South Korea's FinTech Technology Showed Based in Vietnam, a Fast-Growing Southeast Asian Market

To see Southeast Asia as a "one market" is like an illusion, seeing Korea and Japan as the same market.

When it comes to time management, communication, and contracts, judging by Korean standards must not be done.

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The "Koreans in Asia 2022" conference, hosted by Startup Alliance, drew attention as a place to introduce the know-how of Korean entrepreneurs who have entered Japan, India, and Vietnam.

The conference, held at "Naver D2SF" in Seocho-gu, Seoul on the 6th, is a place to solve the concerns of start-up entrepreneurs seeking overseas expansion and job seekers seeking employment through various twists and turns.

In particular, this year's event attracted attention from Choi Dae-hun, head of the Japanese branch of Dal Soft, who developed the successful rhythm game "Superstar" series in the global market as well as Japan based on K-pop music, Han Deuk-cheon, CEO of Remesecosmetics, which is targeting the Indian market with K-beauty brands, and Lee Won-deuk, CFO of FinTech, who is conducting fintech business in the Southeast Asian market, focusing on Vietnam. Tech42 introduces the know-how gained from the experience of these entrepreneurs in three installments.

South Korea's FinTech Enters Growing Southeast Asian Market

The last speaker of the "Koreans in Asia 2022" entrepreneurial session is FinTech start-up and co-founder (vice president) Lee Won-deuk of FinTech, which provides innovative financing solutions through Supply-Chain Finance (SCF).

The vice president, who majored in electronics at UC Berkeley in California, also studied self-driving cars and sensor networks. Since then, he has served as CTO at CC Partners, a sharing economy startup, through Boston Consulting and LG Display. Currently, he is in charge of overseas partnership of FinTOB.

At the conference, Vice President Lee said, "FintoB's mission is to help finance small and medium-sized enterprises," explaining the concept of supply chain finance promoted by FintoB and the characteristics of the Southeast Asian market, citing the case of the Southeast Asian market, especially Vietnam, a major country.

"Sixty percent of the population in Southeast Asia is using the Internet. Every year, about 20 million people become adults who can use mobile devices. The GDP per capita is about $4000. The characteristic of the Southeast Asian market is that foreign funds attraction and regulatory reform are progressing very rapidly. However, in the case of small and medium-sized enterprises, the situation is the same in Korea, but it is not easy to raise funds, especially in developing countries. Supply chain finance is not very developed either."

To paraphrase Vice President Lee, the Southeast Asian market is a "very hot" market. While the average growth rate of global development assets is around 4%, it is 16% in the Southeast Asian market. The main pillars are Vietnam and Indonesia.

In such a Southeast Asian market, FinTOB set Vietnam as its base and launched a trade bond discount service. This was due to the judgment that the Southeast Asian market, which is growing, is the right time to introduce "supply chain financial services." The result is successful. Currently, FinTOB is providing services in the Indonesian and Indian markets beyond Vietnam.

The supply chain financial platform that was first introduced in the Korean market, why did it lead to entry into Southeast Asia?

Supply chain finance, a business item of FinTOB, is simply to lend funds to suppliers with the credit of buyers (large companies) rather than suppliers (small and medium-sized companies). For example, large corporate vendors use so-called "sales bonds" that raise funds as collateral for future payments from large companies from financial institutions.

However, it is not easy for small and medium-sized companies that lack financial capabilities to meet the level of accounts receivable requirements required by financial institutions. The biggest difficulty is that it is difficult to confirm the authenticity of the first bond, the transaction cost is high, and the documents to be prepared by the third are complicated.

Accordingly, Pintob first introduced the 'Sales Bond Discount Platform' in Korea in 2017. It was a platform that gathered investors to purchase accounts receivable from small and medium-sized enterprises instead of banks and reduced the discount rate of 3.5% to the maximum to reduce the burden of financing for small and medium-sized enterprises.

However, the market's response was below expectations. This is because, in the case of blue-chip large corporations, their own services were provided to suppliers, and it was not easy for suppliers of smaller companies to induce them to join the platform.

As a result, Pintob decided to push ahead with its overseas business, which had been scheduled after settling in Korea, and began to look at the Southeast Asian market. At that time, Southeast Asia was a system in which even high-quality conglomerates manage accounts receivable by hand. FinTOB, which immediately decided to enter the Southeast Asian market based in Vietnam, began developing a platform that reflected local regulations and laws, and started its first service in Vietnam in 2019.

In the meantime, there have been not a few achievements. FinTOB's service has been recognized as a proven business model by winning many domestic and foreign fintech awards, including the Best (Financial Supervisory Service Director Award) at the first Maegyeong Fintech Awards and the Asia Bit Shift Award.

Considering entering Vietnam... Understand the specificity of the market.

FinTOB, which started targeting Southeast Asian markets starting with Vietnam, has advanced its services over the past three years to meet the supply chain financial needs of Korean financial institutions and companies that have entered Southeast Asian markets such as Vietnam, and continued to make efforts to create a foundation for synergy by applying the results to the region.

So, what insights did Pintob and Vice President Lee learn from their experience in the process? Vice President Lee first said, "The Southeast Asian market is not one market."

"Cambodia and Vietnam have been at war recently. Also in Vietnam, there is a difference between Ho Chi Minh City and Hanoi to the point where they feel like completely different countries. Treating them as the same market can be said to be the same as Korea and Japan as one market. It's because the language is different, the culture is different, and there are gaps between regions."

Vice President Lee then emphasized, "We need to preemptively review and respond to regulations." The same is true for overseas expansion, but it is especially important to understand regulations and regulations in the Southeast Asian market, especially in Vietnam, a communist country.

"Sometimes the law cannot explain everything. It's not easy for a company entering the Vietnamese market for the first time to do this properly. The best thing is to meet a reliable partner. If possible, it's better to be introduced through the government's program. What we also felt from experiencing the process was that the level of people that start-ups can meet and the people that government agencies in our country can meet is different."

In addition, Vice President Lee said, "It is necessary to remember that Vietnam's concept of time is different from ours," and emphasized, "When promoting local manpower and projects, including sales, we should do 'micro-management' rather than judging them based on Korean cultural standards."

"When you work with Koreans, you have a consensus and expectations. It's easy to communicate. But Southeast Asia is different. After a week or so after giving the assignment, you have to say that you couldn't complete it because there was a blockage in the middle. In our country, speaking verbally during meetings is also reflected in the content, but the Southeast Asian market always has to fill out the minutes and share them by e-mail to confirm."

Finally, what Vice President Lee emphasized is the "importance of the contract." Vice President Lee finished the presentation by emphasizing, "Especially in the case of HR, we must take care of it."

"When hiring new workers in Korea, there are predictable ranges. For example, it's a consensus like, 'You don't have to write this in a contract.' But it's different in Southeast Asia. Regarding the contract, you should never judge it by Korean standards, but write it thoroughly by the country's standards. Business-to-business contracts must also be written thoroughly."