Banks need hundreds of million of dollars for digitalization

Most of the key executives of VP Bank, including VP Bank’s chair Ngo Chi Dung and CEO Nguyen Duc Vinh, were present at a recent event of the bank in HCM City. The Hanoi-based bank launched a new service – digital banking.

The newly launched service is YOLO (You only live once), targeting young customers. It is considered a Mobile Banking app, but with other services like e-hailing, shopping, and hotel and air ticket booking.

VP Bank was not the first bank to follow a digital banking strategy. TP Bank, a smaller bank, after having a new shareholder, the Doji group, began building its image as a digital bank, renewing mobile apps and launching a series of digital products, including LiveBank, a bank branch which doesn’t have officers.

Do Anh Tu, deputy chair of TP Bank, at a meeting with the local press, said the model suite young banks which do not have many transaction points.

Techcombank is also pioneering digitalization. When it put shares on the bourse earlier this year, a representative said the bank invested US$28 million in technology and US$300 million more in the next five years.

“In terms of IT, the investment to be made by Techcombank in the next 3-5 years will be the biggest among domestic banks, equal or higher than most of the other banks in Southeast Asia,” said Techcombank’s CEO Nguyen Le Quoc Anh.

Analysts say that commercial banks, after a period of growth based on credit, all have announced they will implement banking digitalization soon, but to date, only a few banks have begun the process. LiveBank and YOLO are the next steps after the Internet Banking and Mobile Banking period.

In developing digital banking, banks have a rival – fintechs. These include MoMo, a Vietnamese invested startup which successfully developed into a multi-service payment provider after it raised US$28 million worth of funds from Goldman Sachs and Standard Chartered.

Grab also is a big rival in the ‘all in one’ service market. Established as an ride-hailing app, Grab has added US$2 billion worth of capital to become a consumer app for many kinds of services. Most recently, Grab bought Moca, an e-wallet.

Total assets of Vietnam’s banking system reached more than VND9.25 quadrillion ($407.5 billion) by the end of August 2017, according to the State Bank of Vietnam (SBV).