Issue of June 2024 – Decree No. 52/2024/ND-CP of the Government regulating non-cash payments

Dear Valued Clients,

On May 15, 2024, the Government issued Decree No. 52/2024/ND-CP (“Decree 52”) regulating cashless payments, replacing Decree No. 101/2012/ND-CP dated November 22, 2012, of the Government (“Decree 101”). Decree 52 is an important legal document in the field of cashless payments, having a wide impact on various sectors, entities, organizations, and individuals. Thereby it helps establish a fundamental and solid legal framework for cashless payment activities in Vietnam. Decree 52 officially takes effect from July 1, 2024.

In this Legal Update, we shall summarize and clarify the new points in Decree 52 that investors need to pay attention to in the coming time.

1. Regulations on electronic money 

Compared to Decree 101, Decree 52 has supplemented several regulations on electronic money. Accordingly, in Article 3.12 of Decree 52, electronic money is defined as the value of Vietnamese Dong stored on electronic devices provided on the basis of the corresponding amount of money prepaid by clients to banks, foreign bank branches, and organizations providing intermediary payment services[1] and e-wallet services. Electronic money is used in payment activities in various forms, including e-wallets and prepaid cards. 

According to the provisions of Article 6.2 and Article 6.3 of Decree 52, the entities allowed to provide electronic money include the following:

• Banks and foreign bank branches: may issue and provide e-wallets and prepaid cards. The provision, issuance, and use of e-wallets and prepaid cards shall comply with the regulations of the State Bank of Viet Nam (“SBV”).
• Payment intermediary service providers that provide e-wallet apps: services shall ensure the maintenance of a total balance of the payment security accounts for services concerning e-wallets opened at banks or foreign bank branches higher than the total balance of all the e-wallets issued to clients; only permit the use of services for e-wallets linked with payment accounts or debit cards of clients.

Thus, the completion of legal regulations for electronic money in Decree 52 will contribute to preventing and eliminating illegal payment instruments issued by unauthorized organizations, thereby assisting competent authorities in preventing and combating legal violations in the field of electronic money.

2. Regulations on international payments

In addition to regulations on electronic money, Decree 52 also supplements provisions to clarify international payments and the international payment system. Accordingly, international payment refers to payment transactions implemented for an organization or individual with a payment account or payment instrument issued outside of Vietnam’s territory[2]. International payment systems refer to payment systems established abroad that permit the implementation of international payment transactions[3].

According to the provisions of Article 5 of Decree 52, international payment shall comply with this Decree, foreign exchange management, users’ data protection, cybersecurity, and tax administration laws, anti-money laundering, terrorism financing, and financing of proliferation of weapons of mass destruction laws, and international treaties and agreements that Vietnam is a signatory. The application of commercial practices shall comply with Article 3 of the Law on Credit Institutions.

Commercial banks and foreign bank branches may participate in international payment systems when they meet the requirements prescribed in Article 21 of Decree 52.

The provision of payment services and payment intermediary services for clients not residing in Vietnam and foreigners residing in Vietnam to implement payment transactions of goods and services in Vietnam of foreign service providers shall be carried out through commercial banks or foreign bank branches approved by SBV to participate in international payment systems of such foreign service providers.

In addition, financial switch service providers[4] may connect to international payment systems to carry out international financial switch services[5] when they meet the requirements prescribed in Article 22 of Decree 52. Payment intermediary service providers (excluding financial switch service providers) may provide their services for clients for the implementation of payment transactions of foreign goods and services; the payment and settlement of such international transactions shall be carried out through commercial banks or foreign bank branches approved by SBV to engage in foreign exchange on international markets.

Parties involved in international payment shall adequately, accurately, and promptly provide information and meet the requirements of state management authorities according to Vietnamese law.

3. Regulations on cases of payment account freezing

According to Article 11.1 of Decree 52, payment accounts shall have their balances partly or wholly frozen in the following cases:

• When there are prior agreements between owners of payment accounts and payment service providers or requests from owners of payment accounts;
• When there are decisions or written requests from competent authorities as prescribed by the law;
• When a payment service provider discovers an error or mistake while recording a credit to a client’s payment account or when fulfilling a request to refund money from a payment service provider’s account due to an error or mistake compared to the payment order of the transferring party after recording the credit to the client’s payment account, the amount frozen in the payment account must not exceed the amount in question due to the error or mistake;
• When there are requests for account freezing from one of the joint payment account holders, except in cases where there are prior written agreements between the payment service providers and such joint payment account holders.

Thus, from July 1, 2024, there will be 04 cases in which payment accounts will be partially or fully frozen in accordance with the specific regulations mentioned above. On the other hand, regarding the termination of the payment account freeze[6], Decree 52 stipulates as follows:

• There are written agreements between owners of payment accounts and payment service providers or requests from owners of payment accounts;
• There are decisions to terminate the freeze of competent authorities as prescribed by the law;
• The mistakes and errors in money transfer payment;
• There are requests for the termination of the freeze from all of the owners of a general payment account or prior written agreements between the payment service provider and owners of such a general payment account.

According to Article 11.3 of Decree 52, payment service providers, account holders, and competent authorities are responsible for compensating any damages caused to the account holder if they unlawfully freeze a payment account or request such action. Decree 52 provides specific regulations regarding the termination of account freezing and supplements the account holder’s responsibilities in cases of unlawful account freezing. .

4. Regulations on conditions for providing intermediary payment services

Decree 52 has amended and supplemented several regulations on the provision of intermediary payment services to meet practical needs and facilitate service providers, thereby enhancing the efficiency of state management in the provision of intermediary payment services. Specifically, according to Article 22.1 of Decree 52, intermediary payment services include the following services: (i) include financial switch services, (ii) international financial switch services, (iii) electronic clearing services, (iv) e-wallet services, (v) collection and payment services, and (iv) electronic payment portal services. The provision of payment intermediary services shall comply with the regulations of SBV.

A non-bank organization or foreign bank branch shall be licensed to provide payment intermediary services by SBV when it meets and maintains the following requirements during the provision of payment intermediary services:

• Having an establishment license or certificate of enterprise registration issued by a competent state authority; not being subject to any full division, partial division, consolidation, merger, conversion, dissolution, or bankruptcy according to the issued decision while applying for the license to provide payment intermediary services; in case of providing financial switch services and/or electronic clearing services, the organization shall ensure that it only engages in the provision of payment intermediary services;
• Having an actual or allocated capital charter of at least 50 billion VND for e-wallet services, collection and payment services, and electronic payment portal services; 300 billion VND for financial switch services, international financial switch services, and electronic clearing services; assuming responsibility for the legality of contributed or allocated capital sources;
• The organization must have an approved plan for providing payment intermediary services, granted by the competent authority in accordance with the organization’s regulations.[7];
• Personnel requirements: legal representatives and the Director-General (Director) of the organization shall have at least a bachelor’s degree concerning economy, business administration, law, or information technology and at least 5 years of experience as managers and operators of the organization in fields of finance and banking and shall not be the banned entities as prescribed by the law; there must always be at least one legal representative residing in Vietnam[8].
• Deputy Directors-General (Deputy Directors) and core officials carrying out the schemes for the provision of payment intermediary services (including Heads of divisions (departments) or equivalents and technical officials) shall have at least a college diploma concerning economy, business administration, law, information technology, or specific professional fields.
• Having a presentation of technical measures to serve the provision of payment intermediary services requested for licenses approved by competent authorities according to the Charter of the approving organization meeting the requirements for safety assurance of information systems grade 3 as prescribed by the law;
• Regarding e-wallet services and collection and payment services for clients with payment accounts at many banks and/or foreign bank branches, the service provider shall have a provider of financial switch services and electronic clearing services licensed by SBV carry out the financial transaction switch and handle the clearing of arising obligations during its provision of payment intermediary services;
• Regarding financial switch services and electronic clearing services, in addition to the requirements prescribed in sections (i), (ii), (iii), (iv), and (v), the organization providing these services must meet the following requirements: it must have an organization to carry out the settlement of clearing result between concerned parties; have connection agreements with at least 50 banks and foreign bank branches with a total charter capital in the year before the year of applying for licenses account for at least 65% of the total charter capital of banks and foreign bank branches in the system of credit institutions and connection agreements with at least 20 providers of payment intermediary services; have information infrastructures meeting at least the requirement for safety assurance of information systems grade 4 according to the law, ensuring the capacity for integrating and connecting with technical systems of participating organizations with connection agreements; have a server system the complies with the law and has the capacity for processing at least 10 million payment transactions per day;

Participating organizations shall connect to no more than 2 providers of financial switch services and electronic clearing services;

• Regarding international financial switch services, the service provider shall have an effective license to provide payment intermediary services of the financial switch; have another organization carry out the settlement of clearing results between concerned parties; have intramural regulations on standards of the selection of connections to international payment systems to carry out the financial switch of international payment transactions; have intramural regulations on professional and technical procedures for international financial switch services requested for licenses. Organizations operating international payment systems connected to providers of international financial switch services shall be legally established and operated abroad.

Within a maximum period of 6 months from the date SBV issues the license to provide payment intermediary services, the licensed organization must provide payment intermediary services for the market and may only do so after implementing technical systems specified in point (v), meeting the provisions in point (viii), point (ix) for financial switch services, electronic clearing services[9], and international financial switch services.

As usual, we hope you find this Legal Update helpful and look forward to working with you in the upcoming time.

Kind regards,

ENT Law LLC

The full version of this Legal Update can be found here.

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[1] Payment intermediary service providers refer to organizations that are not banks or foreign bank branches licensed to provide payment intermediary services by SBV.

[2] Article 3.8 of Decree 52.

[3] Article 3.20 of Decree 52.

[4] Financial switch services refer to services providing technical infrastructures for the connection, transmission, and handling of electronic data of domestic transactions among payment service providers, financial companies licensed to issue credit cards, and payment intermediary service providers.

[5] International financial switch services refer to the connection with international payment systems to transmit and handle e-data of international payment transactions.

[6] Article 11.2 of Decree 52.

[7] Form No. 08 of Decree 52.

[8] If there is only one legal representative residing in Vietnam, this person shall authorize another individual residing in Vietnam to carry out the rights and obligations of a legal representative when exiting Vietnam. In this case, the legal representative shall still take responsibility for the authorized implementation of rights and obligations.

[9] Electronic clearing services refer to services providing technical and professional infrastructures for the receipt and comparison of transaction data and calculation of amounts to be collected or paid after clearing among members to carry out the settlement for concerned parties.