In Vietnam, although financial institutions have realised the potential of open banking to enable more inclusive and accessible financial services, a patchy legal framework is hampering their efforts to join the data revolution.
Praising the opportunities brought about data sharing, Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association, told Vietnam Investment Review in a recent interview that open banking allows financial institutions to collaborate with other stakeholders, enabling them to be part of the embedded finance movement where banking services are offered in a contextual and seamless manner at the right time and at the right place.
Open banking can also drive financial inclusion by reducing barriers to access and enabling the use of alternative financial data for credit scoring and risk assessment, he added.
Can Van Luc, Chief Economist at the Bank for Investment and Development of Vietnam (BIDV), said that although open banking remains a fairly new concept, the trend holds tremendous potential, especially considering Vietnam’s young and connected population, rising mobile banking usage, and booming e-commerce activities.
At state-owned VietinBank, Deputy General Director Tran Cong Quynh Lan, said the financial institution has been working on an open banking strategy since 2017, citing the concept as being of “utmost importance” to its digital transformation journey.
VietinBank’s head start has allowed it to amass a partner base of more than 100 companies that include superapp and ride-hailing giant Grab, as well as mobile payment leader MoMo (M_Service). These companies now use VietinBank’s iConnect open banking framework to access customers’ data and provide superior experiences as well as personalised products and services.
“As of now, 148 different services from 116 partners have been made available thanks to VietinBank’s open banking platform,” Tran said. “An average of more than 12 million financial transactions are carried out on the iConnect platform each month.”
The need for a comprehensive framework
The past couple of years have seen a growing number of Vietnamese banks waking up to the open banking opportunity, introducing developer portals and providing open application programming interfaces (APIs) for third parties to use.
However, even though industry participants have made significant strides, the lack of a comprehensive regulatory framework around open banking is hindering their efforts to fully embrace the concept.
In a June 2022 guest post on Vietnamese news outlet Bao Dau Tu (Investment Newspaper), Roy Anirban, Deputy General Director of OCB’s Digital Banking and Technology division, wrote that rules and standards must be introduced to ensure interoperability, security and consumer data privacy.
“When there is no common standard for open banking, different banks will implement different API security protocols, leading to the possibility of data theft from some open banking participants,”
“[In addition,] non-bank ecosystem partners will have to connect using different API formats from bank to bank, which will affect the quality of the system software, introduce risk for poor customer experience as different banks will provide different information.”
At the Financial Services and Open Banking Forum 2022 on June 17, 2022, a representative of consulting firm Deloitte shared a similar sentiment, deploring the lack of standards and rules.
The spokesperson said that the major challenge in implementing open banking is that there are no guidelines on open APIs and that there were no common standards on information technology systems, data storage, security, connectivity.
Pham Tien Dung, Deputy Governor of the State Bank of Vietnam (SBV), told Vietnam Investment Review that the existing legislative framework for open banking in Vietnam is in place, but is, however, insufficient in dealing with the fast pace of development the sector is witnessing.
Provisions are dispersed throughout a number of laws, ranging from electronic transactions and credit institutions, to cybersecurity and personal information rules, and no comprehensive regulatory framework currently exists.
“Involved authorities must coordinate and comment on the drafted governmental decrees on data protection, personal identification, and electronic authentication in the coming months so that the documents issued will be thoroughly updated,” Pham said.
Vietnam lags behind Southeast Asian counterparts
Compared to its Southeast Asian counterparts, Vietnam has lagged behind the likes of Singapore, the Philippines, Malaysia and Thailand when it comes to open banking adoption.
In the Philippines, the central bank has set guidelines for both banks and non-banks to engage in the digital financial marketplace under the open finance environment.
The Bangko Sentral ng Pilipinas (BSP) formally launched its Open Finance Framework in January 2022, presenting its top priorities for the years to come, including capacity building, development, and adoption of industry-accepted standards under a test-and-learn approach.
Meanwhile, Singapore has adopted an organic approach to open banking with adoption being nevertheless facilitated by the Monetary Authority of Singapore (MAS) through initiatives such as SGFinDex, an open banking platform that lets individuals retrieve personal financial information from participating financial institutions, the stock exchange, and from government housing and pension agencies, as well as by promulgating standards for APIs, data authentication and security.
Similar to Singapore, Malaysia has taken a market-driven approach by releasing a non-mandatory guideline framework for working with open data and open APIs.
Thailand, which introduced back in 2020 the Personal Data Protection Act, is currently working on new policy guidelines for the banking sector, including open banking.
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