New regulations on cashless payments in Vietnam in effect

19 July 2024

On 1 July 2024, Decree No. 52/2024/ND-CP on Non-Cash Payment (“Decree 52”) came into effect replacing its previous iteration (“Decree 101”).

Decree 52 provides a clear definition of electronic money (“e-money”), updates regulations governing payment and intermediary payment services, and refines provisions relating to e-wallets and payments in foreign currency, among others.

This Article provides an overview of the key provisions of Decree 52.

Application

Decree 52 applies to a wide range of entities including:

  • Organisations and individuals engaging in cashless payment activities;
  • Payment service providers, including banks and non-bank financial institutions;
  • Payment intermediaries such as payment gateways and e-wallet providers; and
  • Entities involved in the management and operation of payment systems.

E-money

Decree 52 clarifies the definition of e-money to mean the value of Vietnamese currency stored electronically corresponding to the amount prepaid by customers to banks, foreign bank branches, and intermediary payment service (“IPS”) providers providing e-wallet services. It also specifically designates e-wallets and prepaid cards as types of storage for e-money, which banks, foreign bank branches, and IPS providers are allowed to issue and provide in accordance with State Bank of Vietnam (“SBV”) regulations.

International payment system

Decree 52 supplements and clarifies issues regarding international payments. An international payment is a payment transaction conducted involving a party that is an organisation or individual with a payment account or payment means issued outside Vietnam.

Requirements

To participate in the international payment system, commercial banks and foreign bank branches must:

  • be permitted to carry out basic foreign exchange operations on domestic and international markets;
  • implement policies and procedures for risk management of money laundering, terrorist financing and proliferation financing of weapons of mass destruction, in compliance with anti-money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction laws;
  • implement an information system meeting requirements on governance, administration, safety and confidentiality in accordance with Vietnam law.

Financial switching services (“FSS”) providers must meet the following conditions to connect to the international payment system to provide international FSS:

  • Have a valid licence to provide FSS;
  • Utilise a clearing organisation to settle the clearing results among the parties involved;
  • Issue internal regulations for selecting connections to international payment systems to process international FSS;
  • Issue internal regulations on the technical and operational processes of the international FSS to be licenced; and
  • Connect to international payment systems whose operators are legally established and operating abroad.

FSS is the provision of technical infrastructure for connecting, transmitting and processing electronic data of domestic payment transactions between payment service providers, financial companies licenced to issue credit cards and IPS providers.

Compliance with other laws

In addition to the provisions of Decree 52, payments in foreign currencies and international payments must also comply with the laws on user data protection, cybersecurity, tax management, anti-money laundering, counter-terrorist financing, combating the financing of the proliferation of weapons of mass destruction, the regulations on foreign exchange and the international agreements and treaties to which Vietnam is a contracting party/member.

Transitional provisions

Banks and foreign bank branches that have participated in international payment systems before 1 July 2024 may continue to participate in those international payment systems until they have obtained the requisite licence within the specified time frame of 24 months from 1 July 2024. Without an updated licence, they must cease participation in international payment systems not listed in the licence.

Organisations licenced to provide FSS before 1 July 2024 and connected to international payment systems may continue to connect to those international payment systems but they need to obtain a licence to provide international FSS from SBV within 24 months from 1 July 2024. Otherwise they must cease connection to international payment systems not listed in the licence.

Intermediary payment services

Decree 52 defines IPS providers as non-bank organisations licenced by SBV to provide such services, which include FSS, international FSS, electronic clearing services, e-wallet services, collection and payment support services, and payment gateway services.

The criteria to obtain a licence to provide IPS has been tightened with Decree 52 stipulating the following:

  • The provider must not be undergoing a spin-off, split-up, consolidation, merger, transformation, dissolution or bankruptcy under a decision issued during the process of applying for a licence to provide IPS.
  • The FSS or electronic clearing service provider must ensure that it does not engage in any other business operations other than providing IPS.
  • The provider must possess a minimum paid-up or allocated charter capital of VND300 billion to provide financial switching services, international FSS and electronic clearing services. This is a significant increase from the VND50 billion stipulated in Decree 101.
  • The legal representative and general director of the provider must hold a university degree or higher in economics, business administration, law or information technology, and must have at least five years of experience as a manager or operator of the provider in finance and banking.

Organisations licenced to provide IPS before 1 July 2024 may continue to operate according to their licence until it expires notwithstanding that they may not meet the new criteria.

SBV supervisory powers enhanced

The SBV has extensive supervisory powers over payment systems, payment services, and IPSs under Decree 52. It is able to promulgate regulations, conduct remote and on-site supervision, and request information from relevant entities which must be provided by law by payment service providers and IPS providers.

Security of payment accounts

Payment service and IPS providers must ensure the safety and confidentiality of transactions, conduct inspections of units used to accept payments, and actively manage risks to prevent the misuse of their services. IPS providers must adhere to information system security requirements with varying levels of compliance depending on the specific services offered (level 4 for FSS and electronic clearing services and level 3 for other IPS).

Decree 52 also updates the regulation of opening and using payment accounts, authorisations for account use, freezing payment accounts and post-unfreeze processing, and account closure. These updates ensure clearer guidelines, greater security, and more flexibility in managing accounts.

Decree 52 instructs payment service providers to freeze accounts where there is evidence of fraud or other transgressions. Additionally, in cases of mistaken fund transfers, freezing accounts enables customers to recover their misdirected funds.