Vietnam - New Draft Decree On Non-Cash Payments Proposes Guidelines For FinTech Participants, Contemplates Foreign Ownership Cap For Intermediary Payment Service Providers.
Legal News & Analysis - Asia Pacific - Vietnam - Regulatory & Compliance - Banking & Finance
13 November, 2018
The State Bank of Vietnam (SBV) has recently published a framework for the draft of a new decree on non-cash payments (Draft Decree), which is proposed to replace Decree No. 101/2012/ND-CP on non-cash payments issued by the Government dated 22 November 2012, as amended by Decree No. 80/2016/ND-CP issued by the Government dated 01 July 2016 (Decree No. 101).
Below are some notable aspects of the proposed amendments in the Draft Decree.
1. Foreign ownership cap on intermediary payment service providers
Article 28.1 of the Draft Decree sets out limited methods in which a foreign investor may access the intermediary payment service sector in Vietnam, namely:
- capital contribution;
- purchase of shares; and
- purchase of equity of an existing intermediary payment service provider onshore.
In addition, the Draft Decree proposes to limit the foreign ownership with regards to the intermediary payment service sector. In particular, Article 28.2 of the Draft Decree intends to provide a maximum foreign ownership cap on non-credit institutions providing intermediary payment services. However, the exact percentage has not been specified in the Draft Decree yet.
In short, the above article suggests that such services cannot be provided on a cross-border basis, and that the onshore entity that provides such service cannot have 100% foreign ownership.
2. Payment agency
The Draft Decree also proposes a new payment service agency model in an attempt to provide financial service coverage in remote areas which do not have transaction points belonging to banks. In accordance with Article 22.1 of the Draft Decree, the payment service agents may provide the following services under an agency agreement with banks:
- Money transfer service, cash deposit service, and cash withdrawal from accounts;
- Collection and payment services such as payment of invoices, and payment of salaries, among others; and
- Receiving card-opening application dossiers and distributing bank cards issued by banks to customers.
Essentially, the payment service agency will act as a bridge between banks and customers domiciled in areas where the bank may not otherwise have a commercial presence. However, the Draft Decree has yet to define which entities are qualified to act as an agent under this proposed model.
3. Data localization requirements
The Draft Decree does not include any specific provision on data localization requirements. However, the SBV's Proposal Letter to the government indicates the need for the government to manage data processing and storage activities conducted by offshore entities.
In short, we anticipate that the government will likely require localization (i.e., onshore storage) of the data derived from these intermediary payment service activities.
For further information, please contact:
Yee Chung Seck, Managing Lawyer, BMVN International LLC,
member of Baker McKenzie International