After having sought public opinion for the draft decree on non-cash payment, the State Bank of Vietnam (SBV), the country’s central bank, has opted to discard the requirement of foreign ownership limit of up to 49% in fintech providing intermediary payment services.
The SBV’s draft decree is set to be submitted to the government in June.
The SBV acknowledged the fact that foreign investment plays a significant role for fintech, therefore, such a cap could affect the attraction of foreign direct investment (FDI) in the field of intermediary payment services in particular and fintech in general.
Moreover, a number of major intermediary payment firms operating in Vietnam have current capital contribution of foreign investors above 49%, thus a change in regulation would then impact their operations.
Deputy Director of the SBV’s Payment Department Nguyen Thanh Son at a conference last August said the SBV had licensed 27 intermediary payment service providers, of which the majority offer e-wallet service. However, five fintech companies holding 90% of Vietnam’s payment market share have foreign ownership ranging from 30% - 90%.
Son added there have been concern over the actual practices of these fintech companies, particularly the security of information related to transaction and the privacy of customers’ data.
Moreover, foreign companies holding large shares of Vietnam’s leading fintech companies could pose the risk of market manipulation, Son stressed, adding neighboring countries such as Singapore and Indonesia also curb foreign ownership.
Vice President of the Singapore Fintech Association Varun Mittal said for the Vietnamese fintech industry to reach the regional level, government agencies should create conditions for them to expand and access new sources of capital.
According to Mittal, these fintech companies are very ambitious but the most important issue would be to secure sufficient funds for operation and rapid development, while ensuring full compliance with the current legislation.
At the Vietnam Business Forum in June 2019, a representative of the American Chamber of Commerce (AmCham) proposed not applying foreign ownership limit in fintech payment companies.
The AmCham representative added the growth of financial services and fintech in Vietnam would depend on the implementation of appropriate legal framework and investment policies. However, a limitation in foreign ownership is seen as considerable obstruction to fundraising capability of Vietnamese fintech companies.