Vietcombank’s Nghiem: “Becoming digitalised is the future for banks”

• Vietcombank started its digital transformation roadmap in 2019 and aims to be the top digital player in Vietnam and a world-class bank by 2025
• The bank has implemented an open architecture core banking system built on APIs that enhances its connectivity with other financial institutions and fintechs
• It builds its vision on a legacy of successful reinvention, from shifting its asset book from dollar to dong, to transforming from a wholesale to a leading retail bank

Commercial Bank for Foreign Trade of Vietnam, commonly known as Vietcombank, has been operating since 1955. It was spun off from the State Bank of Vietnam and is considered one of the country’s four largest state-run commercial banks. It is a known name in international trade payment settlement as well as retail lending.

Digital transformation has also been on top of the bank’s agendas. In this interview, Vietcombank Chairman Nghiem Xuan Thanh details the bank’s experiences and plans, as well as the structural changes digital technology necessitates in the industry at large. He also shares how the bank decided to change its asset structure to cushion the impact of the 2009 economic crisis on its profitability. The transformation that saw Vietcombank becoming a retail bank both in assets and income structure has been the key behind its improved financial performance in recent years. He emphasises the importance of right orientation, clear goals and perseverance to become successful.

Opportunity and vision driving digital reinvention

Foo Boon Ping (FBP): What does digital reinvention mean to you?

Nghiem Xuan Thanh (NXT): With rapid changes in technology, the future for banks in Vietnam in general – and Vietcombank, in particular – is to become digitalised banking businesses. Institutions must be able to provide products and services that integrate new technology and apply new analytics to enhance customer experience. The goal is to gradually move customers towards more advanced platforms and solutions that allows them to design their own banking products for their personalised needs.

The new era is coming with vast opportunities for banks to get access to and freely embark on state-of-the-art digital technology. However, banks face a tough challenge in finding a suitable way to transform themselves digitally to stay active and competitive.

In Vietcombank’s case, we completed a digital transformation roadmap in 2019 after spending a significant amount of resources on research and development. Our target is to become the number one bank in Vietnam in terms of digital transformation by 2025. To realise this goal, we have focused on a number of initiatives, including enhancing customer experience and improving operations efficiency.

For better customer experience, we have continuously reduced transaction processing time and synchronised all distribution channels. As regards improving operational efficiency, we have digitalised many processes, applied smart management principles and automated transaction processing.

FBP: What is your key strategy to succeed and the key priority pillars that support the strategy? What is your vision for your bank in its journey of "reinvention"?

NXT: There are two key pillars in Vietcombank's strategy to succeed in digital transformation.

First, it is to have the right team. We set up a digital transformation steering committee at the board of directors (BOD) level led by myself. This body helps smoothen and unify our transformation stages. Under the committee, we have a digital transformation management unit and a digital banking centre.

The second pillar is our customers. We aim to become the leading bank in Vietnam in terms of customer satisfaction by continuously improving their banking experience and creating an omnichannel solution for uninterrupted interaction with us across channels.

Criticality of technology and its impact

FBP: What are your views about a cloud and open architecture-based platform-as-a-service (PaaS) core banking infrastructure platform that supports application programming interfaces (APIs) and microservices?

NXT: From our point of view, the model of cloud and open architecture-based PaaS core banking infrastructure platform that supports APIs and microservices is an indispensable trend in digital banking development. We have been promoting such a model, especially on our new core banking system which will enhance the connectivity between Vietcombank and other financial institutions as well as fintechs. Cloud and open architecture are in line with the agile approach the bank needs not only to catch up but also to keep up with the ever-changing market.

FBP: What are the key digital initiatives that you have launched and talk through the background/context to why you started them and what you have achieved? What role is technology playing in the reinvention of the bank? Can you give us some examples of technologies in use and how they're supporting this?

NXT: Over the past years, Vietcombank has been implementing a number of digital initiatives. These are aimed at boosting operational efficiency, laying the foundation for digital banking development, improving flexibility and the ability to quickly adapt to the market. We also have had initiatives focused on enhancing customer experience and convenience, supplying more utilities and simultaneously, strengthening and standardising risk management processes in line with international standards.

Digital initiatives to be implemented include projects aimed at developing and modernising activities of business divisions, standardising IT infrastructure, as well as enhancing systems security and stability.

Important projects include the rollout of a new core banking system following modern banking management standards, building service-oriented architecture (SOA platform), upgrading card system, deploying new payment systems (trade finance, payment hub, etc.), centralising credit approval management (through corporate and retail loan origination system, etc.) and launching management information system (MIS, etc.).

These initiatives enable the bank to develop flexible products, respond quickly to customers’ diverse needs, improve operational processes and service quality, as well as to control operational risk and eventually outgrow competitors.

FBP: How have these initiatives impacted your customers, internal organisation and financial performance?

NXT: Digital technology has revolutionised the way we communicate and conduct business by allowing interactions and transactions to happen via digital channels. This is expected to bring about a structural transformation across the entire banking system. Banks have adopted new business models under the influence of digital technology with its basic characteristics of personalisation, scalability, and high connectivity.

Through both physical and digital channels, customers are offered a variety of new services at higher quality, lower cost, and stronger connectivity. This requires banks to adjust not only processing practices and distribution channels, but also their organisational structure, management approach and even their corporate culture.

We expect to invest heavily in our digital banking transformation project and related initiatives that follow. However, we are also confident of the financial efficiency that will result from the successful implementation of this project.

Managing risk and failure – the lesson learned

FBP: With reinvention comes risks and failures, could you talk about the risks and failures that you have experienced in your career and how they have changed you and the institution(s) that you lead? What’s one professional risk you’re proud of taking? How are you teaching people at your bank about risks and failures?

NXT: I would not use the term risks and failures, but we indeed experienced some difficulties during Vietcombank’s restructuring over ten years ago.

For a long time, Vietcombank was a wholesale bank and possessed the largest proportion of foreign currency assets in Vietnam. This portion of our assets suffered greatly in terms of income generation from the economic crisis of 2009. As a result, Vietcombank had to make a rather difficult decision to quickly transform our asset structure towards a larger portion of Vietnam dong (VND) assets. This was a decision that has been proven both correct and timely. Had Vietcombank not taken this step, the impact on our profitability would have been quite severe.

Another example is our strategy to switch from wholesale to retail. We were originally a wholesale bank with a strong customer base, including many large corporations. Therefore, shifting the focus to retail was not easy. We had to make drastic changes to the bank’s organisational structure as well as increase investment in physical network, people and technology, among others.

The most difficult is a change in mindset. Recognising we’re on the right track over the past 10 years, Vietcombank has consistently implemented many effective solutions. Suffice to say, by now, we have become a retail bank both in assets and income structure. This transformation has been key behind a sharp improvement in our financial performance in recent years. Looking back now, it seems easy, but to start such a change a decade ago was no light task.

My takeaway from this is: if you have the right orientation, clear goals and perseverance, you will surely succeed.

FBP: What are your personal aspirations for the new year? What personal advice do you have for people wanting to follow in your footsteps?

NXT: At Vietcombank, we share a common aspiration: the desire to make our bank a regional, then a world-class bank, building upon a proud history nurtured through generations of Vietcombankers.

The year 2020 is an important milestone for our development strategy. On the one hand, we endeavour to offer support for businesses, individuals, communities and the economy as a whole amid an increasingly challenging macroeconomic landscape. On the other hand, I trust that we will still achieve our goals and action plans, continue to affirm its leading position in Vietnam and realise its global ambitions.

I hope each Vietcombanker, especially the younger generations, will continue to carry within them the pride and love for Vietcombank and the high spirit to overcome all difficulties and challenges. Together, these people shall write the next pages of our history.