SBV recently published for public comment a Decree on Controlled Testing Mechanism for Financial Technology Activities (Sandbox) in the Banking Sector. Photo: Lendbiz's app

The State Bank of Vietnam (SBV) recently published for public comment a Decree on Controlled Testing Mechanism for Financial Technology Activities (Sandbox) in the Banking Sector. The draft decree might be seen as one of the first bricks in the construction of a regulatory framework for Fintech in Vietnam, given the rapid growth of financial technology and its many potential hazards.

Defend against the shadow of fintech

Due to a lack of a specific regulatory framework, the Vietnam Fintech sector has seen a variety of borrowing under the pretense of P2P lending to give usury or organize other fraudulent activities..., causing stress and worry for clients who are unsure how to distinguish real from fake.

However, Mr. Tran Viet Vinh, CEO and Founder of Fiin Credit said the soon-to-be-issued draft Decree on a controlled testing mechanism for fintech operations would help to minimize the black credit that lurks in the shadows of creative Fintech. Besides, Fintech companies will also be allowed to grow their operations and influence by collaborating with financial institutions, banks, and investment funds, among others.

Credit institutions as defined by the Law on Credit Institutions 2010; Fintech company/Fintech solution provider partnering with banks; Fintech company/independent Fintech solution provider are expected to be able to participate in the sandbox. Payment, credit, P2P Lending, customer identification support, open application programming interface (Open API), innovative application technology solutions such as Blockchain, and other services supporting banking activities are among the fintech fields participating in the Fintech testing mechanism (such as credit scoring, savings, capital mobilization, etc.).

Equal opportunities needed

In general, the aforementioned draft Decree is well-suited to the current Fintech development setting. However, in Mr. Tran Viet Vinh's opinion, because numerous new financial service models will undoubtedly emerge in the future without particular restrictions, the regulator should anticipates introducing more open Fintech regulations. Furthermore, it is impossible to entirely avoid the dangers that arise during the Fintech testing process. Because the core of the Fintech testing process is to discover and evaluate risks and advantages for each Fintech solution, as well as to control risks to an acceptable level (if any). As a result, during the testing process, testing organizations will be continuously monitored and reviewed by the SBV, allowing it to effectively regulate risks and defend consumer interests.

In addition, the above draft Decree stipulates in Clause 3, Article 5, that "the maximum number of organizations to be approved to participate in the testing for fintech activities shall be determined by the SBV based on the ability of the SBV to consider and approve dossiers and the supervision capacity of the SBV in each period, in line with the actual market conditions."

"Under above regulations, the number of subjects that can participate in the sandbox will be limit  ed as a result of these limit  ations. As a result, they must be changed to allow qualifying enterprises to participate in the sandbox, ensuring that innovative startups have equal and fair possibilities", Mr. Tran Viet Vinh said.