Vietnam to set foreign ownership limit in fintech sector

Vietnam to set foreign ownership limit in fintech sector

The central bank has proposed issuing detailed regulations on foreign shareholding limit in the country’s fintech firms to better manage the nascent financial services sector.

Experts have said that it is good for Vietnam as foreign investors are interested in the country’s fintech industry thanks to its high growth potential. As Vietnamese fintech companies are primarily founded and operated by Vietnamese firms, support from global major foreign financial corporations in technology, experience and capital will help the firms further develop, the explained.

However, the foreign ownership limit in many fintech companies currently exceed the 30 percent rate permitted for credit institutions as there has been so far no legal regulation on the limit applied for the fintech sector yet.

Foreign investors currently hold dominant stake in many local fintech firms, such as South Korea’s UTC Investment holding a 65 percent stake in VNPT Epay, NTT Data holding a 64 percent of Payoo, Hong Kong’s Champion Crest holding 51 percent of Amigo Technologies JSC, Thailand’s True Money owing a 90 percent of 1Pay, and MOL Accessportal holding a 50 percent of Vietnam’s top online payment system Ngan Luong.

To deal with the shortcoming, under a proposal on drafting a decree on non-cash payment submitted to the government recently, the State Bank of Vietnam said that the fintech with intermediary payment services relates to the country’s banking activities and financial market. It thus directly affects on the interests of service participants as well as the security and safety of the national monetary policy.

Therefore, the central bank said, it is necessary for state management agencies to adopt appropriate policies, including regulations on foreign ownership in this area, to avoid the manipulation of foreign investors, as well as ensuring national sovereignty in the banking and finance operation.

Foreign investment wave continues

According to an SBV report, foreign investors have poured some US$130 million in Vietnamese fintech firms in the past two years.

The wave of foreign investment in the sector is forecast to continue next time as more foreign financial institutions want to seek a relationship with local fintech firms, expecting to find this route a promising one to access the underbanked population of the country.

According to experts, foreign investors that are unable or unwilling to wait for the foreign ownership threshold in the banking sector to gradually increase to enter the market are now taking detours to get into the industry, by seeking opportunities to partner up with fintech companies in the country.

Michael DC Choi, deputy general director of the Korea Trade-Investment Promotion Agency (KOTRA), told the media that South Korean investors are looking for opportunities to invest in local fintech companies, on top of options to invest in Vietnam’s banking sector.

Choi said that investors from South Korea and other markets see huge potential for fintech companies to grow in this country, taking advantage of the fact that 70 percent of Vietnam’s population is still unbanked and at least half of the total population has access to the Internet.

Deals in the field are currently being reviewed by major South Korean financial institutions, including Shinhan Bank and KEB Hana, Choi revealed, adding while South Korean financial services companies are seeking to become players in the local fintech scene, South Korean banks, those with a presence in Vietnam as well as those seeking a way to enter the market, are looking at fintech companies to add value to their banking system, Choi said.

According to a report on Vietnam’s fintech growth potential released by APAC-focused consulting firm Solidiance, Vietnam’s fintech market is expected to increase from US$4.4 billion in 2017 to US$7.8 billion in 2020.

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