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Digital allows innovation in consumer finance

Released at: 14:44, 15/04/2019

Digital allows innovation in consumer finance

Photo: VET Magazine

Digitalization has become a competitive edge for consumer finance firms in Vietnam as they adopt disruptive technologies to transform business.

by Hung Cao

The trend towards digitalization can be seen in almost all industries in Vietnam, especially in the financial services sector, giving way to consumer financing thriving in the country over recent years. As advanced technology has now emerged as a competitive edge for many businesses, leading consumer lenders in Vietnam have come forward to embrace opportunities, employ digital technologies to help them deliver the best customer experience, and enhance their business performance. 

Competitive edge

Thanks to the country’s young population and high digital adoption, with about 64 million internet users out of its 97 million population and over 143 million mobile subscribers, Vietnam can benefit greatly from the digital age because its consumers are adaptive and embrace changing trends.

As the digital economy develops alongside rising incomes and aspirations in Vietnam, it’s forecast that the country’s infrastructure will continue to improve. Financial organizations also expect digital adoption will drive trust in consumer lending businesses and confidence among customers, regulators, and citizens alike. “Ultimately, consumer finance companies will leverage data as a driving force for personalization and product expansion, while technology will drive broader access at a lower cost, leading to significantly greater financial inclusion,” said Mr. Kalidas Ghose, Vice Chairman and CEO of FE Credit.

Both consumers and businesses, he added, will be beneficiaries of digitalization as far as the consumer finance industry is concerned. With the strong support of the government and regulators with regard to improving manufacturing facilities, developing human capital with technical expertise, and creating a more digital-savvy society, Vietnam has great potential to expand and grow into a digital economy.

What technology can do to consumer finance companies will go beyond risk management and lending processes to emerge as a stand-alone channel to reach out to potential customers who are young and tech-savvy, according to Ms. Duong Nguyen, Leader of Financial Service Organizations and IT Advisory Services at EY Vietnam. Leveraging new technology in the consumer finance market can thus help players expand their networks and bolster their competitive advantage over traditional banks, whose strength is based on their physical branch network.

Technological breakthroughs

The consumer finance industry, which relies on customer experience, has been investing heavily in the development of digital platforms to improve access for consumers. While a number of market players have been quite comfortable launching mobile apps in recent years to respond to the digitization era, consumer finance company FE Credit has gone the extra mile in employing cutting-edge technologies to transform its entire operations, from not only its front-end, with products and services for customers, but also in the back-end, where lending processes and administration are all automated. 

In order to respond proactively to this fast-growing and maturing sector, the firm deconstructed its traditional manual process-driven operating model and rebuilt it into an end-to-end digital business model, by deploying cutting-edge technologies. Such digitalization is not only in its front-end with products and services for customers but also covers its back-end operations, which became fully automated.

FE Credit is the first-mover in Vietnam’s consumer lending market to deploy an end-to-end digital lending platform called $NAP, which requires zero human intervention at the backend and allows a complete digital process in loan applications, instant approval, and immediate disbursement. Thus, it drastically increases its appeal to customers while mitigating the challenges faced by the traditional lending model.

Moreover, it is not alone in its quest to make use of digitization to enhance the customer experience. Rivals like Home Credit, for instance, have also embarked on this journey, with its mobile app, which is set to launch in the near future. Meanwhile, new South Korean player Lotte Finance has introduced Lotte Card’s Hand Pay, which allows customers to pay using an individual’s distinct hand print as identification, to maximize convenience for customers.

The consumer lending industry in Vietnam has been seeing remarkable growth and hence it is not surprising that the consumer finance market has witnessed many new entrants, not only domestic but also foreign. This increased competition, Mr. Ghose believes, will make the market more efficient, as products and services are continuously improved and unfit players are eliminated. This will also benefit customers in terms of better products, better pricing, and higher service quality.

One of FE Credit’s key challenges is to make sure that the products it offers are innovative, effective, and meet customer needs. In this regard, it has met customer needs and become one of the most successful consumer finance businesses in the country by building the largest customer base among all financial institutions. “We think the government can look at broader avenues of collaboration and engagement with the industry’s leading players and other stakeholders, to develop legislation that is clear, consistent, and continues to encourage and support consumer finance players to boost the country’s digitalization,” Mr. Ghose said.  

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