Digital banking and legal issues around electronic documentation

Digital banking has become a key trend for commercial banks. Alongside the lucrative benefits, this also raises some issues for policymakers in completing the relevant legal system such as regulations on contactless payments, QR code, mobile banking; regulations on protecting customers, internet security and safety; as well as the central bank’s management and supervision of these payment methods.

Besides that, in accounting, mobile banking payments are considered electronic transactions. The question is: Are current accounting regulations suitable to cover digital payments?

Several regulations mention electronic records, such as the Law on Accounting 2015 and government Decree No.174/2016/ND-CP from 2016. Accordingly, they are considered accounting records if they have contents similar to accounting records, are encrypted, and are not altered during transmission. Electronic records must ensure the security and integrity of data, and be managed and inspected to avoid illegal access, duplication, or piracy. Electronic records are managed as accounting documents in the original form they are created, sent, or received, provided there are suitable devices for using them.

The Law on Accounting stipulates the making and retention of electronics records should follow the same rules as physical records such as creating a separate accounting record for each economic/financial transaction; accounting records must be made in a clear, complete, timely, and accurate manner in accordance with the set form; if an accounting record form is not available, the accounting unit may design its own accounting records with the sufficient contents.

The law has also stated that electronic records must bear electronic signatures. Signatures on electronic records are as valid as signatures on physical records. Additionally, electronic accounting records need to be printed and retained. If they are stored on electronic devices instead, it is required to ensure safety and security of information and accessibility during the retention period. At the request of a competent authority for examination, inspection, supervision, and audit, the accounting unit must be responsible for printing on paper the accounting records stored in electronic devices, signed for certification by the legal representative or chief accountant and stamped (if possible) to be submitted within the time limit requested by the competent authority.

Before this, based on the Law on Accounting 2003 and Electronic Transactions Act 2005, the government issued Decree No.35/2007/ND-CP on banking e-transactions, outlining rules related to electronic documents including content, principles of making and supervising electronic documents, as well as making, supervising, and signing electronic documents.

Based on banks’ activities, the State Bank of Vietnam (SBV) in 2015 issued regulations on electronic accounting records, with content on the retention and retaining of electronic accounts and capital payments of intermediary payment organisations (Decision No.376/2003/QD-NHNN) and regulations on banking documents (Decision No.1789/2005/QD-NHNN).

The Law on Accounting 2015 has added more rules on electronic accounts than its predecessor. The government has also issued many regulations on electronic banking documents. However, despite their digital format, they are treated exactly the same way as paper documents. Therefore, almost all rules on content, establishment, procedures, supervision, and signing are the same as for physical records (only via electronic means).

The regulations have not kept up with the development of digital banking. Currently, digital banking transactions do not only involve banks. Accordingly, mobile payments combine banks, mobile companies, and fintech services providers in a single transaction. Via technology, transactions through electronic wallets, QR codes, and others can be conducted without a banking account; and may be made automatically anytime and anywhere. These payments need to be brought under the umbrella of the law.

Mobile payment should follow a set process. Along with this, the customers can install applications from mobile companies or fintech organisations to use bank accounts, electronic money, and electronic wallets to make payments. These transactions include a combination of parties, not just consumers and banks.

Regarding identification, by current regulations, the customers should provide their information directly at banks. However, in the case of some mobile payment providers, bank account or signature are not compulsory, the customers can provide an electronic signature or an OTP code supplied by their bank.

Electronic documents in banking, especially in commercial banks, require clearer and more transparent regulation by the SBV. Decrees 35, 376, and 1789 should be amended and adjusted to fit modern tech capabilities and banking services.

Regulations on the fixed content of electronic documents should be reviewed to cover transactions including more related organisations or transactions that do not involve a banking entity.

Regarding the supervision and signing of electronic documents, in light of Decree 35/2007/ND-CP, electronic documents based on physical records should be checked the coincidence with the physical records; electronic documents based on other electronic records should be checked the coincidence with that electronic records. In case, the electronic documents are established and supervised through many steps, should be checked the content in every step; electronic signature of authors and supervisors in every step. The authors, supervisors, approvers and authorised people should sign in the electronic document after completing their tasks. Because, in automatic payment, the assurance of supervising and signature of authors and supervisors has become inappropriate.

Regarding the security and confidence of electronic documents, regulations need to recognise and be extended to electronic transactions that are conducted without a bank intermediary.

Regarding the use of electronic documents, as under the Law on Accounting, electronic accounts need to be submitted in physical form for inspection, a legal review would be necessary to allow the handling of accounts in other forms to reduce costs for parties.

Digital banking has become a major trend all over the world. In Vietnam, many banks have begun rolling out basic digital services such as e-banking. Many banks have even crafted long-term digital banking strategies. However, the transformation is held up by an outdated legal system that does not recognise many of the new advances.