Sandbox paves the way for new financial services

The controlled testing mechanism in banking operations is expected to become a driving force for innovation, financial inclusion in a transparent, safe and cost-effective manner. This mechanism not only opens up space for testing Fintech solutions in a closely supervised environment, but also helps to comprehensively assess the risks, benefits and suitability of the product to market needs as well as current legal regulations. Thereby, contributing to protecting users' rights and limiting risks in the process of accessing Fintech services. In particular, the testing results will be an important practical basis for management agencies in perfecting the legal framework, towards developing a safe, effective and sustainable digital financial market.

According to regulations, the testing of Fintech solutions is limited to the territory of Vietnam, and cross-border testing is not allowed. The maximum testing period for Fintech solutions is 2 years, depending on the specific solution and field, from the time the State Bank issues a certificate to participate in the testing mechanism.

Decree 94 clearly stipulates the conditions and criteria for participating in the testing mechanism for Fintech solutions. Accordingly, credit institutions and foreign bank branches can be granted a certificate of participation in the testing mechanism. In addition, Vietnamese Fintech companies can also participate in the mechanism when meeting the following conditions: No foreign investment capital, legal representative is a Vietnamese citizen, has at least 2 years of management experience in the financial and banking sector; technology system located in Vietnam, ensuring safety, security, technical backup and being tested before operation.

In particular, Decree 94 also clearly stipulates the criteria for testing the implementation of peer-to-peer lending (P2P Lending). The State Bank will monitor participating organizations to evaluate the testing activities and related Fintech solutions.

Assessing the impact of Decree 94, experts say that both banks and Fintech companies will clearly identify new challenges and opportunities. For banks, despite facing increasing competitive pressure, especially in the retail credit segment when peer-to-peer lending is tested, this is also a time to reposition their strategies. The gradual loss of monopoly power can become a push for banks to accelerate their transformation towards an open banking model, actively integrate APIs and cooperate more deeply with Fintech to optimize the value chain. In particular, technology platforms with the ability to score credit and analyze consumer behavior will help banks improve the quality of credit risk assessment, especially with non-traditional customers - a group that is increasingly making up a large proportion of the digital economy .

As for Fintech companies, it is clear that there will be opportunities for new spaces for innovative financial services. Many companies from the “legal gray area” will have their business models legalized, their ability to raise capital and attract talent increased. However, Fintechs also need to be prepared in terms of resources, management capabilities, etc. to be able to deploy their operations effectively.

As for peer-to-peer lending, this model has appeared in Vietnam for many years, but only now has there been an official testing mechanism for management and development orientation. Associate Professor, Dr. Nguyen Huu Huan, University of Economics, Ho Chi Minh City, commented that in reality, the peer-to-peer lending model has developed for a long time in the world . Although Vietnam has begun to build and deploy a testing legal framework at this time, it is a bit late, but it is a necessary step to avoid falling behind. Especially in the context of rapidly changing financial technology, the legal framework must also be updated promptly to create a safe and sustainable development environment for new models.

The early completion of the legal framework for P2P Lending is an urgent requirement in the context of many shortcomings in the Vietnamese credit market, especially the situation of black credit, high bad debt and low debt repayment awareness. Many lending applications today have transformed and disguised as black credit due to the lack of a clear legal corridor. Therefore, according to experts, for the testing mechanism to be effective, it is necessary to have specific regulations on interest rate ceilings, transaction procedures and the development of a personal credit rating system, thereby contributing to promoting a transparent and sustainable credit environment.

Along with perfecting the legal framework, experts also emphasized the importance of financialeducation and communication for P2P Lending to develop sustainably. “To protect people and improve the effectiveness of the Sandbox mechanism, it is necessary to soon promote propaganda programs on new forms of finance such as P2P Lending, digital finance and open data. Raising awareness will be a key factor in helping the market develop healthily and in the right direction,” an expert recommended.

Source: https://thoibaonganhang.vn/sandbox-mo-duong-cho-cac-dich-vu-tai-chinh-moi-164076.html