In Vietnam, the increase in e-commerce over the past two years — as a result of the COVID-19 pandemic — has gone hand in hand with increased use of cashless payments and online banking transactions. To this end, digital signatures have played an essential role in the digitization strategy of the country’s banking sector. However, even though the legality of digital signatures has been recognized by Vietnamese law, some risks and obstacles remain.
E-financial transactions and digital signatures
Along with electronic know your customer (e-KYC) standards and processes introduced in Vietnam’s anti-money laundering law, e-financial activities (including signing contracts and executing and settling transactions) are generally performed automatically through pre-established information systems. To sign an automatic e-financial transaction, however, the customer must have an authenticated electronic signature.
In Vietnam, digital signatures are the only form of electronic signature that is as authenticated and sufficiently valid as an individual’s wet-ink signature, a signature of a representative, or a seal of an organization. Digital signatures have been widely used by enterprises to sign contracts, pay bills and declare taxes. In the banking sector, commercial banks have accepted their customers’ use of digital signatures to open accounts or make payments via online banking services. The adoption of digital signatures in the banking process has offered banks and their customers a dramatic reduction in cost, paper and time, and has led to enhanced customer satisfaction as well.
Obstacles and risks associated with digital signatures in e-financial transactions
Despite the advantages of digital signatures, there are some concerns regarding their use:
The first issue is the risk of invalidation. Under Decree 130/2018/ND-CP, to be granted a secure digital signature for use in e-financial contracts, customers must submit to the public certification authorities an application dossier for the issuance of a digital certificate. This consists of an application form and auxiliary documents, including a copy of an identity card or passport for individuals and, for organizations, a copy of the establishment decision or certificate of business registration or investment certificate, together with an identity card, citizen identification card or passport of the legal representative. All of these documents must be submitted, together with their originals, for the purpose of certification.
If the customer e-signs the application and submits it online, or signs the application by wet-ink signature and submits it by post, their signature and identification will not be verified and certified, and therefore their signature may be invalid. To use digital signatures, customers must provide physical documents. If the application dossier submitted online is invalidated, this may lead to the invalidation of customers’ signatures as well as relevant transactions.
To ensure the validity of digital signatures, customers must visit the office of the public certification authorities with copies and originals of the documents in hand and sign the application by wet ink. In essence, although digital signatures may be used entirely online, their creation must occur offline to ensure their validity.
Also, financial institutions, especially banks, are using one-time passwords (OTPs) or multi-factor authentication for e-financial transactions, which has the same effect as a certified electronic signature. However, the validity of these forms of electronic signature is not guaranteed.
Finally, Vietnamese laws have been silent on the notarization of e-contracts with digital signatures in e-financial transactions, especially for e-banking transactions. According to Decree 35/2007/ND-CP, e-banking transactions can be used for all transactions in the banking sector, but not to the issuance of drafts and other valuable papers. Similarly, some contracts between a bank and its customers must be notarized; however, no regulations on the notarization of e-contracts have been set out in any relevant legal documents.
Increasing the use of digital banking
The need to sign banking transactions by wet ink is a primary obstacle. To promote digital banking, the legal framework for digital signatures, as well as e-contracts, needs to be completed and fine-tuned. Regulations allowing e-KYC for digital signature issuance and guidance on technical measures to ensure authentication should also be promulgated.