Financing

Financial Technology (Fintech)

Fintech is a dynamic sector at the intersection of finance services and technology. In fintech, financial companies provide capital services and products for startups and businesses entering new markets. Fintech is changing the traditional value chain in the finance sector.

Fintech: Non-Traditional Funding

Crowdfunding

Crowdfunding takes advantage of the larger audience of the web to raise capital for projects that would otherwise have difficulty obtaining funding from traditional banks. Crowdfunding websites make it easy for an average person to invest a small amount in an interesting project. If the business can attract a large number of small investors, it can still raise a significant amount of capital.

Crowdfunding is often used by individual startups and for new projects by small businesses. Entrepreneurs use crowdfunding when they are raising capital and as an initial launch funding before looking for larger loans and investors. Attracting a large crowdfunding audience can show that a market exists for a new product, and can refine an idea with market feedback before investing money in production.

Benefits of crowdfunding

• Provides easier access to capital than with traditional sources
• Provides access to capital for unusual or non-traditional startups or products
• Introduces your vision to target markets and introduce your business to potential customers
• Provides an opportunity to get customer reaction and feedback before production/launch
• Limits the risk of a new product or service through market identification
• Leverages success of crowdfunding to attract larger investments from traditional sources

Steps in the crowdfunding process

1. An individual or team sets a fundraising goal and explains the potential product or service in detail. Successful campaigns often have images, videos, a background story, and profiles of the people involved in the project.
2. The crowdfunding campaign is shared on the crowdfunding website, and on all social networks of the project team. It is important to provide frequent updates with news and offers to get new investor interest.
3. Investors read about the product or business idea and decide whether or not to invest. They can choose how much money to invest from a list of support packages provided by the project organizers. Different investment levels often come with “perks” for the investors, such as a special discount, free sample, or early delivery of the product.
4. The investor’s money is transferred to the crowdfunding website and held until the fundraising term is complete.
5. If the fundraising goal is met, the funds are transferred to the project owner’s account to implement the project. If the fundraising goal is not met, the money is refunded to the investors.
6. If fundraising is successful, it is very important to provide updates to investors as the project is implemented, and send out the promised perks. Otherwise, the project may attract negative press and online reviews.

Types of crowdfunding

Gifts
Some crowdfunded projects are structured as gifts to the project organizer. In this format, people give money to a project without receiving any perks or benefits.

Loans
Sometimes projects receive loans from crowdfunding or from investors. One type of loan contribution is taking a loan in exchange for shares in the business. This is similar to a share purchase, in which an investor is paid back if the company is successful.

Support for charitable projects
Charitable crowdfunding is for social enterprises in need of financial support. People provide funds as a donation and do not receive gifts, profits, or shares in return.

Mixed format
The mixed format combines, for example, a loan contribution with a perk such as lifetime discount member cards.

Crowdfunding websites – International

Indiegogo
Kickstarter

Crowdfunding websites – Vietnam

Fundingvn
iG9.vn
First step
Comicola
Funstart

Crowdfunding Case Study: Startlink

Startlink is a mobile application developed on the Android operating system. Startlink helps connect businesses, startups, and investors, and supports various functions for community-based projects. The Startlink app includes a human resource database to connect people and projects. In addition, Startlink can connect capital ventures, investment funds, and banks with entrepreneurs.

Startlink’s initial objective was to mobilize VND200M from crowdfunding. The project mobilized 112 investors with three investment packages ranging from a silver package at VND5M to a diamond package at VND20M. The project crowdfunded a total of VND2.185B. 

How Startlink used the capital raised
Stage 1: Complete crowdfunding profile and attract 20 million users
Stage 2: VND40M (20%) for costs of hiring professional consultants and developing the Startlink application
Stage 3: VND50M (25%) for costs of maintaining the application
Stage 4: VND80M (40%) for costs of communication and marketing
Stage 5: VDN30M (15%) for costs of hiring customer service representatives

Peer-to-peer lending

Peer-to-peer lending websites create successful direct connections between people who have money to lend and people in need of loans. These platforms help businesses connect with funding without any intermediary lending agencies.

Steps in peer-to-peer lending

1. A business owner or entrepreneur registers an account on a peer-to-peer lending website (for example, http://www.finsom.com/).
2. The business owner creates an application, including a time frame and amount for the loan, and a summary of the skills and expertise in the team.
3. A financial expert from the website appraises the application.
4. If the application is accepted, the business owner agrees to the terms and conditions of the investment and the interest rate.
5. The application may be officially accepted with the requested loan amount, but often there will be some conditions for minimum funds raised.
6. The request for investment is put up on the website, where investors can browse and select from approved investment opportunities.
7. Website staff handle legal procedures related to the loan agreement for all partners.
8. The peer-to-peer lending website distributes the loan funds to the business owner, and sets up accounts for the business owner to automatically make monthly payments on the loan.

Peer-to-peer lending websites

Finsom (formerly known as HuyDong, LoanVi) 
Tima
Trust Circle
Mofin
SHA

Fintech: Managing Your Money

Mobile payment applications

With mobile payment, you can use smartphones as payment tools. Some of the benefits of mobile payment include:

• A convenient, fast way of sending and receiving money
• Simple registration procedures
• Online payment for people who have a mobile phone but no computer
• High levels of information security
• E-payment through domestic e-commerce websites
• Payment both at point of sale and through transfer payments
• The potential for customers to earn discounts and promotions through e-wallet payments

Mobile payment applications available in Vietnam

123Pay
Momo

Digital payment and e-wallet applications

iBox
mPos

Personal finance

Personal finance online tools and software are available to support individual and business financial management and transactions through banks. These tools also support users’ access to their financial information on all mobile devices, even if a computer is not available. These online tools can make money management much easier and quicker for a business owner.

Personal finance tools available in Vietnam

Mobivi, mobile transaction platform
Timo, digital banking

Traditional Financial Funding

Access to financing is always important when starting a new business. To access funding, businesses may seek out venture capital funds, a financial lease company, or government innovation and technology support organizations.

Venture Capital Funds in Vietnam

DGVV
DGVV was the pioneering technology fund in Vietnam in 2008. Its list of investment projects currently includes 41 companies. DGVV’s scope of investment is US$100M.

CyberAgent Ventures
CyberAgent Ventures is a Japanese venture fund made up of five sub-funds, including CA Asia Internet Fund I with capital of US$20M targeting Southeast Asia.

DFJ VinaCapital
DFJ VinaCapital was one of the first venture capital funds in Vietnam. DFJ VinaCapital has investment experience and local market knowledge to help investors clearly understand the business environment in Vietnam.

Finance Companies in Vietnam

Ha Noi

Post and Telecommunication Finance Company Limited
Maritime Bank Finance Company Limited
EVN Finance Joint Stock Company
Handico Finance Joint Stock Company
Vietnam Chemical Finance Joint Stock Company
Vietnam Shipbuilding Finance Company Limited
Vinaconex-Viettel Finance Joint Stock Company
Cement Finance Joint Stock Company
Mcredit
Vinashin Finance Leasing Company Limited
Industrial and Commercial Bank of Vietnam Leasing Company Limited
VCB Leasing Company Limited
Agribank No.1 Leasing Company

Ho Chi Minh City

Mirae Asset Finance Company (Vietnam) Limited
VPBank Finance Company Limited
Home Credit Vietnam Finance Company Limited
HD Finance
Prudential Vietnam Finance Company Limited
JACCS International Vietnam Finance Company Limited
Toyota Financial Services Vietnam Company Limited
Kexim Vietnam Leasing Company
Asia Commercial Bank Leasing Company Limited
Agribank No.2 Leasing Company
Sacombank Leasing Limited
Vietnam International Leasing Company Limited
Chailease International Leasing Company Limited

State-Supported Finance Funds

Small and Medium Enterprises Development Fund
The goal of this fund is to support small and medium enterprises (SMEs) with feasible production plans, business plans, and projects in sectors favoured by the state.

State Capital Investment Corporation

Da Nang SMEs Credit Guarantee Fund

Ha Noi SMEs Credit Guarantee Fund

Ha Noi Business Development and Arrangement Support Fund

Ho Chi Minh SMEs Credit Guarantee Fund