New technologies could lift Vietnamese banks' profits by 15-17 pct

By    May 20, 2016 | 06:53 pm GMT+7

Technological innovations are shaping developments in the banking sector. Banks, in order to maintain growth and expand their customer bases, have no choice but to quickly adopt and implement technologies across their operations.

Banks can reach annual net profit growth of between 15 percent and 17 percent with investments in technological advancements, said industry experts at the Banking Vietnam 2016 expo.

Commercial banks in Vietnam have lagged behind their global counterparts due mainly to a lack of investment funds as most of them are small scale, said Pham Xuan Hoa, deputy head of the State Bank of Vietnam’s Banking Strategy Institute.

Vietnamese banks are now under mounting pressure to pick up their pace in the technology race, according to Can Van Luc, senior advisor to the country's leading partly private bank BIDV.

He said that many factors will have a great impact on the Southeast Asia nation’s banking sector over the next four years, including fiercer competition between local banks and foreign players.

Following Vietnam’s integration into the global market, domestic banks need to upgrade their technological capabilities to comply with stricter international regulatory requirements.

For new players entering the market, the competition between banks and financial technology companies and non-traditional credit firms is strong, and as a result, banks' profit margins are shrinking.

More importantly, consumers are changing their banking behavior. According to a global survey by Ernst & Young, customers are twice as likely to switch banks as they were in the past. This is affecting the technology that banks use to meet their customers’ demands.

Meanwhile, it is forecast that in the next five years, internet and mobile banking in the Vietnamese market will grow 20 – 30 percent per year.

Although IT investments by Vietnamese banks jumped 48.3 percent between 2011 and 2015, they only account for 5 percent of commercial banks’ investment portfolio, compared to the annual average of 7-9 percent in the Asia Pacific region and 19-20 percent in Europe.

new-technologies-could-lift-vietnamese-banks-profits-by-15-17-pct

Vietnamese banks are now under mounting pressure to pick up their pace in the technology race, said industry experts at the Banking Vietnam 2016 expo.

Global retail bank’s spending on information technologies (IT) is forecast to hit $152.5 billion by 2018 as banks worldwide focus on adopting digital innovations to attract customers, according to banking analysts.

Emerging Asia-Pacific markets are expected to grow at around 7 percent, reflecting the economic development in the region and the expected growing wealth of local consumers.

Given the situation, it is important for banks to increase their investments in banking infrastructure and speed up their adoption of new technologies.

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