Vietnam banks support 'adopt and build' approach to digital transformation

This finding was announced on August 31 by Backbase, a global pioneer in Engagement Banking, in their APAC-focused brief "Accelerating Customer-Centric Transformation by Balancing Build and Buy - A Collaborative Approach Towards Sustainable Digital Banking Architecture."

This report draws insights from 125 banks and 316 CIOs in Asia-Pacific, offering a regional perspective on digital transformation.

Case studies from the report reveal that a tier 1 bank in Vietnam opted to build its platform at a significant cost over two years, while another similar bank did the same thing by leveraging the “adopt and build” strategy.

The analysis finds the “Adopt and Build” approach a pragmatic solution for banks to accelerate their go-to-market efforts, differentiating where it matters instead of reinventing the wheel by building from scratch. By adopting a collaborative platform and building upon it, banks can achieve 40 per cent faster time-to-market, where digital engagement banking platforms can be launched within 11 months, as compared to the traditional 20 months with a full "build" approach. In addition, the “Adopt and Build" has proven to be 2.3 times more cost-effective than the traditional in-house "build" option.

“Vietnam currently boasts the second-highest banking app penetration globally. With approximately 30 million digital banking users in the country and 90 per cent of banking transactions managed via digital channels, it is very compelling for banks to not only innovate digital banking around the customer, but to also be able to innovate at pace and at scale,” said Riddhi Dutta, regional vice president, Asia of Backbase.

“Techcombank adopted our Engagement Banking Platform in 2020 and gave themselves a first mover advantage to build differentiated digital journeys for their customers. We see banks starting becoming more and more strategic in the way they approach technology; this year ABBANK and OCB both adopted our platform to give them acceleration in omnichannel banking,” he said.

Despite having embarked on digital transformation since the 2000s, many banks in Asia-Pacific, including Vietnam, remain at an early stage, failing to fully capitalise on its benefits and deliver compelling digital customer engagements.

The report pointed out the top three challenges organisations in Vietnam facing in their digital transformation. They are cost (57 per cent), infrastructure (39 per cent), and data security (34 per cent).

Ashish Kakar, research director, Financial Insights, IDC Asia/Pacific said, “Building in-house has been a de-facto strategy by banks, but it’s no longer feasible to deliver at the pace and scale required to be competitive."

"The complexities that come with the extensive amount of data layers, channels, features, upstream and downstream integration that needs to support legacy and modern systems to manage and orchestrate sophisticatedly is where in-house implementation breaks apart,” he added.

According to Dutta, “over 150 modern and forward-looking banks have adopted and built on top of Backbase’s Engagement Banking Platform to focus on upstream journeys and to design banking around their customers. A true platform comes with all the hygiene requirements from market fit, to security and regulatory compliance, to being versatile and customisable, supporting each bank’s unique customer needs.”

According to the report, the adopt and build trend has gained substantial acceptance. Techcombank is a prime example of this strategy. The bank has achieved control and freedom to create differentiated digital banking customer journeys, engagement and experience with an App Store rating of 4.8 and a Google Play rating of 4.7. In 2023, two more banks in Vietnam ABBANK and OCB announced their investment in the engagement banking platform.

With the acceleration of digital transformation in Vietnam’s banking sector, more opportunities are coming for service providers.

Dutta said, “We understand the potential of Vietnam, and we are making the right investments in ensuring that Vietnam becomes a strong hub for Backbase both in terms of the customers, as well as our internal people, deployed on the ground.”

“We have five existing customers, but we also realise that there are many more banks and the pace of digital transformation is very fast in Vietnam. So to that effect, Vietnam is the only country in Asia outside Singapore and outside India, where we have invested in local teams to manage, handle and implement customers,” he added.

Tyme Group, backed by South African billionaire Patrice Motsepe, plans to enter the Vietnamese market by 2024 having secured $78 million in pre-series C funding. The digital lending entity aims to tap into Vietnam's underserved market and leverage its advanced technological capabilities to provide digital banking services.

Vietnamese authorities have been busy at work dismantling an illicit information network involving bank employees, as local lenders prioritise data protection and digital infrastructure for customer privacy and growth.

BIDV announced on August 23 its selection of IBM API Connect as the platform to build a new API management system to maximise the digital banking experience of its clients.