FinTech faces 4 major legal barriers

19-Sep-2019 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

The biggest problem for the development of the FinTech (financial technology) ecosystem was the completion of the legal corridor, currently having four major barriers.

FinTech’s current activities are mainly payments, and a number of other areas such as e-KYC, P2P lending, credit scoring, electronic authentication, blockchain applications, solutions related to AI, Big Data, etc.

Particularly, e-KYC (ElectronicKnow Your Customer) is a form of digital KYC.

The e-KYC service creates an environment to ensure citizens can share their identity information with service providers (registered with the government) wherever and whenever they want to use the provider’s services as quickly as possible, while ensuring the privacy of personal information in accordance with the law.

In India, the application of e-KYC showed that that was an effective solution that the government offered to enhance comprehensive finance and promote cashless payments in rural areas. Since 2016, the traditional KYC process had been transformed into e-KYC.

Opening an account is very simple, using only on an online photo call, identification number (ID) and fingerprint/retina stored at the National Identity Agency.

Currently, India had nearly 3.5 million e-KYC transactions conducted at 234 licensed e-KYC certifying agencies, including credit institutions and government agencies. At the same time, the country used e-KYC to develop micro ATMs (micro-ATMs) at rural POS.

These micro ATMs are POS with fingerprint and iris scanning feature to make customer identity verification more easily, to facilitate the use of banking services conveniently and effectively.

Meanwhile, in Vietnam, regulations on identifying and verifying customer information have still required face-to-face meetings to carry out this procedure, which will limit the spread of financial services, according to Nguyen Thuy Duong, deputy Chief Executive Officer (CEO) of Ernst & Young Vietnam Ltd (EY Vietnam).

Another problem is the story of P2P lending is where to mobilise and how to lend?

P2P lending companies provide trading platforms, connect borrowers and lenders without going through financial intermediaries (in fact, investors lend people without mobilising).

A financial expert said the regulator did not license that, but if it was banned, how could it be banned in the context of a business model based on a market economy still going on.

Nghiem Thanh Son, deputy director of Payment Department, the State Bank of Vietnam (SBV) shared that the biggest problem for FinTech ecosystem development was to complete the legal framework so that SBV can better manage and FinTech businesses could control risk more effectively in business.

SBV was developing a pilot plan for this type of business and intended to put P2P into a conditional business group, similarly to that e-KYC also proposed a trial legal framework to address current urgent problems.

In general, in line with the existing barriers, SBV was making adjustment plans to support FinTech enterprises, based on research results in the last three years.

However, a legal corridor not only played the role of SBV, but also needed synchronisation among ministries and sectors through the system of laws, decrees, circulars, etc.

Ngo Van Duc, deputy Head of Supervision of Payment Systems SBV, stated that there were four major legal barriers to FinTech: Firstly, the institution for managing FinTech activities had not been mentioned legally;

Secondly, there was no regulation on a specialised agencies to support and handle matters related to FinTech activities;

Thirdly, except for intermediary payment activities, basically, other activities of FinTech were not regulated by legal documents;

Fourth, the current legal provisions relating to the professional activities of credit institutions had not yet allowed the application of modern technology solutions, especially in the field of payment.

Duc emphasized completing the overall legal corridor for the FinTech which was an essential urgent in the development of the 4.0 revolution, especially in the short term when it was impossible to build an overall legal framework immediately.

Over the weekend, the Politburo met and issued a Resolution on actively participating in the 4.0 technology revolution.

This information gives hope to FinTech companies on the legal corridor for the experimental legal framework to come true soon.


Category: Finance, Vietnam

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