1.1.Rationale Banking can simply express as the business of keeping, lending, exchanging and issuing money. The Key business priorities of the banking and financial services industry are Efficiency, Growth and Resilience. The technology helps the sector to fulfill the requirements of the business priority areas. Implementation of information technology began in right earnest in the sector. Starting from back office automation, which was aimed largely at processing of voluminous data and automation of cheque clearing operations; the technology moved to the front desk in the form of total branch automation. At the same time, the development in communication technologies made technology implementation more widespread and it became cost effective to network bank branches. Investments in information technology also helped cut down operational costs drastically. Technology means application of knowledge or a technical process method or emerged as powerful tool to reduce operating costs, making it viable for financial institution to expand into rural and low-income areas. Technology plays an important role in Financial Services for monitoring and controlling of their services; currently some of the technology use by financial institutions (FSIs) These help FSIs to provide efficient, better customer service, greater product variety, shorter response time, enhanced product quality and better customization of products and services. There are about 4 billion unbanked people in the world which is more than two third of the population of low- and middle-income countries financial institution such as commercial bank is still unable to reach poor population, because of high cost for building and maintain branch network and developing. According to Nielsen''''''''s Insights 2017 Report, Vietnam thein Vietnam in 2017 was 84%, an increase of 6% from the previous year. More notably, in rural areas, 68% of the population now use smartphones. The above figures show an impressive trend – the ubiquity of smartphones and tablets. Habits and behaviors of people in all regions, of all classes and ages are changing. Online services, whether for shopping, making friends, exchanging information, or dating, are becoming more popular. The Banking sector is no different. Users expect to be able to access and use banking services at anytime, anywhere and on any device. Each bank has its own approach to digital banking, which focuses on the customer experience or the ability to provide online services. However, these options can only be successful when delivering the best value to the customer. Right from the start, Techcombank has focused on technology, believing it to be the best way to serve customers and promote business development. During 26 years of operation, Techcombank has continuously strengthened its systems and capacity to best meet the needs of customers. In recent years, Techcombank’s application of technology has delivered remarkable progress, creating breakthroughs to improve operational efficiency and customer satisfaction. The aim is to identify and understand the changes that ICT is causing on the banking sector, in order to examine in detail how the recent (and foreseeable) advances in ICT are affecting the sector and can affect its future evolution. As ICT is having a strong influence on the evolution of the banking, the study investigates the influence ICT has on the banking sector and the payments system. Therefore, the purpose of this study was to investigate the relationship between ICT and bank performance, and case study in Viet Nam Technological and Commercial Joint stock Bank (Techcombank) 1.2.Research objectives -To evaluate the status of technology implementation in banking sector. -To analyze the impact of Information technology adoption on the performance of banking sector. -To estimate the relative efficiency and productivity of banking sector in pre and post e banking revolution period. -To draw some policy implications based on the findings emanated from the study 1.3.Research questions -What is theoretical framework of information technology applied for the Sale Performance at Techcombank? -How is the impact of information technology factors influencing on Techcombank Sale performance? -What are the main factors which affect to Sale performance at Techcombank? -What should Techcombank do to improve Sale Performance via Information Technology?
NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL NGUYEN VAN HAI THE IMPACT OF INFORMATION TECHNOLOGY ON BANKING SALES PERFORMANCE CASE STUDY IN TECHCOMBANK MBA THESIS HÀ NỘI-2020 NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL NGUYEN VAN HAI THE IMPACT OF INFORMATION TECHNOLOGY ON BANKING SALES PERFORMANCE CASE STUDY IN TECHCOMBANK MASTER OF BUSINESS ADMINISTRATION IN ENGLISH MBA THESIS SUPERVISOR: Associate Professor Ph.DVU DINH HIEN HÀ NỘI-2020 ACKNOWLEDGEMENT First, I would like to send thanks to my thesis supervisors, Associate Professor Doctor Vu Dinh Hien, who instructed and taught me a lot, gave me his valuable time and preciuos comments to contribute much to my thesis Second, I send my sincere thanks to managers and colleagues at Techcombank Vietnam for catering me in collecting full and accurate data in research process Finally, I also would like to thank my family and friends for their support in finishing this thesis Thank you very much! October 2020 Nguyen Van Hai TABLE OF CONTENTS ABBREVIATION ICT: Information Communication Technology Techombank: Viet Nam Technological and Commercial Joint stock Bank CRM: Customer relationship management EFA: Exploration Factor Analysis FSIs: Financial institutions ROA: Return on Asset ROE: Return on Equity LIST OF TABLES LIST OF FIGURES Figure 1.1: Research process 12 Figure 2.1: Oganizational structure of TCB 28 Figure 2.2 Working Experience in the Banking Industry .38 Figure 2.3 Position Held in the Organization 40 Figure 2.4 Level Education 41 Figure 2.5 Aspect of Performance 45 CHAPTER 1: INTRODUCTION 1.1 Rationale Banking can simply express as the business of keeping, lending, exchanging and issuing money The Key business priorities of the banking and financial services industry are Efficiency, Growth and Resilience The technology helps the sector to fulfill the requirements of the business priority areas Implementation of information technology began in right earnest in the sector Starting from back office automation, which was aimed largely at processing of voluminous data and automation of cheque clearing operations; the technology moved to the front desk in the form of total branch automation At the same time, the development in communication technologies made technology implementation more widespread and it became cost effective to network bank branches Investments in information technology also helped cut down operational costs drastically Technology means application of knowledge or a technical process method or emerged as powerful tool to reduce operating costs, making it viable for financial institution to expand into rural and low-income areas Technology plays an important role in Financial Services for monitoring and controlling of their services; currently some of the technology use by financial institutions (FSIs) These help FSIs to provide efficient, better customer service, greater product variety, shorter response time, enhanced product quality and better customization of products and services There are about billion unbanked people in the world which is more than two third of the population of low- and middle-income countries financial 10 institution such as commercial bank is still unable to reach poor population, because of high cost for building and maintain branch network and developing According to Nielsen's Insights 2017 Report, Vietnam thein Vietnam in 2017 was 84%, an increase of 6% from the previous year More notably, in rural areas, 68% of the population now use smartphones The above figures show an impressive trend – the ubiquity of smartphones and tablets Habits and behaviors of people in all regions, of all classes and ages are changing Online services, whether for shopping, making friends, exchanging information, or dating, are becoming more popular The Banking sector is no different Users expect to be able to access and use banking services at anytime, anywhere and on any device Each bank has its own approach to digital banking, which focuses on the customer experience or the ability to provide online services However, these options can only be successful when delivering the best value to the customer Right from the start, Techcombank has focused on technology, believing it to be the best way to serve customers and promote business development During 26 years of operation, Techcombank has continuously strengthened its systems and capacity to best meet the needs of customers In recent years, Techcombank’s application of technology has delivered remarkable progress, creating breakthroughs to improve operational efficiency and customer satisfaction The aim is to identify and understand the changes that ICT is causing on the banking sector, in order to examine in detail how the recent (and foreseeable) advances in ICT are affecting the sector and can affect its future evolution As ICT is having a strong influence on the evolution of the banking, the study investigates the influence ICT has on the banking sector and the payments system Therefore, the purpose of this study was to investigate the relationship between ICT and bank performance, and case study in Viet Nam Technological and Commercial Joint stock Bank (Techcombank) 1.2 Research objectives - To evaluate the status of technology implementation in banking sector 48 machines, Internet Banking, Mobile Banking …in carrying out business activities This finding of the study supports the findings of the similar studies carried out earlier by the researchers For instance, Simpson, (2002) reveals that electronic banking is motivated largely by the prospects of operating costs minimization and operating revenues maximization An evaluation of online banking in developed andemerging markets reveals that in developed substitute for physical branches for delivering banking services Majority of the respondents indicated that their banks had adopted to a great extent innovation such as automated teller machines, Internet Banking, Mobile Banking, Email, ICT Project among other components of ICT.This finding of the study appears to validate the findings of the earlier studies “Egesa (2006) studied Customer Adoption of Tele-banking Technology in the Kenyan banks and found thatcustomers increasingly extend their use of tele-banking as their experience grows with the system and that education played a vital role in the adoption and usage of telebanking technology” Other studies in agreement of these findings are those done by Young In their research, De Young et al (2007) analyzed the effect of e-banking on the performance of banks by studying US community banks markets and compared the performance of virtual click and mortar banks with brick and mortar banks” Their findings concluded that e-banking improved the profitability of banks hence increasing their revenues Also, E-banking is largely driven by the factors of minimizing the operating costs and maximizing operating profit, suggests Agboola (2002) According to Dabholka (2002), the ebanking adoption factors are divided into two categories: Factors relating to the infrastructure and accessing technology, factors that are related to retail banking factors The prior factors include skills on the part of consumers in using internet and other related technologies, attitudes towards technologies, internet penetration rate, privacy and security concerns Later involves factors like banking culture, e-banking culture, trust in banking institutions and internet banking push However, lack of PC and internet penetrations serve as barriers for development of e-banking Also, in their study conducted in Turkish retail banking sector Hawkins (2001) concluded that e- 49 banking decreases operational costs and it amplifies customers' satisfaction and retention hence increasing the financial performance of the banks The study set out to find the impact of ICT on profitability of the commercial banks and in deed the finding was positive affirming that relationship This supports other studies which have been carried out in this area For instance, Kozak (2005) investigates the influence of the evolution in Information Technology on the profit and cost effectiveness of the banking zone during the period of 1992-2003 The study indicates optimistic relationship among the executed Information Technology and together productivity and cost savings Brynjolfsson and Hitt (2000) indicates that "Information Technology contribute significantly to firm level output." They determine that Information Technology capital contributes an 81% marginal increase in output, whereas non-Information Technology capital contributes 6% Likewise, they illustrate that Information System professionals are more than twice as productiveas non- Information System professionals From the findings, majority of the respondents revealed that ICT had positively contributed to improvement of asset quality of the commercial banks This corroborates a number of similar studies carried out earlier For instance, Haq (2005) states that banks exist because of their ability to achieve economies of scale in minimizing asymmetry of information between savers and borrowers and hence improving the asset quality The unit costs of Internet banking fall more rapidly than those of traditional banks as output increases as a result of balance sheet growth In this context, De Young et al (2007) refer to the Internet banking as a "process of innovation that functions mainly as a substitute for physical branches for delivering banking services" 50 CHAPTER 4: SUMMARY, CONCLUSION, RECOMMENDATIONS 4.1 Summary The purpose of the study was to establish the impact of ICT adoption on the Bank Sale performance of commercial banks in Viet Nam, case study TCB The study was carried out using aquestionnaire that was administered to senior managers of TCB Staff.The banking industry which is the back bone of every economy is confronted withvarious challenges such as globalization, deregulation, competition, significant high costof installing ICT and maintenance The usage of ICT can lead to lower costs, but theeffect on profitability remains inconclusive, owing to the possibility of ICT effects thatarise as a result of consistence high demand of skilled work force, issues ofincreasing demand to meet customer's expectation for customer service delivery,trustworthiness of the information system and competition in financial.The study found out that the adoption of ICT had improved their operations, not only increased their marketcoverage but also remained competitive in the market The study also found out that ICTimproved the earnings in commercial banks TCB studiedrevealed that there was growth of sales of 25% from the year 212 to 2018.The reportedearnings and growth in Sale performance over the period covered can be attributedpartly to ICT We can therefore conclude that the adoption of ICT can improve earningsin commercial banks.In general, the study shows the realization of the benefits in relation to ICT could be thereason why adoption of ICT by TCB has been very high in recentpast It is quite evident from our study that enhancing ICT in the banking industry is amust in a rapidly changing market place, as the ICT revolution has set the stage forexceptional increase in financial activity across the globe 4.2 Conclusions From the study, it can be concluded There is a positive impact of ICT on Sale performance of TCB Competition among banks in Viet Nam has ledto continuous innovation in ICT products The improved performance was as a result ofreduced costs of financial transactions that can be attributed to ICT Majority ofcommercial 51 banks in Viet Nam have invested their resources in new products andtechnology innovations such as automated teller machines, Interner Banking, Mobile Banking, Email, ICT Projects These aspects of ICT have helped the banks in carrying out business activitiesmore effectively and efficiently The importance of ICT by commercial banks was ratedhigh Adoption of ICT by commercial banks also improved firms' performance.To successfully cope with the challenge of the ICT, the banking sector mustunderstand the nature of the changes that revolves around them, changes in terms ofICT, Innovation and Demography Without this understanding, attempts to migrate toICT may be doomed to failure Today, banks that are well equipped with a goodgrasp of the electronic banking phenomenon will be more able to make informeddecisions on how to transform ICT and to exploit the opportunity in electronic banking.In today's competitive market, establishing core capabilities can help the bankingindustry reorganize their product and customer service delivery, so as to sustaincompetitive advantages and to achieve congruence whilst shifting from the conventionalbanking to electronic banking and hence enhance the financial performance of theinstitutions 4.3 Recommendations Based on the findings and conclusions of the study, the following recommendations havebeen suggested in relation to ICT There is need for commercial banks to adopt ICT sincethis will provide the benefits of constant access to certain core services and reducing theneed for one to go to the banking hall ICT adoption by the banks has promptedagreements to share systems through between banks and the development of cash pointsbeing installed in non-branch locations such as supermarkets; this means that aproportion of a particular banks customer base may no longer use the bank's branchnetwork at all Continuous ICT innovation will lead to increased customer satisfactiondue to more choices created of transacting business.Like many businesses, turnover in banks is high but liquidity is not necessarily high Adoption of ICT enables operations of commercial banks to be more efficient throughmaking financial services more available and reducing their costs This was mostlyachieved by technological innovations such as ATM, 52 Internet Banking, Mobile Banking, Email, ICT Projects Financial products thatare delivered through ICT are user friendly and promote banks revenues, increasedprofits, increase liquidity and lower the risks related to the usage of financial services The research therefore recommends that the banks seeking to improve Saleperformance should embrace ICT.Some financial innovations decrease risk and volatility associated with globalizingmarkets With greater globalization, firms, investors and governments are exposed to newrisks such as exchange, interest rate and political risks which ICT seek to manage TCB should proactively monitorcustomers preferences with regard to technological innovations such as ATMs and try toimplement these preferences in their features in order to enhance their functionalitiesleading to enhanced Sale performance REFERENCES Dr K Mala, (2017) In the impact of technology in the banking sector in India International Journal of Pharmaceutical Sciences and Business, 5(1), 1-7 G Tulasi Rao, T Lokeswara Rao, (2015) Role of Information Technology in Indian Banking Sector IOSR Journal of Business and Management (IOSR-JBM), 17(5), 80-84 H K Singh, Amar E Tigga, (2012) Impact of information technology on Indian banking services Research Gate, 2(1), 1-5 https://www.nielsen.com/pk/en/insights/report/2017/ Ibha Rani, (2016) A study of the impact of information technology in the Indian bankink industry Abhinav National Monthly Refereed Journal of Research in Commerce &Management, 4(6), 23-30 N M Nair, (2014) Role of Information Technology in Banking Sector in India IBMRD's Journal of Management and Research, 3(1), 334-346 Nielsen report [online], Address: Rajesh Tiwari, Rakesh Kumar, (2012) Information technology in the banking sector Asia Pacific journal of marketing and management review, 1(1), 25-33 Rebeena Alavudeen28 Dr Sr Rosa K D., (2015) Impact of Technological vadvancements in the banking sector International Journal of Information Technology & Computer Sciences Perspectives, 4(3), 1621-1629 S Gnana Sugirtham, (2014) Impact of Information Technology on the Profitability of Banking Sector in India International Journal of Management and Commerce Innovations, 2(1), 311-341 10 Sahem A Nawafleh, (2015) The Effect of Information Technology on the Bank Profitability Empirical Study of Jordanian Banks International Journal of Business and Management, 10(2), 170-175 11 Thyaga Raju N (2016) Impact of information technology (IT) on the banking sector International Journal of Current Advanced Research APPENDIX 1: QUESTIONNAIRE SECTION A: BACKGROUND INFORMATION OF THE RESPONDENTS What is your total experience in the banking industry? 1 year 2 - years 5 - 10 years Over 10 years How long have you worked with your current bank? 1 year 2 - years 5-10 years Over 10 years Kindly indicate your job designation Financial manager Business Manager IT manager Others (Please Specific) Please indicate the level of education Diploma First Degree Advance diploma Master’s Degree SECTION B: ICT AND BANK PERFORMANCE To what extent does this bank make use of the following technologicalinnovations in its operations? Use a scale of to where is to a very greatextent and is to no extent Technological innovation Mobile banking technologies Online Banking (Internet banking transactions) Electronic Email ATM deposits and withdrawals ICT Projects Other (specify) 6.Would you agree that the adoption of ICT is very important in the improvement of Sale Performance of commercial banks? Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree Please give reasons for your answer How would you rate the importance of ICT in the improvement of the Sale performance in the organization? Very high High Moderate Low Neglible Please explain To what extent has ICT improved the Sale Performance of the bank? Very great extent Great extent Moderate extent Low Extent No extent Please explain APPENDIX DEMOGRAPHIC STATISTICS OF RESPONDENTS Demographic Education level Experience in Banking Working time at current Bank Job designation N=170 Diploma Bachelor Degree Master Degree Doctor year From to years From to 10 years Over 10 years Under year From to years From to 10 years Over 10 years 140 24 18 91 42 19 76 39 17 Percentage (%) 2% 82% 14% 1% 11% 54% 25% 11% 22% 45% 23% 10% Financial manager Business Manager IT manager 38 108 24 22% 64% 14% (Source: Survey of author) APPENDIX SPSS EXPLORATION FACTOR ANALYSIS AND REGRESSION ANALYSIS RESULTS Cronbach Alpha and Exploratory factor analysis to Adjust motivational scale 1.1 Cronbach Alpha analysis The research will retest the scales through impact of ICT to Bank Sale Performance (Questionnare survey) To ensure the reliability of the scale, this study will remove the scales which have Cronbach Alpha less than 0.6 Also, retaining only those variables which have Corrected Item- Total Correlation greater than 0.3 ICT ( X) Scale: Table 1: Cronbach alpha of ICT (Time 1) Reliability Statistics Cronbach's Alpha N of Items 777 Item-Total Statistics Mobile banking Scale Mean if Scale Variance Item Deleted if Item Deleted 12.89 8.273 Corrected Cronbach's Item-Total Alpha if Item Correlation Deleted 806 635 Online banking 13.10 8.635 712 673 Email ATM ICTProject 11.88 11.66 10.49 10.724 10.094 12.796 522 536 200 745 740 831 After testing, the index is 0.777, high reliability and show that these variables are reliable to analyzing and there is no variable removed to increase Cronbach’s Alpha Table 2: Cronbach alpha of Bank Performance Reliability Statistics Cronbach's Alpha 918 N of Items Item-Total Statistics P1 P2 P3 Scale Mean if Item Deleted 4.19 3.92 3.99 Scale Variance if Item Deleted 4.142 3.633 3.663 Corrected Cronbach's Item-Total Alpha if Item Correlation Deleted 846 878 815 901 853 866 Cronbach’s Alpha of the scales is 0.918> 0.6 And Corrected Item-Total Correlation of P1, P2, P3 >0.3 Mobile banking, Online Banking, Email, ATM, ICT Project X Adoption ICT Important of ICT Extent ICT P1 P2 P3 1.2 Exploratory factor analysis KMO and Bartlett’s Test Tables 3: KMO and Bartlett’s Test KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Approx Chi-Square Sphericity df Sig .743 316.992 10 000 KMO=0.743, satisfied requirement: 0.5