In this Leadership Perspective series, Luu Trung Thai, Military Commercial Joint Stock Bank (MB Bank) vice chairman of the board of directors and CEO, credits an early foray into digital transformation as the key to the bank’s improved contactless transactions and strong performance despite the pandemic.
Luu Trung Thai rose from the ranks at MB Bank, holding various positions such as head of the Credit Department, branch manager, Human Resources director and deputy general director since he joined the company 22 years ago. In 2011, he was appointed chairman of the board of directors and also held the position of general director of MB Securities Joint Stock Company (MBS).
In 2016, MB Bank established its digital banking division and embarked on its digital transformation journey. It became the first bank in Vietnam to introduce a digital electronic know your customer (eKYC) onboarding process. A series of new banking platforms such as App MB Bank, BIZ MB, Smart RM, Smart CRM were subsequently launched to encourage bank customers to become mobile app users.
The year 2020 marked a turning point for the bank as it experienced tremendous growth in its digital transactions with more than 80% of its business conducted online, hitting a low cost-to-income ratio (CIR) of 16.7%. That same year, MB Bank saw an increase in its customer base by more than 40%, with 50% of new customers onboarded digitally.
The following key points were discussed:
The following is the edited transcript of the interview:
Foo Boon Ping (FBP): What is the one key opportunity and challenge that your bank faces in this age of digital innovation and disruption?
Luu Trung Thai (LTT): Digital innovation and disruption has been an inevitable wave globally and Vietnam is no exception. The country is currently implementing the National Digital Transformation Programme 2020-2025, orientation to 2030, in which the banking and finance sector plays a crucial role. Under this programme, the government of Vietnam has set a target for more than 50% of the population to have an electronic payments account by 2025.
Therefore, it is fair to say that digital innovation has had far-reaching impacts on the banking industry. With digital transformation becoming a decisive factor that attracts customers in the market, the competition between domestic banks is becoming fierce. New mobile banking apps with modern features are constantly launched by different banks. MB Bank therefore has to ceaselessly ramp up new features for our apps – MB Bank for individuals and BIZ MB Bank for corporates – as well as come up with breakthrough services and marketing campaigns in order to make sure our customers enjoy the best products, proving that we are the most convenient bank in Vietnam.
In addition, fintech startups also present a significant threat to incumbent banks. Banks therefore need to change in order to adapt to the new context and retain the advantages in terms of customers and the market. However, we believe digital innovation has also brought us tremendous opportunities.
MB Bank was the first bank in Vietnam to establish a digital banking division in 2016 as we regarded digital banking as our key strategy from a very early stage. At MB Bank, we find that investing in platforms and technology can help us acquire millions of customers per year. We have created a series of new platforms, such as the MB Bank app, the BIZ MB app, Smart RM and Smart CRM, as well as applied electronic know your customer (eKYC) technology to verify a customer’s identity. Meanwhile, big data analysis is significantly facilitating the credit application process for customers, allowing for the automatic generation of customer credit ratings.
Growing MB Bank
As a result of these pioneer steps in the digital sphere, MB Bank made a major breakthrough in 2020. It took us over 20 years to acquire 4.5 million customers, but within 2020 alone, thanks to our digital transformation, we attracted two million more customers. This means that in just one year, we can acquire the same number of customers as we did previously in 10 or even 20 years. We faced a challenge and made it our opportunity to grow stronger.
FBP: What are your views of digital transformation driving organisational and operational resilience during COVID-19? How has COVID-19 catalysed opportunities for digital transformation and how has it impacted your institution?
LTT: Thanks to an early investment in digital transformation and careful preparation for uncertainties, we successfully got over the adversity and remained resilient during the COVID-19 pandemic. Digital transformation reduced human-to-human contact and prevented the spread of COVID-19. Within our bank, digitisation enabled us to try new ways of working, such as meeting online, working from home, as well as testing different scenarios to ensure the continuity of business activities in the context of a pandemic. M-Office, a smart electronic office system, has been used by MB Bank staff since 2018. It allows us to work from home effectively without face-to-face interactions. The speed of processing materials also significantly improved. With the early adoption of digital transformation, our staff has been able to perform resiliently during the pandemic.
MB Bank’s determination to digitise is shown in a series of our products. The pandemic has changed consumers’ habits and behaviour, as well as the way enterprises operate production and business activities. Never before has a “cashless society” become so critical as today, especially to a country in which people still habitually use cash like in Vietnam. We have rolled out a number of traditional banking services on the MB Bank app. For example, online loans in three minutes, digital savings and international payment, which allows customers to conduct transactions even faster and more conveniently during these times. With the pandemic, the operation of brick-and-mortar branches has been inevitably affected, but seizing the opportunity to promote digital transformation at the right time has helped our business to run smoothly.
FBP: With so much uncertainty in 2021, how will your bank remain resilient? How do you plan to support your customers, employees and the community to be resilient?
Improving customer experience
LTT: We entered 2021 with a strong determination. Our vision is to become “the most convenient bank in Vietnam” by 2021. The business environment is forecasted to be more favourable than 2020, despite the challenges and unpredictable factors that still exist. MB expects to come back with a trajectory showing strong growth as in the last five years, in which the compound annual growth rate (CAGR) of total assets, credit, deposit, revenue and profit is around 18%, 21%, 17%, 29% and 31%, respectively.
Digital transformation is the key for MB Bank to navigate through different challenges and uncertainties. There are around 10,000 employees working at MB Bank, in which 10% is working in the field of information and technology, equivalent to about 1,000 employees. This shows our dedication by investing in our technology and digital transformation in order to provide customers with highly smart and convenient services.
To support the community and as part of our participation in Vietnam’s National Digital Transformation Programme 2020-2025, MB Bank has adjusted its traditional charity work for the digital sphere through iNhandao (https://inhandao.vn), a government-level digital humanitarian platform in coordination with the Vietnam Red Cross and Vietnam Post Office. With its modern, convenient and easy-to-access approach, the platform offers a transparent method for people to help those in need. A variety of charity work is supported by this platform, from donation, counselling to health check-up. Financial donations and payment of donated goods can be made online and these will be delivered to beneficiaries through the Post Office’s smart logistics system. Even during the pandemic, humanitarian work remained a top priority for MB Bank as this will also keep the community resilient.
MB Bank is proud to be among the top three “best places to work in Vietnam” in the field of banking based on a survey conducted by Anphabe HR’s survey and Intage’s market research in 2017. We have ceaselessly created an ideal working environment for our employees as well as innovated programmes and activities for our staff to develop both their expertise and skills. We established the Learning and Creativity Centre (LCC) in Ho Chi Minh City last year to prepare our staff for challenges and uncertainties in 2021. The centre was relaunched in Hanoi this June. We focus on self-learning and online learning, which everyone can do on a daily basis. The key is consistency. Employees are encouraged to develop further and be creative. With the inauguration of our new headquarters in Hanoi November last year, we believe our staff has the best working environment and enjoy the most modern facilities to support their work.
FBP: In the space of a year, the competitive landscape in banking has changed. Several of the confident challengers from this time last year have struggled or been acquired. What insights into resilience for banks and banking can we gain from this?
Transforming MB Bank
LTT: The year2020 witnessed tremendous changes in the field of banking. This has proven that profit in one year is not a reasonable criterion to decide a bank’s position. Profit in five years might be worth taking into account, but definitely not in one year. In the course of one year, the most important factors to take into account are market share, the number of served customers, new products and new experiences on digital platforms. These will build up resilience for a bank.
It is clear that digital transformation is playing a crucial role as digitisation will at least reduce human-to-human contact and prevent the spread of COVID-19 and other epidemics, which may break out in the future. Moreover, in a crisis, the application of big data and artificial intelligence (AI) in building stress testing and growth scenarios will help banks find out suitable solutions and be able to adapt to new circumstances and new variables.
The negative effects of COVID-19 are obvious, but on the other hand, it has brought two positive impacts on organisations, including preparedness for adaption to new circumstances and a push for digital transformation to keep pace with the new context.
FBP: Tell us your personal story. How were you in your younger years or early days of your career? Did you always want to work in a bank? How did you rise up the ranks to be the vice chairman of the board and general director of the bank?
LTT: I have worked at MB Bank for over 20 years and have taken over many different positions. I have been involved in various fields, including Human Resources, Retail Banking and Securities. I spent years working at different places, from branches, a subsidiary – MBS (MB Securities – to MB Bank headquarters. It is our ambition to serve a huge number of customers by setting a financial ecosystem group with six companies working on finance, insurance, security, asset management and even micro finance services. We aim to acquire 20 million customers this year. That’s the way we have supported the socio-economic development of the country. Thanks to the experiences that I have acquired, I have been able to develop a comprehensive knowledge of the bank’s business operations as well as draw from many valuable lessons that equipped me to become the chief executive officer today.
FBP: COVID-19 is a crucible within which resilient leadership has been refined. What do you think is at the heart of resilient leadership?
LTT: COVID-19 has once again affirmed that opportunities arise from challenges. The leader should realise that. The pandemic has been an occasion for me to broaden my leadership experiences so that I can lead my team to be stronger, more pro-active and more meticulous, which are important factors when it comes to providing services to customers. In addition, from my perspective, it is also the hunger for success that lies at the heart of resilient leadership. If you are ambitious and passionate enough, you will create core competitive advantages for the organisation together with your team and resilience will help you overcome any unexpected challenges.