Further Fostering Digital Transformation in Banking Industry

In Vietnam, the banking industry has undergone a strong digital transformation that has produced positive outcomes. Banks and payment intermediaries are now interconnected, with transactions taking only seconds. The average daily transaction value via banks is up to VND900 trillion (more than US$40 billion) with more than 8 million transactions. Over 70% of adults already have a bank account. With digital transformation, the cost/revenue ratio at banks has been reduced by 30%, thus significantly slashing operating costs.

Vietcombank promotes digital transformation, creating different products and services to enhance customer experience

Flagship in national digital transformation

On May 11, 2021, the Governor of the State Bank of Vietnam (SBV) launched the plan for the digital transformation of the banking sector for the 2021-2025 period, with a vision to 2030 (Decision 810). After two years, digital transformation in the banking sector has produced positive results. Banks are always praised for their efforts and inspirational results in digital transformation. According to the Ministry of Information and Communications, in 2021 the SBV was ranked first in cyberinformation security, second in institutional creation and fourth in digital transformation.

To keep up with digital flows, many banks have invested heavily in new technologies such as core banking, API applications and an open banking ecosystem. According to the State Bank, by the end of 2022, the banking industry invested more than VND15,000 billion in digital transformation and made Vietnam one of the leaders in digital banking applications (digital payments expanded by 40% annually in the past 3-4 years).

Up to 96% of banks and credit institutions have implemented digital transformation strategies, with 92% of banks offering internet and mobile application services. According to SBV Governor Nguyen Thi Hong, many credit institutions have seen good performance thanks to active digital transformation efforts that have reduced the cost-to-income ratio (CIR) to 30-40%, near the level that many regional and international banks are currently striving for. These institutions have also ensured information security and safety while seeing non-cash payment indicators climb in both transaction volume and value. In the first five months of 2023, non-cash transactions increased by 52.35% year on year in volume; Internet channels by 75.54% in volume and 1.77% in value; mobile channels by 64.26% in volume and 7.65% in value; QR code channels by 151.14% in volume and 30.41% in value; POS channels by 30.35% in volume and 27.27% in value; and ATM channels by 4.62% in volume and 6.43% in value. These figures illustrate the trend of shifting to electronic and non-cash payment.

Most Vietnamese commercial banks have launched digital banking applications and made significant efforts to differentiate their digital products from their peers, such as Vietcombank with VCB Digibank, VietinBank with iPay, BIDV with SmartBanking, TPB with eBank X, and HDBank with Ebanking.

Banks and credit institutions have adopted modern and disruptive technologies such as electronic payment solutions, blockchain technology, artificial intelligence (AI) application and biometrics to connect to omnichannel user experiences. This has enabled them to build real-time dynamic customer profiles that support seamless customer journeys across digital and physical channels. These technologies have also enhanced customer experiences and optimized service processes by using customer activity history to recommend suitable products and services.

Moreover, banks have applied advanced digital technologies such as cloud computing, big data analysis, robotic process automation (RPA), artificial intelligence (AI) and machine learning (ML) to assess and classify customers, decide lending disbursement and integrate with many different partner ecosystems in many fields to automate operations, make business decisions and control risks.

Notably, thanks to the active implementation of synchronous solutions, the banking industry has reaped positive results with Project 06. This project applies population data in banking operations and creates many practical products and services for customers and companies such as public services at the SBV (granting digital personal certificate which was connected to and used with the official national database from December 2022). The SBV coordinated with C06 of the Ministry of Public Security to check and clean 25 million customer records in the national credit information database. Currently, it is reviewing and cleaning 26 million customer records.

HDBank is constantly expanding diversified products and services and comprehensively digitizing its business activities

Facilitating digital transformation in the banking industry

Deputy Prime Minister Le Minh Khai has identified the finance-banking industry as one of eight areas that need to be prioritized for digital transformation because it can change perceptions at the fastest speed, save costs and bring high social impacts. Banks are the lifeblood of the economy. Therefore, fast digital transformation in the banking industry will foster rapid digital transformation in the whole country; help effectively carry out main tasks and solutions in 2023: “enabling and using data to create new values”; and effectively implement development perspectives stated in the Party’s 10-year socio-economic development strategy in 2021-2030: "Rapid and sustainable development mainly based on science and technology, innovation and digital transformation.”

SBV Deputy Governor Pham Tien Dung has stated that besides good achievements, digital transformation has also posed many challenges to the banking industry. These include current legal regulations on electronic transactions, electronic signatures, electronic documents, electronic customer identification and authentication, and customer data sharing and confidentiality that need to be reviewed and revised to fit the new context. The infrastructural synchronization and standardization among industries and fields create the most convenient conditions for connection and integration of the banking industry with other industries and fields to create digital ecosystems that need more attention and investment.

Moreover, reasonably and effectively balancing and allocating investment resources for digital transformation; and attracting high-quality, experienced and knowledgeable human resources in both professional business and digital technology are also big problems that the banking industry needs to solve. Especially, technology crimes with increasingly sophisticated and unpredictable tricks as well as cybersecurity risks are increasing, and there are still people who are afraid to access and use services on digital platforms.

To enhance the effect of digital transformation on Vietnam’s banking industry, Deputy Governor Dung stated that the SBV will continue to focus on reviewing and improving the legal framework to facilitate digital transformation. In the immediate future, it will make a draft law on credit institutions, a decree to replace Decree 101/2012/ND-CP on non-cash payments and a decree on a mechanism for controlled testing of financial technology in the banking sector, a draft circular on lending on electronic means and circulars on security, safety and confidentiality in e-banking. The SBV will ensure the smooth and safe operation of payment systems; upgrade information technology infrastructure, implement solutions to guarantee security and confidentiality in banking activities, and enhance connectivity and service integration between the banking industry with other sectors to expand the digital ecosystem to increase utility and customer experience. It will promote digital applications, and effectively utilize data in product and service design, development and supply for customers, with guaranteed security, safety and confidentiality of customer information.

In particular, the SBV will continue to focus on developing and implementing policies to attract high-quality human resources; strengthen training and re-training in relevant knowledge and skills to raise the quality of human resources for the digital transformation of the banking sector. The central bank will further promote communication and information to customers in many forms to guide and raise their awareness, understanding and knowledge about technology applications as well as give guidance and warnings to support them to recognize, prevent and avoid risks when performing transactions in the electronic environment.

By Anh Mai, Vietnam Business Forum