Banking Industry Leads in Digital Transformation

Many Vietnamese banks have 90% of their customer transactions performed on digital channels, much higher than the target of 70% in the Banking Digital Transformation Plan by 2025. Many credit institutions become more effective thanks to active digital transformation, reducing the cost-income ratio (CIR) to the 30% threshold and approaching the rate that many banks in the region and the world are aiming for.

Rapid growth pace

According to global strategic consulting firm McKinsey, in 2021, Vietnam's banking industry is rated the fastest in digital banking applications in the region, higher than the average growth of the whole region and even higher than the emerging market average.

According to data released by the State Bank of Vietnam (SBV), in the first six months of 2022, non-cash payment transactions in Vietnam increased by 77.2% in quantity and 29.8% in value. Internet-based transactions grew by 63.2% and 32.3%, respectively. Mobile payments climbed 98.3% and 84.3%, respectively. Payments with QR codes jumped 86% and 127%, respectively.

In particular, mobile subscribers using the Mobile Money service soared, at an average of 20% a month. Up to now, 1.7 million subscribers are currently using Mobile Money, accounting for 97.3% of total activations. More than 67% are opened by people in rural, remote and isolated areas.

These figures proved that the habits of Vietnamese people are changing markedly, from using paper money to electronic payments, a decisive element of the digital economy Vietnam is aiming for.

Banks frequently launch new products and services on high-tech platforms, helping consumers with a better experience and solving their spending needs more easily. This also explains that Vietnam has the highest percentage of e-commerce shoppers in Southeast Asia, with about 50 million people, accounting for nearly 50% of the population.

People-centric digital transformation

According to Prime Minister Pham Minh Chinh, digital transformation is a vital trend, a mandatory and urgent requirement that affects all people and all economic activities.

“Therefore, we must have a people-centric approach. Then, all digital transformation must be directed towards people who are both subjects and beneficiaries. Only then will digital transformation be successful,” he emphasized.

However, national digital transformation and banking digital transformation are still facing a lot of difficulties and challenges, especially incomplete policies, particularly electronic identification and authentication; inadequate information technology infrastructure; connection and demographic data mining, insurance and tax which are still in a narrow scope; limited participation and coordination of fintech firms; high-tech crimes with increasingly sophisticated forms and tricks; insufficient resources, particularly highly qualified human resources for digital transformation, including information technology human resources.

In the coming time, the world and regional developments will be still complicated and unpredictable, with far-reaching impacts on countries, said the Prime Minister. Therefore, Vietnam needs to promote changes in thinking, methodology and modernized working methods of the banking industry; accelerate e-commerce development; develop the digital society and digital economy; reduce costs; ensure safety; facilitate renovation and development; foster integration, connection and sharing of national demographic database and specialized databases to gradually build a digital citizen ecosystem.

For successful digital transformation of the banking industry, the Prime Minister requested businesses and credit institutions to review, issue, amend and complete legal documents to match the reality and context of digital transformation, facilitate digital application to business, provide banking products and services to improve operational efficiency and create customer satisfaction and loyalty. Particularly, we need to focus on reviewing, developing and amending legal documents of the banking industry: Law on State Bank, Law on Credit Institutions, Law on Anti-Money Laundering and Law on Deposit Insurance.

The SBV continues to closely coordinate with ministries and sectors to urgently finalize and submit the decree on non-cash payment to the Government. On the other hand, it is necessary to develop, test and apply a new legal framework for fintech development.

Besides, digital transformation needs to be implemented comprehensively to ensure efficiency and not to waste resources, with clear definition of technology applications and financial intermediaries, and avoidance of technology enterprises encroaching into financial intermediation. The SBV needs to further boost investment and development of shared infrastructure of the banking industry such as payment infrastructure and credit information infrastructure to work as the nucleus and keep pace with the development needs of credit institutions and financial intermediaries.

At the same time, according to the Prime Minister, the banking industry should focus on ensuring security and safety, including security and safety of information technology infrastructure system, the confidentiality of customer information and personal data; develop databases, data information and connection standards; increased inspection and supervision; and analyze data to ensure security and safety for the entire system and prevent crime and money laundering amid increasing high-tech crime with many new and increasingly sophisticated tricks. The benefits of digital transformation in the banking sector need to be conveyed to people and businesses.

Specially, the Prime Minister said that the banking industry should pay more attention to training and improving personnel quality, particularly technology human resources; strengthen discipline and professional ethics to maximize the capacity and intelligence of banking workers in order to better serve people and businesses; bolster international cooperation in digital transformation to develop and adopt new banking technologies such as nearfield communication (NFC) technology and contactless payment card technology.

Quynh Chi (Vietnam Business Forum)