Overview of non-cash payment in Vietnam
Vietnam is making significant strides toward a cashless society, driven by market dynamics and government initiatives. According to the State Bank of Vietnam, non-cash payments are 23 times larger than GDP, estimated at about USD 9.9 trillion in 2023.1 A recent survey by VISA also reveals that 88% of all Vietnamese consumers have gone cashless, surpassing the proportionate cashless population in other Southeast Asian countries like the Philippines, Thailand, and Singapore. The average duration of time Vietnamese people do not spend cash is 11 consecutive days per month in 2023, almost quadrupling the result from 2022. Younger consumers (Gen Z and Gen Y) play an important role in driving the shift towards cashless payments. Merchant's cashless acceptance rate has also increased, reaching more than 70% across all sectors. Besides the commonly known card payments, QR codes and online wallets have emerged as the top preferred payment methods by customers.2
New provisions on payment services
In catching up with the quick evolution of the payment sector, the Government of Vietnam has recently adopted new guidance for cashless payments. Decree No. 52/2024/ND-CP, issued on 15 May 2024, will enter into force on 1 July 2024, repealing Decree No. 101/2012/ND-CP dated 22 November 2012. The Decree has incorporated the existing provisions under Decree No. 101/2012/ND-CP (as amended) and its guiding instruments, as well as introduced a new scope of provisions.
In terms of service providers, in addition to the State Bank of Vietnam, commercial banks, foreign banks' branches, people's credit funds, and microfinance institutions, Decree No. 52/2024/ND-CP supplements public postal service providers as a cashless payment service providers (PSPs). Articles 18 and 19 of the Decree are a continuation of the provisions under Circular 38/2019/TT-NHNN, providing conditions and licensing procedures for public postal service providers to provide payment services without going through payment (bank) accounts. These provisions allow public postal service providers to further support the implementation of public administrative services (e-government) and e-commerce activities.
In terms of cashless payment products, the Decree adds prepaid cards and e-wallets to the list of non-cash payment instruments. Accordingly, under the new regulation, checks, payment/collection orders, debit cards, credit cards, prepaid cards, and e-wallets are among the non-cash payment methods legally recognised in Vietnam.
The Decree also adds a specific definition of electronic money (e-money). Accordingly, e-money is the value of Vietnamese currency stored on electronic means provided on a 1:1 basis with the amount prepaid by the customer to the commercial bank, foreign bank branches, or intermediary payment service providers (IPSPs). As such, Decree 52/2024 implicitly does not recognise cryptocurrency as a payment medium. E-money is stored in e-wallets and prepaid cards. Decree 80/2016/ND-CP, which supplements the soon-to-be-repealed Decree 101/2012/ND-CP, has a provision allowing IPSPs to provide e-wallet services. Decree 52/2024/ND-CP further supplements this provision to allow commercial banks and foreign bank branches to issue and supply e-wallets in addition to prepaid cards.
Requirements for intermediary payment service providers (IPSPs)
According to Decree No. 52/2024/ND-CP, intermediary payment services cover financial switching services (domestic and international), electronic clearing services, e-wallet services, payment orders, collection orders, and electronic payment gateway services. An IPSP cannot be a commercial bank or a foreign bank's branch and is duly licensed by the State Bank to provide intermediary payment services.
Decree No. 52/2024/ND-CP stipulates the criteria for organisations to be licensed by the State Bank of Vietnam to provide payment intermediary services as follows:3
- Have an establishment license or business registration certificate issued by a competent state agency and are not in the process of division, separation, consolidation, merger, conversion, dissolution, or bankruptcy;
- Have a minimum charter capital of (i) VND 50 billion (~ US$ 1.96 million) for e-wallet services, payment orders, collection orders, and electronic payment gateway services; or (ii) VND 300 billion (~US$ 11.8 billion) for financial switching services, international financial switching services, and electronic clearing services;
- Have a plan for the provisions of the intermediary payment services;
- Meet the personnel requirements for the Legal Representative, General Director (or Director), Deputy General Director (or Deputy Director) and key officials implementing the provisions of the intermediary payment services (including Head of Department and technical staff);
- Have a technical solution explanation for the provision of payment intermediary services that meet the requirements for ensuring level 3 information system security according to the provisions of law.
Compared to Decree 101/2012/ND-CP, Decree 52/2024/ND-CP has adjusted to increase the minimum charter capital for financial switching services, international financial switching services, and electronic clearing services. In addition to these general conditions, organisations also need to meet respective requirements to provide e-wallet services, collection orders, payment orders, financial switching services, and electronic clearing services. The licensed IPSPs must roll out the registered intermediary payment services within a maximum period of six months from the date of issuance of the license by the State Bank. The license term is ten years from the date of issuance and is renewable.
Implications for businesses
The movement to cashless payment is an inevitable trend in Vietnam's economy, considering the fast growth of e-commerce and the nudge by the COVID-19 outbreak. In this context, Decree No. 52 provides a general framework considering the evolution of the financial sectors and the birth of new payment products.
In addition to requiring compliance with regulations on currency exchange management, Anti-money laundering and countering financing of terrorism (AML/CFT), Decree No. 52/2024/ND-CP also stipulates additional obligations by the PSPs and IPSPs to ensure the protection of customer's data, cybersecurity, and tax management according to applicable laws and regulations. This requires PSPs and IPSPs to strengthen compliance with other cross-cutting regulations issued in recent years, such as requirements on personal data protection under Decree No. 13/2023/ND-CP and requirements on tax registrations and payment for e-commerce activities as stipulated under Circular No. 80/2021/TT-BTC.
Footnotes
1. Agribank (2024, May 8). The value of non-cash payments is 23 times larger than GDP.
2. VISA (2024, March 19). The Revolution of Cashless Payments in Vietnam: A Glimpse into the Future of Retail.
3. Article 22 Decree No. 52/2024/ND-CP.
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