Many fraudulent organizations disguised as Fintech, illegally mobilized capital, provided illegal online loans with exorbitant interest rates or appropriated property. Fintech companies have to suffer a bad reputation and lose credibility with users.
Explosion of financial scams
The development of technology brings many benefits to consumers of financial services, in which online transactions are becoming increasingly easy and popular. Payment, investment, loan activities, etc. can all be done online via the Internet thanks to the promotion of digital finance development by domestic and foreign financial institutions. However, the ease of online financial transactions has also fueled a proliferation of financial scams. It is a fact that scams happen more during economic times, recessions or even crises.
2022 is considered a boom year for financial fraud. According to the Vietnam Information Security Warning portal, in 2022, there were more than 12,935 victims of online fraud. The number of online scams is estimated to increase by 44% compared to 2021. The two main types of fraud are stealing personal information (24.4%) and financial fraud (75.6%). The actual data may be more because a large part of the victims did not report it because they were afraid of administrative and legal procedures.
Two common types of financial fraud through cyberspace are investment scams and loan scams. For investment scams, investors may be offered to invest in securities, invest in virtual currencies or invest in other assets by scammers impersonating securities companies, fund management companies, public companies, etc. Fintech company. With introductions such as trading T+1, T+0, profit on the same day, profits of tens, hundreds of percent, … and invitations to solicit on groups on social networking platforms like Zalo , Telegram, .. many investors have trusted and poured money into virtual investment apps.
Initially, with a small investment amount, investors can easily withdraw money to the account. But then, when pouring more and more money into the app, using tricks such as withdrawal errors, having to pay extra fees to withdraw money, crashing the app… investors lose all their investment, up to hundreds of millions, billions , tens of billion dong.
For loan scams, scammers often impersonate online money-lending apps with low interest rates and easy procedures, in the form of unsecured loans. Borrowers will quickly fall into the trap as soon as they complete these easy procedures, but to get the loan, they will have to advance a part of the money called by many names such as insurance fee, investment fee, etc. consulting, interest costs, etc. Some people will then not receive the loan amount and lose the above fee, some receive the money, but after calculating the deducted expenses, the interest rate is up to tens of , hundreds of percent, exceeding the legal limit.
Bad reputation on Fintech’s shoulders
In Vietnam, Fintech companies focus on payments. However, in reality, Fintech includes many other services such as crowdfunding, peer-to-peer lending, financial consulting, crypto-currency, data governance, personal financial management, financial investment . These services of Fintech have not really developed in Vietnam, partly because of the lack of legality, partly because of the potential risks related to financial traps and financial frauds.
For example, peer-to-peer lending (P2P Lending) and financial investment activities, many fraudulent organizations have taken advantage of these forms, disguised as Fintech to carry out illegal fundraising activities, illegal online loans with “exorbitant” interest rates, or acts of appropriation of property. With the explosion of online financial scams, Fintech companies have suffered a great reputation and loss of reputation with a certain number of users. Although some Fintechs are still providing P2P Lending and true financial investment and have not/have no signs of fraud, there is still no legal corridor for this activity.
It is known that the first proposals for a sandbox (controlled testing mechanism) for Fintech in Vietnam were launched in 2017. However, by early 2020, it is proposed to develop a sandbox decree for a new Fintech. are discussed. In 2021, the Government approved the proposal to develop a Decree on sandbox for Fintech in the banking sector. Some experts believe that this decree should be expanded to other areas, but the construction of this mechanism is still at the draft stage.
There is no testing mechanism, legal corridor, many Fintechs are still operating without the intervention and management of the authorities. Recently, some famous Fintechs in Vietnam such as Tikop, Infina, Savenow operating in the field of personal financial management have been named in a recommendation by the State Securities Commission (SSC).
Specifically, this agency said that in recent times, a number of businesses have set up trading websites and apps using communication tools to promote their products and services to mobilize capital from businesses. investors in the form of a business cooperation contract, showing signs of fund management and securities portfolio management activities that are not licensed, managed or supervised by the State Securities Commission in accordance with the law on securities. securities.
The State Securities Commission emphasized that investors may face risks when a dispute occurs without the protection of their rights and interests by the securities law. The SSC advises investors to be cautious when making securities investment transactions on these trading apps, investors are responsible for the risks that may arise.
Thus, the lack of a legal corridor and a testing facility not only makes Fintechs lack operational bases but also lacks protection for users. The promulgation of regulations to control the activities of Fintechs can help eliminate fraudulent organizations disguised as Fintech operating illegally in many forms, and at the same time, pave the way for genuine Fintech to develop, bringing about certain trust for users.
One lesson of the lack of government control most obvious is the collapse of the P2P Lending market in China. Specifically, P2P Lending had a great development period in China many years ago. This model mainly caters to small and medium enterprises, which are difficult to access to bank capital in this country.
In the beginning, the Chinese Government did not control P2P Lending to facilitate the development of this activity. However, due to lack of control, P2P Lending turned into an illegal form of capital mobilization or under a multi-level investment model. After the P2P Lending market collapsed with the loss of liquidity for hundreds of businesses, the Chinese government issued stricter regulations for peer-to-peer lending.