Opportunities and challenges for developing digital banking services in vietnam in the current period

Nội dung text: Opportunities and challenges for developing digital banking services in vietnam in the current period

1. OPPORTUNITIES AND CHALLENGES FOR DEVELOPING DIGITAL BANKING SERVICES IN VIETNAM IN THE CURRENT PERIOD Master. Nguyen Quoc Phong – Assoc. Prof. Nguyen Dac Hung1 Abstract: Competition to develop digital banking technology is an inevitable and objective trend for banks in the world as well as commercial banks in Vietnam today. Regarding the general perspective of the entire economy in the current 4.0 revolution, digital banking technology and e- commerce are ecosystems associated with each other to create conditions for mutual development. The article focuses on analyzing the basic contents, the basic benefits of digital banking. At the same time, we also analyze the four most fundamental challenges of digital banking development in the world today. Some contacts with current practice in Vietnam and make recommendations. Keywords: developing, oppotunities and challenges, digital banking, in Vietnam. 1. INTRODUCTION In the booming digital era today, every organization, unit, business and individual has greatly benefited from the achievements in this field. Banking and financial institutions; businesses selling goods, providing services and organizations and individuals operating in e-commerce, are also strongly grasping the advances of digital technology to develop utility products and services, increase sales and service provision, and reduce business costs. On the contrary, it is the financial institutions themselves; businesses selling goods, providing services and organizations and individuals operating e-commerce, are a large market for innovative information technology professionals, making the latest inventions, Competitive technology solution providers offer their optimal products for use in payment and e-commerce transactions. Digital banking and e-commerce are mentioned more often in the daily life of the business community and citizens. 2. RESEARCH METHODS Research articles on practice, within the limit of a scientific discussion, the author can not use quantitative methods, review and find research gaps, no conditions to construct building research hypotheses, building functions and variables, determining the impact level of the factors, not building theoretical bases. The article uses traditional qualitative research methods, uses documents, secondary data, analyzes, interprets, assesses, clarify research topics, making recommendations according to the objectives of the article. 3. RESEARCH CONTENT 3. 1. Overview of digital banking and e-commerce 3.1.1. Digital banking concept Digital Banking is a bank that can perform most transactions of banking products and services online via the internet on mobile devices and desktop computers. 1 Faculty of Economics, Hung Yen University of Technology and Education. 462
2. Digital banking transactions without going to a branch or bank transaction office, or ATM location, using POS, minimizing related paperwork costly, time and polluting environmental pollution, loss of office space to store paper documents. At the same time, the feature of digital banking can be performed anytime, anywhere regardless of time and space, so customers are completely active, whether customers are traveling on planes, yachts in the ocean, plugging in camp in the mountains, traveling on highways without being a driver, as long as there is internet and mobile equipment available. 3.1.2. Technologies supporting digital banking development There are three main areas in the information management space that need to be addressed for banks and financial services organizations, namely Digital Platforms, Content Management and Data Management. a) Digital platform In this area, there has been the fact that the integration of many technologies has come together to deliver a superior digital experience to customers. For example, the ASG – Zenith platform uses a low- code-model approach to leveraging microservices around workflow management, process automation, RPA, and content management. It allows for faster project delivery while helping teams focus on the highest value-added tasks. [Vietcombank (2018–2020)]. b) Content Management Along with that, content management through ASG Mobius has helped banks and financial service organizations manage unstructured data and content for decades. Several major banks have used Mobius to manage content, documents and all sorts of unstructured information. Meanwhile, Nucleus Software's FinnOne Neo – the product was recognized as the World's Best Selling Loan System 10 times. This system supports banks and financial institutions by seamlessly connecting interfaces, rapidly launching innovative products, delivering customer-specific services, and enhancing product portfolio for borrow. Especially, this is a multi-channel solution with rich and powerful API and supports the entire loan life cycle (including origins, loan management, debt analysis and management) Through mobile solutions, FinnOne Neo enables bank customers to monitor their lending applications on mobile and online channels, deployable on both cloud and on-premises platforms [Vietcombank (2018–2020)]. In addition, it also provides Nucleus Software's Lending Analytics – a specialized solution that allows financial institutions to benefit from data-based services over the life of their loans. With advanced Machine Learning and AI capabilities, this solution is an easy-to-build platform that helps make better credit decisions through accurate predictive model [Vietcombank (2018–2020)]. Smart eKYC Platform helps banks to expand customers conveniently as well as help identify existing customers quickly, conveniently, and save costs. This product can be used multi-channel, such as: Mobile App, Web Browser, IoT (Such as identification by Kiosk, STM, VTM devices), Desktop App, Besides, Smart eKYC Platform for public application Biometric technology such as facial recognition (FaceID), fingerprint (Fingerprint), separating letters by AI/Deep Learning, helping to identify and authenticate is done quickly, conveniently, enhancing the human experience and fully ready for integration with Electronic Identification Service Providers (IDP) [Vietcombank (2018–2020)] . Not only a technology platform, but there is a digital banking application ecosystem (Smart Digital Banking) on the market, including: Smart Form, Smart Booking, Smart API, Smart Self Service, Smart 463
3. Auto Bank, Smart RM, The ecosystem makes it convenient in use, reducing transaction time by 15 times, This increases user satisfaction when using the banking services. In particular, this ecosystem has been applied in many commercial banks in Vietnam such as MB, ABBank, SHB, for many years [Vietcombank (2018–2020)]. c) Data management Besides specific solutions for specialized business processes, experts agree that on the "surface" layer of banking operations, users do not need to know all of the underlying problems. Just enjoy the best services, bring the most positive experience. That is convenience, safety, low cost in using banking services So, no matter what technology you choose, from which solution provider is just about increasing the experience. At the same time, digitalizing the service, expanding the market for the bank, this is the requirement of managing data on customer information, information of customer transactions, and ensuring safety, accurate, complete and synchronous. 3.1.2. The benefits of digital banking a) Benefit Digital banking brings a lot of benefits to banks, for customers and for stakeholders: Firstly, it is Business efficiency: not only do digital platforms improve customer interaction and help customers' needs be met faster, digital banking also provides methods for make internal functions work more efficiently. Secondly, cost savings: Digital banking is one of the keys for banks to cut costs through automated applications instead of manual labor. Future digital platforms can reduce costs through the support of network data and analytics, faster processing of changes in financial markets, information technology markets, chemical and other services, including the human resource market. Thirdly, high accuracy: The digital banking technology platform will help calculate, process and record transactions and fluctuations with absolute accuracy. If the client's actions are not correct, they will have to do it again, or be rejected. It is the technology of automatic monitoring of customers' transactions, to accurately ensure and authenticate yourself as the owner of the account, the owner of the transaction. Fourthly, increase security: this is an inevitable requirement for all financial transactions, related to assets, accompanied by personal information. Any transactions or any arising on bank accounts, customers will receive OTP on their personal phones for each transaction and receive text messages on their smartphones with a valid time limit is finite, or email notification. Customers can feel secure about the security of digital banking. b) Some limitations when developing digital banking Firstly, developing digital banking requires a large, synchronous investment from financial resources, modern and synchronous equipment and technology, training for operations and security staff, coordination of fields related: e-commerce, e-administration, e-government, Therefore, requires banks to need large initial investment, but long-term income; at the same time, there should be an overall investment strategy. Besides, there is a need for synchronous implementation coordination in the economy. Secondly, the development of the common technology infrastructure, especially the high-speed, secure, wide-area Internets network. People with mobile devices, computers and proficient use of these 464
4. sites. Therefore, mountainous, highland, remote and isolated areas face many difficulties in developing digital banking. Thirdly, the legal environment is complete and protects relevant parties. But usually the legal provisions are often behind practice and do not fully cover the relevant issues. Therefore, it is required that the authorities need to urgently develop and issue legal documents. Fourthly, the security and safety of electronic payment transactions and e-commerce are very demanding and precise. Some people are concerned about the use and application of digital banking technology. Therefore, it is necessary to have uniform measures for this sector. Fifthly, payment transactions and e-commerce make businesses unable to evade taxes and conceal revenue, so many shops and business owners are afraid to apply this field. 3.1.3. The main services of digital banking There are currently four main areas where digital has the strongest impact on banks globally. Firstly, is customer experience, when there are more and more new channels of interaction for users to access banking, e-commerce and financial services. This requires the bank to be able to capture information technology, financial, commercial and service market opportunities as well as respond quickly to customer needs, and develop internal banking systems and processes, along with training of staff to keep up with the technology to handle transaction life cycle digitally. Secondly, it is the emergence of new products and new business models, as the banking ecosystem and participants will expand beyond traditional banking channels, leading to specialized products and completely new compared to before. Electronic payment is not just private land of banks. Freight, passenger and service providers offer payment services that are most convenient for themselves and for customers. Thirdly, the application of automation and intelligence brings drastic changes in business processes, aiming to optimize costs and shorten time, and personalize services to each customer. This benefit is what both customers, goods and service providers, commercial enterprises, and banks all want to maximize profits, enjoy the latest achievements in the development of mankind. Fourthly, satisfaction with service quality and security for customers. In the field of Finance – Banking, customer information is of great value, requiring banks to have fully-walled systems and processes in place to protect, manage and utilize data, materials effectively, as well as the peace of mind and trust of customers. 3.4. Some opportunities and challenges for Vietnam in digital banking development 3.4.1. Some opportunities As can be seen, digital interactions generate enormous amounts of data. Such data can be analyzed to draw highly accurate conclusions about customer needs. This is the point that banks need to focus on investing more. Compared to traditional banking, digital banking (DIGITAL BANK) has many outstanding advantages thanks to its digital operating model platform, DIGITAL BANK will provide many new financial products such as mobile payments, consumer loans using credit on the basis of advanced data analysis technology, digital insurance products, digital investment Through process automation, DIGITAL BANK helps to reduce costs, increase processing speed and ensure operational efficiency. Therefore, not only the State Bank (SBV) but also commercial banks also 465
5. define development of DIGITAL BANK as a fundamental strategy to create development, not just an information technology project. Currently, about 30% of the Vietnamese population has access to a bank account, but only 20% of customers conduct transactions online. From there, it can be seen that developing digital banking is a long way. Digital banking customers can be quite profitable for banks. Operating costs for digital banking are 67% lower than traditional branch-based services, and digital banking customers can generate twice as much revenue. One of the reasons is that retail customers interact with a bank via digital channels 16 times more often than affiliate-based interactions. In addition, this is an opportunity to enhance marketing and cross–selling opportunities offered by digital channels [Vnba (2016–2020)]. It can be said that Vietnam is facing a great opportunity to develop e-commerce when there are 64 million internet users, accounting for 66% of the population; 62 million users of social networks, accounting for 64% of the population, the number of mobile subscribers reaching 143 million of which 72% of the population use smartphones. However, to exploit this potential, it is necessary to promote the development of logistics infrastructure, online payment methods. E-commerce businesses need to link, cooperate and invest in building a complete ecosystem. In other words, Vietnam's e-commerce, to thrive, needs to be based on an ecosystem built on three key elements: Innovative technology; Logistics system and payment methods are diversified, especially today's digital banking technology [Vnba (2016–2020)]. 3.4.2. Challenges Firstly, the Vietnamese banking industry faces a number of challenges such as competition between banks and financial institutions, and compliance with international standards such as IFRS. International Financial Reporting Standards (IFRS) is a set of accounting standards designed and developed by an independent, non-profit organization called the International Accounting Standards Board (IASB). The goal of IFRS is to provide an international framework for the preparation and presentation of financial statements for public companies. Meanwhile, commercial banks in Vietnam are complying, accounting, and reporting under the account system of Vietnam. Similarly, commercial and service enterprises in general and logistics infrastructure in particular are using Vietnam's financial reporting and account system. Secondly, Vietnam also needs to upgrade digital banking capabilities to better serve its customers. A typical example is Queensland Bank (BOQ) in Australia, in order to ensure the selection of customers, avoid risks and improve performance, this bank has invested in building a new Nucleus lending technology platform. Software, to establish digitization, automation, and rationalization processes for growth, operational efficiency enhancement, and comprehensive credit decision-making. With end-to-end digital processing, BOQ has reduced the time required for loan approval 99% and the total time to touch application processing by 85%. These are the mandatory benefits and transformation trends that banks must participate in. [Vnba (2016–2020)]. Thirdly, in the real development of Vietnam's banking industry, there are also some barriers that banks are facing, such as technology issues awaiting regulations and implementation guidelines. One of the biggest barriers to the development of digital banking is the lack of means as well as the legal corridor for digital identity (KYC – Know Your Customer) to be implemented in a simple and convenient way. It is known that, in order to improve the legal environment for the development of e- 466
6. banking services, digital banking, the State Bank is consulting on the Draft Circular amending and supplementing a number of articles of Circular No. 23/2014/TT–NHNN guiding the opening and use of a payment account at a payment service supplier. In which, the biggest modification is related to allowing commercial banks to decide to meet or not meet customers in person when establishing relationship (eKYC) for the first time [Vnba (2016–2020)]. Fourthly, customer experience is increasingly important. Today, young people need convenience, safety, and low cost in using banking services. They are not ready to use the service if they have to wait to fill out complicated forms, wait for long transactions Therefore, increase experience, reduce costs, digitalize services, expand markets when the number of people Unused use of banking services is still large that can be considered one of the top priorities of the bank. Applying new technologies such as Biometric, AI/Deep Learning, Machine Learning in practical applications of banks is an indispensable trend to achieve the above goal [Vietcombank (2018–2020)]. However, technology is only a tool, it must go with the profession to create specific applications for the bank, including training staff and employees who are proficient in the profession, including network maintenance and operation staff, information technology specialists of the bank, to management levels and internal control points in the bank, to operational staff in operational departments; at the same time, issue internal banking operational procedures. Fifthly, with a field that has a wide impact and is sensitive to currency security like digital banking, the establishment of legal regulations and their application all require indispensable care. This caution is extremely necessary, but it is time consuming, delaying the issuance of management documents of organizations and individuals at the drafting unit, to the agencies that need to apply, comments, such as: Ministry of Justice, Ministry of Information and Communication, Ministry of Public Security, Ministry of Industry and Trade Besides the specialized professional issues of this field, such as cash flow monitoring of virtual banks. In order to minimize the risk of money laundering, finance money for illegal activities, e-commerce transactions , it is necessary to have technical tools to monitor revenue, record tax, regulations on storage and security. Protect personal data, comply with the Law on Cyber security, security in commercial transactions Sixthly, in general, the development of digital banking in Vietnam has not had many breakthroughs. Digital banking products have been invested, but there are no clear differences. To improve this, it is necessary to apply and improve digital banking more and more, from building and upgrading infrastructure to the application of new solutions from banking solution providers. Besides, e-commerce and logistics infrastructure in Vietnam have not really developed. Seventhly, unlike technology and logistics, the payment problem is an obstacle to e-commerce in Vietnam because the majority of people are still not familiar with using credit cards or e-wallets. Mobile Money is a type of e-wallet that plays a huge role in e-commerce development, developing in more than 90 countries around the world. Up to now, Vietnam has not yet officially recognized legal documents. 4. CONCLUSION AND RECOMMENDATION Firstly, the Government of Vietnam, the Ministry of Finance, study and soon implement the international account system, accounting according to international standards, International Financial Reporting (IFRS), complete the regulations on electronic documents This account must be done 467
7. urgently and cannot be delayed because Vietnam is integrating into the international economy increasingly deeply. Secondly, the improvement of the legal environment for the development and operation of the DIGITAL BANK needs to be accelerated one step further. It is necessary to remove questions about the views, perceptions and approaches about DIGITAL BANK in some relevant ministries in commenting on the draft relevant documents, especially issues related to Mobile Money, besides that is the regulation of electronic documents. Thirdly, it is necessary to speed up the construction of e-government, e-government, remove household registration book instead of electronic personal data, review regulations on e-commerce, e- documents, develop logistics infrastructure. Fourthly, the Government directs all public services in all sectors, from the one-stop transaction centers at all levels of government, departments, to the compulsory public service providers must be equipped with non-cash payment devices, make non-cash payments. Competition Administration Department, Market Control Department and other relevant units of the Ministry of Industry and Trade need to strengthen inspection and sanction of frauds and frauds in e-commerce transactions, online sales, acts of not complying with electronic payments, bank payments in order to hide revenue and evade taxes. Fifthly, commercial banks need to synchronously implement DIGITAL BANK: selecting technical solutions and contractors, training staff at all levels, reviewing and issuing full internal regulations, building technical infrastructure digital, propaganda and referral to customers. Commercial banks actively work and cooperate with e-commerce businesses, logistics infrastructure to improve the performance of digital banks. REFERENCE 1. The bank (2017–2020): Access the relevant sections, at: www.thebank.vn; Access date, from August 14 to June 29, 2020. 2. SBV (2020): Website of the State Bank of Vietnam, access to News and Events section, accessible at: www.sbv.go n, date of access, from July 14 to August 29, 2020. 3. Vnba (2016–2020): Report on analysis of banking operations and electronic banking services, quarterly; Vietnam Banking Association, circulating internally, 2016–2020. 4. Vietcombank (2018–2020): Information on modern banking technology and financial services market development – Joint Stock Commercial Bank for Foreign Trade of Vietnam, hard copy, internal circulating documents, April 2020. 468