Digital bankingwhy is it still difficult
Sharing at the seminar ‘Smart start in the journey of digitising banks’ in the framework of FPT Techday 2019 taking place on November 21, Duong Dung Trieu, Chair of FPT Information System (FPT IS) Board of directors, said, most Vietnamese banks were still traditional banks, operating mainly on physical branch system and digitising internal processes.
The Chair of FPT IS had given the question of whether banks could provide credit to individuals within a working day or not to the leaders of several large banks in the country, and received the ‘no’ answer.
Despite many movements, the digital transformation of the Vietnamese banking system was still quite slow. In many banks, the process of credit granting went through dozens of steps. Meanwhile, with some models of digital banking in the world, the process of credit was only in minutes.
Alex Kling, Digital director for Ernt and Young (EY) Asean Regional Financial Services, said that more and more banks around the world were turning to digital banking.
In Vietnam, according to Trieu’s analysis, digital banking was underdeveloped due to some difficulties. The first was the legal barrier. In spite of the State Bank of Vietnam (SBV) and the government’s support, risk control was still an issue that worried the agency. The second was the inadequate awareness of the investment in digital banking of the banks’ leaders. Many leaders still fretted about the commensurate profits when investing in digital banking. The third was the incomplete technology of banks.
As a technology company that had successfully implemented digital transformation for several banks in the world, such as Japan and the US, FPT was eager to support Vietnamese banks in digital transformation.
According to Trieu, the digital transformation would help the bank increase customer experience based on data analysis, customer behavior to offer appropriate services, marketing strategies, or customer care programmes. At the same time, digital conversion also helped banks run their business more efficiently, reducing costs and increasing profits.
On the side of Vietnamese banks, Phung Duy Khuong, deputy general director of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), also affirmed that the benefits of digital banks were enormous.
According to Khuong, at the beginning of the year, when making a plan, VPBank’s leadership set a requirement to increase labour productivity by 30 percent to 40%, cut the process from 18 steps to five steps. Following the traditional banking model would hinder improving labour productivity by 30 percent to 40 percent annually because the cut could not be permanent. However, if VPBank applied digitisation, changed the rules of the game, labour productivity would be improved by 100%, not only 30 percent to 40%, the process could be shortened to only one step, not just five steps. Furthermore, this thereby would increase revenue, reduce costs and well control risks.
Opportunities to change the throne and pressure on the banks
Appreciating the efficiency of digital bank conversion, Khuong also said that one of the most risks of digital banks was that the throne could easily be swapped. A bank was once in the top 10, but with the development of technology, in a short time, it could quickly climb to the top one.
However, in the immediate future, the problem of how short-term raising ensure the maintenance of annual profit, but still having enough budget for investing in digital banks, convincing all bank leaders to invest in was a difficulty for many bank leaders.
Nguyen Minh Tam, deputy general director of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), said that the digital transformation was extremely pressure but also exciting. Digitising the business was not only outside but also from the inside. As at Sacombank, just changing paper bills into electronic invoices can save 10 billion dong every year. However, digital conversion required consensus to achieve the highest efficiency.
Talking about the consensus, many banks’ leaders shared that, at present, the technology department and the business department of many banks had not yet matched with each other, blaming each other for unsold products. The technology side of the business department was not knowledgeable to advise customers, while the business division blamed the technology for being not so good. Therefore, the leaders of banks must combine the work of the two departments to achieve the highest results.
Sharing coordination experience, Huynh Buu Quang, Vietnam Maritime Joint Stock Commercial Bank (MSB)’s general director, said that at MSB, business and technology were inseparable. The products given to both parties must be uniform, and both sides had joint responsibility for the sale of the product.
Leaders of many banks also acknowledged that the pressure of digital transformation was immense, especially in increasing experience and increasing customer satisfaction. For example, with the traditional model, if the service was slow, bank staff could apologise to customers, offer cakes, tea, but with a digital bank, only a slow of 10 seconds could make the customer exit the application. Therefore, digital transformation required banks to brainstorm regularly, continually creating and innovating to retain customers.
