Regulatory Sandbox – Where to go?

REGULATORY SANDBOX PROPOSED BY SBV, PAVING AN ORDERLY WAY FOR FINTECH DEVELOPMENT IN VIETNAM

03 June 2021

Regulatory Sandbox proposed by SBV, paving an orderly way for Fintech development in Vietnam

The State Bank of Vietnam (SBV) is proposing the Government of Vietnam to issue a Government Decree on Regulatory Sandbox for Fintech firms and Fintech service providers in Vietnam.
Is the to-be set Sandbox good or bad, I’m not sure yet but I believe it could be a big platform and leverage for Fintech development in Vietnam.
Fintech is not new to Vietnam but so far there may be no specific legal frameworks for Fintech firms to operate here. During the last few years Fintech firms and startups have vigorously grown and been booming in Vietnam. According to SBV, from 2016 to now the number of known Fintech firms increases from 40 to more than 150 and in 2019 the total investment in Fintech reached more than USD 400 million making Vietnam to rank No. 2 in ASEAN in term of Fintech investment. SBV reports that most of these Vietnamese Fintech firms operate in banking related businesses, among them 34 has been licensed by SBV to provide payment intermediary services while more than 40 are providing P2P lending services which recently vaguely determined by SBV to be in the grey area of the banking law and potentially cause severe damages to the society.
The proposed Decree shall cover 3 groups of entities:
–    Banks,
–    Fintech businesses providing fintech solutions in cooperation with banks, and
–    Fintech businesses providing fintech solutions or services independently
and 2 groups of fintech businesses:
–    Fintech Services and solutions provided by non-bank fintech businesses; and
–    Technology solutions applicable to or supporting regulated banking products, services and businesses.
The businesses shall be subject to the proposed Decree may include Fintech solutions or services relating to payment, credits, P2P Lending, eKYC, open APIs, Blockchains, customer scorings etc. which shall be allowed by SBV through a sandbox licensing mechanism.
At the moment, SBV proposed that only those Fintech solutions, among others,
–    for which Vietnam has no or part of legal frameworks governing them;
–    which are novel to Vietnam or applicable to novel businesses which represent high creativeness or innovation for the consumers in Vietnam or increase financial service penetration in Vietnam;
–    which are designed to manage risks well, or do not or least create negative impacts to the financial system or banking system or the economy of Vietnam, and
–    are proved to be feasible and highly commercialisable.
may be sandbox licensed under the new Decree for 1 or 2 year experiments.
It is obvious that more clarifications and tuning are needed and more works to be done even once such Fintech Sandbox Decree shall have been introduced to make the frameworks really work in life. This move now at least shows the Vietnamese Government and SBV are serious to remove barriers for Fintech, preparing for its further and orderly developments, pushing innovation, the application of digitalization and the development of the digital economy and finally expanding people’s access to banking services and comprehensive financial services in Vietnam.

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