Digitising banking activities is developed by many banks in order to create competitive advantages as well as to form new products and services. The development of digital banking is driven by the Project on developing cashless payment in Vietnam for the period of 2016-2020, with the goal of bringing the proportion of cash to total means of payment to below 10 percent by the end of 2020.
According to statistics of the State Bank of Vietnam (SBV), as of the end of December 2018, the interbank e-payment system processed 137,594 transactions, worth 73 million dong, 13 times higher than GDP. However, the digital banking segment in Vietnam has many potentials and challenges to develop in the future.
According to Rong Viet Securities Joint Stock Company (VDSC), by the end of the second quarter of 2019, 164 million bank cards were issued. The number of bank accounts is nearly 43.2 million, equivalent to 45 percent of the population. However, according to VDSC’s assessment, this rate is still relatively modest compared to other emerging countries and other marginal markets. In addition, according to the World Bank data, the number of ATMs in Vietnam is only 24.3 per 100 thousand adults, which is lower than similar countries.
Contrary to the level of penetration of banking services, Vietnam’s digital infrastructure (related to internet and mobile usage) has a relatively high level of development, with the number of internet and mobile phone users in 2018, respectively, 55.2 million and 45.8 million, accounting for 57 percent and 45 percent of the population. In particular, the penetration rate of smartphones has increased sharply in the past five years, especially in big cities, reaching 84 percent in 2017.
It is forecasted that internet and mobile penetration will continue to expand and Vietnam will reach 60 million internet users and 55.4 million mobile phone users by 2022.
Thus, Vietnam is a country with low penetration level of traditional banks but the digital infrastructure has developed quite strongly. This means that as the level of penetration of banking services in general is strengthened, Vietnam will have a greater potential to promote the development of digital banking transactions in the medium term than other countries.
In addition to the advantages and potential of developing digital banks, Vietnam still has noticeable challenges that are not easy to solve in a short time.
Firstly, the majority of Vietnamese people still have the habit of using cash in daily payment. Since the start of the Cashless Payment Development Project in 2016, the ratio of cash to total means of payment still improves slowly.
According to a FT Confidential study, in Vietnam, more than 46 percent of respondents only use cash when paying. This is much higher than countries like the Philippines (34 percent) and the rest of the Asean countries (only at 20 percent or less).
Secondly, the capacity of financial information security in digital environment is limited in Vietnam. The published data of Ernst & Young Vietnam shows that in 2018 there were 8,319 cyber attacks related to banking activities in Vietnam; 560,000 computers were affected by malware that could steal bank account information. Vietnam ranked 7th globally in the target of the Trojan attack (malicious programme disguised with benign appearance) in 2018.
Thirdly, there is a shortage of legal regulations. The digital payment segment currently grows very fast with technological advances. However, domestic legal regulations have not kept pace, making banks reluctant to apply new technologies and services outside the allowed framework.
For example, Vietnam does not have a legal framework for data sharing, mining, and storage, so banks have not been able to put cloud computing or block chain to their mass applications.
However, in August, the government approved the Project to promote the sharing economy model, which allows the implementation of a new policy testing mechanism for the deployment and application of new technologies in the model. This is also a method that has been successfully applied by many countries in the past and is expected to help shorten the time to study and issue new laws on digital banking to keep up with the continuous development of technology.
