The development of digital banking in Vietnam is showing a fair practice, in which position and efficiency depend on vision, strategy, investment efforts and ways of doing, and are not necessarily based on particular advantages or scale.
In Vietnam, state-owned banks are having their own advantages in capital mobilisation and lending with a long-term relationship with large customers. However, in the field of digital banking, many private joint stock banks have been creating their own advantages to rise.
Surprises from low starting points
In 2013, PetroVietnam Finance Joint Stock Corporation (PVFC) merged with Western Bank. One of the biggest difficulties at that time was connecting the technology system between the two parties.
When piecing together as a whole system, it required a large investment costs. Western Bank, during the merger faced difficulties in resources, while PVFC was a large-scaled unit in a model of a finance company. However, technology is the first project that needed to be dome, in order to quickly operate a new bank after the merger Vietnam Public Joint Stock Commercial Bank (PVcomBank).
Unexpectedly, a few years later, PVcomBank was one of the few Vietnamese banks to have a relatively complete mobile banking service application (app) with many outstanding utilities in the market. It has early offered online savings and instalment savings on this app, while some large banks with a half a century of experience were still struggling in deploying.
Also having a low starting point compared to many other members, Tien Phong Commercial Joint Stock Bank (TPBank) over four years ago was still a small bank. It also had a very difficult period and to self-restructure. TPBank is also a young bank which was established in 2008.
However, after being successfully restructured, TPBank is creating a phenomenon of profit growth, continuously being in the top in the system in recent years. And one of the driving force is digital banking.
TPBank’s leader once said that TPBank chose digital banking strategy to create a unique direction. Digital banking strategy was selected because it is associated with the bank’s own strengths. TPBank’s Board of directors (BOD) considers this as a solution to quickly shorten the distance with other members, as well as to create new position with better competitiveness.
Accordingly, instead of focusing on expanding the network as a traditional bank model which requires large investment costs, high personnel and operating costs while the lag profitability is long, TPBank has prioritised digital banking with lower comparative costs but higher efficiency, especially in capturing the trend of market demand.
Of course, it depends on how to do it, but so far, TPBank has been successful in the early stages of implementing that strategy.
As mentioned in the above, investing in technology to develop digital banking requires large resources. This requirement partly explains the steps that are still quite low of banks of which the total assets reach around 1,000 trillion dong over the years.
It takes time to significantly change the technology of a large system. In fact, it was not until the end of 2018 that Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) completed the Core Banking project and it was called a “transformation”. Meanwhile, previous audit information still showed that Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) still needs to upgrade its technology aged many years ago, and it is expected to really be “reformed” by the end of this year.
Meanwhile, in the group of private joint stock banks, despite early taking initiative in technology, since 2017, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has determined to continue to spend 200 million US dollars of budget for technological investment, ensuring that it will not be out of date in at least 10 years.
Or when many commercial banks started to strongly participate in consumer credit and this segment has shown signed of saturation, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) more than three years ago prepared and has in turn launched numerous new products to the market under the strategy of developing digital banking. At that time, VPBank’s general director Nguyen Duc Vinh once said that profit from digital banking in the near future will be an important component to balance with consumer credit.
Profit from digital banking has step by step been seen at the above typical cases, such as TPBank, Techcombank and VPBank, with increasing proportion of service revenues in the recent years.
In directly, the above strategy has been helping commercial banks improve customer base, set up their ecosystems to increase other benefits, especially in improving and raising the amount of Current Accounting Savings Account (CASE) to indirectly increase the value of credit collection, promote cross-selling of other products such as insurance, etc.
More importantly, the value from digital banking is not just inward.
According to leader of HCM City Development Commercial Joint Stock Bank (HDBank), digital banking, in addition to the value in management and operation of each bank and in the development of products and services, also creates values through solutions for customers.
At HDBank, considering the ecosystems with Vietjet and HDSaison alone, the design of specific products and specialised solutions on a digital platform to manage and integrate the agent chain operation from payment, cash flow management to credit, has stimulated additional benefits and values for the whole ecosystems.
By identifying the needs to proactively create its own ecosystem with new solutions, VPBank has built BIZPAY service, a product considered as the current strategic focus with concentration on small and medium-sized enterprises.
However, it is not easy for the current digital banking spearhead to overcome practical barriers in order to further increase value. The barriers can be the legal framework which awaits completion in some aspects, the habits and certain hesitance of customers, especially in the context of the technological innovation requirement which is associated with costs and higher transparency, etc.
In another direction, the participation and development of Fintechs and the growth of models such as MoMo, Grab, etc. or even MobileMoney in the near future, which are going to create their own ecosystems, will more or less compete with commercial banks’ operations. And this is a new trend.
