Reimagining the customer experience in digital banking

Bruce Delteil - Managing partner McKinsey Vietnam

According to 15 Asia-Pacific markets, the share of Vietnamese customers using digital banking tools at least once monthly doubled from 41 per cent in 2017 to 82 per cent in 2021 For comparison, active users of digital banking in the region increased from 65 to 88 per cent of the customer base.

In Vietnam as well as across the region, the acceleration in the consumer demand for digital banking tools, driven partly by the ongoing pandemic, means that banks and fintechs in emerging markets are facing increasing pressure to strategically and rapidly drive digital innovations to convert customers and gain market share.

While leading banks in Vietnam have taken significant steps to drive digital banking, our research shows that banks still need to overcome several challenges. These include bridging the gap between Vietnamese customers’ intent and actual use of digital banking, connecting with more diverse customer segments, and reimagining the role of physical branches in online and offline customer experience. Banks that are able to address these obstacles have the potential to play a bigger role in the growth of Vietnam’s digital economy.

Bridging the gap

McKinsey’s research shows that 71 per cent of Vietnamese bank customers are open to purchasing banking products or services through digital channels, but only 23 per cent have actually completed the purchase of a bank product online or through a bank’s mobile app.

To close this gap between customers’ appetite and their actual behaviour, banks could engage customers in more meaningful and sophisticated ways, offering a broad set of financial services, including diverse types of new accounts, lending, insurance, and wealth management products wrapped into a seamless and integrated customer journey.

For example, instead of taking a few hours to open a new account, digitalising the process could cut the processing time down to minutes. Banks will also benefit from safely and responsibly advanced analytics to anticipate customer needs and deliver personalised messages and offers to each customer at scale, at the right time, and via the preferred channel.

From a market level, with so many non-financial institutions expanding into digital ecosystems, banks also need to consider how they can become involved as partners, orchestrators/owners, or platform builders to gain the most value from ecosystems.

Each bank must be strategic about engaging with diverse segments in Vietnam’s increasingly competitive market. Our survey found that digital banking drives about 68 per cent of consumers’ interactions with their banks – but mostly for simple activities such as balance enquiries and simple transactions. This presents banks with opportunities to develop value propositions targeted to customer segment needs in complex transactions, such as loans, insurance, or financial advisory.

Just over half of consumers are already using other digital solutions from fintech/e-wallets – after banks, consumers trust e-wallets with their payments. Banks could seek opportunities to partner with or acquire fintech/e-wallet solutions to increase their reach and access to new customers and to complement and enhance their value propositions under a digital ecosystem.

Moreover, as about 70 per cent of Vietnamese consumers are multichannel users with mixed needs, banks have the opportunity to rethink their customers’ entire journeys to provide more seamless end-to-end touchpoints.

Other digital banking opportunities are present among Vietnam’s sizeable informal economy, which accounted for over 56 per cent of workers in non-agricultural sectors in 2018, according to the International Monetary Fund. This informal economy still relies heavily on cash, and the demand is increasing for greater financial inclusion. Banks could seek to incentivise informal economy workers to turn to mobile banking through new strategies in microfinancing, agency distribution, and customer incentives.

Reimaging physical branches

There is broad enthusiasm among Vietnamese bank customers for digital banking tools, with nearly 70 per cent of surveyed consumers sharing that they are multi-channel users and 22 per cent saying that they are digital-first users.

However, a challenge is that 40-50 per cent of Vietnamese consumers surveyed cite that gaps in customer service at branches are one of the top reasons for switching main banks in the past 12 months. Half of the respondents also cite difficult digital functionality as another top reason for switching main banks.

To close customer service gaps at branches and create seamless offline to online journeys for customers, banks need to enhance training in digital products and standardise service quality among their employees, as well as bring in capable digital teams to develop products and platforms with easy-to-use and secure functionalities.

Banks could also consider building on upside trends to redefine branch services. Consumers’ increasing comfort with digital advisory services creates a crucial opportunity for banks to leverage automation and digitisation to shift customer activities that are usually conducted at branches to online.

Our research shows these activities include customers seeking general information or obtaining financial consultations on savings accounts, deposits, and personal loans, as well as customers opening accounts, making deposits, or obtaining mortgages at branches.

By redeploying and reskilling branch staff to better serve customers via teleconferencing and devoted in-person branch consultations to more complex and high-value transactions, banks have an opportunity to redefine and strengthen the roles of branches and staff in the digital era.

Emerging markets have become Asia-Pacific’s engine for digital banking and fintech innovation, and Vietnam is attracting interest as one of the region’s fastest-growing digital economies. Banks that create distinctive and diverse value propositions and engage customers with highly personalised offers in near real-time have the potential to thrive in this fast-evolving market.