Vietnam leads the world in embedded financial transformation and BaaS

Finastra's annual global survey shows that Vietnamese financial institutions are showing strong interest in emerging technologies and banking models, although technology investment is limited by challenging economic conditions.

The 'Financial Services: State of the Nation Survey 2023' found that 91% of CFOs in Vietnam said their organization was interested in Generative AI – the highest figure of all markets surveyed. Of these, 58% have either implemented Generative AI in some way, or are researching and testing the technology.

Vietnam is leading the world in the implementation of embedded finance and Banking as a Service (BaaS).

Strong growth in BaaS and embedded finance

Vietnam is leading the world in the deployment of embedded finance and Banking as a Service (BaaS). According to a Finastra survey, 58% of Vietnamese financial institutions have deployed or improved embedded finance capabilities in the past 12 months, higher than the global average of 41%, and ranked second in deploying or improving BaaS capabilities (55%, compared to 48% globally). This reflects the strong interest of Vietnamese financial institution executives in emerging banking models, with 89% citing these models as a tool to generate business growth and income - second highest after Hong Kong (95%).

Economic conditions limit investment plans

The difficult global economic climate has impacted banks’ investment plans, with a high proportion across all markets reporting that their financial institutions have been constrained in their investments in technology and digital banking. This proportion was highest in Vietnam, where 87% said their institutions’ investments had been constrained, of which 32% were severely constrained. However, 67% have gone ahead with their full investments, or expect to make them in the second half of 2024.

Green lending growth potential

Environmental-Social-Governance (ESG)-focused finance is expected to benefit both financial institutions and the community, with 91% in Vietnam agreeing that a focus on ESG and sustainability will be the next big thing in finance. This is the highest globally, and 10% higher than the global average (79%).

Specifically, 82% of finance leaders in Vietnam believe that green lending offers growth and revenue opportunities. One of the keys to tapping this potential is Generative AI. Among banks interested in the technology, the most common application of Generative AI in green lending is the collection, processing and analysis of ESG data or the classification of lending criteria (36%). In Vietnam, 44% of banks plan to use Generative AI in green lending. This is the highest rate globally, second only to Saudi Arabia (47%).

“Despite challenging economic conditions, our research clearly shows that investment in AI, BaaS and embedded finance remains a top priority for financial services organisations over the next 12 months, particularly as they look to enhance and personalise the customer experience,” said Simon Paris, CEO at Finastra. “We are strongly committed to ESG initiatives, collaboration around Open Finance and using cutting-edge technologies such as AI to capture the opportunities ahead.”

Finastra’s survey involved a total of 956 professionals (managers) at financial institutions and banks across the US, UK, France, Germany, Hong Kong, Singapore, Saudi Arabia, Vietnam and the UAE. These financial institutions represented a combined revenue of approximately $33 billion over the past 12 months, employed approximately 2.4 million people and had approximately 240 million partner/customer/member relationships.

Tra Khanh

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