The local banking system has made slow changes and lacked flexibility when it comes to application of new technologies, leading to high banking fees and banking services failing to satisfy customers’ needs, said Le Anh Dung, Director of the SBV’s Payment System Department, at a national workshop on Industry 4.0 and new changes in the finance – banking sector held in Hanoi on June 12.
Meanwhile, Fintech firms are capable of providing innovative, flexible and effective technology-based services that help reduce fees and enhance customer experience, he noted.
Fintech companies, however, still lack experience in finance-banking activities, capital, customers and a system for internal compliance control and risk management. Meanwhile, banks now have all of these factors, he added.
Therefore, cooperation between banks and Fintech firms is viewed as a foundation for improving financial service assess, the official stressed. “Fintech is a fast-growing sector and a dynamic intersection between technologies and financial services that reflects the impact of Industry 4.0 on the banking and finance industry.”
Operating costs of a bank will be cut by 80% if Fintech is applied, said Prof. John Wong from the Paris Graduate School of Management, adding that thanks to Fintech, banks can reduce the numbers of transaction offices and unnecessary ATMs; and with only a smartphone, Visa or Master cards will be no longer needed.
Nguyen Dinh Thang, Chairman of the Board of LienVietPostBank, pointed out three major challenges to Vietnamese commercial banks in developing the digital banking system: legal environment, capital, and human resources and risk management.
The slow change of related regulations that does not keep up with the pace of technological growth has hindered the development of high technologies and digital banking, posing great legal risks for banks and Fintech firms, he explained. At the same time, research and development of digital banking requires big investment while technological risks and threats of banking frauds remain, he added.
The SBV acknowledged these challenges and has been continuously investing in upgrading the local financial infrastructure to prevent cyber risks and introduce warnings and new policies on information security, Dung said.
He urged the commercial banks to strengthen system security themselves to avoid card frauds that can negatively affect the industry’s reputation.
The Fintech industry is thriving in Vietnam with the market value expected to increase from US$4.4 billion in 2017 to US$7.8 billion by 2020, according to a report by Solidiance, a management consulting firm in the Asia-Pacific.
Amongst three segments of Fintech services, the digital payment leads the way, accounting for 89% of the local market share. The personal finance and the corporate finance, meanwhile, are forecast to experience respective Compound Annual Growth Rates (CAGRs) of 31.2% and 35.9% between 2017 and 2025.
The main factors driving the Fintech development in Vietnam include the Government’s plan to expand the local access to banking services to 70% by 2020; the respective increases of 52% and 72% in the numbers of Internet and smartphone users in urban areas in 2016; and the growth of e-wallet services driven by the small number of bank account holders.
The number of e-wallet users in Vietnam was estimated at 10 million people last year.
In addition, increasing income is leading to the expansion of the middle class and as a result, consumption is on the rise.
The growth of Fintech has been also fueled by the robust development of e-commerce which will see the number of users hitting 42 million by 2021 alongside the improvement of the country’s regulatory framework.