accordingly, we hope more Vietnamese people will be able to enjoy the financial benefits through our services.

Lotte’s consumer finance business has focused on the convenience of customers. Therefore, we are not only providing customers with the benefits from using Lotte’s distribution subsidiaries in Việt Nam, but also offering them financial products for customers’ daily activities.

We are starting a loan service this month and planning to launch credit card products in the first half of next year. Based on our rich experience in the field of consumer finance in Korea, Lotte Finance will continue to develop products that meet the needs of Vietnamese customers.

Our goal is to become a leading financial services company which is trusted by all customers, partners and stakeholders. In addition, expansion of Lotte group in Việt Nam through this new business also reinforce our group’s commitment to become a company that grows with Việt Nam through social contribution, investing in various business sectors, creating jobs and improving the living conditions of the Vietnamese people. — VNS