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|Nguyen Kim Anh, Deputy Governor cum chairman of the Fintech Steering Committee at the State Bank of Vietnam|
The Fourth Industrial Revolution is already having massive impacts on business and society, and is shaping up to be an area where businesses can produce tangible results. Vietnam, as one of the fastest-growing nations in the region, has also been integrating deeply into the world economy and achieved many successes in recent years, with aspirations to rise higher in the global value chains.
The digital transformation is reaching a tipping point when technologies radically change the business model and user experience, leading to a fundamental disruption of the industry. We have seen such digital journeys and disruptions play out across a number of industries, from retail and media to telecommunications, in a kind of sorcerer’s apprentice scenario. Yet until recently, one industry has managed to mostly withstand the turbulence: banking.
Through employing digital channels or novel business models, incumbent banks can enter new geographies or market segments that would be prohibitively expensive targets using traditional approaches.
Vietnam boasts immense potential for digital transformation thanks to its young and tech-savvy population with 56 million people of working-age and 72 per cent being smartphone users among its large populace of more than 96 million. Moreover, there are over 64 million of 143 million mobile phone subscriptions equipped with 3G and 4G.
Banks are deploying a mix of strategies to stay ahead in the game, including higher technology spending on channel improvement. Consumer experiences are upping the ante for most lenders, with some trying to blend experiences from the physical and digital worlds.
In fact, most banks are going full throttle on a variety of digital transformation efforts to contain affordable costs and improve customer experience. The benefits of technological change are likely to be vast.
Particularly, a slew of domestic lenders has embraced digitisation with the Internet of Things, providing their clients with greater access to their financial resources, banking services and innovative products that connect to other digital ecosystems.
They include, for example, Timo of VPBank, LiveBank of TPBank, or E-Zone of BIDV. Additionally, emerging technologies have created banking services seamlessly and intuitively embedded into mobile, which brings a great number of benefits rather than physical face-to-face services.
The number of people making mobile payments in stores is growing the fastest in Vietnam, according to the Global Consumer Insights Survey 2019 by global consultancy PwC. The figure grew by 24-61 per cent in a single year.
This PwC survey, conducted in 27 territories and countries worldwide, illustrated how Southeast Asia is leading the customer shift to smartphone payments. It is also noted that the Vietnamese fintech sector is poised to reach a total value of $8 billion this year, of which digital payment solutions make up for 89 per cent of the field.
In the technology arena, the promise of exponential technologies seems more real than ever. While the wild enthusiasm with blockchain has tapered off, the industry continues to sail towards a blockchain future.
Experts believe that the energy might now lie with AI and the cloud, as they are already transforming many aspects of banking in significant ways, such as credit scoring, effective credit management, operational risk assessment, and sentimental analysis, among others.
The State Bank of Vietnam (SBV) has recognised that the next level of innovation is centred on the customers, on how strategy, technology, or operations work together across the field. Hence, the SBV is actively supporting and encouraging innovation over the coming time through the following orientations:
To begin with, the SBV is set to polish up mechanisms, policies, and the legal framework in the sector and related activities, in order to adapt to the Fourth Industrial Revolution.
In addition, the SBV will also focus on facilitating and promoting banking business models and governance which not only highlight breakthrough innovations but also ensure cybersecurity as well as secure consumers’ rights. This aims to limit potential risks brought about by the approaching Industry 4.0.
Second, technology infrastructure will be developed comprehensively, which is capable of integrating and connecting with other industries and sectors, to provide banking products and services on the basis of digital transformation, as well as to improve quality of services, enhancing customer usability and experience.
Third, the Fourth Industrial Revolution technologies and digital applications are prioritised with digital banking to be ramped up, in which, e-payment is considered a crucial gateway to seamlessly connect and promote various banking services such as capital mobilisation, lending, investments, and insurance, among others.
Digital payment also plays a significant role in stimulating communication between the banking system and external digital ecosystems to provide secured, convenient, personalised products and services at a reasonable cost and with transparency.
Last but not least, the SBV sees the quality of human resources in banking as one of the decisive factors which very much drive the success of banks in this digital shift to transform, and of the digital banking format in Vietnam. For this reason, we pay a great deal of attention to training, retraining, and improving the quality of workforce serving in the banking industry, making sure that banking employees will be fully equipped with essential skills and developing capacity to adapt to the Industry 4.0.
In particular, the SBV has drawn out specific plans for the research and build-up of a legal corridor which can help facilitate the supply of digital banking products and services, through a new decree replacing the current Decree No.101/2012/ND-CP that took effect in 2012 on non-cash payments to stimulate e-payments. Furthermore, we would submit to the prime minister a scheme on setting up a regulatory sandbox for fintech operations.
At the very first stages of infrastructure development, the interbank e-payment system will be upgraded in a centralised manner, next to escalating the official operation of the 24-hour automated clearing house, and real-time payment solutions.
Standards for QR-code payments and chip cards will soon be widely applied to enhance connectivity and interconnected solutions between payment service providers, payment intermediaries, and to offer safe, convenient payment services closely integrated with other sectors.
The SBV will keep putting efforts into researching and applying advanced, modern technology to design innovative banking products and services for the country following the main orientation of providing smartphone applications with safety, convenience, and improving the customer experience.