FINANCIAL TECHNOLOGY AND OTHER RELATING ISSUES
5. Discussion of research results and policy implications for digital banking development
From the aforementioned analysis, it can be seen that digital banking development is highly valued by many Vietnam’s commercial banks, which is illustrated by a list of crucial projects, bank’s products development in the direction of digitalised and automated services to quickly reach and attract customers. Bank development trends at Vietnam’s commercial banks such as AI application in bank, combining banking services provisionwith technology companies, transformation of core banking and Cloud, developing digital banking and e-wallet applications. Eventhough digital banking have been implemented in many Vietnams’
commercial banks yet the results are still limited, for instance: The digital banking development strategy at commercial banks is simply changing the interface of the application to interact with customers without paying attention to internal processes, using science to analyse data and ability of employees; In the digital transformation process, the requirement for human resources with knowledge not only on finance banking but also on technology is a great challenge. The
reality of Vietnamese banking human resources today is thatthose who are knowledgeable on banking and finance will not be knowledgeable about technology and vice versa. The evaluation result of 4 criteria (VAL, EFF, SUI, SUS) for State management on digital banking development in many Vietnams’ commercial banks through Kano-IPA model shows a positive correlation and is statistically significant, in which suitability is assessed to be fairly good, while validity, effectiveness and sustainability are evaluated at medium level.
From the scatter plot, it shows that out of 18 variables, there are 6 variables that need improvement, 3 variables should continue to be maintain, 4 variables should not be invested excessivelyin and 5 variables (SUS3, SUI2, VAL3, VAL2, VAL1) should be paidlittle attention. This shows that in digital banking development of Vietnam’s commercial banks, inadequate and inconsistent legal provisions on policies are obstacles for commercial banks to boldly apply digital banking as there is no uniform regulation on current electronic documents and specific characteristicsof electronic documents arising in the transaction; The State Bank has not had official regulation on products applying for digital banking such as electronic deposit, internet banking services, mobile banking; The legal corridor to protect users on electronic transaction is still weak; Regulations on identifying customers at the counter increase the barrier to applying digital banking and there is any regulation on identifying electronic customers. Thereby creating many gaps in unhealthy competition between commercial banks and Fintech.
Digital banking development at Vietnam’s commercial banks in IR 4.0 is an inevitable trend and a core issue for Vietnam’s commercial banks to develop and maintain competitive advantages. Although, it has achieved some remarkable results, to better implement digital banking in the future, this paper recommends some implications as follows:
Regarding the Government and the State Bank
To begin with, the Government and the State Bank need to issue a legal framework to on the one hand create conditions for banks to easily implement digital banking application and on the other hand focus on the rights and benefits of the parties involved. In which, it is necessary to focus on perfecting the law on the contents (i) regulations to manage change on transactions in digital banking activiy such as electronic authentication for custom ers (e- KYC), applying cloud computing and blockchain in bank operation, etc.; The Government and the State Bank also need to soon issue the policy on safety and confidentiality of information in electronic transactions to protect the legitimate interests of consumers; At the same time, it is necessary to issue a process for conducting electronic transactions through banks, supervise digital banking activities and prevent money laundering.
In addition, promoting infrastructure investment as well as building data platform related to digital banking. To successfully implement digital banking, it is essential to remove obstacles caused by small distribution of data, create large databases with a high degree of service integration in the financial ecosystem, and implement data transformation in clould computing to boost the transformation process. Continue to implement scheme, program and
action plan to encourage online, cashless payments. These policies should aim to create a favourable environment for the development of digital banking on the basis of creating a healthy competitive market and encourage innovation. One of the key factors to develop digital banking relates to the customers’ awareness. As a result, the State Bank should continue to work with universities and training facilities on finance banking as well as localities, especially remote areas, to propagate, guide and popularise financial knowledge to enhance users’ awareness to easily use digital banking services.
Regarding Vietnam’s commercial banks
Figure 4: Digital ecosystem bank in 2025
Source: Gasser, 2017 Firstly, commercial banks need to develop project, strategies and roadmap to transform traditional banking to digital banking. This clearly is not an overnight job, it requires time, energy and a large amount of capital. Therefore, when implementing digital transformation, banks need to clearly identify the method, transformation roadmap to fit with the conditions on human resources, capital, technology and current network. Since the digital banking ecosystem tends to form in 2025 (see Figure 4) due to changes in customer consumption trends, operating models, revenue models, digital banking platforms, banking industry data and banking value chains (Gasser et al., 2017). New types of banks that are likely to form in the digital banking ecosystem include digital custody and transaction bank, digital advisory bank, digital ecosystem bank and digital blockchain bank.
Secondly, gradually developing human resources to meet jobs’ requirements when commercial banks deploy digital banking. Currently, human resources have knowledge on finance banking and technology in commercial banks are rare, requiring commercial banks to ensure suitable benefits for high quality human resources and have a reasonable placement policy for these human resources when implementing digital banking. At the same time, in addition to implementing self-training plans, commercial banks need to work more closely
with financial and banking training institutions to help orient training for young human resources, to meet the actual requirements of the market.
Finally, promoting the implementation of cashless payment. Commercial banks can work with Fintech to introduce products suitable with payment needs of customers, reduce excessive investment costs and learn from partner’s experiences in the process of digital transformation. Besides, commercial banks also need to gradually improve databases, apply AI and big data to data analysis and customer credit scoring.
6. Conclusion
The development of digital banking at Vietnam’s commercial banks is at the stage of establishment and its growth potential is fairly high, stemming from market demand, development orientation of the banking industry and finance intergration. However, the development of digital banking in Vietnam is facing many difficulties from limitations of the legal framework, internal issues of banking industry, information security issues from the user side. Some solutions for creating an environment for digital banking development, focusing on completing the legal framework for digital banking development, which enables electronic customer identification and encourages the development of finance technology in a smart production and innovative economic of digital economy and IR 4.0.
References
American Banker (2018), Digital banking, Available at
https://www.americanbanker.com/conference/digitalbanking-2018.
Dinh Thi Thanh Van, Nguyen Thanh Phuong (2019), Digital banking development:
international experiences and lessons for Vietnam, Banking Review No. 4/2019.
Gasser, U., Gassmann, O., Hens, T., Leifer, L., Puschmann, T., Zhao, L. (2017) Digital banking2025.
Gaurav Sarma (2017), What is digital banking, Available at http://www.ventureskies.com/blog/digital-banking
Moeckel, C. (2013). Definition of Digital Banking. Retrieved November, 23, 2015.
Nghiem Xuan Thanh (2017), The Industrial Revolution 4.0 and the preparation of Vietnam's banking industry. Financial Review, 2nd term, No. 2/2017.
Nguyen Thu Thuy, Nguyen Thi Ha Thanh & Le Thanh Tuyen (2020), Digital banking development in Vietnam and some international experiences, Financial Review Period 1, No. 6/2020.
Pham Bich Lien (2020), Digital banking development in Vietnam, Review of Finance, No.
4/2020
Pham Minh Ngoc 2018, State management in the banking industry: How to develop sustainably?
Pham Tien Dat & Luu Anh Nguyet (2019), Digital banking – Future prospects and development. Review of Finance, No. 2+3/2019
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www.sbv.gov.vn, access date from July 15 to 30/ 72021.
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Vietcombank (2018-2020): Information on financial services market development and modern banking technology - Commercial Bank for Foreign Trade of Vietnam, hard copy, internal circulation documents, April 2020.
IMPACT OF FINANCIAL LITERACY ON BEHAVIOR OF USING ELECTRONIC PAYMENT SERVICES IN BAC NINH
Pham Thi Huyen - Phan Thi Hong Thao Banking Academy of Vietnam - Bac Ninh Campus
Abstract
In recent years, along with the development of science and technology, online payment forms are increasingly diverse with many new features and utilities. In Vietnam, e-payment has made a remarkable development, with the number of payment transactions via internet and mobile banking reaching 551 million items, much higher than other non-cash payment methods (number of payment transactions via internet and mobile banking reaching 551 million items). data of the State Bank of Vietnam in the first quarter of 2021). This study was conducted to evaluate the influence of financial literacy on the behavior of using electronic payment services. Based on survey data from 126 customers in the first 6 months of 2021 in Bac Ninh, using Logistic binary regression method, we found that financial literacy has a positive and significant impact on behavior vi using electronic payment services. In addition, the study also found a statistically significant impact of some demographic variables on the behavior of using electronic payment services. From the need to conduct the research and based on the research overview, the authors present research methods, research results and policy suggestions.
Keywords: customer behavior, financial literacy, electronic payment.
1. Introduction
Non-cash payment is a form of payment using non-cash payment means such as assets, valuable certificates, tangible assets, payments using digital technology, or indirect payments in cash through credit institutions. from the mid-2010s, there were many countries witnessing extremely impressive non-cash payment habits such as Belgium, France, Canada, UK... with the rate of non-cash payment in consumption surpassing 90%. Along with the rapid development of technology, non-cash payment forms are increasingly diverse, with many new features and utilities, especially electronic forms of payment. In the past two decades, electronic payments have attracted the attention of various researchers. Concepts of electronic payment are also understood from different perspectives in accounting, finance, business technology and information systems. Electronic payment is an integral part of electronic commerce, which is a form of payment in which money is exchanged electronically (Abrazhevich, D., 2004). Or electronic payment is a form of association between organizations and individuals supported by banks that allows the exchange of money in electronic form (Briggs, A., & Brooks, L., 2011). According to Ogedebe, P. M., & Jacob, B.
P. (2012), electronic payment refers to payment for the purchase of goods or services via the internet or any type of electronic money transfer. Similarly, Roy, S., & Sinha, I. (2014) argued that electronic payment is a platform used to pay for goods or services purchased online through the use of the internet. Internet and mobile-based payments are common forms of electronic payment in developed countries (Izhar et al., 2011). Thus, it can be understood that electronic payment is an intermediary payment service that customers pay through the Internet or mobile phones when purchasing goods and services. This form of payment helps to overcome the limitations of traditional cash and non-cash payments such as minimizing costs and payment time, minimizing frauds, etc. Since then, electronic payments contribute to promoting the process of exchange goods and capital transferring, and the improvement of the efficiency of the entire economy. Recognizing this importance, many countries have developed strategies to develop e-payments to promote financial inclusion and foster the economic development.
In Vietnam, forms of electronic payment include payment by card (including credit and debit cards, mainly credit cards), payment by e-wallets (Payoo, VnMart, Mobivi). ...), payment by smart mobile device (Mobile banking), payment by bank transfer (via ATM or direct transaction at the bank. In the past time, online payment has been and is being done.
According to statistics from the State Bank (2021), there are 78 organizations providing internet payment services and 43 organizations supporting mobile payment services. Data from the Department of E-commerce and Digital Economy - Ministry of Industry and Trade shows that e-commerce in Vietnam has seen positive changes in the past time when transactions via the internet and mobile increased by 238% in terms of value (in 2020).
Figure 1: Payment via Internet and Mobile
Source: State Bank However, cash is still dominant, accounting for nearly 80% of transactions in 2021?.
According to data from Vietnam Digital 2021, as of January 2021, Vietnam has 154.4 million mobile subscribers, 68.72 million internet users (accounting for 70.3% of the population) and the online shopping rate is 78.7%. In contrast, the percentage of people having accounts at
5060
7202
13546
16188
22227
24600
113.9 303 690 1859
5747
10900
2015 2016 2017 2018 2019 Nov-20
Internet Mobile
financial institutions is significantly low (only 30.8%). Especially, only 20.5% of the population makes online purchases and payments. .
In recent years, there have been many domestic and international studies on factors affecting the behavior of using financial services in general as well as electronic payments in particular. However, these studies mainly focus on assessing users' perceptions on different aspects of financial services such as usefulness, ease of use, trust, risk, etc. There are very few studies which deals with the impact of financial literacy. In particular, there have not been any research which evaluates the impact of financial literacy on the behavior of using electronic payment services in Vietnam. Therefore, this study was conducted to provide more evidence on the influence of financial literacy on the behavior of using online payment services in Vietnam.
2. Literature review
The literature on financial literacy and its impact on customer behavior has been researched by various authors. Here, the authors present some studies to make an overview for this study.
Sandra J.Huston (2010) has summarized financial literacy measures used in previous studies, thereby providing the meaning and measurement of financial literacy. According to research, financial literacy includes both knowledge and application of that knowledge to manage personal finances. To measure the financial literacy, individuals must demonstrate the knowledge and skills necessary to make choices in financial markets. This might be the right approach to measure financial literacy, but it reflects the reality that all individuals make choices between standard financial products and services.
David L.Remund (2010) also analyzed different conceptions of financial literacy and how it is measured. Accordingly, the author gives a definition of financial literacy as a measure of the extent to which a person understands financial concepts and has the confidence to manage personal finances through appropriate decision making, sound short- term and long-term financial planning, while also taking into account emerging events as well as changing economic conditions.
Lusardi et al. (2011) conducted the survey by asking the same questions about three areas: understanding of compound interest, understanding of inflation, and understanding of risk classification to measure financial literacy in eight countries. The study concluded that the level of financial literacy worldwide is very low, regardless of the level of financial market development. In addition, the research showed that changes in the market do not bring about an improvement in their financial knowledge but are brought about by their financial experience (cite). In particular, there are age and gender differences in financial literacy.
Marc Oliver Rieger (2020) has introduced a new method of measuring financial literacy that is the combined method (CL scale). According to this method, the author has conducted a survey on financial literacy scales, measured a number of control variables such
as self-assessment ability, attitude to money and demographics, finally, investment hypothetical questions to give general ideas about long-term investing. To get the results, the research has surveyed on two sample samples, the difference between the second sample and the first sample is the addition of questions. Respondents are university students, but there are also working subjects. The results show that men, students, working people, and university degree holders are more financially savvy.
Grohmann, A. (2018) conducted an analysis of the financial literacy and financial behavior of the middle class in Bangkok, Thailand. The study conducted a middle class survey in Bangkok, Thailand in December 2012 based on the basic survey set by Lusardi and Mitchell that was first used in the United States in 2004. Survey questions based on three main dimensions: interest rates, inflation and risk diversification. Research results showed that the level of financial literacy of the middle class in Bangkok is at an average level, comparable to that of other countries.
Different from the research of Antonia Grohmann (2018), the study of Panayiotis C.
Andreou Sofia Anyfantaki (2019) focused on studying financial literacy and influencing customer behavior in online banking. The study surveyed 600 adults in Cyprus on issues of:
(i) demographics; (ii) assess financial literacy through: compounding, consequences of inflation, benefits of risk diversification, understanding and use of percentages, and awareness of banking issues ; (iii) questions regarding the source of information the person seeks to resolve financial matters; (iv) questions related to banking activities and behavior of using banking services (especially online banking). OLS regression results have shown that financially savvy customers will prefer to regularly use online banking products, whereby the increase in online banking usage is due to increased understanding, know your client's finances. In addition, the study also showed the interplay between digital and finance as well as the positive effects on the use of digital financial services.
To examine the relationship between financial literacy and use of financial technology (Fintech) products, the research by Morgan and Trinh (2019) was conducted in Laos, a developing country. The study also used the standard OECD questionnaire on financial literacy, the control variable is still the customer's characteristics, then the author uses OLS regression to assess the impact of financial literacy. The results showed that financial literacy has a strong and positive impact on customers' perception of fintech products. The results also showed that people with incomes higher than 3.5 million kips (per month) are more likely to know about a fintech product than those with incomes lower than 2 million kips (reference group). In addition, the authors also provided a group of instrumental variables to test the level of financial literacy and the conclusions of the study remain the same.
More specifically on bank lending products, Lyons et al. (2019) examined the impact of financial literacy on the use of bank loans. and non-bank loans. To measure financial literacy, the authors conducted a survey on issues related to interest rates, inflation and investment risk. In addition, the authors have shown whether social and infrastructural factors