On 6 November 2019, the State Bank of Vietnam ("SBV") published an updated version of the draft decree amending Decree No. 101/2012/ND-CP on non-cash payments (respectively, "Draft Decree" and "Decree") and certain explanatory documents attached to the Draft Decree ("Explanation Letter"). The Draft Decree imposes a foreign ownership cap on intermediary payment services ("IPS") and makes payment services not conducted via payment accounts a conditional business line.
1. The 49% foreign ownership cap for IPS
Under Article 29.2 of the Draft Decree, the maximum contributed capital rate for foreign investors, including both direct and indirect investment, is 49% of the charter capital of an IPS company. The transitional provision of the Draft Decree allows an existing IPS company with foreign ownership exceeding 49% to continue its operation until the expiration of its IPS Provision Licenses issued by the SBV or there is a change of shareholders, whichever is earlier.
2. The types of IPS under the Draft Decree
The Draft Decree provides that IPS includes switching services, e-clearing services, e-payment gateway services, cash collection and cash payment services, support services for wire transfer, and e-wallet services in addition to mobile-money. The above-mentioned services, with the exception of mobile-money, are provided for under Circular No. 39/2014/TT-NHNN guiding the IPS ("Circular No. 39"). Incorporating these services into the Draft Decree shows the Government’s intention of imposing the 49% foreign ownership limitation requirement under the Draft Decree. The newly added category of mobile-money service is a new type of payment support service provided for under Vietnamese regulations. Currently, only money issued by the SBV is legally recognized. The Draft Decree proposes to allow banks, branches of foreign banks and IPS companies to provide and issue electronic money in the form of e-wallets and mobile money.
3. Payment services not via customer accounts becomes a conditional business line
In addition to the already provided for payment services via customer accounts, the Draft Decree proposes to provide for "payment service not via customer accounts", which refers to money transfer services, entrusted collection and entrusted payment services. In its Explanatory Letter, the SBV expressed its concern that payment service not via a payment account may pose potential risks to national monetary security, hence its proposal that this service line shall be subject to legally binding business conditions. Accordingly, the Draft Decree imposes business conditions on payment service not via customer accounts provided by co-operative banks, people's credit funds, micro-finance organizations and public postal service providers. Only commercial banks and branches of foreign banks are allowed to provide this service unconditionally. Specifically under the Draft Decree, co-operative banks, people's credit funds and micro-finance organizations are required to incorporate "payment service not via payment accounts" into their SBV-issued Establishment License and Operation or amendment to said license, whereas public postal service providers are subject to additional requirements.
4. International payment is newly defined and subject to additional requirements
International payments, which the current Decree defines as payments made by parties, among which at least one has payment accounts outside Vietnam’s territory, under the Draft Decree is defined as a payment transaction between a payment service provider in Vietnam and an offshore payment service provider for the purpose of serving the payer/money remitter or beneficiary. Under the Draft Decree, parties to transactions deemed as international payments must conform to the laws on consumer data protection, cyber security, tax management, anti-money laundering and anti-terrorism financing in addition to the laws on foreign exchange control and international treaties on payment to which Vietnam is a signatory to, and international practices that do not contradict with the fundamental principles of Vietnamese laws.
5. Introduction of payment agency concept
The Draft Decree introduces the concept of payment agency defined as an arrangement under which a payment agent ("Agent") conducts parts of the process for bank account opening, and provision of payment service of the principals to the customers. The entities appointed by the payment agent ("Principal") include commercial banks, co-operative banks, foreign bank branches that have obtained written approval from the SBV. Agents can be commercial banks, co-operative banks, foreign bank branches, people's credit funds, organizations other than credit institutions, and foreign bank branches. Agents that are not credit institutions or branches of a foreign bank are subject to the following additional requirements:
- It must not (i) act as an Agent of another Principal concurrently, unless otherwise approved by the other Principal in writing, nor (ii) appoint a third party as its Agent, and
- It is subject to the following transaction limits when dealing with individual customers: VND 20 million/day/customer for cash withdrawal and VND 50 million/day/customer for payment/money remittance.
The Principal must open and maintain a bank account specifically for the Agent for purposes of performing payment agency activities, which shall be within the minimum balance agreed upon by the Principal and Agent.
6. Exemptions to the SBV’s license
In accordance with the Government's directive on reducing the licensing red tapes, the SBV proposes in the Draft Decree to allow non-bank organizations to provide e-payment gateway services, cash collection and cash payment services, and support services for wire transfer by cooperating with commercial banks and/or branches of foreign banks in order to provide the above-mentioned services. Non-bank organizations are not required to obtain the SBV's license. However, they are required to notify the SBV 45 working days prior to providing the said services. Commercial banks and branches of foreign banks are responsible for implementing internal regulations on evaluation and selection of non-bank organizations to cooperate in providing the said services.
7. Timeline for the Draft Decree
The Draft Decree, available here, is open for feedback for 60 days as of its release date and this consultation period will close on 6 January 2020