Peer-to-peer (P2P) businesses expect that the trial legal corridor for P2P will eliminate disguised businesses and the market will grow significantly.
The trial legal framework for the P2P mechanism that the State Bank of Vietnam (SBV) is building is highly anticipated by the business community in this field. Tran The Vinh, general director, and member of the Board of directors of Tima said that it was extremely necessary to issue a trial legal corridor (sandbox) for P2P in particular and fintech in general at this time.
Specifically, the sandbox will open opportunities for businesses operating in the field of P2P to break through, promote their full potential, develop commensurate with the size of the market and take advantage of 4.0 technology. In addition, the trial legal corridor will help P2P companies step up to support disadvantaged customers who cannot access the official credit channel, promote comprehensive finance, and repel shadow banking.
The promulgation of the trial legal corridor of P2P also helps purify the market, eliminate weak businesses and disguised operating units that are disrupting the market, losing consumer confidence, and reducing credibility of P2P field in Vietnam. “We believe that the sandbox will have clear regulations on P2P operating conditions and standards, which will be the basis for the state agency to purify the market, eliminate disguised units that operate lending applications of shadow banking is causing negative consequences for the market”, Vinh believed.
Agree with this opinion, Nguyen Tri Hieu, an economist, said the lack of a legal corridor was making the P2P market in turmoil. Various online loan applications impersonated P2P, causing bad consequences for society, causing discredit for this form of lending. “It is necessary to introduce a testing mechanism for the P2P model. However, in my opinion, it should only be tested for one year, instead of extending to two years as the current draft of SBV. Because if the P2P businesses are licensed sooner to seriously operate, the market for disguised and fraudulent companies will be narrower”, Hieu proposed.
According to many experts, the issuance of the sandbox will help purify the P2P market and provide authorities with the basis to handle dozens of disguised shadow banking application and impersonate P2P originating from China. Even if P2P companies are operating properly, it is necessary to purge again.
Nguyen Viet Hung, Chair of the Board of directors and general director of Lendbiz Joint Stock Company, said that the Chinese P2P market at the peak had nearly 5,000 companies, then more than 4,000 companies were closed, only about 200 companies continued to restructure the industry. With Vietnam’s P2P market, the number of 40 formal enterprises is not much, it will develop more, but it also needs to be rearranged to eliminate weak businesses.
Nguyen Tri Hieu said that the P2P market in Vietnam was very potential because the proportion of people who did not have access to the official credit channel was still quite large. With the advantage of quick disbursement and no collateral required, P2P was an effective capital access channel for low-income people.
Another advantage of P2P companies is lending through technology, not limited by geographical barriers. Therefore, these companies can fully expand operations to customers in remote areas. Technological advances have also become an effective tool for P2P companies to collect and analyse customer data, credit scores, disbursements, etc.
Many businesses say that the biggest barrier of the P2P market is that there is no official legal corridor, people cannot distinguish the true and the disguised P2P company, leading to unfriendly view of this model. However, once SBV issues a pilot mechanism and publishes a list of tested businesses, the market will screen out disguised P2P businesses and open up huge development opportunities for true P2P businesses.
“Currently Vietnam’s P2P market is quite competitive. In the coming time, when the legal corridor is established, the advantage will be in the companies operating in the standard model, applying the most advanced technology”, Vinh said.
Despite being granted a late trial license, P2P in Vietnam still has a lot of room for development, which is a necessary piece to complement bank credit and financial companies. Looking ahead, the banking system will be extended arms down to remote areas thanks to the agent bank network. However, this system of agents only performs a limited number of operations, cannot replace banks for credit development. In other words, in the market of nearly 100 million people in Vietnam, P2P is still very attractive.
