Credit has just launched a business accelerator programme called FE Xcelerate for the global fintech community. Why have you chosen to launch such a programme right now when there have been a few of its kind introduced in Vietnam over the past years? Why didn’t you do it earlier or perhaps later on? What do you expect from it?
Basker Rangachari: When many companies launch programmes like this, they launch with a certain purpose. So clearly when they launch for their own purpose, we may not be able to participate or leverage their efforts because they will have their non-disclosure agreements. So for us, the fact that other programmes have been launched is not really a benchmark, simply because we look at our own journey of evolution.
So why do we do it now? Because it actually fits well with the way we’re thinking about the future strategy. And part of our future strategy is a strong belief that customers shouldn’t have to come and search for us to get a loan; but we should be available to them wherever they are and be always ready to finance their needs in real-time.
Prior to 2017, we grew by focusing on our physical network – it was a physical business, largely manual and labour intensive, but well organized operationally. Back then, if you look at our [parent] bank’s result, our profit grew by over 50 per cent. Technically speaking, we could have just sat back and relaxed with such strong performance. But we didn’t because we felt that, at some point in the future, our growth curve will start to flatten. In most physical footprint businesses, the cost will eventually grow faster than our revenues, and our growth will also be impacted by our inability to reach deep into Vietnam’s rural areas.
Combining that with what’s happening around the world in fintech, has prompted us to create the new digital business model. The physical model is functioning very well and continues to be a core contributor, but the idea was that as our customers become more digital, we should be able to readily serve our customers with a second wave of innovation.
FE Xcelerate is thus Vietnam’s first consumer finance-led business accelerator programme that will now help serve FE Credit’s business needs. It’ll take us on the journey of in-sourcing innovations by partnering with early-stage disruptive fintechs and addressing specific opportunity areas that we’ve identified and deemed to be important for our future growth.
If you look at financial services around the world, the opportunities are suddenly exploding in many ways. Historically, for 3,000 years, banking industry had many barriers to entry. But because of technology, the barrier to entry has reduced sharply. We have large players in Europe who are pure digital players: they have no branch and they became massive within one year with strong customer adoption.
In Vietnam, we’ve seen that Vietnamese customers, notwithstanding any education gap, are savvy enough to adopt digital technologies.
Whilst we’ve started this now, it will not be the only programme we will launch. This is the first and it will allow us to get exposure to global and local fintechs. Maybe we’ll find some good opportunities right away, or maybe we might find some interesting ones who will need to be nurtured.
So what are you looking for in an ideal fintech to help you serve your future strategy?
Basker Rangachari: We’re definitely looking for fintechs who are already operational for one year and already had a minimum viable product of some sort, for example they may have a scoring model or marketing tool, or something to segment customers or for data analysis.
All in all, fintechs should have a minimum viable product, which can match one of the eight specific problems that we need solutions for. Some of them include building a customer platform for digital engagement, creating an omnichannel digital customer service, designing an on-demand platform to serve customers and when they need our services and so on.
In the pitch, we’ll ask these fintechs for details of their management team, experience, number of employees, how long they have been in business and how they are funded, so that we’ll understand them as a whole. We do this because sometime people do have the solutions that may look very beautiful in the proof of concept but can’t be scaled to 10 million customers.
When we shortlist the applicants, we’ll start the mentoring process to engage more with them on what their solution does and how the technology works. They may not know how to link them together at first, but in our mind, we’ll start connecting all of them together in order to meet FE Credit’s expectations of a minimum viable “go-to-market” solution.
The few fintechs who get selected to work with FE Credit at the end of the day are those that can create real solutions and are good to go to the market.
How will you financially support those fintechs that could make it through the challenge?
Basker Rangachari: Once the product has been designed, let’s say they have developed a web-based marketing tool and we like it, then we would be agreeing on what kind of licensing fee and transaction fee FE Credit will pay. It’ll be a commercial arrangement.
But when we evaluate the tool and arrive at a commercial deal, we will aim to give the startup a good financial cashflow to develop further.
Separately, we’ll also evaluate the investment opportunity. If we choose to invest in startup, then we may become an equity holder or we can choose to invest through a debt instrument.
As the programme is opened to global fintech startups, are you targeting the local ones or those from overseas in this case?
Basker Rangachari: We target both. For some of the solutions that we’ve asked for, we know that they are already available out there. We know some but not all of them and instead of approaching them one by one, we open the programme for all to propose their commercial solutions with good outcomes. So if there are goods solutions out there, no matter where they are originated, we will evaluate them and look at whether they are easy enough to adopt and adapt.
Vietnam currently has some 150 fintechs and do you think this number is rather modest for an emerging market like us? What do you think are the challenges and opportunities for them?
Basker Rangachari: A lot of time the term ‘fintech’ is loosely used, it could be a group of students who has an idea and they manage to raise $50,000 as funding and they’ve called themselves a fintech with solutions. But how many of them have survived is a different story and that is the challenge for the fintech industry.
So I don’t think the actual number of fintechs in each market is really indicating anything. It is more of the areas they are getting in. Today you see a lot of fintech in the payment space like e-wallet and they are often capable of handling simple transactions.
If I have to advise a fintech, I will advise them to assess any problem carefully, whether it is worth solving and has enough financial benefit to the buyers, since they might be solving something which is not a real serious problem. Then customer adoption would not happen.
And secondly, the fintechs should really ask themselves whether they were striving to solve something that had already been solved by 10 other players and the barrier to entry is nothing. So they might be spending all their time creating a solution and suddenly some overseas rivals come in and if their product is better at the same price, they could then lose out.
I don’t know exactly what the survival rate for fintechs is, but the players who achieved huge global success are less than 5 per cent.
The nature of most Vietnamese I see is that they are entrepreneurial; they always want to start their own business. Fintech creates the freedom for many young people. A young boy, for instance, could come from a poor family but is very intelligent and the fintech world is giving an opportunity for him to start off and in fact everybody has a shot to success. To be honest, I’ve never seen this degree of widespread ambition to be an entrepreneur in any country I’ve lived in.
There are many challenges yet there is also a lot of drives. It is going to inspire young, hungry and successful people. The more of them will try, somebody will hit a jackpot, just like how Facebook or Apple was formed in the same way. It’ll just need some young persons with hunger and passion, and the hard work ethic to keep innovating.
I’m very bullish on the Vietnam fintech scene and if there is an investment opportunity, like a fintech fund in the future, I’ll definitely invest in, because I do think that Vietnam has a big role to play in fintech in the long term. The country has a lot of potentials that I’ve been amazed by before coming here, I’d never realised how big the tech innovation here is. Gaming design in Vietnam, for instance, is incredible. I feel fortunate I’m here at this stage to be able to participate in the early stage of your country’s fintech development.
Register here: https://innovation.gomedici.com/fe-xcelerate/vietnam/
Text by Trang Nguyen - Designed by Viet Anh
27 November 2019