88 Trang 6 AI Artificial Intelligence API Application Programming Interface ATM Automated Teller Machine BOK Bank of Korea BOT Bank of Thailand CEO Chief Executive Officer CRM Customer
INTRODUCTION
Research rationale
The banking industry is entering a transformative era driven by innovation, reshaping the relationship between banks and their customers Traditional banks are struggling to keep pace with 21st-century technological advancements, resulting in numerous shortcomings The rise of information technology and mobile telecommunications has led to a significant trend toward digital banking solutions, which are increasingly seen as valuable investment opportunities As customer needs evolve, traditional banks are unable to meet the demands of the digital revolution, prompting consumers to favor digital banking for its convenience and efficiency In Vietnam, a survey by IDG Vietnam revealed that 81% of respondents utilized digital banking solutions in 2017, a substantial increase from 21% in 2015 (Fintechnews Vietnam, 2018).
Digital banking presents significant opportunities and challenges for banks and regulatory agencies alike Banks must address high customer expectations, leverage emerging technologies, and safeguard against cybersecurity threats while ensuring the protection of customer information Meanwhile, state agencies face the dual challenge of safeguarding consumer interests and managing risks related to network security and data privacy, all while striving to balance regulation with innovation and competition in the financial sector.
To meet market demands and enhance international integration, domestic banks in Vietnam are increasingly adopting new technological solutions to streamline processes and expand product and service offerings However, the implementation of these technologies is hindered by incomplete legal frameworks Therefore, it is crucial to adjust and update policies and laws to align with the necessary reforms in banking technology, which is essential for the sustainable development of digital banking in Vietnam.
In such circumstance, it is necessary to have a full scaled research about digital banking which is very important and needful for Vietnam.
Literature review
There are a lot of domestic and foreign studies on digital banking
Recent research highlights that traditional banks are lagging in technological advancements as we enter a third wave of innovation in banking According to experts from MIT, the digital age demands a transformation in banking practices, questioning the future role of banks To adapt to evolving customer expectations, banks must not only digitize their existing operations but also consider establishing new digital-only banking services.
Buiding a Digital Banking Business in 2018) Report of the Working Group on
FinTech and Digital Banking in 2017 by Reserve Bank of India explained why
FinTech innovations are revolutionizing the financial markets, prompting banks to view fintech firms as strategic partners while increasingly adopting public cloud services, according to Capgemini's 2017 report In 2018, Takeshi Jingu highlighted the importance of financial risk prevention and personal information protection as key regulatory priorities in his research on China's initiatives in the Internet finance and FinTech sectors.
In recent years, there has been a significant increase in research and publications on digital banking from local writers, highlighting its growing importance Nguyen Thuy Duong, Deputy General Director of Ernst & Young Vietnam, conducted a study in 2017 examining the practices, legal frameworks, and management of digital banking in countries like India, Singapore, and China Additionally, Nguyen Hung, General Director of TPBank, addressed various digital solutions in his 2017 work, focusing on challenges in implementing identification methods and promoting electronic savings and agency banking services The State Bank of Vietnam (SBV) has also organized several legal workshops on digital banking, including "The Legal Framework for Digital Banking in Vietnam" in December 2017 and "Digital Banking: Breakthrough Opportunities" in October 2018, which attracted significant participation from industry stakeholders.
Deputy Governor Nguyễn Kim Anh of the central bank, along with representatives from the Ministry of Public Security, Ministry of Justice, local banks, E&Y Company Limited, fintech firms, research institutes, and universities, participated in a workshop focused on the development of digital banking in Vietnam The discussions emphasized the necessity for policy and legal adjustments to effectively govern and promote digital banking services in the country.
Current research on digital banking primarily examines specific legal aspects, such as its emergence, competition between fintech and traditional banks, financial risks, data protection, and management practices, including eKYC However, there is a notable lack of comprehensive, large-scale studies analyzing the digital banking laws across various countries, including the EU, Singapore, Thailand, South Korea, and China This gap hinders the evaluation of Vietnam's potential to learn from these countries' experiences, as well as the identification of opportunities and challenges in adapting their digital banking regulations Therefore, recommendations for the Vietnamese government to amend or supplement its digital banking laws are essential.
Research questions
Question 1: What is law on digital banking?
Question 2: What are differences between electronic banking and digital banking?
Question 3: How do some countries in the world promulgate/ revise their policies and laws to govern digital banking?
Question 4: Which law on digital banking of Vietnam need amending?
Scope of the research
The article examines the legal frameworks governing digital banking in various countries and draws valuable lessons for Vietnam It highlights the importance of adapting regulatory measures to foster innovation while ensuring consumer protection By analyzing successful international practices, the article provides insights into how Vietnam can enhance its digital banking landscape, ultimately promoting financial inclusion and economic growth.
This study addresses the lack of research on digital banking, focusing on the development and policies of digital banking in selected countries, including the EU, Singapore, Thailand, South Korea, China, and Vietnam from 2012 to 2018 It evaluates the legal frameworks governing the banking sector and digital banking specifically, assesses the measures in place for protecting customer information, and examines the new technologies that have contributed to the rapid growth of digital banking.
This research aims to explore Vietnam's experiences by analyzing the achievements and challenges faced by selected countries in digital banking The findings will provide valuable recommendations for the Vietnamese government to enhance and implement policies and laws that support the growth of digital banking in the country.
Research methodology
This study employs a qualitative research approach to develop a theoretical dissertation The methodology encompasses the selection and discussion of both theoretical and descriptive materials, alongside publication research, legal research, and case reviews It integrates contemporary and historical information, providing a comprehensive comparison of regulations and theories regarding their applicability.
Structure of thesis
This thesis comprises of 6 chapters, which are:
Chapter 1: Introduction Chapter 2: Overview of digital banking Chapter 3: Policy and Law on digital banking in some countries Chapter 4: Policy and Law on digital banking in Vietnam
Chapter 5: Recommendations for Vietnam on amendment of law on digital banking
OVERVIEW OF DIGITAL BANKING
Origin and development of digital banking
2.1.1 History of Digital Banking luan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnam
In the mid-1970s, Barclays Bank launched the first automated teller machine (ATM), marking a significant advancement in digital banking Developed by John Shepherd-Barron of De La Rue Company Limited, this electronic ATM allowed customers to perform essential banking transactions such as cash withdrawals and check deposits (Linda Rodriguez McRobbie, 2015).
Online banking was introduced to customers in the 1980s, coinciding with the rise of the internet, which enabled producers to sell products online This innovation allowed customers to perform various banking transactions, such as money transfers, accessing bank statements, and electronic bill payments, through bank websites or apps The evolution of digital banking can be traced back to the development of e-commerce systems in the early 2000s, providing users with convenient access to banking services beyond traditional ATMs and branches By 2017, more than 60% of consumers preferred using their smartphones for digital banking (Jim Marous, 2017).
Customer behavior is evolving rapidly, particularly among younger consumers who frequently utilize smartphones and the internet for online purchases To retain current customers and attract new ones, banks must swiftly digitize their operations and adopt a new digital business model This shift has led to the emergence of digital banking, allowing nearly all banking transactions to be conducted via electronic devices like smartphones, tablets, and laptops, without the need for in-branch visits Consequently, the traditional banking model reliant on branch networks is set to transform into a fully integrated digital banking model.
2.1.2 Electronic banking and digital banking
Digital banking and electronic banking are increasingly popular due to their convenience and efficiency compared to traditional banking methods While both concepts share similarities, significant differences exist Electronic banking emerged in Vietnam alongside the rise of Internet usage, allowing customers to perform transactions such as balance inquiries, withdrawals, and money transfers online However, it remains an alternative solution under the control of traditional banks In contrast, digital banking encompasses all functions of a real bank, enabling customers to conduct transactions and inquiries entirely online via mobile devices Essentially, electronic banking serves as a utility that digitizes core banking features, while digital banking integrates all banking activities and programs As digital banking represents the future of finance, it offers substantial cost and time savings for both customers and financial institutions.
2.1.3 Fintech and threats to bank
FinTech, or financial technology, refers to the integration of innovative technologies in the financial sector, encompassing areas such as banking, insurance, investments, and payment services By leveraging modern solutions, FinTech aims to deliver transparent, efficient, and cost-effective financial services compared to traditional methods Unlike banks, FinTech companies face fewer regulatory barriers, allowing them to adopt advanced technologies like automation and artificial intelligence, which enhances customer experience and productivity Additionally, these companies are willing to take on higher risks, enabling them to serve a broader range of customers, including those who may not qualify for traditional banking services.
The rise of Fintech poses a significant threat to traditional retail financial service providers, particularly banks Acknowledging this challenge, many banks are undergoing comprehensive transformations in their operations and service offerings To remain relevant in the evolving financial landscape, these institutions are increasingly adopting digital banking models, leveraging technology to meet customer demands for quick, convenient, and secure services, contrasting sharply with traditional business approaches.
Banks are shifting from competition to collaboration with Fintech companies, embracing a win-win partnership model This approach allows banks to implement modern technologies cost-effectively while enabling Fintech firms to leverage the banks' customer networks, data, and capital Research from various international organizations highlights the significance of this cooperation, which helps banks adopt technological solutions that align with market demands A 2017 KPMG survey revealed that 81% of banks support a cooperative model with Fintech, marking a 20% increase from previous years.
2017, an average of 45% of banks surveyed globally have collaborated with Fintech companies in developing and supplying products higher than 32% of banks surveyed in 2016 (PwC, 2017).
Definition of law on digital banking
To start with, let us begin with the term “digital” and “digitalization”
Digital banking refers to the storage and management of data through digital signals, utilizing formats such as digital KYC and electronic customer records Unlike digitization, which merely converts physical formats into digital ones, digitalization transforms processes into interactive and multimedia experiences This evolution enables online dialogues between previously disconnected parties, enhancing the overall banking experience.
Digital banking encompasses a broader range of services compared to e-banking, representing an advanced evolution of online banking While many perceive digital banking primarily as an online banking channel, this thesis adopts a more comprehensive definition, recognizing digital banking as a multifaceted concept that extends beyond mere online transactions.
Digital banking enables customers to perform most banking transactions online, eliminating the need for branch visits and reducing paperwork It offers 24/7 access to various services, allowing users to manage their finances actively from anywhere Through financial applications and websites, customers can easily execute tasks such as bank remittances, money transfers, bill payments, loans, and savings deposits, as well as explore financial products like insurance, investments, and both personal and corporate finance Various definitions of digital banking exist, reflecting its evolving nature and significance in modern finance.
Digital banking represents an advanced evolution of traditional online and mobile banking, aiming to enhance user experience by integrating cutting-edge digital technologies This includes the use of strategic analytics tools, social media interactions, innovative payment solutions, and mobile technology The primary goal of digital banks is to provide a richer, more engaging banking experience for users, reflecting a significant shift in how financial services are delivered.
Fivedegree presents a unique perspective on digital banking, defining it as the complete digitalization of all banking products, services, and traditional processes, along with the evolution of online and mobile banking This definition emphasizes the necessity for automation in every aspect of a bank's operations.
Digital banking encompasses the complete digitization of banking operations, including services, programs, and functions It involves not only the digitization of customer-facing services but also the automation of back-end processes, integrating these areas through middleware Ultimately, digital banking automates every aspect of the banking relationship, extending far beyond traditional online or mobile banking platforms.
Digital banking, as defined by Rajendra Kumar Tolety, leverages technology to provide seamless processing of banking transactions initiated by clients This approach maximizes utility for customers through enhanced availability, usefulness, and cost-effectiveness For banks, digital banking results in reduced operating costs, minimal errors, and improved service delivery.
Digital banking integrates emerging technologies such as eKYC, big data, APIs, and artificial intelligence into financial services, enhancing both internal and external relationships This innovation aims to elevate customer service and experience, allowing commercial banks to thrive in a competitive landscape and improve their business management capabilities for future growth.
The law on digital banking encompasses a set of regulations established and enforced by the state to govern the interactions between state agencies, credit institutions, and customers It addresses key aspects such as the establishment, operation, and management of digital banks, outlines the requirements and conditions for credit institutions offering digital banking products and services, and defines the rights and obligations of customers utilizing these digital services.
Main types of digital banking
This article explores the legal frameworks governing digital banking in various countries and draws valuable lessons for Vietnam It highlights the importance of adapting regulatory practices to foster innovation while ensuring consumer protection By analyzing successful international models, the article provides insights into how Vietnam can enhance its digital banking sector Furthermore, it discusses the challenges faced by emerging markets in implementing effective digital banking laws and suggests strategies for overcoming these obstacles Ultimately, the findings aim to inform policymakers and stakeholders in Vietnam to create a robust legal environment for digital banking growth.
The transition from traditional banking to digital banking involves significant changes in infrastructure, back-office operations, distribution channels, and service products This digital banking model can be categorized into four distinct types.
Traditional banks often struggle to engage young customers due to their established identities and reluctance to alter their images A strategic solution is to create new brands that focus on products, sales, and promotional policies tailored to younger audiences This approach effectively establishes a new type of digital bank while leveraging the existing infrastructure, back-office, and distribution channels of traditional banks Notable examples include OCBC's FRANK brand in Singapore and VPBank Vietnam's YOLO, both of which exemplify this innovative digital banking model.
2.3.2 Digital banking is distribution channel
User experience is crucial and can be enhanced through online and mobile services that prioritize user engagement This approach often leverages existing banking licenses to develop innovative products with improved user interfaces, distinct from traditional banking services Implementing a test-and-learn strategy allows for initial pilots and tests, leading to full deployment of digital offerings in a flexible and agile manner A notable example of this model is Moven in the United States.
2.3.3 Digital bank is a subsidiary of traditional bank
Large banks are increasingly recognizing that their existing banking systems are overly complex for effective innovation To address this, they are creating standalone subsidiaries that operate independently from the parent company, featuring completely separate back-end and front-end systems A prime example of this approach is HSBC's First Direct In Vietnam, VPBank has launched Timo as a dedicated e-banking channel, utilizing only VPBank's back-end system while offering independent digital products, services, and a distinct sales force.
2.3.4 Full-scale Digital bank luan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnam
A full-scale digital bank operates entirely on digital technology, often without physical branches, or utilizing them solely to enhance digital services In this model, bank employees are equipped with a digital-first mindset, aligned with company regulations, culture, and innovation For instance, South Korea’s K-Bank exemplifies this approach, where customer interactions predominantly occur through digital channels.
Main characteristics of digital banking
The traditional branch banking model operates for only 8 hours, which often coincides with the working hours of many customers, particularly individuals, leaving them unable to visit the bank This has created a pressing need for digital banks to automate the delivery of products and services through non-human channels By integrating digital distribution methods, these banks can enhance the automation of product creation and delivery processes, offering advanced solutions to customers Modern core banking systems now feature capabilities like product packaging tailored to customer segments, facilitating efficient management of product distribution across various channels.
To enhance efficiency and deliver suitable products swiftly across various channels, banks must effectively manage extensive internal and external data for informed decision-making Consequently, digital banking applications should be equipped to analyze data, enabling quicker and more precise decisions based on customer preferences and risk management Additionally, core banking solutions like Customer Relationship Management (CRM) and Loan Origination System (LOS) play a crucial role in automating customer care, marketing, sales, and key business processes, ultimately improving overall operational effectiveness.
2.4.3 Innovation luan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnam
Building a digital bank necessitates thorough research and development to leverage technological advancements in the banking sector Innovations like biometrics, blockchain, and near-field communications are enhancing the popularity of payment transactions among customers Additionally, artificial intelligence, social media support channels, and live chats are transforming customer experiences in the banking industry Many banks are establishing innovation labs in collaboration with Fintech companies to explore and develop new banking applications.
To effectively meet customer needs, banks must modernize their services by implementing multiple interconnected channels, including branches, transaction offices, Internet Banking, Mobile Banking, Customer Contact Centers, and social media platforms like Facebook A robust technology platform is essential to ensure that banking services are consistently delivered across these channels For instance, if a customer inquires about savings deposits online and later visits a branch to complete the transaction, the bank must have access to the customer's prior information to provide seamless support without requiring the customer to re-enter details This interconnectedness allows banks to digitize products and processes, enhancing customer experience at both online and physical locations To achieve this, significant investment in advanced technology is necessary to create an omnichannel experience that improves customer satisfaction across all platforms.
Advantages and disadvantages of digital banking
Digital banking becomes increasingly fundamental in the banking industry because of its main characteristics of digital banking mentioned above
Digital banking empowers customers in remote areas by providing access to essential banking services, transforming the landscape from traditional to digital banking It allows users in rural locations to perform various banking tasks, such as money transfers, savings deposits, and loan applications, with unprecedented ease Online payment transactions have never been simpler, as banking applications track account histories and transaction details seamlessly Customers can avoid long wait times at physical banks, completing payments with just a click Additionally, they can monitor their account balances anytime and anywhere, helping to safeguard against fraudulent charges.
The rise of Fintech has posed a significant threat to traditional banks, compelling them to enhance customer experiences and reduce costs to stay competitive Automation through digital platforms has minimized the need for extensive staffing in back-office operations, resulting in lower operational risks and errors Consequently, banking processes have become simpler and faster, allowing for the rapid launch of new digital products and services that meet market demands This evolution enables banks to deliver comprehensive services with the same level of innovation and quality as Fintech companies.
Digital banking is crucial for banks to swiftly adapt to new legal regulations For instance, the State Bank of Vietnam issued Circular No 14/2017/TT-NHNN on September 29, 2017, which outlines the methods for calculating interest on deposit and credit extension transactions This regulation became effective three months post-issuance, and non-compliance could lead to severe penalties, including financial fines and the revocation of licenses However, digital core banking enables banks to efficiently comply with such legislation by implementing new interest calculation modules and automating contract amendments This process includes publishing updated terms on their websites and automatically notifying customers, ultimately saving time and resources for financial institutions.
Digital banking presents a valuable opportunity for traditional banks to leverage new technologies Innovations such as big data, APIs, blockchain, and artificial intelligence are anticipated to significantly enhance the efficiency of the sales process.
Despite a number of advantages mentioned above, there still some disadvantages that the customers may have to confront with when using digital banking
For new customers, navigating digital banking through internet banking, mobile banking, CRM, and ATMs can be challenging initially While some digital banks provide detailed guides and demo videos on services like account opening, savings deposits, and debit card issuance, not all banks offer these resources As a result, customers may need to invest time in learning how to use digital devices for their banking transactions.
Traditional banks offer a physical presence that fosters trust and confidence among customers, whereas fully digital banks operate without branches, which can lead to concerns about security and accessibility Customers depositing large sums may worry about how to reach their digital bank in case of server issues, password theft, or identity fraud In such situations, logging into their accounts and executing transactions can become challenging Additionally, the absence of personal bank officers and reliance on customer service hotlines can exacerbate frustrations, especially during server outages that may overwhelm contact center resources.
Digital banks facilitate quick money transfers and bill payments, but they may not be suitable for complex transactions like share purchases In these cases, an escrow account, governed by an agreement among the buyer, seller, and bank, is essential to ensure that funds are securely held until all conditions of the share purchase agreement are satisfied This traditional banking service provides the necessary oversight and guarantees that digital banks typically cannot offer, as they often lack the capability for in-person transactions required for such arrangements.
The factors affect to digital banking
In the evolving landscape of digital banking, traditional banks must shift from a product-centric strategy to a client-centric approach to enhance customer experience Previously, banks focused on providing existing customers with new, cost-effective products, leading to a reliance on banks for all financial services However, the rise of fintech competitors has given customers alternative options, necessitating a transformation in how banks engage with their clients This shift requires bank employees to adopt a new mindset, embracing changes in habits, beliefs, and skills to meet the needs of digitized customers Through targeted training, workshops, and effective communication, all departments must prioritize the integration of digital technologies Additionally, employees should adopt a "test and learn" methodology, allowing them to experiment with and provide feedback on the bank's digital offerings.
An agile technological platform is crucial for enhancing customer experience in banking It allows banks to offer innovative digital products like lending, money transfers, and wealth management To fully leverage this platform, additional functionalities must be integrated with existing core banking systems, necessitating highly automated solutions Furthermore, this trend pushes banks to open their systems to third parties and utilize open APIs for improved collaboration and service offerings.
To successfully transition from traditional to digital banking, banks must adapt their organizational structures, which includes establishing a Transformation Project Manager Department This department ensures that bank personnel are swiftly allocated to necessary teams, facilitating the timely launch of new digital products and services Members of this department should possess expertise in managing multiple large-scale projects, a solid understanding of legal considerations, and proficiency in agile banking development Their responsibilities include assessing the strengths and weaknesses of various departments and collaborating with partners and vendors to efficiently address incidents, escalating issues to the CEO or board of management when necessary.
Unlike traditional banks with physical branches, fully digital banks face challenges in reaching customers due to their online-only platforms To effectively attract customers to their digital products and services, these banks should allocate significant resources to marketing Utilizing social media for recommendations and feedback can be a cost-effective communication strategy A notable example is Tencent's WeChat, which in 2014 introduced a creative marketing initiative that allowed users to send money to multiple recipients in traditional red envelopes for New Year's, requiring beneficiaries to register for a WeChat account to receive funds This campaign successfully linked 200 million customers' bank cards to their WeChat accounts, demonstrating the effectiveness of innovative marketing in the digital banking sector.
CHAPTER III: POLICY AND LAW ON DIGITAL BANKING
IN SOME COUNTRIES 3.1 Policy and Law on digital banking in some countries
A MasterCard study reveals that over 90% of individuals in the EU are keen on digital banking solutions, with 70% citing time-saving benefits and 59% highlighting ease of use as major advantages.
In 2017, the total value of card transactions reached €69.2 billion, highlighting the growing significance of electronic transactions, which were ten times more frequent than paper-based ones While the number of ATMs saw a slight decline of 1.0% to 0.43 million, the number of POS terminals surged by 9.9% to 13.5 million Additionally, mobile wallet transactions in the EU are projected to grow by 61.8% from 2016 to 2021, indicating a strong trend towards digital banking development (European Central Bank, 2018).
To streamline electronic payments across Europe, the European Payments Council has created the Single Euro Payment Area (SEPA), encompassing 34 countries SEPA's rulebooks and guidelines standardize electronic payment instruments such as credit transfers, direct debits, and cards, enabling European customers to utilize the same payment methods for transactions throughout Europe as they would in their own country.
Many European countries have implemented policies to limit cash payments For instance, in Italy, any purchase agreement totaling €1,000 or more must be completed using electronic payment methods Additionally, the governments of France and Spain are actively encouraging their citizens to transition from cash and checks to digital payments by reducing transaction fees.
The Payment Services Directive (PSD1), introduced in 2007, aimed to enhance competition in the payments sector among banks and non-banking entities while safeguarding consumer rights through uniform regulations across the EU market This directive not only involved banks but also encompassed central banks and government bodies, establishing a new legal framework for payment services.
The Payment Services Directive (PSD2), enacted by the Council of the European Union in 2015, enhances customer protection and improves cross-border payment systems within the EU, addressing the limitations of the original PSD1, which only regulated payments within European countries and left customers vulnerable in transactions with third countries PSD2 mandates banks to adhere to multi-layered technical standards, including basic compliance, liability and dispute management, and optional services It also establishes the legal framework for third-party service providers to access customer data through open APIs, contingent on customer consent, thereby streamlining customer identification processes Additionally, PSD2 expands its scope to include activities of fintech and non-bank financial service providers, marking a significant amendment in the regulatory landscape.
Electronic Identity and Electronic Services (eIDAS) which was enacted to increase digital growth among EU countries entered into force on 17 September
In 2014, the EU established regulations for electronic transactions, advanced electronic signatures, qualified electronic signatures, qualified digital certificates, and trust services to ensure secure electronic interactions among businesses, citizens, and public authorities EU member states are required to implement a common framework that acknowledges the authenticity and security of electronic identities (eIDs) from other member states Consequently, electronic signatures are granted the same legal validity as handwritten signatures As of September 29, 2018, digital service providers in EU countries must recognize electronic identification from all EU member states.
Under the regulatory frameworks of PSD2 and eIDAS, banks can swiftly and efficiently offer digital products and services while enhancing data security through advanced cybersecurity systems and authentication mechanisms Customers benefit from the ability to open multinational payment accounts and conduct digital transactions using digital platforms, electronic identification (eID), and digital signatures.
As of January 2019, five out of 28 Member States, including Denmark, the Netherlands, Poland, and the UK, have implemented regulatory sandboxes, which are controlled environments that allow financial institutions to test innovations under regulatory oversight The UK's Financial Conduct Authority (FCA) established its Innovate Regulatory Sandbox in 2016, outlining a seven-step application process for financial institutions This process includes submitting a firm proposal, undergoing an FCA assessment, collaborating on the testing approach, delivering sandbox options, conducting testing and monitoring, submitting a final report for FCA review, and deciding whether to offer the solution outside the sandbox Financial institutions must demonstrate that their new solutions meet specific criteria through various tests If the FCA approves the final report, institutions can choose to launch their solutions commercially Regulatory sandboxes help financial institutions minimize costs associated with compliance, expedite the regulatory process, and provide a secure environment for customers using new financial products and services, ensuring the protection of customer information and transaction security.
European authorities have established guidelines to enhance payment security, providing a legal framework for payment service providers These regulations aim to safeguard transactions and ensure compliance across various jurisdictions, particularly in the context of digital banking Experiences from different countries can offer valuable insights for Vietnam as it navigates its own digital banking landscape.
In 2014, the European Banking Authority introduced the Guidelines on Security of Internet Payment to improve the security of electronic retail payment services across EU member states These guidelines mandate payment service providers to implement strong customer authentication, ensuring secure and efficient online transactions To combat fraud and cybercrime in internet and mobile banking, providers must conduct a Know Your Customer (KYC) process before processing online payments Since August 2015, all payment service providers in the EU have been required to adhere to the minimum security standards outlined in these guidelines.
Experiences for Vietnam
3.2.1 Lessons learned from selected countries a Payment system
All selected countries have implemented laws to enhance their payment systems, often establishing state agencies to oversee electronic payment regulations Examples include the European Payments Council, the Bank of Thailand, the Monetary Authority of Singapore, the Korea Financial Telecommunications & Clearings Institute, and the China Banking Regulatory Commission Through the enactment of these laws, governors in each country play a crucial role in guiding and supervising financial institutions in facilitating electronic banking transactions.
In the initial stages of payment transactions, banks utilize e-KYC and e-ID to ensure precise customer identification and verification on digital platforms, a practice adopted in various countries Additionally, many of these countries have implemented transaction value limits as part of their digital banking regulations For instance, in Italy, any purchase agreement exceeding €1,000 must be conducted via electronic payment Similarly, South Korea's payment system features a large-value payment system (LVPS) alongside other retail payment systems (RPS).
The Government of Vietnam, through the Payment Department of the State Bank, oversees the legal framework for digital payment transactions However, cash usage habits and limited digital banking knowledge hinder customer adoption of digital payment systems To address this, the government introduced a non-cash payment plan for 2016-2020, aiming to reduce cash transactions to below 10% by the end of 2020 Amendments to Decree No.116/2013/ND-CP are underway to facilitate eKYC and eID processes, streamlining customer service delivery Additionally, the Payment Department has organized workshops with commercial banks and international experts to enhance knowledge and experience in digital banking, positioning Vietnam to meet its non-cash payment objectives.
Innovations and new technologies are expected to lower service costs for financial institutions, but they also introduce increased financial risks such as crises, heightened bank fragility, and excessive credit expansion Consequently, various countries are focusing on regulatory sandboxes that allow fintech companies to test new technologies under strict regulatory oversight.
Before implementing innovations in a regulatory sandbox, companies must submit a proposal detailing the innovation, its conditions, and plans for consumer protection and risk management to state agencies Each country has its own laws regarding regulatory sandboxes, which may require participants to comply with certain regulations or allow exemptions from strict requirements In Thailand, participants must obtain necessary licenses and adhere to laws beyond the jurisdiction of the Bank of Thailand Conversely, Singapore's Monetary Authority of Singapore (MAS) facilitates a reduction of stringent requirements during testing, while South Korean financial institutions approved by the Financial Services Commission enjoy exemptions from current financial regulations.
The State Bank of Vietnam is currently drafting a legal framework for a regulatory sandbox aimed at fintech activities, addressing key issues such as agency banks, cryptocurrencies, and banking operation policies In collaboration with the Asian Development Bank (ADB) and VinaCapital Ventures, the SBV held a workshop on September 25, 2018, to explore international experiences with fintech regulatory sandboxes and assess their applicability in Vietnam It is crucial for Vietnam to establish clear conditions for participants in the regulatory sandbox and outline procedures for testing innovations Additionally, the SBV must evaluate acceptable risk appetites in relation to innovation and new technologies, determining whether participants should adhere to existing laws or be granted exemptions from certain regulations.
Vietnam's fintech sector has experienced remarkable growth, with 78 institutions licensed by the State Bank of Vietnam (SBV) to offer online payment services as of September 2018 Additionally, there are 41 providers of mobile payment solutions, 27 institutions specializing in payment intermediary services, and 12 banks implementing QR Code payment services at 5,000 locations This burgeoning landscape allows Vietnam to draw insights from international best practices in legal frameworks and risk management from selected countries, particularly in the realm of peer-to-peer (P2P) lending.
Peer-to-peer (P2P) business loans have rapidly expanded, supporting the growth of small and medium enterprises Learning from China's P2P lending fraud (Ezubao), Vietnam's regulators can implement measures to prevent similar issues Countries like South Korea and China have introduced new policies to mitigate risks in the P2P lending sector A crucial initial step is the enforcement of e-KYC and anti-money laundering regulations, requiring P2P platforms to verify the identities of borrowers and investors through valid identification Given the online nature of P2P transactions, e-KYC is vital for their success Additionally, regulatory measures mandate that lenders use escrow accounts to safeguard investor funds, and only accredited investors with significant net worth or income can participate In Singapore, P2P platforms must be licensed under the Securities and Futures Act, ensuring compliance with regulations Following the Ezubao incident, China issued an Action Plan in April 2016 to regulate P2P lending and requires lending intermediaries to secure a telecommunications license and partner with banks for fund custody However, it is essential that control measures remain flexible to encourage participation from both investors and borrowers in the P2P lending market.
Vietnam currently has 40 P2P lending companies, but several have been found to violate local laws by providing misleading risk information, falsely advertising profits, and charging excessive interest rates above the 20% annual cap Deputy Prime Minister Vuong Dinh Hue announced that the government will soon implement a pilot program for P2P lending, which will focus on connecting lenders and borrowers without allowing P2P companies to mobilize capital from credit institutions During this trial, financial institutions will also be prohibited from participating in P2P transactions However, banks may eventually act as custodians of customer funds, following successful models from other countries This pilot program is a necessary step towards establishing a formal legal framework for P2P lending in Vietnam, learning from previous crises in other nations like China.
3.2.2 Risk Identification and Mitigation Mechanism a Risk identification
Digital banking not only creates opportunities for improving efficiency and reducing costs and creating high-value digital services; it also leads to major challenges and risks
Banks, as financial service providers, are responsible for safeguarding customer data and managing risks to protect their assets Consequently, they must comply with increasingly stringent regulations, including GDPR and PSD2.
The EU and Vietnam's anti-money laundering regulations, specifically Decree No 117/2018/ND-CP, emphasize the importance of protecting client confidentiality and the responsible handling of information by credit institutions and foreign bank branches Non-compliance with these laws can lead to severe penalties, including both administrative and criminal repercussions For instance, in September 2018, the US Department of Justice highlighted the serious consequences of failing to adhere to these regulations, underscoring the need for financial institutions to prioritize compliance to avoid legal ramifications.
The investigation into Danske Bank, Denmark's largest financial institution, centers on its role in Europe's largest money laundering scandal linked to its Estonian branch, potentially resulting in fines up to $630 million from the Financial Supervisory Authority of Denmark (FSA) Additionally, in June, the Commonwealth Bank of Australia faced a $530 million penalty from AUSTRAC for not complying with anti-money laundering risk assessment requirements related to automatic teller machine transactions.
Cybercrimes and fraud related to digital services are increasingly becoming a top priority for commercial banks as security concerns rise Digital banking transactions, while convenient and fast, expose customers to risks such as hacking and computer viruses, making security a significant challenge Despite various security measures, the threat of personal information being compromised persists, often beyond the bank's control, as criminals continually develop new tactics A notable example is the 2016 cyber heist involving Bangladesh Central Bank, where hackers exploited a bank official's computer to steal $81 million through SWIFT transactions, with only $15 million recovered Similarly, in May 2016, hackers accessed the Ecuadorian bank Banco del Austro's SWIFT codes, resulting in a $9 million theft The 2017 WannaCry ransomware attack further exemplified the global threat, affecting over 150 countries and 200,000 computers, as cybercriminals demanded ransoms from victims.
$300 worth of bitcoins to unlock their systems (Elizabeth Dwoskin and Karla Adam,
2017) Frauds have become more and more advanced due to the fact that the cybercriminals can design new attacks based on the precautions made by banks
Data from the chart indicates that customer payment fraud and distributed denial of service (DDoS) attacks are significant factors impacting digital banking security in various countries, including Vietnam Customer payment fraud constitutes 45% of the reported digital security vulnerabilities encountered by Fintech companies, while DDoS attacks represent a concerning 50% from the perspective of banks These statistics highlight the urgent need for enhanced digital security measures to protect stakeholders in the financial sector.
Chart 4: Executive Responses on Digital Security Vulnerabilities Faced by Stakeholders (%), Q2 2017
Source: Capgemini Financial Services Analysis (2017)
Many banks operate on outdated core banking systems established at their inception, necessitating regular updates and customizations to meet modern digital banking demands However, excessive customization can lead to over-engineering, complicating solutions and increasing costs Additionally, ongoing maintenance fees highlight the need for banks to either re-engineer their core systems or develop a new digital foundation Given the complexities, costs, and time involved in digital transformation, selecting a specialist for this process poses a significant challenge for commercial banks.
POLICY AND LAW ON DIGITAL BANKING
Overview
As of now, Vietnam lacks a fully digital bank offering comprehensive banking services, although traditional banks are making strides in digitizing their operations A survey by the State Bank of Vietnam (SBV) in April 2018 revealed that 94% of banks are either implementing or researching digital transformation strategies Specifically, 35% of banks are actively developing their digital transformation plans, while 6% have yet to consider creating a comprehensive strategy for digital transformation (Phạm Tiến Dũng, 2018).
Vietnamese domestic banks have embraced digital services, transforming processes and communication channels to offer features like balance inquiries, bill payments, and money transfers Notable services include online shopping through banks like Viettinbank and Agribank, as well as money remittance via social networks such as Facebook and Zalo by Techcombank and VIB These services are accessible through various digital platforms, including ATMs, POS systems, mobile banking, internet banking, and e-wallets.
As of the end of 2016, Vietnam had a total of 17,472 ATMs, facilitating transactions valued at VND 1,809 billion This translates to 24.50 ATMs per 100,000 adults and 56.35 ATMs per 1,000 km² Despite this growth, Vietnam's ATM density remains significantly lower than that of leading Asian countries like Japan, Thailand, and China, although it is on par with Laos and exceeds that of India Furthermore, when considering the number of ATMs per 1,000 km², Vietnam again falls behind countries such as Japan, Thailand, India, and China, while being comparable to Hungary and Indonesia and surpassing Laos.
Table 2: Number of ATMs per 100,000 adult population and over 1000 km2 of some countries in 2016
The number of ATMs per 100,000 adult population the number of ATMs per 1,000 kilometer square
ATM density in Vietnam is significantly higher in metropolitan areas like Hanoi and Ho Chi Minh City, with ratios ranging from 37.5% to 64.5%, while rural areas experience much lower density Recent data shows a slowdown in ATM growth, with increases of only 5.73% in 2015 and 3.15% in 2016, compared to an average growth of 21% from 2010 to 2014 By the third quarter of 2017, the total number of ATMs reached 17,396, making it unlikely for Vietnam to achieve the target of 40 ATMs per 100,000 adults and to close the gap with neighboring countries Despite the challenges, ATMs remain vital for facilitating cash flow, though substantial investment costs and insufficient income are leading to increased losses for commercial banks.
Chart 5: Growth rate of ATM transaction and value in the period of 2012 - 2016
Source: State Bank of Vietnam, 2017 b POS
In Vietnam, there are 36.79 POS devices per 100,000 adults, with a significant concentration of these devices in large banks The growth of POS machines is lagging behind the rapid increase in card issuance, as evidenced by the 111 million cards in circulation compared to only 263,427 POS machines This results in an average of 421 cards per POS device, a stark contrast to Thailand's average of 177.37 cards per POS.
On average, there are only 2.9 Point of Sale (POS) systems per 100,000 people, which is significantly lower than neighboring countries like Thailand and Malaysia, with 5 and 8 machines respectively Furthermore, when analyzing the ratio of installed POS systems to active businesses, it becomes evident that the percentage of businesses equipped with POS technology is quite minimal.
Growth rate of ATM transaction and value in the period of 2012 - 2016
The article discusses the number of transactions and their corresponding values in million dong, focusing on the landscape of digital banking across various countries It highlights key experiences and lessons that Vietnam can draw from these international practices in digital banking By analyzing transaction data and value metrics, the article aims to provide insights into enhancing Vietnam's digital banking framework.
Chart 6: The groth rate of POS, quantity transactions in the period from 2012 to 2016
Source: State Bank of Vietnam (2017)
The Centralized Card Switching system in Vietnam has facilitated seamless connections between ATM and POS systems, allowing cardholders from various banks to make payments at any ATM or POS However, the network faces challenges, as modern banking utilities are predominantly available in urban areas, and cash withdrawal transactions still dominate, overshadowing payments and transfers In rural regions, the reliance on account-based wage payments complicates cash withdrawal for employees To address these issues, it is essential to expand the ATM/POS network into rural and remote areas through specific mechanisms, such as tax and fee incentives, which would encourage banks to invest in these regions and contribute to a comprehensive financial solution in Vietnam.
As of now, 76 commercial banks and foreign bank branches have launched Internet Banking services, while 41 banks offer mobile banking In 2016, internet payment transactions exceeded 125 million, totaling over 7.2 trillion VND, marking a 51% increase from 2015 Mobile transactions also surged, with over 97 million transactions valued at 303 trillion VND, reflecting a remarkable 126% growth compared to the previous year In the first nine months of 2017, internet transactions reached 138 million, amounting to over 9.4 trillion VND, which is a 106% increase compared to the same period in 2016.
2016) The number of mobile transactions in 2017 reached 94.5 million transactions worth 457 trillion dong (equivalent to 150% compared to 2016) (SBV, 2017)
Chart 7: The number and value of transactions via Internet banking and mobile banking in the period 2015 - 2016
Source: State Bank of Vietnam, 2017
According to McKinsey's 2014 survey on personal financial services in Asia, Vietnam experienced a significant surge in Internet banking adoption, with user numbers increasing 6.3 times from 2011 to 2014, second only to Indonesia's 7.2 times growth By 2014, Vietnam ranked as the second most populous country in Southeast Asia for Internet banking usage at 44%, trailing behind Singapore, which had a remarkable 94% adoption rate; however, a substantial gap remains between the two countries.
Mobile banking services in Vietnam surpass traditional online banking by offering a comprehensive range of retail services These services include account inquiries, account management, internal and external money transfers, bill payments, online savings, loan payments, credit card management, and online purchases Additionally, mobile banking caters to both individual users and corporate clients, making it a versatile financial solution.
Several banks have enhanced their mobile banking applications within just a few years of launch, with Vietcombank and Vietinbank already utilizing version 3.0 Additionally, many new features are currently in development to further improve user experience.
Number of transactions via Internet…
Transaction value via Internet banking…
Number of transactions via mobile banking Transaction value via mobile banking…
The number and value of transactions via Internet banking and mobile banking in the period 2015-2016
In recent years, digital banking has gained significant traction globally, with countries implementing various mobile banking applications, such as future-dated transfers, card management, and QR code payments Notably, biometric technologies like fingerprinting are being utilized to enhance security and privacy In Vietnam, the adoption of QR code payments has surged, particularly among the tech-savvy youth, with over half the population owning smartphones By September 2017, QR code payment transactions had increased by 120% since the start of the year, leading to 5,000 acceptance points and a projected growth to 50,000 by 2018 Currently, 12 banks in Vietnam are offering QR code payment services, indicating a robust shift towards digital financial solutions.
Electronic wallets (e-wallets) are gaining popularity in Vietnam, offering services like purchasing movie and air tickets, as well as consumer loans and insurance policies As of 2017, the State Bank of Vietnam has licensed over 20 e-wallet services, including notable names such as Payoo, MoMo, BankPlus, 1Pay, M-Pay, Vimo, BaoKim, ZaloPay, Ngan Luong, and Mobivi.
The volume and value of electronic wallets transactions for the period 2012 -
This article explores the legal framework surrounding digital banking in various countries, highlighting key experiences and lessons learned that could benefit Vietnam It examines the regulatory approaches adopted by different nations and discusses their implications for the development of digital banking services By analyzing these international experiences, the article aims to provide valuable insights for Vietnam's ongoing efforts to enhance its digital banking landscape.
Chart 8: The number and value of electronic wallet transactions during the year of 2012 to 2016
Source: State Bank of Vietnam, 2017
Case Study
Digital banking in Vietnam is in its nascent stages, with several domestic banks evolving their operations and services into digital formats Notable examples include Tien Phong Bank's LiveBank, VPBank's Timo app, Vietcombank's digital banking space, Vietinbank's next-generation core banking system, Military Bank's 24/7 ChatBot virtual assistant, and Napas's digital card service Among the pioneers in digital banking technology are Timo, powered by VPBank, and TPBank’s LiveBank, which showcase innovative applications of technology in financial services.
On August 4, 2015, the National Bank of Vietnam confirmed that Vietnam Prosperity (VP Bank) registered to issue the TIMO debit card, marking a new era in digital banking aimed at helping locals and expatriates manage their finances conveniently Launched in 2016, Timo operates through mobile and internet banking, distinguishing itself from traditional e-banking services Timo offers a range of banking products, including a Spend Account, term deposits, debit and credit cards, and unsecured loans By 2018, Timo aimed to attract over 100,000 customers with its innovative approach and Timo Hangout locations in Ho Chi Minh City, Hanoi, and Da Nang.
To open a Spend Account with VPBank, applicants must be at least 18 years old, reside in Vietnam, and have no prior transactions with VPBank or FE Credit The account opening process is quick and takes only about 2 minutes, requiring the submission of personal information such as full name, email address, phone number, date of birth, and identification (People’s identity card, Citizen’s identity card, or Passport) However, customers must visit a VPBank branch to complete the KYC process in compliance with the Anti-Money Laundering Law.
Timo offers customers a Fast Cash service, providing a current account overdraft facility with limits ranging from 10 to 100 million VND Unlike traditional unsecured loans, Fast Cash does not require lengthy procedures or proof of income To qualify, customers must meet four criteria: be a Vietnamese national aged 18 or older, maintain an active Timo Spend Account for at least 180 days, have a minimum average balance of VND 500,000 in their Timo accounts, and conduct deposit transactions averaging at least VND 5,000,000 over the same period Funds from Fast Cash are activated when the Spend Account balance reaches zero and can be used for payment services, including online bill payments and transactions at POS terminals However, withdrawals from ATMs are not permitted, and the service must be maintained for a maximum of one year Activation involves completing four steps within the Timo app and agreeing to the Fast Cash Terms and Conditions.
TPBank, the first bank in Vietnam to implement the innovative ATM+ model (TPBank LiveBank), partnered with UK-based fintech Scale360 to revolutionize traditional banking Launched in early 2017, TPBank LiveBank offers teller-less account openings and KYC functionalities, with 77 locations primarily in Hanoi, Ho Chi Minh City, and Da Nang Customers can conduct various transactions, including cash deposits and withdrawals, e-banking services like money transfers and bill payments, product registrations, and access to Video Teller Machines (VTMs) Operating 24/7, TPBank LiveBank is designed to reduce transaction times by 40% compared to traditional banking, utilizing modern technologies such as VTMs that connect customers with bank tellers via video This service aims to provide a seamless and comfortable banking experience, akin to visiting a physical counter.
To open a payment account in VND using TPBank LiveBank, customers must be Vietnamese individuals aged 18 or older, residing in Vietnam, and possess the necessary civil act capacity as per local laws Additionally, individuals aged 15 to under 18, who are not restricted in civil act capacity and have assets to secure their account, as well as foreigners, may also apply under Circular 23/2014/TT-NHNN However, individuals under 15 or those between 15 and 18 cannot open accounts through ATM+ models The application process requires a complete set of documents, which are scanned using optical character recognition (OCR) at LiveBank Each application includes a Quick Response Code (QR code) for fraud detection The know-your-customer (KYC) process involves guidance from a teller via Video Teller Machine available 24/7, with identity documents scanned and processed to meet security criteria established by relevant authorities TPBank LiveBank employs biometric authentication, including fingerprint recognition and facial detection, to verify customer identity against their identity cards All customer interactions, including images and conversations, are recorded for security purposes.
Customers can open a VND payment account and utilize TPBank's LiveBank for savings deposits To qualify for the LiveBank savings deposit product, individuals must meet specific criteria: they must be Vietnamese citizens aged 18 or older, reside in Vietnam, have a VND payment account with TPBank, and express a desire to make a deposit in VND The minimum deposit is VND 1,000,000 Depositors must select one of their VND payment accounts at TPBank as both the debit account for deposits and the receiving account for withdrawals Additionally, customers using LiveBank for savings deposits will benefit from higher interest rates compared to transactions made at the counter or through eBank.
Opportunities and challenges
The inevitable transition to digital banking for traditional banks marks a significant shift in the operational models of the banking sector in Vietnam This evolution presents both new opportunities and serious challenges, reshaping the future landscape of banking in the country.
Digital banking services offer user-friendly and convenient solutions that save customers time and reduce transaction costs With predetermined transaction steps, users can easily follow the required procedures to ensure accurate and efficient transactions.
Digital banking services allow customers to conduct transactions anytime and anywhere, provided they have internet access When a transaction fails due to errors or incorrect information, the system promptly notifies the user This online transaction capability enables banks to form card alliances, simplifying interbank transactions for customers From a social perspective, digital banking fosters economic growth by enhancing trade, services, and tourism, while expanding economic cooperation Embracing the internet as a distribution channel for banking products not only opens new business opportunities for banks but also offers significant benefits to customers, ultimately contributing to societal economic development.
Vietnam boasts the highest Internet growth rate globally, with nearly 30% of its population using smartphones for various transactions (Ecommpay, 2018) This trend creates a favorable environment for the advancement of digital banking, enabling customers to access banking products conveniently The ongoing 4.0 industrial revolution facilitates the integration of modern technologies in banking, enhancing product design, utility services, and overall operational efficiency.
The digital banking sector is rapidly expanding, driven by an increasing number of service providers adopting digital technologies to facilitate non-cash payments and process digitization Initiatives such as the Government's non-cash payment scheme, e-customs, and online tax payments are enhancing efficiency Consumers can now pay electricity bills, tuition fees, and hospital fees through various e-banking channels, including mobile banking, POS systems, and e-wallets Additionally, online payment systems enable the purchase of train and air tickets, while telecommunication providers also offer payment services and internet-based telephone cards.
Thus, Vietnam's market with large population size, the high rate of telephone and internet users is a potential market for the development of the digital banking
Due to the habits and characteristics of the market, the banking sector also encountered certain obstacles when participating in the e-commerce market of Vietnam
Vietnamese consumers predominantly prefer cash transactions over digital payment methods such as mobile banking, internet banking, and bank transfers Consequently, the country's payment and settlement system largely relies on paper-based instruments, highlighting a significant challenge in the transition to digital banking.
Digital banking faces constant technological changes, driven by the rise of smartphones and app development, which enhance user convenience The rapid evolution of devices and technology necessitates regular updates to digital banking products and services, including the integration of innovations like biometric identification and mobile payment systems such as Samsung Pay, Apple Pay, and Android Pay This swift technological advancement puts pressure on banks to quickly introduce new offerings to meet customer preferences and maintain competitiveness Consequently, the demand for robust risk management increases, as banks must ensure comprehensive risk analysis and transaction security are in place before launching new products.
The stability of digital banking systems poses a significant challenge, as customers expect to access services anytime and anywhere However, issues such as service congestion and disconnections disrupt service continuity and reliability Additionally, the technological infrastructure gap between urban and rural areas complicates the expansion of digital banking services To address these challenges, banks must prioritize enhancing their IT infrastructure and standardizing system management to ensure smooth, stable, and continuous 24/7 operations.
Digital banking transactions, while convenient, expose users to significant information security challenges, including rising cybercrimes such as data breaches and unauthorized modifications To combat these threats, banks must enhance system security, implement robust risk controls, and prioritize customer data protection Unlike traditional crimes, high-tech criminals operate without geographical or temporal restrictions, complicating the banking landscape in Vietnam A report from the Ministry of Information and Communications highlights that Vietnam ranks sixth globally for denial of service attacks and third for being controlled by "ghost" networks Common criminal tactics include phishing emails, ATM skimming, counterfeit card usage, fraudulent promotions, and impersonation scams These cybercrimes not only disrupt banking operations but also lead to identity theft and financial loss for customers Moreover, tracking perpetrators is challenging due to their ability to erase digital traces To mitigate risks, banks must not only invest in advanced security measures but also educate customers on safeguarding their information while using digital banking services.
The cooperation and readiness of stakeholders, including the State Bank of Vietnam (SBV) as the regulator, commercial banks as service providers, and customers as service users, are crucial for the stable development of digital banking in Vietnam.
Policy and Legal framework on digital banking in Vietnam
The article explores the legal frameworks governing digital banking in various countries, highlighting their implications and potential lessons for Vietnam It analyzes the regulatory approaches adopted by these nations, examining how they address challenges such as cybersecurity, consumer protection, and financial inclusion By comparing international experiences, the article aims to provide valuable insights for Vietnam's evolving digital banking landscape, emphasizing the need for a robust legal structure to support innovation while ensuring safety and accessibility for users.
4.3.1 Policies of the Government of Vietnam on digital banking
Since 2016 SBV has cooperated with World Bank Group on a comprehensive approach in order to finalize the national financial inclusion strategy
The Vietnam Banking Sector Development Strategy aims to transform digital finance by shifting government and financial institutions towards digital payment platforms, enhancing access to banking services for minorities and rural communities, and prioritizing consumer data protection and financial education Approved in 2018, the strategy, outlined in Decision No 986/QD-TTg, includes optimizing the ATM and POS network to promote non-cash payments, targeting a cash ratio below 10% by the end of 2020 and under 8% by 2025 It emphasizes the development of modern banking products and services, expanding traditional channels while advancing e-banking, mobile banking, and internet banking through technological innovations Additionally, the strategy encourages a shift from a "mono-credit" model to a diversified approach in non-credit banking products, enhancing professionalism in electronic banking services to increase accessibility for enterprises and individuals in rural and remote areas, serving as a foundational step for the growth of digital banking in Vietnam.
The State Bank of Vietnam (SBV) faces ongoing challenges that require its proactive involvement As the central banking authority, SBV must take a leadership role in guiding and coordinating with various stakeholders to effectively implement the national strategy.
To facilitate the digital transformation of banking in Vietnam, various state agencies must collaborate effectively The Ministry of Finance is tasked with reforming government payment policies, while the Ministry of Information and Communications focuses on developing mobile payment solutions The Ministry of Agriculture and Rural Development supports the State Bank of Vietnam (SBV) in providing digital banking services to rural communities, and the Ministry of Education and Training is responsible for integrating financial education into school curricula Additionally, the government should establish a comprehensive national demographic database to enable data sharing across sectors such as banking and fintech It is crucial to enhance the legal framework surrounding digital banking, including regulations on eKYC, open APIs, and blockchain technologies Strengthening the infrastructure of state agencies and stakeholders, including commercial banks and fintech firms, is essential A regulatory sandbox should be implemented to allow banks to test new technologies legally Following the example of China, Vietnam must issue guidelines for banks on adopting secure technological practices, reviewing business processes, and ensuring compliance with online payment regulations The State Bank should provide clear guidance to commercial banks and fintech companies on digital transaction services while fostering collaboration with internet service providers and software developers to create innovative financial products that enhance user convenience and build trust in digital banking services.
The Government and the State Bank of Vietnam (SBV) should strategically limit the use of large cash denominations, requiring significant transactions to be processed through digital banking channels To encourage this shift, higher fees for cash withdrawals and payments compared to digital transactions should be implemented Additionally, regulations should be established to facilitate the installation of POS systems in retail stores, ensuring they can effectively partner with banks to enhance customer service The government must also promote electronic payment systems within public services, connecting key ministries to the State Bank's electronic payment gateway to streamline commerce Inspired by South Korea's approach, the SBV could explore developing a payment platform that enables electronic money transfers without requiring a bank account, using only a mobile number or citizen ID Furthermore, banks and fintech firms should create incentive programs to attract customers to digital services.
A national program aimed at enhancing education and knowledge about financial transactions and digital banking is essential for improving access to these services, particularly for customers in remote areas This initiative will raise awareness and provide fundamental knowledge about the benefits, convenience, safety, and security of digital banking, ultimately increasing customer demand and accelerating the adoption of digital banking in Vietnam.
To enhance the capabilities of financial service providers, the Government should explore and establish a legal framework for digital banking, drawing on successful experiences from other countries This initiative aims to create a robust regulatory environment that supports the growth and innovation of digital banking in Vietnam.
Fintech companies play a vital role in delivering tailored products and services to meet customer needs, prompting regulators to consider reducing or exempting restrictions on their operations Additionally, implementing regulations on capital risk management and liquidity is essential to ensure the safety of Fintech firms in lending and capital markets Vietnam must swiftly establish a comprehensive legal framework and enhance oversight of payment systems and services to align with international standards The rise of high-tech crime and fraud threatens end-users and undermines public trust in the banking system, making it crucial to develop regulations that govern digital banking and payment services provided by the Central Bank, commercial banks, and financial institutions.
4.3.2 Vietnam Laws on digital banking
Vietnam has established a comprehensive legal framework for digitization in financial and banking transactions, highlighted by key regulations such as the Law on Electronic Transactions No 51/2005/QH11 and the Cyber Information Security Law No 86/2015/QH13 Additionally, Decree No 35/2007/ND-CP addresses banking e-transactions, while Circular No 35/2016/TT-NHNN ensures safety and confidentiality in online banking services The Law on Credit Institutions and Decree No 101/2012/ND-CP further outline the legal parameters for intermediary payment services, including the necessary conditions and procedures for service provision permits Following Decree 101/2012, the State Bank of Vietnam issued several circulars, such as Circular No 23/2014/TT-NHNN on payment account management and Circular No 39/2014/TT-NHNN on intermediary payment services, which collectively enhance the legal framework for electronic payment services in Vietnam.
Digital banking regulations have lagged behind the swift advancements in the sector, creating a mismatch between legal frameworks and the evolving digital landscape While existing regulations primarily address payment services, they lack specific guidelines for electronic savings deposits, electronic loans from commercial banks, and Fintech operations Additionally, emerging electronic payment methods, including contactless payments like Samsung Pay, highlight the need for updated regulatory measures.
The emergence of QR codes and biometric identification methods, such as fingerprints and iris recognition, necessitates the establishment of a comprehensive legal framework Currently, there are no specific regulations addressing the requirements and quality standards for digital banking models like TPBank LiveBank and VPBank's Timo Hangout To safeguard consumers utilizing these new technologies, it is crucial to amend and enhance existing regulations concerning data security and anti-money laundering Additionally, raising customer awareness about digital banking is vital for fostering its growth in Vietnam, particularly in the context of intermediary payment services.
The Government of Vietnam has implemented Decree No 101/2012/ND-CP, regulating non-cash payment services and intermediary payment services Non-bank organizations aiming to offer intermediary payment services must fulfill specific establishment requirements, including a solid business plan, adequate charter capital, qualified personnel, and robust technical infrastructure These organizations are responsible for maintaining confidentiality and are subject to oversight by the State Bank of Vietnam, which further detailed these regulations in Circular No 39/2014/TT-NHNN However, significant limitations persist, such as the absence of a clear legal framework for bank-authorized agents, which hampers the establishment of such agents and their operational guidelines Additionally, the current laws restrict individuals from providing banking services, complicating efforts for commercial banks to expand their reach, particularly in rural areas where financial institutions are scarce.
To mitigate the risk of money laundering, banks must adhere to stringent regulations regarding customer identification Under Circular No 23/2014/TT-NHNN, which outlines the guidelines for opening and using payment accounts, as well as amendments from Circular No 32/2016/TT-NHNN and regulations from Circular No 19/2016/TT-NHNN concerning bank card activities, customers are required to provide accurate personal information and valid identification, such as an identity card, passport, or entry visa for foreign individuals This process, known as Know Your Customer (KYC), is essential for commercial banks to verify client identities Additionally, payment service providers are mandated to retain the account holder's signature, regularly update their information, and comply with anti-money laundering and counter-terrorism financing laws, as stipulated in the Law on Money Laundering Prevention and Fight of 2012 and Decree No 116/2013/ND-CP.
In 2013, the government implemented measures to enhance the prevention and control of money laundering, requiring financial institutions to identify customers when opening current accounts or conducting transactions Commercial banks must conduct face-to-face interactions with clients when utilizing new technologies, ensuring that they gather essential information and establish a comprehensive risk assessment process for money laundering risks associated with these services.
KYC regulations have been instrumental in aiding credit institutions in combating financial crimes; however, the rise of digital technology has exposed several shortcomings in traditional customer identification methods Firstly, the reliance on bank tellers for customer verification introduces a subjective element that can lead to operational risks and potential exploitation by organized crime Secondly, the requirement for face-to-face interactions to complete the KYC process poses a significant barrier to the growth of digital banking, which thrives on online platforms and applications, contrary to global trends Lastly, the existence of anonymous prepaid cards, which allow balances of up to VND 5 million without identifying the cardholder, raises concerns about the effectiveness of KYC practices in addressing the needs of younger customers.
RECOMMENDATIONS FOR VIETNAM ON
E – KYC mechanism
The authentication industry is rapidly evolving, with banks increasingly adopting reliable biometric and digital technologies for electronic identification (eID) systems These systems enhance security and facilitate easier access for customers while complying with government regulations eID plays a crucial role in both public and private sectors by enabling multiple electronic authentication methods, significantly reducing identity fraud and allowing safer banking transactions via smartphones or online platforms However, in Vietnam, many government agencies and private organizations struggle with the absence of a unified identity system for citizens, relying mainly on identification cards for first-time authentication This lack of a cohesive electronic identity framework poses challenges for the growth of digital banking, which heavily depends on efficient electronic identity and authentication solutions.
To enhance payment services and personal credit ratings in Thailand, it is essential to establish legal regulations governing the use of national databases, such as eID and biometric ID This system enables individuals without bank accounts to transfer money and make payments using their mobile phones and personal identification For corporate clients, the State Bank of Vietnam (SBV) could allow commercial banks to access the National Business Registration Portal to verify customers using their identification codes, streamlining the identification process and minimizing paperwork Additionally, developing a legal framework for digital signatures as part of the eID system is crucial, as it ensures that signature information is encrypted, facilitating swift and secure bank transactions.
The 2012 Law on Money Laundering Prevention and the Government's Decree No 116/2013/ND-CP should be revised to support the implementation of eKYC and eID in banks, streamlining customer service and reducing unnecessary procedures Technologies like biometric identification (fingerprints and retina scans) and electronic tools such as video calls can enhance customer identification The implementation of these technologies may be phased in or applied under specific conditions, such as limits on bank transfer amounts or referrals from existing customers who have completed the identification process.
Non-cash Payment
To achieve the objectives of the Non-cash Payment Scheme in Vietnam for 2016-2020, approved by the Prime Minister, the State Bank of Vietnam (SBV) has developed a comprehensive implementation plan outlining tasks, deadlines, and responsibilities However, existing guidelines, particularly Circular No 16/2014/TT-NHNN, remain inadequate and misaligned with the government's non-cash payment policy This Circular requires foreign customers to provide extensive documentation for transactions involving foreign currency and VND accounts, creating challenges for individuals and organizations For instance, foreign individuals must submit labor contracts to open USD accounts and purchase contracts for real estate transactions These stringent requirements complicate transaction processes, particularly for foreign customers, and hinder banks' ability to offer seamless digital banking services, which rely on automation and efficiency.
To promote the growth of digital banking in Vietnam, the Government and the State Bank of Vietnam should consider amending Circular 16/2014/TT-NHNN This amendment would allow customers and banks to conduct low-value transactions, specifically those under VND 30 million, without the need for documentation and vouchers, aligning with the non-cash payment orientation and the SBV's foreign exchange control policies.
Authorized agents of banks
The legal framework surrounding digital banking varies significantly across different countries, offering valuable insights for Vietnam By examining international experiences, Vietnam can enhance its regulatory approach to digital banking, ensuring consumer protection and fostering innovation Understanding the successes and challenges faced by other nations will help Vietnam develop a robust digital banking law that aligns with global standards while addressing local needs This comparative analysis is essential for creating a sustainable and competitive digital banking environment in Vietnam.
The Law on Anti-Money Laundering mandates that credit institutions perform Know Your Customer (KYC) procedures when opening accounts or handling transactions involving new technologies Utilizing authorized banking agents is an effective solution for banks to conduct KYC on their behalf, which not only reduces personnel costs but also saves time for both banks and customers Authorized agents, defined as retail or postal outlets contracted by financial institutions, can include various entities such as non-governmental organizations, microfinance institutions, post offices, telecommunications agents, government offices, insurance agents, pharmacy owners, and petrol dealers Similar to bank branches, banking agents facilitate a range of services including savings and withdrawals, loan disbursement and recovery, utility bill payments, money transfers, social assistance distributions, and the processing of account openings, borrowing, payments, and credit card registrations.
To facilitate the expansion of banks' operational networks and enhance the implementation of intermediary payment services, the State Bank of Vietnam should establish a legal framework for the creation and functioning of bank-authorized agents This framework should include specific regulations outlining selection criteria and assessment processes to ensure these agents are capable of providing intermediary services effectively.
Electronic banking accounting vouchers
The State Bank of Vietnam (SBV) has established regulations for electronic accounting vouchers through Decision No 376/2003/QD-NHNN, which outlines the maintenance and preservation of electronic vouchers used for accounting and payment by payment service providers Additionally, Decision No 1789/2005/QD-NHNN introduces a framework for banking accounting vouchers, reflecting the evolving landscape of digital banking in various countries and offering valuable insights for Vietnam's financial sector.
Digital banking transactions are predominantly conducted through mobile platforms, facilitated by partnerships among banks, mobile phone companies, and financial technology providers Advanced technologies enable transactions via e-wallets and QR codes, allowing payments to be linked to cell phone numbers or identification codes instead of traditional bank accounts The processing and accounting of these transactions are fully automated and occur in real-time Consequently, regulations governing electronic document content, as well as procedures for controlling, preserving, and archiving vouchers, must be updated to align with current operational practices.
Digital banking transactions are fully automated, encompassing everything from payment to accounting, with checkpoints and reconciliation handled by software without bank officer oversight According to Decree No 35/2007/ND-CP on banking e-transactions, e-documents derived from paper must be verified for content consistency It is essential for the issuer, controller, and signers to apply their e-signatures after completing their respective tasks However, the fully automated payment process raises concerns about ensuring appropriate controls and signatures for e-documents Therefore, the State Bank of Vietnam (SBV) should consider revising guidance on the issuance, control, and signing of e-documents, allowing banks to establish internal regulations that comply with legal standards and their operational realities.
According to Decree No 174/2016/ND-CP, electronic accounting documents must be printed and signed by the legal representative or chief accountant when required for inspection or audit by competent authorities This indicates that electronic documents are not entirely independent from paper vouchers, highlighting the need for compliance in electronic accounting practices.
A transition between the two types of vouchers is necessary to accommodate various stakeholders, which may prove to be both time-consuming and expensive for banks To enhance efficiency and reduce costs, it is anticipated that banks will utilize electronic signatures for accounting documents, eliminating the need for physical printing.
The preservation and archiving of electronic vouchers must align with the archival duration of paper vouchers, as both types are subject to economic content requirements However, the longevity and viability of electronic vouchers differ from that of paper vouchers To optimize the use of information and accounting data, the storage time for electronic vouchers should be adjusted, ensuring more effective long-term access compared to traditional paper vouchers.
The legal framework for digital signatures and certification services is established under the Law on E-Transactions and Decree 26/ND-CP, which outlines the governance of digital certificates and signatures Despite this framework, practical application faces challenges due to the lack of regulations on procedures and numerical models Article 8, Clause 2 of Decree 25/2007/ND-CP states that authorized digital signatures can replace traditional signatures and seals; however, clerical and archival provisions hinder the effective use of digital signatures in banking systems Therefore, encrypting digital signatures is essential for the swift and secure identification and confirmation of bank transactions.
Regulation on loans
The article explores the legal framework surrounding digital banking in various countries and examines valuable experiences that can inform Vietnam's approach It highlights the importance of understanding international regulations to enhance Vietnam's digital banking landscape By analyzing successful models from other nations, Vietnam can adapt and implement effective legal structures to foster innovation and ensure consumer protection in its financial sector.
Despite the State Bank of Vietnam's regulations on the credit granting process, the adoption of digital banking loans by commercial banks remains limited due to challenges in assigning responsibility for automated assessments and decisions To enhance online loan offerings, the government and SBV should prioritize finalizing the legal framework for automatic appraisal and approval processes, as well as developing essential infrastructure such as LOS and CLIMs systems Additionally, commercial banks require guidance from the SBV on implementing automatic credit scoring processes, which can streamline loan applications by calculating scores without the need for paper documentation, thereby accelerating the loan approval process and enhancing customer experience.
Regulatory Sandbox
The legal frameworks in many countries have struggled to keep up with the rapid advancement of Fintech technologies Developed nations typically approach Fintech regulation in two ways: they establish regulatory frameworks for high-risk business models like peer-to-peer lending, while they create legal sandboxes for lower-risk innovations, such as blockchain technology and virtual assistants, allowing banks to test new applications safely Given the growing importance of regulatory sandboxes, it is essential to develop specific rules that support the advancement of innovative technologies in digital banking Each sandbox should clearly define the technology under evaluation, the scope of testing, and the permissible activities Additionally, customers must be informed about the products and services being tested, including a list of companies involved in the trial operations These sandboxes operate under certain constraints, such as limited trial periods, customer caps, and specific demographic criteria, while maintaining customer protection principles to mitigate the risks associated with testing failures.
Thailand’s internet and mobile banking transaction volume
The thesis examines the legal frameworks surrounding digital banking in various countries and draws valuable lessons for Vietnam It highlights the importance of adapting regulations to accommodate the rapid growth of digital banking technologies By analyzing successful models from other nations, the study aims to provide insights that could enhance Vietnam's digital banking landscape The findings suggest that a balanced approach to regulation can foster innovation while ensuring consumer protection Ultimately, the research emphasizes the need for Vietnam to develop a robust legal structure that supports the evolution of digital banking.
From 2011 to 2017, there was a slight increase in internet banking transactions, while Thailand experienced a significant surge in mobile banking transactions during the same period According to the Bank of Thailand (BOT), by June 2018, the total value of mobile banking transactions reached 1,269 billion Baht, compared to 2,187 billion Baht for internet banking transactions This growth highlights the importance of policies aimed at developing digital banking in Thailand.
The Bank of Thailand (BOT) has established a comprehensive policy framework for digital banking development through its Financial Sector Master Plan, which is divided into three distinct phases: Phase I from 2004 to 2008, Phase II from 2010 to 2014, and Phase III starting in 2016.
2020) Phase I set out a number of measures regarding post-1997 financial crisis
The Thai financial sector is undergoing significant "house-cleaning," focusing on structural improvements and the re-organization of financial institutions to enhance risk management and governance practices while increasing public access to financial services The second phase of the Financial Sector Master Plan emphasizes effective risk management and accessibility to financial services Following this, the State Bank of Thailand introduced Phase III of the Master Plan for 2016-2020, which involves collaboration among government agencies to facilitate data access and connectivity, promote coordination among financial institutions and electronic payment providers, and establish a robust legal framework and technological infrastructure for digital banking This phase prioritizes not only the promotion of electronic financial services but also the support for service providers in developing infrastructure and tailored financial products that meet customer needs.
In 2017, the Bank of Thailand (BOT) supported the government's National e-Payment Plan, addressing the risks and fraud that threaten digital banking development To ensure the stability of financial institutions, the BOT implemented policies focused on enhancing risk management and supervision Commercial banks are required to establish strategies and regulations for operational management, conduct special examinations, and perform thorough analyses and monitoring Additionally, they must carry out onsite examinations and risk assessments for significant activities and information technology systems.
Thailand has established itself as a leader in digital transformation by implementing blockchain technology in banking applications On March 14, 2018, the central bank announced the formation of the Thailand Blockchain Community Initiative, which includes 14 major banks collaborating to develop the Hyperledger Fabric platform, designed by IBM Blockchain Services This blockchain-based platform aims to digitize letters of guarantee and other documents, with testing conducted in a regulatory sandbox to enhance data verification, reduce fraud, simplify processes, and improve overall business efficiency.
Launched in August 2018, Thailand's Project Inthanon aims to revolutionize interbank settlements through the use of a wholesale central bank digital currency, known as the national digital currency The project will utilize Corda, an open-source blockchain platform developed by the US fintech company R3, to enhance the technological readiness of Thailand's financial sector By adopting new financial technologies, the initiative seeks to improve operational efficiencies within the banking system.
The State Bank of Thailand has issued Notification SorNorSor 7/2559, guiding financial institutions on the acceptance of public deposits and money This notification permits banks to utilize digital platforms for effective customer identification and verification through electronic Know Your Customer (eKYC) processes Methods for eKYC include video interactions with bank tellers, the use of legally equivalent electronic documents, electronic signatures, and customer authentication via smart card readers or biometric data The eKYC process must adhere to the same standards as traditional KYC procedures and is applicable to individual customers using electronic devices Before implementing eKYC, banks must establish robust risk management processes and obtain approval from the State Bank of Thailand Currently, Thai banks remain cautious about adopting eKYC, as they are still exploring technological solutions, resulting in no official implementations to date.
To foster financial technology innovations, the Bank of Thailand launched a regulatory sandbox on December 21, 2016 This initiative outlines specific qualifications for participants, including financial institutions and fintech firms, allowing them to test new technologies in financial services such as lending and payments Participants must hold necessary licenses and adhere to laws beyond the Bank's authority, including those related to electronic transactions, anti-money laundering, and anti-terrorism Additionally, those wishing to enter the sandbox must implement measures for corporate governance, IT security, and customer information protection.
PromptPay, an electronic wallet developed by the State Bank of Thailand in 2016, is a key component of the national e-payment scheme aimed at facilitating quick transfers using personal phone numbers or identification numbers instead of traditional account numbers As part of Thailand 4.0 initiatives, it aims to foster a cashless society and promote a value-based economy through innovation and technology A survey by Bangkok Post revealed 37 million savings accounts leading to 97 million transactions worth 370 billion Baht, with 12 million accounts linked to mobile numbers Initially focused on peer-to-peer transactions, PromptPay plans to expand its services to enterprise customers and eventually support social benefits and tax refunds To register, Thai citizens must provide their current account number along with a phone or ID number, which will be linked to their account The government anticipates that PromptPay will boost banking service usage, decrease cash transactions, enhance efficiency, and strengthen the country's competitive edge while ensuring the protection of customer information and transaction security.
Thailand currently lacks specific data protection laws, with the draft Law on Personal Data Protection from September 2018 still awaiting approval from the National Legislative Assembly Despite this, various sectors, including banking, finance, insurance, telecommunications, and healthcare, are required to ensure customer data protection The Financial Institution Business Act BE 2551 and the Royal Decree on Electronic Payment regulate the collection, storage, and use of customer information, mandating that banks only use data for operational purposes and not disclose it without customer consent Financial institutions must adhere to regulations set by the Bank of Thailand regarding the transfer of customer information to third parties and must notify the BOT in case of any breaches Additionally, applicants for electronic payment licenses must outline their data protection measures as a condition for license approval.
Under the BOT regulations, electronic money card service providers are responsible for ensuring customer security when outsourcing IT services Each provider must implement a comprehensive security policy that safeguards system integrity, customer authentication, data confidentiality, and system availability They are also required to monitor systems, resolve issues, and report any incidents of loss or disruptions exceeding 24 hours Additionally, providers must conduct an annual evaluation of their IT systems to ensure compliance with the Bank of Thailand's security policies and submit a report of their findings within 30 days of the examination.
3.1.3 Singapore luan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnamluan.van.thac.si.law.on.digital.banking.in.some.countries.and.experiences.for.vietnam
According to the Global Financial Centers Index 24 released in September
2018, Singapore had ranked fourth globally, and the second largest in Asia where many banks and financial institution choose to relocate their headquarters in Asia
Table 1: Top 5 Centers in GFCI 24
Source: The Global Financial Centers Index 24 (2018)
Singapore, recognized as the "smart country," leads the Asia Pacific in digital economy and e-commerce initiatives According to MasterCard Advisors analytics, non-cash payments in Singapore accounted for 61%, making it the world's most cashless nation (MasterCard, 2017) The country's developed economic and political environment, along with favorable tax policies and stringent enforcement against financial crimes, has positioned Singapore as Asia's largest hub for commodities and foreign exchange, hosting around 117 foreign banks.
The banking sector in Singapore is primarily dominated by six local banks, which are regulated by the Monetary Authority of Singapore (MAS) MAS actively supports the financial industry by implementing legislation that encourages the swift integration of financial technologies In a significant move to foster innovation, MAS pledged US$ 166 million over five years starting in 2015 to enhance technological advancements within the financial sector.
South Korean Internet-only banks take off
Source: Press Reports (Business News Daily Korea) Citi Research (2017)
In April 2017, Korea saw the launch of its first digital bank, K Bank, which revolutionized banking by eliminating physical transaction points and bank tellers All banking operations, including account opening, money transfers, and lending, are conducted entirely through smartphones and the internet, offering a seamless digital experience for customers.
Kakao Bank, launched by Daum Kakao in July 2017, quickly gained popularity, attracting 3 million users in its first month and securing deposits of 2 trillion won ($1.78 billion) and loans of 1.8 trillion won The bank offers traditional services like account opening, transfers, and loans, with a competitive edge due to its easy account setup, low loan interest rates, high savings deposit rates, and minimal transfer fees The rapid growth of smartphone users in Korea further boosts Kakao Bank's customer base Unlike traditional banks, Kakao Bank simplifies the customer identification process, allowing users to open accounts without in-person meetings Customers can verify their identity through a small transfer from another bank or via a video call for those new to banking in Korea This innovative approach enables Kakao Bank to operate without physical branches, offering flexible, accessible banking services with competitive rates.
Korea's payment system comprises a large-value payment system (LVPS) and various retail payment systems (RPS) The LVPS, known as the Financial Wire Network (BOK-Wire+), is operated by the Bank of Korea, while the Korea Financial Telecommunications & Clearings Institute (KFTC) oversees the retail payment systems under a non-profit model established by the BOK Recent advancements have significantly enhanced the Korean payment system, with the BOK introducing real-time money transfer capabilities in the LVPS.
Since 2009, there has been significant growth in low-value payment systems, including credit cards from local brands, electronic wallets, prepaid tools, and mobile banking apps The Korea Financial Telecommunications and Clearings Institute (KFTC) has introduced its 24/7 payment gateway, BankPay, facilitating seamless bank transfers for payments to merchants and online shops In April 2016, KFTC launched the Bank Wallet service, enabling smartphone users to make small transactions between phone numbers, even without a bank account, at convenience stores and for online purchases.
Digital banks, such as K Bank and Kakao Bank, are a recent development in South Korea, with their establishment being assessed by the Financial Supervisory Service based on market demand These digital banking operations must adhere to the same regulations as traditional banks, governed by various laws including the Bank of Korea Act 2016, Financial Investment Services and Capital Markets Act 2007, Electronic Financial Transaction Act 2006, and the Regulation on the Operation and Management of Payment and Settlement Systems 2001.
K-Bank and Kakao Bank, two prominent digital banks in South Korea, operate under the same regulations as traditional banks, highlighting the government's commitment to advancing digital banking The emergence of these banks indicates active institutional support from Korean financial authorities aimed at fostering healthy competition between digital and traditional banking sectors.
Consumers now have alternative options for banking services, moving away from the traditional banks that once held a monopoly Recent revisions to relevant laws and regulations support the growth of digital banking, including payment gateway systems, debit card transactions via bank networks, mobile remittances through smartphones, and credit card services Additionally, innovations such as investment consulting, insurance offerings, real-time Q&A through AI-driven chatbots, and the assessment of loan applications without document submission using scraping techniques are transforming the banking landscape.
The Korean National Assembly enacted the Act on Special Cases Concerning the Establishment and Operation of Internet Banks, effective from January 17, 2019 This legislation defines Internet Banks as institutions conducting banking via electronic financial transactions, without direct interaction between bank personnel and customers Despite their digital nature, Internet Banks must adhere to the existing provisions of the Banking Act The Act also outlines specific service conditions, such as allowing only small- and medium-sized enterprises to secure loans from these banks and prohibiting loans to major shareholders.
Under South Korean law, non-financial companies are limited to owning no more than 4% of a bank's shares to prevent large industrial firms, like Samsung, from using banks as mere storage for their capital This regulation, however, hinders digital banks such as K-Bank from effectively raising funds To address this issue, the Act on Internet-Only Banks allows non-financial entities to own up to 34% of shares in internet banks, reflecting the Korean government's efforts to create a more favorable legal environment for the growth of digital banking.
The South Korea Special Act on Financial Innovation Support, effective from April 1, 2019, introduces a regulatory sandbox designed to foster innovation without imposing excessive regulatory delays Financial institutions approved by the Financial Services Commission can operate within this sandbox, gaining exemptions from existing financial regulations However, these companies must obtain prior approval from the Commission regarding their consumer protection and risk management strategies to ensure the safety of customers' information and the security of transactions.
In South Korea, the Personal Information Protection Act (PIPA) governs the collection, usage, and disclosure of personal data by both governmental and private entities This legislation applies to all agencies, legal entities, organizations, and individuals that process personal information in an organized manner, similar to the 'controller' concept under the EU's General Data Protection Regulation Notably, when handling sensitive or unique identification information, data handlers must secure explicit consent from the data subject, distinct from consent for other types of personal data processing.
In addition to the Personal Information Protection Act (PIPA), online service providers, including telecommunication companies, must adhere to the Act on Promotion of Information Communication Network Usage and Information Protection (Network Act), while financial institutions are governed by the Act on Usage and Protection of Credit Information (Credit Information Act) Both the Network Act and Credit Information Act take precedence over PIPA for personal information and credit information processing, respectively The Network Act differentiates between essential personal information, necessary for online service provision, and optional personal information, which is not mandatory Service providers can deny services if users do not consent to essential personal information collection but cannot refuse based on optional information consent Therefore, providers must obtain separate consent for processing both essential and optional personal information, particularly for sensitive or unique identification information, which typically does not qualify as essential.
Data handlers must secure explicit opt-in consent from individuals before processing their personal information, ensuring that data subjects retain control over their data Additionally, if personal information is to be shared with a third party, separate consent is necessary after providing details such as the third party's name, their intended use of the data, the specific information to be shared, the duration of data retention, and the implications of withholding consent.
When personal information is outsourced to a third party, data handlers must disclose specific details about the outsourcing agreement, including the name of the data processor and the tasks involved, typically through their privacy policies A written outsourcing agreement is also necessary For sensitive and personally identifiable information, separate notice and consent are mandatory However, if personal information is transferred to a foreign entity, user consent may not be required under certain conditions, such as when the transfer is essential for the online service provider’s operations and has been adequately disclosed in the privacy policy or through prescribed notification methods like email.
Financial institutions must adhere to cyber security regulations outlined in specific laws According to Article 43 of the Banking Act, a bank can deny requests for inspecting or reproducing account books and documents if fulfilling such requests could seriously harm the rights and interests of its customers.
Adoption of internet banking and mobile banking in China
Digital banking laws in various countries offer valuable insights and experiences that can inform Vietnam's approach to its own digital banking regulations By examining successful frameworks and regulatory practices from these nations, Vietnam can enhance its legal framework to better support the growth of digital banking The adaptation of international best practices will not only improve financial inclusion but also foster innovation in the banking sector Understanding the legal landscape of digital banking globally will enable Vietnam to create a robust regulatory environment that balances consumer protection with technological advancement.
Source: Asian Banker Research (2017) a Policies on digital banking development
In 2015, the Chinese government established a robust regulatory framework for digital banking through the Guidance on Promoting Internet Finance's Healthy Development This guidance outlines essential regulations covering internet payment services, online lending, information security, anti-money laundering measures, and consumer protection It restricts digital finance transactions, such as internet payments, peer-to-peer lending, micro-loans, and online equity crowdfunding, to small values to mitigate risks associated with larger transactions while enhancing efficiency and cost-effectiveness Additionally, the Guidance clarifies the roles of various regulatory authorities, promoting better coordination in overseeing digital finance activities.
In 2016, the Government introduced the Action Plan on Thematic Regulation of Internet Finance Risks to mitigate risks that jeopardize investors' rights and the integrity of the financial sector This plan aims to establish a standardized legal framework for digital banking in Vietnam, drawing insights from international experiences It seeks to balance consumer protection with the promotion of financial incentives and support for startups Additionally, the Action Plan identifies regulatory concerns across various subsectors of Internet finance, emphasizing the need for comprehensive oversight.
With regard to internet banking, Rules on the Administration of Electronic banking (the “Rule”) was enacted by China Banking Regulatory Commission in
In 2006, regulations were established to enhance risk management in electronic banking transactions and safeguard customer rights Banks providing electronic banking services via digital platforms must adhere to specific requirements, including obtaining approval from the China Banking Regulatory Commission (CBRC) for domestic and cross-border operations They are also mandated to implement internal and external risk management systems and establish a dedicated risk department For domestic e-banking, banks must develop comprehensive plans, ensure qualified personnel, and manage operational risks effectively When engaging in cross-border services, Chinese banks must comply with the laws of the customer's country and report transaction details to the CBRC, including service scope and customer agreements Additionally, banks must regularly report on the development, profitability, and risk management of their e-banking operations, engaging independent valuation firms for external evaluations alongside their self-assessments.
The China Banking Regulatory Commission is conducting a security evaluation of the e-banking system to enhance consumer protection New regulations establish that banks will be held liable for any damages incurred by customers, provided these damages are not due to consumer-related factors This includes issues arising from illegal operations of e-banking systems or inherent security vulnerabilities within the banks themselves.
In 2010, the Chinese government established regulations governing third-party payment services through the "Rules on the Administration of Payment Services Provided by Non-Financial Institutions" and the "Measures on the Implementation of the Rules." These services encompass various non-financial payment options, such as online payments, the issuance and acceptance of prepaid cards, and the acceptance of bank cards, thereby facilitating a diverse range of payment solutions.
To provide payment services in China, non-financial institutions must obtain a payment service business license from the People's Bank of China These service providers are required to meet specific criteria, including a minimum capital of RMB 100 million for national services or RMB 30 million for provincial services, implement anti-money laundering measures, and fulfill personnel, organizational, and facility requirements Additionally, regulations cap the total annual payment amount based on customer authentication methods Since 2015, compliance with customer authentication, protection, and anti-money laundering regulations has been mandatory for non-financial institutions offering payment services.
Peer-to-peer lending (P2P lending) has rapidly emerged in China as an innovative debt financing method, enabling customers to borrow and lend money through online platforms without traditional financial institutions These platforms connect borrowers, who provide their profiles and desired loan amounts, with individual investors who evaluate these profiles to decide on loan offers at agreed interest rates A loan in P2P lending may originate from multiple investors, requiring the borrower to repay each one separately To address the growing popularity and associated risks of P2P lending, the Chinese government has introduced regulations to ensure better governance in this sector.
The 2011 Circular proved ineffective in managing risks associated with P2P lending due to its lack of specific regulations, leading to increased illegal activities A notable example is the Ezubao platform, which became a Ponzi scheme, resulting in a staggering loss of 59.8 billion yuan ($9.14 billion) for over 900,000 investors by the end of 2015 (Neil Gough, 2016) In response, the Action Plan on Regulation of Online P2P Lending Risks was introduced in April 2016 to establish guidelines for P2P lending and intermediaries This plan mandates that lending intermediaries secure a Telecommunications business license and appoint a bank to safeguard customer funds, thereby enhancing customer information protection.
In response to growing concerns over customer information protection in the digital banking sector, the Chinese government has enacted several key laws, including the Cyber Security Law of 2017, which established a comprehensive legal framework for safeguarding customer data This law mandates that banks obtain customer consent prior to disclosing personal information and requires them to clearly communicate the purpose, means, and scope of data usage Additionally, banks are prohibited from collecting more personal information than necessary and must delete or anonymize data once it has served its transactional purpose Following the Cyber Security Law, interpretations of existing legal protections and penalties for violations were issued by China's Supreme People’s Court and the Supreme People’s Procuratorate in June 2017 Furthermore, the China Banking Regulatory Commission introduced the E-banking Rule, which obligates e-banking service providers to formalize contracts with customers and transparently disclose risks, rights, and obligations associated with their services.
3.2.1 Lessons learned from selected countries a Payment system
All selected countries have implemented laws to enhance their payment systems, often establishing state agencies to oversee electronic payment regulations Notable examples include the European Payments Council, the Bank of Thailand, the Monetary Authority of Singapore, the Korea Financial Telecommunications & Clearings Institute, and the China Banking Regulatory Commission Through the enactment of laws and regulations, these agencies play a crucial role in guiding and supervising financial institutions in facilitating electronic banking transactions.
In the initial stages of payment transactions, banks utilize e-KYC and e-ID to ensure accurate customer identification and verification on digital platforms, a practice implemented in select countries Additionally, establishing transaction value limits is a key mechanism outlined in the digital banking laws of these nations For instance, in Italy, any purchase agreement totaling €1,000 or more must be conducted through electronic payment methods Meanwhile, Korea's payment system includes both a large-value payment system (LVPS) and various retail payment systems (RPS).
In Vietnam, the Government and the Payment Department under the State Bank oversee the legal framework for digital payment transactions Due to a strong preference for cash and limited awareness of digital banking, many customers are not accustomed to digital payment systems To address this, the Government introduced a Plan for non-cash payments from 2016 to 2020, aiming to reduce cash transactions to below 10% by the end of 2020 The amended Decree No 116/2013/ND-CP is being revised to facilitate eKYC and eID processes, streamlining services for customers Additionally, the Payment Department has organized workshops with commercial banks and international experts to enhance knowledge and implementation of digital banking laws, positioning Vietnam to meet its non-cash payment goals.
Innovations and new technologies are expected to lower service costs for financial institutions, but they also introduce increased financial risks, such as financial crises, heightened bank fragility, and excessive credit expansion In response, several countries are focusing on regulatory sandboxes that allow fintech companies to conduct live testing of new technologies under stringent regulatory oversight.
Before implementing innovations within a regulatory sandbox, companies must submit a proposal detailing the innovation, its conditions, and plans for consumer protection and risk management to state agencies Each country has its own laws governing the regulatory sandbox, which may require participants to comply with existing regulations, be exempt from certain strict requirements, or be free from current financial regulations In Thailand, for instance, participants must obtain necessary licenses and adhere to laws beyond the jurisdiction of the Bank of Thailand In contrast, Singapore's Monetary Authority of Singapore (MAS) offers support by relaxing some stringent requirements during testing Additionally, in South Korea, financial institutions approved by the Financial Services Commission benefit from exemptions from current financial regulations while using the regulatory sandbox.
The groth rate of POS, quantity transactions
in the period from 2012 to 2016
Source: State Bank of Vietnam (2017)
The Centralized Card Switching system in Vietnam has facilitated seamless connections between ATM and POS systems, allowing cardholders from various banks to make transactions across all platforms However, challenges remain, particularly as modern banking utilities are predominantly available in urban areas Cash withdrawal transactions still dominate, overshadowing other services like payments and transfers, which poses difficulties for employees in rural regions who rely on account-based wage payments To address this, it is essential to expand the ATM/POS network into rural and remote areas through targeted mechanisms such as tax and fee incentives, thereby promoting comprehensive financial solutions across Vietnam.
As of now, 76 commercial banks and foreign bank branches offer Internet Banking services, while 41 commercial banks provide mobile banking options In 2016, internet payment transactions exceeded 125 million, amounting to over 7.2 million billion VND, marking a 51% increase from the previous year Mobile transactions also saw significant growth, with over 97 million transactions valued at 303 trillion VND, reflecting a remarkable 126% rise compared to 2015 In the first nine months of 2017, internet transactions reached 138 million, with a total value surpassing 9.4 trillion VND, indicating a 106% increase year-on-year.
2016) The number of mobile transactions in 2017 reached 94.5 million transactions worth 457 trillion dong (equivalent to 150% compared to 2016) (SBV, 2017).
The number and value of transactions via Internet banking and mobile
mobile banking in the period 2015 - 2016
Source: State Bank of Vietnam, 2017
According to McKinsey's 2014 personal financial service survey, Vietnam experienced one of the highest increases in internet banking adoption in Asia, with users growing 6.3 times from 2011 to 2014, second only to Indonesia's 7.2 times By 2014, Vietnam ranked as the second most populous country in Southeast Asia for internet banking usage at 44%, trailing significantly behind Singapore's 94%.
Mobile banking services in Vietnam surpass traditional online banking by offering a comprehensive range of retail services These services include account inquiries, account management, internal and external money transfers, bill payments, online savings, loan repayments, credit card management, and online purchases Additionally, mobile banking caters to both individual users and corporate clients, making it a versatile financial solution.
Several banks have enhanced their mobile banking applications within just a few years of launch, with Vietcombank and Vietinbank adopting version 3.0 Additionally, numerous new features are currently in development to improve user experience.
Number of transactions via Internet…
Transaction value via Internet banking…
Number of transactions via mobile banking Transaction value via mobile banking…
The number and value of transactions via Internet banking and mobile banking in the period 2015-2016
In recent years, the evolution of digital banking has significantly impacted various countries, including Vietnam Notable mobile banking applications have emerged, offering features such as future-dated transfers, card management, and QR code payments Additionally, biometric technologies like fingerprinting have been adopted by banks to enhance security and privacy In Vietnam, the rapid adaptation of young people to technology has led to a substantial increase in QR code payments, with a remarkable growth rate of 120% by September 2017, resulting in 5,000 QR code acceptance points and projections of 50,000 by 2018 Currently, 12 banks in Vietnam provide QR code payment services, highlighting the potential for e-wallets and digital payment solutions in the country.
Electronic wallets (e-wallets) are gaining popularity in Vietnam, offering services like purchasing movie and air tickets, consumer loans, and insurance policies As of 2017, the State Bank of Vietnam has licensed over 20 e-wallet services, including prominent names such as Payoo, MoMo, BankPlus, 1Pay, M-Pay, Vimo, BaoKim, ZaloPay, Ngan Luong, and Mobivi.
The volume and value of electronic wallets transactions for the period 2012 -
The article discusses the legal framework surrounding digital banking in various countries and its implications for Vietnam It highlights the experiences and lessons learned from these international practices, emphasizing the need for Vietnam to adapt its regulatory approach to foster innovation in digital banking By examining the successes and challenges faced by other nations, Vietnam can develop a robust legal environment that supports the growth of digital financial services.
The number and value of electronic wallet transactions during the year of
Source: State Bank of Vietnam, 2017
Chart 8 illustrates a significant increase in both the number and value of electronic wallet transactions over the observed period, with the total transaction value reaching VND 5,831,749 million.
2012, jumped to VND53.109 trillion in 2016 By the third quarter of 2017, the number of e-wallets was 9,638,130, increasing 152.08% compared to 2016 (3,823,396 e-wallets)
As of May 2018, the Vi Viet app boasts 2.2 million users and over 19,000 locations across the country that accept payments Similarly, ZaloPay, an e-wallet facilitating electronic bill payments for services like electricity, water, internet, and TV, also allows for money transfers via QR codes and connects with bank accounts for cash withdrawals In 2018, ZaloPay plans to establish around 1,000 new points of sale.
E-wallets have emerged as strong competitors to traditional banking services, prompting many commercial banks to enter this market swiftly Maritime Bank and Sacombank have introduced QR code payment systems for use in shops and restaurants Additionally, numerous banks are enhancing their partnerships with e-commerce businesses and payment intermediaries to facilitate seamless online transactions Currently, 40 commercial banks are collaborating with organizations that provide intermediary services to implement e-wallet solutions, catering to retail payment transactions, including low-value payments on e-commerce websites and mobile phone transactions.
As new foreign players like Alipay, Samsung Pay, and Amazon enter Vietnam's e-wallet market, domestic service providers are increasingly collaborating to capture market share A notable partnership is between M-Service and Shinhan Bank Vietnam, which integrates Shinhan Bank's payment accounts with the MoMo e-wallet Additionally, Southern Airport Services Joint Stock Company (SASCO) has teamed up with Vi Mo Technology Joint Stock Company to offer WeChat Pay for Asian tourists, enabling them to make payments in VND at SASCO's duty-free and retail shops in Ho Chi Minh City’s Tan Son Nhat International Airport since January 1, 2018 This service allows foreign customers to swiftly complete transactions by scanning a QR code with their mobile phones, enhancing convenience and efficiency in payment processing.
In Vietnam, the process of automatic credit assessment and approval remains unclear, leading to a limited implementation of digital banking loans by banks like Techcombank, ABBank, and Sacombank, where customers must still visit branches to complete traditional procedures However, VPBank offers a fully automated digital loan product for customers receiving salaries through its accounts, allowing loans of 10-20 million VND with a repayment period of 6 to 60 months, disbursed within 3-5 days To enhance the digitization of loan applications, many banks in Vietnam have adopted Loan Origination Systems (LOS), which streamline various loan processing steps and improve efficiency by reducing reliance on paper documents Notable banks utilizing LOS or similar systems include Vietinbank, Techcombank, VBBank, MBBank, Maritime Bank, VIB, and TPBank, as highlighted in Mr Vu Hong Thanh's study on the development of digital banking in Vietnam.
Peer-to-peer (P2P) lending in Vietnam has rapidly emerged over the past few years, with around 10 lenders currently operating in this space The growth of P2P lending is driven by increasing incomes, a rising adoption of advanced technology, and limited access to traditional financial services—only 30% of Vietnamese adults have payment accounts, compared to 81% in Thailand and 80% in China Leading platforms like Tima and Vaymuon.vn are at the forefront of this trend Founded in 2015, Tima connects borrowers and lenders directly, attracting 800,000 borrowers and 5,000 lenders, with transactions totaling VND15 trillion (approximately US$700 million) To mitigate bad debt risks, Tima employs artificial intelligence for credit assessment Meanwhile, Vaymuon.vn targets small loan demands unmet by banks, utilizing big data and AI for loan evaluations and offering third-party guarantees for borrowers when needed.
P2P lending is rapidly growing in Vietnam, addressing capital needs and diversifying investment channels, yet it currently lacks a legal framework, leading companies to register as investment advisory firms under the Civil Code This gap in understanding the true nature of P2P lending raises significant economic and social risks To mitigate these risks, the Vietnamese government should establish a comprehensive national financial strategy that enhances access to formal banking services and raises awareness about P2P lending Key regulatory measures should include defining P2P lending, ensuring operational safety for companies, protecting lenders' interests, and mandating risk provisions for defaults The State Bank of Vietnam (SBV) is actively studying global P2P lending models to create a legal framework that maximizes benefits while minimizing risks Additionally, improving national IT infrastructure and fostering collaboration among local authorities and organizations will be crucial for effective P2P lending management in Vietnam.
Digital banking in Vietnam is still in its infancy, with several domestic banks adopting digital models for their operations and services Notable examples include Tien Phong Bank (TP Bank) with its LiveBank, VPBank's Timo application, Vietcombank's digital banking space, and Vietinbank's new generation core banking system Additionally, Military Bank offers a 24/7 ChatBot virtual assistant on social media, while Napas provides digital card services Among the pioneers in this sector are Timo by VPBank and TPBank’s LiveBank, which exemplify the innovative use of technology in enhancing digital banking services in Vietnam.
On August 4, 2015, the National Bank of Vietnam confirmed that Vietnam Prosperity Bank (VP Bank) registered to issue the TIMO debit card, a new generation of banking in Vietnam designed to help locals and expatriates manage their finances conveniently Launched in 2016, Timo operates through a digital banking model that utilizes Mobile Banking and Internet Banking, distinguishing itself from traditional e-banking services Timo offers a range of banking products, including Spend Accounts, term deposits, debit and credit cards, and Fast Cash loans By 2018, Timo aimed to attract over 100,000 customers through its Timo Hangout locations in Ho Chi Minh City, Hanoi, and Da Nang.
To open a Spend Account with VPBank, individuals must be at least 18 years old, reside in Vietnam, and have no prior transactions with the bank or FE Credit The account opening process is quick and takes only 2 minutes, requiring the applicant to provide their full name, email address, phone number, date of birth, and identification documents such as a People’s Identity Card, Citizen’s Identity Card, or Passport Additionally, customers must visit a VPBank branch to complete the KYC process in compliance with the Law on Anti-Money Laundering.
Timo offers a Fast Cash service, providing customers with a current account overdraft facility ranging from 10 to 100 million VND Unlike traditional banks, Fast Cash requires no loan procedures or proof of income To qualify, customers must meet four criteria: be a Vietnamese national over 18 years old, maintain an active Timo Spend Account for at least 180 days, have a minimum average balance of VND 500,000 in their Timo Spend Account and Goal Save, and conduct an average of VND 5,000,000 in deposit transactions over the same period Fast Cash is activated when the Spend Account balance reaches zero, allowing customers to make payments, transfer money, and pay online bills at POS terminals, though it cannot be withdrawn from ATMs and is valid for a maximum of one year Customers can access Fast Cash by completing four steps in the Timo app and agreeing to the terms and conditions.
In early 2017, TPBank became the first bank in Vietnam to implement the ATM+ model, known as TPBank LiveBank, through a partnership with Scale360, a UK-based fintech start-up with a development center in Bangkok Currently, there are 77 LiveBanks primarily located in Hanoi, Ho Chi Minh City, and Da Nang, enabling customers to perform various transactions such as cash deposits and withdrawals, e-banking services like money transfers and bill payments, and product registrations The innovative Video Teller Machine allows customers to interact with bank tellers via video, significantly reducing transaction times by 40% compared to traditional banking methods This technology aims to provide a seamless and comfortable banking experience, akin to transactions at a physical counter.
To open a payment account in VND using TPBank LiveBank, customers must be Vietnamese individuals aged 18 or older, residing in Vietnam, and possess the necessary civil act capacity as per local laws Additionally, certain groups, such as foreigners and Vietnamese individuals aged 15 to under 18 with appropriate civil capacity and assets, can also open accounts under Circular 23/2014/TT-NHNN, while those under 15 are ineligible for ATM+ models Customers are required to submit a complete application file, which is scanned using optical character recognition (OCR) at LiveBank, and each application includes a Quick Response Code (QR code) for fraud detection The know-your-customer (KYC) process involves consultations via a Video Teller Machine available 24/7, where identity documents are scanned and processed to meet security standards set by the Police Department and National Population Database TPBank LiveBank employs biometric authentication, including fingerprint recognition and facial detection, to verify customer identity against their official documents All transactions, including customer information and interactions, are recorded via surveillance cameras within and outside the LiveBank.
Customers can open a VND payment account and utilize TPBank LiveBank for saving deposits, provided they meet specific criteria: they must be Vietnamese individuals aged 18 or older, reside in Vietnam, have an active VND payment account with TPBank, and have a need to deposit in VND The minimum deposit is VND 1,000,000 Depositors will select one of their VND payment accounts at TPBank as their debit account for deposits and the receiving account for withdrawals TPBank LiveBank incentivizes customers by offering higher interest rates on savings deposits compared to traditional counter and eBank services.
The evolution of banking necessitates that traditional banks transition to digital banking, leading to significant changes in operational modes and models This shift presents both new opportunities and serious challenges for Vietnam's banking system.