Vietnam has witnessed a remarkable surge in mobile banking adoption in recent years. It has transformed the way individuals manage their finances and interact with financial institutions. This widespread adoption is driven by a confluence of factors, such as increasing smartphone penetration, government initiatives, and the growing demand for convenient and secure financial services. This article delves into the drivers, current status, and future trends of mobile banking in Vietnam. It also explore the transformative impact on the country’s financial landscape.
Table of contents
1. Introduction
1.1. Definition of Mobile Banking
Mobile banking, also known as m-banking or mobile financial services (MFS), is an electronic banking service that allows customers to access and manage their bank accounts from a mobile device, such as a smartphone or tablet.
The concept of mobile banking started in the late 90s and early 2000s, when the internet had become popular. At that time, there were only some giant banks like Wells Farrgo and Wachovia, which could deploy banking services on their websites to basically help their customers check their account balances and find the nearest ATMs…
Mobile web and SMS banking were the two most popular mobile banking services until 2010. After that, the emergence of smartphones, coupled with Android and iOS – the two most popular operating systems has completely revolutionised the services, with the introduction of Mobile App.
Nowadays, the mobile banking services typically offers a variety of services, such as:
- Money transfer service
- Online saving account opening/ closing service
- Bill payment service (electricity and utility bills, phone charges….)
- Account information querying service: checking account balances and transactions history, notifications of account balance fluctuates, receiving bank information (interest rates, exchange rates, transactions points, ATMs…)
- Online services buying (airline tickets, insurance…)
- E-wallet service
1.2. Benefits
For Customers
- Convenience: Mobile banking allows customers to access their accounts and manage their finances from anywhere, at any time. They can check balances, transfer funds, pay bills, and more all from their smartphones or tablets.
- Accessibility: It is available to a wide range of customers, including those in underserved areas. Consequently, it eliminates the need to visit physical branches, which can be inconvenient and time-consuming.
- Security: The apps typically use strong encryption and authentication methods to protect customer information. These measures make mobile banking just as secure, if not more secure, than traditional banking methods.
- Cost savings: It can help customers save money by reducing the need for physical branch visits and ATM transactions. Many banks even offer fee-free mobile banking services.
- Real-time financial management: Mobile banking apps provide customers with real-time access to their account information. This allows them to track their spending, monitor their balances, and make informed financial decisions.
For Banks
- Reduced costs: Mobile banking can help banks reduce their operating costs by reducing the need for physical branches and customer service staff.
- Increased customer engagement: It can help banks increase customer engagement by providing a convenient and user-friendly way to access banking services. This can lead to increased customer satisfaction and loyalty.
- Enhanced data collection: The apps can collect valuable data about customer behaviour and preferences. This data can be used to improve products and services, personalise marketing campaigns, and detect fraud.
- Expanded reach: It can help banks reach new customers, particularly those in underserved areas.
- Competitive advantage: It can give banks a competitive advantage in the marketplace.
2. Mobile Banking in Vietnam
2.1. Drivers of mobile banking adoption in Vietnam
Application of digital technology
Almost all banks have already applied technical and technology solutions. They are Cloud Computing, Data Analysis, Big Data, Artificial Intelligence (AI) and Machine Learning (ML), Blockchain…
- Big Data: This allows people to collect and store a large amount of data, reducing data processing time to make appropriate decisions.
- IoT: The IoT is the network of physical devices (smartphones, computers…), which enables these objects to connect and exchange data in real time.
- AI & ML: AI and ML will help automate tasks that previously required human intelligence with higher security capabilities. Regarding the banking sector, AI and ML can be applied to Chatbot, Chatbox, data collection and analysis, face and voice recognition, risk management, and anti-money laundering. Sari – an AI chatbot of Sacombank has two specific features: consulting on products and services and providing quick support to customers when needed.
- Cloud Computing: Cloud Computing allows people to use information storage services from vendors like Google, Microsoft, Amazon… This assists banks on providing services to customers continuously every day, through any device with an internet connection.
- RPA (Robotic Process Automation): RPA is an automation form by using robot software, helping manage, research and process data and information faster and more productively. Vietinbank has applied RPA to savings book mortgage loan products, reducing the average time of savings book mortgage loans by 38 minutes, from 58 minutes.
Besides, many other technologies have been tested and developed to create new products and services. For instance, they are DLT and Blockchain technology, Fintech connection, Biometrics, Cyber security.
Legal corridor
The Vietnamese government has played a crucial role in promoting mobile banking by implementing supportive policies and regulations.
On September 27th, 2019, the Political Bureau issued Resolution No. 52-NQ/TW “on a number of guidelines and policies to actively participate in the Fourth Industrial Revolution”. It identified the banking and finance industry as one of the priority, core and focus sectors in the implementation of digital transformation. To concretise the Resolution No. 52-NQ-TW, the State Bank of Vietnam issued Decision No. 810/ QĐ-NHNN on “Approving the Banking Industry Digital Transformation Plan until 2025, with a vision to 2030”; Decision No. 1097/ QĐ-NHNN promulgating the 2022 digital transformation plan of the banking industry…
Technological innovation in the banking industry aims to build a smart banking system, applying digital transformation as the foundation.
Tech-Savvy Young Population
According to data from the General Statistics Office, by the end of 2022, Vietnam’s population would be about 99.46 million people, of which 51.7 million people in working age. These are the subjects who have quick access to technology platforms. That’s why they would be the customers of the banking industry. Moreover, they are also the subjects benefiting from the positive changes that are the current process of implementing digital banking restructuring. In 2022, around 85% of Vietnamese banking consumers were more likely to use online and digital banking services compared to a year and a half ago, according to a report by SaaS cloud banking platform Mambu.
Coupled with the high smartphone penetration rate (over 70%) in recent years, Vietnam has seen the development of mobile banking via mobile applications.
The COVID-19 pandemic
One major side effect of the COVID-19 pandemic is that it has created a new demand of using cashless through e-banking channels and online transaction channels.
According to the Payment Department – State Bank of Vietnam, payment transactions through domestic payment channels via Internet and Mobile Banking have had huge changes. In the fourth quarter of 2022, the number of transactions via Internet and Mobile Banking reached more than 1.5 billion transactions, total sales of 13,272,494 billion VND. Growth compared to the same period in the fourth quarter of 2021 in quantity is more than 2 times and transaction value is more than 1.5 times. This shows that modern transaction channels are the development trend of the banking industry.
In terms of proportion structure, transactions via Mobile banking channel are dominating the proportion mechanism compared to Internet banking channel: In the number of transactions, Mobile’s proportion increased from 76.9% in the fourth quarter of 2021. up 77.7% in the fourth quarter of 2022; The transaction value structure in the fourth quarter of 2022 accounted for 45.4%, an increase of 3.4% billion over the same period last year.
2.2. Current status of Mobile Banking in Vietnam
Penetration rate
The mobile banking penetration rate in Vietnam has grown rapidly in recent years, reaching 69% in 2022, according to data from the State Bank of Vietnam (SBV). This is one of the highest mobile banking penetration rates in Southeast Asia.
Number of customers participating in payment transactions via mobile phones (average growth of 87%/ year in transaction volume and 140%/ year in transaction value in the 2015 – 2021 period) and the Internet (average growth 44%/year in transaction volume and 41%/year in transaction value in the 2015 – 2021 period) increasing rapidly.
Mobile Banking Apps
Most Vietnamese banks have their own mobile banking apps. These apps are typically available in both Vietnamese and English. They are also user-friendly and feature-rich, and they offer a wide range of services and functionalities. In fact, the number of downloads of mobile banking apps on iOS operating system are Techcombank Mobile, MB Bank, MyVIB2.0… The “Big 4” ranked 4th to 7th (VCB Digital, Vietinbank Ipay, BIDV SmartBanking and Agribank E-Mobile Banking). Other non-bank financial applications are also making changes on the iOS app store with Momo app ranked 3rd and Viettel Money ranked 6th in the chart. In contrast, with CH Play, the Android operating system’s app store rankings have changed again. The top three positions belong to MB Bank, VCB Digibank and Agribank E-Mobile Banking. Applications from Vietinbank and Techcombank ranked next.
Security
The widespread adoption of mobile banking has raised concerns about the security of mobile banking transactions, particularly in light of the increasing sophistication of cyber threats. However, Vietnamese banks and financial institutions have taken significant steps to safeguard mobile banking transactions. They employ a range of advanced security measures to both protect customer data and prevent unauthorised access.
Since the end of 2019, VPbank, TPbank and HDbank have applied many technology solutions to improve the quality of Mobile Banking services. It is the eKYC solution – online customer identification and insider. With these breakthrough technologies, banks have introduced a mobile service application version that allows customers to both open online payment accounts and make transactions immediately without waiting.
Multi-factor authentication
One of the most critical security measures implemented by Vietnamese banks is multi-factor authentication (MFA). MFA requires users to provide multiple layers of verification beyond their traditional username and password. For example, they could be a one-time passcode (OTP) sent to their registered phone number or a biometric authentication method such as fingerprint or facial recognition. This additional layer of security significantly reduces the risk of unauthorised access, even if a user’s login credentials are compromised.
Device fingerprinting
Device fingerprinting technology is another important security measure employed by Vietnamese banks. This technology collects information about a user’s device, such as the operating system, browser type, and IP address, to create a unique digital fingerprint. This fingerprint is then associated with the user’s account, and any subsequent login attempts from a different device will trigger an alert, prompting the bank to take additional verification measures or block the transaction altogether.
Data encryption
Data encryption plays a crucial role in protecting mobile banking transactions from eavesdropping and data breaches. Vietnamese banks encrypt all sensitive data transmitted between the user’s device and the bank’s servers. Consequently, this ensures that only authorised parties can access and decrypt the information. This encryption process safeguards account details, transaction history, and other sensitive personal data.
3. Future Trends of Mobile Banking in Vietnam
Mobile banking adoption in Vietnam is poised for continued growth in the coming years. Here are some key factors that will shape the future of mobile banking in Vietnam:
Emerging Technologies
The integration of emerging technologies, such as artificial intelligence (AI), blockchain, and augmented reality (AR), will revolutionise the mobile banking landscape. AI will personalise banking services, enhance fraud detection, and enable chatbots for customer support. Blockchain will secure transactions, facilitate cross-border payments, and promote financial inclusion. AR will provide immersive banking experiences and virtual interactions with bank representatives.
Mobile Banking Super Apps
Mobile banking apps will evolve into super apps, offering a wide range of services beyond traditional banking transactions. These services may include e-commerce platforms, bill payment options, investment tools, insurance solutions, and lifestyle features. This convergence will create a seamless and integrated user experience.
Fintech Partnerships and Open Banking
Collaborations between banks and fintech companies will accelerate innovation and expand the reach of mobile banking services. Open banking initiatives will promote data sharing and enable third-party providers to develop innovative financial products and services.
Rural Connectivity and Digital Infrastructure
Expanding network coverage and improving internet infrastructure in rural areas will be crucial for extending mobile banking services to underserved communities. Thus, it will require investments in telecommunications infrastructure and partnerships with local providers.
Cybersecurity and Regulatory Oversight
Banks and regulatory authorities will continue to enhance cybersecurity measures to safeguard mobile banking transactions and protect user data. This includes implementing robust authentication mechanisms, data encryption, and vulnerability assessments
Conclusion
In conclusion, mobile banking has emerged as a powerful catalyst for financial inclusion in Vietnam. It bridges the gap for unbanked and underbanked populations and empowering individuals with greater access to financial services. As technology continues to evolve and mobile banking penetration deepens, the future of finance in Vietnam is poised for continued transformation. Moreover, with its potential to personalise financial services, enhance security, and promote economic growth, mobile banking is shaping the trajectory of Vietnam’s financial landscape, driving innovation and empowering individuals to take control of their financial well-being.
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