Digitalizing traditional banking activities and generating profits from the digital ecosystem require not only upgradation of information technology infrastructure but also a comprehensive approach from innovation strategy to the operational model, corporate culture, working style, and organizational structure.

The “product-focused” business philosophy face with challenges, forcing banks to switch to “customer-centric” and build a digital ecosystem that fulfills customers’ needs. So, what is the essence of this transformation?

New context, new opportunities

The 4.0 industrial revolution has brought about significant innovations in banking and finance activities. Consumers are spending more and more time on online platforms using their mobile phones and Ipad.

This rate has further increased as the Covid-19 pandemic broke out. This has given banks more favorable conditions to develop digital products and modern banking applications in order to attract customers. In recent years, banking apps in Vietnam have been ceaselessly updated, in which new features are constantly ramped up. This shows Vietnamese banks’ relentless efforts in fostering digital transformation.

Digitalization is a must

In recent years, the government has issued a large number of decisive resolutions to promote digital transformation, such as Resolution No.1/NQ-P dated January 1, 2020 regarding the pilot institutional framework (sandbox), Resolution No.50/NQ-CP dated April 17, 2020 issuing the guiding policy to actively participate in the 4.0 industrial revolution, and Decision 316/QD-TTg on the pilot usage of telecommunication accounts to pay for goods and services of small value.

Digital banking is a journey, not a destination. It requires a comprehensive strategy for change in all aspects, from business thinking to organizational culture.

Cashless payment not only helps improve the management efficiency of state administration authorities but also saves time and costs for citizens. To do so, developing mobile money and digital banking is a must. The increasingly rapid growth of the pandemic and the superiority of technology are the driving forces for organizations to stimulate digital transformation.

MBBank is among the first banks in Vietnam to establish a digital banking division.

Potential is enormous

Vietnam is in its “golden population structure” with nearly 70% of the working-age population, of which 92% uses smartphones. Yet, the rate of the population having bank accounts and mobile money apps remains low, especially in remote areas. Currently, only about 30% of the population has a bank account and just 3.5% has mobile money apps. The scale of online payments in Vietnam is estimated to reach 8.7 billion USD in 2025, nearly four times the size of 2017. This effectively means the potential to develop banking services in Vietnam is enormous.

Pioneer banks

In recent years, with their determination to change, as well as policy orientation from regulatory bodies, especially the State Bank of Vietnam, many Vietnamese banks have proactively innovated, transformed, and upgraded their information infrastructure to be able to fulfill customers’ demand on digital channels. Digital products such as QR payment, savings, digital loans, and recently, eKYC, have been actively implemented by many banks.

Some pioneers can be named as MBBank, TPBank or VPBank,... MBBank was the first in Vietnam to establish a digital banking division, rolling out a series of traditional banking services on the MBBank App, such as online loans in 3 minutes, digital savings, international payment, and recently customized bank account number and launching a program to name account number after the phone number of customers.

It’s just the start

However, upgrading the technical infrastructure to digitize banking products is just the very first step in the digital transformation process. Based on the upgraded platforms of advanced technology, Vietnamese banks have been continuing to complete their digital ecosystem, which provides customers with the experience of diversified products and services, such as shopping, traveling, investment or entertainment.

Pioneering banks such as MBBank or Techcombank are enthusiastically completing their digital ecosystems. In addition to conventional services like other banks, the MBBank App also allows users to shop, book airline tickets, play games, searching information and get financial management, securities, bonds, and insurance investment consultation online.

Digitalization is not a destination

Digital banking is a journey, not a destination. It requires a comprehensive strategy for change in all aspects, from infrastructure to business thinking and organizational culture. This competition is not merely about technology but also concerns a change in the way of thinking and organizational culture of banks.

More specifically, the conventional “product-focused” business philosophy is facing many challenges, forcing banks to switch to “customer-centric” and build a digital ecosystem that fulfills customers’ needs.

The process of digitizing banking operations or building new ways of doing business in a digital environment requires a considerably high level of innovation and flexibility. This might also be a challenge for banks because banking is a risky business that prioritizes prudence and compliance. Hence, banks need to come up with methods to nurture the creativity of their digital banking staff.

...and the core elements

Requirements for digital transformation and steps to foster digital banking have been widely discussed. Many banks have shown no hesitancy in investing a large amount of money and hiring consultants to build up their system; others have managed to deploy digital banking systems by themselves. But at the end of the day, perhaps it is digital management that is the core in addition to other fundamental factors including business model, foundation, connection, technology, algorithm, data, and analysis. If banks have not made use of data inside and outside the bank into their business decision-making process or turn them to become unique offerings or special experiences of customers, it is still at the very first stage of the digital banking process.