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Technology Modernization in the Vietnamese Banking Sector

Abhishek Kumar Financial Insights Asia/Pacific May 17 th , 2006. Technology Modernization in the Vietnamese Banking Sector . Capital Markets. Insurance. Banking Services. Institutional Trading, Retail Brokerage, Investment Mgmt. Individual Annuity, Personal Lines — P&C, Life.

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Technology Modernization in the Vietnamese Banking Sector

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  1. Abhishek Kumar Financial Insights Asia/PacificMay 17th, 2006 Technology Modernization in the Vietnamese Banking Sector

  2. Capital Markets Insurance Banking Services Institutional Trading,Retail Brokerage,Investment Mgmt. Individual Annuity,Personal Lines —P&C, Life ConsumerBanking &Credit GlobalAnalysis CorporateBanking Payments Risk Management European Banking Services European Capital Markets European Insurance European Risk Management RegionalAnalysis Asia/Pacific Banking Services Asia/Pacific Capital Markets Asia/Pacific Insurance Asia/Pacific Risk Management ITOServices Asia/Pacific IT Benchmarking Canadian FinancialServices U.S. ITO Europe ITO Brazil ITO Mexico ITO Financial Insights - Globally

  3. Current State of Bank IT Growth, Consolidation & Decentralization Consolidation,Complexity Increases Dynamic IT Transformation Growth &Efficiency Utilities-model, Convergence, STP, SOA Mainframes, Applications, Silos. Centralized - delivery, Wider access, Hosted-services, Outsourcing Client-Server, Data-Warehousing, Process- automation, Middleware     1970s–1980s Mid-80s–Mid-90s Mid-90s–2004 2005–2010+ 10 years 10 years 10 years ~10 years

  4. Strategic Top 10 for Asia/Pacific • Core Banking Systems Transformation • Channel Investments • Profitability and Performance Management • Customer Analytics • Payments • Technology to Support New Business Strategies • Regulatory Compliance and Risk Management • Security and Fraud Management • Business Process Automation/Reengineering • Selective Sourcing

  5. Exciting Time for Vietnam’s Banks • Average Economic Growth: 7.4% over past decade • Increasing foreign investment: US$5B+ • WTO member by end of 2006 • Banks issuing bonds and increasing savings accounts • Privatization: Vietcombank

  6. Foreign banks (8.3%) Joint-stock banks (11.7%) State-owned banks (80.0%) Vietnamese Banking Industry • State Owned Commercial Banks (SOCBs) • Joint-Stock Banks • Entering Foreign Banks Vietnam Credit Market by Bank Type Source: Financial Insights, 2005

  7. SOCBs • Large geographical presence • Infrastructure development through government support • Financial disclosure rules and capital adequacy • NPL confusion

  8. Joint-Stock Banks • Improve technology infrastructure • Expand branch presence • Increase capital infusions • Hire tech-savvy management

  9. Foreign Banks • WTO and US-Vietnam Bilateral Trade Agreement • 100% Foreign invested banks by 2010 • Growing presence: • ANZ and Sacombank • Standard Chartered and ACB Bank • HSBC and Techcombank

  10. Hurdles to IT Modernization • Lack of funds for smaller banks • Public acceptance of modern banking technology • Lack of guidance and poor infrastructure

  11. Government Support • Payment System and Bank Modernization Project (PSBM) • PSBM 1: US$49M • PSBM 2: More than US$100M • Aid filters down to smaller banks

  12. Approaches to IT Modernization • Small to medium sized joint-stock banks • Basic upgrades to antiquated systems • Focus on channels with cheap transaction costs in order to build customer base • Large joint-stock banks • Detailed 3 phase approach • Networking • ATM deployment and major technology upgrades • Implementation of complex applications

  13. Approaches to IT Modernization • SOCBs • Larger budgets = bigger projects • Core banking systems • International banking systems • Ebanking services

  14. Essential Guidance for Local Banks • Improve transparency in financial reporting • SOCBs should focus on streamlining operations for greater efficiency • Joint stock banks need to be cautious with their IT investments

  15. Essential Guidance for Vendors • Target banks based on mentioned classifications • Banks are looking for easy-to-use, scalable, easily upgradable and compatible products • Focus on recurring supervisory or maintenance-related services in order to ensure outsourcing projects in the future

  16. Thank You Contact me at: abhikumar@financial-insights.com or +65-6228-7739

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