Mobile-Money Service – A Promise Of Financial Inclusion For The Unbanked
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Publishing date:
27/4/2021
April 27, 2021

MOBILE-MONEY SERVICE – A PROMISE OF FINANCIAL INCLUSION FOR THE UNBANKED

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), [1] 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. [2]

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

The Providers

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.

The Users

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

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.

State authorities

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

Cash-in

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-out

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.  

Solvency mechanism

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.

Tax compliance

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. [3]    

OTHER LEGAL UPDATES

Several important legal instruments have also recently been promulgated:

  1. Decision 10/2021/QD-TTg regulates criteria for the identification of high-tech enterprises. This Decision mainly applies to manufacturers of hi-tech products and providers of hi-tech services in Vietnam. To qualify as high-tech enterprises, in addition to the conditions stipulated under Article 18.1 of the Law on High Technology No. 21/2008/QH12 (as amended from time to time), enterprises also have to meet other criteria concerning (i) revenues generated from high-tech products (ii) expenses on research and development, and (iii) number of employees directly participating in research and development activities holding college degrees or above. The Decision comes into effect on 30 April 2021.
  2. Decree 31/2021/ND-CP details and guides the implementation of the Law on Investment 2020. This is the most anticipated legal instrument since the beginning of the year when the Law on Investment 2020 came into force. Containing new principles and guidance on investment management, Decree 31 takes effect from the date of issuance (26 March 2021) and replaces the majority of legal instruments detailing and guiding the Law on Investment 2014 including Decree 118/2015/ND-CP and Decree 83/2015/ND-CP.
  3. Decree 35/2021/ND-CP details and guides the implementation of the Law on Investment 2020 insofar as the public-private partnership (PPP) model is concerned. One of the notable points under this Decree is the requriements relating to the field of investment and scale of PPP projects. Overall, there are six principal fields of investment, including (i) transport; (ii) power grid, power plants; (iii) irrigational sector; clean water supply, drainage, and wastewater treatment; waste treatment; (iv) health; (v) education – training; and (vi) information technology infrastructure. The scale of such PPP projects must be at least VND 1,500 billion, VND 1,500 billion, VND 200 billion, VND 100 billion, VND 100 billion and VND 200 billion respectively. The Decree replaces Decree 63/2018/NĐ-CP and takes effect on 29 March 2021.
  4. Decree 18/2021/ND-CP revises Decree 134/2016/ND-CP guiding the Law on export and import duties. Of note, the Decree has added a stipulation on the exemption of export and import duties of goods in line with international treaties to which Vietnam is a member. The legal ground for determination of duty-free goods is the categories and quantities of duty-free goods specified in the treaty; or, if the treaty does not specify any such categories and quantities, written confirmation issued by either the authority proposing the signing of or participating in the treaty or a specialized management authority. The Decree comes into force on 25 April 2021.
  5. Decree 21/2021/ND-CP regulates the implementation of the Civil Code on security for the performance of obligations. Under the Decree, assets which may be used to secure the performance of obligations are now expanded to four types which are (i) current assets or assets/property to be formed in the future, (ii) assets sold pursuant to an asset purchase and sale contract with retention of ownership, (iii) assets being the subject of an obligation in a bilateral contract in which the provision on lien is breached, and (iv) assets which belong to all citizens as stipulated by the relevant law. The Decree replaces Decree 163/2006/ND-CP and takes effect on 15 May 2021.
  6. Circular 09/2021/TT-BTC provides guidelines for inspection of accounting service providers. According to the Circular, in-person inspection would be conducted (i) every 3 years if, within 3 years preceding the inspection date, the accounting service provider in question serves at least 100 clients and, as per its financial statements, generates a revenue of at least VND 20 billion from accounting services; or (ii) every 5 years if the provider does not fall under the aforementioned case. The Circular replaces Decision 32/2007/QD-BTC and enters into force on 01 April 2021.
  7. Circular 01/2021/TT-BKHDT provides for guidance on business registration. This instrument is issued following the entry into force of the Law on Enterprises 2020, and replaces Circular 20/2015/TT-BKHDT and Circular 02/2019/TT-BKHDT on the same. Aside from other forms, the form system mainly comprises (i) 10 application forms for business registration; (ii) 28 forms of notification and other documents issued by the enterprise; (iii) 06 forms for business households; (iv) 07 forms for Enterprise Registration Certificate, Registration Certificate of Branch Operations/ Representative Offices/ Business Locations; and (v) 02 forms for organizations and individuals. The Circular enters into force on 01 May 2021.
  8. Circular 03/2021/TT-BKHDT provides for guidance on investment registration. This instrument is issued following the entry into force of the Law on Investment 2020, and replaces Circular 16/2015/TT-BKHDT and Circular 03/2018/TT-BKHDT stipulating the templates for investment activities conducted in Vietnam, investment activities conducted overseas by Vietnamese individuals and organizations and investment promotion activities. The Circular takes effect on 09 April 2021.
  9. Circular 19/2021/TT-BTC provides for guidance on electronic tax transactions. Alternatively to registering on the Web Portal of the General Department of Taxation (GDT), taxpayers may also register electronic tax transactions through two other channels , namely (i) the Web Portals of competent authorities connected with the GDT’s Web Portal (i.e. the National Public Service Portal and the Web Portal of the Ministry of Finance and other state authorities’ Web Portals), and (ii) providers of T-VAN platform. The Circular replaces Circular 110/2015/TT-BTC and takes effect on 03 May 2021.

[1] 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.

[2] 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.

[3] 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.

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