Banking is a big business in Vietnam with 4 state-owned commercial banks, 31 joint-stock commercial banks, 2 joint-venture banks, 52 branch offices of foreign banks, 60 representative offices, 16 financial companies and 9 foreign banks[1]. According to an Austrade Report (2020), 78 banks offer internet payment solutions. Mobile payment is available at 47 banks, and 29 banks accept QR code payment[2]. These numbers have surely grown since then. A McKinsey report issued last year suggested that Vietnam has exceeded the APAC average for digital banking adoption from the years 2017 to 2021, marking a 41% gain against an average of 33% over the same period. Additional services such as fintech and e-wallets have reached 56% penetration in Vietnam, an increase of over 40% since 2017. Seventy-three percent of consumers in Vietnam are multi-channel banking users which mean they use a combination of traditional and digital banks[3].

This trend towards the use of digital banking by Vietnamese consumers has led, as of the end of 2019, over 60% of banks to initiate digital banking solutions[4]. While there are digitalization options for both front and back of house services, the most relevant issues facing banks in countries like Vietnam are the front-end services such as innovation in mobile banking, e-know your customer (eKYC), QR code payment, virtual assistants/chatbots and 24/7 call centers. At the same time, banks such as TPBank, Vietcombank and Techcombank have spent a large amount of time and money digitizing the data of their users and developing the ability to utilize that data to offer customers more personalized and relevant products[5]

Digital banking is a form of banking in which all banking operations are digitalized and provided by electronic means and the physical presence of traditional banks can be substituted with an online presence. Vietnam’s first all-digital bank, TNEX, began operations within the last year and has received a certain level of international recognition as it is considered a groundbreaking endeavor. Unfortunately, Vietnam lacks a consolidated legal document regulating digital banking. Banks are currently operating digital banking activities in compliance with the credit institution law, the anti-money laundering law, the counter financing of terrorism laws, regulations on e-transactions under the electronic transaction law, and their guiding documents. Some of the major regulations are requirements on information safety and security in banking activities and provision of banking services on the internet as stipulated in Decree 35-2007-ND-CP, Decree 85-2016-ND-CP, Circular 35-2016-TT-NHNN and Circular 09-2020-TT-NHNN.

On 11 May 2021, the state bank of Vietnam, adopted Decision 810 approving the plan for the digital transformation of the banking sector by 2025 with orientations towards 2030, which outlined the specific goals on digital transformation rates for the operations of credit institutions, together with nine main solutions to achieve those goals, namely:

1. Mindset change, promotion of communications activities and enrichment of knowledge about digital transformation in banking sector;
2. Formulation and completion of legal frameworks facilitating digital transformation in the banking sector;
3. Digital infrastructure development;
4. Establishment and efficient operation of e-Government at the SBV;
5. Establishment and development of digital banking models at CIs;
6. Development and efficient use of digital data;
7. Cyber safety and security assurance;
8. Human resource development; and
9. Other solutions and tasks (e.g., enhance cooperation and exchange and sharing of experience concerning digital transformation of the banking sector with foreign partners, etc.).

While the concept of digital banking has grown apace in Vietnam, the legislation to govern the sector remains limited, as e-payments regulations have floundered due to the glacial pace of the National Assembly’s response to technological advancements digital currencies remain prohibited. There have been some movements, however, as a recent pilot program has allowed for mobile money to be used for the non-banked users in remote and rural areas (see Mobile Money Pilot Program in Vietnam), and as the prime minister gave his approval in-principal for the fintech regulatory sandbox to move forward[6]. Digital banking, and the technologies and regulations required for its development and operation are clearly in high demand, Vietnam still lags in its regulatory framework. Existing banking regulations rarely take into account the technical aspects of bringing digitalization of banking products to the consumers.

It wasn’t until 2016 that the first digital lifestyle bank was launched when Timo[7] began offering banking services on mobile applications and remote requests for debit cards. Timo developed a precursor to this year’s eKYC legislation by offering Know Your Client “hangouts” that allowed for greater flexibility for customers than having to go to a local branch. In 2017, TPBank has launched LiveBank, which is a system of interfaces across Vietnam that offer not only traditional ATM services but also eKYC and thumbprint scanning and opening of accounts via the terminal. BIDV and countless others have also taken steps to digitize their banking facilities and add value to their consumers through the use of big data[8].

Of course, all of these changes and developments must be understood against the backdrop of a country that is over 60% unbanked[9]. Vietnam has one of the highest percentages of unbanked citizens, and the large majority of those who have bank accounts are located in urban centers. Digitization efforts, such as TNEX and the Mobile Money Pilot offer opportunities to expand the services of banks to the millions of adults in Vietnam who do not currently have access. Digitalization of banking products, and the centralization of data surrounding their creation, access, and use will offer these unbanked citizens more opportunities to use digital resources as they strive to manage their livelihoods and prepare for an uncertain future.

Digital lending activities have also been enhanced in conjunction with the development of digital banking in general. Primarily, digital lending activities are provided by banks, which operate under an operation license issued by the state bank of Vietnam to credit institutions. In order to promote consumer loans, many banks have diversified their offered lending products, including: loans which can be registered online and managed via mobile application (Techcombank)[10]; and online non-collateral loans which can be disbursed within 30 minutes (with up-to-36-month load period and offered interest rate from 1.6%)[11]. These products of digital lending, as part of banking operations, fall under the ambit of credit instituion laws and regulations on the banking sector in general.

Apart from credit institutions in general, and banks in particular, many fintech companies are showing interest in the field of digital lending. However, due to certain obstacles in obtaining an operation license for conducting lending activities, fintech companies tend to cooperate with credit institutions in offering lending activities. In addition, another common form of lending-related activities offered by fintech companies is P2P lending, which has been adopted by some entities in Vietnam, namely, Fiin Credit[12], Tima[13], etc. These entities, however, usually offer a platform for connecting lenders and borrowers, but not direct lending activity itself.

[1]           https://bit.ly/3mqwpBg

[2]           Digital Banking in Vietnam: A Guide to Market, Austrade, 2020.

[3]           https://en.vietnamplus.vn/vietnams-digital-banking-adoption-catches-up-with-developed-markets/209039.vnp

[4]           Digital Banking in Vietnam, Austrade.

[5]           Digital Banking in Vietnam, Austrade.

[6]           Decision 316.

[7]           The first digital bank developed on internet-based platform to operate via both mobile banking and internet banking. Timo is ensured and co-developed by Viet Capital Bank.

[8]           Digital Banking in Vietnam, Austrade.

[9]           https://en.vietnamplus.vn/vietnams-digital-banking-adoption-catches-up-with-developed-markets/209039.vnp.

[10]          https://www.techcombank.com.vn/dang-ky-vay-von-truc-tuyen.

[11]          https://tpb.vn/vay-tieu-dung-tra-gop-tin-chap.

[12]          https://fiin.vn/vay-tien/.

[13]          https://tima.vn/vay-tien-online.