CORE banking of commercial banks in Vietnam
Flexible CORE Banking system is the key competitive advantage with enhanced processing ability of day-to-day transactions. It does not only deliver a faster banking service in making deposits, issuing loans but also create a smoother customer experience for Internet and Mobile Banking.
As a result of economic recovery, combining with appropriate financial policies, the banking sector was experienced a steady growth in transaction demand. Thus, being able to maintain the smooth operation across branches is increasingly a challenge for most banks. Specifically, it’s estimated that banks in top 4 have to process approximately 17 million transactions per day.
Their top priorities are regulatory compliance, improving asset quality, enhancing customer centricity, focusing on digital convergence, and tackling competition from other finance institutions. However, most Banks currently obsolete CORE banking platforms with poor automation, lack of a unified view & control and high maintenance costs.
In addition, the deployment of core banking or banking modernization encounters lots of difficulties. A cutting-edge core banking must be able to tightly manage, efficiently operate, be scalable, quickly adapt, create competitive advantages and exceptional values when banks have needs to implement different services, such as ATM, Mobile Banking, Internet Banking.
Vendors need to come up with their products such as highly automated, componentized, technology platform independent, extremely extensible and cloud ready.
The procedure of CORE banking transformation is a complex and expensive undertaking. CORE banking transformation strategy depends upon the size of the bank and complexity of operations and business transformation. For example, large Tier 1 banks, due to the intricacies of their technology systems, it is preferable for them to develop their own CORE banking systems. On the other hand, vendors, such as Oracle and SAP are gearing up to develop CORE banking solutions for large banks. For mid-size Tier 1 banks, there is a large number of core banking packages available in the market (such as Temenos, TCSBaNCs, and Finacle) and bank-in-a-box solutions that can be customized to meet specific requirements of the bank. For Tier 3 and Tier 4 banks, there are cloud-based hosting solutions that are both economical and easy to deploy.
Currently, the biggest challenge that Vietnam banks are facing on the threshold of economic integrations is the competition on service quality. As compared with international banks, Vietnam banks can provide services like Telephone Banking, Internet Banking and Digital Banking with equivalent quality. However, the issue is how the banks’ system can manage and maintain the quality of those services efficiently. In addition, most of system in Vietnam banks currently stands at only fixed when incidents occurred, while vital requirement for system administration is warning before the incidents happened. Therefore, Vietnam banks need to urgently equip assessment and regular statistics tools.
In recent years, under the high pressure of restricting and ICT innovation, Vietnam banks have focused on and invested huge amount of capital on core banking deployment. Depending on demands, financial capability, and scale of operation, each bank is looking for and choosing different core banking systems with different range of costs, some banks even invest millions of dollar for cutting edge transaction supportive system.
Nevertheless, in addition to the consolidation of infrastructure, human resources after M&A cases, the integration of information technology systems is one matter of concern. Banks are required to spend a certain amount of time when they want to operate a new core banking software. Therefore, in the short time after M&A, existing customer administration system will still be managed under the old core banking. This will certainly pose challenges for banks leaders in operating the banks due to simultaneously managing two separate customer systems.
To achieve completely the CORE Banking transformation, Banks must identify a true reason for CORE transformation, build up a good relationship with CORE Banking system provider with available retail and fully integrate the CORE system solutions
According to data collected, almost banks in Vietnam have been implementing core banking presently. Temenos and Oracle, which are the world leading banking software vendors from Switzerland and United States, are rated as top core banking vendors, constituting a half of banks as their customers. Temenos is the market leader, which stands out 37.5%. Oracle’s core banking system is widely trusted by many Vietnam banks, making up 25% of market share. Fiserv comes third in popularity with 9.4% of market share. Besides, Sungard and Hyundai are being employed by minority of Vietnam banks, which both stand at 6.3%. The others consist of Infosys, Polaris, Fidelity, Silver Lake, and Unisys.
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