DOING BUSINESS IN FINTECH IN VIETNAM: A REGULATORY OVERVIEW ON SELECTED SECTORS

Nguyen Quoc Bao (Mr.)

Senior Associate, TND Legal

BAO Quoc Nguyen* & NHU Thi Thao Hoang**

The world has witnessed the exponential growth in the development and outreach of financial technology (Fintech) in different parts of the globe with different socio-economic status, and Vietnam is not an exception to this trend. Fintech reconceptualises how financial services are delivered to the public through the process of disintermediation, gradually alleviating the dependence on conventional banking institutions of the financial system. In a nutshell, financial market is made up of three primary branches, namely banking, capital market and insurance[1]. This article shall discuss, in a brief, the current status of the regulatory framework in Vietnam on selected sectors of each aforementioned branch, including:

  • Payment sector and in particular to the foregoing the e-wallet and B2B cross-border payment service, as part of the banking branch;
  • Crowdfunding and in particular to the foregoing, lending-based crowdfunding and equity-based crowdfunding, as part of the banking and capital market branch; and
  • Insurance technology (InsurTech), as part of the insurance branch.

Overview Fintech market in Vietnam occupied by sectors

According to Vietnam Fintech Report 2020 submitted by Fintech Singapore[2], payment sector has been and remains the overwhelming sector of Fintech in the market, accounting for 31% of the total operating Fintech companies in 2020 while lending-based crowdfunding, including both P2P lending and SME financing, occupies nearly one-fourth of the Fintech market. The other branches of crowdfunding (mainly the donation-based) and InsurTech account for a quite minimal portion of the market (8% in total).

Diagram 1 – Breakdown Vietnam’s Fintech Players in 2020 (Source: Fintech Singapore)
Diagram 2 – Fintech Vietnam Startup Map 2020 (Source: Fintech Singapore)

The domination of the payment sector is indeed plausible given the constant promotion of e-commerce and cashless payment policy taken on by the Vietnamese Government. In light of such motivation, Vietnam has adopted a cohesive legal framework governing the provision of payment intermediary service by non-bank financial institutions (NBFIs), particularly to e-wallet and payment gateway services. Crowdfunding, on the other hand, has not received much attention from the regulators until the dramatical rise of P2P lending and SME financing start-ups in Vietnam, especially in the context of the collapse of Chinese P2P lending due to the lack of regulatory oversight[3]. Unlike the payment and crowdfunding sector, InsurTech receives the least attention from the regulators and most InsurTech firms in Vietnam tend to apply technology to the traditional insurance model rather than come up with new insurance products that are intrinsically different from the conventional ones.

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*          BAO Quoc Nguyen (LLB, LLM), lead author, is the senior associate of TND Legal.

**         NHU Thi Thao Hoang (LLB), co author, is the legal assistant of TND Legal.

[1]           Mark Fenwick, Steven Van Uytsel, Bi Ying, Regulating Fintech in Asia – Global Context, Local Perspectives (Springer 2020) 21.

[2]           Fintech Singapore (supported by Switzerland Global Enterprise), Vietnam Fintech Report 2020.

[3]           Angela Tritto, Yujia He and Victoria Amanda Junaedi, “Governing the gold rush into emerging markets: a case study of Indonesia’s regulatory responses to the expansion of Chinese-backed online P2P lending” (2020) 51 Financial Innovation 1, 7.