Leading the technology transformation in VietinBank, Tran Cong Quynh Lan, the bank’s deputy general director, explains the changes in its technology infrastructure and challenges it faced in the transformation process
Banks in Vietnam have increasingly realised the need to move out of realms of legacy systems and undertake technology transformation to create digitally-enabled, agile and integrated service offerings to its customers. In a bid to come at par with its rivals in the region and acquire the ability to develop new products and services, Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), the second largest bank in Vietnam in asset base, recently undertook strategic transformation of its technology systems.
Having started its operation less than three decades back, Hanoi based VietinBank now has 155 branches and close to 1,000 transaction offices and savings counter in Vietnam, two branches in Germany and presence in Laos and Myanmar. Though expanding, the bank was operating on legacy systems that were posing challenges to meet its objectives and the bank increasingly realised the need for transformation. Tran Cong Quynh Lan, deputy general director and IT director of VietinBank, who joined the bank five years ago from OCBC Bank, leads this technology change.
Laying the building blocks
“In 2012, VietinBank embarked on technology transformation journey, we defined the target ‘end to end’ architecture and launched 15 strategic IT projects. Now in the last five years, we have built a good foundation with the new core banking system, treasury system, services-oriented architecture (SOA), enterprise data warehouse, many processing systems such as: Anti-money laundering system, payment processing, loan origination engine, early warning system, trade finance and also revamped our channels with a wholly new internet and mobile banking with much better customer experience. These initiatives lay the technology foundation and now we have all the complete building blocks that enable us to go forward,” explained Lan.
The customer expectations are changing as new players, particularly financial technology (fintech) come to market with customer-centric propositions. Bank wanted to develop new products but found challenging achieving it with the old system and fragmented view of customer relationship.
“We needed a technology infrastructure that can provide a 360-degree customer view, SOA-oriented, has greater flexibility and ease to create products so that control our destiny (instead of depending on the core banking vendor to modify code all the time) and are scalable to support our growth. We wanted to integrate and consolidate automated teller machine and saving accounts, create a single customer information file (CIF) while implementing a new core banking platform. We are growing at 15%-20% year on year and the old system had reached its capacity,” pointed Lan while explaining the reasons for transformation.
Besides the backend infrastructure, the bank also needed a new and better front-end system for better sales capability.
“In the new infrastructure we have the teller system, sales and service and marketing and campaign module, which allow users to identify the potential products to sell to the customers. We centralised the branch systems server at headquarter to reduce operational effort at branches. In addition, we had ability to configure the systems to meet different product needs using parameter and rule configuration and are able to provide different product bundling for different segments,” he added.
The transformation has yielded significant benefits including reduced operational costs, reduced processing time and reduced product development time by 75%.
Challenges during transformation
The most challenging component of the transformation was probably the core banking replacement which integrated 63 applications along with other periphery systems. The system needed to be customised and localised to meet the unique needs of Vietnam and specific requirements of the bank.
“Vietnam has complex payment infrastructure as we do not have a single interbank transfer hub. The new core banking required a lot of customisation on this area, while the scope kept expanding and it took longer for development than planned. We also have quite a large number of localised requirements in Vietnam such as loans classification, bad debt provisioning, regulatory reports and they are in Vietnamese language. The bank also needed to integrate CIF of cards and current accounts which were located in two different systems. A lot of data cleaning and cleansing was required,” explained Lan.
In addition, the bank has more than 1,000 branches and it needed to prepare all these staffs (about 15,000 users) for the new system which required extensive training and trial runs over six months.
“We conducted 16 trial runs to prepare for the final cutover. This is very important to mitigate the risk of a big bang cutover and ensure smooth operation of the new core banking,” he added.
Along with core banking system, the bank implemented other projects including a new trade finance system, data warehouse, internet system, general ledger, new branch system and middleware, several of them coming from different vendors. This demanded a significant integration exercise.
Now with new technology framework and integrated data, the bank is not only targets better growth, but is also gearing to meet the 2018 deadline for Basel II compliance.
As new technology innovations emerge and more fintech players venture into market bringing disruptive customer experience, it is essential that Vietnamese banks focus on digitisation towards improved customer journeys, while targeting greater financial inclusion. Changing its operating model towards a more digitally-enabled, customer-centric proposition and enabling its services with technology innovations, VietinBank is now planning new proof of concepts in artificial intelligence (AI) and big data to explore their use to support its future growth.
“Now we have to work with the business to transform the foundation and strategic building blocks to new business initiative and put the business creativity into our product and services. We want to be able to work with fintech, AI, analytics and big data, so that we can make better use of data and application programming interface that we have and see how we can collaborate with other people in ecosystem for creative service for our business,” concluded Lan.Categories: Financial Technology, Retail Banking, Technology & Operations