Banking Digital Transformation People-centric Approach

In the new context of the Fourth Industrial Revolution and the emergence of financial technology (fintech), digital transformation has become a mandatory choice for Vietnam's banking industry, an indispensable way for the banking sector to adapt and go beyond Industry 4.0 challenges.

 
HDBank invests heavily in digital transformation, particularly in technology infrastructure and payment platforms 

The State Bank of Vietnam (SBV) issued the Banking Digital Transformation Plan to 2025, with a vision to 2030 (Decision 810/QD-NHNN) which takes people at the center of service and sees convenience for service users as a measure of digital transformation. After nearly two years of carrying out Decision 810, banking digital transformation has made remarkable achievements.

In 2022, mobile payment and QR payment grew over 100% compared to 2021 (Mobile payment leaped 139.3% in quantity and 106.5 % in value) and QR payment surged 225.4% in quantity and 243.9% in value.

Up to 74.63% of Vietnamese adults have payment accounts at banks. There are about 18.6 million cards and 8.7 million bank accounts opened electronically (using eKYC).

Currently, more than 2.8 million Mobile Money accounts have been opened, with about 70.4% in rural and remote areas, more than 8,800 business points and more than 15,000 points of sales. Over 19 million Mobile Money transactions have been completed, with a total value of VND1,268 billion.

Many banks have invested heavily in new technologies, core banking, API applications, and an open banking ecosystem to keep up with digitalization flows. According to the SBV, by the end of 2022, the banking industry had invested more than VND15 trillion in digital transformation and made Vietnam one of the leading countries in digital banking (growing 40% in digital payments in the past three or four years).

At present, 96% of banks have launched digital transformation strategies and 92% have developed Internet and Mobile application services. Depending on the size, financial capacity and resources, each bank will have a different level of digital transformation but most Vietnamese commercial banks have launched digital banking applications and endeavored to differentiate digital products with other ones, for example Vietcombank with VCB Digibank, VietinBank with iPay, BIDV with SmartBanking, TPBank with eBank X, and HDBank with Ebanking.

In particular, according to SBV Governor Nguyen Thi Hong, the SBV has connected with the National Database on Population to clarify credit information for 25 million and serve many other professional activities. Credit institutions have constantly researched and widely applied advanced digital technologies such as big data, data analysis, artificial intelligence and machine learning to optimize and simplify business processes, and provide highly personalized products and services for the various needs of customers. Many credit institutions have adopted solutions that allow customers to open payment accounts based on residential data authentication; allow customer information identification and verification using chip-powered citizen identity card or VneID (mobile application created to replace traditional papers); clarify customer information with the national population database; optimize lending processes with credit scoring solutions, and authenticate multi-dimensional information with population data.

She said, many credit institutions have achieved good performance thanks to active digital transformation, reduced the cost-to-income ratio (CIR) to 30%, near to the level that many regional and international banks are striving for; seriously ensured the security and safety of information technology systems; and increased non cash payment indicators in terms of volume and value.

Strengthening interconnectivity

To implement the Government's programs and projects, the Banking Digital Transformation Plan sets very specific goals to 2025. Accordingly, the SBV will focus on perfecting the legal framework to be favorable for banking digital transformation; continue to closely coordinate with the Ministry of Public Security and relevant ministries and branches to accelerate the implementation of the Prime Minister's Decision 06/QD-TTg approving the project on population data application development, electronic identification and authentication for national digital transformation in 2022-2025, with a vision to 2030.

At the same time, the SBV will continue to upgrade and perfect the technology infrastructure and enhance security, safety and continuous operation of the electronic interbank payment system and its important information systems; further strengthen communication, financial education, awareness raising and knowledge about digital applications and provide notes against risks in the electronic environment.

According to Deputy Prime Minister Le Minh Khai, the SBV needs to closely coordinate with central and local agencies to research and establish a synchronous and unified technical infrastructure to facilitate and promote interconnection and bring overall benefits to people and businesses.

“Digital transformation takes the people as the center and the subject, so there is a need for banking interconnectivity, especially commercial banks and payment intermediaries with other industries and fields, especially the national public service portal, the administrative procedure settlement information system, the public service portal of central and local agencies, to encourage people and businesses to use online public services and adopt non cash payment," he affirmed.

In addition, the banking industry needs to develop and complete legal documents in line with reality and the digital transformation context, thus creating favorable conditions for digital applications to banking products and services to enhance operational performance and build up customer satisfaction and loyalty, he added.

According to the Deputy Prime Minister, digital transformation must be implemented holistically to ensure efficiency and avoid wasting resources. Therefore, the SBV should continue to boost investment and development of shared infrastructure. The core is the payment infrastructure and credit information infrastructure, which must keep up with and meet the development needs of satellite systems - credit institutions and payment intermediaries.

Moreover, globalization and digital transformation trends will also be associated with increased risks of high-tech crimes and increased monetary security with sophisticated tricks and complicated developments. Therefore, ensuring banking security and safety should be paid special attention. There is a reasonable balance between product and service development investment with IT system security investment, between customer experience and convenience with data security and customer protection on digital channels.

By Quynh Anh, Vietnam Business Forum