Digital transformation in the financial sector in Vietnam

Along with the economic pulse and digital transformation trends in the financial sector in the world, Vietnam’s economy is also making strong changes in the digital transformation process.

1. Vietnam’s digital economy

The digital economy is booming in Vietnam. In 2016, PC Magazine described Vietnam as the Silicon Valley of Southeast Asia. Emerging industries and fast-growing sunrise industries in Vietnam include financial technology (Fintech), telecommunications, electronics and computer manufacturing, and information and communication technology (IT) services. -TT).

By mid-2018, Vietnam was home to about 30,000 businesses spread across hardware, software, digital content and IT services. Vietnam also has a thriving community of software developers and startups, developing digital products and services for use in Vietnam as well as doing software development from emerging economies. developing more. There are also specialist training centers and technology parks for IT programmers and engineers.

While television and newspapers retain their market share, growing mobile device users are driving national demand for digital news and content. Facebook is by far the most popular social network in Vietnam with an estimated 53 million active users. The Vietnamese government is promoting the development of local social media networks through initiatives such as the Vietnamese Digital Knowledge Platform, an Open Platform that encourages users to develop apps and software. another using government data and infrastructure.

Starting in 2014, social networks overtook search engines to become the most used online advertising method for businesses in Vietnam. Most of the advertising clients are family businesses about individuals selling goods and services online. These groups have contributed the most to the growth of social media advertising.

Since 2012, over-the-top (OTT) services such as Zalo, Skype and Viber began to replace traditional SMS and phone services. To compete, major carriers including Viettel and VNPT have switched to providing their own OTT services, such as Viettel, Mocha or Viettalk. Vietnam has become one of the largest markets for online games in Southeast Asia. In 2018, Vietnam ranked 25th out of 100 countries in terms of total game revenue, with revenue increasing by $123 million in 2018 to $490 million, surpassing the Philippines and Singapore. Flappy Bird by Nguyen Ha Dong was the most downloaded free game in the iOS App store in 2014.

E-commerce is one of the fastest growing segments of Vietnam’s digital economy. According to the Vietnam E-commerce and Information Technology Administration (VECITA), Vietnam’s e-commerce market is growing by 35% annually – 2.5 times faster than Japan. By 2020, VECITA predicts the number of online shoppers will increase by 52%, while the Vietnam E-commerce Association (VECOM) predicts online sales to reach $10 billion.

According to the e-commerce development plan to 2025, Vietnam will have about 55% of the population shopping online with an average purchase value of 600 USD/person/year. The Internet has become important for the exchange of information between businesses, especially export and import companies. Nearly half of Vietnamese enterprises own a website (49%) and a third (32%) have established relationships with foreign partners through online channels.

The logistics sector has grown rapidly along with the e-commerce boom. In recent years, logistics businesses have grown by an average of 14-16% ($40-42 billion) per year. Businesses operating in this area are shifting from media logistics companies to logistics e-commerce companies to cope with competition and new markets. According to a report from the Vietnam Logistics Business Association, the number of businesses applying technology has increased from 15-20% to 40-50% in recent years.

The World Bank’s report on logistics trade in 2018 shows that Vietnam ranks 45th out of 160 countries in terms of logistics development. Despite its considerable potential, the competitiveness of this industry is still quite modest compared to other countries in the region, especially in terms of technology. For example, the robotic system in the warehouse is applied by only two companies in Vietnam, Schenker and Vinamilk in Binh Duong. Major domestic shipping companies are still handling goods manually without using automated distribution centers. Technologies such as virtual reality or drone delivery have yet to be announced in any plans to deploy the technology.

Tourism is booming in Vietnam. Vietnam’s tourism industry has rapidly changed and increased service quality by using a smart tourism model. According to a survey by the Vietnam National Administration of Tourism, 71% of international tourists to Vietnam in 2017 used online sources to identify their travel destinations. Additionally, 64% of international travelers have booked their trips to Vietnam online.

Nearly 100% of Vietnamese businesses in the field of tourism have used websites to introduce their products to consumers, however, only more than 50% of domestic enterprises have successfully applied the sales method. and online payment. The COVID-19 pandemic has dealt a strong blow to Vietnam’s tourism industry. However, until now the tourism industry is rapidly recovering.

In 2018, Vietnam’s health sector set specific goals to develop a smart health system, with a plan to apply digital technologies in three main pillars: smart prevention, examination and Smart treatment and smart health administration. The “digital healthcare communication network model” is a closed network of communication channels in a hospital environment, operated and processed via the Internet. In 2018, the model was applied by 40 hospitals and 500 pharmacies. Information management systems are being digitized.

The Ministry of Health is expanding the Electronic Medical Record (EMR) plan to its affiliated units across the country after a successful pilot under Circular No. 46/2018/TT-BYT. This EMR system allows medical facilities to digitally record, display and store each resident’s medical data. Vietnam is also focusing on developing AI systems in diagnostics. VinBDI Big Data Research Institute of Vingroup has researched and developed an artificial intelligence called VinDr. Although it is still only at the research level, almost the whole world is at the same starting line with AI technology in diagnostic imaging, and Vietnam has absolutely the opportunity to rise to the top.

E-government services are growing rapidly in Vietnam. As in other developing countries, Government Agencies often adopt digital services before many businesses. According to Resolution No. 17/NQ-CP, Vietnam aims to become one of the top four ASEAN countries on the e-Government Development Index (EGDI) by 2025.

The main focus of Vietnam’s e-government initiatives is the development of the government administrative system in terms of finance, customs and tax administration. Newer priorities are developing and supporting the underlying platforms and infrastructure including IoT development, Open Data Gateways, and the Right to Information and Interagency Communications. According to Resolution No. 19/NQ-CP, by 2020, Vietnam aims to integrate information systems and databases among agencies at all levels of government, with 20% of users being authenticated. and consistent across all systems.

Vietnam’s digital economy is developing comprehensively and rapidly. The financial sector is no exception. Vietnam has many potentials and opportunities to lead in digital transformation in this area.

2. Digital transformation in Vietnam’s financial sector

Vietnam is a rising star in the global Fintech ecosystem. Like many industries in Vietnam, Fintech has grown rapidly in recent years. The structure of the Fintech ecosystem is changing, but payments still account for a large proportion, and emerging segments such as InsurTech, WealthTech and RegTech also attract interest from investors around the world.

The characteristics of the political economy driving digital transformation in the financial sector in Vietnam have their own directions compared to the world trend. Digital transformation in the financial sector in Vietnam is happening fast but has not yet exploited the full potential of the economy.

Fintech Vietnam focuses on new models and finding niche markets to create breakthroughs instead of researching and developing new technologies. The cooperation, or joint venture between financial institutions and Fintech is almost nonexistent. Vietnam Fintech ecosystem mostly receives investment from foreign PEs and VCs with an investment of 410 million USD as of September 2019.

The use of data for commercial purposes has not been formalized and the data security has not been focused on by the units. Bans are discussed by government agencies, with varying levels of enforcement on cryptocurrencies, and issues related to crypto scams have occurred. At the same time, regulators are also developing strategies to deal with the illegal use of cryptocurrencies in cross-currency flows.

Governments and regulators also facilitate the growth of digital transformation. The Vietnamese government has also established basic regulations for digital finance, including cashless payments and intermediary payment services since 2010. The Master Plan on Digital Payments has been aimed at promoting e-commerce in Vietnam is developed under Decision No. 1073/QDTTg of the Prime Minister since 2010; and Decree No. 52/2013/ND-CP of the Government on e-commerce from 2013.

In November 2012, the Government of Vietnam issued Decree 101/2012/ND-CP directing the promulgation of regulations for non-cash payments. Circular 36/2012/TT-State Bank and Circular No. 39/2014/TT-Bank were also issued in December 2014, providing guidance for intermediary payment services. On July 1, 2016, Decree 80/2016/NC-CP was issued based on the amendment of Decree 101. Later, Circular No. 20/2016/TT-Bank was issued based on the amendment. Circular No. 39.

The Government also issued a policy to restrict cash payment transactions under the Government’s Decree No. 222/2013/ND-CP to promote more cash fee payments. Payment innovation exploded with a series of payment services such as: MoMo, Airpay, VinID Pay, Viettel Pay, Zalo Pay, VNPay QR. However, according to a report of the World Bank, the rate of non-cash transactions in Vietnam is only 4.9%.

It can be seen that Vietnam still has a lot of space to conduct digital transformation. With a faster return to the new normal than many countries around the world, as well as untapped potential, Vietnam has many opportunities to lead the digital transformation in the financial sector. However, it is necessary to clearly identify the challenges that need to be faced and find ways to solve them.

Firstly, the legal framework is not precise enough, especially for new technologies in security and privacy issues. The time to update, amend and supplement legal documents is too long and does not keep pace with the rapid development of technology.

Second, Vietnam’s technology infrastructure does not meet the requirements of high technology development, especially security technology.

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