Mobile Money Pilot Program in Vietnam
On March 3, 2021, the Vietnamese Prime Minister approved a pilot program to use mobile money in Vietnam. This is a huge step forward in the use of non-physical currencies in the country and marks a potential change in the direction of government policy towards digital currencies. This article examines the provisions of this new ruling and the impact of mobile money in Vietnam.
Before this decision, the use of digital currency was not allowed in Vietnam. This ban applied to all non-traditional means of payment, including cryptocurrency, digital coins and all forms of digital currency. At the international level, a customer can buy digital tokens or coins and use those coins to buy goods or services. This was not allowed. We have advised several customers on this topic and everyone who wanted to offer the opportunity to “recharge” or otherwise create the possibility of storing values in digital form was disappointed. They could only credit existing accounts, not provide digital tokens.
However, the prime minister’s decision envisages a two-year pilot program for precisely these digital tokens. However, the purpose is not intended for purely commercial reasons. Only 63% of adults in Vietnam have bank accounts and as a result, it is difficult for many of the country’s citizens to access the conveniences and sources of the goods and services offered online. However, there are nearly 130 million phones in the country (less than 100 million people). By enabling people to top up accounts on their phones through payments at kiosks or convenience stores, more people can access the goods and services available online and in digital formats. The aim is to help people in “rural, mountainous, difficult, remote, border and island regions”. This is not only for the convenience of discerning city dwellers, but also for those who do not have access to banks or other existing payment methods.
The pilot program is limited. Only companies that already have an interim payment service license for the provision of e-wallets, companies with licenses to set up a public land mobile telecommunications network or certain subsidiaries can take part in the pilot program. As soon as they have registered for the pilot program, they can only offer limited services to users.
Users can sign up for the services with their mobile accounts. However, they must prove their identity in a know-your-customer request by providing ID cards, citizenship cards or passports. You must also have a registered mobile account for at least three months before signing up for the service. These rather strict requirements seem designed to limit the opportunities for abuse and fraud.
The mobile money pilot program will be approved throughout the territory of Vietnam, although priority will be given to the areas already mentioned: rural, remote, border and island regions. Mobile money can only be used to pay for goods domestically. There are no rules for allowing cross-border payments.
Customers can top up or withdraw their mobile money accounts at physical kiosks, bank accounts and e-wallets. You can also pay for goods and services in stores that accept mobile money.
It also supports money transfers between customers’ mobile money accounts. There is an upper limit on the total number of transactions allowed to minimize the risk of digital piracy and other abuses. In any given month, a single user can only make up to VND 10 million for all transactions including withdrawals, transfers and payments.
Companies offering mobile money services must open a security bank account and ensure that there is enough money in the account to cover the outstanding amount of mobile money at any given time. Businesses also need to develop a system that allows government agencies to match the amount of mobile money in circulation with the amount of money in the bank account. To prevent money laundering and to protect customer data, additional requirements apply.
Companies need to put in place security precautions, technology and training for staff at deposit and withdrawal points. They also need to set up reporting and notification protocols to inform customers of their obligations and rights in relation to mobile money and to comply with consumer protection principles. Additional guidelines are given for technical standards and requirements for the method of monitoring individual accounts. The responsibilities of various government agencies are defined, and the two-year pilot program begins once the first mobile money company receives approval to deploy it.
This is an important milestone in the development of digital technologies. Coupled with the ongoing news that the government is looking into the possibility of allowing cryptocurrencies, it shows that they are no longer bogging their heads in the sand when it comes to digital funds. Not only will this allow a wide range of people without a bank account to have access to goods and services that are only available online, which will also provide an expanded customer base for domestic merchants, but it will also allow them to use new technology.
Vietnam has long had a cash-based economy and the idea of being able to convert that cash to digital form without opening a bank account or having the financial reputation required to obtain credit will dramatically increase the purchasing power of those without a bank account . It will also have the nudge effect of allowing discerning city dwellers to purchase digital tokens and participate in online games and other luxurious behaviors that were not previously allowed. It will benefit the country and the city, consumers and retailers alike.