Mobile transactions in Vietnam are expected to increase by 300 per cent 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.
|The survey forecasts heavy disruptions for banks due to mobile transactions |
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 Asia-Pacific 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-energise 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 Asia-Pacific market that will pose a significant challenge to incumbents. 30 per cent 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.
Meanwhile, traditional banks are increasingly focused on responding to changing consumer behaviour. Digital banks across the Asia-Pacific saw three times the growth in their customer bases compared to traditional banks in 2020/2019.
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 centres saw surges in usage.
The latest edition of Fintech and Digital Banking 2025 (APAC) found that 60 per cent of banks in the Asia-Pacific will leverage AI or machine learning technologies for data-driven decisions, compared to 48 per cent from the previous year. In Vietnam, core banking and payments system modernisation 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 Asia-Pacific region will be focusing on digitalising their core business of lending with some focus, subsequently, on deposits. This is particularly evident in Vietnam, with 80 per cent of banks having re-invested in credit risk and asset-liability management, as well as building up capabilities in lending. Vietnam will see double-digit growth for lending every year from 2021. New capabilities will be acquired from fintech partners: IDC predicts by the middle of 2021, 50 per cent of lending decisions in retail banking across the Asia-Pacific will be supported by fintech propositions, underscoring accelerating bank-fintech collaboration.
Riddhi Dutta, regional director for ASEAN and South Asia at Backbase, said that, "COVID-19 has brought about significant changes in Vietnam and the Asia-Pacific's banking landscape, and banking and fintech players will need to quickly act on their digital strategies to capture market share. The 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.”