What is fintech?
Evolution of fintech market

What is fintech?

The term "fintech" refers to the synergy between finance and technology, which is used to deliver financial services and enhance business operations. Fintech can take the form of software, a service or a business that provides technologically advanced ways to make financial processes more efficient by disrupting traditional methods.

Figure 1 shows an overview of the fintech ecosystem.

Figure 1: fintech ecosystem

Evolution of fintech market

While Vietnam went through much economic turbulence in 2020 because of the covid-19 pandemic, for the fintech sector, the pandemic presented an opportunity as the increase in distance commerce came hand in hand with an increase in the use of cashless payments and e-finance.

To meet demands, according to Decision 2617/QD-NHNN, the State Bank of Vietnam (SBV) has proposed policies on the following five fintech-related vital issues to create a legal framework for fintech companies in Vietnam:

  • the application of blockchain technology in the field of finance;
  • managing Bitcoin and other cryptocurrencies in Vietnam;
  • the research and management of mobilisation and peer-to-peer (P2P) lending based on advanced technology;
  • solutions for developing electronic know-your-customer (eKYC) identifiers in financial-banking services in Vietnam (specifically, eKYC is acting as the first step for digital banks in Vietnam); and
  • researching open application programming interfaces (APIs) to apply in the field of finance.

Furthermore, in May 2020, the Ministry of Information and Communications and the State Bank submitted to the prime minister a decision on the pilot use of a telecoms account to pay for other small value services (known as "mobile money"). Most recently, on 9 March 2021, the prime minister promulgated Decision 316/QĐ-TTG to allow a mobile money pilot in two years (from the time the first enterprise was approved to conduct the pilot). The results of the pilot implementation of a mobile money service constitute a practical basis for the competent authorities to review and formulate and issue official legal regulations for mobile money services in Vietnam.

On 11 May 2021, the State Bank of Vietnam issued Decision No. 810/QD-NHNN to approve the plan for the digital transformation of the banking industry by 2025, with the implementation thereof by 2030. Accordingly, the grant or amendment of legal provisions to facilitate the digital transformation of the banking industry will prioritise the development and implementation of a mechanism for the controlled testing of fintech activities in the banking sector (ie, the regulatory fintech sandbox), and research issues related to the digital currencies of State Bank.

The most exciting developments to watch out for in the next 12 months are reports from authorities researching the ability to issue digital currencies as a fiat currency and a regulatory sandbox for fintech planned to be piloted from 2021 in seven fintech segments:

  • payment;
  • credit;
  • P2P lending;
  • eKYC;
  • open API;
  • innovative technology application solutions such as blockchain; and
  • other services supporting banking operations (eg, credit scoring, saving and crowdfunding).

Lastly, there will be a draft decree replacing the decree on non-cash payments likely to be published in 2021. From the current draft, it is clear that there will be various enhancements of the legal framework on payment intermediaries services, bank cards and bank accounts following Directive No. 22/CT-TTG.

For further information on this topic please contact Net Le or Thanh Minh Vu at LNT & Partners by telephone (+84 28 3821 2357) or email ([email protected] or [email protected]). The LNT & Partners website can be accessed at www.lntpartners.com.