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In brief

Financial technology, or fintech, has been transforming a wide range of financial services, receiving warm- welcomes by a fast growing number of adopters and attracting hundreds of billions of USD in global investment value in recent years. As at 30 September 2019, from only 0.4% in 2018, Vietnam rose to rank second in ASEAN in terms of fintech funding, attracting 36% of the regional investment, second only to Singapore with 51%. However, the financial areas transformed by fintech are quite limited, with 98% of the funding concentrated in the payment sector and 1% in blockchain tech related, according to a joint report by United Overseas Bank (UOB), PricewaterhouseCoopers (PwC) and (Singapore FinTech Association) SFA.  Vietnam is still considered as having limited fintech activities and remains an unlikely home base of choice for fintech firms. One of the factors largely impacting the local fintech growth include an unprepared regulatory framework where regulations mostly evolve around fintech in the payment industry.

The fintech regulatory framework in Vietnam is still in the early stage of development. Traditionally, the Government was quite conservative when it comes to currency control. However, despite an impressive banked population of approx. 63% of adults in 2018,  limited access to traditional bank services has made extensive financial inclusion so desirable that the conservative approach may gradually give way to a more relaxed one. Recent efforts from the Government in this regard include, among others, establishing a dedicated fintech team and issuing specific regulations. Efforts have also been made to regulate fintech enablers (e.g., key 4.0 technologies) and design a fintech regulatory sandbox. More details are discussed below.

A dedicated fintech team

In 2017, the SBV established a Steering Committee on Financial Technology as the centralized State authority for fintech management.  The Committee is positioned to, among others, provide solutions to develop and complete the fintech ecosystem (including a regulatory framework) in order to enable fintech firms in Vietnam. So far, the Committee has set research targets to include fintech in five services, including e-payment, electronic Know Your Customer (e-KYC), Peer to Peer (P2P) lending, Open Application Programming Interface (API) and block chain application. In addition, the Committee has also established direct dialogue channels to fintech firms to facilitate active problem solving during their operation.  A recent relevant achievement is a fintech regulatory sandbox in the banking sector that allows the test run of fintech in the above five services and an open dialogue mechanism for the test run.

Fintech specific regulations

The Government has aspired to a cashless society for years, and a regulatory framework facilitating non-cash payment is in the spotlight. Following the non-cash payment regulations, the financial service sector — once dominated by traditional financial institutions — is now seeing more organizations providing intermediary payment services (“IPS”) such as e-wallet service providers. Recently, the Government issued a draft decree on non-cash payment to replace the current Decree No. 101.  Notably, the draft decree institutionalizes electronic money, e.g., mobile money, as a payment instrument. Another notable proposal under the draft decree is a 49% foreign ownership cap for an IPS provider. However, upon considering public opinion, the SBV has recently decided to reconsider the cap.  Still, a new version of the draft decree reflecting the reconsideration has yet to be publicized. Pending the official institutionalization of mobile money, under a recent Government resolution, the Prime Minister will decide on approving the pilot scheme for the use of telecommunications accounts to pay for low-value goods and services.
Fintech in the lending industry is also in the spotlight. The SBV disclosed that they have been working to put P2P lending in the regulated sphere. So far, the SBV has confirmed that P2P lending is currently unregulated by Vietnamese laws despite the fact that some P2P lending platforms are operating in the market.  In addition, the policy is to consider P2P lending as a civil transaction rather than a business activity.

Specific regulations for fintech enablers

Efforts to boost the development of fintech could be pointless in the absence of a framework for fintech enablers. In December 2019, the SBV set the goal that, by 2025, a regulatory framework will be issued for the application of key 4.0 technologies, including those for, among others, e-KYC, Open API, big data, artificial intelligence, block chain and cloud computing.
Regarding e-KYC, a recent regulatory development is that transactions involving high technologies no longer need to involve in-person meetings when establishing customer relationships for the first time. Instead, anti-money laundering reporting entities could take the initiative to apply alternative measures.  In addition, the SBV has proposed a draft circular to allow, among others, account openings without physical meetings.  However, while regulations are being prepared, e-KYC enablers remain in progress. While a safe application of e-KYC calls for the use of data from the National Residential Database, the Database has yet to be completed and may not be ready until 30 April 2021.

As for Open API, the SBV has been working on a draft circular for the application of Open API in the banking sector. Currently, the SBV has been partnering with NTT Data Company, a Japanese company, to test-run Open API with Open Canvas solution.
For cloud computing services, notably, the outsourcing of information technology/cloud computing services in banking activities is subject to certain requirements such as the obligations of the service user, the criteria for selecting the service provider and the compulsory contents of the service contract.  The SBV expects that the number of local banks using cloud computing will reach 60% by 2025 and 100% by 2030. Currently; however, local cloud service providers account for only 20% of the market, and the majority are offshore entities.  Given the regulatory requirement of data localization imposed on data-based service providers,  partnering with offshore cloud service providers to facilitate the widespread use of cloud computing would be challenging.

Through the above plan, the SBV aims to achieve its target of 50% of banks successfully providing digital banking by 2025 and 100% of banks providing digital banking and basically completing the digitalization of traditional banking services by 2030. According to a recent SBV survey on the stages to banking digitalization, the majority of banks in Vietnam are at the first stage, and only some major banks are at both stages 1 and 2.

Fintech regulatory sandbox

The Government has included a fintech regulatory sandbox in many masterplans, such as the Strategy for developing information technologies in the banking sector,  the Scheme for promoting a sharing economy  and the Strategy for national financial inclusion.  Notably, the Ministry of Science and Technology is scheduled to issue a sandbox scheme for applying new technology in the sharing economy by 2020, and the SBV is set to issue one for fintech activities in the banking sector by 2025.
In early June 2020, the Government issued a draft decree providing for a fintech regulatory sandbox in the banking sector for public opinion. Under the draft decree, the fintech regulatory sandbox in the banking sector is a legal mechanism established by the Government that allows credit institutions, fintech solutions providers and other innovative organizations to directly test the fintech products and services in a closely controlled environment supervised by relevant state bodies. The financial services that are open for the fintech test run include payment, credit, P2P lending, KYC supports, Open API, solutions applying innovative technologies (e.g., block chain), and other services supporting banking activities (e.g., credit scoring, savings, fundraising). Fintech organizations are organizations other than banks, established in Vietnam in accordance with the Law on Enterprise 2014, that directly provide some banking services based on fintech solutions and/or provide fintech solutions supporting the activities of credit institutions. Fintech organizations must obtain a Certificate of Registration for participating in the fintech regulatory sandbox in order to join the sandbox and must act accordingly during the test run. In addition, the draft decree details the conditions and procedures to obtain such license, the test run requirements and the extension/exit scheme for fintech organizations. The draft decree also instructs that the SBV will provide further detailed guidance for the implementation of the draft decree.

However, it appears that the Government’s current focus is on developing a regulatory sandbox for fintech in the banking sector, which will be managed by the SBV. Seeing that fintech could disrupt financial services other than banking activities (e.g., insurance with insurtech services), we hope to see more regulatory development in the near future for Vietnam to welcome fintech investors from more diverse financial subsectors to the playground.


Despite the Government’s efforts to reduce cash transactions to below 10% by 2020, the number as at 31 December 2019 is a harsh 88.7%.  With a significantly high proportion of the unbanked and underbanked, together with increasing mobile phone connection (150%), internet penetration (70%)  and 3G&4G registration (45%),  Vietnam remains largely an untapped market and a promised land for fintech investors. In the current context of reduced economic development amid the COVID-19 pandemic, increased demand for low-value transactions at low costs and the Government’s well-known success in the pandemic control, fintech is expected to be increasingly in demand.

On the other hand, investment and industry expertise from foreign investors is a critical factor in accelerating the digitalization of financial services. However, foreign investors may be discouraged due to uncertainty about the 49% foreign ownership cap for an IPS provider, the data localization requirements and the lack of detailed guidance for a regulatory sandbox for fintech in the banking sector as well as in other financial subsectors. That is to say, the Vietnamese Government will have a lot to do to achieve its ambitious goals while it operates within the boundaries of the supporting regulatory infrastructure.


Linh Chi Dang is a Special Counsel in Baker McKenzie's Hanoi office.