Welcome to the world of fintech regulation in Vietnam, where innovation meets compliance! As the fintech industry continues to flourish in the country, it is essential to examine the regulatory landscape shaping this dynamic sector. Fintech, a fusion of finance and technology, has the potential to revolutionize traditional financial services by offering innovative solutions to consumers and businesses alike. In Vietnam, where digital transformation is on the rise, policymakers and regulators are striving to strike a balance between fostering fintech innovation and ensuring consumer protection, financial stability, and fair competition. This first-step analysis will delve into the key regulatory frameworks and initiatives that govern fintech activities in Vietnam, shedding light on the opportunities and challenges that lay ahead for both fintech startups and established financial institutions.
Authority responsible with the Fintech regulation
In Vietnam, the regulatory landscape for fintech products and services is currently decentralized, with no single governing body in charge. However, the State Bank of Vietnam (SBV) holds the primary responsibility as the regulator under the Fintech Draft Decree. The SBV possesses the authority to grant special pilot approvals, also known as Trial Approvals, for fintech products and services. While considering the sandbox for a particular fintech offering, the SBV may seek input from various regulatory bodies, including the National Assembly Standing Committee, the Ministry of Finance (MOF), the Ministry of Industry and Trade, and the State Securities Commission (SSC). This collaborative approach aims to ensure comprehensive evaluation and regulation of fintech activities in Vietnam.
What activities in your jurisdiction necessitate obtaining a license?
The following activities in our jurisdiction are subject to regulation and require a license:
+ Securities brokerage
+ Securities investment consultancy
+ Financial advising related to securities trading or investment
+ Securities underwriting and sponsorship
+ Proprietary account transactions
+ Securities asset management
+ Accepting deposits from the general public
+ Domestic and foreign settlements and intermediary payment services
+ Handling, accepting, and discounting certain negotiable instruments
+ Underwriting and market-making of government bonds
+ Offering and providing discretionary investment management services
+ Buying and selling foreign exchange, and acting as an agent for such transactions
+ Fund management services
+ Fund custodian services
+ Derivative products transactions
+ Lending microloans online or offline
+ Providing certain types of insurance
+ Credit information services
+ Consumer finance services
Engaging in any of these activities necessitates obtaining a license to operate within the regulations of our jurisdiction.
Payment services
a. Non-cash payment:
In your jurisdiction, Decree No. 101/2012/ND-CP (Decree 101) and the SBV strictly regulate non-cash payments, including non-cash payment services and intermediary payment services. Here are the activities that fall under these regulations:
– Non-cash payments that are restricted to Vietnam-based banks:
+ Issuing cheques
+ Processing payment orders
+ Managing collection orders
+ Issuing bank cards
+ Dealing with letters of credit
+ Conducting monetary remittances via the client’s payment account
+ Managing receipts and disbursements on behalf of others through the client’s payment account
– Intermediary payment services (IPS) that can be provided by non-credit institutions (IPS providers) include:
+ Provision of electronic payment infrastructure, such as financial switch services, electronic clearing services, and online payment gateway services
+ Supporting services for payment services, including support for authorized collection or payment, e-wallet services, and support for electronic funds transfer.
b. Intermediary payment service (IPS)
Intermediary payment service (IPS) providers must obtain a license from the SBV. Only IPS providers based in Vietnam are permitted to offer IPS within the country, while offshore providers cannot. Specific technical, legal, and personnel requirements must be met for IPS, including a minimum charter capital of 50 billion Vietnamese dong. Market access restrictions for foreign investors apply to IPS, although the current regulations do not explicitly state the foreign investment limitations or ownership restrictions. Vietnam has not made any commitments under international treaties to open the IPS sector to foreign investors, such as the WTO and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Competent authority
Competent authorities, particularly the SBV, have the authority to decide on limitations or technical barriers for foreign investors seeking to engage in IPS. The establishment of a 100% foreign-owned IPS provider is at the sole discretion of these authorities. As of June 29, 2023, out of the 50 licensed IPS providers listed on the SBV website, a few companies have foreign investors holding up to 100% equity interest.
Since 2019, the SBV has been in the process of amending the existing regulations on non-cash payment, including IPS. The proposed draft decree by the SBV, known as the Non-cash Payment Draft Decree, introduces new concepts such as e-currency, mobilized currency, and pre-paid cards. Initially, the SBV suggested a foreign ownership limitation of 49% for IPS, but this proposal faced objections from experts and IPS providers, leading the SBV to reconsider it. The Non-cash Payment Draft Decree also exempts certain IPS from the SBV’s licensing requirement, specifically online payment gateways, supporting services for authorized collection or payment, and supporting services for electronic funds transfer.
However, IPS providers will still need to collaborate with a Vietnam-based commercial bank or a foreign bank branch to conduct their business. In May 2023, the Deputy Prime Minister instructed the SBV to expedite the submission of the Non-cash Payment Draft Decree to the Government for official promulgation.
Conclusion
In conclusion, the fintech industry in Vietnam is subject to regulatory oversight by the State Bank of Vietnam (SBV), which plays a crucial role in setting and enforcing regulations to ensure the stability and integrity of the financial system. Fintech companies operating in Vietnam need to comply with licensing requirements and adhere to specific technical, legal, and personnel standards. The SBV has been actively updating and amending regulations to keep pace with the evolving fintech landscape, including the ongoing amendments to non-cash payment regulations, which impact intermediary payment service providers (IPS). As Vietnam embraces digital innovation, the regulatory framework must strike a balance. This balance fosters fintech growth while safeguarding consumer protection and financial stability. By navigating the intricacies of fintech regulations, Vietnam aims to create an enabling environment. This environment promotes innovation and propels the country towards a more inclusive and advanced digital economy.
HMLF is always available to offer assistance in understanding the procedures with authorities.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
