Bold new approach for digital banking 

March 06, 2021 | 10:00
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The State Bank of Vietnam (SBV) in late 2020 issued Circular No.16/2020/TT-NHNN amending Circular No.23/2014/TT-NHNN guiding the opening and use of payment accounts at payment service providers, which is one of the prominent legal documents issued to promote the transformation and development of cashless payments. 
1533 p18 bold new approach for digital banking
Bold new approach for digital banking (source:

By Vu Thanh Minh and Ha Thanh An Lawyers, LNT & Partners

In addition to a number of notable changes relating to opening bank accounts, long-awaited reform via Circular 16 is the detailed regulation on opening individual payment accounts at credit institutions by electronic know-your-customer (eKYC). This is the first legal instrument that provides detailed guidance on its implementation.

The system is used to verify customer’s identity against the declared information in compliance with applicable laws and regulations, with support from video call and AI technologies such as face-matching for photos on ID card, or optical character recognition to read and extract information, instantly comparing personal information with a centralised database of user identity. Thus, bank account opening and customer onboarding become much easier, as customers do not need to go to a branch to open a bank account.

In the past, under Decree No.116/2013/ND-CP guiding the Law on Anti-money Laundering and the aforementioned Circular 23, the first meeting between the bank and client must be face-to-face if the latter wishes to open a bank account. However, reflecting the development of 4.0 technology, in November 2019 the government issued Decree No.87/2019/ND-CP detailing the implementation of a number of articles of the Law on Anti-money Laundering, of which Article 8.2 stated that the bank can “decide whether to meet the client in person when the relationship is first established”.

These developments are now mirrored in Circular 16, thereby allowing commercial banks to decide whether to meet clients in person when the latter wishes to open a bank account, and to decide which methods, forms and technologies it wishes to use to identify and verify a client.

However, the SBV also requires banks to adopt necessary technologies and procedures for risk management, and adequately store and manage information/data used for identifying clients. Regarding transaction limits, except for some cases where banks are allowed to apply a higher transaction limit, transactions made from an electronically opened account must not exceed VND100 million ($4,350) per month per customer in aggregate.

In addition to important regulations on eKYC, Circular 16 also provides for a number of notable changes relating to the opening of bank accounts.

Firstly, Circular 16 clarifies that a legal entity can represent a person to open a checking account. In such cases, documents that can be used to identify such legal entities must be included in the application to open a checking account.

Secondly, a bank or foreign bank branch is allowed to stipulate the components of the application dossier and prescribe the application form for opening a shared checking account. The bank or foreign bank branch is also entitled to agree with its client on whether or not foreign language documents included in the application must be translated into Vietnamese. This is a completely new addition to Circular 23.

Lastly, Circular 16 supplements regulation on the use of standard form contracts on opening and use of checking accounts. Accordingly, if the bank or foreign bank branch in question uses a standard form contract for the opening and use of checking accounts, it must make the standard form contract publicly available on its website, mobile banking app (if any), and its lawful transaction locations.

In light of the above, international and domestic banks in Vietnam are gearing up to boost their eKYC process to provide customers with a seamless on-board experience and reduce paper-based procedures. Indeed, a number of commercial banks such as HDBank, TPBank, VPBank, and Sacombank have applied eKYC to open accounts for customers.

Digital banking and non-cash payment are some of the goals that the laws of Vietnam are aiming for in the near future. In the first six months of 2020, non-cash payments increased by 180 per cent. This trend necessitates the completion of a sound legal framework. In this context, Circular 16 with the regulation on eKYC could be considered an important premise for development of digital payment and banking in Vietnam.

Slated to take effect on March 5, Circular 16 is expected to provide a legal platform for this, as well as paving the way for more foreign credit institutions, banks, and tech companies on eKYC to enter and develop the Vietnamese market.

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