BANKING INDUSTRY BEFORE 4TH INDUSTRIAL REVOLUTION: PLENTIFUL OPPORTUNITIES, ABUNDANT CHALLENGES

Despite staying out of the list of nine sectors hardest hit by the Fourth Industrial Revolution, the banking industry, typically at the forefront of information technology application, will not stand out of the whirlwind of this Fourth Revolution.

Many opportunities

High-tech application and development demands in banking operations in Vietnam are rising. A survey conducted by the State Bank of Vietnam (SBV) showed that some banks are planning to invest 8 - 10 per cent of their annual operating expenses for information technology. Advances from the digital revolution and the upcoming Fourth Industrial Revolution will provide banks with the opportunity to attract investment capital, gain access to international markets, learn advanced management and business skills, and acquire smart digital models and technological innovations.

The application of high technology, typical of the Fourth Industrial Revolution, will help Vietnamese banks to gain many benefits such as improving profitability by reducing administrative costs, effectively operating the banking system and tech infrastructure, deploying new products and services in a faster and more flexible manner to meet customers' demands for electronic banking services. This will thus help domestic banks develop strongly and compete with advanced banks in the region and in the world.

The digital banking model, technologically operated digital devices connected to computer software in the Internet environment, has in fact been, and will be, changing the entire banking structure and providing modern banking services. Many new financial services such as M-POS, internet banking, mobile banking, chip card technology and e-wallet are developing strongly to facilitate people to use modern banking services and save transaction costs.

Recently, at the Vietnam Retail Banking Forum 2017 hosted by the Vietnam Bankers Association and International Data Group (IDG Vietnam), Mr Nguyen Toan Thang, General Secretary of the Vietnam Bankers Association, said that Vietnamese banks are positively moving with new technology trends. It is the shift from conventional banking to digital banking, the transformation of business model, an increase in customer experiences with new products and solutions, modern digital infrastructure construction and data management and artificial intelligence application.

He said, the Fourth Industrial Revolution will bring more opportunities and motivations for Vietnamese banks to develop retail banking, especially apply innovative business solutions and create technology breakthroughs to meet customer experiences.

Tough challenges

Banks will see challenges with new business models and governance models. The inevitable shift from simple digital to smart innovation based on technological blending is forcing domestic banks to rethink how they operate business and tune up with governance trends driven by artificial intelligence, mobile banking, paperless banking and digital banking.

In addition, with technology development, customers will demand banking services capably integrated on a single device, enabling them to use the services anywhere, anytime. Therefore, banks should focus on maximising customer experience based on their knowledge and understanding of these trends.

In addition, the fact that small and medium banks do not have enough potential to build backup data centres or, if having enough, are not able to meet national standards has significantly impacted information security.

One of the biggest concerns is technological risk and personnel quality. The growing sophistication of digital technology has led to an increase in security vulnerabilities, which lure cybercriminals and hackers. Indeed, cybercriminals may steal bank assets and information without having to go to the bank or even physically connecting it. Consequently, governments and service providers should take proactive measures to ensure network security and customer information.

In addition, the increase of cross-border financial products and derivative financial products in the context of integration has made security network infrastructure extremely important to banks. Improving the quality of human resources, not only professional skills but also digital operation skills and compliance with the process of delivering banking products and services in the technological environment, is also an interesting challenge.

And, before these challenges, whether they like them or not, banks and policymakers have to accept inevitable changes and broaden their outlook on banking services to survive and develop sustainably.

Source: VIR