FINANCIAL TECHNOLOGY AND OTHER RELATING ISSUES
4. Research results on digital banking development at Vietnam’s commercial banks
Digital banking development at Vietnam’s commercial banks has many optimist signs.
According to Pham Tien Dung, Director of the Payment Department-the State Bank of Vietnam, there are currently a total of 45 million personal accounts inVietnam (duplicates are removed), equivalent to about half of the population of Vietnam. Recently, cashless payment in Vietnam has had a positive change with encouraging numbers. According to statistics of Vietnam E-commerce and Digital Economy Agency in 2019, the transaction value via the Internet and mobile increased by 239% and according to the statistics of the State bank in 2019, the value of transactions via POS increased by 36.5% over the same period in 2018.
The level of research on theimplementation of digital transformation strategies of Vietnam’s commercial banks is demonstrated below (see figure 2).
According to the State Bank (2018), 59% of commercial banks have initially implemented digital transformation process. With the development trend of Industrial Revolution 4.0 and the growth of technology when Vietnam’s commercial banks implement digital banking will achieve a number of certain successes in digitalisation and modern technology application in specific finance-banking activities such as: Digital banking/Digital Lab; Timo Bank, ATM + LiveBank, etc. Some commercial banks have successfully cooperated with Fintech companies to introduce new, modern technology into payment activity on mobile device such as biometrics application, use of QR code, Tokenization, mPOS technology, e-wallets, etc.Commercial banks have also taken the first steps in the process of researching and applying artificial intelligence (AI), robotic automation (RPA),
blockchain, etc. Thus, currently in Vietnam, there is no genuine digital banking, the development of digital banking is mostly at the level of decentralization and services sharing.
Domestic banks in Vietnam have implemented digital banking at a transformation level in terms of processes and communication channels, with only a few banks transform digitally in the data platform.In terms of process, most of the top and middle banks (such as BIDV, Techcombank, Vietcombank, TPBank, VPBank, etc.) have completed the automatic transaction system, applying a part of big data. In terms of communication channels, some banks have applied AItechnology, self-learning machine and offered 24/7 automated consulting services, through automated chat box on the bank's website or social media channels (MB, Techcombank, etc.). For the front office, banks are providing NHS services, such as checking balances, paying bills, transferring funds, booking flights with user-friendly interfaces that are easy to use and constantly upgraded (iFast of Techcombank, E-mobile banking of Agribank, etc.). Some other services are only provided by a few banks such as investment (Agribank, Techcombank), online shopping (Agribank, Vietinbank), transfer via social networks (Techcombank), etc.
Figure 2: The level of research on the implementation of digital transformation strategies of Vietnam’s commercial banks
Source: The State bank, 2018.
4.2. Current situation of digital banking development trend at Vietnam’s commercial banks - Applying IT in bank: In 2016, VpBank connected with Lifestyle Project Management VN to launch Timo digital banking, which is considered the first digital banking in Vietnam, marking an important milestone for digital banking development trend in Vietnam. Timo has all the features of a bank, with ATM cards and payment and savings accounts, etc. The difference of Timo is creative experience: No branch, no traditional transaction office, Internet application and Mobile banking are optimized with smart design, which brings the most convenience and unique features for users. Until now, typical banks that implemented AI are TPBankwith T'Aio virtual assistant application on Facebook Messenger and
Banks that have planned for digital
transformation strategies
6% Banks that are
researching the development of
digital transformation
strategies 35%
Banks that are initially implementing
digital transformation
59%
VietABank with Chatbox operating on Fanpage, with main functions are: Consulting customer with information on interest rates, exchange rates, products, fee schedules, etc., answering customers' questions about locations, transaction fees, card opening process. In addition, there are a number of banks that have automated the registration and service change processes through the implementation of SMART FORM, typically MBBank (piloted since May 2017), thereby reducing the time required for registration and change of services performed at the counter down to an average of 3 - 5 minutes (excluding waiting time, scanning and approving documents). In addition, some banks use software to analyse information of millions of customers, evaluate and forecast their debt repayment ability to make accurate lending decisions like BIDV, which uses intergrated software Watson designed by Five 9.
- Combining the provision of bank services with technology companies: Most of the financial and banking services provided by Big Tech are not widely available. Some global brands entered Vietnam’s market are Samsung Pay, Amazon (through owning 83% of Lazada's capital) and JD.com (throuhh the 50 million USD investment in Tiki). Big Tech groups in Vietnam (FPT, Viettel, CMC, VNG, BKAV, VC Corp) still mainly focus in technology area, a few groups approach the banking service supply segment through the development of electronic payment tools, such as WePay (VC Corp), Zalo Pay (VNG), Bao Kim (VNP), etc. Along with that, commercial banks are implementing cooperation model with finance technology enterprise. This partnership provides customers with many interesting experiences as well as access to diversified services with fewer transactions. At the same time, through cooperation, banks have increased the number of customers as well as investment cost in technology. Some cooperation deals have taken place such as VietinBank cooperation with Opportunity Network in providing digital platforms for businesses;
Vietcombank and M-Service cooperate in money transfer payment; cooperation between VPBank and Moca in providing digital payment services, or a combination between VIB and Fintech company Weezi providing MyVIB Keyboard application to help customers transfer money via social networks; Techcombank cooperates with Fastcash to offer an increase in F@st mobile to help transfer money via Facebook and Google +, etc.
- Core Banking and Cloud transformation: This transformation is still slow due to the lack of capital resources or has been implemented but still formally at most and has not had adequate effectiveness. The reason is that over the last years, commercial banks have to priotised resources to deal with bad debt, liquidity assurance, etc., the core banking system is fairly outdated, not qualified to integrate digital applications based on big data, or transformed but do not buy all the features of modern Core Banking. Regarding data integration on the core, most banks have not yet implemented cloud computing due to sensitive data characteristics, complex and unsynchronised data systems. Currently, only a few banks have completed uploading data on private cloud, for instance, VietABank had performed this in 2014-2017; Or at VP Bank in 2018, Yolo digital bank launched and was the first digital bank
operating on the Amazon web service cloud, allowing rapid development in both quality and number of users. Specifically, Yolo allows users to buy insurance packages online without medical examination, at the same time, new bank customers can register to open a prepaid card (virtual card) with just email and phone number.
- The development of digital banking and e-wallet applications: Many banks show the positivityin providing banking services applying modern digital technology such as:Vietcombank with digital transaction space Digial Lab;MBBank allows customers to transfer money through Facebook; TPBankwith the launch of automatic banking service- LiveBank; BIDV launched BIDV SmartBanking-a mobile banking application with QR Pay utility;Sacombank with Sacompay-a payment application, which uses 2-factor authentication method; OCB with OCB OMNI application; Techcombank launched a card product with contactless payment technology; LienVietPostBank with a non-physical card-Vi Viet; In recent years, LienVietPostBank has focused on investing in creating a digital banking platform to become a significant transaction channel based on the Vi Viet. As of December 24, 2019, Vi Viet has more than 37,000 payment acceptance points and more than 2.7 million users nationwide. In the coming time, LienVietPostBank plans to launch LienViet24h service which is a 24/7 online banking service application including 3 main functions: Digital banking, Cards (physical and non-physical), E-wallets and at the same time, it integrates with the ecosystem to support users and business points in searching information, buying and selling goods and services, etc.
Thus, it can be seen that Vietnam’s commercial banks have been determined to transform the operating model and digitalise the bank through a series of key projects, development of banks’ products in the direction of promoting digitalised and automated services, to quickly approach and attract customers in the technology segment. The application of IR 4.0 to all areas of the economy in general and especially to the digital banking industry in particular is an inevitable and irreversible trend in the context of globalisation.
4.3. Current situation of critera for evaluating the digital banking development in Vietnam’s commercial banks
Overall evaluation of the level of implementation of 4 State management criteria on digital banking development in Vietnam’s commercial banks (see Table 6). The results show that digital banking development in Vietnam’s commercial banks has validity criteria with a mean score of 3.4029, which is fairly good, the rest of the criteria EFF, SUI, SUS need more focussince they are just above average.
Table 6: Descriptive statistics of the implementation of the criteria Observations Mean Standard deviation
VAL 119 3.4209 .65171
EFF 119 3.0576 .76320
SUI 119 3.3223 .57853
SUS 119 3.1825 .59076
Source: Summary from SPSS 21 Regarding the correlation of the criteria performance: The results show that the above matrix between these criteria have a positive correlation and the correlation is statistically significant at 99% confidence level. In-depth analysis shows that the correlation between these criteria is different. Between validity and suitability criteria, effectiveness and sustainability criteria have a fairly good average correlation (correlation coefficient is greater than 0,4). Meanwhile, between the criteria of suitability and sustainability, validity and effectiveness, validity and suitability have average correlation (correlation coefficient is greater than 0,3), and between the criteria of validity and sustainability the correlation is fairly weak but still acceptable (correlation coefficient is greater than 0,25). In summary, the results after analysis show that the level of performance of digital banking development management criteria in Vietnam’s commercial banks is positively correlated with each other and is statistically significant at 99% confidence level, no multicollinearity occurs.
Table 7: Pearson correlation coefficient of the criteria
VAL EFF SUI SUS
VAL
Pearson Correlation 1 .336** .362** .287**
Sig. (2-tailed) .000 .000 .000
EFF
Pearson Correlation .336** 1 .387** .415**
Sig. (2-tailed) .000 .000 .000
SUI
Pearson Correlation .362** .387** 1 .323**
Sig. (2-tailed) .000 .000 .000
SUS
Pearson Correlation .287** .415** .323** 1
Sig. (2-tailed) .000 .000 .000
Source: Summary from SPSS 21 The quantitative research of IPA model and data processing on SPSS 21 obtain 4 quadrant (see Figure 3) to assess the importance and the performance level of 18 variables built based on 4 evaluation criteria for evaluating the performance level of State management
on digital banking development in Vietnam’s commercial banks, which has a positive correlation and statistically significant correlation, in which the suitability is met quite well while the validity, effectiveness and sustainability are assessed at average level.
From the scatter plot, it shows that out of 18 variables, there are 6 variables (SUS1, EF1, EF4, SUS4, VAL5, SUS4) that need to be improved, 3 variables (SUS2, EFF2, SUS5) should continue to be maintained, 4 variables (SUI4, SUI3, EFF3, VAL4) should not be invested excessivelyin and 5 variables (SUS3, SUI2, VAL3, VAL2, VAL1) should be paidlittle attention.
Figure 3: Kano-IPA scatterplot