Vietnam Report Joint Stock Company (Vietnam Report) has officially released the list of Top 10 prestigious Vietnamese banks in 2019. Along with this announcement, the company also pointed out some highlights some highlights of the industry, including credit regulation, bad debt handling promotion, and financial capacity improvement of commercial banks. The fintech trend was also mentioned with numerous notes.
The highlights of Vietnam’s banking industry in 2019-2019
The new moves which are also the highlights of Vietnam’s banking industry in 2018-2019 were recorded at three points.
Firstly, the State Bank of Vietnam (SBV) clearer demonstrated the role of credit regulation, controlled intervention with retention of market characteristic. The credit growth in 2018 was lower than the previous years, and is likely to be maintained at 14 percent in 2019.
Regarding the banking performance by the end of May 31st, the outstanding credit for the economy increased by 5.75 percent compared to the end of 2018. Credit increased in most priority areas such as exports (13 percent), high-technology application enterprises (14.33 percent), small and medium-sized enterprises (5.04 percent), agriculture and rural areas (five percent), and supporting industries (4.11 percent).
Mobilisation interest rates increased reasonably and the exchange rate volatility was not significant, showing the initiative and flexibility in operating and enforcing the monetary policy of the SBV.
Secondly, the settlement of bad debts has been promoted. The implementation of bad debt handling solutions was carried out synchronously with measures to control and prevent newly arising bad debts, contributing to improve credit quality and reducing the bad debt ratio of credit institutions (CIs).
From August 15th 2017 to the end of March 2019, the whole system handled 227.86 trillion dong of bad debts, of which the on-balance sheet bad debts were 117.8 trillion dong. The group 2 debts of banks tended to decrease in 2018 and sees lower pressure of risk provisioning in 2019.
Thirdly, raising charter capital has helped strengthened financial capacity of commercial banks. Decision No.1058/QD-TTg dated July 19th 2017 of the prime minister approved the Scheme on “restructuring the system of CIs associated with bad debt settlement in the period of 2016-2020″ set goals to increase charter capital to ensure the Capital Adequacy Ratio (CAR) in accordance with the Basel II standards; and ensure the dominating goal of the State in state-owned banks, in which the State holds at least 65 percent of the total shares.
The charter capital of the entire system by the end of March 2019 reached 578.9 trillion dong, up by 0.45 percent compared to the end of 2018, and up by 63.5 percent compared to the end of 2011. The equity of the system was 792.6 trillion dong, up by 4.2 percent compared to the end of 2018 and 20.1 percent compared to the end of 2017.
The efforts of the government and the SBV in regulating the monetary policy and banking operations over the time have been acknowledged and highly appreciated by international credit institutions. Fitch has raised Vietnam’s credit rating from BB- to BB, and S&P for the first time after nine years has upgraded Vietnam’s credit rating from BB- to BB.
“In the coming time, the financial market is expected to continue to be stable and credit is strictly controlled, especially in the areas with potential risks (real estate, securities, build-operate-transfer (BOT) projects), and Build-Transfer (BT) projects, etc.) in order to build a healthy financial system, best supporting the goal of achieving sustainable economic growth,” Vietnam Report mentioned.
Fintech and digital banking trend
According to Vietnam Report, in the past two to three years, the penetration of technology in financial sector (financial technology fintech) is considered a “trendy” tendency in the context of the global development of 4.0 technology and the changes of customers’ online behaviours (including shopping, entertainment, social network, etc.)
Vietnam Report cited the statistics of the Payment Department (SBV) stating that the number of domestic payment transactions made via bank cards in the first quarter (Q1) 2019 increased by 18.45 percent, and the number of financial transactions made via the Internet increased by about 66 percent compared to the same period of 2018. Electronic payment (e-payment), especially payment via mobile phones also developed strongly in both number of transactions and trading value (by respectively 97.75 percent and 232.3 percent).
Results of the survey at commercial banks operating in Vietnam carried out by Vietnam Report provided that 100 percent of the surveyed banks said that they plan to cooperate with fintech companies in payment field with the aim to complete the goal of “cashless payment). Some successful models such as Uber, Grab, Alibaba, Amazon, etc. are applying technologies of which payment is linked with banks.
Vietnam Report included three notes related to the trend and the process of expanding financial technology application.
Firstly, the fintech trend is inevitable and its development speed is very fast, requiring banks to quickly participate to meet the needs of customers, while their technology, capital source, workforce, etc. are still very limited.
Large banks, despite having sufficient investment capital, still have to consider when putting in the matter of costs, profits and strategic priorities in 2019.
Secondly, there are concerns about financial security and customer security. Online payments or mobile payments will promote an economy that uses less cash, which is more convenient, but security issues are more concerned by users, especially when the cases of frauds, and money losses in bank accounts, etc. are increasing.
Thirdly, the development of fintech by chance makes the management more complicated. Vietnam is expected to have nearly 100 fintech companies, and it requires legal mechanism to operating the operation of these companies.
At the same time, the authorities should also have documents adjusting and supplementing the principles in managing international payment and money transfer activities, regulations on providing intermediary payment services, etc. to minimise possible financial risks.
Prioritising new technology application to build reputation
In the survey on commercial banks operating in Vietnam in June 2019, Vietnam Report stated that nearly three quarters of the surveyed banks said they will prioritise research and application of new technology in the system of customer management and services. More than three fifth of banks planned to invest in upgrading to advanced enterprise management system. In addition to the priorities related to business operation, more than 50 percent banks expressed interest in improving reputation and images on the media.
Building an image on the media in the era of information technology development is a particularly important task of banks. In fact, media research shows that banking sector shows the best communications with a continuous and diverse presence on financial and banking, investment news and sites with a wide range of readers.
In the last 12 months, among 1,440 coding units around four topics (out of a total of 24 theme groups covering information, excluding Finance and Business group) including Public image, Research development, Human resource, and Strategic cooperation, Events (10.2 percent), Cooperation with other companies (9.4 percent) and Positive images (6.5 percent) were the most mentioned information group. It shows that banks have actively cooperated with other companies (fintechs, insurers, etc.) to launch new products that are more suitable to the trend and customers’ needs.
