Vietnam Report had officially announced the list of Top 10 prestigious commercial banks in 2020 and researches on the banking industry under the impact of Covid-19.
Banks worried about falling profits, rising bad debts
According to a report of the Vietnam Report, in the first six months of 2020, the whole industry faced difficulties due to the Covid-19 pandemic despite the lag in the impact thanks to industry-specific characteristics. The three most apparent consequences of the banking industry in the first six months included the declined profit, the increasing bad debt and the reduced income of workers in the industry.
However, in such a context, the banking industry also had some notable highlights in the first six months of 2020. Banks had been proactive in supporting people and businesses affected by the pandemic by issuing interest and fee reduction programmes with existing loans as well as debt restructuring and debt rescheduling for customers.
Besides, banks also promoted digital banking services, non-cash payments, and developed other consumer services associated with e-commerce. The mode of operation of banks had changed to allow transactions at home, towards electronic processing. The State Bank of Vietnam (SBV) also allowed authentication of electronic signatures associated with the bank’s development conditions.
According to SBV, this year, credit growth was about 10%, lower than the previous year. The survey of Vietnam Report with commercial banks also showed that 69 percent of banks rated the growth prospect in 2020 to be slightly lower than in 2019, 15 percent of banks thought that they would maintain the growth rate of previous years and only 8 percent said that the growth was positive and slightly better. This showed that credit growth this year would have strong differentiation.
Five new normal trends in the banking industry
In the context of economic difficulties due to the epidemic, besides challenges, there were still many opportunities for the banking industry. Both opportunities and challenges would be the motivation for banks to maintain their creation, converting to be more suitable to new market conditions. Vietnam Report stated that there were five new normal trends in the banking industry.
The first was the trend of standardisation and merger acquisition. At the request of the government in Decision 986 to Decision 2025, banks must meet Basel II standards, and some banks could pioneer Basel III, as well as accounting and auditing international standards and information management, corporate governance in the banking sector in particular. Also, the impact of the EU-Vietnam Free Trade Agreement (EVFTA) on the banking sector would create a driving force for Vietnamese commercial banks to quickly innovate and standardise operations to enhance their competitiveness with international banks. EVFTA also created opportunities for commercial banks, especially banks lacking capital to meet Basel II standards, creating a robust M&A wave in the banking sector. With the participation of EU strategic partners, domestic banks would have access to modern management and technology as well as state-of-the-art banking and financial products.
The second was open banking, which would open up opportunities for banks to develop new services and add value by empowering their customers to understand their financial situation, explore options quickly, then to choose alternatives and make better financial decisions. This not only enhanced the experience of consumer banking but also increased competition in the market, thus encouraging cooperation and innovation between banks and fintechs. This had driven an API-rich economy among banks, expanding their ecosystems and eventually developing the overall financial services ecosystem.
The third was banking on the cloud network. To compete in the new era of financial services, all banks need to ensure their technology was in line with their business strategy while reducing costs, leading to an increase in demand for cloud saving to any type of business. Cloud technology enabled rapid development, helping bring new products to market quickly and seize opportunities in the shortest possible time. Cloud banks provided scalability and elasticity as well as operational efficiency and reduced costs, space and enhanced the security of document storage and management.
The fourth was cross-selling of financial and banking products continuing to be promoted. The trend of cross-selling of financial and banking products would continue to be healthier, such as between commercial banks and investment banks, between banks and insurance in securities, to create an ecosystem for customers, while helping banks increase non-interest revenues.
The fifth was the trend of strengthening and cooperation between banks and financial technology companies and other organisations to create a better and comprehensive ecosystem for customers. This was both a trend but also an opportunity and a challenge for the banking system. The challenge for banks was how to connect with these partners, in addition to the need for big data at the national level and each business. That database was standardised and shared by each other. Along with that were challenges of network information security, customer security, customer property information security.
