Banks must break tradition for development: experts
Banks must break tradition for development: experts
Accelerating the use of internet and mobile technology will be essential for Viet Nam's banking system as the country looks to reach international standards, experts said during The Asian Banker Summit 2016 in Ha Noi today.
Addressing the event, Prime Minister Nguyen Xuan Phuc said Viet Nam will speed up the reorganisation of credit institutions and enhance the efficiency of banking operations for a more stable and competitive economy.
"The overall banking picture has positively changed after five years of reforms, significantly supporting economic stability and growth, and curbing inflation," he said.
State Bank of Viet Nam Governor Le Minh Hung said the country's integration into the global economy, especially since becoming a member of the ASEAN Economic Community and signing the Trans-Pacific Partnership trade deal, means local banking institutions and administrators have to improve their capacity.
"We expect more active contributions from foreign investors to the domestic banking restructuring process in the future, and I believe the years ahead will bring about greater opportunities for all of us," he said.
"There are three things that are really important: technology, technology and technology," Schulte Research International Chairman Paul Schulte told Viet Nam News when asked what be the key for domestic banking development.
"What can happen in Viet Nam is that a banking system can be created on cell phones, a fact happening all over the world. It is happening very quickly in Kenya, Tanzania and Zambia, and Laos, Cambodia and Indonesia, as well as India and China."
Schulte said the challenge for Viet Nam is how to use technology to perform normal banking activities, such as deposits and payrolls, on cell phones. If the country succeeds in doing this, it will be able to reduce expansive banking networks and mobilise capital very quickly.
The Asian Banker Chairman Emmanuel Daniel said proper payment infrastructure will be needed to support capital flows, especially as domestic currency becomes more stable and trade flows become more important.
"New technology coming on stream today, such as mobile technology, creates opportunities for Vietnamese banks to build ability and reach out to customers in the economy," he said.
Daniel said the technology will also help local banks with international connectivity, which is important as banks in other countries are interested in the of the Vietnamese market.
"Today's technology enables Vietnamese banks to withstand competition from foreign banks coming in and at the same time provide similar services to local citizens, which in the past were only provided by institutions with better capital and infrastructure," he said.
Dean Young, the head of product management at personal data provider eWise, said his firm focuses on the Australian, American and UK markets and is looking for new customers – both banks and end-consumers – in Viet Nam.
"I think Vietnamese banks are ready to take a big step forwards," he said. "Technology is going to underpin local banks making big strives forwards with small risks and investments."
Daniel said that many financial technology companies, also known as fintech firms, today aspire to become banks themselves. "It is not the business of banking that they despise, but the behaviour of the incumbents.
"But traditional technology players have greater reason than banks to fear the fintechs. A service that one of the larger technology behemoths used to charge a bank US$1 million and 12 months to install, a new fintech company might charge only $40,000. They destroy the price points and value that the traditional technology vendors offer."
"Banks that do not think through the process of ‘breaking traditions' will risk becoming exhausted in the next few years as they chase after ‘innovation' like young people chasing after new religions, only to become disillusioned with their ‘chief innovative officers' who did not know better just a moment ago," he said.
Alain Chevalier, Chairman of The Asian Banker Summit Advisory Council, said Viet Nam is poised to engage with its neighbours as a major player not only in the Southeast Asian region, but in the entire Asia Pacific.
The question remains will Vietnamese banks, many of which are still undergoing a restructuring process after the last financial crisis, be able to take advantage of new technology and "break traditions"?
Schulte from Schulte Research International told Viet Nam News: "I was working in Indonesia in the 1980s, when [the banking sector of] this country had serious problems that required regulations, learning and discipline to be solved. Reducing corruption was so important and necessary."
He suggested Viet Nam should study the case, while the country has industrious young people who are grabbing onto new technology. "New technology is really a way to democratise money and force competition," he said.
