Foreign banks in Vietnam are investing heavily in innovation and digital technologies to provide a better customer experience.
The United Overseas Bank (UOB) announced two months ago it will increase its charter capital in Vietnam from $131.9 million to $219.9 million. Earlier, in August, Standard Chartered Bank Vietnam gained approval to raise its charter capital from $184.7 million to $303.4 million. These fresh injections of capital were perceived as demonstrating foreign banks’ commitment to deepening their presence in Vietnam amid the pandemic, expanding their coverage and accelerating their digital transformation journey. “Foreign banks have invested intensively in digital banking this year to resolve the inefficiencies in traditional financial products and services, which are limited in terms of time, space, and complicated transaction processes and procedures,” said Dr. Oliver Massmann, General Director of Duane Morris Vietnam.
UOB recently announced it will invest up to $371 million in digital innovation initiatives across ASEAN, including Vietnam.
The initiatives will drive innovation and speed to market, to enhance the digital banking experience for its retail customers. “For example, we will focus on pushing the boundaries of innovation by creating hyperpersonalized banking experiences that are unique to each customer,” said Mr. Harry Loh, CEO of UOB Vietnam. “This is our aim, to make banking simple, engaging, and transparent for all UOB customers.”
The bank’s unsecured digital lending program, UOB BizMerchant, remains popular among its small and medium-sized enterprise (SME) customers. It offers online merchants easier access to collateral-free loans based on a credit assessment of their business data beyond financial records. In the first half of 2021, the bank provided $3.3 million in loans to more than 400 businesses through the program.
Many banks and financial firms in the country have expanded their digital innovation capabilities. Similarly, Shinhan Bank Vietnam recently introduced eKYC on its mobile banking app SOL 2.0 for online account opening and debit card issuance.
“We also automated a number of internal procedures,” said Ms. Nguyen Thi Hai, Director of the Digital Experience Department at Shinhan Bank. “We will soon be able to provide fully digitalized products and services to our clients by significantly improving our processes and SOL 3.0 UI/UX. This development will help us reach our objective of boosting customer values and providing a better customer experience.”
Shinhan Bank Vietnam is proud of being a foreign bank providing comprehensive digital banking products and services in Vietnam, from individual to corporate customers. “We started our digitalization strategy in Vietnam more than five years ago with the establishment of a specialized digital banking unit, with the support of digital banking experts at our parent bank in South Korea,” she explained. “In investing in our own technological capacity, we also cooperated with fintechs to expand our ecosystem and utilize their new technologies as well as their networks. Internally, we encourage and provide training courses to our staff to create a ‘digital mindset’ and apply agile thinking and design thinking.”
Meanwhile, digital penetration and new technology solutions are a key focus at HSBC Vietnam, for both retail and corporate customers. “Our corporate customers in particular have taken advantage of HSBC’s digital platform, which provides digital solutions that enable customers to bank remotely in almost all key services,” said Mr. John Anthony, COO of HSBC Vietnam. “Likewise, in the retail space, we were the first bank in the market to roll out an end- to-end digital journey for onboarding new customers and mobile banking. We not only continue to demonstrate the adoption of technology for our customers but also ensure that our staff have best-in-class systems to support their ability to work from home seamlessly and safely.”
It is evident that digital transformation transcends banking and is causing ripples across many industries, and the main accelerant for this transformation has been the Covid-19 pandemic, according to Mr. Sylvester Kinuthia, Head of Transaction Banking Vietnam at Standard Chartered Bank. There are a number of emerging trends that can be seen regionally and globally, including an accelerated shift to e-commerce, the reinvention of trade and supply chains, a focus on end-to-end digitization of the client journey, and the need for increased operational agility for organizations, among others.
Standard Chartered views digitization as more than simply moving existing bricks- and-mortar business models online. “We see the potential for a wider industry transformation that can be achieved by continuously looking at ways of doing business and engaging with customers, partners, regulators, and the government,” he added. “We also see multilateral cooperation as the way forward, and we’re already very much involved in this space through co-creating solutions with our clients and external partnerships.”
As Vietnam’s economy continues to grow, there will be increased demand for better financial products from consumers and businesses to protect and increase their wealth. “One of the ways we help our customers meet their financial goals is by offering them access to a wide range of life insurance products through our strategic bancassurance alliance with Prudential Vietnam Assurance,” Mr. Loh said by way of example.
Even as the region continues to be affected by the pandemic, most foreign banks remain positive about Vietnam’s economic potential and strong fundamentals. The country will continue to be attractive to foreign investors, especially in fields such as renewable energy, manufacturing, infrastructure, healthcare, and technology. “We anticipate that Vietnam’s economy will gradually rebound from the impact of the pandemic,” he added.
In investing in our own technological capacity, we also cooperated with fintechs to expand our ecosystem and utilize their new technologies as well as their networks.” Ms. Nguyen Thi Hai, Director of the Digital Experience Department at Shinhan Bank
Covid-19 has further demonstrated the tech-savviness of Vietnam’s population amid underdeveloped fintech infrastructure – factors that make the country a “promised land” for financial technology investment, according to Dr. Massmann. Its fintech market reached $7.8 billion in 2020, and the number of fintech companies nearly tripled from about 40 at the end of 2017 to about 115 at the end of last year. The total number of e-wallet users in Vietnam exceeded 10 million in 2020 out of a population of 100 million people. These figures show that there is still room for growth in the domestic payments sector. The excitement and attractiveness of e-wallets has encouraged commercial banks as well as large technology companies and corporations to gradually penetrate into the market.
In that context, foreign banks should continue to diversify products and popularize fintech knowledge among their customers. Based on developing fintech products, mainly payments and money transfer, it is necessary to expand other products of potential, such as financial management, lending, and savings, etc., to meet the diverse needs of customers.
The lockdowns from the fourth wave of Covid-19 disrupted the lives and livelihoods of individuals and businesses alike. “To help our customers manage the impact of the disruptions, we had to act quickly,” said Mr. Loh. “For instance, we actively engaged our customers virtually and encouraged them to use our digital banking services. Businesses could also use our online banking platform, UOB BIBPlus, to perform banking transactions conveniently. Our relationship managers proactively reached out to customers and extended assistance to them, including offering guidance on using our digital banking services. We also leveraged our strong digital capabilities, such as our data analytics-powered credit underwriting engine, to assess and respond quickly to SMEs’ financial needs, especially during the pandemic.”
The banking sector is an essential business and foreign banks must now not only maintain daily operations but also adapt to the new circumstances. The greatest challenge is that these circumstances can change very quickly, and decisions must be made within a very short period of time without any precedent to rely on. “To overcome this, we take advantage of all nonface communications to eliminate the distance between us and our customers and between our Shinhan members,” Ms. Hai said. “Our staff are therefore more aware of the importance of digital transformation, and our customers become more familiar with using digital banking services and products. This will be an important factor in spurring on our digital transformation.”
Prior to Covid-19, the digital acceptance level in Vietnam was pretty low, as there was no compelling reason for customers to sign up to internet banking when everyone was comfortable with paper-based transactions, Mr. Anthony observed. During the pandemic, when people realized the importance of the other online services being offered by HSBC Vietnam, it saw a jump in internet banking from 23 per cent a year ago to 78 per cent in September in trade business volume and fast-growing demand for other digital platforms that allow customers to conduct transactions. What is required now is for the regulatory framework to evolve more rapidly to support digitalization.
In this regard, banks are having to address many challenges. First, the legal corridor is not fully complete, especially for new technologies. The time taken for legal updates, amendments, and supplements to appear is still slow compared to the rapid development of technology. Second, Vietnam’s technological infrastructure is yet to meet the requirements of high- tech development, especially security technology. Third, there is a shortage of high- quality personnel in specialized fields associated with banking and technology, such as artificial intelligence, big data, data analytics, and blockchain, as domestically- trained human resources do not meet the desired requirements.
It is worth noting the importance of the government and regulators in the digital transformation journey. “Various regulators have established sandboxes to facilitate the development of new disruptive technologies, which cultivates the accelerated innovation we’re seeing, especially in this region,” Mr. Kinuthia said. “In Vietnam, the launch of the national digital transformation program to 2025, which includes infrastructure investment, cybersecurity, developing a digital culture, driving digital payments, and building a digitally-fit future workforce, etc., is a massive and positive step in the right direction.”