Intermediary payment enterprises: Is a foreign ownership rate of 49 percent reasonable?

	More import – export duty collected via electronic payment
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Non-cash payments are an inevitable trend in the digital era.

Large market, fast growth

The State Bank of Vietnam (SBV) is seeking a draft decree replacing Decree No. 101/2012/ND-CP of the Government on non-cash payments. According to the State Bank of Vietnam, the current decree has created a basic legal foundation for payment operations and intermediaries, facilitating new forms such as electronic payments and mobile payments. However, with the development of technology as well as economic circumstances, this Decree should be replaced to minimize cash payments, creating transparency for the economy, encouraging innovation of businesses as well as limiting transaction risks and payment intermediaries.

According to the latest report of the international evaluation organization, e-commerce in our country in 2019 has reached about US$12 billion, the highest growth rate in Southeast Asia. It is predicted that by 2020, the growth rate of e-commerce will continue to be around 40 percent, possibly reaching US$15-16 billion. Therefore, Mr. Nguyen Thanh Hung, Chairman of Vietnam E-commerce Association (VECOM), said that non-cash payments in e-commerce transactions arecurrently about 20 percent, so it is necessary to complete the legal framework to reduce cash payments.

In order to promote non-cash payments, enterprises not only propose creating favorable mechanisms but also to expand the ownership ratio for foreign investors to increase financial resources for domestic enterprises. Provisions in the draft Decree said that the capital contribution ratio of foreign investors both directly and indirectly owned is only 49 percent of the charter capital of intermediary payment service providers. According to the explanation of the drafting agency of the Decree, the regulation of the rate of capital contribution of foreign investors to the intermediary payment field is to strictly control this activity, because intermediary payment is an activity that involves banking, directly impacting the interests of service participants, as well as affecting security and safety in national monetary policy.

Continuing research on capital ratio

The regulations mentioned above are causing many businesses to be afraid of hindering investment activities and attracting more finance. Mr. Nguyen Thanh Hung said that to develop non-cash payments, foreign investment is required, because this is a risky field, so it needs large capital, but domestic capital is not ready or not enough. The representative of Vietnam Community Online Services Joint Stock Company also said that foreign investors have made great contributions because of their investment capital, technology and knowledge. Therefore, the State Bank of Vietnam should consider the regulation on restricting foreign investment. Many businesses worry this regulation will greatly affect the confidence of investors, leading to the transfer of capital out of Vietnam in the field of payment.

In addition, many experts also expressed concern about the application of foreign ownership rate of 49 percent is not in line with international commitments. Specifically, in Agreements such as the General Agreement on Trade in Services of the WTO (GATS), CPTPP and EVFTA, Vietnam committed to open the market to allow 100% foreign ownership for some services, including payment and financial services.

A representative of the Association of Financial Investors said that financial technology enterprises need foreign investment capital to develop and invest in technology and human resources. The government has allowed 100% foreign-owned enterprises in fields related to banking, finance, insurance and securities. Therefore, concerns about security and monetary safety in the field of intermediary payment are unreasonable.

Le Anh Dung, Deputy Director of SBV Payment Department, said that the percentage of foreign ownership in the intermediary payment field in the draft is reasonable and suitable for international commitments, ensuring the interests of the parties, and demonstrating Vietnam's sovereignty and management rights in the field of payment. However, the drafting committee of the decree will continue to study the contents of bilateral and multilateral agreements in order to have the most reasonable regulations in this regard.