Mobile banking: narrowing distance, minimizing costs


Over the world, there have been various successful models of mobile banking/ digital banking service. In Vietnam, this kind of modern financial service has recently been applied in order to improve financial inclusion for people in rural and remote areas.

Financial technology to approach remote areas

At the seminar on “Mobile banking for the poor and women in Vietnam” held by the State Bank of Vietnam (SBV) in association with the Vietnam Bank for Social Policy (VBSP) and the Vietnam Microfinance Working Group, Mr Justin Baguley, Counselorof Economic and Development Cooperation at the Australian Embassy in Vietnam revealed that he himself rarely usedhis wallet but mostly mobile phone instead for banking services.

His experience is similar to that of those people living in urban areas now when technological initiatives help simplify everything.

In fact, many people in remote areas in Vietnam has started enjoying these services. An example for this is the project “Mobile banking – financial inclusion and economic empowerment for the poor and women in Vietnam” implemented by the VBSPin association with Asian Fund and MasterCard, funded by the Australian Government.

The VBSP revealed that the project despite being under implementation stagehas initially brought about huge and measurable economic effects for not only customers but also banks.

Regarding this issue, Mr Ha Hai An – Deputy Director of the International Cooperation Department of the SBV shared that there have been various models of mobile banking successfully applied over the world, typically in Africa, where solutions of digital currencies and agent banks have facilitated the access of people and small enterprises in rural and remote areas to banking services such as payment, saving, credit and even insurance in a safe, reliable and prompt manner with reasonable costs. These models have made a remarkable contribution to raising the account ownership in Africa to 43% of adults in 2017 from 23% in 2011.

Improving transparency

A senior officerof the VBSP affirmed that through the SMS service for reminding due date, debts and monthly outstanding balance, banks would improve their transparency and efficiency, then earn more confidence of customers who would be assured to access financial inclusion services.

At the same time, the service would help improve credit quality and cost efficiency for both banks and customers, ease the burden of cross checking, minimize time and cost for travelling, detect violations of borrowing under false names or arrogation in capitallending. Besides, the SMS service haspositively affected customers’ awareness of their debts, responsibility to repay, saving… and then time and printing costs would be saved much.

The SMS service isa tool for customers to check their own information without regularly travelling to commune headquarters at the end of the year. Moreover, the customers have not to pay fees for the SMS service. That’s not to mention through this channel, customers have access to modern financial services and get familiar with digital technology facilitating the VBSP to diversify its products/ services, improve its operational efficiency in order to better serve more customers. 

“Why Mobile Banking for Vietnam? I see a great potential here in Vietnam with 65% of the population is under 30, young and active, while the current cash utilization is not effective and safe enough with risks of loss during transfer.”, shared Ms Winnie Wong from MasterCard.

Easily measurable economic effects

In fact, before using the SMSservice for checking balances, the VBSP had to do it face-to-face with customers. That means it had to deliver a notice to customers demanding them to be present at the commune transaction point for the check. In case customers could not come, the bank staff had to meet the customers at home for the check.

Practically, a customer needs an average of ¼ working day for a traditional check, while an average working day of a local labourer costs 200,000 dongs. Thus a total cost for 856,608 customers to check their balances at bank counters is 42,830,400, 000 dongs.

With the SMS service, customers no longer bear an opportunity cost of half working day for checking at bank counters. On receiving messages from the VBSP, customers check the balances themselves. Then in case of differences or inquiries, customers should contact the VBSP for information and explanation. The economic benefit gained for 856,608 customers in 10 provinces is 42,830,400,000 dongs saved thanks to using this service.

For the bank, in recent time, the total messages sent to customers for checking balances amount to 856,608 with a total cost of 214,152,000 dongs for the messaging. 

With the traditional method, it takes a bank staff 1 working day to check 3 saving and borrowing groups, each group consists of 50 members. A bank staff in charge of the check is paid with an average amount of 450,000 dongs per day. Therefore totally the checking cost for 856,608 customers with the traditional method is 2,569,950,000 dongs. While with the SMS service of 250 dongs per message, it would take 10 bank branches only 214 million dongs to check with their customers, 12 times cheaper than the traditional method.

Narrowing the distance

With the actual demonstrating data, Mr Ha Hai An asserted that: “Up to now, the application of digital technology in providing banking products and services has showed many advantages in minimizing costs and maximizing benefits of customers, especially those who have limited access to basic banking services.

In Vietnam, mobile banking/ digital banking has become a hot trend among banks for broadening their scope of operation and optimizing services to customers not only in urban areas but also in underprivileged regions”.

However, citing information from a Vietnamese report, Mr Justin Baguleyshared that by 2025, the financial inclusion would be improved but many underprivileged people may be still out of access to banking services due to geological distance and costs.

“Hopefully the better improved technology and infrastructure would support the provision of financial services to rural and remote areas, help narrow distance and minimize costs”, said Mr Justin Baguley.  

Nhuệ Mẫn
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