Why Legal and Regulatory considerations should come first in payment infrastructure

Behind every cross-border transaction lies a complex network of banks, payment service providers, transaction processors, foreign exchange providers and other intermediaries. Each entity may operate in a different jurisdiction and be subject to a distinct legal and regulatory framework.

Cross-border payments, therefore, are not just about moving funds from one place to another. They are also about connecting multiple financial and legal systems within a single transaction.

One transaction, multiple legal and regulatory frameworks

Each market may take a different approach to payment services, licensing, fund management, anti-money laundering, consumer protection and personal data.

This is particularly relevant to cross-border transactions, where each country or region has its own rules governing payment activities and the movement of funds.

For example, in the United States, money services businesses may be required to register with the Financial Crimes Enforcement Network (FinCEN) and comply with licensing requirements at the state level. In India, payment activities and cross-border money transfers are subject to regulations issued by the Reserve Bank of India (RBI), depending on the business model and type of service.

In Vietnam, cross-border payment activities are likewise governed by a range of regulations covering payment services, foreign exchange, anti-money laundering, as well as the activities of credit institutions and payment intermediary service providers.

This means that even where the underlying payment transaction is similar, its implementation can vary significantly depending on the market, business model and role of each participating party.

Why do these regulations need to be strict?

At the cross-border level, payment flows can have implications for the stability of the financial system, the prevention of financial crime, capital flow management and trust between financial institutions across jurisdictions.

The faster and more accessible cross-border payments become, the greater the volume and velocity of funds that can move across borders. At the same time, this interconnectedness can also be exploited for activities such as fraud, money laundering and terrorist financing. A weakness in controls at one point in the chain can create risks for other institutions and markets within the same network.

This is why regulatory frameworks are needed to define who is permitted to participate, what licensing requirements apply, how risks must be managed, where responsibility lies, and how payment flows can be monitored and controlled.

The challenge for fintechs expanding into cross-border payments

For fintechs, legal and compliance considerations should therefore not be addressed only after a product has been developed. They need to form part of the market-entry strategy from the outset, from understanding local regulations and determining the appropriate operating model, to assessing licensing requirements, designing fund flows and selecting partners.

When entering a new market, fintechs should not assess potential partners solely on their payment connectivity, cost structure or technological capabilities. Legal standing, relevant licenses, compliance capabilities and an understanding of the local regulatory environment are equally important in ensuring sustainable and stable operations over the long term.

This is also why partnering with entities that have the appropriate legal standing, licenses and local market experience can help fintechs significantly mitigate risks as they expand.

In Vietnam, 9Pay is one of the fintech companies licensed to provide payment intermediary services and foreign exchange receipt and payment services, providing the regulatory foundation for supporting payment and cross-border transaction needs.

As a member of the International Financial Center, 9Pay is legally researching the application of blockchain technology to optimize its existing B2B services, particularly in supporting collection and disbursement as well as cross-border money transfers.

9Pay also has a team with expertise in tax and legal matters, supporting international partners in understanding and complying with regulations governing business activities and taxation in Vietnam, including foreign contractor tax requirements.

With transparent transaction processing capabilities and connectivity across a diverse network, 9Pay not only helps optimize costs for its partners but also supports compliance with regulations governing foreign exchange management and anti-money laundering.
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A cross-border transaction may be processed in seconds, but ensuring that funds move correctly and securely requires a robust legal and regulatory framework behind the payment flow. For fintechs, therefore, choosing a partner is not simply a decision about technology or connectivity. It is also a decision about legal and compliance capabilities, as well as an understanding of the local market.