Digital Banking: Trends and Issues to Watch Out For

Most of us are familiar with banks such as Vietcombank, Ban Viet, VPbank, TPbank, MSB, VIB. So do you know that Digital Lab, Timo plus, Yolo, Live bank, Tnex, MyVIB are the names of digital banks of the above banks? The following article will help us understand more about this topic.

What is digital banking?

In 1960, the first ATM was born, marking the first time in the history of banking that customers could make transactions with banks without going through bank employees. And only 23 years later, Internet Banking was first introduced by Bank of Scotland. By 2006, online banking became popular in the US when about 80% of banks in the US provided this service. In 2011, Mobile banking was first introduced in the UK by HSBC.

Internet Banking and Mobile Banking have helped customers perform many transactions without having to go to a bank branch, just need a computer or phone with an Internet connection. However, it does not stop there, the development of technology in banking has introduced another term: "Digital Banking".

Digital banking is understood as a form of banking that operates on the Internet platform without the need to go to a branch or meet in person, but can still exchange and use banking products and services quickly through an application or some technology channel. Digital banking is more diverse and advanced than electronic banking (Internet Banking and Mobile Banking).

Digital banking development is inevitable

With digital banking, consumers can save time and effort in financial transactions with banks and service providers. At the same time, with digital banking, banks can better serve more customers, including those in remote areas.

In particular, digital banking can help banks reduce the ratio of operating costs to revenue. Specifically, experts say that applying digital technology to banking operations will increase costs by about 31% but increase net profit by about 43%.

In the world, major digital banks include BBVA, DBS bank, RBS Group, Uni Credit, Bank of America, Barclays, HSBC, Banco Santander, JP Morgan Chase, BNP Paribas.

In Vietnam, Digital Lab, Timo plus, Yolo, Live bank, Tnex, MyVIB are the names of digital banks of Vietcombank, Ban Viet, VPbank, TPbank, MSB, VIB, respectively, these are the leading banks in investing in digital technology for banking activities.

In the digital banking sector, with eKYC technology, customers can sit at home to open a bank account 24/7 instead of having to go to the counter to fill out account opening information. In addition, virtual assistant applications, such as TPbank's T'Aio or VietABank's Chatbox, can advise customers on information about interest rates, exchange rates, products, fee schedules, etc., and answer customers' questions about locations, transaction fees, and card opening procedures.

Some banks have automated registration and service change processes through the implementation of SMART FORM, typically MBBank, thereby reducing the time at the counter to an average of 3 - 5 minutes (excluding waiting time, scanning and approving documents).

In addition, some banks also use this software to analyze information of millions of customers, evaluate and predict their ability to repay debts to make accurate lending decisions such as BIDV using Watson integrated software. In particular, TPbank has launched the digital bank Live bank. Live bank has a system of unmanned banking points where customers perform operations with the machine system with a quick process.

Students of the Faculty of Finance and Banking visit BIDV Digital Banking Center

VIB is also one of the pioneers in digital banking. At VIB, AI and Big Data have been successfully applied to the credit card limit approval process, thereby shortening the process to 15 minutes, much lower than the 5-7 days it takes using traditional methods.

The challenge of digital transformation

In this digital transformation process, banks also face certain challenges such as: cybersecurity risks; technology infrastructure and payment platform systems have not met the rapidly increasing needs of users; policies and legal regulations have not kept up with the development of digital banking; and the possibility of a shortage of skilled workers to meet new conditions.

To facilitate the development of digital banking in the coming time, some issues that need to be focused on and improved are:

• Drive the building of technology platforms: Data is the most important factor in implementing artificial intelligence. For successful digital banking implementation, data should be built into centralized databases.

In addition, it is necessary to develop unified standards for QR codes for the market, build an inter-bank information sharing system, perfect technologies related to the use of electronic documents instead of paper documents, promote the application of electronic signatures, etc.

• Completing the legal framework: Policies and regulations related to digital banking need to be completed, such as policies on creating information platforms and national citizen databases; regulations on electronic customer identification processes; laws and regulations on cybersecurity.
• Promoting quality human resource training for digital banking: Domestic banks are focusing on developing digital services, so the demand for recruiting related positions is also increasing sharply. According to Mr. Nguyen Duc Vinh, General Director of Vietnam Prosperity Joint Stock Commercial Bank (VPBank), if in the past, economics students accounted for 90% of the input of banks, now it is only 60%.

Lecturers and students of the Faculty of Finance and Banking regularly attend seminars on Digital Banking.

High-quality human resources for digital banking require "3 in 1": knowledge of technology, finance and foreign languages. Meanwhile, banking human resources with financial expertise do not have IT skills and are not good at foreign languages and vice versa.

Banks also identify the serious lack of high-quality candidates as one of the major obstacles to the current digital transformation process. This requires training organizations to step up research on appropriate training programs to create human resources capable of promoting the development of digital banking.

MSc. Le Quynh Anh, Lecturer, Faculty of Finance and Banking, Dai Nam University