Development of digital banking services at joint stock commercial bank for investment and development of vietnam (bidv)

MINISTRY OF EDUCATION AND TRAINING BANKING ACADEMY BANKING FACULTY ------ GRADUATION THESIS DEVELOPING DIGITAL BANKING IN JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPME

MINISTRY OF EDUCATION AND TRAINING

BANKING ACADEMY BANKING FACULTY

- -

GRADUATION THESIS

DEVELOPING DIGITAL BANKING IN JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM (BIDV)

Student name : TRUONG HUY HOANG

DECLARATION

My name is Truong Huy Hoang, a student of the Banking Academy, majoring

in Banking and Finance, student code 20A4010246 with Graduration's thesis topic:

"Development of digital banking services at Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)", hereby declares:

- This master's thesis is my independent scientific research work conducted under the guidance of PhD Bui Huy Trung

- The information and data used in the topic are collected and synthesised from a reliable source, fully cited and adequately regulated

- The research content of the thesis has never been published

Ha Noi, 14 May 2021

Student

TRUONG HUY HOANG

ACKNOWLEDGEMENTS

This thesis topic is the result of independent and serious scientific research of the author During implementing the thesis, the author encountered many difficulties in collecting and processing data, orienting and arranging content, and the pressure of research time and limitation of expertise To overcome these difficulties, the author was fortunate to receive the enthusiastic support of PhD Bui Huy Trung

Through the topic, the author would like to express sincere thanks and deep gratitude to the teachers of Banking Academy for having given valuable knowledge

to the author through the subjects in the program Especially, PhD Bui Huy Trung has spent precious time enthusiastically guiding and giving suggestions to the author while completing this thesis

However, due to limited knowledge and time to conduct research, this thesis cannot avoid shortcomings Therefore, the author would like to receive comments from teachers and readers to improve the thesis

TRUONG HUY HOANG

TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENTS ii

LIST OF ABBREVIATIONS v

LIST OF FIGURES vi

LIST OF TABLES vii

ABSTRACT viii

CHAPTER 1: THEORETICAL ISSUES OF DIGITAL BANKING AND DEVELOPMENT OF DIGITAL BANKING OF COMMERCIAL BANKING 1

1.1, Digital banking concept 1

1.2, Digital bank structure 3

1.3, Commercial banking with digital banking services 5

1.4, Criteria for evaluating the development of digital banking 7

1.5, Experience in developing digital banking services 8

CHAPTER 1 CONCLUSION 14

CHAPTER 2: DEVELOPMENT STATUS OF DIGITAL BANKING SERVICES AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM 15

2.1 An overview of the Joint Stock Commercial Bank for Investment and Development of Vietnam 15

2.1.1 General information 15

2.1.2 Business performance of BIDV in recent years 16

2.2 Digital banking development in BIDV 19

2.2.1 Introduction about IT system at BIDV 19

2.2.2, BIDV Digital Banking sector missions 23

2.2.3 Current status of distribution channels and digital banking services in BIDV 24

2.2.4 Current digitalisation of some major processes 32

2.2.5 Current situation of digital activities risk management 35

2.2.6 Current big data analysis for decision making 36

2.2.7, Assessment of the present status of DB services at BIDV: 38

2.2.8, Evaluate the development of digital banking in BIDV 39

CHAPTER 2 CONCLUSION 42

CHAPTER 3: SOLUTIONS TO CONTRIBUTE THE DEVELOPMENT OF DIGITAL BANKING SERVICES AT JOINT STOCK COMMERCIAL BANK

FOR INVESTMENT AND DEVELOPMENT OF VIETNAM 43

3.1 Development orientation of banking IT in 2021 43

3.1.1 About orientation 43

3.1.2 On the target 44

3.2 Development orientation of BIDV 46

3.3 Opportunities and challenges for BIDV in developing Digital banking services in the near future 48

3.3.1 Opportunities 48

3.3.2 Challenge 52

3.4 Solutions to develop digital banking services at BIDV 54

3.4.1 Investment and development of modern IT infrastructure 54

3.4.2 Diversifying and developing digital banking services 57

3.4.3 Diversity of distribution channels 60

3.4.4 Enhance data collection and analysis to support decision-making 61

3.4.5 Process automation 63

3.4.6 Human resource development 65

3.4.7 Cooperation with Fintech companies and payment intermediaries 65

3.4.8 A few suggestions to BIDV 66

3.4.9 Ensuring security and safety for digital banking services 67

3.5 Some recommendations to the Government and management agencies 69

3.5.1 Completing a legal corridor in several new areas 69

3.5.2 Organize the implementation of monitoring payment systems in Vietnam71 3.5.3 Studying and applying various types of standards and ISO according to international practices 71

3.5.4 To upgrade and develop internal payment systems of commercial banks72 3.5.5 Promote information propaganda 72

CHAPTER 3 CONCLUSION 73

REFERENCE

LIST OF ABBREVIATIONS

2 BIDV Joint-stock Commercial Bank for Investment

LIST OF FIGURES

Figure 1.2, Commercial bank products and services 6 Figure 1.3 A roadmap for conversion and completion of digital

banking model

6

Figure 1.4, Theory of the determinants of perceived quality 8

Figure 2.5, Number of BIDV’s Personal Customer 2018 – 2020 25 Figure 2.6, Number of SME Using BIDV 2018 – 2020 26 Figure 2.7, The amount of ATM and POS machine of BIG 4 27 Figure 2.8, Number of customers using Internet Banking in 3 major

banks - 2019

28

Figure 3.1 Vietnam Population and Social Networks 48

Figure 3.4, The Comparison of Customer Traditional and Digital

ABSTRACT

1 The necessity of the topic

The world is transforming in the Fourth Industrial Revolution (Industry 4.0) This is considered a leap after every 100 years of the world (since the industrial revolution in the early 20th century) and will fundamentally change the production model around the world today As an essential sector in the economy, the banking industry is always at the forefront of trends and the industry's success is always associated with the application of technological advances Examples include the use

of computer systems in business operations in the 60s, the introduction of credit cards and ATM networks in the 70s, and the early transition to online banking in the 90s of the last century In the 21st century, the banking industry is also actively promoting major reforms and landmark programs focusing on the infrastructure system to develop new technologies and solutions to serve customers In addition, the development process of the banking industry is currently under the pull of companies outside the industry with new technology platforms that are attacking the financial banking sector and can fundamentally change the way they operate - the traditional activities of the industry It can be said that the banking industry is changing at an unprecedented rate under the impact of Industry 4.0, and this presents both opportunities and challenges for existing banks Technology trends impacting the bank's distribution channels include Wireless and Mobile Technology, Self-Service Counters Technology, Biometric Technology, Media and Multimedia, Networks Social, Usage/Voice Recognition Technology, Cloud Computing, Big Data In addition, social networks have been a necessary channel for advertising and sales, thanks to the advantage of developing services associated with building customer relationships

On the contrary, the role of the traditional (physical) distribution channel is decreasing due to rapidly changing customer behaviour In addition, due to huge operating costs, many banks around the world are tending to shrink or restructure and upgrade their traditional channels in parallel with the development of digital

channels Digital Banking - a new trend has been implemented in many countries worldwide and is also the choice of many Vietnamese banks With a modern technology platform, plus advantages in helping traders save time, suitable for young people's tastes, Digital banking will be popular in the near future in Vietnam

If BIDV does not keep pace with this trend, it will lag behind and quickly fail in the race to find customers Stemming from the above reasons, the author has chosen to

research the topic "Development of digital banking services at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)" as the

graduation thesis topic

Competition in the banking sector is toughening, and without the introduction

of new technologies into the service mechanism, even the strongest banks with a conservative strategy will lose a significant part of customers, according to Belous and Lyalkov (2017), “A vector of business development in the flow of digital revolution”

Domestic Studies

The article from PhD Nguyen Thi Kim Thanh (2011), “Expanding access to banking services through information technology solutions" has presented the current situation of accessing banking services in Vietnam, compared with other countries globally, thereby offering solutions to expand access to banking services for the State Bank in general and commercial banks, mainly related to the application of information technology

Mai Thi Nhu Hiep (2012), “Developing digital banking services at Vietnam

Joint Stock Commercial Bank for Industry and Trade - Binh Dinh Province Branch” The topic introduced digital banking services at Vietinbank - Binh Dinh

branch, measures to develop digital banking services that the bank has implemented, stating customer surveys on the branch's quality of digital banking services But only comparing the services and convenience of digital banking services at Vietinbank - Binh Dinh province branch with other banks in the area, there is no comparison with leading services of banks in the world

According to Truong Thi Ngoc Thuan (2013), “Developing e-banking services

at Joint Stock Commercial Bank for Foreign Trade of Vietnam”, Master's thesis of

Business Administration The thesis has fully stated DB services deployed at Vietcombank, evaluate the quality of Vietcombank's DB services by comparing the convenience of digital banks with other banks, and at the same time surveying the level of customer satisfaction with the digital banking service of Vietcombank The topic has not evaluated the status of essential services such as Mobile Banking, SMS Banking but only mentioned the status of payment activities via card, Internet banking and associated banking services

Overall review, all studies have not specifically analysed the current situation

of digital banking products, and there is no relationship between bank branches and digital products in the digital transformation environment Focusing only on providing specific solutions and recommendations to the bank, but not having many recommendations to state agencies, not thoroughly analysing and applying the technology base factor based on the current IT system, and not compared with other banks, especially with pioneer banks of the world in the field of digital transformation

4 Research object and research scope

4.1 The objective of the research is Digital banking and the development of

digital banking services of commercial banks

4.2 Research scope

- Space: at the head office of Joint Stock Commercial Bank for Investment and

Development of Vietnam

- Time: in the period 2018-2020

- Content: Research DB trends; Analyse the current situation, premises, opportunities as well as challenges in the process of developing DB services at BIDV; From there, propose solutions to build the DB and develop the DB at BIDV

in the near future

5 Research Methods

To accomplish the research objectives set out, the thesis uses research methods: qualitative comparison methods, statistics, analysis, comparison and synthesis method

6 Structure of the thesis

In addition to acknowledgements, the introduction, lists of tables, conclusions, references and appendices, the thesis includes three chapters:

- Chapter 1: Theoretical issues of DB and development of DB of Commercial Banking

- Chapter 2: Development status of digital banking services at Joint-stock Commercial bank for Investment and Development of Viet Nam

- Chapter 3: Solution to contribute the development of Digital baking services

at Joint-stock Commercial Bank for Investment and Development of Viet Nam

CHAPTER 1: THEORETICAL ISSUES OF DIGITAL BANKING AND DEVELOPMENT OF DIGITAL BANKING OF COMMERCIAL

BANKING 1.1, Digital banking concept

A Digital Bank (DB) is an organisation that can offer banking activities online that were historically only available at a bank branch In essence, a digital bank should be able to provide all the banking functions that have traditionally been carried out at bank head offices, branch offices and via bank cards at ATM machines DB is a new concept that has not been defined as a major teaching material of the academy, university The regulator mainly identifies or mentioned it through the banks' results that have successfully deployed DB or some technology solution providers There are many definitions of DB, but through some example below, we can see some relatively suitable definition of DB, including:

The State Bank of Vietnam (2019): "DB is a banking model that operates on a

technological process platform to provide all services to customers through digital devices connected on the internet, network environment mobile telecommunications or self-service branch " Thus, DB is different from e-banking and e-banking (including internet banking, SMS Banking, and mobile banking), just service provision channels to customers based on the current operational process platform At the same time, DB is a bank operating on digitising most of its banking operations: from digitising traditional distribution channels and developing modern distribution channels to automating business processes, applying big data analysis for decision making and creating digital products, applying innovative products

According to the FFIEC (Federal Financial Institutions Examination Council), DB is the "automated delivery of new and traditional banking products

and services directly to customers through electronic, interactive communication channels."

Temenos: DB is a bank that can bring customer experience and orientation

Temenos simulates DB using the following equation:

C = Contextual: Products, services, communication methods and offers are personalised according to the needs of each customer based on extensive data collection and analysis

D - Digital banking: Combining the above components will become a Digital Bank

The term "digital banking" is like many new terms in the finance and banking industry, with many different definitions However, when it comes to digital banking, organisations, banks and researchers all affirm that: digital banking is a bank that can help customers perform most of the traditional banking transactions utilising online via an internet connection All banking transactions will be wrapped

up on a website or mobile device Digital bank transactions do not require customers to go to a bank branch and minimise the related paperwork At the same time, digital banking transactions can be done anytime, anywhere, regardless of time and space, creating an initiative for customers According to experts, the Covid-19 pandemic is a catalyst to promote social activities in the digital space, so digital infrastructure systems, digital transformation and digital banking development must be associated with a comprehensive financial promotion

Each bank has a different orientation of DB in the market, depending on their customers The bank must create a perfect customer ecosystem, serving the maximum needs of the customers Through the above definitions, we can draw the differences of the DB model compared to traditional banks:

Table 1.1, The operating differences between traditional and digital banking

01 The branch is the centre Customer is the centre

The digital distribution channel

is one of the channels of the

branch system

Digital distribution is the centre of products and services

05 Consistent products and

services for all customers

Products and services can be designed, offered for sale individually, under customers'

preferences

06 Consistent customer experience

across all channels

Provide a stable customer experience, regardless of the channel used by the customer

Digital banks come with a considerable amount of advantages in comparison

to traditional banks They can simply do things that regular banks can not, as fintech tends to be more flexible, filling in gaps in the market or leveraging new technologies such as cloud computing to scale and secure their businesses The table below shows the differences between traditional banking and digital banking in operating:

1.2, Digital bank structure

With the above concepts and the successful implementation results of banks, the DB structure includes four main components:

Figure 1.1, Digital Bank Structure

- Channels connecting with customers

To meet customers' needs, the bank must modernise to have multiple channels connecting with customers such as branches and traditional transaction counters; Internet channel (Internet / mobile Banking, website, social network), customer care switchboard (Contact Center) The bank must have a good technology foundation

to ensure banking services are provided easily and quickly On many different channels, the quality is similar Information is circulated between channels The DB will promote digital distribution channels, combine digital distribution channels with counter channels, and digitise counter channels (self-service at the counter) to bring an excellent customer experience An essential requirement of the DB is to have the interconnection and ensure service consistency between customers' channels

- Process automation

The requirement to automate the maximum process of providing products and services, banking operations through channels is a mandatory DB requirement Current IT solutions allow banks to use cutting-edge technologies in process building and process tuning Some popular solutions such as CRM (customer relationship system), ECM (enterprise content management system), BPM (business

New product

Customer's channels

Automatically Process Big data

Decision

process management system), LOS (loan management) products equipped with support solutions for the automation of product creation and supply processes to combine with digital distribution channels, providing products with high technology content for customers For example, when a bank wants to make loans online on mobile Banking, without human intervention, the bank must have enough information about customers, choose and design a safe and straightforward loan product to apply on the software system

- Decision support

The bank invests in IT systems in the information storage and processing process Especially the Data Warehouse solutions (Dataware house) and the BI analysis tool (Business intelligent) support extensive data analysis Data can come from inside the bank or outside the bank (government database, third party), so the bank needs a solution to connect the structured information and the client's structural fees to turn it into valuable information for your business Accordingly, the bank can simplify the process, provide fast, suitable products to suitable customers on different channels

- Innovating products and business

The Bank can offer innovative and high technology products compared to traditional products and create products that are not available in the media distribution channel

1.3, Commercial banking with digital banking services

DB services within commercial banks are defined as follow: "The ability to connect and integrate channels to serve customers of the bank; automating providing products, services and operations; applying Big data analytics to support making a business decision"

The services commercial banks provide to customers: In addition to providing traditional products and services to customers on a digital platform, commercial banks develop innovative products and services to form an ecosystem These services can be illustrated as the diagram below:

Figure 1.2, Commercial bank products and services

Source: IBM December 2017 the financial Brand

The above services can be designed, offered for a personalised sale following the preferences of each customer The number of services DB can implement internally or provide to customers depends on the legal regulations, payment infrastructure of countries; IT foundation, the creativity of commercial banks in front of customer needs (resources of commercial banks) and the development of intermediary payment partners (e.g fintech .) so through learn about theory as well The implemented commercial banks do not have a set of indicators to evaluate the development level of commercial banks' services However, in terms of the transition from a traditional banking model to a DB model, banks around the world often take place according to the roadmap from simple to complete as follows:

Figure 1.3 A roadmap for conversion and completion

of digital banking model

Source: https://www.celent.com/insights/522752202

1.4, Criteria for evaluating the development of digital banking

Level of customer satisfaction: The banking services provided for customers

are used a lot, showing the utility of those types of services and the customer satisfaction with the services provided by the bank The satisfaction level can be divided into three groups to consult with customers: Very satisfied, satisfied and not satisfied Through statistical results, the bank will help to have suitable policies to meet customers' needs best

Trademark and reputation of digital banks: When a bank has a brand name,

prestige in the market has been confirmed, customers will trust and use that bank's products A bank with a good brand name and reputation is a bank with a secure IT system, solid financial potential, vast operating network, professional and dedicated service staff, diverse services with many added value, modern distribution channels, fully meet the demand for services for all subjects of the economy

Competitiveness in the market: Banks wishing to stand firm in the digital

market require innovation in their products to meet diversified and rich requirements of customers Criteria for measuring the competitiveness of a digital bank: Monthly customer interactions via digital channels, monthly page views, marketing campaign/ responses, the volume of session per user/period, click through rates, frequency of savings, cost per click,

Diversity of services: To fully meet and satisfy the needs of all classes of

customers, banks need to diversify services, constantly innovate and improves application to suit customers best By doing so, banking services will grow continuously with the increasing number of customers, contributing to increased profits and distributing risks Therefore, the criteria for the diversity of services is one of the crucial criteria However, diversifying banking services still need to develop core and different digital services to create the prestige and reputation of the bank in the market

The utility of the service: Speaking of application quality is referring to the

utility of the service When service quality is an objective, qualitative and cognitive concept, satisfaction is a combination of subjective components based on feelings

and emotions When the service quality components assessed by customers increase

or decrease, their satisfaction level also changes accordingly These banking gadgets can be used as a weapon to make a difference According to Parasuraman (1991), the quality of banking services is reflected in 5 factors: Material, reliability, response, assurance, empathy

Figure 1.4, Theory of the determinants of perceived quality

Source: Association for Consumer Research, Pages: 483-490

1.5, Experience in developing digital banking services

Digital banking service of commercial banks in the world

Under the impact of Industry 4.0 and the world financial crisis, the world banks' vision has changed dramatically Two significant trends affecting the banking industry are identified quite consistently by banks:

(1) the development trend of DB services

(2) the trend of safety regulations for daily banking operations In the two major movement trends of this industry, the banks worldwide have identified a long-term vision and have made necessary strategic adjustments To see the change

in the vision, strategic goals and operational orientation of the banks globally, the author chooses the vision that some banks are considered to be at the forefront of

the above DB services

ING Bank

ING is one of the top banks in the world in DB development In 2016, ING

was rated as the best DB in Europe ING's positioning strategy is as follows: "The

challenge for the banking industry is not to create products that are new and

differentiated, which is realising product distribution and delivery most quickly This is how fintech is creating the challenge for banks on a platform that does not have a limited size Accordingly, ING focuses on finding ways to distribute products quickly, economically and with the highest quality Since the banking product has not changed in the past decade, savings are still savings, and home loans are still home loans That technology is what the bank wants” ING is concentrating most of

its investments on improving mobile banking DB service more customer-friendly and based on a modern platform, ING strives to turn all banking processes into

"paperless”, fast browsing on computer systems, except for huge loans that need to

be passed through the Central Credit Council

The ING branch model in Luxembourg has several main features:

+ Serving the training, orientation and guidance for customers to perform simple transactions by themselves on ATMs or other electronic devices: There are two separate ATM areas, the area right at the entrance hall has three machines: Open 24/7 for convenient transactions at any time, and the area inside the branch has one device so that when needed, bank staff will lead customers there to guide operations Arrange counters, iPad desks, computers for customers to perform online transactions by themselves The bank is responsible for guiding customers to operate the machine with basic transactions, and staff do not perform transactions at the counter at all

+ Serving branch staff for consulting and sales activities: On the 1st and second floors, there are many meeting rooms with different sizes suitable for meetings from 2 to 20 people At the head office branch, there are about 15 such meeting rooms Customers who need in-depth consultation on products and services will be welcomed by staff in such meeting rooms

+ Serving the cohesion and strengthening coordination between the employees

in the unit: All 25 employees, including the director, in the branch, are arranged to work in the same space With the above layout and arrangement, an ING branch has only 2-3 employees sitting in the outside lobby, which functions as a receptionist to welcome guests, arrange meeting rooms and make announcements for specialists to meet and advise customers, guide customers to complete transactions on electronic devices in the lobby or on ATMs when customers are not familiar

Overall, ING does a great job focusing on developing digital banking on application development, but they have overlooked the critical factor: product development and product quality Most of the resources on the application and utility can bring the satisfaction of customers, but it is not easy to compete with other banks

NEDBANK

The Bank provides banking, insurance and asset management services through

a network of 1,100 transaction points Nedbank has grown through mergers, acquisitions, and a good IT foundation Nedbank has standardised and simplified its

IT infrastructure The bank integrates the technology plan with the business plans Nedbank partnered with Microsoft channel integration (Nedbank uses Microsoft Enterprise Architect) to build a more effective roadmap for interaction, communication, and transactions with customers Thereby, Nedbank developed solutions for customer management, solving customer related problems through tools such as Microsoft Dynamic CRM, Microsoft Lync Server 2010, and Microsoft SharePoint Server 2010 This enables portfolio management, relationship management, collection, storage, and analysis of large data sets

When ING focuses on customer satisfaction through experience using the application, NEDBANK focuses on solving problems in its working process to create the best solution for customers The partnership with Microsoft is a significant step that proves that they are serious about digital transformation Still, there is a gap between NEDBANK and other digital transforming banks, which lacks investment in user's interface and customer experience

ICICI Bank:

The bank focuses on technology to serve the following goals: enhancing customer convenience (accessible at any time), optimising operating costs by offloading high-cost channels such as branches The digitisation process of ICICI started very early, from the days when the Bank was founded in the 1990s ICICI Bank focuses on:

+ Firstly, provide the best service with many features above all Bank digital

channel, and ensure that customers have maximum use The Bank offers a comprehensive suite of services and products to all customers on digital or self-service platforms such as accounts, term deposits, cards, loans, investment accounts Internet and Mobile is the two leading digital channels banks focus on delivering customer experiences This platform does provide more than 250 services, and customers can choose to transfer money, pay bills for more than 1000 suppliers and e-commerce sites At the same time, customers can also perform actions on the account such as viewing reports, modifying services and tracking the products and services they use

+ Second, comprehensive financial service development through mobile

wallets (Pockets): downloadable for anyone, even non-ICICI customers, install, use the wallet from bank's account and use it This e-wallet is also the first mobile application to integrate a VISA payment solution that allows QR-based payments Moreover, now, the bank continues to develop apps to promote contactless payments

Development Bank of Singapore (DBS)

Since 2010, DBS has turned its vision to DB development Currently, DBS is developing strongly, expanding its operations worldwide in a completely different way than before In 2016, DBS was ranked as the world's best DB, surpassing many significant banks in the US and Europe to achieve this title With the orientation of

"Make Banking Joyful" - "Turning banking services into excitement", the lesson to

achieve the best DB in the world learned through three main goals:

Firstly, focus on customer experience: DBS's goal is to develop excitement

when customers use banking services Therefore, DBS considers this an opportunity

to build a new banking service system with the following criteria: simplicity, reliability and more attached to people's lives In the future, people will not need a physical bank but need banking services in everyday life Therefore, this bank aims

to build a virtual bank, effectively serving people's lives and full of positive experiences;

Second, focus on products and services: DBS aims to bring the highest

satisfaction to customers (joyful) at high-quality products, services Accordingly, DBS determines the development strategy of the DB, focusing on technology development, re-establishing communication with customers In particular, DBS focuses primarily on mobile phones, helping customers not have to go to branches, ATMs or use computers;

Third, changing corporate culture: DBS raises the quality of customer service

to a new height "Make banking joyful" On the one hand, DBS creates a unique, creative banking culture to promote innovation and efficiency, reduce employees' pressure, and increase happiness On the other hand, DBS promotes corporate culture of providing services with a positive attitude and inspiring customers Good service can only be achieved with a good service attitude

United Overseas Bank Singapore (UOB)

UOB does not target 100% DB through mobile channels like DBS However, UOB deployed more comprehensively on the DB, the branch designed and built in

an integrated model with digital technology

Space design supports customer training on automatic transaction channels while still serving customers through traditional transaction counters The branch roadmap and customer experience should be transparent and part of the customer multi-channel integration experience with the bank UOB has a very suitable view

of customer needs and helps banks ensure competitiveness in the digital age,

building an ecosystem The ecosystem includes banks as a focal point to provide banking products and services and third parties to coordinate with banks to provide other services that customers need (for example, search, reservation, payment at restaurants…) The Bank and third parties form an ecosystem to maximise customer needs on digital channels, increasing customer engagement The Bank may not need

to benefit from a third-party service; the crucially important goal is to maintain and develop the customer base

UOB also promotes big data analytics for sales processes such as real-time data analysis to sell insurance to travelling customers, appearing at Changi Airport, online warning for branch leaders with unusual withdrawals (withdrawing more than usual) of customers to retain customers promptly UOB Bank implements digital projects to establish a specialised team consisting of personnel from many related units such as operations, engineering, human resources

CHAPTER 1 CONCLUSION

The emergence of smartphones (Smartphone) will continue to completely change the way people communicate and interact, leading to changes in distribution channels, sales networks and product design of banks Sales channels via Internet, Mobile banking, Tablet Banking, social networks (Social Media), DB development and paperless transactions will be a strong development trend, and customer experience will be a major target There have been more and more "paperless banks" for development, including in developing countries Thanks to the digital transformation application, the bank's products can be integrated with ancillary products and services to satisfy customers With the application of the achievements

of Industry 4.0, intelligence analysis (intelligence analytics) will be typical applications in product development activities, especially in products with high technology content of banks in the coming time In addition, Big Data and customer behaviour analysis are also becoming future trends for the digital age when internal and external data can be collected through executive analytics organisations This for customers will improve service quality, bring added value, reduce costs and support a decision Currently, being the first stage is also the time to be identified as

a hinge for Vietnamese banks to keep up with modern banking Identifying DB activities' impacts and development trends helps banks carefully prepare the necessary resources, have the right direction, promptly innovate, and have appropriate policies

CHAPTER 2: DEVELOPMENT STATUS OF DIGITAL BANKING SERVICES AT JOINT STOCK COMMERCIAL BANK FOR

INVESTMENT AND DEVELOPMENT OF VIETNAM

2.1 An overview of the Joint Stock Commercial Bank for Investment and Development of Vietnam

2.1.1 General information

Brief history of the establishment

BIDV was formerly known as Vietnam Construction Bank, established on April 26, 1957, when the country just regained peace in the North and continued the war against the US in the South In that context, the bank has effectively implemented the tasks of allocating and managing budget capital for the resistance war and national construction, contributing to the victory of national independence and unification Over more than 60 years of construction and growth, BIDV has brought four names and perform tasks following the requirements of each stage of development of the country

BIDV always excellently completes the tasks assigned by the Party and State, even as a unit with the function of allocating and managing the State's capital construction investment or as Commercial banks operate under the market mechanism and international integration

Ownership structure, mission, vision, core values

Mission: BIDV always accompanies, shares and provides the best modern

financial and banking services to customers; bringing the best value to shareholders; create a professional, friendly working environment, career development opportunities and excellent benefits for all employees; and is a pioneer bank in community development activities

Vision: "To become a top-quality, efficient and prestigious bank in Vietnam." Core Values: 5 core values of BIDV

Figure 2.1 Core values of BIDV

Source: BIDV' ’s website

Business networks

BIDV has developed an extensive network covering 63 provinces/cities nationwide with a total number of network points as of December 31, 2017, including 1 Head Office, 190 domestic branches and 01 foreign branches in Myanmar, 815 Transaction Offices, 02 affiliated units (BIDV School for Staff Training, Information Technology Center), 03 Representative Offices in Vietnam:

TP Ho Chi Minh City and TP Da Nang and TP Can Tho, 06 Overseas Representative Offices (Cambodia, Myanmar, Laos, Czech, Taiwan, Russian Federation); Subsidiaries: BIDV – SumiTrust Financial Leasing Joint Venture Company, BIDV - BAMC Debt Management and Asset Exploitation Company Limited, BIDV Securities Joint Stock Company - BSC, BIDV Insurance Joint Stock Company,…

2.1.2 Business performance of BIDV in recent years

With only 200 officers and 11 branches on the first day of establishment, after

60 years of operation, BIDV has become a joint-stock commercial bank with the most significant scale in the Vietnamese banking system, with high growth results

Financial Indicators of BIDV from 2018-2020

Table 2.1, Table of business performance of BIDV 2018 – 2020

unit: VND billion

Financial

The % Growt

h rate compar

ed to

2018 (2019)

2020

The % Growth rate compared

to 2019 (2020)

1) Total assets reached 1,516,686 billion increase of 1.8% compared to 2019 after a year of 13.47% growth compared to 2018 Compared to many recent years, the low growth rate is mainly due to the restructuring of BIDV Asset portfolio to improve business performance

2) Total net income reached 50,037 billion, the highest in the system of commercial banks, up 4% compared to 2019, recording positive results from net service income and income from capital and currency trading

3) The capital mobilisation structure continues to shift towards a more sustainable direction: BIDV successfully issued more than 23,700 billion bonds to increase capital as planned with a controlled issuance interest rate of 0.94% / year lower than the average interest rate in 2019, making an essential contribution to improving financial capacity

4) The structure of lending activities ensures safety and efficiency and focuses

on priority areas directed by the Government, the State Bank of Vietnam Medium and long term loans are balanced to expand retail segments, SME customers, and FDI; key projects and programs have been effective December 31, 2020, TDH outstanding loans increased by 7.4% compared to the beginning of the year; The proportion of TDH’s outstanding loans to total outstanding loans is 37.9%, lower than the control target (≤ 42%) Credit for priority sectors maintained positive growth in the context of the Covid-19 epidemic, especially loans for high-tech enterprises increased by 18.03%

5) The mobilised capital meets the capital use needs, ensuring the safety of the system liquidity: The total mobilised capital from December 2 to 31, 2020, is 1,402,248 billion

6) Market capitalisation value in 2020 will reach 193,000 billion VND, ranking 5th on Vietnam’s stock market Ending the session on 31/12/2020, BID shares closed at 47,900 VND / share, up 56% compared to the “bottom” time of March 2020, up 4% compared to the beginning of 2020

At BIDV, the total net cash flow in 2020 is negative to VND 71,501 billion

while the previous year increased by VND 48,865 billion Including, net cash flow from operating activities is negative, nearly 67,913 billion VND, the same period last year increased by nearly 33,745 billion VND; net cash flow from financing activities was also negative 2,669 billion VND, while in 2019 increased by nearly 15,451 billion VND; The net cash flow from investing activities was negative over

919 billion VND while the previous year was only negative over 330 billion VND The negative cash flow at BIDV was mainly due to the decrease in other income, increase in deposits and loans to other credit institutions, and decrease in debts to the Government and the State Bank

Figure 2.2, ROA and ROE of BIDV 2018 -2020

Source: Financial report of BIDV 2018 – 2020

Among the indicators evaluating the bank’s business performance, it can be said that the profitability rate is the most important indicator, in which the return on average equity (ROE) and the rate of return (ROA) are two key metrics However, BIDV is the bank with the lowest ROA and ROE in the top 10 bank profits in 2020 with 0.47% and 9.07%

2.2 Digital banking development in BIDV

2.2.1 Introduction about IT system at BIDV

In the past few years, BIDV’s priorities are focusing resources on the IT sector, and they have successfully completed many outstanding projects, even the most complicated and even failed by other banks in the region (for example, MPA,

MIS,…) As a result, BIDV has developed more than 200 application products, most of which are prized with prestigious awards in and out of the country I want

to introduce, explain BIDV’s IT system with its main infrastructure and model

a) IT infrastructure

BIDV network infrastructure includes:

- LAN network;

+ Network Center: Including Head Office network, a centralised processing

system in IT Center and IT backup centre High-speed fibre optic cables connect these areas

+ Branches (BDS): All branches in the BIDV system have had an intranet

(LAN) with a unified standard, STAR or ExtenSTAR structure

- WAN network:

+ WAN network at BIDV is built based on linking branch LANs with the

Processing Centre’s LANs

b) IT Model

Figure 2.3, BIDV’s Software Systems

Source: BIDV Transaction Branch 3

- Core Banking System

Figure 2.4, Core banking system model of BIDV

Source: BIDV Transaction Branch 3

Core Banking server system model, with a modern technology foundation, OS/400 V5R4 operating system, located at 03 locations: Main Processing Center (Hanoi), Backup Center in Hai Duong (50km far from the processing centre) and hot-backup centre (500m away from the processing centre, in Hanoi) When there is

a transaction, the data on the Production server will be synchronised almost instantaneously to the backup servers (BackupHA and BackupDR) through the MIMIX software The current core banking system of BIDV is the software of Silverlake Malaysia (starting now referred to as SIBS), equipped in 2003 SIBS has professional modules and distribution/transaction channels The core types of banking transactions follow the one-stop transaction model, centralise accounts and customer information, and are processed online as follows:

+ Customer Information Management module: Initialises customer

information, customer number (CIF) and centrally stores customer information in the whole system Provide CIF number for other modules to use

+ Ledger module: Synthesise transaction results from other modules

Automatically perform many accounting functions

+ Deposits module: Manage customers’ deposits, including demand and term

deposit accounts

+ Loan Module: Meeting the basic needs of loan management of customers

Flexibility in configuring loan products to customers

+ Money Transfer Module: Providing money transfer products This module

connects with external systems such as SWIFT payment, the interbank payment system of the State Bank, bilateral/multilateral payment system with partners through the Gateway system of the bank

+ Trade Finance subsystem (Trade Finance): Has its separate user interface,

and the data is updated directly to SIBS

+ Debit card and ATM management module: Manage and issue domestic debit

cards Perform transactions on ATMs Distribution channel at the branch (BDS): Providing an interface for transactors to directly transact with customers at service delivery points

- Electronic banking transaction system (referred to as IBMB - Internet

for short):

Banking Mobile IBMB system is a distribution channel that allows customers

to directly register and use banking services via Internet, mobile phone without going to the bank IBMB consists of 2 main components:

+ Internet Banking system for individual customers (BIDV Online)

+ Internet Banking system for corporate customers (BIDV Business Online) BIDV’s IBMB system is also applying standard security technologies for financial transactions on the internet: securing the connection with HTTPS connection protocol, encrypting information on Secure Sockets Layer (SSL), apply two-factor authentication to users: using security device Hardware Token or SMS OTP (one-time-password message via mobile phone)

- Card / ATM / POS applications

Currently, in addition to the debt card management module of the SIBS

system, BIDV has deployed many card / ATM / POS applications, including:

+ Switching system (IST Switch): switches card transactions at BIDV, connects transactions with other card systems (Visa, Master, Napas, ), manages ATM

+ Cadence system: issue VISA, Master international cards, and manage POS

+ Bilateral/multilateral payment system: Software built by BIDV

+ Gateway system: Software serving the integration between remittance module at SIBS and external payment channels such as SWIFT, IBPS ,

+ Bill payment system with partners (VNPay, OnePay, e-wallets )

- Reporting, warning and risk control applications

With the purchase of commercial software or self-built, BIDV has about 90 reporting programs serving different purposes such as reporting to the State Bank, supporting management and administration, information analysis system intelligent information based on big data (MPA, MIS )

2.2.2, BIDV Digital Banking sector missions

Digital Banking Center

- The focal point to develop products on Digital channels

- Coordinating with the Department of Policy and Development, Customer Service Center to support the requirements related to Digital Banking services developed by the focal point of the Customer Service Center

- Coordinate with product development units at Head Office and branches to add new products on the digital channel, upgrade new features

- Report and propose to handle / promptly handle arising issues related to Digital Banking service to the Board of Directors according to authorisation decentralisation

- Implement the work contents to meet the requirements of Anti-Money Laundering in accordance with BIDV's current Anti-Money Laundering Regulations for channels, products and services developed by the central bank

Technology board

- Evaluate and identify technology trends related to Digital Banking, coordinate with the digital banking centre in developing suitable Mobile Banking products with BIDV's information technology trends and conditions

- Manage Digital Banking system to ensure technological responsiveness

Center of Information and Technology - Operate and manage Digital

Banking systems in accordance with regulations, ensuring system security, stability,

safe and continuous operation Support related units in the use of these systems

- Identify technology risks that may arise from e-banking activities, propose measures to manage and prevent and limit technology risks Responsible for technology in ensuring system safety and preventing the risk of attacks, unauthorised collection and interference with applications and data

- Set system parameters, parameters used in the program

- Support the Branch, the Department of Civil Defense and Criminal Procedure, in handling and fixing technical problems and issues related to customer complaints and investigations that need the support of the IT Center

- Support to export transaction data for analysis and statistical purposes for the Department of Injury and Prevention if the Board of Insurgents cannot actively exploit

- User management at Back Office of Mobile Banking system

- Make requests to upgrade/edit Mobile banking programs according to plan and unexpected requests

2.2.3 Current status of distribution channels and digital banking services in BIDV

BIDV has been developing relatively enough distribution channels from

traditional to present, including Branches (direct transaction counters); internet banking, mobile banking; ATM, POS; Social network and customer care centre; Internet website However, BIDV’s channels are still relatively independent from each other, not linked or integrated, affecting customers’ service experience Considering the business process, including marketing, selling, providing products and services and after-sales customer care, these processes mainly occurs at the branch channel, selling on existing channels There are still limitations, and there is

no optimal combination between modern and counter-channel channels in the sales processes, specifically:

1) Branch channel

Figure 2.5, Number of BIDV’s Personal Customer 2018 – 2020

Unit: million

Source: BIDV website

In 2020, BIDV had 190 branches with 821 transaction offices and 2000 ATMs

in Vietnam (not including ten commercial presence, branches in foreign countries) and the bank number of personal customer reached 11 million, an increase of 21% compared to 2018 It also witnessed the growth of SME customer, raising 19,000 customers in a year to 309,000 The branch channel is the primary channel to interact with customers through IT applications serving transactions and control at

the branch-like core-banking (BDS module), trade finance, chapter card manager, internet / mobile banking, payment Still, these applications operate independently

to respond to altered service transactions of customers, cannot link information between systems to aggregate all the needs of one customer at a time so that the teller can fully serve the customer Customer use many services simultaneously, almost the customer has to write declaring different independent forms, and transactors must handle them on separate IT programs

Figure 2.6, Number of BIDV’s SME Customer in 2018 – 2020

Unit: customer

Source: BIDV website

2) Channel ATM, POS

Figure 2.7, The amount of ATM and POS machine of BIG 4 in 2020

Unit: machine

Source: collected from the websites of banks in May 2021

BIDV has 2000 ATMs and about 70,000 POS, ranking 2th in the banking system in 2020 In which about 26% is distributed in towns and industrial zones Periodically, BIDV calculates the ATM network's effectiveness and plans to rearrange that network to gain more efficiency in operating

At the point of sale on ATM, POS is very limited (there are only product advertising images and clips), has used this channel to sell card and service products

3) Internet Banking channel

Figure 2.8, Number of customers using Internet Banking

in 3 major banks - 2019

Unit: million

Source: Vietcombank, Agribank, BIDV websites

In 2019, the number of customers using Internet banking of 3 major banks in Viet Nam respectively was BIDV with 6,5 million, Vietcombank with 6 million clients, and Agribank come first with 7,4 million customers The Internet Banking system of BIDV is used by Polaris India, starting from mid-2012 to individual customers (BIDV Online) and enterprises (BIDV Business Online) The Internet Banking system has supported most basic transactions such as inquiry, payment for services (electricity, water, telecommunications, insurance, air tickets, ships, tuition fees .), money transfer inside and outside BIDV Fast money transfer, periodical money transfer, periodical payment, online savings deposit and withdrawal However, the system lacks some features related to a credit card such as view statement, charge, activation, lock the card… The system interface is not yet friendly with mobile devices and tablets, and there is no feature integration with other transaction systems such as counters, ATMs, Mobile Banking This system is integrated with the registration link on the BIDV website so that customers can

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