Banks must become technology firms in order to develop digital banking

06-Dec-2016 Intellasia | Dau Tu Chung Khoan | 6:00 AM Print This Post

Speaking at the retail banking forum on December 1st 2016 in Hochiminh city, financial and banking expert Dr Can Van Luc said that the strong development of information technology in the present time is forming a trend to develop digital banks and Vietnam included in this trend.

Compared to some regional countries such as Indonesia, Philippines and Malaysia, the ratio of using digital banking (such as mobile or internet banking) of Vietnamese people is fairly high at about 40 percent of banking service users. The potential to grow digital banking in Vietnam remains huge because Vietnam has a young population and high internet growth rate.

According to data of IBM in 2015, the growth rate of internet in Vietnam ranked the 15th in the world. In addition, the policy of non-cash payments has stimulated the huge development potential of retail banking, not to mention the large potential of retail banking customers using digital banking services in the future, as the young generations are born and grow up in the era of digital technology.

The development of digital banking is also the needs of banks themselves to expand distribution channels and make changes to the competitive environment and cost savings.

Nevertheless, according to experts, the digital banking services in Vietnam remain fairly basic with some products such as money transfer or payment cards, etc. To successfully and effectively develop digital banking, there is a need for multiple supports such as the establishment of a steering for directing and designing an overall digital banking strategy.

The three uninterrupted steps banks need to follow to develop digital banking include (1) to enhance digital technology for products and services, (2) customer experiences, and (3) operation services and personnel. Banks should also make investment in business analysis which uses digital technology to increase long-term value for customers as well as taking advantage of digital technology to develop business and new products.

Banks should change their own thinking because the consumption habits of customers on mobile devices are strongly increasing. Customers sleep with their mobile phones around, check emails when waking up, use phones in the car, make notes via mobile phones, make orders over the phone, and take pictures and post them on Instagram via their smart phones, etc. Vietnamese consumers are currently using smartphones anytime anywhere for working and entertaining.

According to financial experts, by 2018, doing business using digital technology will contribute about 44 percent of the revenue of banks, while it was 32 percent in 2013. However, the changes in the investment in digital technology and digital banking development will positively influence the reduction of operating costs and profits, but increase risks.

Dr Luc said that the development of digital banking will pose many risks such as leakage of information and customer data, transaction frauds, or hackers, etc. In addition, if the information technology products are delayed or exceed the budget, or are low in quality, they will negatively affect customers’ transactions as well as the operating results of banks.

Thus, bank leaders need to have leadership skills to manage multi-generational workforce (mainly young people and tech-savvy people who are capable of multitasking and have desire to be successful) with higher productivity.

The compliance with regulations on the management of technological risks, data protection, and safety and security of customer information should also be enhanced. This requires new workflows of banks, as the application of digital technology and the costs will increase. At the same time, it also requires commitments and consistency of different levels of bank leaders. The success in developing digital banking needs long-term investment. However, the investment cost is a challenge.

Matthew B Martin, Chief Technology Officer of Asia Commercial Joint Stock Bank (ACB) said that the new methods for the banking sector in the development of digital era include electronic signatures, online shopping, and social-media centre, etc. According to Matthew, to survive and grow, each bank must become a digital technology firm.

 


Category: Finance

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