Doing Business

A brief look into the BNPL market in Vietnam

Trường Lăng

November 15, 2022

Doing Business

A brief look into the BNPL market in Vietnam

Trường Lăng

November 15, 2022

The buy now, pay later (BNPL) deferred payment method is growing in great popularity among shoppers in Vietnam over the last few years. The growth of the industry across the country has been primarily driven by the rising adoption of BNPL payment options by millennials and Gen Z shoppers.

Moreover, the Covid-19 pandemic has changed consumers’ behavior toward payment methods, subsequently reshaping the payment sector in Vietnam. It is expected that the increased market attractiveness is likely to motivate the rise of both domestic and global BNPL players to jump into the Vietnamese BNPL market in the next three to four years.

What is BNPL in Vietnam

What is BNPL?

Buy Now Pay Later (BNPL) is now no longer new to Vietnamese consumers, especially young shoppers who are tech-savvy and financially proactive. This payment solution allows buyers to purchase goods first and pay later in installments that can be divided over several months depending on the product’s value and the buyer’s personal financial situation.

As of now, with millions of users, Klarna, Afterpay, and Affirm are the biggest companies dominating BNPL’s global market as cited in the latest report conducted by Research and Markets. All three work with thousands of retailers and are responsible for millions of transactions yearly. Up until this point, Klarna – the Sweden BNPL company is leading the industry with a reported $53 billion in GMV, roughly 5 times the world’s second biggest American player Afterpay.  

Top Buy Now, Pay Later players in the world by region

Despite the rapid emergence of BNPL startups, many people still mistake BNPL for credit service since both types of payment solutions let you pay over time, sometimes even without any interest. However, BNPL doesn’t require good credit and has a pre-set payment schedule. Therefore, this payment solution is specifically targeted toward those who do not have a credit card as approval for a loan is nearly instant. 

Yet, BNPL is not just about credit, it is about shopping convenience. 

Unlike other traditional installment payment schemes that require customers to provide a bewildering array of documentation, BNPL providers offer a much more simple and fast registration option that maximizes the advantages of digital technology. 

                                                              How BNPL works

Breakdown of spending patterns 

In Vietnam, motorcycles, smartphones, expensive home appliances, personal care, and other consumer goods account for the majority of BNPL purchases. As BNPL is purely digital and fueled by e-commerce, it’s key for BNPL entrepreneurs to stay up to date with top commodity categories that are leading the market in order to make timely adjustments that fit with consumers’ spending habits. 

      Most popular shopping categories according to online shoppers in Vietnam in 2021. Source: Statista

A report by Statista released in September 2022 revealed that last year, Vietnam’s most popular online shopping categories were Clothing, footwear, and cosmetics at 69%; followed by home appliances at 64%. Technological and electronic devices accounted for 51%, whereas stationary and gifts were at 50%. Food lands 5th in the list with 44%, 8% lower than the same period of 2020. In the travel sector, ticketing represented 27%, with hotel bookings at 25%. These elevated amounts indicate a very robust eCommerce industry in the country.

In addition to traditional transactions paid in installments such as electronics, education, and motorbikes, many financial companies also open up new schemes for air tickets, travel, cosmetics, and more. This creates opportunities not only to help retailers access modern financial solutions to increase sales but also to give consumers diverse options to balance their spending and personal finances.

The state of development of BNPL in Vietnam

BNPL’s first move into Vietnam’s market 

The concept of BNPL has long been popular in the world. Installment plans have been around for years. But why has it become such a bomb lately?

One word: Coronavirus.

The pandemic resulted in many brick-and-mortar retailers being forced to temporarily shut down and saw consumers spend much more of their time at home. Although BNPL plans had already been growing in popularity prior to the pandemic, a shift in consumer spending habits and surging e-commerce adoption during that time really gave the market a significant lift.

According to a report by Worldpay, BNPL accounted for 2.1% – or about $97 billion – of all global e-commerce transactions in 2020. This number is expected to double to 4.2% and rank 5th in the top most popular eCommerce payment methods by 2024. 

Back in Vietnam, BNPL first entered the market in early 2019; however, we can only see the thriving of this zero-interest payment since the eruption of the Covid pandemic in late 2019. Covid-19 has dramatically changed consumer behavior, from predominantly offline to online shopping, and thus, made BNPL one of the most appealing monetary solution models to the population.

Mr. Le Tran Bao Duy, CEO of Kaypay said: ” Vietnam got into the game quite late when compared to other competitors in the world, but it will go very quickly once it catches up with the trend. Within the next three years, I believe that BNPL will become one of the most popular payment solutions among Vietnamese shoppers.” 

Which stage are we in right now?

In general, the BNPL market in Vietnam is still in its early stage of development.

Country-wise BNPL penetration. Source: Twimbit  

A research conducted by Twimbit in 2021 indicated that even though Vietnam’s total e-commerce revenue amounted to approximately $13.7 billion, BNPL only accounted for 2% of the market share across payment methods, which brought in roughly $260 million in transaction volume last year.  

As of 2020, Vietnam has a total population of more than 97 million, out of that number, only approximately 6 million have reported owning personal credit cards and 2.7 million are BNPL users. This number is still quite modest when compared to other countries in SEA, particularly Indonesia and the Philippines with 7.8 million and 3.7 million BNPL users respectively. 

Number of BNPL users in Southeast Asia in 2020, selected by country (in millions). Source: Statista.  

Given the extreme growth prospects, homegrown BNPL startups are constantly looking to raise funds actively for funding their market expansion strategies and take the first-movers advantage in the market, which is expected to grow significantly over the next few years.

Key players dominating Vietnam’s BNPL market 

BNPL products are gaining increasing traction among consumers in Vietnam as both startups as well as established corporations bet big on it. As of now, there’re 2 main types of enterprises that offer BNPL payment solutions to customers: (1) Companies where BNPL is developed as part of the payment option and (2) BNPL startups with BNPL as the core product.

Companies with BNPL as a side product

The majority of BNPL companies of this type are usually built up as a branch or subsidiaries in the whole business system of big finance corporations as well as established banking institutions. 

For example, Home Pay Later, Grab Pay Later and Way4 payment services are developed by Home Credit, GRAB Finance Vietnam (GFG), and Lotte Finance Vietnam respectively. These are among the top finance companies that have the most considerable impact on the BNPL market at present. 

And to give you a better picture on how they’re doing lately, in July this year, Home Credit signed a strategic cooperation agreement with the Tiki e-commerce platform to launch Home PayLater, a BNPL scheme. Home PayLater – a digital financial product with a VND200 billion ($8.7 million) investment – is set to enhance the convenience of consumers’ online shopping experiences.

Together with finance companies in this category are banking institutions. Up till now, Sacombank is still among the top domestic banking institutions offering the most efficient and trustworthy BNPL service. 

BNPL Startups

In Vietnam, many startups and digital payment providers have also jumped on the BNPL bandwagon, such as Ree-Pay, Fundiin, Kredivo, LitNow, Movi, and Atome.

Among the biggest names in the market, Fundiin and Ree-Pay can be listed as the most formidable opponents dominating the game. 

To be more specific, in October 2022, Fundiin has raised over $5 million in the Series A funding round co-led by Trihill Capital and Thinkzone Ventures. This round follows the company’s $1.8 million investment in the Seed round led by Japanese funds Genesia Ventures and JAFCO Asia in September last year. Up till present, the company has cooperated with more than 300 partners, having more than 4000 physical stores across Vietnam’s big cities, including top retailers such as Mobile World, Dien May Xanh, Unilever, Galaxy Play, and Reebok. 

Another well-worth-mentioning female-led startup in this field calls for the name of CEO Olivia Anh Nguyen with her EasyGop. After 2 years of operation, in early 2022, the company was announced to enter a strategic partnership with the top local Payment Gateway. The collaboration boasts 15M+ users and marks its ambition to extend seamless BNPL services to both Vietnamese offline and online retailers in the upcoming years. 

Why now?

It is no surprise that economic drivers that were observed in Europe, Asia Pacific, and North America now find salience in Vietnam. With a growing digital economy, an increasingly affluent consumer population, and low credit card usage, many credit-hungry borrowers may find BNPL as a strong and convenient alternative to satisfy their financial needs.

However, despite these promising developments, BNPL may still present many challenges in Vietnam that entrepreneurs who are about to dive into this potential but risky market should take into serious consideration. For more detailed information on what makes BNPL such a lucrative sector as well as potential obstacles and challenges for investors to watch out for, check out. A promising future holds for newcomers in Vietnam’s BNPL market to gain better insights before jumping into the competition.  

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