Recently, with the rapid development of Vietnam’s foreign trade, the trade finance sector has been facing dual challenges of efficiency improvement and risk control. Against this background, the decentralized, tamper-proof, and highly transparent characteristics of blockchain technology have gradually attracted the attention of Vietnam’s financial sector and trading enterprises.
Although the application of blockchain in Vietnam’s trade finance is still in its infancy, some banks and enterprises have begun to explore the potential of this technology. From simplifying letter of credit processing to optimizing supply chain finance, blockchain technology is bringing new possibilities to Vietnam’s trade finance sector.
This article will investigate and analyze the current status, application cases, and challenges of blockchain technology in Vietnam’s trade finance, providing practical reference information for enterprises interested in the development of the Vietnamese market. We will discuss how to reasonably utilize blockchain technology to improve trade finance processes and increase business efficiency based on local actual conditions.
Overview of Blockchain Technology Applications in Trade Finance
Blockchain technology has global potential. The core advantages of blockchain, such as decentralization and immutability, can address the long-standing challenges in trade finance, including information asymmetry, low process efficiency, high fraud risk, and high operational costs.
In specific applications of trade finance, blockchain technology first significantly enhances trust and transparency. By recording transaction information on multiple accounts, all participants can view and verify transaction status in real-time, greatly reducing risks brought by information asymmetry. For example, in Letter of Credit (L/C) business, blockchain can realize real-time sharing and verification of documents, avoiding the cumbersome document exchange and manual intervention process in traditional models. This not only improves efficiency but also reduces fraud risk.
Secondly, blockchain technology greatly simplifies trade finance operations. The application of smart contracts allows many processes that traditionally require manual intervention to be executed automatically. Taking supply chain finance as an example, when preset conditions are met (such as goods delivery confirmation), smart contracts can automatically trigger the payment process, significantly shortening the settlement cycle and improving capital utilization efficiency. This benefits not only large enterprises but also provides more convenient financing channels for SMEs.
In terms of cost reduction, blockchain technology also performs excellently. Traditional trade finance involves multiple intermediary institutions, with each link potentially generating additional costs. Blockchain technology, through disintermediation, directly connects transaction parties, significantly reducing intermediary costs. Especially in the field of cross-border payments, blockchain-based payment networks can substantially reduce handling fees and achieve near real-time fund clearing, which is a huge advantage for international trade participants.
Furthermore, blockchain technology enhances the risk management capability of trade finance. By digitizing trade documents and storing them on the blockchain, it can effectively prevent document forgery and repeated financing fraud. At the same time, the traceability of blockchain makes it easier for regulatory authorities to conduct compliance checks and monitoring, contributing to the establishment of a safer and more transparent trade finance ecosystem.
However, we also recognize that the application of blockchain technology in trade finance still faces some challenges. First is the issue of technology standardization, with interoperability between different blockchain platforms needing improvement. Second, legal and regulatory frameworks need further refinement to adapt to the new business models brought by blockchain. Additionally, widespread acceptance and adoption by industry participants will take time, especially as some traditional financial institutions may have a cautious attitude towards new technologies.
Nevertheless, the application prospects of blockchain technology in trade finance remain promising. As the technology continues to mature and the ecosystem gradually improves, we have reason to believe that blockchain will play an increasingly important role in trade finance. For enterprises participating in international trade, actively understanding and exploring the application of blockchain technology will not only help improve their competitiveness but also lay a solid foundation for future development.
Current Status of Blockchain Trade Finance in the Vietnamese Market
Regarding the specific application of blockchain in trade finance, the Vietnamese market is still in the exploration and initial stages. This status reflects both the unique characteristics of Vietnam’s financial market and the country’s gradual approach to embracing new technologies.
The Vietnamese government maintains an open attitude towards blockchain technology while remaining cautious. In 2020, the Prime Minister of Vietnam approved the “National Digital Transformation Program until 2025”, clearly identifying blockchain as one of the key technologies for development. This policy orientation provides a favorable macro environment for the application of blockchain technology in various fields, including trade finance. However, at the regulatory level, Vietnam has not yet established detailed regulations specifically for the application of blockchain technology in the financial sector, which to some extent limits bold attempts by financial institutions in this area.
Under this policy background, major banks and financial institutions in Vietnam have shown strong interest in blockchain technology, but actual applications remain limited. Some leading commercial banks, such as Vietcombank (Vietnam Foreign Trade Bank) and Techcombank (Vietnam Technological and Commercial Joint Stock Bank), have begun to explore the potential application of blockchain technology in trade finance. These explorations mainly focus on simplifying cross-border payment processes, optimizing supply chain finance, and improving the efficiency of letter of credit processing. However, most projects are currently still in the concept verification or small-scale scenario stage, with a certain distance from large-scale commercial application.
The characteristics of Vietnam’s trade finance market have indeed influenced the application process of blockchain technology to some extent. As an export-oriented economy, Vietnam’s international trade volume continues to grow, providing ample space for trade finance innovation. At the same time, Vietnam has a high level of SME activity, and these enterprises generally face difficulties in financing and high financing costs. Blockchain technology has the potential to address these issues by increasing transparency and reducing costs, but the technical adoption capability and willingness of SMEs are relatively limited, which has become a challenge in promoting blockchain solutions.
In practical applications, blockchain trade finance projects in the Vietnamese market mainly revolve around the following aspects: First is the cross-border payment field, where some banks are experimenting with blockchain-based cross-border payment solutions, aiming to reduce transaction costs and improve settlement speed. Second is supply chain finance, where some large enterprises are cooperating with banks to explore the use of blockchain technology to optimize supply chain management and financing. Additionally, there have been attempts in digitalizing trade documents, but progress has been relatively slow, mainly limited by factors such as legal recognition and industry habits.
However, the application of blockchain technology in Vietnam’s trade finance market also faces severe challenges. The limitations of infrastructure and technological foundations, despite the increasing penetration rate of internet infrastructure in Vietnam, the overall IT infrastructure level still falls short of the requirements for blockchain technology. Additionally, the awareness and acceptance level of traditional trade finance participants need improvement, with many enterprises and financial institutions’ understanding of blockchain technology still remaining superficial, which affects their decision-making in adopting new technologies.
Nevertheless, the prospects for blockchain trade finance applications in the Vietnamese market remain bright. With the gradual clarification of government policies, continuous investment by financial institutions, and deepening international cooperation, we have reason to believe that blockchain technology will play an increasingly important role in Vietnam’s trade finance market. Especially in promoting trade process digitalization, improving financing accessibility for SMEs, and enhancing cross-border trade efficiency, blockchain technology is expected to bring significant positive impacts to Vietnam.
For enterprises entering the Vietnamese market, it would be wise to closely monitor the development dynamics of blockchain trade finance in the country and adjust strategies according to local actual conditions. In this rapidly developing but challenging market, flexibility and focus will be key to success.
Analysis of Specific Application Cases
Although Vietnam’s exploration in the field of blockchain trade finance started relatively late, some representative cases have emerged in recent years. These cases not only demonstrate the enormous potential of blockchain technology in trade finance but also reflect the innovative spirit of Vietnamese financial institutions and enterprises in their digital transformation process. Below, we will analyze three representative application cases in detail.
Case 1: Vietcombank’s Blockchain Letter of Credit Project
Vietcombank, as one of the largest commercial banks in Vietnam, has always been at the forefront of financial innovation. In 2021, Vietcombank launched a blockchain-based Letter of Credit (L/C) processing system pilot project. The project aimed to address issues of inefficiency, high costs, and fraud risks existing in traditional L/C business.
In this project, Vietcombank collaborated with several major import and export enterprises to migrate the entire L/C process to a blockchain platform. Specifically, the system utilized blockchain technology to achieve digitalization and automation of the entire process including L/C application review, modification, and payment. The application of smart contracts ensures that the system can automatically execute corresponding operations when default conditions are met, minimizing the need for manual intervention.
After implementing the project, Vietcombank reported that L/C processing time was reduced from an average of 7 days to less than 24 hours, and operational costs were reduced by about 30%. Moreover, as all transaction records are immutably recorded on the blockchain, it significantly improved transaction transparency and security, effectively reducing fraud risks.
However, the project also faced some challenges during implementation. First is the uncertainty of legal regulations, as Vietnam’s current legal framework has not clearly stipulated the legal effect of blockchain electronic documents. Second, there were some difficulties in coordination among project participants in terms of technology and business processes, requiring a significant investment of time in system integration and employee training.
Nevertheless, Vietcombank’s attempt provided valuable experience for Vietnam’s banking industry in applying blockchain technology. The bank plans to extend this system to more trade partners and broader business areas within the next two years.
Case 2: Vietnam Dairy Association Vinamilk’s Blockchain Supply Chain Finance Project
Vinamilk, as Vietnam’s largest dairy company, has a complex supply chain network. To optimize supply chain management and provide better financing support to small and medium-sized suppliers, Vinamilk launched a blockchain-based supply chain finance platform in early 2022.
The core of this platform is to use blockchain technology to create a transparent and tamper-proof supply chain record system. Every transaction, every goods delivery, and quality inspection result is recorded on the blockchain. Based on this trusted data, participating financial institutions can more accurately assess suppliers’ credit status, thereby offering more favorable financing terms.
The platform also introduced smart contract functionality, achieving automatic confirmation and payment of receivables. Once goods are delivered and pass quality inspection, smart contracts automatically trigger the payment process, greatly shortening suppliers’ collection cycles.
Preliminary data after project implementation showed that participating small and medium-sized suppliers’ financing costs decreased by an average of 2 percentage points, and financing time was reduced from an average of one week to 3 working days. For Vinamilk, the system also brought significant benefits including improved supply chain transparency, reduced operational costs, and strengthened relationships with suppliers.
However, the project also faced some challenges. First is the uneven technical capabilities of participants, with some small suppliers having concerns about using the new platform. Second, data privacy and security issues also require ongoing attention, especially in cases involving sensitive commercial information.
Despite these challenges, Vinamilk’s innovative attempt provided a powerful demonstration for Vietnamese enterprises in applying blockchain technology to optimize supply chain finance. The company plans to gradually extend this platform to its global supply chain network in the future.
Case 3: Vietnam’s Timo Digital Bank’s Cross-border Payment Project
As a leading digital bank in Vietnam, Timo has been committed to using innovative technologies to improve financial service efficiency. In early 2023, Timo partnered with a Singaporean fintech company to launch a blockchain-based cross-border payment project, aiming to provide faster and more cost-effective international remittance services for Vietnamese SMEs.
The project utilized distributed ledger technology and stablecoins to create a new cross-border payment network. Compared to traditional cross-border payment processes, this system bypasses complex intermediary bank links, establishing a direct fund transfer channel between Timo and its partners.
Specifically, when a Vietnamese enterprise needs to make a payment to Singapore, Timo exchanges the equivalent Vietnamese dong for stablecoins and transfers them to the Singaporean partner through the blockchain network. The partner receives the stablecoins and immediately exchanges them for Singapore dollars. The entire process is completed within minutes, greatly accelerating the traditional cross-border remittance method.
The initial results of the project were impressive. Participating enterprises reported that cross-border payment time was reduced from the original 2-3 working days to less than 1 hour, and fees were reduced by about 40%. Additionally, thanks to the transparency of blockchain, enterprises can track transaction status in real-time, greatly improving the convenience of fund management.
However, the project also faced challenges. First is the regulatory compliance issue, as the Vietnamese central bank’s attitude towards using stablecoins for cross-border payments is not yet clear. Second, scaling up the project also faces challenges, requiring the establishment of a broader network of banks and enterprises to maximize its effectiveness.
Despite these challenges, Timo’s innovative attempt has brought new possibilities to Vietnam’s cross-border payment model. The bank is actively communicating with regulatory authorities, hoping to create a favorable policy environment for this new type of payment method.
Overall, these three cases demonstrate the enormous potential of blockchain technology in Vietnam’s trade finance field. From L/C processing to supply chain finance, and to revolutionizing cross-border payments, blockchain technology is gradually reshaping Vietnam’s trade finance landscape. Although these projects are mostly still in the pilot stage and face various challenges, they undoubtedly point the way for digital transformation for Vietnamese financial institutions and enterprises. As the technology continues to mature and the regulatory environment gradually improves, we have reason to believe that blockchain technology will play an increasingly important role in Vietnam’s trade finance market.
Recommendations for Enterprises Expanding into Vietnam
For enterprises entering the Vietnamese market or already operating in Vietnam, understanding and appropriately utilizing blockchain technology to optimize trade finance can be a key factor in enhancing competitiveness. The following are detailed recommendations aimed at helping enterprises better apply blockchain technology in Vietnam’s complex business environment:
Firstly, it is crucial to have an in-depth understanding of Vietnam’s blockchain policies and regulatory environment. The Vietnamese government maintains an open attitude towards blockchain technology, but relevant regulations are still being refined. Enterprises should closely monitor policy changes from the State Bank of Vietnam and the Ministry of Finance. Especially in areas such as cross-border payments and digital currencies, policy changes may directly affect the implementation of blockchain solutions. It is recommended that enterprises maintain close contact with local legal advisors to stay informed about the latest regulatory changes. At the same time, actively participating in industry associations and policy discussions can help enterprises better grasp policy trends and even have the opportunity to participate in the policy-making process.
Secondly, enterprises should choose suitable blockchain trade finance solutions based on their own needs and the characteristics of the Vietnamese market. One of the characteristics of the Vietnamese market is the high activity of SMEs, which means flexibility and cost-effectiveness are extremely important. When selecting or developing blockchain solutions, consider the scalability of the system, compatibility with existing IT infrastructure, and integration capabilities with local payment systems. For example, if an enterprise mainly cooperates with local Vietnamese suppliers, choosing a blockchain platform that supports Vietnamese dong settlement becomes crucial. Additionally, considering that Vietnam’s internet infrastructure is still developing, lightweight blockchain solutions with low network requirements may be more suitable for the Vietnamese market.
Establishing a broad cooperation network is another key to successfully applying blockchain technology. In Vietnam, it is extremely important to establish cooperative relationships with major local banks. Large state-owned banks such as Vietcombank and VietinBank are actively exploring blockchain technology, and cooperating with these institutions can help enterprises promote blockchain solutions more quickly. At the same time, pay attention to cooperation with technology companies. Vietnam has a large number of excellent IT talents, and cooperating with local blockchain technology companies can help enterprises better adapt to local market needs. For example, consider cooperating with local Vietnamese blockchain enterprises like TomoChain, leveraging their deep understanding of the local market.
Data security and privacy protection are important aspects that cannot be ignored when applying blockchain technology. Vietnam’s data protection regulations are gradually being improved, and enterprises need to pay attention to the compliance of data processing. When implementing blockchain solutions, strict data encryption measures should be adopted, clear data access permissions should be defined, and sensitive business information should be fully protected. At the same time, considering Vietnam’s requirements for data localization, enterprises may need to deploy some IT infrastructure within Vietnam to meet relevant regulations. Conduct regular security audits and develop comprehensive data protection strategies.
Equally important is training employees and improving internal blockchain technology application capabilities. One challenge in the Vietnamese market is the relative scarcity of talents with blockchain expertise. Enterprises can consider cooperating with local Vietnamese universities, such as Hanoi University of Science and Technology or Ho Chi Minh City University of Technology, which have dedicated blockchain research programs. By establishing internship programs or joint training programs, enterprises can cultivate local talents that meet their own needs. At the same time, focus on existing training, especially establishing good communication between business departments and IT departments, ensuring that blockchain projects can meet real business needs.
When implementing blockchain projects, taking a gradual approach is usually wise. Start with small-scale pilot projects, for example, first implementing blockchain solutions in a specific supply chain segment or between specific trading partners. This can minimize risks while accumulating valuable implementation experience. As the project succeeds, gradually expand the scope of application. For instance, a textile export enterprise can first implement a blockchain supply chain finance solution in the raw material procurement stage with local Vietnamese suppliers, and then expand it to the entire supply chain network once the system operates stably.
Closely monitoring the development of Vietnam’s blockchain ecosystem is also important. Vietnam is building its own blockchain innovation centers, with cities like Ho Chi Minh City and Da Nang actively creating blockchain industry clusters. Enterprises can consider participating in activities of these innovation centers, such as blockchain hackathons or startup accelerator programs. This not only helps understand the latest technology trends but may also discover potential partners or investment opportunities.
Finally, maintaining flexibility and an innovative spirit is crucial. The Vietnamese market is rapidly developing, and the application scenarios of blockchain technology are continuously expanding. Enterprises need to pay attention to market changes and adjust strategies accordingly. For example, with the rapid development of e-commerce in Vietnam, integrating blockchain technology into cross-border e-commerce payments may become a new growth point. At the same time, attention should also be paid to the combination of other emerging technologies with blockchain, such as the Internet of Things (IoT) and Artificial Intelligence (AI). The fusion of these technologies may bring more innovative possibilities to trade finance.
Overall, applying blockchain trade finance solutions in the Vietnamese market requires comprehensive preparation and continuous investment from enterprises. By deeply understanding the local market, establishing extensive cooperation, focusing on talent cultivation, implementing gradually, and maintaining an innovative spirit, enterprises can better control the opportunities brought by blockchain technology and gain advantages in the competitive Vietnamese market. As Vietnam’s digital economy continues to develop, those enterprises that can leverage blockchain technology to optimize trade finance processes will undoubtedly be in an advantageous position in future market competition.
