Vietnam’s new cashless payment rules come into effect: Allen & Gledhill

July 19, 2024

On 1 July 2024, Regulation No. 52/2024/ND-CP on cashless payments (“Regulation”) entered into force.Decree 52”) entered into force, replacing the previous version (“Decree 101“).

Decree No. 52 provides a clear definition of electronic money (“electronic money”), updates the regulations governing payment and payment intermediary services, and clarifies the provisions on electronic wallets and foreign currency payments, among other things.

This article provides an overview of the most important provisions of Decree 52.

App

Decree 52 applies to a wide range of entities, including:

• Organizations and individuals dealing with cashless payments;
• 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.

Electronic money

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

International payment system

Decree 52 supplements and clarifies matters relating to international payments. An international payment is a payment transaction conducted with the participation of a party that is an organization or an individual with a payment account or means of payment issued outside Vietnam.

Requirements

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

• be able to perform basic foreign exchange operations on the domestic and foreign markets;
• implement policies and procedures to manage the risks of money laundering, terrorism financing and proliferation financing of weapons of mass destruction, in accordance with anti-money laundering, counter-terrorism financing and proliferation financing regulations;
• implement an IT system that meets the management, administration, security and confidentiality requirements in accordance with Vietnamese law.

Financial Switching Services (“FSS“Suppliers must meet the following conditions to be able to connect to an international payment system and provide international FSS services:

• Have a valid license to provide FSS services;
• Use the services of a settlement organization to settle the results of settlements between the parties involved;
• Issuing internal regulations governing the selection of connections to international payment systems for the processing of international FSS;
• Issuing internal regulations regarding the technical and operational processes of the international FSS system subject to licensing;
• Connect to international payment systems whose operators are legally based and operate abroad.

FSS consists of providing the technical infrastructure enabling the connection, transmission and processing of electronic data relating to domestic payment transactions between payment service providers, financial institutions licensed to issue credit cards and IPS system providers.

Compliance with other regulations

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

Transitional provisions

Banks and branches of foreign banks that participated in international payment systems before July 1, 2024, may continue to participate in these international payment systems until they obtain the required license within a specified period of 24 months from July 1, 2024. Without an updated license, they must cease participating in international payment systems not listed in the license.

Organisations that obtained a license to provide FSS services before 1 July 2024 and are connected to international payment systems may continue to connect to these international payment systems, but must obtain a license to provide international FSS services from SBV within 24 months of 1 July 2024. Otherwise, they must stop connecting to international payment systems not listed in the license.

Payment intermediation services

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

The criteria for obtaining a license to provide IPS services have been tightened by Decree 52, which states:

• The Provider must not be in the process of being separated, divided, consolidated, merged, transformed, dissolved or bankrupt on the basis of a decision issued during the process of applying for a license to provide IPS services.
• The provider of FSS or electronic settlement services must ensure that it does not conduct any other business activity than the provision of IPS services.
• A supplier must have a minimum paid-up or allocated share capital of VND 300 billion to provide financial switching, international FSS and electronic settlement services. This is a significant increase from the VND 50 billion specified in Decree 101.
• The legal representative and general manager of the service provider must have a university degree or higher in economics, business administration, law or computer science and must have at least five years of experience as a manager or operator of a service provider in the area of ​​finance and banking.

Organisations that were licensed to provide IPS services before 1 July 2024 may continue to operate under their licence until it expires, even if they do not meet the new criteria.

Extended supervisory powers of SBV

The SBV has broad supervisory powers over payment systems, payment services and IPS under Decree 52. It is able to issue regulations, conduct remote and on-site supervision and request information from relevant entities that payment service providers and IPS providers are required to provide by law.

Payment Account Security

Payment service providers and IPS must ensure the security and confidentiality of transactions, conduct audits of entities used to accept payments and actively manage risks to prevent misuse of their services. IPS providers must comply with IT security requirements, with compliance levels varying depending on the services offered (Level 4 for FSS and electronic settlement services and Level 3 for other IPS).

Decree 52 also updates the provisions on the opening and use of payment accounts, the authorization of the use of accounts, the freezing of payment accounts and the processing after unfreezing, and the closure of accounts. These updates provide clearer guidelines, greater security and greater flexibility in the management of accounts.

Decree 52 requires payment service providers to freeze accounts where there is evidence of fraud or other wrongdoing. In addition, in the case of erroneous transfers of funds, freezing accounts allows customers to recover the funds that were misdirected.