Vietnamese Fintech is booming, and can be said to be competitive with foreign Fintech. However, there are still many dark corners within Vietnamese Fintech. Let’s find out the dangers of Vietnamese Fintech.
Recently, I read a debate on a Facebook group about finance, the topic of the debate revolved around whether or not to invest in Apps of Fintech companies in Vietnam. I found it quite interesting, so I would like to summarize the most important points of the debate.
I have a few small notes as follows:
1/ We will not discuss the benefits of Fintech Apps, most of us clearly understand how those Apps work as well as the benefits they bring. In the scope of this article, we will only discuss the risks.
2/ We also do not compare foreign Fintechs, specifically in prestigious countries like the US, Australia, etc. Although they have similar operating mechanisms to Vietnamese Fintechs, foreign Fintechs have their own legal corridors as well as come with their own risks, so within the scope of this article we will only discuss Fintechs in Vietnam.
If Vietnamese Fintech goes bankrupt, what will happen to my money?
The biggest and most important question that people often wonder before using Fintech VN is “if they go bankrupt, where will my assets go?”
There are many opinions that have been debated, but personally I find the following opinion to be the most accurate, at least from a legal perspective.
Currently, most Vietnamese Fintechs are not (are not) registered members of securities depository at the Vietnam Securities Depository (VSD), which means that when buying securities through Vietnamese Fintech apps, your assets will not be guaranteed.
So when they go bankrupt, do you lose your assets? You won’t lose money exactly, but you will lose your accumulated assets. What does this mean???
For example, if you buy securities at any securities company registered for depository at VSD, for example TCBS, in case TCBS goes bankrupt, your securities (ie your assets) will still be at the depository center, at this time you just need to transfer those securities to another securities company (also a member of VSD), for example VCBS.
At this time, there may be some problems such as transfer fees, transfer time, transfer procedures, etc. But in short, your assets are still intact, you just need to use VCBS to continue trading and investing normally.
If you buy through Fintech VN, your securities will not be deposited on VSD (more precisely, they will be deposited under the name of Fintech, not your name). In case Fintech goes bankrupt, your securities will become floating assets (because they are not deposited, there is no one to manage and keep your securities).
That is, when Fintech goes bankrupt, they are forced to liquidate their assets, the securities on VSD are now Fintech’s assets and they are forced to sell those securities to liquidate the assets back to investors.
That means you still get money back through Fintech selling securities, but the amount you get back will be at the market price when Fintech sells (because they are forced to sell so they cannot choose the time of sale), if you make a profit, you will enjoy the difference, if you lose, you will bear it. That is the reason for the following clause:
So what will be the impact on investors?
For example: suppose I have the ability to analyze super well, I analyze and accurately predict that company A will lose money from January to June and its stock will lose value, but by the end of the year, due to the characteristics of their industry, they will definitely make a profit and the stock will increase in price => so starting from January, I buy company A’s stock and hold it until the end of the year to sell, because I am sure I will make a profit.
But in May, for some reason Fintech went bankrupt, that was Fintech’s business, not mine, but my shares were forced to be liquidated at market price, and so I lost my face. That is, I lost not because of my ability but because of Fintech.
That is the danger of Fintech, those who follow the schools that Mr. Hieu taught such as Dividend Investing, Growth Investing, Value Investing and even Passive Investing are all very reckless when using Fintech VN (at this time). That means having to watch the market, watch the company you invest in and now have to watch Mr. Fintech too.
In addition, there is one more example, a bit negative but I think it is also possible, I will copy it verbatim:
“Suppose in January 2022, HPG is priced at 50k/share, then I told Fintech that I would buy it, the quantity is 2 shares, which is 100k. According to your analysis, the market share in Vietnam is 5-7 million people, I take 5 million people multiplied by 100k, which is 500 billion. After receiving my request, Fintech agreed and reported that the purchase was completed, the information was displayed on the app, and the money was deducted. But in reality, I don’t know if Fintech actually used that money to buy shares.
By August 2022, the price dropped to 25k/share. Fintech deliberately manipulated the financial situation into bankruptcy and announced to sell my shares at the market price at that time. Fintech returned 250 billion, and pocketed the remaining 250 billion. Investors had opinions, so they flipped the contract terms.
Thus, it can be seen that, from a legal perspective, Fintechs that have not registered with VSD but still call on investors to participate in buying individual shares will be considered a violation of the law, with the potential risk of “fraudulent appropriation of assets”. Given the situation of investment fraud springing up like mushrooms in Vietnam, this aspect (although negative) is also an aspect worth considering.
In short, the development of technology is a very good thing. Vietnamese Fintech is proving the development of the country, this is a good sign for the country.
However, for many reasons, they may not have completed the necessary legal procedures, so their operations are potentially very risky. You should consider carefully before participating in any Fintech.
Thank you for reading my sharing, hopefully it has brought more or less useful value to you.
- Sky -