Digital transformation has become a mandatory requirement for the banking industry in the new context. It’s a long way from digitizing services to having a brand new digital bank emerge. There are great opportunities but many new challenges for banks.
Switching pressure
Currently, 100% of banks have digitized most of the activities and services of traditional banks thanks to the application of new technology. With strong digitization of services, customers save time and minimize procedures when transactions can be done anywhere, anytime. At the same time, digitization also helps increase work efficiency, save costs and increase competitiveness for banks.
However, digital transformation in the Vietnamese banking system is only in the first stage, which is the optimization and digitization of traditional services. According to experts from EY Consulting Joint Stock Company (EY Consulting Vietnam), digital transformation anywhere must go through 3 stages. First, optimize the number of traditional banking services. Second, create a digital platform in a bank. Third, form a new comprehensive digital bank.
Currently, a completely new digital banking model has begun to appear in Vietnam in the form of experimental sub-banks in traditional parent banks. In early March 2023, OCB launched Liobank digital bank. Before that, the market knew the first name Timo – now operating in Viet Capital Bank. Meanwhile, VPBank is investing in Cake, and MSB has Tnex… Currently, digital banking pilot models in Vietnam are still operating under the license of the parent bank.
Bank digital transformation is an inevitable development trend and a mandatory requirement that is no longer the choice of the banking industry. Especially when banks are targeting young customers who have a habit of using technology for transactions and payments. The results of Chase’s attitude research on digital banking show that 98% of Generation Y (Gen Y, born between 1981 – 1996) and 99% of Generation Z (Gen Z, born between 1997 – 1996 – 1996). 2012) often use mobile applications to make payment transactions instead of going to the bank. The mission of banks is not only to meet the needs and expectations of current users, but also to anticipate the future.
In Vietnam, digital transformation in the financial – banking sector is considered as one of the priority orientations of the Government. On May 11, 2021, the Governor of the State Bank (SBV) issued Decision No. 810/QD-NHNN on “Plan for digital transformation of the banking industry to 2025 with orientation to 2030”.
The SBV sets a target for the milestones of 2025 to 2030, equivalent to 50-70% of banking operations allowing to be performed entirely on digital channels; 50-80% of adults use electronic payment services; 70% of customer transactions are done through digital channels; 60-80% of units have revenue from digital channels reaching over 30%; 50-70% of disbursement decisions of banks and financial companies for small loans, personal consumption loans are digitized and 70-90% of work records are stored/processed in the environment. number.
In recent years, most banks in Vietnam have made serious investments in expanding digital banking services and establishing a comprehensive digital banking ecosystem. In particular, the Covid-19 shock has accelerated the digital transformation process of banks in Vietnam by 3-5 years.
Up to now, many banks have reshaped their strategies and identified digital transformation as an option to survive, catch up with trends and create competitive advantages in the context that technology is dominating all fields. in the economy and consumer habits. In the first stage of the long journey of digital transformation, banks focus on the fastest digitization of existing services to bring to the digital space, while sparing no money to invest in the optimal digital platform to make a difference. .
The challenge of converting
Pham Quang Minh, General Director of Mambu Vietnam, said that: Developing digital banking is a strategic goal of most banks in order to respond to the change of the economy, the digital age as well as to meet the needs of customers. consumer demand. Taking advantage of digital technologies such as cloud computing, big data, artificial intelligence, process automation, banks have been continuously converting traditional processes to digital services both in internal and digital channels serving users.
In addition to enhancing user experience, improving data integration efficiency and automating processes, digital transformation at banks is moving towards a higher level of understanding of digital customers through digital channels. behaviors, needs and preferences to personalize services while enhancing data security.
Over the past time, many banks have actively applied digital technology to banking activities, providing safe products, services and utilities. Many banks actively cooperate with big technology firms and Fintech companies to launch a new generation of digital banking (Neobanking) aimed at young customers, focusing on superior customer experience only on digital channels.
According to the State Bank of Vietnam, 95% of Vietnamese credit institutions have been developing and implementing a comprehensive digital transformation strategy, applying technical solutions and new technologies in service provision to simplify service delivery. streamline processes, shorten service delivery time and support customer assessment and classification.
By the end of 2022, many banks have recorded that more than 90% of customer transactions are done via digital channels, exceeding the target set in Decision 810/QD-NHNN 2021 on digital transformation plans of 70%. by 2025. The digital banking and payment ecosystem has been established by connecting digital banking services with many other digital services in the economy, bringing seamless experiences and great benefits. for service users in the digital space.
Currently, Vietnam has about 30 million people using the Internet banking payment system every day. The growth rate of transactions on mobile banking in Vietnam is 200%. The value of money transactions with the mobile phone channel alone is about 300 trillion VND/day.
The process of bank digital transformation in Vietnam in recent years has achieved positive results. This has been creating new opportunities but also posing new challenges. Digital transformation of the banking industry requires huge investment costs for technology, a shortage of highly qualified personnel… while always facing risks in security issues, the increasing trend of technology crimes; Meanwhile, the legal corridor is still slow to complete compared to the development, many legal gaps are creating risks for banks in the transition.
However, many banks have taken steps to overcome difficulties to both meet legal requirements and implement digital banking applications.
In the long term, banks need to have a basic and methodical digital banking strategy with the determination to consider digital transformation as a vital goal; strongly apply digital technologies to banking activities to provide banking products and services on digital platforms. At the same time, digital banking services must be thoroughly analyzed and evaluated before being applied. There are applications that can be deployed immediately, and there are applications that take years to develop. It is necessary to persevere in implementing the core and comprehensive foundations to create a real digital bank.
It is a fact that banks are racing to upgrade services and develop applications rather than making large investments in data and technology platforms. Experts say that banks should have a comprehensive digital transformation strategy, need to invest in transforming both core systems and big data platforms to make a difference in both customer experience and service products. service.