Digitalization for credit risk management
Digitalizing credit risk management is a crucial step for banks in the current context. By maximizing the use of digital data instead of traditional scoring methods, credit institutions are improving their ability to identify customers, thereby minimizing bad debts and protecting capital flows.
Hung Vuong Trading and Service Company Limited operates in many fields, so its working capital needs are very large. Ms. Nguyen Thi Huong - Director of the company - affirmed:Nowadays, thanks to digital technology, the process of accessing capital has completely changed. All documents uploaded to the app, from eKYC verification to scanning transaction history, are fully automated. This is faster for businesses, and the information is transparent and cannot be falsified.”
As for Hop Thinh Mineral Trading Joint Stock Company, Mr. Ta Vu Anh - the company's director - affirmed:Exporting is a unique industry: cash flow is constant, heavily dependent on exchange rates, geopolitical risks, and involves lengthy international payment periods. Therefore, the application of technology by banks to manage risk has greatly benefited businesses. By shifting to data-driven risk management and real-time cash flow management through digital banking systems, banks can accurately assess the "health" of businesses. Automated credit scoring eliminates biases, opening up opportunities for businesses to access unsecured loans based on export contracts or inflows of foreign capital.
Instead of manual assessment, current machine learning algorithms can process thousands of data points simultaneously, accelerating the approval process and minimizing subjective errors. This technology is becoming a solid foundation for banks to direct capital flows to the right recipients, maximizing the efficiency of capital in the market.
As part of the comprehensive digital transformation strategy of the entire system, BIDV Nghe An has been strongly applying modern technology software to its credit risk management process, shifting from a passive response to proactive identification and prevention from an early stage, such as the application of Big Data and Artificial Intelligence (AI) in early warning systems. Accordingly, the system automatically scans and filters cash flow data and detects unusual signs in business operations or customer payment history. This helps risk management officers in Nghe An to promptly detect bad debt risks before the actual incident occurs. The credit monitoring system always provides red, orange, and yellow alerts to support timely management of the loan portfolio and improve credit management and operations.
Grandma Nguyen Thi Huong - Deputy Director of BIDV Bank Nghe An branch, affirmed:"By mastering these risk management technologies, the unit has not only improved labor productivity and shortened the time for customer application approval, but also ensured safety and maintained stable credit quality amidst market fluctuations.”
Mr. Nguyen Manh Ha, Director of HD Bank's Nghe An branch, said:"Beyond just loan approval, the intelligent management system continuously monitors customers after disbursement. Any negative fluctuations in cash flow are alerted early, helping banks proactively prevent bad debts from afar.Thanks to the application of AI, Big Data, and electronic customer identification technology, this unit has automatically screened and rejected substandard applications from the outset, helping to reduce the non-performing loan ratio from over 2% to below 1.5%. The tireless machine learning algorithms are capable of processing millions of data fields simultaneously. As a result, appraisal productivity has increased 20-fold, while the error rate due to subjective human factors has been reduced to almost zero.
In banking, lending is the main revenue-generating activity but also a source of significant risks. These include customers incurring losses, intentionally defaulting on payments, or, more sophisticatedly, falsifying financial documents for personal gain. In the digital space, the risks are even greater as hackers constantly attack and impersonate individuals to steal online disbursed funds. In the context of a volatile economy, the pressure of bad debt is a major challenge. Worryingly, not only are large businesses struggling, but even individuals taking out consumer loans or unsecured loans are now facing bad debt.
According to Ms. Nguyen Thi Huong, Deputy Director of BIDV Bank Nghe An branch:"The increasing sophistication of high-tech fraud and cybercrime poses a significant challenge to the financial system. To protect customer assets and maintain reputation, banks must not only continuously upgrade their technological infrastructure (such as implementing biometric authentication, AI fraud detection, and multi-layered security) but also ensure transparency and strict adherence to information security standards.
The safety of the banking system is always linked to the stability of the economy. In the context of a volatile market, the digitalization of credit risk management is a mandatory solution to maintain financial security. Only then will funds reach the right recipients, be used for the right purposes, and create strong momentum for growth targets.
