Lotte Group is expanding its buy now, pay later (BNPL) service in Vietnam and is aiming to penetrate the local financial market.
According to Lotte Holdings in Japan on the 15th, Lotte C&F launched the mobile BNPL service 'LOTTE FLEX,' co-developed with Vietnam Prosperity Joint Stock Commercial Bank (VPBank), in Hanoi starting from the 11th of this month. Lotte C&F is a financial company jointly funded by Korea's Lotte Capital and Japan's Lotte Financial in 2023.
As the non-cash payment service market grows in Vietnam, Lotte C&F signed a memorandum of understanding (MOU) for smart financial solution research and development cooperation with VPBank in September last year, which led to the launch of LOTTE FLEX this time. Lotte C&F is responsible for the development and operation of the LOTTE FLEX platform, while VPBank handles financing, credit assessment, and other aspects.
LOTTE FLEX is a mobile application-based service, allowing consumers who install the app to use it as a payment method in offline stores such as Lotte Mart, Lotte Department Store, Lotteria, and Lotte Cinema through a simple identity verification.
Both Lotte C&F and VPBank plan to expand their cooperation in the future by introducing joint brand cards, digital banking apps, electronic wallets, and digital payment gateways.
Vietnam has a low credit card penetration rate. Instead, the BNPL market is rapidly growing, driven by a quick digital transformation, expansion of the e-commerce market, and the Vietnamese government's policies promoting 'cashless consumption.'
The BNPL service allows customers to purchase goods or services, with the business paying the merchants upfront and the customers subsequently paying the BNPL providers. Unlike credit cards, there is no need for a credit score, and the fees are cheaper compared to credit cards. It also provides installment services.
In the case of LOTTE FLEX, the installment periods are 1, 2, 3, 6, or 12 months, with an interest rate of 10% per annum. The arrears fee is 30,000 dong (approximately 1,584 won) per case, which is lower than the market average.
The BNPL market in Vietnam is estimated to be worth about $1.91 billion (approximately 2.64 trillion won) as of last year. The Vietnam E-Commerce Association (VECOM) predicts that the Vietnamese BNPL market size will grow to $8.82 billion (approximately 11.78 trillion won) by 2028.
This project is reportedly led by Shin Yu-yeol, the eldest son of Shin Dong-bin, chairman of Lotte Group, and vice president in charge of future growth at LOTTE Corporation (also serving as head of global strategy at Lotte Biologics). Vice President Shin also serves as CEO of Lotte Financial, Japan's largest shareholder in Lotte Capital. He was appointed as an internal director of Lotte Holdings, Japan's holding company, in 2023.
Industry insiders believe that Lotte Group is strengthening its competitiveness in the Vietnamese market through LOTTE FLEX and is also trying to expand its presence in the local financial market. Currently, Lotte is operating in various sectors in Vietnam, including retail, food, and construction. For Lotte Shopping, sales in Vietnam last year reached 483.2 billion won, a 20% increase compared to the previous year, and plans to open an additional 10 department stores and large supermarkets are underway.