Banking sector needs improved legal framework to speed up digital transformation

Illustrative image (Photo: VNA)

The banking sector was expecting amendments to the Law on Electronic Transactions would help remove bottlenecks and speed up the sector’s digital transformation progress.

According to Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association, banks and financial intermediaries were facing a number of difficulties and even legal risks due to the lack of a legal framework about e-transactions in the context that the demand for e-transactions was increasing strongly across all sectors in recent years.

The transaction methods were also changing dramatically with the breakthrough development of digital technologies such as artificial intelligence, big data, biometrics and blockchain.

Hung said that the Law on Electronic Transactions dated back to 2005 and proved to be outdated in the era of digital transformation.

He said that draft amended Law on Electronic Transactions was expected to tackle bottlenecks which were hindering the digital transformation progress of the banking sector. Specially, electronic transactions would be recognised with the same legal value as traditional transactions with attached requirements.

It was necessary to raise clear and practical regulations about electronic signatures to create favourable conditions for electronic operations of credit institutions, Hung said.

Economic expert Pham Xuan Hoe pointed out that the biggest challenge to the banking sector was the shortage and inconsistency of the legal framework.

How to share population data so that credit institutions could use eKYC to authenticate was also a problem that needed to be solved, Hoe said.

The digital transformation process of the banking industry could not be carried out in a comprehensive way, in part because the Law on Electronic Transactions had not yet been revised, he said.

According to Hung, the digital transformation in lending operations was stagnating because Circular 39/2016/TT-NHNN on lending activity of credit institutions could not be amended until the amended Law on Electronic Transactions was passed.

The Ministry of Information and Communications has sent a report to the National Assembly about the draft revised Law on Electronic Transactions.

The draft would be discussed at the National Assembly’s fourth meeting in October and is expected to be passed in May 2023.

To speed up the digital transformation of the banking sector, the State Bank of Vietnam set up a steering committee and approved a digital transformation plan to 2025 with an aim that 50% of the banking operation would be digitalised and 70% of transactions would be conducted on digital channels by 2025./.