On 9 March 2021, the pilot scheme for Mobile-Money service, which would allow the use of telecommunication accounts for payment of small-value goods and services, was officially approved under Decision No. 316/QD-TTg of the Prime Minister (“Decision 316”).
The launch of Mobile-Money service under this program is well expected to promote a cashless economy and to extend financial inclusion to the unbanked population, especially those in rural, mountainous, remote, border and island areas. Any of its remarkable results will then feed into the development of a legal framework for Mobile-Money service in Vietnam in the near future. The piloting period will be two years from the date on which the first Mobile-Money service provider (the “Provider”) is permitted to provide Mobile-Money service.
1. DEFINITION OF MOBILE-MONEY
According to the Global System for Mobile Communications Association (GSMA),  in order for a service to be considered a Mobile-Money service, it must (i) include transferring money, making and receiving payments using mobile phone, (ii) be available to the unbanked, and (iii) offer a network of physical transactional points that makes the service widely accessible to everyone. 
In Vietnam, the legal definition of Mobile-Money is not first stipulated in Decision 316 but in the Draft Decree replacing Decree No. 101/2012/ND-CP on non-cash payments. Accordingly, Mobile-Money is defined as electronic money issued by an intermediary payment service provider providing telecommunication services and identifying customers through a mobile subscriber database.
2. PARTIES IN THE MOBILE-MONEY ECOSYSTEM
To be eligible for the scheme, the Providers must be enterprises licensed to provide e-wallet intermediary payment services, and either (i) also licensed to establish public mobile terrestrial telecommunication network using radio frequency bands, or (ii) subsidiaries permitted to use telecommunication infrastructure, network and data by parent companies that are licensed to establish public mobile terrestrial telecommunication network using radio frequency bands.
Any individual mobile phone subscriber can register to use Mobile-Money service (the “Users”) by providing an ID or passport number that is identical to the information registered for his/her mobile number. Decision 316 also requires the subscription to have been active for at least three consecutive months prior to the Mobile-Money registration. Moreover, the Users are subject to two key restrictions, namely (i) a total transaction value cap of VND 10 million per month per Mobile-Money account, and (ii) a limit of one Mobile-Money account held at each Provider.
Trading points can be either telecommunication service points with defined addresses established by the Providers or other telecommunication service points having authorization agreements with the Providers.
Payment acceptance units
Payment acceptance units include shops and suppliers of goods and services that accept payment via Mobile-Money accounts.
Under Decision 316, the State Bank of Vietnam (“SBV”), in collaboration with the Ministry of Information and Communications (“MIC”) and the Ministry of Public Security (“MPS”), is responsible for appraising and approving businesses’ applications for deployment of Mobile-Money service.
3. MOBILE-MONEY CASH FLOW
The Users may credit their Mobile-Money accounts by topping up cash at trading points, transferring money from their own bank accounts, or transferring money from their e-wallet accounts operated by the same Provider.
Cash withdrawal can be made at any trading point of the Mobile-Money service Provider. The Users can also transfer money from Mobile-Money accounts to their bank accounts, e-wallets, or others’ Mobile-Money accounts operated by the same Provider, although transferring money to Mobile-Money accounts operated by other Providers is not possible. In addition, reflecting the aforesaid objective of Decision 316, the Users can also pay for small-value transactions if accepted by the vendor.
The cash flow in the Mobile-Money ecosystem can be illustrated as follows.
4. KEY POINTS ON MOBILE-MONEY SERVICE
Monetary value of deposit to Mobile-Money accounts
The Providers cannot increase or alter the monetary value of any deposit made by the Users to their Mobile-Money accounts, that is, the deposit must be credited exactly as it is to the Mobile-Money account. This principle differentiates a pre-paid telecommunication account from a Mobile-Money account since a deposit made into the former can be converted into more credits for the customers through a promotion scheme. Hence, the Providers must segregate deposits made into these two accounts so that there will be no exchange from the pre-paid telecommunication account to the Mobile-Money account.
To secure payments, the Providers must hold payment guarantee accounts at commercial banks and ensure that their balance is always at least equal to the total deposit of all Mobile-Money accounts at any given time. The payment guarantee accounts must only be used to ensure the solvency of Mobile-Money service and must be separate from any other accounts of the Providers such as payment accounts, payroll accounts, or guarantee accounts for e-wallet services.
Moreover, the Providers must grant the SBV, the MIC, and the MPS permission to access the Mobile-Money system to check, monitor, and extract information about the balance of all Mobile-Money accounts and their payment guarantee accounts.
Know your customer (KYC)
One of the prominent trends in cashless payments is Electronic Know Your Customer (EKYC) which was introduced in Circular 16/2020/TT-NHNN. Mobile-Money service is not an exception to this trend as the Providers can develop both EKYC and so-called original KYC process provided that the customers and their transactions are identified precisely. Specifically, the Providers may choose to meet the Users face-to-face (original KYC) or electronically (EKYC) for their first-time registration and usage of Mobile-Money service. For EKYC, the Providers shall use artificial intelligence (AI), big data, and any other feasible methods to identify the Users (e.g. facial recognization, iris scanner, or fingerprint).
Furthermore, as part of the anti money-laundering and anti terrorism financing efforts, the Providers have to enforce internal regulations and establish mechanisms to coordinate with competent state management agencies (SBV, MPS, and MIC) to alert any illegal acts, unusual and suspicious transactions. Most importantly, the state management agencies may obtain all information about the User’s activities within the Mobile-Money accounts in case of inspection.
The Providers must build a supervision and control system to precisely mirror the revenue accrued from Mobile-Money service for the purposes of value-added tax (“VAT”), corporate income tax, personal income tax (“PIT”), and other taxable amounts, as required in Decision 316. At the moment, it is difficult to anticipate how the Providers will collaborate with the tax authorities during inspection and back tax collection. However, it is safe to say that the tax authorities will keep an eye on small-value transactions made to the payment acceptance units, operated under the registration of household business and sole proprietorships, for VAT and PIT collection purposes. Moreover, if the Users do not incur any fees for using Mobile-Money service, based on the wording of Decision 316, transactions between Users and Users will not be subject to the abovementioned taxes as the Providers’ revenues, in this case, will always be zero.
While Decision 316 provides a cashless payment alternative for all individuals, the Providers should bear in mind the unbanked living in rural areas in particular when developing a compliant yet straightforward Mobile-Money service platform. It is a welcoming sign that, despite the strict regulations stipulated in Decision 316, dominant telecommunication providers, e.g. Viettel and VNPT, already seem ready for a race in this arena. 
Several important legal instruments have also recently been promulgated:
 GSMA, State of the Industry Report on Mobile Money 2019, https://www.gsma.com/sotir/wp-content/uploads/2020/03/GSMA-State-of-the-Industry-Report-on-Mobile-Money-2019-Full-Report.pdf, accessed on 5 April 2021.
 For the avoidance of doubt, mobile banking or payment services offering mobile phone as just another channel to access a traditional banking product or linked to a traditional banking product or credit card are not included.
 A race for Mobile-Money, https://tuoitre.vn/chay-dua-cung-cap-mobile-money-20210312084129217.htm
This briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.