Vietnam, March 16, 2021 – Beyond regulations and compliance, banking players in the country will look to incorporate emerging technologies such as artificial intelligence (AI) to drive revenue and customer engagement. Mobile transactions in Vietnam are expected to increase by 300% between 2021 and 2025, led by strong growth in mobile payments, as revealed in the second edition of the Fintech and Digital Banking 2025 (Asia Pacific) IDC InfoBrief, commissioned by Backbase.
Digital banking fitness has been the key factor in the resiliency of financial institutions and being able to recover from pandemic-related setbacks. The InfoBrief highlighted that digital banks across Asia Pacific (APAC) enjoyed three times the growth in customer bases in 2020/2019, compared to traditional banks. Incumbent banks have also had to accommodate at least a 50% growth in the quantity of digital customer transactions and interactions. It is expected that organizations will reinvigorate digital transformation initiatives and undertake a comprehensive realignment of customer engagement projects.
New competition in an evolving banking landscape
Incumbents and new entrants alike will be jockeying for market share, and will look to compete on the basis of being digital-first. While the APAC banking landscape saw the departure of some neo banks and fintechs due to COVID-19 challenges, incumbent banks in Vietnam benefited from the chance to build loyal customer bases and re-energize their businesses for the long-term.
However, we will still see 100 new challengers across the region by 2025, according to IDC. With new challengers presenting stronger post-pandemic propositions, there will be at least two digital banks in every APAC market that will pose a significant challenge to incumbents. 30% of the business of Vietnamese banks are predicted to be under threat from new digital challengers.
Some fintechs that had gained sufficient size by 2019 also found success, gaining more market share than expected. Fintech categories that have typically shown success include payments, wealth advisory, alternative data, lending platforms, and account origination.
Traditional banks double down on digital
Meanwhile, traditional banks are increasingly focused on responding to changing consumer behaviour. Digital banks across APAC saw three times the growth in their customer bases compared to traditional banks in 2020/2019.
Innovation initiatives are expected to re-accelerate in 2021 and will most likely have a higher chance of success as banks restructure their agile and DevOps teams. 50% of Tier 1 banks already have agile frameworks in place. Investments in digital channels have paid off: banks have growing strength to acquire new customers, expand share of wallet, and push more products. 44% of the top 250 banks in APAC will leverage platforms with componentized modernization and API-enablement. Technology spending on governance, risk, and compliance saw double-digit growth in the region for 2020/2019, while other areas of investment lagged behind.
Strategic investments and growth priorities for 2025
One result of the economic downturn is a more humanistic type of customer centricity, as banks needed to communicate with customers in empathetic, trustworthy and reliable ways that are complemented by digital innovations. There has been an increased integration of human agents into customer engagement strategies, as contact centers saw surges in usage. The latest edition of Fintech and Digital Banking 2025 (APAC) found that 60% of banks in Asia Pacific will leverage artificial intelligence (AI) or machine learning (ML) technologies for data-driven decisions, compared to 48% from the previous year. In Vietnam, core banking and payments system modernization are the top 2 priorities among the top 8 banks in Vietnam in anticipation of rising consumer demands by 2025.
A back-to-basics trend has also overtaken the need for new revenue sources. Banks across the APAC region will be focusing on digitalizing their core business of lending with some focus, subsequently, on deposits. This is particularly evident in Vietnam, with 80% of banks having re-invested in credit risk and asset-liability management, as well as building up capabilities in lending. We will see double-digit growth for lending in Vietnam every year from 2021. New capabilities will be acquired from fintech partners: IDC predicts by the middle of 2021, 50% of lending decisions in retail banking across APAC will be supported by fintech propositions, underscoring accelerating bank-fintech collaboration.¹
Regional Director for ASEAN & South Asia, Backbase, Riddhi Dutta, said:
“COVID-19 has brought about significant changes in Vietnam and APAC’s banking landscape, and banking and fintech players will need to quickly act on their digital strategies to capture market share. Thus report highlights key areas for Vietnamese banks, including massive growth in mobile as well as opportunities in lending. Backbase is committed to helping Vietnam’s financial institutions stay ahead in the digital race and develop the innovative banking models and experiences that Vietnamese customers now expect.”
Michael Araneta, Associate Vice-President of IDC Financial Insights, Asia Pacific added:
“The events of 2020 have shown the resilience of the financial services industry, and that organizations must refocus their efforts on becoming even more customer-driven and platform-oriented. The insights from this report will help banks, neobanks and fintechs identify key areas of investment in preparation for 2025 and beyond.”
Backbase is on a mission to transform the broken banking system, so financial institutions don’t just interact—they engage—with the people they serve.
That’s made possible with the Backbase Engagement Banking Platform—powering all lines of business on a single platform, including Retail, SME & Corporate and Wealth Management. From digital sales to everyday banking, the platform’s entire design focuses on a seamless and captivating experience for both customers and employees.
Industry analysts Forrester, Ovum and Celent continuously recognise Backbase’s front-runner position, and over 120 large financials around the world are powered by the Backbase Engagement Banking Platform—including AIB, Barclays, Banamex, Bank of the Philippine Islands, BNP Paribas, Bremer Bank, Citibank, Citizens Bank, CheBanca!, Discovery Bank, Greater Bank, HDFC, IDFC First, KeyBank, Lloyds Banking Group, Metrobank, Navy Federal Credit Union, PostFinance, RBC, Société Générale, TPBank, Vantage Bank Texas, Westpac and Wildfire Credit Union.
About the report
¹ IDC FutureScape: Worldwide Financial Services 2021 Predictions — Asia/Pacific (Excluding Japan) Implications
This study is based on IDC Financial Insights review of digital banking strategies of 65 banks from key Asia/Pacific markets that represent more than 65% of the total share of assets in each market. The study also looked at 100 challenger banks and fintechs under the Challenger Bank Program of IDC Financial Insights Asia/Pacific. The study was conducted in 4Q2020-1Q2021. IDC also made reference to its reports on Digital Banking from the past five years to understand the evolution of digital banking strategies.