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Illustration photo. (Source: Forbes)
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Credit scoring is expected to be one of the three financial technology solutions that the State Bank will pilot in the near future, according to a draft decree on the regulatory sandbox mechanism in the banking sector.
The pilot of fintech solutions is anticipated to enhance the comprehensiveness of credit scoring. However, there are also accompanying risks.
A credit score is an index reflecting a customer’s credibility in their history of borrowing from credit institutions. It is determined based on financial information such as payment history, outstanding debt, and credit history.
A higher credit score is usually associated with more favorable borrowing conditions, higher credit limits, and more attractive interest rates.
In Vietnam, the credit scoring system is managed by the Vietnam Credit Information Center (CIC).
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Illustration photo. (Source: Vietnam+)
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CIC collects and stores customer credit information from banks and financial institutions and provides credit scores to these organizations upon request.
According to Dr. Nguyen Tri Hieu, an economic expert, credit scoring for the population is very important, especially in consumer lending activities.
However, currently, only the CIC’s scoring system exists, and this system has not been applied universally to the entire population. A segment of the population without a credit history or who have never used banking services will not have historical data for CIC to determine their credit score.
Therefore, the pilot of credit scoring through a regulatory sandbox for fintechs is expected to provide a more diverse data source. Data will be collected from various sources, including mobile payment history, e-commerce purchases, social media, identity data, and telecommunications, helping to build a more comprehensive credit scoring model for customers.
In addition, fintechs can apply technology and data to develop credit scoring products and services that cater to the needs of different customer segments, increasing the competitiveness of the service.
However, possessing a large amount of customer data also comes with risks related to security that fintech companies must address.
Sharing with reporters, a cybersecurity expert said that fintech companies could become attractive targets for hackers as they possess a large amount of personal and financial information of customers.
Hackers can steal this data to perform illegal activities such as using personal information to open fake bank accounts or credit cards, conducting unauthorized transactions, or selling the data on the black market.
“Even technical incidents such as software errors, configuration errors, or user errors that inadvertently disclose personal information or install malware can lead to customer data leaks. This can have serious consequences for both customers and fintech companies, resulting in financial losses, reputation damage, and the risk of penalties from regulatory authorities,” the expert added.
Regarding the legal framework and approach to managing fintech, Dr. Can Van Luc, Chief Economist at BIDV, suggested that fintech should be understood and analyzed in a broad sense as innovative technologies in financial services, including banking, securities, insurance, and fund management, instead of just narrow sense as fintech companies.
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Mr. Can Van Luc, Chief Economist at BIDV. (Photo: Tran Viet/ VNA)
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“For now, we are implementing a regulatory sandbox in the banking sector, but we should also expand it to other sectors as soon as possible to ensure the development of a financial technology ecosystem and control risks. At the same time, we should shift from a wait-and-see approach to a learning and experimentation approach, taking a more proactive stance to support fintech activities and the digital transformation process of the financial market, as many countries have done in the past time,” Dr. Can Van Luc proposed.
He also suggested establishing a management agency, such as an inter-sectoral management and supervision committee, to have a more appropriate fintech management model. In addition, enhancing financial education and strengthening information technology risk management and cybersecurity are essential.
Regarding the people’s access to loans, at the end of December 2023, the Prime Minister assigned the State Bank to coordinate with the Ministry of Public Security to continue implementing the credible scoring solution to help people access credit quickly and effectively. The top leader requested a pilot of credible scoring when people borrow, initially at Vietcombank from 2024.
Recently, at the Banking Industry Digital Transformation Day 2024, held on May 8, Mr. Pham Anh Tuan, Director of the Payment Department of the State Bank, announced the close cooperation between the banking industry and the Ministry of Public Security in implementing this solution.
Specifically, activities such as data cleaning, customer authentication, and business support have been actively deployed. Notably, 24 credit institutions have signed with the Department of Administrative Management of Social Order, Ministry of Public Security, to pilot offline customer data cleaning.
At the same time, 19 credit institutions are testing the VNeID electronic identification and authentication account in daily operations, and seven credit institutions have deployed or are deploying credible scoring solutions.
The pilot of credit scoring for fintech is an important step in developing the financial market and improving financial access for the population.
However, a clear and transparent legal framework is needed, along with close coordination between related parties, to ensure the effectiveness of the pilot and bring benefits to all stakeholders.
By Le Phuong
