AI's role in banking sector

Digital transformation in the banking sector has become an essential trend in Vietnam and around the world, enhancing the efficiency of any number of financial operations. From simplifying loan procedures and strengthening loan oversight to facilitating consumer spending through electronic payments, adopting technology has rapidly propelled Vietnam’s financial sector forward.

Future of banking and finance

Speaking at the Smart Banking 2024 workshop and exhibition, held in Hanoi on October 29, Dr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banks Association (VNBA), noted that AI, machine learning, and big data analytics enable detailed and rapid data analysis, providing valuable insights and helping enterprises make the best business decisions. “AI applications have become a prominent trend globally in many sectors, especially in banking,” he told the workshop. “Approximately 85 per cent of banks have established AI strategies to develop new products and services, and over 59 per cent of employees now use AI in their daily work.”

Banks’ investment in generative AI (GenAI) is projected to reach $85 billion by 2030; a steep increase from $6 billion in 2024 and signaling a more than 1,400 per cent rise. The trend highlights a clear shift from traditional banking and digital banking towards AI banking, Mr. Hung emphasized.

Ms. Nguyen Thi Quynh Giao, Deputy CEO of the Bank for Investment and Development of Vietnam (BIDV), said that, in response to the digital transformation trend in the banking sector, it has expanded its team of IT engineers from 100 four years ago to 1,000 today, which will increase to 1,400 by 2025.

Data has become an especially valuable resource, Mr. Nguyen Hung, CEO of TP Bank, added, and AI has become a crucial tool helping banks gather and analyze vast amounts of customer data. “Through data analysis and AI models, we can predict customer behavior at each transaction point and calculate appropriate daily cash reserves for our 500 automated LiveBank 24/7 branches,” he explained. “This has enabled us to reduce our cash reserve needs by up to 25 per cent.”

This represents significant savings, as a commercial bank must manage cash reserves in the trillions of VND in addition to traditional costs like cash transportation and staffing.

Improving security

AI not only aids in data analysis and scenario predictions but also holds substantial potential to transform cybersecurity in the financial sector, including banking operations.

Mr. Le Van Tuan, Director of the Authority of Information Security (AIS) at the Ministry of Information and Communications, said there were over 240 incidents and attacks on the banking and financial sector in the first half of 2024, accounting for approximately 13.75 per cent of all reported cybersecurity incidents.

AI definitely has a role to play as an emerging tool for enhancing data protection, according to Mr. Nguyen Quoc Huy, Vice President, Head of Account Management, at Mastercard Vietnam. “With GenAI’s development creating realistic images or videos using big data to deceive banking security systems, humans alone can no longer keep up with these advancements,” he believes. “However, AI can be leveraged as a powerful solution against such threats.” Mastercard has implemented proprietary AI technology across 143 billion transactions, demonstrating significant efficacy in safeguarding its operations.

Mr. Nguyen Tuan Khang, Southeast Asia Director of Software at IBM, added that AI tools for strengthening cybersecurity and fraud detection in the banking and finance sector have expanded over recent years, including blocking ransomware attacks through malware prevention. This year has seen a new trend in using AI to combat fraud related to account data theft. He also noted that while AI has made substantial progress in detecting and preventing ransomware attacks on banking systems, its application in preventing bank account theft has only recently garnered attention, and he expressed optimism that the AI application will receive greater focus and development in the future.

Despite significant potential and growing adoption by banks and financial institutions, representatives from these organizations also believe there remain barriers in expanding and developing AI in Vietnam’s digital banking transformation.

The first challenge is a shortage of highly-skilled engineers and specialized talent. As AI remains an emerging technology, even in leading tech countries, Vietnam faces difficulties in supplying sufficient high-quality talent for the sector.

The second challenge is the high cost of investment. Beyond the expense of skilled personnel, building a complete AI model also requires technological investment, especially in infrastructure such as chips and servers, to operate and scale these models effectively.

A third challenge is the difficulty of AI training. Mr. Huy noted that one of the biggest obstacles in applying AI in banking and financial systems is training AI models to interpret external influencing factors.

To accelerate AI adoption and effectiveness in the banking sector’s digital transformation, representatives from government agencies and commercial banks made several key recommendations.

Firstly, banks must fully master the technology to enable rapid and rational product development and modification. Controlling technology allows banks to build AI models tailored to their operational mechanisms, business conditions, and customer base.

Secondly, a robust data categorization and cleansing system is essential to maintain the quality of the bank’s analytical and predictive models.

Thirdly, an appropriate policy framework is needed to encourage and facilitate banks and financial institutions in developing and applying AI models. This would benefit internal operations as well as business activities, credit operations, and payment processes for enterprises, organizations, and individual customers.

Initial efforts

Commercial banks are strengthening their capabilities to handle cyberattacks, ensuring the safety of critical information systems. Drills help banks identify and assess risks, thereby enhancing their response capacity and effectively protecting customer data.

Mr. Hung said that 98 per cent of TP Bank’s transactions now occur on its digital platform, necessitating robust and stable digital infrastructure. “As digital transactions surge, we face tremendous pressure to protect our data,” he explained. “TP Bank prioritizes not only infrastructure development but also client security when they transact digitally through mobile devices or our banking platform.”

In today’s complex digital environment, malicious actors target not only the bank’s systems but also individual clients. “Beyond reinforcing our systems, TP Bank proactively advises customers to safeguard their personal information and avoid sharing passwords or OTPs,” he went on. “This challenge affects the entire banking sector, not just TP Bank.” For this reason, TP Bank has deployed biometric security measures and authentication procedures through clients’ chipped ID cards to enhance transaction security.

Mr. Tran Cong Quynh Lan, Deputy General Director of VietinBank, told the media that AI technology has increased productivity and optimized operational costs, supporting internal automated processes and reducing training time. “We have launched an AI chatbot that helps employees quickly access internal procedures and documents, which is especially beneficial for new hires navigating our extensive database,” he said.

AI also enables the bank to analyze customer behavior and offer personalized services, predicting client needs and tailoring services to elevate the customer experience.

In tandem with biometric security, VietinBank also uses AI for identity authentication, protecting clients from fraud. Mr. Lan stressed that both technologies allow the bank to adapt to digital challenges and enhance client security. He added that it also helps VietinBank to quickly adjust its systems in response to emerging technologies and client requests. “Previously, system adjustments took time, but AI allows us to respond rapidly, improving service quality and better meeting client needs,” he concluded.