Search results for online lending apps. A regulatory sandbox for fintech was planned to be piloted from 2021. – Photo bizlive.vn

The seven sectors fintech would participate in within the sandbox were payment, credit, peer-to-peer lending, customer identification support, open application programming interface (open API), tech-based solutions and other banking support services, according to the draft decree which the central bank made public for comment this week.

The central bank said that there was a lack of a legal framework to regulate the operation of fintech companies in Viet Nam, which created risks such as financial exclusion, security and data breach, money laundering and financing of terrorism, high intermediary fee and lack of transparency.

Meanwhile, fintech is developing rapidly in Viet Nam.

The central bank said that the past three years saw a rapid increase in the number of fintech start-ups, from 40 in 2016 to more than 150 currently. Of them, 34 operate in payment, 40 in P2P lending while others provided banking support services without directly collecting fees on end-users.

More than 80 per cent of fintech companies in Viet Nam had operation related to banks.

The fintech sector also attracted significant attention of tech giants in Viet Nam like FPT, Viettel and VNPT through the foundation of fintech solution companies, investment funds and incubators to support fintech start-ups.

The central bank cited United Overseas Bank’s Fintech in Asean – From Start-up to Scale up Report 2019 that Viet Nam saw an investment inflow worth US$400 million into fintech last year, accounting for 36 per cent of the total investment poured in fintech in ASEAN and ranking second in ASEAN, only after Singapore.

The rapid scale-up and operation expansion of fintech companies could have negative impacts on the stability of the financial and banking system, the central bank stressed.

The participation of Uber and Grab in the transportation market of Viet Nam was an apparent lesson for the financial and banking sector about how to respond to the rapid development of technology, the central bank said.

It was necessary for Viet Nam to have a legal framework for the operation of fintech companies amid Industry 4.0 and the country’s rapid international integration, the central bank said, adding that if the management agency was not active in monitoring the development of fintech from the early stage, their out-of-control development might pose threats to financial and banking stabilities.

The central bank’s task was to promote innovations in the banking sector, at the same time, ensure the financial safety and stability and promote economic growth.

The central bank said that a regulatory sandbox would be suitable in the early stage before the issuance of the official legal framework.

The decree was expected to be submitted to the Government for approval this month.

The central bank planned to allow banks and fintech companies to apply for the participation in the sandbox from 2021 and the sandbox would be piloted in one or two years, depending on each field. – VNS

Regulatory sandbox: the key to fintech success

The Vietnamese fintech startup ecosystem is now home to more than 150 companies and brands, covering a broad range of services from digital payments and alternative finance to wealth management and blockchain.