Financial regulationRegulatory bodies
Which bodies regulate the provision of fintech products and services?
Currently, there is no single regulatory body responsible for the regulation of fintech products and services. Under the current Fintech Draft Decree, the State Bank of Vietnam (SBV) is the sole regulator of fintech products and services, and it may seek opinions from different regulatory bodies for approving the sandbox for a specific fintech product or service, such as the Ministry of Finance (MOF), the Ministry of Industry and Trade, and the State Securities Commission (SSC).Regulated activities
Which activities trigger a licensing requirement in your jurisdiction?
The following activities are regulated and require a licence:
- carrying on securities brokerage;
- carrying on securities investment consultancy;
- carrying on financial advising relating to securities trading or investment;
- carrying on securities underwriting and sponsorship;
- carrying on proprietary account transactions;
- carrying on securities asset management;
- taking in deposits from the general public;
- handling domestic and foreign settlements and intermediary payment services;
- handling, accepting and discounting of certain types of 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 the purchase and sale of foreign exchange;
- carrying on fund management services;
- carrying on fund custodian services;
- carrying on derivative products transactions;
- lending micro loans online or offline;
- providing certain types of insurance;
- carrying on credit information services; and
- providing consumer finance services.
Is consumer lending regulated in your jurisdiction?
Consumer lending is generally regulated by (1) Law on Credit Institutions No. 47/2010/QH12, as amended from time to time (the Law on Credit Institutions); (2) Circular No. 39/2016/TT-NHNN prescribing lending transactions of credit institutions or foreign bank branches, or both, with customers (Circular 39); and (3) Circular No. 43/2016/TT-NHNN, as amended in 2019, prescribing consumer lending by finance companies.
The Law on Credit Institutions provides two types of credit institutions that are allowed to provide consumer lending such as (1) Vietnam-based commercial banks, foreign bank branches and foreign invested banks and (2) Vietnam-based finance companies. Both banks and finance companies must obtain an operation licence from the SBV and an enterprise registration certificate from the Department of Planning and Investment. Finance companies are limited to providing loans not exceeding 100 million Vietnamese dong (except for car loans with security). Non-credit institutions such as fintech companies are currently not allowed to provide consumer lending.Secondary market loan trading
Are there restrictions on trading loans in the secondary market in your jurisdiction?
Yes, trading loans in the secondary market in Vietnam are subject to the following restrictions:
- a credit institution (seller) can only sell its bad debts to the Vietnam Asset Management Company (VAMC) and this sale is subject to the supervision by the SBV and the following restrictions:
- the currency used for the purchase and sale of bad debts is Vietnamese dong (except in case of special VAMC bonds);
- all rights and interests associated with the bad debt, collateral and other security measures must be preserved and transferred to the debt buyer under the debt purchase contract;
- if the VAMC and the credit institution reach agreement on amending the security conditions of the bad debt, a written approval of the borrower and guarantor must be obtained; and
- the VAMC and credit institutions must report certain information to the SBV;
- trading in loans between persons being non-credit institutions or individuals is considered as assignment of rights to demand the payment of debts or assignment of obligation:
- for assignment of right to demand, the transferer must provide a written notice to the obligor of such assignment, unless otherwise agreed; and
- for assignment of obligation, the transferer must obtain a consent from the obligee; and
- trading in loans by debt trading companies pursuant to newly issued regulations of the government in 2021 is subject to further guidelines of the government, which have not been issued yet.
Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.
The establishment and operation of securities investment funds are regulated under Law on Securities No. 54/2019/QH14 (the Law on Securities). Securities investment funds include public funds and member funds, and public funds include open investment funds and closed investment funds. The establishment of public funds must be registered with and approved by the SSC, and the establishment of member funds shall be notified to and approved by the SSC. Only commercial banks, finance companies, finance leasing companies, investment funds, and security investment companies and fund managers can receive funding or capital to carry out investment activities based on investment entrustment agreements.
The peer-to-peer or marketplace lenders or crowdfunding platforms do not fit the definitions of securities investment funds and so are not currently recognised. Currently, there is no specific regulation of fintech companies providing alternative finance products or services under the Law on Securities.Alternative investment funds
Are managers of alternative investment funds regulated?
Managers of alternative investment funds are regulated under the Law on Securities and Law on Credit Institutions. Only commercial banks, finance companies, finance leasing companies, investment funds, and security investment companies and fund managers can receive funding or capital to carry out investment activities based on investment entrustment agreement. In particular, these investment activities are broadly defined as (1) securities investment consultancy conducted by securities companies or securities investment fund managers, (2) securities investment fund management conducted by securities investment fund managers, (3) securities investment portfolio management conducted by securities investment fund managers, and (4) receipt of entrusted funds conducted by credit institutions.
Managers are subject to different regulatory regimes depending on the specific forms of these alternative investment funds; and when fintech regulations are adopted by the government, fintech companies may participate in alternative investment funds (ie, crowdfunding).Peer-to-peer and marketplace lending
Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.
Peer-to-peer lending (P2P lending) is not regulated under the prevailing laws, and currently fintech companies are not allowed to engage in P2P lending. The SBV has expressed concerns over unregulated P2P lending companies applying exorbitant interest rates, high uninformed fees, or resort to threatening tactics, harassment and even violence to recover loans.
According to the Fintech Draft Decree, a P2P lending company can commence operation after complying with the following conditions: (1) being selected for the trial mechanism on P2P lending; (2) passing this trial mechanism for a certain period of time decided by the SBV and the PM; and (3) being subject to some restrictions on locality of service provision, a number of limited customers and limitation of the services.
To be selected for the trial mechanism, the company needs to submit application dossier to the SBV, who will review and examine it; if it is cleared by the SBV, it is submitted to the PM for approval for participation in the trial mechanism.Crowdfunding
Describe any specific regulation of crowdfunding in your jurisdiction.
Crowdfunding is not regulated or recognised as the legal framework for crowdfunding is still under development by the SBV. Currently, fintech companies are not allowed to engage in crowdfunding.
According to the Fintech Draft Decree, a crowdfunding company can commence operations after complying with the following conditions: (1) being selected for the trial mechanism on crowdfunding; (2) passing this trial mechanism for a certain period of time decided by the SBV and the PM; and (3) being subject to some restrictions on locality of service provision, a number of limited customers and limitation of the services.
To be selected for the trial mechanism, the company needs to submit application dossier to the SBV, who will review and examine it; if it is cleared by the SBV, it is submitted to the PM for approval for participation in the trial mechanism.Invoice trading
Describe any specific regulation of invoice trading in your jurisdiction.
The Law on Negotiable Instruments and the Law on Credit Institutions provide regulations on debt instruments but are silent on invoice trading.
The Law on Negotiable Instruments applies to categories of negotiable instruments including bills of exchange, promissory notes, cheques and some other negotiable instruments.
The Law on Credit Institutions regulates banking activities that include, among others, factoring. Factoring is a form of credit extension to a goods seller or buyer through acquiring receivable or payable amounts arising from the purchase or sale of goods or provision of services under a contract on goods purchase or sale or service provision while reserving the right to claim these amounts.
The government has assigned the SBV to draft the Fintech Draft Decree as a framework regulation on a trial mechanism in relation to an alternative financing solution for a borrower with cash flow problems with its investors to sell its unpaid or overdue invoices on e-commerce platform. Until the government adopts new regulations, the invoice trading is not allowed.Payment services
Are payment services regulated in your jurisdiction?
Non-cash payment (including non-cash payment services and intermediary payment services) is strictly regulated under Decree No. 101/2012/ND-CP (Decree 101) and controlled by the SBV. In particular:
- non-cash payments that can only be provided by Vietnam-based banks:
- payment orders;
- authorised payment orders;
- collection orders;
- authorised collection orders;
- bank cards;
- letters of credit;
- monetary remittance via client’s payment account; and
- receipts and disbursements on behalf of others via client’s payment account;
- intermediary payment services (IPS) that can be provided by non-credit institutions (IPS provider), include:
- electronic payment infrastructure provision services: financial switch services, electronic clearing services and online payment gateway services; and
- supporting services for payment services: supporting services for authorised collection or payment, e-wallet services and supporting services for electronic funds transfer;
- IPS providers are required to obtain a licence from the SBV. Only Vietnam-based IPS providers can provide the IPS in Vietnam, while offshore IPS providers cannot. There are certain technical, legal and personnel requirements for the IPS, including a minimum charter capital of 50 billion Vietnamese dong. Further, the IPS is subject to market access restrictions for foreign investors; however, current IPS regulations are silent on the foreign investment restrictions applicable (including foreign ownership limitation). There is no commitment by Vietnam to open this sector to foreign investors under international treaties (eg, Vietnam’s commitments to the WTO and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)). The competent authorities will decide on any limitations or technical barriers applicable to foreign investors who wish to engage in the IPS. Establishment of a 100 per cent foreign-owned IPS provider is subject to the sole discretion of competent authorities, especially the SBV. Foreign investors hold, directly or indirectly, up to 100 per cent equity interest in a few companies of the total 43 licensed IPS providers published on the SBV website; and
- the SBV is in process of amending existing regulations on non-cash payment (including the IPS). The SBV’s draft decree to replace Decree 101 (the Non-cash Payment Draft Decree) introduces new concepts of ‘e-currency’, ‘mobilised currency’ and ‘pre-paid card’. Initially, the SBV proposed a foreign ownership limitation of 49 per cent for the IPS, but this proposal was objected to by experts and IPS providers, and the SBV is reconsidering it. The Non-cash Payment Draft Decree also provides that certain the IPS are not subject to SBV’s licence requirement (ie, online payment gateways, supporting services for authorised collection or payment, and supporting services for electronic funds transfer). However, IPS providers will still be required to cooperate with a Vietnam-based commercial bank or a foreign bank branch to conduct the business.
Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?
There are no laws or regulations in Vietnam on open banking. The SBV is considering allowing credit institutions and fintech companies to apply Open API with an Open Canvas solution introduced by NTT. However, the SBV has been working on a draft circular for the legal framework for this application.
Under the Law on Credit Institutions, disclosure of data by credit institutions (Vietnam-based banks and finance companies) is heavily restricted. In particular:
- employees, managers and executive of a credit institution (eg, bank and finance company) shall not be permitted to disclose the business secrets of this credit institution (eg, customer and product data);
- credit institutions must ensure confidentiality of information on accounts, deposits, deposited assets and transactions of clients conducted at these credit institutions;
- credit institutions shall not be permitted to provide information to any other organisation or individual about accounts, deposits, deposited assets or transactions of clients conducted at these credit institutions, except when requested by competent authorities or when the client consents; and
- credit institutions shall be permitted to exchange information with each other about their operation.
Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?
The sale or marketing of insurance products in Vietnam by insurers or non-insurance companies is regulated by the Law on Insurance Business and the Law on Advertising. In particular, a Vietnam-based insurer can sell insurance products via multiple channels including, among others, online or offline. However, it is currently unclear whether insurance products can be sold via an e-commerce platform operated by third parties. Thus, sale or marketing of insurance products through e-commerce platforms may cause the e-commerce platform service providers to fall within (1) the scope of the insurance agency or insurance broker and (2) the scope of the advertising service.
For (1) (insurance agency or insurance broker), these are conditional businesses that fall in the market access restriction list, with restrictions applying to foreign investors; however, there is no foreign ownership limitation for insurance agencies or insurance brokers under Vietnamese law. The licensing authority may, at its sole discretion, seek opinions from the higher-level authorities (eg, the Ministry of Planning and Investment and MOF) before approving incorporation.
- For insurance agency services, in addition to incorporation documents, the company needs to meet the following requirements: execution of the insurance agency agreement with the insurer; and the staff being Vietnamese citizens, residing locally, at least 18 years old and holding an insurance agency certificate.
- For insurance broker services, the company must make their capital contributions in cash (which must not be financed by a loan or investment trust from other entities); conduct profitable business in three consecutive years prior to the application (for corporate investors holding more than 10 per cent of the charter capital); and undertake that their owner’s equity less the minimum legal capital is at least equal to the planned amount of investment in insurance broker.
For (2) (advertising services), the display of the insurance products on platform (such as introduction of products) is regarded as aimed at the public for introducing the insurers and their products and services. Hence, this display would be considered an advertising activity under the Law on Advertising and Vietnam’s Commitments to the WTO; and a foreign-invested company engaging in advertising services is required to have a local partner who has registered a business line of advertising.Credit references
Are there any restrictions on providing credit references or credit information services in your jurisdiction?
Currently, there are two organisations providing credit information services: the Credit Information Centre under the SBV and a company named Vietnam Credit Information Joint Stock Company, which is owned mostly by Vietnam-based banks, which have been licensed by the SBV to provide credit information services.
Credit information services are regulated by Decree 58/2021 (which takes effect on 15 August 2021), replacing Decree 10/2010. ‘Credit information’ is data and relevant data of borrowers and clients at participating institutions, including credit institutions, foreign bank branches, non-credit institutions, and foreign bank branches that provide property rental services, instalment purchase services, pawn shop services under conditions of interest, duration, rental and security interest pursuant to law.
In addition to incorporation documents, a credit information company must obtain a certificate of eligibility issued by the SBV to provide credit information services and satisfy the following conditions, among others, technical facilities, personnel, minimum charter capital of 30 billion Vietnamese dong, and agreements with at least 15 participating institutions being Vietnam-based banks and foreign bank branches who agree to provide credit information to only a credit information company. The credit information company shall only receive credit information from the participating institutions if the concerned borrowers give consent to the information collection. We are not aware of any other credit information service provider that has obtained this SBV approval.