May 09, 2019 / 11:57

Transformation needed for Vietnamese banks’ sustainable growth: Expert

Local banks should focus on improving management capability and raising operational efficiency, which can be achieved through transformation, including digital transformation and workforce transformation.

Local banks should focus on transformations to boost their internal strength and achieve sustainable growth, as the banking sector enters a new stage of development. 
Overview of the forum.
Overview of the forum.
This was the consensus of experts at the "Banking Forum 2019" held on 8 May 2019 in Hanoi.

The event attracted various bank leaders, representatives of the State Bank of Vietnam (SBV) and governmental agencies, banking experts, as well as delegates from international financial institutions looking to invest in Vietnam’s banking sector.

The forum gave an overview of the SBV’s monetary policies in 2018 and directions for the future, while taking into account the external factors affecting the macro-economy. A major part of the program was dedicated to discussing solutions to help the banking system improve its internal strength for future growth. Key topics included bank restructuring, non-performing loans, technology investments, human resource development, and green credit.

According to experts at the event, the restructuring of the banking sector saw positive results in 2018, as evident in a gradual reduction of bad debt. Some small banks started reporting a profit again, while several large banks achieved their profit targets. Faced with fluctuations in the global market in 2019, the SBV is adjusting its monetary policies in order to support the development of the banking sector.

Many experts shared the expectation that domestic banks will improve their capital mobilization capacity, technologies and human resources to keep pace with their Asian peers. However, they also agreed that banks will need to prioritize the enhancement of internal capabilities to overcome challenges in their growth journey.

People at center of banks’ transformation

Sharing experience gained from advising banks on both strategies and operations, Vo Tan Long, Technology Consulting Partner at PwC Consulting Vietnam, said that local banks should focus on two key tasks, i.e. improving management capability and raising operational efficiency. These can be achieved by means of transformation, including digital transformation and workforce transformation.

Long emphazised that digital transformation is not just about technology, as it can drive a fundamental change in existing processes and procedures in banks. Banks can expect positive changes, such as higher productivity and accuracy, better management of operational and credit risks, lower cost-to-income ratio, etc. Banks can also improve their customer service quality, and create new products and services with digital transformation.

Long added that digital transformation is tightly linked with workforce transformation. He said that the latter is a major concern not only for local banks but also their global peers. In fact, PwC’s latest global CEO Survey revealed that nearly 80% of CEOs in the banking and capital markets sector are worried about a lack of skills, particularly those needed to innovate effectively and provide a winning customer experience.

PwC’s approach is to put people at the heart of banks’ transformation. That means that banks should train or recruit talent to employ technology in a way that caters to customers’ needs and facilitates the human interactions between banks and their customers. 

Bank leaders should start early conversations with their staff about where their organization is heading to, so that they can understand how automation and artificial intelligence will affect their jobs. Most importantly, business models will need to be redefined to fit the new reality of the talent and technology in banks.