Digitalisation important for banks’ growth

25-Nov-2021 Intellasia | Thoi bao Ngan hang | 7:19 AM Print This Post

Under the negative impact of the Covid-19 pandemic, to support customers, the banking system has actively implemented various measures to timely remove difficulties for people and businesses. Accordingly, the State Bank of Vietnam (SBV) has reduced the operating interest rates for three times, creating conditions for credit institutions (CIs) to lower lending interest rates; at the same time directed CIs to minimise operating costs, using resources to reduce lending interest rates for customers. Particularly, the issuances of Circular 01/2020/TT-NHNN, Circular 03/2021/TT-NHNN and Circular 14/2021/TT-NHNN (amending and supplementing Circular 01) have created a legal framework for CIs to restructure debt repayment terms, exempt/reduce interests and fees, maintain debt groups, remove difficulties for borrowers affected by the pandemic. Banks have also constantly promoted credit packages with preferential interest rates to the market to help businesses promptly supplement capital after the epidemic. Moreover, many banks have accepted to sacrifice a part of their profits to have more room to cut lending interest rates and share with customers. Information from the Credit Department for Economic Sectors, so far, lending interest rates have decreased by about 1.66 percent per annum compared to the pre-epidemic period.

However, banks themselves are also suffering many negative impacts from the epidemic such as declining business, increasing bad debts, etc. However, with the promotion of digitalisation activities, and increase in service income, many banks still stand firm in the face of difficulties. For example, Nam A Commercial Joint Stock Bank(NamABank) has introduced robots in its transactions, implemented Onebank to help customer make 24/7 transactions without having to go directly to the counter in the context of many localities implementing social distancing. The acceleration of digitalisation has helped NamABank’s revenue from services in the first nine months of 2021 rise by 3.6 times year-on-year.

For Orient Commercial Joint Stock Bank (OCB), the rate of online transactions from the beginning of the year until now has increased by up to 269%, particularly, after the bank launched electronic Know Your Customer (eKYC); the number of customers using OCB ONI has reached more than one million people. Thanks to the investment in digitalisation, the Cost to Income Ratio (CIR) of OCB has fallen to 29.1 percent in the third quarter (Q3) this year from the 31.9 percent in the same period of last year. It is known that, in 2021, the investment value in digitalisation of OCB is about one million US dollars with T24 core banking project to be upgraded in the end of the year.

For Maritime Commercial Joint Stock Bank (MSB), the electronic banking services with various promotions have helped the bank maintain its Current Account Savings Account (CASA) at a high level of 29.254 trillion dong in Q3/2021 (accounting for 31.09 percent of the total deposits). For Saigon Hanoi Commercial Joint Stock Bank (SHB), the boost in digitalisation has significantly lowered the bank’s CIR to below 30 percent an optimal level in the system. SHB’s representative said that this result reflects higher efficiency in optimising operations with the value of digital transformation, higher quality of human resources to improve productivity and minimisation in investment costs compared to the traditional banking model in the past.

Tran Hoai Nam, director of Digital banking division of Tien Phong Commercial Joint Stock Bank (TPBank), shared that the costs for the LiveBank model alone is only one third of the initial establishment costs and one fifth of the operation cost compared to the traditional counter. At the same time, it also reduces time and the procedures for providing services to customers by 40 60%.

The application of many advanced technologies helps increase convenience but raises banks’ costs. Experts said that for investment issue, one of the obstacles is the high initial costs, but if it is implemented properly, the costs of scaling up will be greatly reduced. Thanks to the application of technology, banks have a lot of time as well as resources in operations, lower costs for customers. Customers are those to benefit.

It is easy to see that the biggest challenge of banks at present is that the traditional business model is no longer appropriate, particularly since the Covid-19 outbreak. That makes banks to focus all resources on their digital transformation.

Tran Thai Binh, director of Information Technology Division of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), said that each bank has its own goals and strategies in digital transformation. For Sacombank, the bank sets a focus on handling large sources of work. Firstly, the bank aims to bring the best experience to customers in the fastest and most convenient way. Secondly, the bank also focuses on human resources to reduce the workload, by optimising the internal business processes including the large system, the Customer Relationship Management (CRM) system, marketing processes, and customer services. In addition, tasks such as signing documents and papers also need to be “paperless”, and tasks that are difficult to be digitalised can be handled with the application of robots in coordination with humans.

Experts realise that it is very difficult to be satisfied with a target or a specific figure because every number is a challenge for digital transformation. According to a finance and banking expert, the target of having 90 percent of the transaction made on digital channels in the near future is feasible, because in fact, many banks have achieved this target just with the need of a smart phone. As user behaviours change, banks have no other choice than making changes. It is the digitalising internal operations which is a difficult problem, forcing banks to have a strategy and make methodical steps.


Category: Finance, Vietnam

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