With the goal of creating an academic forum for scholars, researchers and practitioners to discuss challenging issues in the fields of financebanking, currency and macroeconomics Every year, on December 5 in Hanoi, the Banking Academy organised the first International Conference on Finance and Banking under theme ‘Banking system and the fourth industrial revolution’. In particular, the discussion session on ‘Digital banking development in 4.0 Industrial Revolution’ received special attention from the participants.
Sharing at the seminar, Bui Tin Nghidirector of the Banking Academy, said that 4.0 Industrial Revolution and international economic integration were taking place strongly on a global scale, opening up many opportunities and challenges to all production and business sectors. The finance-banking industry was also not out of this trend when advances in science and technology did and would change the structure, mode of operation and provision of financial and banking services.
Presiding over the discussion on digital banking development, Phan Thanh DucHead of Management Information System Department of the Banking Academy cited the profit figures of 17 banks listed on the stock market all had good growth over the years. In such outstanding results, digital conversion and digital banking had contributed a significant part.
Also agreeing that the role of digital banking was important, Can Van Luc, chief economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) citing the case of BIDV, said that the current contribution of digital banks was about 37 percent to 40 percent of the total service revenue of the bank and was expected to increase even more in the near future, in line with a recent McKinsey survey that identifies banks in Asia moving toward 2020, revenues from bank services might account for about 44%.
However, Can Van Luc also raised three major challenges to the banking system. The first was the issue that needed to be addressed in institutions for the operation of the economy in general and the banking system in particular. The second point was related to infrastructure and the third was people. One of the bottlenecks in competitiveness also mentioned by BIDV’s chief economist was about the workforce, more specifically, the skills of the Vietnamese workforce were still very poor, especially the inadequate skills of new-graduated students. The report of the International Labour Organisation (ILO) also showed that the highly skilled labour force in Vietnam was only about 12 percent compared to the world average of 20%. Not to mention, the process of economic restructuring in general and the banking system, in particular, was slow compared to the requirements. Currently, BIDV was trying to change the revenue structure in banking activities, service revenue was still around 11 percent to 12%. While according to the State Bank of Vietnam (SBV)’s Decision 986, net service fee collection requirements would account for 12 percent to 13 percent in 2020, and 16 percent to 17 percent in 2025. The conversion was relatively slow compared to the current context, Luc frankly acknowledged.
Focus on the pillars
Discussing the strategy of the SBV’s initiative in developing digital transformation towards digital banking, Pham Xuan Hoe, deputy director of the Banking Strategy Institute of SBV commented that calculated among industries, the Banking industry was one of the industries that would be most strongly affected by 4.0 Industrial Revolution. Recognising that, SBV had quickly implemented the prime minister’s Directive 16 on May 4, 2017, on strengthening access to 4.0 Industrial Revolution in the banking industry. Currently, the Draft on the Information Technology (IT) Development Strategy of the Vietnamese banking system would soon be signed for issuance. The Vietnamese banking system was taking very urgent steps in the application of 4.0 technologies. Most banks already had digital transformation strategies, in which key technologies of 4.0 were considered for applied research. According to a summary of the reports sent to the Institute of Banking Strategy, artificial intelligent (AI) and machine learning had been researched and deployed by 20 percent of banks, Big Data was used to analyse customer behavior and score credit ratings, cloud computing was used in online training or sales, and so on.
In fact, digital transformation was seen as an increasing customer experience. Sharing the orientation of the digital transformation of Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Tran Cong Quynh Lan, deputy general director of VietinBank said that this bank’s digital transformation strategy was divided into four sections. The first was the application of technology to transform the customer experience, when customers interacted with the bank, improve the experience of all communication channels with customers so that only by mobile phones customers would be able to perform all services most conveniently and smartly. About how to get customers to the branch, the bank had a face recognition system, no need to check identity card. The second was that the bank must use technology to digitise its processes. The third was about digitising products, the bank combined financial products and technology products providing to customers. The fourth was creating an ecosystem between banks and different industries in each field.
Mobile was becoming the largest transaction channel of VietinBank, currently three times higher than the number of transactions via the internet. An important characteristic to encourage transactions via mobile channels was to ensure that the technology was friendly, fast and easy to use, Lan said.
Standing on the perspective of a Chief Digital Officer (CDO), Nguyen Minh Duc, the CDO of Military Commercial Joint Stock Bank (MBMBBank), recognised the value of a bank in the data. However, deploying the process of banking data management was not focused in recent days, was also not simple. However, without the first step, banks could hardly go far in digital transformation. Data management would need and should be separated as a new field, also need to consider data sharing mechanism; training and developing human resources for the data industry in general.
