Vietnam’s banking industry convened in Hanoi on May 8 for its annual Digital Transformation Day, a prestigious event highlighting the sector’s pivotal role in driving the country’s digital advancement.
With great fanfare, Prime Minister Pham Minh Chinh presented an ambitious vision for lenders to lead this revolution. His wide-ranging speech outlined three overarching goals and six key tasks, reflecting the government’s expectation that banks will spearhead the development of a digital economy, society, and citizenry.
Vietnam has witnessed significant momentum in its digital transformation agenda in recent years, recognizing technology as a strategic imperative for rapid and sustainable development.
For 2024, the national theme, “Digital Economy Development,” is supported by four pillars: fostering the IT industry, digitizing all economic sectors, enabling digital governance, and harnessing the power of digital data.
The banking industry has been assigned a mission of paramount importance within this framework. As the “lifeblood of the economy,” the digitization of lenders impacts almost every sphere of commercial activity and public service delivery.
Addressing an audience of top bankers, regulators, and experts, Mr. Chinh commended the industry’s achievements, which have laid a solid foundation. However, he strongly emphasized the need for intensified and coordinated efforts to overcome challenges and take digitization to new heights.
Notable Progress, but Challenges Remain
Vietnam’s banking digitization has yielded tangible and encouraging results. Non-cash payments have proliferated nationwide, with a surge in user numbers and total transaction values. Adult payment account ownership has reached 87%, surpassing the initial target of 80% set for 2025, a testament to banks’ aggressive promotion of digital financial inclusion.
The explosive growth of mobile and internet banking channels is evident. Mobile payment transaction volumes have skyrocketed annually, while internet banking has expanded rapidly. These changes illustrate the profound impact on the industry and customers’ banking habits.
Nearly half of all bank customers now regularly use non-cash payment methods, and the combined value of these transactions in 2023 was a towering 23 times Vietnam’s GDP for that year. This boom has been supported by the rapid development of robust electronic payment infrastructure, ensuring smooth and reliable operations at scale.
Lenders have also integrated banking services with Vietnam’s national digital ID ecosystem, enabling seamless and secure authentication through embedded biometrics, digital signatures, and the VNeID electronic identity platform.
Banks have embraced cutting-edge technologies to enhance the user experience, including facial recognition, one-touch payments, and QR codes. Big data analytics improve credit scoring and underwriting for borrowers, and online payments are now integrated into a vast array of services, from utility fees to e-commerce transactions.
This digitization has catalyzed a broader transformation within banks. Over 90% of work records are now processed and stored electronically, improving efficiency and reducing paper waste.
The expansion of online banking services via the National Public Service Portal has been significant. In 2023, nearly 14.6 million accounts were created, and 46.2 million documents were submitted through this digital hub. It also processed an impressive 26.8 million online payment transactions worth over 12.9 trillion dong ($510 million)
The government estimates that essential public digital services, supported by banking system integration, have generated annual savings of 3.5 trillion dong ($138 million) for the state and society. Additionally, 41 out of 53 essential administrative procedures have been streamlined, enabling efficient, cashless, and paperless processing.
However, Vietnam’s digital banking transformation is a work in progress, facing stubborn obstacles. Prime Minister Chinh acknowledged regulatory and policy shortcomings that hamper quicker progress. For instance, Decree No. 73, governing IT investment using state funds, has not been updated since 2019 to keep up with technological advancements.
Two highly anticipated legal milestones are also pending. The first is a decree to permit controlled testing of innovative digital banking products and services based on emerging technologies. The second is a new decree to modernize the regulatory framework for non-cash payments, aligning with global best practices.
Infrastructure inadequacies present another challenge. While banks have prioritized investments, 5G deployment and large-scale data center construction lag across Vietnam. This could strain digital systems as data-intensive services gain traction, and unresolved capacity constraints may hinder seamless service delivery and exacerbate cyber-risks.
On the cyber front, Prime Minister Chinh revealed that Vietnam’s banking sector faced nearly 2,400 attacks in the first quarter of 2024 alone. As ransomware and other threats become more sophisticated and pervasive, stronger countermeasures are necessary.
A shortage of manpower is another issue. Domestic fintech startups are relatively limited compared to regional powerhouses, and there is a shortfall of top-tier digital talent within banks—highly skilled professionals adept at data science, cybersecurity, cloud computing, and AI. They are essential to realizing Vietnam’s digital banking vision.
Charting a Bold Course for the Digital Future
To accelerate progress, the Prime Minister outlined three overarching goals for the banking sector’s digital transformation strategy. The first is to enable convenient and affordable access to financial services and products for all Vietnamese entities, including individuals, businesses, and government agencies.
This involves seamless digital onboarding, user-friendly daily banking experiences, tailored product offerings, and fully integrated services from application to payment. The second aim is to boost efficiency by eliminating outdated manual processes and compliance procedures, reducing costs and burdens for customers and staff.
By automating workflows and operations, lenders can lower overheads, pass on savings, and reallocate resources to higher-value activities that drive growth. The third and most critical goal is to enhance risk management and controls by implementing rigorous safeguards for user authentication, transaction monitoring, data security, and regulatory compliance.
This would clamp down on illicit financial activities, protect against fraud and money laundering, and shield customers and institutions from cyber breaches and scams. Underpinning these goals are five core principles that Prime Minister Chinh emphasized must guide banking digitization.
First is aligning with the Communist Party’s policies, laws, and strategic orientation for a digital economy and society. Second is capitalizing on the opportunities and managing the challenges presented by the Fourth Industrial Revolution, including harnessing frontier technologies while mitigating their risks and disruptive impacts.
The third principle is focusing digital initiatives on enhancing Vietnam’s economic competitiveness and development. This involves using technology to upgrade the country’s industrial base, production capabilities, labor productivity, and economic complexity. Heavy investments in reskilling and upskilling are necessary to cultivate a digitally savvy workforce that can drive Vietnam’s transition to higher-value industries.
The fourth guiding principle is to pursue holistic digitization, emphasizing quality over quantity. Banks must reimagine end-to-end operations and services around digital delivery models, diversifying and upgrading product suites to global standards. The fifth and final principle is close coordination across government ministries, agencies, and localities.
Digital transformation transcends industry boundaries, and banks must work hand-in-glove with healthcare providers, education authorities, tax bodies, and municipal administrations to catalyze network effects and promote Vietnam’s digital ecosystem.
To realize this vision, Prime Minister Chinh presented a multi-pronged action plan. Regulatory modernization is a top priority, especially updating the long-awaited decree to allow controlled pilots of novel products and services and a new decree codifying international best practices for non-cash payments.
The entire legal code must also be scrutinized and harmonized with recent legislation. The second thrust is infrastructural upgrades, including investments in more powerful electronic payment systems and credit bureau infrastructure to handle the surge in digital transaction traffic without disruptions.
Seamless integration between core banking platforms and government portals is crucial for delivering unified digital experiences. The third prong involves digitizing banks’ internal operations and governance to enhance competitiveness and efficiency, adopting global best practices for risk analytics, compliance monitoring, and decision support.
The fourth pillar highlighted by Prime Minister Chinh focuses on monetizing Vietnam’s strengths in residential data. This includes unifying customer databases, linking them with the central population registry for biometric authentication, and utilizing AI/Big Data analytics to tailor offerings to individual profiles and behavioral patterns. Robust cybersecurity and data privacy regimes will ensure public trust.
Finally, a concerted human capital development push is necessary to attract top tech talent to banking. Creative partnerships with universities, international organizations, and digital powerhouses can facilitate knowledge transfers and upskilling programs.
On the cyber front, Prime Minister Chinh emphasized enhanced cooperation between banks, police, and intelligence agencies to improve monitoring, threat detection, and incident response capabilities. With cybercriminals becoming more sophisticated, Vietnam’s financial system must address vulnerabilities to prevent crippling attacks.
In conclusion, Prime Minister Chinh affirmed that digital transformation is a whole-of-nation mission to secure Vietnam’s future prosperity. While challenges remain, the banking sector has demonstrated its commitment to leading this charge. Under the government’s guidance, the industry will redouble its efforts to overcome obstacles and seize the vast opportunities presented by digitization.
