Voluntary insurance for rapid growth bank-led digital banking: Seeking the attention of bank management in the Vietnam financial sector

Abstract

Vietnam, a country where 87% of the population is under 54 years of age, appears to be the leader in the race of financial digitalisation among Southeast Asian countries. However, the psychological risk-factor has been undermining the progression-trends of bank-led e-transactions. As a result, the current growth-trends of e-transactions are slower than expected in Vietnam. Even though Fintech claims it to be a secure-service, people mostly in rural areas feel it to be the opposite. To overcome this dilemma, having voluntary insurance (VI) as a product under Akim’s model in e-banking services can be instrumental. This new and growing value of the product will keep the bank growing. It can ensure risk-free e-banking services. So, the policy proposal adoption can enhance the number of e-banking-users in Vietnam. For assessing an effective price of the VI in the e-banking service market, this study uses welfare analysis for ensuring cost-effective VI products in the operation. Thus, the VI product becomes attractive to the parties involved. Having a third party as an insurance-provider in the e-banking service-market, the welfare cost evolves from inefficient pricing and will be small. Once the VI is in place, it will spread from bankers to e-banking customers. So, its growth trend, the S-curve, will capture revenue and productivity growth against time. In the beginning, the trends will be slow. But at some point, digital banking-users will begin to demand it. This expected progression will ensure a higher number of e-transactions by attracting probable customers. Therefore, the prompt efforts of policymakers can play significant roles, which can ensure a cashless Vietnamese society soon.