Hanoi (VNS/VNA) - Financial technology (fintech)start-ups should have sound ideas to tap the potential but risky rural areamarket, said experts.

Tran Duy Khanh, Director of APEC Entrepreneurs Training andResearch Institute, said that accounting for more than 70% of the country’spopulation, rural areas provided significant room for fintech start-ups togrow.

“Potential, however, always goes hand in hand with a challenge,” Khanh said.Doing business as a start-up is difficult and even more so in the field offintech. Being in a rural area adds more difficulty still, he stressed.

It requires not only knowledge of technology, finance, credit andbanking but also experience and passion, critical to the birth and pursuit ofstart-up ideas, he added.

Three decisive elements for the success of doing fintech businessin rural areas were convenience, meeting local demands, and the ability tocombine with credit institutions, he said, adding that fintech startups shouldbe looking to bridge the gap between users and credit institutions.

Analysing the difficulties of fintech development in rural areas,Khanh said that people in rural areas had a habit of using cash and still hadconfusion over tech apps. On the other hand, security problems still exist.

Capital is also an important issue because it takes years for astart-up business to make a profit, he said.

Start-ups are often faced with a lack of capital for growth andcredit institutions don't often dare to lend money because there is noguarantee of return.

Khanh said that this is a major bottleneck that requires supportfrom the Government for incubation. “Without the Government’s support inincubation, it will be difficult for start-ups to succeed - even with goodideas.”

According to Vu Sy Cuong from the Academy of Finance, fintechcompanies are now mostly focused on exploiting markets in cities and few haveeyed rural areas.

Rural areas are a potential market for fintech if the ideas can create adifference. To expand in rural areas, Cuong said that fintech start-ups need tocarry out market assessments carefully.

Cuong said that the policies for fintech should be more detailed and practical,especially those related to information security to consolidate the confidenceof the people on technology apps.

A report about Vietnam’s fintech market in 2021 showed that the number offintech companies increased four times, from 39 in 2015 to more than 154 by theend of 2021, 70% of which were start-ups.

However, the lack of a proper legal framework was hindering the development ofthe fintech market in Vietnam, especially in peer-to-peer lending.

Credit growth was low in the first half of this year, at just 4.73%, statisticsof the State Bank of Vietnam (SBV) showed, not only because of the drop incredit demand as firms fell into difficulty but also because many people couldnot meet requirements for loans.

To promote economic growth it is necessary to promote the development of otherchannels which eye sub-prime customers, such as peer-to-peer lending andfintech lending.

Many countries around the world have developed a legal framework to regulatefintech, including fintech lending.

For example, in the UK, the ceiling rate for daily interest rates on loans isset at 0.8%, or 292% per year and the interest and fee borrowers must pay cannot exceed the original loan amount.

The policy framework is still long-awaited in Vietnam, causing confusionbetween licensed lending fintech companies and black credit lending apps. Asandbox for fintech has been drafted by the SBV.

A recent report by Insider Intelligence about smartphones in Southeast Asiashowed that the number of smartphone users in Vietnam was forecast to reach63.8 million by the end of this year, up 1.6% over 2022 and accounting for 96.1%of the country’s total number of Internet users.

Vietnam ranked second in the region in terms of the number of smartphone users,after Indonesia./.