KRX switch primed to boost market

October 27, 2023 | 09:56

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Technology prowess has brought multiple advantages to investors in the stock market, yet more perks are set to come in the forthcoming months.

The new KRX system will help Vietnam’s bourses introduce new services, Photo: Shutterstock

According to the Vietnam Securities Depository and Clearing Corporation, by the end of September, the number of transaction accounts in Vietnam’s stock exchanges surpassed 7.8 million, with those of local individuals predominant with over 7.76 million accounts.

Newly opened retail customer accounts in less than three years were more than doubled those opened in the past two decades.

Aside from the market’s allure, the use of e-verification in account opening, applied on a massive scale by securities firms, is deemed the key behind the exceptional growth. The method does not require the physical presence of customers when they open transaction accounts, while the use of face and voice identification can significantly save securities firms time and money, while still ensuring privacy.

Besides e-verification, the regulation that each customer is liable to open just one account at a securities firm, yet they can open accounts across firms, has stepped up competition among them.

For years, the incentives in the form of transaction fees or margin interest have been common at securities firms, yet currently digital technology has become an important weapon in market competition.

Along with enhancing user experience on applications or websites, a series of cutting-edge products have been launched by securities firms to support customers in recent months.

For instance, Ho Chi Minh City-based Yuanta Vietnam Securities launched the YSRadar analysis tool with stock evaluation features based on transaction data, financial indicators, and valuation factors. This was followed by the Yswealth asset management tool, providing portfolio recommendations consistent with investors’ risk appetite, integrated in YSradar.

Many companies have also added new features, such as AI Speed Reporter as a smart assistant to continuously and quickly update market news for Vina Securities; or AI Broker launched by DNSE Securities, helping to synthesise information about stocks and businesses, and send personalised notifications based on investors’ needs.

With tech prowess, securities firms are also capable of serving numerous investors simultaneously, and thereby significantly supporting the work of brokers or even removing the brokerage department entirely.

More securities companies are now considering digital transformation as a tool to help increase strength. Nguyen Duy Linh, CEO of VPBankS – almost fully owned by Hanoi-based lender VPBank – remarked that to pursue a large-scale retail strategy, building a customer care platform could only be possible when promoting digital transformation.

“Despite the disadvantage of starting later, this very factor can help them to take advantage and put into use the latest technologies in building their apps and webs for customer transactions or operating state-of-the art internal operating tools,” said Linh.

Availing of technology prowess in creating new products or diversifying business methods is welcomed, yet industry experts assume that there are innovations that, albeit bringing comfort to customers, are still not suitable for application. These may include the use of algorithms, robots, and high frequency trading.

“In the securities sector, all innovations and new applications must ensure meeting diverse factors such as legal compliance, transparency, and fairness, and most importantly, their consistency with the current context of the market,” said a representative from the State Securities Commission.

“For instance, robot orders shall only be applied when there is careful research and preparation on the legal basis and technological infrastructure, yet not at the present time.”

This infrastructure bottleneck could be soon resolved as the flagship new trading system KRX is slated to be launched.

The system, from the South Korea Stock Exchange, is set to manage and operate transactions on the Vietnamese stock market. The project aims to upgrade the technology system and infrastructure.

In light of KRX’s plan, the Vietnamese side will expedite the system’s final testing in November and is expected to finalise all preparation work by the end of the year to be ready for deployment.

When the KRX system is fully operational, Vietnamese bourses are expected to have many new competitive products such as intraday trading, short selling, option contracts, or the application of the central counterparty clearing house mechanism.

Securities companies have been tasked to be well-prepared for the launching of the new system. To entice customers, their technology departments need to prepare for new tech features and products.

Sylvester Kinuthia, head of Transaction Banking, Standard Chartered Bank Vietnam

The economic and financial landscape is undergoing rapid transformation. As consumers and businesses increasingly prioritise speed, convenience, and accessibility, banks must keep up. This means innovating at pace to enhance visibility, security, control over financial activities, and the end-user experience, most of which is becoming increasingly reliant on data.

Indeed, data is quickly becoming the foundation of how banks operate because it enables understanding consumers at all stages of their financial journey. Data is enabling banks and businesses alike to solve some of their biggest problems.

We aim to be a digital-first and data-driven bank that delivers enhanced client experiences. What does it mean to be a data-driven bank? It’s about using data and analytics to better serve our customers; to anticipate their evolving needs, to personalise the products and services we provide them with, and to embed ourselves deeper into their financial lives with real-time services.

Lately, big data and emerging digital technologies continue to disrupt banking and other industries, as well as consumer behaviour. Banking, as an industry, is best placed to benefit from big data because it can quickly adapt new technologies to deliver innovative solutions for core business challenges and generate new revenue streams.

However, to take advantage of data as a resource, banks need to ensure they have a data strategy. They also need to realise that transformation into a data-driven organisation requires alignment and clarity on the business and data strategy. Most banks/organisations struggle to get this right because they don’t build a strong foundation for their data strategy.

A solid data strategy involves having good data management processes, like ensuring data is not fragmented and managed in silos, having all the right datasets, having the appropriate talent, and continuously developing analytics to meet the evolving needs of consumers.

In addition, good management of your data helps ensure that your analytics lead to actionable insights that generate beneficial outcomes such as personalised customer service, driving sustainability, fraud detection, lending decisions, regulatory compliance, cybersecurity, and risk management.

Dr. Huy Pham, senior finance lecturer, RMIT University Vietnam

The fintech market has welcomed a new wave of products with environmentally conscious objectives, commonly referred to as green fintech. The term refers to tech-enabled innovations applied to financial operations and products that intentionally support the United Nations’ Sustainable Development Goals.

In the Asia-Pacific, Singapore, South Korea, Australia, and Hong Kong have reached mature levels of green fintech development. In comparison, green fintech development is still in its infancy stage in Vietnam, though the government has shown interest in it. One thing is for sure, government support will be crucial in facilitating the development.

For example, the State Bank of Vietnam is expected to soon issue guidelines for financial institutions to promote green finance. Its governor has also issued a directive requesting relevant entities to establish a legal framework for green credit development and an action plan for the banking sector to implement the National Strategy on Green Growth.

What is more, there have been increasing funding opportunities available to support sustainable fintech initiatives in Vietnam, from venture capital firms to non-profit organisations.

One of the primary barriers to the development of green fintech is the lack of awareness among the public and businesses about the benefits of sustainable finance and green investments. Regulation also remains a significant obstacle. It is crucial to have specific regulations and guidelines that encourage the development and adoption of environmentally friendly fintech solutions.

Without accurate and reliable data on environmental impacts and performance, it becomes challenging to assess the effectiveness and credibility of green fintech platforms. Access to data on clean energy, carbon emissions, and other environmental factors is often limited. In addition, limited access to finance remains an issue.

Most importantly, green fintech requires collaboration among various stakeholders, including related companies, financial institutions, government agencies, environmental organisations, and consumers. Strong partnerships are essential to building a more robust and sustainable green fintech ecosystem in this country and beyond.

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