Banks struggle to reach online lending target

Phạm Anh Tuấn, Director of the SBV’s Payment Department, said after three years of implementing the decision, the banking industry still has a lot of work to do to meet the target.

It is difficult for the banking industry to meet online consumer lending targets by 2025, due to a lack of an independent credit scoring system, experts said.

Under Decision 810/QĐ-NHNN on the digital transformation plan of the banking industry by 2025, with a vision to 2030, issued in 2021, the State Bank of Vietnam (SBV) set a goal that at least 50 per cent of disbursement and lending decisions for small retail loans and consumer loans of individual customers given by commercial banks and financial companies will be made digitally by 2025.

Despite not revealing the proportion of the online outstanding loans delivered in this way, Phạm Anh Tuấn, Director of the SBV’s Payment Department, said after three years of implementing the decision, the banking industry still had a lot of work to do to meet the target. Notably, the banking industry must coordinate with the Ministry of Public Security to clean up and create clean data for the banking industry.

Currently, 53 credit institutions and 43 payment intermediaries are coordinating with the Ministry of Public Security to deploy the identification and authentication of customer information through chip-based identification cards on mobile devices and VneID accounts, according to the director. This is one of the core solutions for the banking industry to authenticate customer information, which matches population data, to ensure payment security and develop additional utilities in the future.

According to banking expert Dr Nguyễn Trí Hiếu, Việt Nam currently does not have a national credit scoring system for all people, but only for bank customers, which is one of the main obstacles hindering the development of online lending.

In the US, for example, most loans are online.

Banks have to buy services from credit scoring companies to immediately get customers' credit scores so that is very transparent. Therefore, within just a few minutes, banks will respond to customers whether to lend or not and announce interest rates based on the customers’ credit scores. Notably, people can use credit scores to adjust their credit behaviour to pay off their debts faster and on time when their credit score is low.

Meanwhile, in Việt Nam, banks only have their own credit scoring system for their customers. People who are not bank customers do not have credit scores.

Experts said that when borrowing online, many customers complained though there were no reminders to repay debts, their debts suddenly became bad debt when they were late in repaying because the apps would not allow them to pay the late fee immediately, but forced them to pay on the due date. The shortcoming had made customers turn away and not be interested in borrowing again.

In addition, online lenders should reduce lending interest rates, as many customers said that the rate was too high, at nearly 2 per cent per month for loans via apps and about 3 per cent per month for loans via e-commerce platforms.