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BANKING ACADEMY OF VIETNAM
FACULTY OF INTERNATIONAL BUSINESS - ADVANCED PROGRAM
PROJECT REPORT
ANALYSIS OF THE VIETNAMESE MARKET FOR
DIGITAL BANKING SERVICE FROM 2021 TO 2024
Lecturer: Cao Hải Vân Students: PHẠM THU NGÂN – 27A BÙI DƯƠNG THANH LAN – 27A CÔNG HẠ VY – 27A TRẦN GIA LINH – 27A Class: K27CLC – KDQTA
NO Name Student ID Percentage of contribution 1 Phạm Thu Ngân 27A4052866 25% 2 Trần Gia Linh 27A4052851 25% 3 Bùi Dương Thanh Lan 27A4052840 25% 4 Công Hạ Vy 27A4052901 25%
A. INTRODUCTION
Reasons for choosing the topic Nowadays, with the advancement of technology, the development of digital banking is inevitable. Customers today are becoming more tech-savvy and expect their banking experience to be as smooth and convenient as all the other digital services they use. With this shift, banks need to step up their game and deliver accessible experiences to keep up with the pace. In recent years, Digital banking has become popular in Vietnam. With all of its advantages such as unlimited service access, security, financial control and personalization, digital banking service attracts majority of Vietnamese customers, especially young generation. In addition, the 4. Industrial Revolution along with drastic changes in consumer behavior and e-commerce transactions in the post COVID -19 period has accelerated the speed of digital banking transformation and development. This market also witnesses strong competition between suppliers and receives encouragements from the government in Vietnam. With the widespread of Internet and young population, Vietnam have many potentials to develop and advance digital banking service to meet the demand. This analysis provides insight into the digital banking service, demand for the market, supply and forecast about the future of the market. Research goals Evaluate Market Growth and Scale: Analyze the growth rate of the digital baking service market in Vietnam from 2021 to 2024, identifying the driving and restraining factors.
- Study Consumer Behavior: Survey consumer habits and preferences
- Analyze Market Potential: Identify growth opportunities for digital banking service
- Analyze Customer Segments: Study the diversity in the consumer base and how banks can effectively target different market segments.
- Assess Competition: Analyze the marketing strategies and positioning of banks in the market Research methods: - Method of analyzing and synthesizing theory. - Statistical methods, interviews, and document collection.
- Investigation methods, and practical research.
- Case study methods, theory, and data collection.
B. CONTENTS
CHAPTER I: THEORETICAL BASIS AND PRESENTATION
1.1. Concept of supply and demand Supply: Supply is the number of goods and services that sellers are able and willing to sell at different prices during a certain period, provided other factors remain unchanged. Supply is the set of quantities supplied at different prices. Demand: Demand is the amount of goods and services that buyers are able and willing to pay at different prices during a certain period, provided other factors do not change. 1 .2. General overview of the digital banking market in the world and Vietnam 1 .2.1. In the word The digital banking market has expanded its size because of the strong demand of consumers and the large investments from traditional banks and fintech companies. By 2023, the total number of licensed digital banks globally had reached 300. Industry has been experiencing substantial growth driven by technological advancements, evolving regulatory demands, and the widespread adoption of digital solutions. Digital banking platforms play a critical role in improving financial services, accelerating transaction processes, and reducing operational costs across various sectors such as retail banking, corporate banking, and fintech.
(Source: CafeF) Figure 2. Banking services in Vietnam in comparison with other Asian’s nation in 2021. 1.3. Market analysis (analysis of price and output fluctuations) 1 .3.1. Market size and growth rate Market size: The global digital banking market has seen significant growth in recent years, especially in developed regions such as North America, Europe, and the Asia-Pacific, driven by technological advancements, increasing customer demand for convenience, and shifting from traditional banking services to digital channels. Figure 3. Regions with the most online banking users (Source: advapay) Growth rate: Digital Banking Platform Market was valued at USD 30.3 billion in 2023 and is expected to reach USD 164.7 billion by 2032, growing at a CAGR of 20.7% from 2024-2032. 1 .3.2. Key market drivers Rapid rise of internet and mobile phone : The widespread of smartphone and internet allows people around the world easily access to banking services anytime.
Millennial and Gen Z population : Millennials and Gen Z are leading the charge in shaking up the banking world. They want mobile apps packed with features that let them do everything from checking balances and transferring money to depositing checks with just one click on their mobile phone. (Source: innowise) Figure 4. Online banking usage by age groups Advanced technology : With the integration of Technology, Digital banking services enhance personalization, lower operational costs by implementing more efficient and dependable computer systems to perform manual tasks. For example, according to McKinsey’s banking report, the use of generative AI could potentially improve productivity in the banking industry by around 5%. 1 .3.3. Market challenges Cybersecurity and fraud prevention : With the increasing number of digital transactions, the threat of cyberattacks and fraud attempts continues to grow. According to EY, cybersecurity is the number one risk for the global digital banking. Customer privacy : Customer privacy is a critical issue in the digital banking industry, as customers are increasingly concerned about the protection of their personal and financial data. 1 .3.4. Market trends Instance access : With one click on smart gadgets, people can access to services such as check balances on accounts, view records of your transactions, pay bills, transfer funds access the account 24/ Environmentally Preferable: Online banking greatly minimizes the usage of paper because people receive all banking correspondence via email or text.
Figure 5. People at age groups using digital banking service in 2022 (Source: compile by authors) Cost of Digital bank Service : With the low cost related service (account maintenance fees, transaction charges) customers will have new experiences with shortened transaction time while the banks enjoy enhanced operation capacity and improved competitiveness. Especially for small and medium enterprises (SMEs), digital banks are able to offer small, convenient, and reasonably priced products and services based on relatively simple procedures, giving access to more effective financial support. Interest: the majority of customers prefer seeking information, consulting, and shopping on the Internet through mobile devices and tablets is increasing. Additionally, the "buy now, pay later" trend has transformed consumer spending habits by offering installment payment options at checkout by popularizing interest-free or low-interest plans for online and in-store purchases, appealing particularly to the millennials and Gen Z demographic. Cost of complimentary service : With the low cost and widespread use of the Internet, the digital bank is more accessible with higher demand in Vietnam.
Figure 6. Overview of internet use in Vietnam (Source: DataReportal) Number of consumers : Because of its convenience, this market has recorded significant increase in percentage of users during the period. According to State bank of Vietnam, more than 87% of adults have payment accounts at banks, and many banks have over 95% of transactions processed through digital channels in 2023. The number of mobile and QR code payment transactions has grown by more than 100% annually from 2017 to 2023. Marketing: Many influences have a big impact on society. Consumers choose digital banking service because they are attracted by advertisements on TV, social media,... For example, VIB and Techcombank has recently tried to advertise their digital banking services through playing the role as sponsors for famous reality shows which are “say hi” Brothers and Call me by fire. These shows attracts large number of audiences, especially millennials and genZ who have potentials to use digital banking services. 2.1.2. Quantity demanded With higher digital literacy and the widespread of the Internet and smartphone, the demand for the convenience of payments and transactions of digital banking service has been gradually large. People want their mobile phones concluding all banking service such as pay bills, view records of accounts…. The usage of digital banking almost meets all these demands of people. Therefore, the demand curve of digital banking service shifts to the right.
The Vietnam Bank for Agriculture and Rural Development (Agribank), for instance, deployed in 2022 Agribank Digital. Military Bank (MB), meanwhile, has implemented a digital transformation strategy since 2018 through strategic cooperation with IBM. Digital Infrastructure: Network coverage is increasingly widespread in Vietnam. The main telecommunications companies include Viettel, VNPT, and Mobifone. Mobile technologies are also developing fast as it is reported that 95% of Vietnamese households have 4G networks. Driven by Advanced Technology : With the integration of Technology, Digital banking services enhance personalization, lower operational costs by implementing more efficient and dependable computer systems to perform manual tasks. Some banks in Vietnam have applied AI in digital bank service such as VCB digibot (Vietcombank), facial recognition technology applied by MB, TP bank,.... Expectations : In Covid 19, we are warned to expose cash as little as possible on account it can store bacteria, so online banking services were recorded used by many clients (increase a larger number of clients in comparison with the time before COVID-19 happened). A policy that directs citizens to be “digital citizens” with the ability to use/work/manage all aspects of life through digital platforms has affected banks to positively provide online services. Encouragement from government’s policy (for instance: combining identity card - VNEID in online banking services to ensure the benefits & rights relating to the security of users). Those factors create a potential market for digital banking service in Vietnam. With positive and frequent system modernization to adapt global trends and demand of consumers, Digital banks use their services and supplies large quantity services as well as incentive policies in order to attract large number of customers. The supply curve of the digital banking market shifts to the right.
CHAPTER III: MARKET FORECAST AND PROPOSE THE SOLUTION FOR THE
MARKET IN VIETNAM
3.1. Market demand forecast and factors affect the demand Market demand forecast: According to the Vantage Market Report, the global digital banking platform market was valued at $7,75 billion, projected to reach $17,50 billion by 2030. This forecast indicates a robust demand trajectory, reflecting the ongoing evolution and adoption of banking services in response to consumer needs and technological advancements. Figure 8. Digital banking platform market size (source: Forbytes) Forecast factors affect the demand: Demographics : The young population, coupled with an increasing number of working-age individuals, suggests a growing customer base for banking services. Income Levels : According to the World Bank, Vietnam's estimated per capita income for 2023 is approximately 4,200 USD. As disposable incomes rise, consumers are likely to seek more sophisticated banking products, such as investment services, insurance, and loans for consumption or investment purposes. Technological Advancements : Innovations in fintech, such as AI and blockchain, will transform how banking services are delivered, potentially increasing demand for more efficient and user- friendly products. Advertising and Marketing : Strong campaigns from banks.
in identifying suspicious activities in real time. Plus, they also flag potential fraud for further analysis and investigation. Thus, AI cyber security systems can not only detect but also prevent possible cyber threats. Sustainable and ethical banking: With new generations caring more about ethics and sustainability, banks are changing to keep up. They’re recognizing the need to fight climate change and bring sustainable practices into their operations. By focusing on environmental, social, and governance (ESG) factors, they’re helping push for a low-carbon economy and give customers options to reduce their carbon footprint, like investing in carbon credits for reforestation, renewable energy, and cutting waste. Robo-advising: Robo-advisors use Modern Portfolio Theory (MPT) to build portfolios while maximizing returns and minimizing risk through diversification. MPT suggests spreading investments across different asset classes to reduce the impact of market fluctuations and maintain steady portfolio growth_._ According to IMARC Group, as of 2023, the global robo- advisory market reached US$9.4 billion, with forecasts suggesting it could reach US$76.2 billion by 2032, reflecting a CAGR of 25.6% from 2024 to 2032. Super app banking: In the financial world, a super app combines all sorts of financial services into one handy mobile app. Instead of downloading separate apps for banking, investing, payments, insurance, and financial planning, a financial super app puts everything in one place. 3.4. Judging the market in Viet Nam in the future Positive Aspects Economic Growth : Vietnam has a rapidly growing economy with stable GDP growth, which will create higher demand for banking services. The expansion of the middle class will also drive demand for financial products. Digital Transformation : The development of information technology and the adoption of digital banking will enhance customer experience. Banks will be able to provide services more quickly and conveniently through online and mobile platforms. Frequent use : In fact, consumers can now shop for goods, use services and then pay entirely on digital channels. For instance, universities use it to collect tuition fees from students, hospitals collect medical examination and treatment services, taxes and customs, public services, and sanction administrative violations, especially traffic violations. Negative Aspects Intense Competition : With the entry of many new banks and fintech firms, the market will become more competitive. This could put pressure on the profitability of banks, especially traditional ones that do not innovate quickly. Technology Risks : While digital transformation offers many benefits, it also comes with cybersecurity and data protection risks. Banks need to invest heavily in technology and security to protect customer data.
Legal Basis : Legal regulations and adjustments of many management agencies do not keep up with new technology, thus limiting the development of high-tech applications and Digital Banking Large investment costs : Investment costs for combining new technology with existing payment infrastructure are quite large, commercial banks must change their payment service delivery model to suit new technology. The capital to invest in AI research and development is quite high, so AI research and application has only been deployed at large banks/financial institutions in the world. 3.5. Propose solutions for the market in VN Technological Innovation : Invest in Digital Technology : Banks need to upgrade their IT infrastructure and develop user-friendly mobile and online banking applications to meet the increasing demands of customers. Enhance Security : Invest in advanced security solutions to protect customer information and data from cybersecurity threats. Enhance Customer Experience : Improve Customer Service : Train staff and utilize technology to provide faster and more efficient customer service. Banks should collect customer feedback to continuously improve their services. Offer Diverse Products : Develop a variety of financial products that cater to the needs of different customer segments, including products for small businesses and individuals. Collaboration and Partnerships : Form Partnerships with Fintech Companies : Banks should consider collaborating with fintech firms to leverage technology and innovative solutions to enhance service quality. Participate in Banking Networks : Engage in banking associations and financial organizations to share information and experiences, thus improving operational efficiency. Complete the legal framework Policy on safety and information security in electronic transactions to protect legitimate interests of customers Professional process of electronic transactions through banks, monitoring digital banking activities and preventing money laundering.
