luận văn thạc sĩ law on digital banking in some countries and experiences for vietnam

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS LAW ON DIGITAL BANKING IN SOME COUNTRIES AND EXPERIENCES FOR VIETNAM Specialization: International Trade Policy and Law PHAM THI QUYNH MAI Hanoi – 2019 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY ACKNOWLEDGEMENTS MASTER THESIS Firstly, I would like to express my deepest appreciation and thanks to my mentor, Dr Ha Cong Anh Bao for precious guidance, comments and suggestions This paper is one of the last compulsory elements of Master of International Trade Policy and Law program at the Foreign Trade University The objective of LAW ON DIGITAL BANKINGfor IN Vietnam SOME COUNTRIES AND the this study is to find out recommendations Government to enhance EXPERIENCES FOR VIETNAM development of digital banking I hope that the recommendations of this study will be useful for the legislature in developing of policies and laws on digital banking in the foreseeable future COMMITMENT Major: International Trade Policy and Law I would like to assure that the research of “Law on digital banking in some countries and experiences for Vietnam” was carried out by me All contents, tables, figures, chart illustrated in this study are honest, accurate and quoted from a reliable source Full name: Pham Thi Quynh Mai Hanoi, January, 2019 Supervisor: Dr Ha Cong Anh Bao Pham Thi Quynh Mai Hanoi – 2019 TABLE OF CONTENTS LIST OF ABBREVIATIONS i LIST OF TABLES AND CHARTS iii ABSTRACT iv CHAPTER I: INTRODUCTION 1.1 Research rationale 1.2 Literature review 1.3 Research questions 1.4 Scope of the research 1.5 Research methodology 1.6 Structure of thesis CHAPTER II: OVERVIEW OF DIGITAL BANKING 2.1 Origin and development of digital banking 2.1.1 History of Digital Banking 2.1.2 Electronic banking and digital banking 2.1.3 Fintech and threats to bank 2.2 Definition of law on digital banking 2.3 Main types of digital banking 2.3.1 Digital is a brand 10 2.3.2 Digital banking is distribution channel 10 2.3.3 Digital bank is a subsidiary of traditional bank 10 2.3.4 Full-scale Digital bank 10 2.4 Main characteristics of digital banking 11 2.4.1 Automation 11 2.4.2 Decision making support 11 2.4.3 Innovation 11 2.4.4 OmniChannels 12 2.5 Advantages and disadvantages of digital banking 13 2.5.1 Advantages 13 2.5.2 Disadvantages 14 2.6 The factors affect to digital banking 15 2.6.1 Client centricity approach 15 2.6.2 Technological innovation 16 2.6.3 Organizational flexibility 16 2.6.4 Get creative with marketing 17 CHAPTER III: POLICY AND LAW ON DIGITAL BANKING 18 IN SOME COUNTRIES 18 3.1 Policy and Law on digital banking in some countries 18 3.1.1 European Union 18 3.1.2 Thailand 22 3.1.3 Singapore 27 3.1.4 South Korea 32 3.1.5 China 38 3.2 Experiences for Vietnam 44 3.2.1 Lessons learned from selected countries 44 3.2.2 Risk Identification and Mitigation Mechanism 48 CHAPTER IV: POLICY AND LAW ON DIGITAL BANKING IN VIETNAM 4.1 54 Digital banking development in Vietnam 54 4.1.1 Overview 54 4.1.2 Case Study 64 4.2 Opportunities and challenges 68 4.2.1 Opportunities 68 4.2.2 Challenges 69 4.3 Policy and Legal framework on digital banking in Vietnam 71 4.3.1 Policies of the Government of Vietnam on digital banking 72 4.3.2 Vietnam Laws on digital banking 75 CHAPTER V: RECOMMENDATIONS FOR VIETNAM ON AMENDMENT OF LAW ON DIGITAL BANKING 82 5.1 E – KYC mechanism 82 5.2 Non-cash Payment 83 5.3 Authorized agents of banks 84 5.4 Electronic banking accounting vouchers 85 5.5 Regulation on loans 87 5.6 Regulatory Sandbox 88 5.7 Protection of Customers’ information and Data Security 89 5.8 Adoption and Application of new technology 90 5.8.1 Artificial intelligence 90 5.8.2 Open APIs 92 5.8.3 Block chain 92 CHAPTER VI: CONCLUSION 94 LIST OF REFERENCES 96 i LIST OF ABBREVIATIONS 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 Relationship Management E-banking Electronic banking eIDAS Electronic Identity and Electronic Services Directive 2014 eKYC Electronic Know Your Customer process EU European Union FinTech Financial Technology GDPR EU General Data Protection Regulation GovTech Government Technology Agency in Singapore ID Identity Card Korea Financial Telecommunications & Clearings KFTC Institute KPMG is a global network of professional firms providing KPMG Audit, Tax and Advisory services LOS Loan Origination System LVPS Large-Value Payment System MAS Monetary Authority of Singapore NIS Network and Information Security Directive 2016 The OCBC Bank group comprises a family of companies OCBC Bank owned by Singapore's longest established local bank P2P Peer-to-Peer PDPA Personal Data Protection Act 2012 of Singapore ii LIST OF ABBREVIATIONS PIPA Personal Information Protection Act of Korea POS Point of Sale PSD1 The Payment Services Directive 2007 PSD2 Payment Services Directive 2015 PricewaterhouseCoopers is a global network of professional firms providing Audit, Tax and Advisory PwC services RPS Retail Payment Systems SBV State Bank of Vietnam SEPA Single Euro Payment Area 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 iii LIST OF TABLES AND CHARTS TABLES Table 1: Top Centers in GFCI 24 28 Table 2: Number of ATMs per 100,000 adult population and over 1000 km2 of some countries in 2016 55 CHARTS Chart 1: Thailand’s internet and mobile banking transaction volume 22 Chart 2: South Korean Internet-only banks take off 33 Chart 3: Adoption of internet banking and mobile banking in China 39 Chart 4: Executive Responeses on Digital Security Vulnerabilities Faced by Stakeholders (%), Q2 2017 50 Chart 5: Growth rate of ATM transaction and value 56 Chart 6: The groth rate of POS, quantity transactions 57 Chart 7: The number and value of transactions via Internet banking and mobile banking in the period 2015 - 2016 58 Chart 8: The number and value of electronic wallet transactions during the year of 2012 to 2016 60 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 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 iv ABSTRACT In Vietnam, the Prime Minister has approved Decision No.986/QD-TTg on the Development Strategy of the Vietnam Banking Sector to 2025, with orientations to 2030 which also aims to develop digital banking in order to create a basis for improving access to banking services, in particular, broadening the network of traditional channels in combination with enhancing the development of modern banking channels (electronic banking, mobile banking, internet banking, etc.,) through the application of technical advances Policies on digital banking are made up of two components, namely the digital banking policy and law; and the application of technical advances Researching policy and law governing the digital banking is meant to be the fundamental and priority condition to facilitate both components This research selected policy and law in EU, Singapore, Thailand, South Korea and China as the mirror for Vietnam thereby giving some recommendations for Vietnam Government to amend and supplement policy and law on 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 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 CHAPTER I: 1.1 INTRODUCTION Research rationale The world is coming to a new era of innovation that will change the relationships between banks and their customers Old-fashioned banks suffer from numerous drawbacks, because they are far behind the latest technological breakthroughs in the 21 century’s the digital economy Thanks to innovations in information technology and mobile telecommunications adoption, there is an increasing trend in digital banking solutions Digital banking is a valuable investment opportunity because traditional banks or even online banking are no longer able to adequately service their customers' requirements in the digital revolution Customer needs cannot be satisfied by traditional banks which is unable to catch up with the digital ages The customers prefer digital banking to traditional banks due to its convenience and time savings In Vietnam, according to a survey conducted by IDG Vietnam, 81% of surveyees responded that they used digital banking solutions in 2017 compared to 21% in 2015 (Fintechnews Vietnam, 2018) Digital banking not only offers great opportunities for banks, but also brings many challenges for both banks and state agencies Banks shall have to clarify how to meet the high expectations of customers; utilize new technologies, prevent network security threats and protect customers’ information while the state agencies are being challenged by the protection of consumer interests, dealing with the risk of network security/data privacy and balancing management with innovation and competition In order to meet market demand and international integration timely, many domestic banks have actively applied new technological solutions to simplify the process and increase the coverage of products and services efficiently However, implementation of these solutions faces many challenges due to incomplete legal corridors Therefore, the adjustment and updating of policy and laws in line with the inevitable reform of banking technology is really necessary and decisive for the long-term development of digital banking in Viet Nam 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 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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 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 103 60 Vinayak Konasirasgi, Need for Automation in LOS (Loan Origination System) 2016, available at https://www.linkedin.com/pulse/need-automationlos-loan-origination-system-vinayak-konasirasgi/ check in 24 October 2018 61 Wikipedia, Single Euro Payments Area, available at https://en.wikipedia.org/wiki/Single_Euro_Payments_Area check in 19 October 2018 62 William Watterson, 2018, 2018 will be the year of open banking Here’s everything you need to know, available at https://thenextweb.com/worldofbanking/2018/06/27/openbanking/ check in 17 October 2018 63 Wong Casandra, 2017, MyInfo extended to private sector, allowing businesses to tap citizen data for digital services, available at https://www.channelnewsasia.com/news/singapore/myinfo-extended-toprivate-sector-allowing-businesses-to-tap-9395540, check in 18 December 2018 64 World core, 2017, Most cashless nations of the world, where consumers still prefer cash despite heavy fines, available at https://worldcore.eu/blog/cashless-nations-world-consumers-still-prefercash-despite-heavy-fines/ check in 16 October 2018 65 Yoon Yung Sil, 2017, Kakao Bank Fever Confirms Power of Kakao Talk Platform, available at http://www.businesskorea.co.kr/news/articleView.html?idxno=18917, check in 13 December 2018 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 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 104 BỘ GIÁO DỤC VÀ ĐÀO TẠO MINISTRY OF EDUCATION AND CỘNG HOÀ XÃ HỘI CHỦ NGHĨA VIỆT NAM SOCIALIST REPUBLIC OF VIETNAM TRAINING Độc lập - Tự - Hạnh phúc Independence – Freedom – Happiness TRƯỜNG ĐẠI HỌC NGOẠI THƯƠNG FOREIGN TRADE UNIVERSITY Hà Nội, ngày 25 tháng năm 2019 Hanoi, 25th June 2019 BẢN XÁC NHẬN CHỈNH SỬA LUẬN VĂN THẠC SĨ CONFIRMATION OF THE MASTER THESIS AMENDMENTS THEO KẾT LUẬN CỦA HỘI ĐỒNG ĐÁNH GIÁ LUẬN VĂN IN ACCORDANCE WITH CONCLUSIONS OF THE EVALUATION COMMITTEE Học viên cao học (Master student): Phạm Thị Quỳnh Mai Chuyên ngành (Major): Master of International Trade Policies and Law Đề tài luận văn (Topic): Law on digital banking in some countries and experiences for Vietnam Người hướng dẫn khoa học (Thesis instructor): Dr Hà Công Anh Bảo Căn kết luận Hội đồng đánh giá luận văn thạc sĩ (được thành lập theo Quyết định số ngày Hiệu trưởng Trường Đại học Ngoại thương), học viên bổ sung, sửa chữa luận văn thạc sĩ theo nội dung sau: Pursuant to the conclusions of the Evaluation Committee (established according to Decision No dated .of the President of Foreign Trade University), the post graduate student did the amendments as follows: Literature review Clearly pointing out the research gap in the literature review, as following: “Thus, all of the researches mentioned above are tended to focus on an specific aspect of the law on digital banking such as: the appearance of digital banking, competitiveness between fintech and banks, financial risk and data protection, experiences on management and development of digital banking, eKYC, etc., Up till now, however, there has not been a comprehensive, large-scale study in terms of laws on digital banking of several countries (including EU, Singapore, Thailand, South Korea and China) in order to evaluate (i) experiences for Vietnam; (ii) ability of 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 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 105 Vietnam to learn from experiences from such countries; (iii) opportunities and challenges when application of such countries’ experiences on digital banking law as well as recommendations for Vietnam government to amend and/or supplement laws on digital banking” Definition of law on digital banking: Adding the Definition of law on digital banking in Section 2.2, as following: “As a result, Law on digital banking is a system of rules on Digital banking that are created and enforced by a state to regulate behavior amongst state agencies (i.e government, state bank), credit institution (commercial banks, fintech) and customers including but not limited to (i) the establishment, operation, management of digital banks; (ii) requirements and conditions for the credit institution when providing digital banking product and services; (iii) rights and obligations of the customer when using digital banking product and services.” Chapter 3: Clarifying the law perspective in Chapter 3, as following: (i) “3.1.Policy and Law on digital banking in some countries 3.1.1 European Union b Legal framework Up till January 2019, there are of 28 Member States including Denmark, the Netherlands, Poland and the UK having established the Regulatory sandboxes which is a closed environments allowing testing of innovations by financial institutions under the regulator’s supervision In the case of the UK, the UK Financial Conduct Authority has enacted the Innovate Regulatory Sandbox in 2016 Under the Financial Conduct Authority’s Regulatory Sandbox, the process for a financial institution to apply the regulatory sandbox including steps, including: (i) Firm proposal to use sandbox; (ii) Financial Conduct Authority assessment; (iii) Firm and Financial Conduct Authority collaborate and agree the testing approach; (iv) delivery of sandbox option and; (v) testing and monitoring; (vi) firm submits final report for Financial Conduct Authority’s final review; and 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 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 106 (vii) firm decides whether it will offer solution In general, the financial institution’s new solution must be proved to meets the criteria by several tests If the final report on such new solution is approved by Financial Conduct Authority, the financial institution shall make decision on whether it will offer the new solution outside the sandbox or not Regulatory sandbox enable the financial institutions to reduce cost related to compliance consultants and lawyers as well as fast-track the regulatory process while offers a safe space with safeguards to customer using new financial services and products.” (ii) “3.1.Policy and Law on digital banking in some countries 3.1.2 Thailand b Legal framework In order to encourage the development of financial technology innovations, Bank of Thailand established a regulatory sandbox on 21 December 2016 Accordingly, the regulatory sandbox specifies qualifications for participation and rules to be followed once permission is granted to operate within the regulatory sandbox This regulation enable participants such as financial institutions, fintech firms, and general tech firms to test new technology in financial services including lending, payment, or any other type of transaction within the scope of authority of the Bank of Thailand Besides, participants are still required to have licenses that are necessary to conduct their intended businesses as well as comply with the laws that are beyond the authority of the BOT, such as laws relating to electronic transactions, anti-money laundering, and anti-terrorism In granting permission to participate in the regulatory sandbox, participants shall have to set out measures to manage corporate governance, security and integrity of IT systems as well as protection of customer information.” (iii) “3.1.Policy and Law on digital banking in some countries 3.1.3 Singapore b Legal framework 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 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 107 Regarding lending-based crowd funding or the so called P2P lending, the lending is carried out by means of online platform which is regulated under the Securities and Futures Act (Cap.289) and the Financial Advisers Acts (Cap 110) In Singapore, P2P lending allows many investors lend sums of money to a enterprise (which is not an individual) and the lender shall receive such enterprise’s legally-binding commitment to repay the loan at pre-determinded time and specific interest rates Accordingly, the operator of the lending platform is required to hold a license namely capital markets services under Securities and Futures Act Besides, an invitation to lend a sum of money of a company is also regarded as the debentures, which is a type of security In such context, to be funded by the investors, borrower shall have to prepare and register a prospectus with MAS in accordance with Securities and Futures Act unless it take the advantages of several prospectus exemptions including (i) small offers ($5 million within 12month period); or (ii) private placements (issuing debentures to no more than 50 person within 12-month period); or (iii) offers of debentures to investors such as institutional investors and accredited ones In order to protect the investor from the risks beyond their actual capacity where their funds may wiped out, lenders on P2P platforms must be accredited investors whose net worth of at least SG$2 million or an income of at least SG$300,000 in the past 12 months (iv) “3.1.Policy and Law on digital banking in some countries 3.1.4 South Korea b Legal framework The Korean National Assembly passed the Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks (hereinafter as “Act on Internet-Only Banks”) takes effect from 17 January 2019 Accordingly, Internet Bank is defined as “banks engaged in the banking business by means of electronic financial transactions”(Act on InternetOnly Bank, Article 2) Internet Banks provide their banking products and services through electronic financial transactions where there is no directly meeting or communication between the bank officers and customer 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 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 108 However, Internet-Only Bank internet Bank still have to comply with other provision of Banking Act Besides, Act on Internet-Only Banks provide several guidance on conditions of services of Internet Banks, for example, only corporations such as small- and medium-sized companies shall receive a loan from internet-only banks (Act on Internet-Only Banks, Article 6); prohibition of extending to major shareholders (Act on Internet-Only Banks, Article 8-10) Regarding the regulatory sandbox, the South Korea Special Act on Financial Innovation Support has taken effect from April 2019 Under the special act, a regulatory sandbox is a mechanism for the development of regulations that not unduly slow down the pace of innovation Accordingly, financial institutions which are approved by the Financial Services Commission to use the regulatory sandbox are exempt from current financial regulations Besides, participating companies must seek Financial Services Commission prior approval in terms of consumer protection and risk management plans in order to protect consumers from potential harm (v) “3.1.Policy and Law on digital banking in some countries 3.1.5 China b Legal framework With regard to internet banking, Rules on the Administration of Electronic banking (the “Rule”) was enacted by China Banking Regulatory Commission in 2006 in order to strengthen the risk management in conducting electronic banking transactions as well as protect the rights and interests of the customers Accordingly, electronic banking services provided by the banks through internet, telephone, mobile phone and other digital devices and networks shall have to meet the requirement of the Rule In general, there are several conditions which the service providers must comply with, including: (i) seeking for CBRC’s approval before conducting domestic and/or cross-border electronic banking business; (ii) setting up the internal and external risk management and evaluation as well as establishing the risk department Within the scope of domestic e-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 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 109 businesses, banks are required to have plans and strategy, competent personnel and internal system to control and mange risks associated with the operation of e-banking businesses; and protect the legitimate rights of their customers In addition to the requirements mentioned above, when doing cross-border e-banking businesses which mean that a Chinese bank using e-banking platform to provide e-banking services to customer, banks shall have to comply with the laws of the country where the customers reside Besides, Chinese banks take the responsibilities to report to China Banking Regulatory Commission the detail of the cross-border banking transaction including: (i) scope of services; (ii) contractual agreement with the customers Besides, under the Rule, banks are required to report to China Banking Regulatory Commission regarding the development, operation, profitability, and internal risk management and extern al professional evaluation of their e-banking businesses Together with the self-evaluation of each financial institution, each bank have to engage a third party which is an independent qualified valuation firm recognized by China Banking Regulatory Commission to carry out a security evaluation of their e-banking system The Rules also set out provision which impose the banks’ liabilities for any damages suffered by the banks’ customers in the event if the damages is not caused by factors attributable to consumer, including illegal operation of e-banking systems, or security problems of such banks Lessons learned from selected countries Adding more information to draw experiences for Vietnam, as following: “3.2.1 Lessons learned from selected countries a Payment system It can be seen from section 3.1 above that all of the selected countries have enacted laws on facilitating the payment system Each countries often establish a State Agency in order to govern the law on electronic payment, for example: European Payments Council, Bank of Thailand, Monetary Authority of Singapore, Korea Financial Telecommunications & Clearings Institute, China Banking Regulatory Commission By means 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 of 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 110 promulgation of laws and legal regulation, the governor in each countries take the leading rode in guidance or supervision on financial institution in providing the electronic banking payment transactions As a very first step of the process between banks and customers in payment transactions, e-KYC and e-ID have been used by banks as mechanisms in digital platform to ensure effective and accurate identification and verification of customers This identification and verification method has been applied in almost selected countries Besides, setting up a limit on payment transactions’ value is another fundamental mechanism which has been chosen by the governor of the selected countries in their digital banking law In particular, any and all purchase agreement with total value of €1,000 or more must be carried out by electronic payment method in Italy – an EU Member States where the payment system in Korea consists of a large-value payment system (LVPS) and other retail payment systems (RPS) In Vietnam, the Government and Payment Department under the State Bank of Vietnam is responsible for guidance as well as supervision on the legal regulations on digital payment transaction Due to the habits of using cash in payment as well as limited knowledge of digital banking services, customers not get used to digital banking payment system Because of such gaps, the Government has issued the Plan on non-cash payment in Vietnam in the 2016-2020 period approved by the Prime Minister, by the end of 2020, the ratio of cash transactions should be reduced to below 10% in order to orient the state agencies as well as the commercial banks Regarding the identification and verification method, the draft of the amended Decree No.116/2013/ND-CP dated October 2013 of the Government detailing the implementation of a number of articles of the Law on money laundering prevention and control is being amended to enable banks to implement eKYC, eID to facilitate the provision of products and services to customers, minimizing unnecessary procedures Besides, as the governor, the Payment Department under the State Bank of Vietnam has hold a number of workshops with the participant of commercial banks and experts from countries having successfully implemented the law on digital 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 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 111 banking in term of payment system to train the Government and SBV’s officers as well as enable commercial banks to learn experiences in providing the digital services, Vietnam has the opportunity to achieve the target of Plan on non-cash payment in Vietnam in the 2016-2020 period b Regulatory Sandbox Innovations and new technologies shall obviously reduce the cost of providing specific services for the financial institution However, it also give rise to greater financial risk including financial crises, higher banks’ fragility; excessive credit expansion As a result, the selected countries have paid attention to the regulatory sandboxes which enables live testing of new technologies by fintech under the strict supervision of the regulator In general, before application of any innovations in regulatory sandbox, a company should submit the proposal setting out such innovation’s description; conditions; and consumer protection and risk management plans to the State Agencies In term of the risk appetite, each country has promulgate its own laws and legal regulation on the application of regulatory sandbox which impose the participants to (i) comply with relevant laws; or (ii) exempt from some strict requirements; (iii) exempt from current financial regulations In particular, in Thailand, participants are still required to have licenses that are necessary to conduct their intended businesses as well as comply with the laws that are beyond the authority of the Bank of Thailand As for Singapore, MAS support the participant in the reduction of some strict requirements for the product during the test Besides, financial institutions in South Korea which are approved by the Financial Services Commission to use the regulatory sandbox are exempt from current financial regulations In Vietnam, the State Bank of Vietnam is in the course of drafting legal framework on regulatory sandbox for fintech activities in Vietnam including several issues such as agency banks, crypto currencies, policies on banking operations SBV in collaboration with the Asian Development Bank (ADB) and VinaCapital Ventures, organized a workshop on “International Experience in Fintech Regulatory Sandbox” on September 25, 2018 with the participation of relevant ministries and agencies in order to acquire inluan.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 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 112 depth understanding of the model of Fintech Regulatory Sandbox in other countries and the possibilities of application and formulation of a similar model in Vietnam Thus, Vietnam should pay attention to the conditions for participant to participate in the regulatory sandbox as well as procedure to approve the test of the innovations Besides, based on the innovation and new technologies compared with the risk management mechanism, SBV should consider to which risk appetite is acceptable, whether the participants shall comply with prevailing laws and regulations or may be exempted from some strict regulations Vietnam has witnessed significant growth in fintech companies As of September 2018, there have been 78 institutions licensed by the SBV to provide online payment services, 41 institutions providing mobile payment solutions, 27 institutions providing payment intermediary services, and 12 banks implementing the QR Code payment services with 5000 points accepting QR Code payments (SBV, 2018) As a result, Vietnam has the ability to learn from international experience in legal framework and risk management from selected countries c P2P lending Peer-to-peer (P2P) business loans have grown rapidly in recent years in helping small and medium enterprises grow The lessons learned from China’s P2P lending fraud (Ezubao) will help regulators in Vietnam avoid making the same mistakes while preventing malpractices in the P2P industry Regulators in selected countries (i.e South Korea and China) have made a number of attempts in implementing multiple new policies and laws to control these risks arising out of the P2P lending At the very first step of P2P lending process, e-KYC and anti-money laundering regulations should be a prerequisite condition Accordingly, the identity of the borrower or investor must be verified by the P2P platforms by means of their passports, drivers’ licenses, or a government-issued ID E-KYC plays an important part in the success of P2P transactions due to the fact that P2P lending are carried out online and without direct face-to-face contact between the lenders and borrowers In addition, several measures obligatory have been imposed on the lenders For example, MAS requires 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 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 113 that escrow accounts must be used by P2P lenders In order to protect the investor from the risks beyond their actual capacity where their funds may wiped out, lenders on P2P platforms must be accredited investors whose net worth of at least SG$2 million or an income of at least SG$300,000 in the past 12 months Pursuant to Singapore Securities and Futures Act (Cap.289), all P2P platforms are regulated by MAS and the operator of the lending platform is required to hold a license namely capital markets services under Securities and Futures Act Following China’s P2P lending fraud (Ezubao), Action Plan on Regulation of Online P2P Lending Risks has been issued by the China Government in April 2016 to regulate P2P lending activities and lending intermediaries’ activities As a result, lending intermediaries must obtain a Telecommunications business license and appoint a bank to serve as a custodian of customer funds Besides, control measures should not become too rigid so as to attract both investors and borrowers to participate in P2P lending In Vietnam, there are 40 P2P companies providing lending platform for investors and borrowers However, the operation of a number of such service providers have been proved to violate the prevailing laws of Vietnam, including: providing inaccurate information related to risks; falsely advertising profits, lending at very high interest rates (i.e exceeding the interest rate cap of 20 per cent per year) According to Deputy Prime Minister Vuong Dinh Hue, before officially promulgating a specific law governing the P2P lending transactions, the Government will soon issue a decision to allow a pilot implementation of peer-to-peer (P2P) lending in the country Accordingly, P2P lending would be restricted to connecting lenders and borrowers during the pilot operation P2P lending companies which are regarded as intermediaries to connect lenders and borrowers would not be allowed to mobilize capital from the credit institutions At the same time, financial institutions will not be allowed to take part in P2P lending transaction during the trial operation However, following the model in selected countries mentioned above, banks may participate in the P2P lending transaction as a custodian of customer funds in the near future As the lesson learned from China’s P2P lending crisis, the Decision 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 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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