Financial Technology (Fintech) Regime in Vietnam

In recent years, Financial Technology (fintech) has become a rapidly growing field. Fintech is the combination and application of modern technical technologies in the provision and use of financial services, gradually changing the way people, enterprises, and traditional financial institutions transact and manage their finances. Below, Viet An Law will analyze the financial technology (Fintech) regime in Vietnam.

Fintech development tendency in Vietnam

In recent years, the Fintech market in Vietnam has grown very strongly in terms of quantity, diversity of products, services, and investment capital attraction. The revenue of this market reached 4.4 billion USD in transaction value in 2017 and reached about 7.8 billion USD in 2020, equivalent to an increase of 77% within 03 years. The number of Fintech companies in Vietnam has also increased rapidly, from about 40 companies at the end of 2013 to about 176 companies at the end of 2022, and is estimated to increase in the coming years.

Main activities of Fintech

Vietnam’s Fintech market in a broad sense includes Fintech activities in the following main groups:

Electronic payments

Fintech helps users make quick and convenient online payments through e-wallets, online bank transfers, services such as PayPal, Venmo, or payment applications such as Momo, ZaloPay in Vietnam.

Digital banking

• In Vietnam, the digital banking model is still in its early stages of development. Digital banks provide completely online banking services such as account opening, depositing money, borrowing money, and account management, through mobile applications and web platforms.
• Among them, online financial services, e-wallets, and investment platforms also apply eKYC to verify users’ identities without requiring them to go directly to branches.

Crowdfunding

The peer-to-peer lending model (P2P Lending) has also developed in Vietnam in recent years, with the emergence of companies operating in the same model since 2016 with the website huydong.com. P2P Lending is a modern lending model on a digital technology platform, where borrowers and lenders (investors) will be connected directly to each other without having to go through any traditional credit institutions or banks.

Asset management

By the end of 2022, there will be 16 FinTech companies in the asset management sector operating in Vietnam. Fintech uses algorithms and artificial intelligence (AI) to provide investment advice and manage investment portfolios automatically.

Insurance technology (Insurtech)

The Insurtech field in Vietnam is still quite young but has made remarkable progress in recent times. Technology is used in the insurance industry to improve contract management, risk assessment, and insurance claim settlement processes.

Financial activities related to digital currencies

Fintech provides platforms for trading cryptocurrencies (e.g. Bitcoin, Ethereum), using blockchain to record transactions and improve transparency and security.

Fintech regime in Vietnam

Currently, the legal framework on fintech includes the Law on Credit Institutions 2024 and Decree 52/2024/ND-CP. In particular, the Law on Credit Institutions 2024 stipulates:

“Article 106. Regulatory sandbox in the banking sector

1. 1. Regulatory sandbox in banking sector means an environment that allows experiments on technologies, products, services and business models in banking sector with limited scale, space and duration of implementation; institutions participating in the regulatory sandbox shall satisfy conditions and criteria for approval of participants and be subject to supervision by competent state agencies.
   2. The Government shall elaborate this Article.”

Thus, the Law on Credit Institutions 2024 only provides general regulations on regulatory sandbox in banking sector but does not have specific regulations on the legal framework on fintech (Financial Technology) in Vietnam.

In addition, Decree 52/2024/ND-CP regulating non-cash payment activities does not directly regulate fintech, but many new contents regulate non-cash payment activities, including opening and using payment accounts; non-cash payment services; and payment intermediary services.

Currently, the Government is seeking comments on the second draft of the Decree regulating the regulatory sandbox in the banking sector, which includes some provisions on fintech as follows:

How to understand fintech

Financial technology solutions (Fintech solutions) in the banking sector are creative and modern innovations in financial services based on technology applications applied in the banking sector.

A financial technology company (Fintech company) is an organization that is not a credit institution or a foreign bank branch, having a license to establish or legally register to do business in Vietnam, independently providing Fintech solutions or through cooperation with credit institutions or foreign bank branches to provide Fintech solutions to the market.

Fintech solutions in the banking sector

Pursuant to Article 7 of the Draft Decree on Controlled Testing Mechanism in the Banking Sector, Fintech solutions in the banking sector are allowed to be tested in the Testing Mechanism in the following areas:

• Granting credit on technology platform.
• Scoring credit.
• Sharing data via an application programming interface (API).
• P2P Lending.
• Applying blockchain technology, and distributed technology ledger (DTL) in the banking sector.
• Applying other technologies in banking operations, deploy innovative business cooperation models in line with the objectives of the Testing Mechanism.

Issuance of Certificate of Participation in the Testing Mechanism

Pursuant to Article 7 of the Draft Decree, a Fintech company is considered for a Certificate of participation in the Testing Mechanism when it meets the following conditions and criteria:

• Is a legal entity established and operating legally in Vietnam; not in the process of division, separation, consolidation, merger, conversion, dissolution, or bankruptcy according to an issued decision; not belonging to the group of credit institutions under special control according to the Law on Credit Institutions.
• The legal representative and general Director (Director) of the organization requesting to participate in the Testing Mechanism must have professional qualifications or practical experience in business administration or the field in charge.
• The team of staff implementing the experimental Fintech solution has professional qualifications in the field in charge.

Accordingly, the State Bank is the focal agency to receive registration dossiers to participate in the Testing Mechanism and issue Certificates of participation in the Testing Mechanism.

Testing duration and scope

• The testing period for Fintech solutions is a maximum of two (02) years depending on the specific solution and field, from the time the State Bank issues a Certificate of Participation in the Testing Mechanism.
• The duration of the Certificate of Participation in the Testing Mechanism shall not exceed the validity period (if any) of the Establishment License or Enterprise Registration Certificate of the organization participating in the Testing Mechanism.
• The State Bank will decide the scope of operation of the solutions including, but not limited to, one or more of the following factors: Geographical, transaction limit, number of customers using the solution; and will not change during the testing period.

The draft Decree regulating the Controlled testing mechanism in the banking sector is still in the process of collecting opinions for approval and promulgation. If this regulation is approved, it will provide a specific and clear legal framework for fintech (Financial Technology) in Vietnam, which is an important factor to promote the development of this sector in the future.

Above is an update of some information about the financial technology (fintech) regime in Vietnam. If you have any related questions, please contact Viet An Law for the best advice and support!