Vietnam’s digital economy is rapidly expanding, reaching a value of US$30 billion in 2023 and projected to increase by 20% to hit US$43 billion by 2025.
This growth is fueled by technology adoption across businesses, the rise of key sectors including fintech, as well as rising middle-class incomes, a new report by Acclime Vietnam, a professional services provider from Ho Chi Minh City, says.
Released in September 2024 and supported of Singapore’s United Overseas Bank (UOB), the report explores the transformation of Vietnam’s digital economy, highlighting the key drivers propelling the sector’s growth and the emerging trends shaping the industry.
Vietnamese businesses embrace technology
The report notes that Vietnam has undergone technological transformation over the past years, with its young population quickly adopting mobile Internet services. Businesses too are embracing digital transformation at a fast pace, digitalizing data, standardizing their processes, and incorporating new technologies.
A 2023 survey of small and medium-sized enterprises (SMEs) by the Vietnamese Ministry of Planning and Investment (MPI) found improvements in digital transformation readiness across all sectors, with scores rising by 0.7 to 1.4 points from 2022 to 2023.
UOB Vietnam’s study also highlights this trend, with 87% of the 525 businesses surveyed adopting digitalization in their business. Additionally, over 8 in 10 businesses in Vietnam said they were planning to spend more on their digitalization efforts in 2024, with most budgeting an increase of 10% to 25%.
GenAI, sustainability as emerging trends
Within Vietnam’s burgeoning digital economy, several trends are emerging. Most particularly, generative artificial intelligence (genAI), which refer to AI systems that can generate new content such as text, images or audio, is gaining significant traction.
A 2023 Finastra survey found that Vietnamese financial institutions are leading genAI adoption globally. 40% of Vietnamese respondents polled said their organizations had either rolled out or improved their capabilities in natural language processing (NPL) including genAI, the highest rate among all the markets studied and ahead of Saudi Arabia (39%), the US (24%) and the UK (24%).
A remarkable 91% of decision-makers at financial institutions in Vietnam said they were either adopting or open to adopting genAI. These leaders expressed interest in using the technology for various applications, including enhancing customer service, improving IT operations, as well as collecting, processing, and analyzing data for environmental, social and governance (ESG) criteria classifications, with 45%, 44%, and 44% of respondents prioritizing these areas, respectively.
Sustainability is another emerging trend in Vietnam with both investors and customers increasingly integrating ESG factors into their decision-making processes. Additionally, smart industrial parks, which leverage advanced digital technologies and sustainable practices to enhance efficiency, productivity, and environmental performance, are becoming more prevalent, driven by supportive growth policies.
According to a report from the MPI, Vietnam is now home to 416 industrial parks and more than 1,000 industrial clusters, contributing to around half of the country’s export turnover.
Growth drivers boosting Vietnam’s digital economy
Vietnam’s digital transformation is supported by a number of factors. For one, the country is home to a burgeoning startup ecosystem which now comprises about 3,800 ventures, according to the Ministry of Science and Technology.
Furthermore, the COVID-19 pandemic accelerated digitalization by pushing Vietnamese consumers to embrace e-commerce platforms, digital financial services, online education, and remote work. This presented new opportunities for numerous businesses and prompted them to accelerate digital transformation initiatives.
In addition, the rise in middle-class spending power has introduced opportunities within Vietnam’s digital economy, heightening demand for information and communications technology (ICT) products, digital tourism, and services delivered via digital platforms.
Finally, the government is also actively promoting the growth of the digital economy. In 2019, the National Innovation Center (NIC) was established in 2019 to support innovative startups and digital entrepreneurs, focusing on industries such as smart manufacturing, smart cities, cybersecurity and semiconductors. A year later, the government approved the National Digital Transformation Programme by 2025, aiming to transform Vietnam into a digital economy, society, and government, and have the digital economy account for 30% of overall gross domestic product (GDP) by 2030.
Fintech growth
Finally, the Acclime Vietnam report highlights fintech as a prominent startup segment in the country. The sector is currently dominated by payments and mobile wallets. Vietnam had 32.77 million active e-wallets by the end of 2023, with payment transactions via Internet and mobile channels growing by 52% and 103.3%, respectively, annually from 2021 to 2023.
The growth of fintech in Vietnam has been driven by booming funding activity. The Vietnam Innovation and Tech Investment Report 2024 estimates that from 2013 to 2023, a substantial US$1.04 billion was invested in payment fintech startups in Vietnam, alongside US$495 million directed towards financial services, underscoring the growing dynamism of the fintech industry in Vietnam.
Just last month, private equity firm NextBold Capital announced that it was looking to raise a US$100 million fund to back SMEs in Vietnam, Cambodia and Laos. The fund will target businesses across education, healthcare, consumer goods, technology, and agribusiness, further contributing to the growth of Vietnam’s tech sector.
Featured image credit: edited from pexels
