Foreign fintech investment restriction could hinder Vietnam’s development

Investment restriction in fintech may hinder the digital transformation of the Vietnam’s economy, said Fred Burke, head of Investment and Trade Working Group of Vietnam Business Forum during the forum on Friday in Hanoi.

Furthermore, Vietnam plans to access the opportunities and initiatives from other countries for the 4th industrial revolution and electronic payment is an area with ​​rapid innovation.

The Vietnam central bank’s proposed regulation of 49% foreign ownership limit at e-payment firms is warned to discourage foreign investors and investment activities, said Burke, said the representative of VBF Trade and Investment Working Group 2019.

Chairwoman of AmCham Vietnam - Amenda Rasussen shared Burke's opinion saying growth in the financial services and fintech sectors will depend on implementation of a legal, regulatory and policy framework that facilitates investment and enables these sectors to continue contributing to Vietnam’s financial inclusion and prosperity.

Non-cash payments are critical to innovation, smart cities, and Industry 4.0. Those services and the supporting technology come from major foreign fintech companies currently operating and investing in Vietnam, she added.

However, the introduction of foreign ownership limits to the fast-growing payments and fintech sector will significantly restrict the ability of Vietnamese fintech startups to raise institutional capital from foreign investors, which in turn would limit their ability to attract talent and render them less competitive versus their peers in the region.

Fintech services rely on the use of artificial intelligence and big data analytics – where foreign companies have led in the development of these technologies. Overall, such limits would make it very challenging for the sector to grow.

Illustrative. Photo: Pixabay.com

A representative from the British Business Group Vietnam comments further that the fintech regulatory framework, which is not in place, has created uncertainties for companies who want to access the market.

Investors seeking to establish a fintech business in Vietnam continue to face a number of hurdles and there is little legislative guidance and licenses in place rather it is based on the discretion of the authorities.

At the event with the attendance of Deputy Prime Minister Trinh Dinh Dung, the Investment and Trade Working Group of the VBF gave a warning that the proposed 49% cap is “highly likely to be incompatible” with Vietnam's commitments under international trade agreements.

Dung, who acknowledged the essential role of foreign invested companies, instructed the Ministry of Planning and Investment to coordinate with other agencies to resolved outstanding issues and support businesses to growth and improve the overall competitiveness of the economy.

Millions of people in Vietnam already use e-wallet services to pay for everyday items like Grab rides, phone bills and groceries, but e-wallet firms are playing a long game.

Data from the Department of E-commerce and Digital Economy under Ministry of Industry and Trade shows that Vietnam is one of the countries with the highest growth in e-payments in the world, with annual growth of 35 percent.

Vietnam is seen as a potential market for fintech firms including the e-wallets since more than 80 percent of the current retail market is paid with cash.