Banks in the digital transformation race

Going further in digital transformation

In recent years, the use of banking transactions on digital channels is no longer unknown to the majority of people.

According to experts, the bank's digital transformation journey consists of three steps, the first is digitization - converting the traditional process to a digital one; the next is digital transformation - digitizing each part of business, increasing customer experience; the last is ultimately digital reinvention - combining technology and digital platforms to generate revenue and results through innovative strategies, products and services.

In fact, most banks in Vietnam are at the third step, so there are already many plans to go further in digital transformation. Therefore, many banks have moved to establish a digital banking ecosystem, from opening accounts to registering, issuing, and managing products and services such as accounts, credit cards, loans can all be done online.

In addition, banks also build data warehouses, standardize centralized digital infrastructure, and connect banking applications with public services, financial services, telecommunications, electricity, transport and healthcare; helping customers to use more utilities than direct transactions at the bank.

Mr. Do Quang Vinh, Member of the Board of Directors, Deputy General Director and Head of Digital Banking Division of SHB, said that digital transformation is considered a long-term project, with items that are highly complex and require coordination between many units.

SHB has applied transformation in customer management to offer a variety of financial solutions as well as applying technology in operations, helping to save time and personnel costs as well as increasing productivity.

Similarly, Nam A Bank said that in 2022, it will continue to focus on increasing investment and applying technology, creating new steps in digital transformation, and continuing to perfect the digital banking ecosystem: Robot OPBA, Open Banking and ONEBANK, meeting the needs of transactions anytime, anywhere.

MSB has also cooperated with the world's leading consulting group Boston Consulting Group (BCG) in implementing the Digital Factory project with an investment of approximately VND2,000 billion.

However, to solve the above problems, banks have to invest up to tens of trillions of dong per year for digital transformation. Mr. Do Quang Vinh said SHB has invested a lot of resources and budget to upgrade Core Banking (core bank), upgrade cards, deploy investment banking, loan origination solutions (LOS), deploy Omni Channel systems and related information technology systems and apply the most modern solutions.

In addition, SHB also cooperates with leading financial technology (Fintech) organizations and enterprises in the world to support the fastest, best and most suitable digital transformation at SHB.

Perfection from technology to legal issues

In recent years, in order to avoid dependence on credit income, banks have made digital banking one of the driving forces for profit growth. For example, VIB is often at the top in terms of growth in the number of credit cards, and spending on cards is twice as high as the industry average.

At TPBank, online transactions amount to over 92% of the total number of transactions of the whole bank. At MB it is 93%. For BIDV, income from non-credit activities (especially services) has continued to grow strongly in the past few years thanks to the motivation from insurance services and digital banking. SHB also expects the digital banking sector to make a major contribution to the efficiency and profitability of the bank's corporate and retail segments.

However, digital transformation in the banking sector must include perfection from technology to related legal issues. Luu Trung Thai, Vice Chairman of the Board of Directors, and General Director of MB, said that digital transformation is still a problem because the investment is not small, but the revenue and profit generated is a big question while the basic service is free, it is not always easy to create an effect.

Also talking about the bank's difficulties, Mr. Nguyen Manh Hung, a member of the Board of Directors of Vietcombank, said that the digital transformation process of banks faces some difficulties and challenges because digital transformation needs accuracy, so it needs a data center and training of appropriate human resources.

As for the legal issue, this is still an unresolved difficulty for banks although the State Bank of Vietnam (SBV) commits to research, develop and perfect mechanisms and policies to facilitate digital transformation.

According to experts, up to now, the legal framework in the field of information technology in banking activities has only stopped at electronic transactions, some other areas such as blockchain application (Blockchain) have only guidelines on how to ensure compliance with legal regulations, it is not clear how it will operate.

Commenting on the amendment of Circular 39/2016/TT-NHNN on lending activities of credit institutions and foreign bank branches to customers, the Vietnam Banks Association said regulations on lending activities by electronic means are very general while this method has its own characteristics.

Techcombank's representative again suggested that more specific regulations are needed to "pave the way" for the application of information technology in the entire lending process.

Besides the above problems, another concern with the digital transformation of banks is that the financial and banking sectors are being "targeted" by cybercriminals. Since the beginning of 2022, many banks, e-wallets, payment intermediaries, and e-commerce sites have issued warnings about online impersonation tricks and appropriation of assets.

For example, Techcombank, which once broadcast information that faked the bank providing Vietcombank credit card services, also warned of the appearance of frauds impersonating brand messages.

At the beginning of June, the Company Cybersecurity Group-IB (Singapore headquarters) issued a warning on a phishing attack impersonating 27 familiar Vietnamese financial institutions to steal information and user accounts, and perform illegal transactions.

According to statistics from the National Cybersecurity Monitoring Center, in 2021, more than 1,000 online fraud websites, impersonating banks and financial institutions have been blocked and handled.

With the above issues, we cannot deny that the trend of digital transformation is opening up many new development opportunities for Vietnam's banking industry.

Speaking at a seminar on digital transformation in June 2022, Governor of the State Bank Nguyen Thi Hong said that the banking industry will strengthen security and safety in electronic payments; effectively implement important payment systems and operate payment intermediary service providers to ensure proper, smooth and safe operation.

However, this needs more improvement in terms of legislation, infrastructure, human resources as well as awareness of banks and regulators. This will require the participation of all parties, with the goal of achieving the common development of the whole economy.