The State Bank of Vietnam (SBV) has scrapped its initial plan to limit foreign ownership of locally registered e-payment companies to 49% after consulting with experts and industry participants, according to a VN Express report.
In a note released earlier this month, the SBV said it will not submit the proposal to the government in June after hearing feedbacks from fintech players. The central bank said that foreign investment has played a key role in the domestic payments landscape since providers heavily rely on technology. Limiting foreign ownership would hamper foreign investment in the e-payment sector and fintech in general, it said.
In some digital payments companies, foreign ownership already exceeds 49%. Hence, a change in regulation could affect their activities. Several of them operate on a large scale, the regulator said.
In December 2019, the Vietnam Chambers of Commerce and Industry (VCCI) held a workshop during which legal experts as well as fintech and e-payment firms shared their views on the proposed rule.
Nishikawa Shinichiro, representing Japanese investors and a director at Payoo e-wallet, asked the SBV to reconsider the limit, stating that “foreign investors have made a great contribution not only in terms of investment but also in technology and know-how for the development of e-payments in the country.”
Phung Anh Tuan, deputy general secretary of the Vietnam Association of Financial Investors, noted that payment intermediaries accounted for 90% of local fintech activities and value, and argued that “limiting investment will affect the whole fintech market.”
A representative from VNPT Epay SJC, an enterprise funded by 70% of foreign investment, reminded the audience that fintech was still in the early stages of development in Vietnam. The sector was fortunate to attract lots of foreign investments but limiting ownership “could create fear among foreign investors.”
Echoing this, Virginia Foote, a representative of the American Chamber of Commerce in Vietnam (AmCham Vietnam) and co-chair of the Vietnam Business Forum (VBF), urged the drafting board to reconsider the proposal, adding that the rule could impact investors’ confidence in the country.
In November 2019, the central bank released a draft of a foreign ownership cap proposal for consultation. The proposed cap was part of a revised decree to regulate non-cash payment activities in the country.
The proposed rule was intended to balance the ease of attracting foreign capital with ensuring an active role for local firms in the fintech sector, the SBV said. It was also aimed at preventing foreign investors from manipulating the field and ensuring the safety, security, as well as Vietnam’s national sovereignty over its financial sector, the regulator said.
Vietnamese fintech companies have attracted considerable interest from foreign investors over the past couple of years. In 2019, companies in the sector raised US$420 million between January and September, or 36% of all fintech funding in Southeast Asia during that period, according to a report by UOB, PwC, and the Singapore Fintech Association. The figure made Vietnam second amongst ASEAN members in terms of fintech funding behind Singapore (US$714 million or 51%).
Notable deals that took place last year include MoMo’s US$100 million Series C funding round from Warburg Pincus, VNPAY’s US$300 million funding round from SoftBank and Singapore sovereign wealth fund GIC, and Ant Financial’s acquisition of a major stake in Vietnamese e-wallet eMonkey.
To date, the SBV has licensed 32 companies that provide e-payment solutions, including Moca, the digital payments platform integrated into Grab, Zion, the operator of Zalo Pay, and M_Service, the company behind MoMo.
Here is the updated list of 32 Non-Bank Organizations Licensed To Provide Payment Services In Vietnam.
