SBV drafts regulations on a testing mechanism for Fintech


According to the draft report submitted to the Government by the SBV, the world banking sector in general and the Vietnamese banking sector in particular have witnessed a strong application of new technologies associated with the achievements of the industrial revolution 4.0 such as cloud computing, big data analysis, blockchain, artificial intelligence (AI)… into business models, product and service supply of banks and credit institutions to improve operational efficiency and increase customer experience, ensuring transactions safe, quick, convenient with suitable services and reasonable costs.

In Vietnam, the financial technology (Fintech) trend is also clearly shown through the participation of technology startups and non-bank organizations with technological strengths in various activities in the banking and finance sector (Fintech company).

The Fintech field has a lot of development potential. Illustrative photo: ST
The Fintech field has a lot of development potential. Illustrative photo: ST

In fact, in our country’s market, there are many Fintech companies participating in the financial sector such as providing payment intermediary services, peer-to-peer lending (P2P Lending), credit scoring, and personal finance management.

In particular, the Fintech field also attracts a large amount of domestic and foreign investments.

However, the SBV believes that the rapid development and expansion of the scope of Fintech without a comprehensive legal framework or specific legal regulations may have potential risks and negative consequences on some aspects such as fair competition, financial stability, consumer rights protection, and network security

For example, in the P2P Lending activity that has emerged in Vietnam recently, some companies in the name of the P2P Lending model take advantage of people’s lack of knowledge and understanding to deceive and give misleading advertisements and promises about high profits and high interest rates to defraud and usurp people’s capital to invest in this loan model or deceive borrowers about “low interest rates” and loan incentives while real interest rates are exorbitantly high, that negatively impact people’s lives.

Some agreements between participating parties in the P2P Lending model (P2P Lending company and investors, P2P Lending company and third parties, P2P Lending company and borrowers…) lack clarity and transparency, legally binding, and monitoring and post-inspection mechanism for the borrower’s use and management of loan capital for the right purposes, which can lead to disputes and complaints between the parties.

SBV has proposed six policies to concretize into detailed regulations in the draft decree.The six policies are conditions for registering to participate in the Testing Mechanism; testing implementation; risk control; ensuring the legitimate rights and interests of businesses, consumers, and related entities; on post-test processing; and transition processing.

Therefore, along with world trends, the SBV believes that Vietnam needs to soon build a management framework in the form of a decree stipulating a testing mechanism for Fintech activities to promote innovation, creation, restrict unfair competition, prevent legal violations in the name of Fintech, and protect the interests of service users.

At the same time, the process of applying this framework provides a practical basis for relevant State management agencies to amend and supplement current regulations, complete the legal framework, and promulgate management regulations toward facilitation and adaption to Fintech activities in the banking sector in the future.

Accordingly, in the draft decree, the SBV has proposed a number of risk management policies through: Regulations on the responsibilities of participants in the Testing Mechanism in building a full risk management framework, protecting service users; Regulations on responsibilities for information and reports of organizations participating in the Testing Mechanism; Regulations on the authority and responsibility of State management agencies (including the Ministry of Public Security) in the process of receiving, appraising and evaluating applications for participating in the Testing Mechanism along with inspection and supervision during the operation of the Testing Mechanism…

The SBV believes that these regulations are intended to ensure that the testing process of Fintech solutions is always closely monitored and supervised by management agencies and participants in the Testing Mechanism implement the best measures to prevent and prevent risks from arising (if any).

But during the testing process, the participants will have to be closely monitored, monitored, and comprehensively evaluated by State management agencies, thereby controlling arising risks (if any), better protecting customers’ interests, while avoiding negative impacts compared to large-scale, long-term deployment.

Currently, the SBV is gathering comments on the draft decree including five Chapters and 24 Articles.


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