This article was co-authored by Leon Gauhman, co-founder and CPSO at digital product consultancy Elsewhen.
The World Economic Forum predicts that 70% of new value created this decade will be based on
digitally enabled technologies—and Vietnam's thriving, digitally literate, small business sector is an example of this trend in action. Powered by spectacular economic growth, a young population, and rising smartphone use, the country is on track to overtake
other ASEAN markets to join the world's
top 25 economies by 2038.
The face of this surge? So-called "household merchants" are local, family-based, young business owners (65% in Vietnam are under 40) taking
advantage of rapid digitisation and a supportive enterprise climate that includes government proposals
to cut corporate income tax for small businesses. Characterised by
digital sophistication, this dynamic cohort accounts for
more than 90% of Vietnam’s private sector.
Over three-quarters of Vietnamese SMEs grew in 2023, according to CPA Australia.
Promising as this picture is, their scale-up journey is far from easy. From wavering trust in banks to digital fraud, household merchants face a series of hurdles on the path to maturity in Vietnam. Many are unregistered and reliant on manual processes and
notebooks, meaning they miss out on offers, products, services, and advice that would help them grow and scale. Although Vietnam's banked population has recently
jumped 10% in just one year to 77.4%, small business owners struggle to
access finance to fund future innovations.
Against this backdrop, Techcombank—Vietnam's fourth largest bank—recently approached Elsewhen to enhance its customer offering in the household merchant space. Together with Techcombank’s omni-channel service design team and dedicated customer research lab,
this joint project aimed to fine-tune the bank's household merchant proposition to appeal to small, growing businesses.
Our focus was the needs of this lucrative yet elusive segment, using a combination of stakeholder interviews, ethnographic research, and collaborative customer journey mapping.
Here are four insights we learned from studying Vietnam's dynamic household merchant scene end to end:
1. QR codes for advanced and affordable contactless payments
Booming smartphone use has sparked a sharp increase in
QR codes as a payment tool across Southeast Asia, and for good reason. Enhanced encryptions and zero need for expensive point-of-sale tech make the QR system an accessible, affordable, and secure choice for many household merchants.
QR codes are everywhere in Vietnam, from coffee shops to beauty salons and pavement postcard stalls. Yet the static QR codes common in Vietnam still require customers to type in the actual payment amount. After that, the merchant often needs to photograph
the “transaction complete” screen (for invoicing purposes), and check that they have received the payment, before the customer can leave the store.
This type of small yet everyday inconvenience is fintech's opening to step in with a seamless digital payments system. Solutions could include an app enabling instant notifications for remote or on-site QR code payments, providing an efficient and convenient
way of managing transactions in real-time.
2. Streamlining tasks to reduce cognitive load
What household merchants want most from banking are efficient shortcuts that make their lives easier. They're searching for products that support the rapid digital growth taking place across the country (and the wider ASEAN region). This provides an opportunity
for banks and fintechs to develop solutions that reduce the cognitive load for household merchants such as cash flow management dashboards to help customers stay on top of fast moving revenue streams. Our experience is that apps which focus on individual tasks
and use simple conversational interfaces for bills and transfers, are likely to have the greatest success with merchants.
3. Incentives to shift entrenched behaviours
Even with explosive growth in e-commerce and other digital sectors, the number of household merchants operating as unregistered family affairs is large. As a result, these businesses are cut off from the formal technical and business support necessary to
help them grow. Any cultural shift encouraging household merchants to operate more formally is a slow process, but banks and fintechs can use various incentive mechanisms to help oil the wheels. Loyalty schemes are an effective way of encouraging retail customers
and small businesses to register for business as opposed to personal bank accounts, especially if points can be converted to vouchers to pay household bills such as utilities. Scale is important here: to ensure merchants have access to a wide range of earning
opportunities, loyalty schemes need to feature hundreds of brands across thousands of points of sale.
4. Delivering personalisation in a culture of many
With banking services for small businesses still evolving, some Vietnamese household merchants can struggle to receive credit and therefore prefer to borrow from friends and family than from a bank. In addition, around 20% of SMEs in Vietnam are
owned by women, many of whom
want to know more about international trade opportunities and policies focused on business development.
By better understanding a household merchants' unique situation and aspirations, banks and fintechs can more easily provide credit and deliver more personalised banking experiences that fulfil bespoke customer needs. At the same time, this approach needs
to allow for an inherently communal social structure, with a strong emphasis on family and close-knit communities.
Data and analytics via business banking apps play a key role in providing easier access to credit for Vietnam’s merchants. Enabling lending by allowing merchants to apply for an unsecured loan via an app in minutes and get approval in hours, helps to remove
some of the barriers household merchants face in terms of borrowing from a bank.
Looking to the future
Vietnam’s household merchants are at a pivotal moment, with small, fast-growth businesses accounting for around
40% of the country’s GDP. Fintechs are ideally placed to work with Vietnam’s banking industry to support a new wave of growth by creating innovative digital-led products and experiences that empower merchants to run and grow their businesses.
To be successful, fintechs and banks must pay close attention to the motivations that drive Vietnam’s merchant segment and work to better understand the needs of individual small business owners. Tailored solutions such as all-in-one smart payment acceptance,
personalised loyalty schemes and easier access to credit, will persuade SMEs to come on board.
While tailored solutions are key, well designed digital platforms, seamless experiences and other incentives all play an important role in winning small business accounts. By financially empowering Vietnam’s many merchants and SMEs, Techcombank, and other
Vietnamese banks, in collaboration with fintechs can help to power a new chapter of breakthrough economic growth driven by Vietnam’s thousands of small businesses.