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Financial wellness & digital money management apps the key to igniting Vietnam’s digital banking boom

67% of Vietnamese consumers feel ‘stressed’ about their financial situation. Only 26% and 45% of Vietnamese consumers feel ‘comfortable’ and ‘informed’ about their finances respectively, ranking the lowest in ten APAC countries listed in the report

New data revealed in a Backbase commissioned study, conducted by Forrester Consulting reveals a potential future spark for igniting Vietnam’s race for digital dominance in the retail banking sector. Like other areas of the world, smartphones and digital-only services have changed how people live in Vietnam. However, compared with other developing countries, the uptake of digital banking has been slower.

One reason for this, as highlighted in the research, was a lower level of confidence in digital-only banks, with only 16% of consumers saying they currently trust them. However, looking at other more mature markets in the research, it’s proven that the implementation of free financial wellness and digital money management tools – full of features and benefits – greatly improves this sentiment.

Talking about the results of the research and how empowerment and knowledge improve trust in the banking system, Regional Vice President for the Asia Pacific region, Iman Ghodosi, said:

“Vietnamese banks and their customers are only at the start of their digitization journey. The more information and control we can put in the hands of Vietnamese to make their own informed financial choices, the more they will trust the organizations providing them with this opportunity. Technology now enables us to do this. This is happening around the world, and our research shows it will work here in Vietnam too. This could be the catalyst for Vietnam’s digital banking to really take off.”

“Now more than ever, it is important to own the relationship with your customer. We’ve entered the Engagement Banking Era, an evolution that stresses a one unified platform approach for banking. The number one priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments,” Mr. Ghodosi added.

Financial wellness and digital money management apps

Through advancements in A.I, behavioural analytics from the spending habits of users, better user experience, and mobile-first technology such apps can provide customers with a huge range of financial literacy tools such as: spending analysis, creating savings goals, transaction categorization, personalized recommendations, and the scheduling of bill payments, to name a few. “One can see how this level of insight and assistance would empower and build trust for users,” Mr. Ghodosi adds.

The research shows that 50% of Vietnamese are not achieving their financial goals, 62% feel overwhelmed by debt and 71% don’t know where to go for reliable financial advice. “Through digital money management tools, banks can address all of this and more. They could make a big difference to the financial lives of their customers”, Mr Iman Ghodosi emphasized.

The race is starting, and many banks are not ready

Banks in Vietnam are moving forward into digital, but for some it’s a slow paced journey. Of the Vietnamese retail-banking business decision-makers interviewed as part of the report, 58% said their company was implementing or expanding their digital banking offering, while 28% said their company had ‘no interest in’ or was ‘removing’ its digital banking offering.

According to Riddhi Dutta, Regional Director for Backbase ASEAN & South Asia, “There seems to be a wide disparity between some banks who are progressing and others who are yet to start; this could be a huge opportunity for those disruptors who want to put their ‘pedal to the metal’ and gain first-mover advantage.”

From our research, 42% of the interviewed Vietnamese retail banking business decision-makers said they are going to increase spending on financial wellness initiatives over the next 12 months. 74% said they were ‘planning to’ or ‘actively expanding’ digital financial wellness initiatives, so there are some positive signs there too

Riddhi Dutta,
Regional Director for Backbase ASEAN & South Asia

Banks must overcome roadblocks

With banks well aware of the challenges their consumers face, and with the knowledge that digital financial wellness apps are an ideal solution for these challenges, all thoughts go to why some Vietnamese banks are slower in getting started.

The research revealed that in Vietnam, 72% of the banking sector sees a ‘lack of understanding of customer needs and outcomes’ as an obstacle in further developing digital tools for its customers, and 74% said they are ‘unsure of how to work with or partner with a fintech company’ to implement the activity. 70% said it was due to ‘outdated or legacy technology’ and 68% said it was due to ‘competing priorities.’

Talking about the points raised, Mr. Ghodosi said: “It seems there is a lack of understanding; we can empathize with these challenges because at one time every bank in the world faced them. Change is not easy. However, for those institutions who want to take the lead, the slowness of some of the sectors is definitely an opportunity.”

“There is no doubt that financial wellness apps aimed at consumers can play a large part in improving trust in digital banking and adding value to the lives of Vietnamese. 12 months from now, adoption will be much further advanced, and 24 months from now Vietnamese will have a whole different digital relationship with their banks. It all comes down with who wants to be first”, Mr. Ghodosi concluded.