The impact of digital banking on the efficiency of BIDV’s branch channel

--- LÊ THỊ THANH YÊN THE IMPACT OF DIGITAL BANKING ON THE EFFICIENCY OF BIDV’S BRANCH CHANNEL TÁC ĐỘNG CỦA NGÂN HÀNG SỐ LÊN HIỆU QUẢ CỦA KÊNH QUẦY TẠI BIDV LUẬN VĂN THẠC SĨ QUẢN TRỊ K

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LÊ THỊ THANH YÊN

THE IMPACT OF DIGITAL BANKING

ON THE EFFICIENCY OF BIDV’S BRANCH CHANNEL

TÁC ĐỘNG CỦA NGÂN HÀNG SỐ LÊN HIỆU QUẢ

CỦA KÊNH QUẦY TẠI BIDV

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2019

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

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LÊ THỊ THANH YÊN

THE IMPACT OF DIGITAL BANKING

ON THE EFFICIENCY OF BIDV’S BRANCH CHANNEL

TÁC ĐỘNG CỦA NGÂN HÀNG SỐ LÊN HIỆU QUẢ

CỦA KÊNH QUẦY TẠI BIDV

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS NGUYỄN NGỌC THẮNG

HÀ NỘI - 2019

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DECLARATION

As the author of this research, I confirm that all of the research findings in this paper are done by me throughout my studying and thesis implementation period In addition, there are no pieces of this paper are ever published before anywhere

All of the previous results and findings published by other researchers and articles are properly cited with permission

I am completely responsible for all of above declaration in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws

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ACKNOWLEDGEMENT

It was a great honour for me to be able to express my gratitude to my respectful advisors, my friends and colleagues, and last but not least my family for all the supports I received in the completion of the thesis

First of all, I am very grateful to my family’s supports and encouragements which help me feel more confident about my choices of studying and thesis They have always been by my side through ups and downs

Secondly, I want to express my gratitude to my advisor for his encouragement, patience, insightful advice, and constructive feedback during the entire period of research work He oversees my steps to ensure that I fully understand the method and stay on the right track for best fulfilment Moreover, his tolerance of my weaknesses or mistakes has motivated me significantly

Thirdly, I would like to express my gratefulness to all of my friends and colleagues as well as my survey respondents who are very supportive in my survey

At last, I am so happy and grateful to all of the Thesis Assessment Committee, Hanoi School of Business and Management for your considerations and supports during my thesis period

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TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENT ii

ABBREVIATION vi

LIST OF FIGURES vii

LIST OF TABLES ix

INTRODUCTION 1

1 Research background 1

2 Literature review 2

3 Research objectives 3

4 Research questions 3

5 Research scope 4

6 Research structure 4

CHAPTER 1–THEORETICAL BACKGROUND 5

1.1 Definition of digital banking 5

1.2 History of digital banking 6

1.3 Popular trends for digital banking in the ASEAN area 6

1.4 Examples of digital banking applications 8

1.4.1 SMS Banking 8

1.4.2 Mobile Banking 9

1.4.3 Internet Banking 9

1.4.4 Digital Branch 9

1.5 Benefits of digital banking 10

1.6 Impacts of digital banking on branch channel’s performance 10

1.7 Hypotheses development 13

CHAPTER 2 – METHODOLOGY 14

2.1 Research Philosophy 14

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2.2 Research Approach 16

2.3 Research strategy (document analysis and survey with the support of questionnaires) 16

2.4 Research method (combination of qualitative and quantitative) 17

2.5 Methods of collecting data 18

2.5.1 Secondary data 18

2.5.2 Primary data (questionnaires and interview) 18

2.5.3 Questionnaire design 19

2.5.4 Sample size 19

2.5.5 Data collection procedure 20

2.5.6 Technique of analysing data 21

2.6 Research Ethics 22

2.7 Strengths and Limitations of the Methodology 23

CHAPTER 3 – RESULTS AND DISCUSSIONS 24

3.1 Application of theories 24

3.1.1 Situation of developing digital banking in Vietnam 24

3.1.2 Current application of digital banking at BIDV’s branch channel 26

3.2 Findings from survey 29

3.2.1 Questionnaire results 29

3.2.2 Respondent background 44

3.2.3 Descriptive statistics of survey responds 47

3.2.3.1 Descriptive statistics of effective interaction with customers 47

3.2.3.2 Descriptive statistics of reduction of bank operation costs 51

3.2.3.3 Descriptive statistics of higher accuracy rate 54

3.2.3.4 Descriptive statistics of stronger competitiveness 57

3.2.3.5 Descriptive statistics of higher customer satisfaction 59

3.2.3.6 Descriptive statistics of higher security 61

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3.2.3.7 Descriptive statistics of BIDV branch channel’s higher efficient

performance 64

3.2.4 Correlations analysis 65

3.2.5 Multiple Regression Analysis 68

3.2.6 Recommendations to improve the efficiency of BIDV’s branch channel through application of digital banking 72

CONCLUSIONS, LIMITATIONS, AND IMPLICATION 76

1 Conclusions 76

2 Limitations 78

3 Implication 78

References 79

APPENDIX 1: QUESTIONNAIRES 82

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ABBREVIATION

BIDV : Joint Stock Commercial Bank for Investment and Development of Vietnam

ATM : Automatic Teller Machine

SPSS : Statistical Package for the Social Sciences

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LIST OF FIGURES

Figure 1.1: Research framework 13

Figure 3.1: The age of participants 45

Figure 3.2: Participant’s gender 46

Figure 3.3: Usage of branch channel services at BIDV 47

Figure 3.4: The interaction at branch channel is much better than digital banking services 48

Figure 3.5: Using branch channel services is time-consuming due to slow interaction compared with digital banking services 49

Figure 3.6: The better interaction at branch channel encourages me to get loyal to BIDV 50

Figure 3.7: The digitalization of branch channel helps save bank operation cost comparing to traditional channel operation 52

Figure 3.8: Application of digital banking on bank branch channel helps banks reduce expenses on location and staff 53

Figure 3.9: The bank should reduce number of transaction branches while applying digital banking at branch channel to reduce the costs 54

Figure 3.10: The services at digitalized branches are more accurate than the traditional ones 56

Figure 3.11: The implementation of digital banking platforms at branch channel helps reducing the error rate during bank system operation 56

Figure 3.12: The services at branch channel of BIDV are much better than other banks in Vietnam 58

Figure 3.13: BIDV does not need to apply digital banking on their branch channel to make them more competitive in comparison with other banks in Vietnam 58

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Figure 3.14: Digitalization level at BIDV branch channel makes me more satisfied with this bank 60 Figure 3.15: Because of good services provided through applying digital banking at its branches, I will recommend BIDV to my acquaintances 61 Figure 3.16: Services provided through application of digital banking at branch channel ensure higher security level 62 Figure 3.17: BIDV’s support on security issues is very professional and fast 63 Figure 3.18: BIDV’s support staffs on security issues are also very helpful and professional 63 Figure 3.19: Sound application of digital banking can lead to higher business performance at BIDV’s branch channel 65 Figure 3.20: Which are the weaknesses of BIDV’s branch channel? 73 Figure 3.21: What do you expect from BIDV’s application of digital banking at their branch channel? 74

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LIST OF TABLES

Table 3.1: Mean and mode of participants’ age 44

Table 3.2: Mean and mode of participants’ gender 45

Table 3.3: Mean and mode of participants’ usage of branch channel services at BIDV 46

Table 3.4: Effective interaction with customers 47

Table 3.5: Reduction of bank operation costs 51

Table 3.6: Higher accuracy rate 54

Table 3.7: Stronger competitiveness 57

Table 3.8: Higher customer satisfaction level 59

Table 3.9: Higher security 61

Table 3.10: BIDV branch channel’s higher efficient performance 64

Table 3.11: Correlations 66

Tabke 3.12 Model Summaryb 68

Table 3.13 ANOVAa 68

Table 3.14 Coefficientsa 69

Table 3.15: Which are the weaknesses of BIDV’s branch channel? 72

Table 3.16: What do you expect from BIDV’s application of digital banking at their branch channel? 73

In the era of the internet and technology, the banking industry has shifted its focus to digital banking as one of its long-term strategies and core values For example, in Asia, especially in Vietnam, the pace of development of banks is equivalent to the pace of implementation and application of digital banking into banking services The development of digital banking encompasses many aspects including growing banking and mobile internet services and strategic planning for banks to acquire more customers in the online market (James, 2016) Digital banking has a great influence on the distribution channels of the banking industry As a result, the channels of communication have been replaced by modern digital distribution channels developed on the basis of digital banking such as Internet banking, mobile banking, or electronic wallets Under the influence of digital banking, traditional distribution channels have reduced in size with the number of users decreasing Customers find modern channels not only convenient but also fast and time-saving Consequently, they are gradually transforming demands from traditional branch channels into digital channels, thus reducing the number of customers using traditional branches (Bharadwaj&Sawy, 2013)

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Meanwhile, take a look at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) BIDV operates a huge distribution network with various channels including ATM, tradtional branches, Internet Banking, Mobile Banking, etc However, it can be seen clearly that the adoption of digital banking in their system has created various challenges to the branch channel of BIDV rather than leading to their higher improvements on branch channel’s overall performance Specifically, application of digital banking

in the bank has made the operation of the traditional branch channel more stressful due to the bank’s main focus on the development of modern channels and the shift

of customers toward these new channels (Hendershott, Jones, & Menkveld, 2011) This poses a significant threat to the performance of the branch channel of BIDV

In order to deal with these urgent issues, it is a must for BIDV’s branch channel to detect the roots of poor performances under the application of digital banking for suitable approaches of digital banking in order to utilize the advantages of digital banking and outweigh the disadvantages A better utilization of digital banking process in the traditional branch channel of BIDV is necessary in order to ensure higher efficiency at the traditional branch channel of the bank, leading to a higher customer satisfaction level

With considerations of how to deeply improve the branch channel’s efficiency and productivity, BIDV is taking into account the impacts of digital banking at their branch channel in order to improve its efficiency It is also the

reason for the author’s choice of the research topic “THE IMPACT OF DIGITAL BANKING ON THE EFFICIENCY OF BIDV’S BRANCH CHANNEL” to complete the master thesis

2 Literature review

In the age of the Internet and advanced technology, no one can deny the needs for digital banking compared to traditional banking In terms of digital banking, it is clear that automation and online services with APIs are core

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elements that help customers experience more convenient and efficient banking services With digital banking, access to and control of customer financial information is made easier with a variety of access device options such as laptops, smartphones, and ATMs In general, digital banking is the ultimate platform that includes user interfaces for the use of customers and ultimately for banks to handle customer requests as well as data management In addition, it is imperative to apply digital banking to support all banking functions efficiently for smooth service delivery platforms (Kelman, 2016) There are three trends motivating the implementation of digital in the banking systems including: Rapid adoption, multichannel consumer decision journeys, and openness to purely digital banking More details about these trends will be presented in the chapter 1

3 Research objectives

The author strives to achieve three objectives within this thesis as below:

- Providing background information of digital banking and how digital banking could affect the performance of a bank’s branch channel

- Analysing the impact of digital banking at BIDV’s branch channel via hypotheses and appropriate methodology to test the hypotheses

- Recommending solutions to improve the impact of digital banking

on the efficiency of BIDV’s branch channel

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5 Research scope

The research is conducted in Hanoi

Data and time scope:

- Secondary data: The author will collect secondary data about digital banking and its impacts on the performance of bank branch channel in general and across Vietnam in particular

- Primary data: The primary data will be gathered within 2 or 3 weeks from the beginning of December, 2017

6 Research structure

The author intends to divide this research into four main parts In the title chapter, the author introduces the research rational and background as well as the research’s objectives, scopes, and structures to make it easier for readers to follow

In the chapter 1, the author will provide readers with the theoretical framework of digital banking and its impacts on bank’s branch channel First of all, an insightful overview of digital banking will be illustrated to help readers have the fundamental understanding about the digital banking and its prospects Then, its impacts on branch channel’s efficiency and productivity are also discussed throughout

The chapter 2 digs into the current situation of digital banking on BIDV’s branch channel The author presents the current application of digital banking within BIDV’s branch channel prior to discuss and analyse its impacts on the branch channel performance in terms of both pros and cons

Finally, in the chapter 3 of the thesis, the author will summarize the whole research’s findings about digital banking’s influences on BIDV’s branch channel Then, all the research’s limitations and contributions are also mentioned clearly at the end of the chapter

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CHAPTER 1–THEORETICAL BACKGROUND

1.1 Definition of digital banking

It is possible to define digital banking as the bank operation manner by digitalizing all services and functions including digitalizing traditional distribution channels, developing modern distribution channels, automating business activities, implementing big data analysis on decision making as well

as digital service creation, etc In the age of the Internet and advanced technology, no one can deny the need for traditional banking to digital banking

In terms of digital banking, it is clear that automation and online services with APIs are core elements that help customers experience more convenient, efficient services (Banker, Chen, Liu, &Ou, 2009) With digital banking, access

to and control of customer financial information is made easier with a variety of access device options such as laptops, smartphones, and ATMs In general, digital banking is the ultimate platform that includes user interfaces for the use

of customers and ultimately for banks to handle customer requests as well as data management In addition, it is imperative to apply digital banking to support all banking functions efficiently for smooth service delivery platforms (Rippert, 2014) To some extent, it can be said that digital banking can perform all the functions of a head office, branch office, online service, bank card, ATM and even point of sale machine The key factors that make the digital banking industry more prominent than the mobile platform are the middleware solutions

It can be defined as a software middleware that connects a bank's entire database

to other related applications Moreover, a number of banks also include other departments such as product development, marketing, etc in the middle to complete its functional suite (Chen, Vinayak, &Lam, 2014)

In spite of the fact that digital banking is related to technology, it is service-oriented to some extent Under the application of digital banking, the

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bank is expected to develop better service quality for the customers, reduce paperwork as well as direct transactions in branch and cut costs (Dootson et al, 2016) The expectation of customers toward the effective adoption of digital banking in banks is growingly high which makes the digital banking become critically important for bank’s survival

1.2 History of digital banking

Digital banking has not become popular until the late 1980s when there are various radical changes in the technology whose impacts on the banking industry are significant The launching of the automatic teller machines (ATM)

in the early 1970s has marked the evolution of digital banking in which customers are enabled to pay bill and make electronic fund transfer via the ATM without having made direct transaction at the bank’s branch In the late 1990s, customers have been familiar with the concept of Internet Banking in which they gradually build their habit of making transaction over the web, indicating a new era of technology revolution in which the distribution channel of banking shifts from traditional banking into digital banking including ATM, Internet Banking, and Mobile Banking Thanks to digital banking, the transaction could be conducted anytime anywhere worldwide without having to depend greatly on the traditional branch

Under the radical shifts to digital banking in the existence of significant development of the Internet, various banks worldwide have made huge investments into technology with the purpose of gaining competitive edge, reducing costs and improving their performance via innovative products/services and higher satisfaction and loyalty of the customers (Chandio, 2011)

1.3 Popular trends for digital banking in the ASEAN area

There are three trends motivating the implementation of digital in the banking system including rapid adoption, multichannel consumer decision journeys, and openness to purely digital banking Mentioning the rapid adoption,

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in the ASEAN region, the number of mobile users such as laptops, tablets and smartphones to access and use banking services increased sharply between 2011 and 2014 In Singapore, 94% of respondents said that they regularly access and control their bank accounts via the Internet This figure in other developing countries in the region such as Vietnam, Indonesia, and Malaysia is at 40% According to studies conducted by McKinsey in 2015, the number of users using the bank digitally via PCs or smartphones doubles from 2011 to 2014, while the figures for Indonesia and Vietnam are sevenfold Unlike most developed Asian countries whose customers usually start using digital banking services on their computers prior to using mobile devices, customers in developing countries consider mobile as their main access to digital services According to Scholten (2017), the new Internet banking services tend to be adopted first by the richer and younger customers For instance, the frequency of using digital banking services of rich customers is double than the national average level of Philippines and Thailand In addition, the younger customers who are in their twenties tend to use digital banking services more frequently than the people who are in their forties It is a trend among customers to try the digital banking services due to their curiosity and recommendations from their networks including friends, family members, or even bankers The more developed digital banking services are, the less confident customers are in direct transaction’s quality Despite this fact, the appearance of the transaction branches is irreplaceable for the next two decades It is a fact that banks still need to maintain their traditional branch networks as means of branding as well

as service delivery address for low-tech customers or highly strict customers who have not completely believed in transparency of digital banking services in developing countries like Vietnam, Indonesia, Thailand, etc Talking about the multi-channel consumer decision-making journey, it is obvious that users are tending to use a variety of interactive channels to research and choose the bank

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that has the best and most reliable service (Denecker, Sameer, &Marc, 2014) Consumers are beginning to routinely examine transactions and services over the Internet even if they have successfully completed direct banking channel transactions such as at transaction branches Taking credit card decisions as an example, it is clear that most consumers respond that digital channels have introduced them to credit vouchers and voucher support purchase Meanwhile, there are also people who say they are affected by the recommendations from the mouth Some others have said they have changed their mind about offering credit

or bank cards based on online research Earlier, Singapore led ASEAN on the use

of online channels similar to the more developed Asian markets Referring to the openness factor to attract index services, this is considered one of the key factors for the growth of digital banking in the ASEAN region as the market is more and more willing to accept banking services with advanced technology and automation (Moewes, Puschmann, & Alt, 2011) In most ASEAN countries, most people said they would consider opening an account at a bank without a physical network Taking Singapore as an example, about 80 percent of respondents said they were willing to test a pure digital program ASEAN's relatively thin branch network can encourage the development of pure digital programming In the six surveyed countries, on average there are 8.7 bank branches per 100,000 adults, a proportion roughly equivalent to the rest of emerging Asia However, Asian development has more than 23 bank branches for every 100,000 adults; nearly triple the saturation This gap represents an opportunity for banks to reach out to non-digital consumers, especially in countries such as Indonesia, Philippines, and Vietnam, where personal financial services market are developing rapidly

1.4 Examples of digital banking applications

1.4.1 SMS Banking

SMS Banking is a utility service package using digital banking modern technology, which is available to all customers having accounts at the bank

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SMS Banking includes utilities such as fund transfer from accounts to accounts; bill payment; notification of account balance change, bank loan repayment due, premium programs, promotions…; looking up information such as transaction history, interest rates, exchange rates and ATM locations

1.4.2 Mobile Banking

Mobile Banking is a banking application for mobile devices such as smartphones and tablets, usually available for all iOS, Android, and Windows phones With this application, customers could perform and access many bank utilities, from accounts inquiry to other financial services through the use of smartphones Customers can download the application from the App Store, Play Store or Google Play to manage their accounts, right from their devices at any given place and time

1.4.3 Internet Banking

Internet Banking is an online banking service for customers with accounts

at the bank The service provides various banking utilities, from accounts inquiry to other financial services through the use of modern applications and technology Benefits for customers include activeness in financial planning; easy account and data management (including all deposit, savings accounts, etc which customers have registered at the bank); saving time and money; multiple product and service functions helps customers select and perform transactions with the bank in a timely and accurate manner

1.4.4 Digital Branch

Digital branch utilizes modern technology to boost sales and improve customer experience significantly However, it is not simply equipping touch screens or buying tablets, digital branch must be built on three pillars: The integration of cutting-edge branch technology; the adoption of teller-free and desk-free branch formats at every location; and the use of digital technology and advanced analytics to improve the operating model in branches If done right,

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digital branch can help bank reduce staffing, lower real-estate requirements, and alters customer interaction, resulting in improvement of branch effectiveness compared with tradtional branch

1.5 Benefits of digital banking

Digital banking provides huge benefits for both banks and the customers

at the same time

First of all, in terms of the bank, digital banking helps increase the efficiency of the bank due to the reduction in paperwork and workload of frontline staffs, because customers could serve themselves via Internet access to the banking system or via self-service systems at the branch In addition to that, the consumable costs involved in the system such as paper, ink, etc and overhead costs including staff’s salary and branch’s sizes are reduced significantly contributing to a saving in the bank’s resources Thirdly, products and services of the banks will become more diversified leading to higher satisfaction of customers (Emmanuel, 2011)

From the perspective of customers, digital banking helps save time and increase the convenience for customers Transactions could be made anytime anywhere based on customer’s demand and will not be depended heavily on opening hours of the branch

1.6 Impacts of digital banking on branch channel’s performance

It is a fact that the implementation of digital banking on BIDV in general has not achieved the expected results in terms of both scope and quality Mentioning the scope of digitalizing, BIDV has still only focused on developing new digital channels and services such as Internet banking, Mobile banking Meanwhile, they maintain the operation manner of branch channels which are sometimes too complicated and out-of-date leading to the in-equality in performance and service quality between the traditional channel and digital channels Looking at cases of other well-developed banks in other countries, it

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can be said that if BIDV has made progresses on digitalizing both their new channels and their traditional distribution channel which is the branch channel, and they can gain significant improvement on their overall performance

In detail, after a long period of operation and development of the digital banking system, banks have demonstrated the positive impact of digital banking

in creating a more consistent customer relationship that boosts the base of competitive advantage such as increasing number of new customers and reducing inherent operating costs In a study carried out in 2017, Gaurav pointed out that banks successfully utilizing digital banking operates more effectively than traditional banks in six major areas First, thanks to digital banking with advanced technology platforms that allow banks to increase time and effectively interact with customers as well as internal systems, business performance has improved markedly No one can deny the fact that digital banking can leverage the middleware to maximize its performance beyond just standing at the bottom

of the platform and keeping customers at the top of the interface Secondly, the development and application of digital banking have also contributed to the reduction of bank operating costs The widespread automation of the system allows banks to cut back on human capital, thereby saving a tremendous amount

of human capital According to Dias, Patnaik, Scopa, and Van Bommel (2015), the traditional banking channels have to pay such a high operation expenses due

to their wages budget, the consumption of various resources such as papers, offices, and so on Meanwhile, the application of digital banking at these channels not only contributed to the reduction of labour force consumption, but also improved the data quality and response speed of the entire system The accuracy is the third advantage of digital banking compared to traditional banking In traditional banking systems where most of the operations are handled by human power, the error rate is often quite high, sometimes reaching

up to 40%, which makes it difficult to improve productivity (Pole &Puschmann,

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2011) In addition, the loose connection between the branches in the same system and the office in charge of many operating areas also has a negative impact on the overall operating efficiency of the entire system In contrast, with the foundation of integrating many advanced technology solutions and high automation elements, digital banking with sophisticated software systems are designed and automated to enable banks to deliver solutions (Prensky, 2001) Determining the error rate takes place in different stages of the operation process, thereby improving productivity and efficiency Fourth, digital banking creates more opportunities for banks to increase their competitiveness especially thanks to greater market access and stronger relationships with technology-savvy customers In addition, the CRM platform is very effective in tracking customer data that banks can communicate with customers faster and more accurately via email, phone or other online media channels In addition, digital banking offers tremendous agility in both internal and external banking processes, enhancing customer experience and significant level of satisfaction

In particular, digital banking allows the integration of different software into a system to effectively detect problems that respond to market changes for the quickest response and decision-making (Tallon, 2010) Last but not least, digital banking has also enhanced security It is very useful in avoiding the online threats that affect the image and reputation of the bank In other words, digital banking offers better security for bank data and resources than traditional banking (Zhang & Riordan, 2011)

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1.7 Hypotheses development

Figure 1.1: Research framework

Based on the six outweighed strengths compared to traditional banking, it can be said that digital banking can contribute significantly to the branch channel’s performance via six factors including more effective interaction with customers, reduction of bank operation costs, higher accuracy rate, stronger competitiveness, higher customer satisfaction level, and higher security In other words, in order to enhance the contribution of digital banking to BIDV branch channel’s performance, it is a must for the bank to empower these six factors in applying digital banking into their branch channel These relationships are summarized clearly in figure 1.1

Higher security

Higher customer satisfaction level

Stronger competitiveness Higher accuracy rate

Reduction of bank operation costs

Effective interaction with

customers

BIDV’s branch channel higher efficient performance Digital

banking

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CHAPTER 2 – METHODOLOGY

Following the school of thoughts by Saunders and Thornhill (2012), it is highlighted that the research design is associated with a range of different methodological decisions to select a collection of tools and approaches to the research methodology Research Onion framework is one of the popular tools to arrange and organize different methodological choices in different layers like in

an onion Such a logical arrangement of the Research Onion model will help to develop a comprehensive system of methodology in which the research’s objectives are expected to be obtained The different methodological choices under the Research Onion framework are illustrated as follows:

Source: Saunders and Thornhill (2012)

2.1 Research Philosophy

Firstly, in terms of research philosophy, the philosophy is generally divided into four main categories which are popularly used in the field of

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management including pragmatism, interpretivism, realism and positivism According to Saunders et al (2009), research philosophy plays a vital role in the growth of the study However, only positivism and phenomenology are the two most widely applied approaches among the four major types of research philosophy Sometimes it is hard to differentiate between these two philosophies because of their abstract differences

In the responses to the objectives of the research, positivism has been decided to function as the main philosophy to be applied in this research under the motivation of different reasons In the definition of Adler (1964), positivism concept is defined as the approach to philosophy which is developed on the expectations that social experiences, natural senses and behaviors are the reliable sources of trustworthy information Wyly (2009) highlighted that positivism is suitable to be applied to examine the figures in the facts and explain the causational relationship among variables This philosophy, therefore,

is suitable for the examination of how digital banking affects the performance of branch in BIDV which is the major objective of this research From the perspective of O’Neill (2003), positivism could ensure the high level of creditability due to the fact that it excludes the individual bias

In summary, the two below reasons have motivated the researcher to select positivism as the major philosophy of the research

Firstly, under the use of positivism philosophy, the researcher is facilitated to develop a valid theoretical background for the study and excludes the unnecessary engagement of human rationality contributing to high level of objectivity of the research

In addition to that, positivism is appropriate to examine the cause and effect association which is suitable for the examination of how digital banking affects the performance of branch in BIDV which is the major objective of this research

In contrast, the deductive approach is related closely to the process of theory testing Following, the researcher makes attempts to test the hypotheses which are deduced from prior research in the review of literature by the results

of the data collection process

In response to the research’s objectives, the deductive approach will be selected to function as the major research approach of this paper because it is compatible with the positivism philosophy of the research

2.3 Research strategy (document analysis and survey with the support of questionnaires)

Within this research, the author decided to apply the document analysis and survey to fully test the hypotheses about the relationship between digital banking and branch channel’s performance via six factors including more effective interaction with customers, reduction of bank operation costs, higher accuracy rate, stronger competitiveness, higher customer satisfaction level, and higher security (Bryman&Bell, 2007) Mentioning the existing knowledge and theories about digital banking as well as six mentioned factors, the author will examine and analyse data from various resources from earlier researches, online libraries, and so on In addition, a survey questionnaire will be carefully

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designed to gather more data for examining the proposed hypothesis All the collected data from the questionnaire will be illustrated in the most suitable forms for readers to understand At the end of the research, the author will present some recommendations on how to improve the impacts of digital banking on BIDV’s branch channel performance

While implementing this research strategy, not only the secondary data but also the primary data are needed to comprehensively address all the research’s questions The main sources for gathering secondary data for this research are previous researches, journals, books, etc The source for gathering primary data is the survey questionnaire, and then all the gathered data will be processed with the support of SPSS software

2.4 Research method (combination of qualitative and quantitative)

Mentioning the research method, the qualitative and quantitative are the two most popular approaches According to Castellan (2010), qualitative research method is highly effective for the inductive approach to deal with the exploratory case study The most powerful techniques of qualitative research method are observation, open-ended questionnaires and interviews which generate the non-numeric data

According to the insight of qualitative method, it is a must for researchers

to form hypotheses and theories relating to the research topic to test throughout for supporting the research result As a result, the main types of results from the qualitative method are non-numeric data and easily to illustrate into words or descriptions such as personal ideas, subjects, etc (Maxwell, 1996) Meanwhile the quantitative emphasizes on gathering the numeric data which is also essential for the hypothesis-testing procedure like this thesis One of the most effective data gathering techniques used for quantitative method is the survey questionnaire (Alwood, 2012)

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Within this thesis, the researchers decided to combine both qualitative and quantitative research methods to collect both objective and bias-free data for best testing the proposed hypothesis After all data are collected and processed

in SPSS, all the results will be presented in forms of figures, tables, etc to make

it easy for readers to follow and understand (Vogelgesang&Astin, 2000)

2.5 Methods of collecting data

2.5.1 Secondary data

It can be defined that secondary data is the re-analyzed data used for different research with different objectives and targets According to Church (2001), the secondary data would be adapted in the new research in a suitable way to meet the new research’s objectives In general, the secondary data is gathered from the previous relevant topics

Mentioning the secondary data in this thesis, it would be used in the literature review with aims to create conceptual framework for the impacts of digital banking on improving the branch channel’s performance criteria The author paid great attention to clarify the conceptual framework about the digital banking, its pros and cons as well as its impacts on bank branch channel’s efficiency as the focus of the literature review The secondary data plays an important role in all researches, especially in this thesis as it is easy and cost-saving to find in comparison with the primary data thanks to the presence on online libraries and Internet (Johnston, 2014)

2.5.2 Primary data (questionnaires and interview)

In his research conducted in 2014, Johnston defined that primary data is the data gathered by the authors for the first time and used for their research’s objectives It is very important for the researchers to gather the primary data by themselves so that they can use it most adequately to address their research’s questions as well as testing their proposed hypotheses As indicated in a research

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in 2005 by Hox and Boeije, the most popular tool to gather primary data is the survey questionnaire

Speaking of this thesis, the author intends to deliver the questionnaire to

150 respondents locating in Hanoi to handle the limitation of time and budget The questionnaire will consist of close-ended questions about the impacts of digital banking on six criteria determining the performance of BIDV’s branch channel including more effective interaction with customers, reduction of bank operation costs, higher accuracy rate, stronger competitiveness, higher customer satisfaction level and higher security More detail information about the sample size and questionnaire design will be presented below

By designing the whole questionnaire with closed-ended questions which are very time-saving and easy-to-understanding, the author expected to successfully call for more participants (Saunders, Phillip, & Adrian, 2009) The questionnaire will be divided into two main parts The first part aims to get the personal background of all participants including their ages, their gender, and their experience of using banking services at BIDV branch channel The second part will dig into examining the respondent’s perspective towards six impacts of digital banking on BIDV branch channel’s performance

2.5.4 Sample size

Mentioning the research sample size, the author will approach 150 participants locating in Hanoi only All questionnaires will be delivered directly

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to each participant and the researcher will observe until they finish the whole

questionnaires

2.5.5 Data collection procedure

With the attempt to gather the necessary information to solve the listed objectives of the research, the researcher will conduct a three-stage data collection process which is described as follows

Stage 1 – Preparation

In order to get approach to the targeted sample population, the role of preparation stage is highlighted as significantly important Firstly, the questionnaire will be carefully designed along with the deep insight into the analysis of prior research in the literature review section After that, the researcher searches for the location of different BIDV’s branches before coming across each branch of the bank to directly distribute the questionnaire to the customers here In the direct meeting with the respondents, the researcher provides a clear explanation of the objectives of the research in order to ensure that the respondents could clearly understand that objective and voluntarily participate into the survey Cluster sampling will be applied in which each district of Hanoi will be regarded as a cluster so that the researcher could gradually collect information from respondents

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meaning is vague or unclear After the piloting section, the researcher will review the first draft of the questionnaire and develop the final version of the survey to be delivered to the sample population The responses of the 5 respondents in the piloting stage will not be considered as a part of the data collection result

Stage 3 – Surveying

The final version of the questionnaire after being redesigned will be taken into the surveying stage The survey after that will be distributed to the whole sample population to collect necessary data for the whole study As having been mentioned before, the survey will be directly distributed to the hand of customers at BIDV’s branches in Hanoi, namely BIDV Ha Noi, BIDV Quang Trung, BIDV Ha Thanh, BIDV Hai Ba Trung, BIDV Thang Long, BIDV Hoan Kiem, BIDV Ha Tay, BIDV My Dinh, BIDV Thanh Do, BIDV Dong Do, BIDV Trang An, BIDV Dong Da, BIDV Hong Ha, BIDV Dong Ha Noi, BIDV Thai

Ha, BIDV Cầu Giấy (a total of 16 branches) Interviewer-administered survey helps the researcher to ensure that respondents understand the whole questionnaire and keep the right track during the process of completing the questionnaire However, the results might be subjectively influenced by the engagement of the researcher in the process of conducting the research The questionnaire is designed with the opening of a promise from the researcher in which all personal information of the respondents will be kept strictly confidential Other information provided by the respondents will be applied for the research’s objectives only Each section will be guided in a careful manner

in order to make sure that there will be no misunderstanding during the process

of conducting the survey

2.5.6 Technique of analysing data

After gathering data, the author will use the SPSS software version 20 to process the numeric data the most effectively Then, all the result will be

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presented in appropriate forms such as table, graph for easily following With the SPSS software application, the objectivity and reliability of the analysis results are expected to be kept excessively high

Specifically, in this paper, four major tests of SPSS software will be taken into careful considerations with clear purposes Those tests are Cronbach’s alpha analysis, exploratory factor analysis, descriptive analysis and multiple regression analysis First of all, the Cronbach’s alpha analysis test aims at measuring the level of internal consistency of all variables in the framework Any variable which passes the requirements of the reliability test will be proved to be internally related with each other and reliable enough to be kept in the framework Secondly, exploratory factor analysis helps to eradicate the unnecessary variables in the framework whose absence does not affect the final results of the original set of variables In addition to that, the trends in the collected data will be described via the descriptive analysis test before the relationship between different variables in the framework is tested under the use

of multiple regression analysis

2.6 Research Ethics

The researcher pays special attention to the issue of feasibility and ethics

of the research by focusing heavily on the careful selection of research methodology

It is highlighted by Basto and Pereira (2012) that a research which is proved to have high level of reliability must ensure a high level of internal consistency of the model in the research With high internal consistency, any random error will be excluded from the research results In order to prevent the random error, the researcher must ensure that all participants must have clear understanding toward the objectives of the research as well as the implication of each question in the survey questionnaire

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First of all, the researcher makes attempts to design the questionnaire on the basis and references from reliable sources in the literatures In addition to that, the researcher organizes a piloting stage in which the survey questionnaire will be tested before being distributed to the whole sample population This trial run is expected to reduce any possible misunderstanding of the research’s survey

In addition to that, in order to ensure the high level of research’s ethics, all respondents are ensured to participate in the survey voluntarily with clear understanding of the objectives of the research There will also be no leak of personal information provided by the respondents in the survey

2.7 Strengths and Limitations of the Methodology

The methodology section has been carefully designed by the researcher with some good strength However, there are still some unavoidable limitations due to the limited time and capacity of the research

Firstly, regarding the strengths of the methodology, with the careful consideration of the researcher, a comprehensive methodological set of choices has been developed based on the Research Onion model The selection of positivism philosophy is proved to be not only suitable for attaining the research objectives but also suitable for the deductive approach and the research instrument of survey questionnaire Quantitative research is also proved to match perfectly with such a large target sample population

However, the research methodology still has some limitations in which the future research should consider to fix Firstly, no qualitative method is included in the research which limits the researcher in exploring the innovative ideas from the respondents because their responses are limited within available choices of the survey questionnaire No discussions between researcher and respondents are available which prevents the researcher from gathering in-depth information Thus, a mix-method approach is proposed to be applied in the future research

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CHAPTER 3 – RESULTS AND DISCUSSIONS

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3.1 Application of theories

3.1.1 Situation of developing digital banking in Vietnam

Developing the digital banking system in the ASEAN region, especially

in developing countries like Vietnam, opens opportunities for incumbents and attackers No one can deny the remarkable features and positive contributions of digital banking to the quality of banking products and services In addition, banks can also leverage digital banking to further strengthen their loyal customer relationships However, attackers can take advantage of cost savings

by ignoring expensive branch networks and focusing on their digital capabilities

- complete platforms and products and services, for example, to win market share The main reasons why users in Asian countries are reluctant to use digital banking are security, lack of Internet expertise and traditional banking habits (Ende, 2010) There are some people who have tried digital banking, but they are still worried about security and really want to be consulted directly by the bank staff Most of the customers in developing countries like Vietnam, Indonesia, etc all said they are ready to switch to digital banking if it meets their needs such as mobile payment, access accounts on multiple devices, etc (Gartner, 2012) In order to get over this limitation, it is a must for banks to raise the permitted value for online transaction to make it easier for customers to make decisions For instance, banks can simplify their transaction rule online to attract more customers In fact, some banks in the world have taken action by simplifying their credit card functions online which are evaluated fast, convenient and high customer satisfaction Moreover, there are also various mobile application applied for home purchases and mortgage calculation provided by other vendors In an emerging area like ASEAN, the security and

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regulatory framework are among the top concerns of customers while using online services, especially the digital banking ones People tend to prefer face-to-face services or supports Meanwhile, in developed countries like Germany, some banks serve their customers requests via Skype or other online communication channels In Australia, all customers’ requirement of diligence

of their accounts or transactions can also handle via home address or directly at

a branch (Sachse, Alt, & Puschmann, 2012)

However, it is undeniable that both digital banking and traditional banking have their strengths and weaknesses Banks should consider combining these two types instead of trying to separate them In fact, mentioning the traditional banking model, the branch network is still operating effectively thanks to the direct connection and interaction with customers as well as ensuring the level of satisfaction of customers during the process of using the services The customer experience at the branch should reflect the "first customer" approach applied to all other channels Meanwhile, banks have many different ways to put digital banking into operation in their systems For example, banks may consider automating processes in the system to increase productivity and efficiency Automated customer-focused processes and processes allow bank employees to spend more time performing high-value services such as consultancy and sales (Moewes, Puschmann, & Alt, 2011) Branch operations can focus on process improvement and continuous improvement based on contextual knowledge relevant to the needs of the customer Moreover, the application of digital banking also contributes significantly to the recording of information and customer service data to create prerequisite for the evaluation and improvement of service quality of the system (Hossain, 2008) Data collected from customers can provide an opportunity to better understand the customer's contribution to setting up contextual and personalized products, contributing to the customer experience Finally, the

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technology in branch channel can also be improved in the form of digital banking For example, replacing traditional cash registers with handheld devices can differentiate banking services and personalize the customer experience at branches Equipment can be run by any branch employee - not necessarily a designated employee Teller's functions are provided in digital format providing the opportunity to quickly identify customers, their interests, their experience models, and so on In addition to developing new digital banking services, some top banks in Vietnam starts digitizing their branch channels via various new functions for direct customers Some banks have digitalized themselves through the construction of self-service systems that allow customers to participate in a part of the process, such as automatic queuing systems that can transfer customer requests after the customers has taken the order number to the counter for tellers; pre-transaction through mobile system, etc In such a way, channels are interconnected and integrated to handle customer transactions starting from one channel and ending at another Another example is that modern banks are equipped with solutions for mobile branch, the main software system at traditional branches can be operated on tablet and brought to the customer's place after receiving customer request from different channels such as mobile banking, call centre, etc.) or easily arranged at events, supermarkets, etc

3.1.2 Current application of digital banking at BIDV’s branch channel

Currently, for BIDV’s traditional branch channel, the support of technology, or in other words, the application of digital banking is quite limited All BIDV's products and services when dealing with customers at the counter have been computerized However, from the point of view of digital banking, computerization is applied sporadically to each business without support for business process flows as well as support for interconnection between systems Processes such as customer identification and authentication, documentation, transaction processing, etc are handled mostly manually or semi-automatically

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About the customer identification and authentication process, the bank’s teller and checker performs the identification and authentication of customer through inspection and reconciliation with naked eye and compares various aspects, including customer’s face with image on the identification, information on customer's identification with information in BIDV's system, customer's signature on documents with signatures in the system, etc Acceptance or non-acceptance of transaction depends largely on the sensitivity and subjective assessment of the teller and checker This implies the risk of counterfeiting, misleading, etc., as well as a lot of time and human resources cost for the identification and authentication of customer With documentation, customers make transaction documents manually or are supported by teller to make documents at the counter on software program developed outside of BIDV core banking system, customers then verify and sign the transaction information on documents printed by teller However, because there is no direct connection to the core banking system, the bank's teller has to manually re-enter the information into the corebanking system At present, BIDV applies the method

of sending forms to customers to make the necessary documents and send them back to BIDV (in person or by post office) However, according to the regulations of the State Bank, customers have to directly go to the bank to sign contracts, agreements on registration and use of accounts In addition, the documents (paper) must circulate through various departments to perform steps such as opening an account, registering for services, issuing cards, storaging, etc., which costs office expenses, time and human resources Finally, about the transaction process, cash deposit/withdrawal transaction is handled by teller on cash register and manually accounted through the corebanking program Thus, for the process of receiving and processing transactions conducted by the bank, customer engages in transactions of their own passively (sign documents, wait, give/receive money, etc.) BIDV's most prominent application of digital banking

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at their branch channel is the E-zone This is a new transaction space model of BIDV with a modern, dynamic and high tech layout design, aimed to meet many goals, including enhancing the customer experience, allowing customers to be proactive in implementing transactions at the branch channel, training customers

to familiarize themselves with modern technologies and raising the image of BIDV At the E-zone, customers can actively perform the majority of transactions similar to the counter by themselves, including cash deposit, cash withdrawal, savings deposit, and money transfer and product registration through E-zone’s touch screen system E-zone also provides tablet PCs and display screens to help customers keep up-to-date on the bank's products, services and promotions Most of BIDV's customers are highly appreciated of E-zone for the modernity, convenience, and helping customer save transaction time However, the effectiveness of E-zone at BIDV has not been clearly demonstrated as at the moment, E-zone is still in the pilot phase on a very small scale of only 4 branches Thus, compared with the branch channel of other fast moving banks and even BIDV's modern channels, BIDV's branch channel is losing its competitiveness

Due to the emphasis on the development and promotion of digital channels (mainly Internet Banking and Mobile Banking) and lack of focus on the digitalization of the branch channel as stated above, the current situation of BIDV is that digital channels have gradually grown and accounted for a larger proportion of transactions while conversely, the number of transactions processed at branch channel is decreasing In 2016, digital channels account for 32% of total financial transactions on digital channels and branch channel, 28%

of interbank transfers, 62.3% of bill payment transactions even though there are several channels that have just been implemented in recent years at BIDV such

as Internet Banking, Mobile Banking In addition, with the huge network of branches and transaction offices of BIDV’s branch channel with a total number

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of over 1000 sites nationwide, the number of transactions processed through this channel is decreasing while the cost which BIDV has to spend to maintain the network is very large, including costs such as site costs, labour costs, etc., which have negatively affected the performance of BIDV’s branch channel

3.2 Findings from survey

As mentioned in the research methodology, within this thesis, the author will deliver a survey questionnaire to 150 participants to explore their attitudes toward the impacts of digital banking on BIDV branch channel’s performance Based on these findings, the author then proposes some recommendations on how can BIDV improve the impact of digital banking on BIDV’s branch channel to leverage its performance The questionnaire was divided into two main parts including respondent’s background and questions about BIDV’s branch channel The findings from these questionnaires are as following