The State Bank of Vietnam (SBV) plans to lower the foreign ownership rate in the payment intermediary service sector to 49 percent instead of leaving it unrestricted to avoid manipulation by foreign investors in the field.

The SBV would include the limit in a new draft Decree on intermediary payment services, news site tinnhanhchungkhoan.vn reported recently.

According to the SBV's Payment Department, the new regulation would help avoid manipulation by foreign investors, ensuring security and safety for banking and financial activities.

It will also create favourable conditions for domestic enterprises to seize more investment opportunities in the sector.

Most countries in the region had set limits on foreign ownership in the field. In Indonesia and China, the ratio did not exceed 20 percent, while in Malaysia, the ratio was 30 percent, the SBV said.

As of November this year, Vietnam had 30 payment intermediary service providers licensed by the State Bank, including MoMo, Moca, Payoo, SenPay, Zalopay, Airpay, VNPay, Monpay, ViettelPay, 1Pay, Nganluong, VTCpay, Mpay and Wepay.

It is worth mentioning that most of the payment intermediary service providers in the country now belong to foreign investors.

Nguyen Hoa Binh, chairman cum founder of Vietnamese e-commerce start-up NextTech Group, which runs many payment intermediary companies in the country, said it was high time for a restriction on foreign ownership in the sector.

In recent years, flourishing cashless payment services had paved the way for a sudden flood of foreign capital flowing into the market. Many foreign investors had already grasped the major shares of domestic payment intermediary companies, he said.

Currently, 90 percent of 1Pay's capital is owned by Thailand’s True Money; Japan’s NTT Data Group has bought 64 percent of Payoo; South Korean investors Global Payment Service and UTC Investment Co Ltd hold 65 percent in VNPT EPAY; and foreign funds Warburg Pincus, Goldman Sachs and Standard Chartered Private Equity hold about 64 percent in MoMo.

Tight control

According to Nguyen Thuy Duong, deputy director of consulting firm Ernst and Young Vietnam, in other countries, during the early stages of development, payment intermediary companies were allowed to freely raise capital.

But now the market had grown to a certain size, market regulators would need to tighten control over the operation of businesses to ensure the security and safety of the country’s payment system, she said.

Strong development of technology had made it easier than ever to transfer money through payment intermediary channels, including cross-border money transfers, she said.

Experts warned that if it was not strictly controlled, there would be the risk of tax evasion, money laundering and illegal cross-border money transfers.

The SBV admitted the management of cross-border electronic payment transactions in Vietnam faced many difficulties due to the fact that most transactions were conducted via international payment gateways and handled by international card-issuing organisations.

Another problem relating to foreign ownership room was indirect ownership. For example, foreign investors could indirectly expand their ownership in Vietnam’s payment intermediary companies by pouring capital into local investment funds.

This exercise had also been adopted in many other sectors. Once foreign investors dominated the market, it was very difficult for local enterprises to compete, the SBV said.