BASIC THEORETICAL ISSUES OF DEVELOPING NON-
OVERVIEW OF SERVICES OF COMMERCIAL BANKS
At present, each country has an understanding of banking services but there is no agreement on definitions In the World Trade Organization’s classification of services, financial services are classified in the 7th sub-sector of the 12 service sub- sectors
WTO classifies services into 12 sectors: 1 Business services, 2 Communications services, 3 Construction services, 4 Distribution services, 5 Education services, 6
Environment services, 7 Financial services, 8 Health and social services, 9 Travel and tourism services, 10 Entertainment and sport services, 11 Transportation services, 12 Other services
According to the General Agreement on Trade and Services (GATS), banking services are included in the financial services According to this organization, financial services are any service that has the fiancial nature provided by a financial services provider of a member Financial services include all insurance services, all banking services and other financial services (except insurance)
In particular, banking services include: + Receipt of deposits or other payable payments from the public; + Loans in various forms, including: consumer credit, mortgage credit, debt collection and financing of commercial transactions; + Financial leasing; Payment and remittance services, including: credit cards, payment and debit cards, traveler’s checks and bank drafts; + Guarantees and commitments; + Trading in their own accounts or customer’s accounts, whether at trading centers or in the unofficial market, or other transactions involving money market and foreign exchange instruments; derivative financial products; forward contracts or option contracts; exchange rate and interest rate- based products, including swaps, forward foreign exchange rate contracts; transferable securities; + Involved in the issuance of all types of securities, including issuance underwriting and offering as an agent and a supplier of relevant services; + Money broking; Asset management such as cash or portfolio management, pension fund management, storage and trust services; Financial asset settlement and payment services, including: Securities, derivatives and other payment instruments; Supply and transfer of financial information, processing of financial data and related software by other financial service providers; Supply of consultancy services, brokerage services and other related financial services, including credit reference and analysis, investment and portfolio research, corporate strategy planning consultancy
The Law on Credit Institutions of Vietnam (2010) has not given a specific concept or explanation for the concept of banking services but only referred to the term of
“banking operations” in clause 12, Article 4: “The regular business and supply of one or several of the following operations: Receipt of deposits; Credit granting, supply of payment service via account” However it is not clear what is the currency business and what is banking services, which is one of the shortcomings of the Law on Credit Institutions of Vietnam
From the above definitions, although there are different ways of defining banking services, the banking services may be construed as follows:
Banking services are banking operations that provide customers with utilities such as deposits, loans, payments, foreign exchange services, guarantees and consultancy, etc
1.1.2 Characteristics of banking services a Invisibility This is a characteristic of service in general and is the main factor to distinguish banking services from products of other material production industries in the national economy Banking products usually follow a process, not just the quality of services during or after use
Therefore, it is often difficult for customers to make the decision on choosing and using the products and services They usually evaluate services through the overall image of the bank As a result, banks must always build and consolidate customers’ trust in the quality of their services and attempt to develop tangible characteristics of their products b Inseparability The process of providing banking products and services is usually carried out in accordance with certain procedures such as loan process, bank payment process, etc, which makes the bank have no unfinished products and inventories to directly provide for customers when they need
The inseparability of banking products and services is reflected in the combination, cross-linking, serialization of banking services and accompanying utilities such as deposits, payments, consultancy, etc c Instability and difficult identification Banking products and services are made up of a variety of factors, such as: business processes, qualification of staff, technology, etc At the same time, the difference in implementation method, implementation conditions and time, etc also makes the service quality unstable Therefore, banks need to standardize service delivery d Heterogeneity The intangible nature of banking services and customer engagement in service provision has created a diversity of customers’ perception of service quality In using the same service, knowledgeable and familiar customers will feel the service is very convenient However, customers who are unfamiliar feel difficult As a result, banks need solutions that make the service easier to understand, easier to use and more practical for customers e Two-way information Banking service is not simply one-off purchases that involve a series of two-way transactions over a specified period of time This type of interaction provides banks with valuable information about customers related to preferences, needs, requirements of customers, etc so that banks can make appropriate adjustments in providing banking services f Diversity and constant development
Today, there are from several dozens to several hunders of different types of banking services Banks are trying to develop in the direction of multi-functional business rather than merely performing traditional business operations as before
For each type of service, banks try to diversify the forms of supply In addition, many banking services are launched and developed with the support of information technology Not only modern services use modern technologies but traditional services are also being improved with high technology contents
1.1.3 Classification of banking services by the nature of revenue sources
Based on the nature of revenue sources, it can be divided banking services into two forms: + Credit service + Non-credit service
Providing credits to organizations in the forms of lending, discounting, guarantee, financial leasing and other forms as prescribed + Lending based on criteria of customer credit rating, commercial banks consider granting credit at the request of customers If based on the loan term, the loan consists of two types: short-term loans (usually for investing in current assets), medium and long-term loans for investment in fixed assets, investment and production and business development projects) Project loans: This type of loan is designed to help accelerate the investment in infrastructure and production development Accordingly, for the State or enterprises’s investment projects of developing production and business, infrastructure, services and life, etc with expected economic efficiency, feasible but lack of capital, banks will provide investment project loans to help the investor have capital to complete it In essence, object financing is also a credit activity within traditional commercial banks Co-financing loan: In essence, co-financing loan is a credit product of traditional commercial banks However, the amount of capital required for a transaction is very large ($ 400-500 million) leading to a high concentration of risk Therefore, co-financing is a solution for capital providers to share risks for each customer and each transaction Retail loan: consumer loan, personal loans (study- abroad loans, auto loans, mortgage loans, specialized project financing, etc.), mortgage loans, household loans and SME loans Together with the socio-economic development, the proportion of personal and family loans in outstanding loans of commercial banks has been increasing day by day Personal loans now account for a very important proportion in the portfolio of commercial banks + Discount: Banks discount other short-term valuable papers for large enterprises and can rediscount other commercial papers and other short-term valuable papers to other banks With this service, commercial banks help large enterprises restore their solvency, accelerate the capital transfer This service is preferred not only for customers but also for banks because of valuable paper collateral and low credit risks Bank guarantee is a commitment of a guaranteeing bank made in writing to commit to the beneficiary (referred to as the guarantee beneficiary) If, upon maturity, the obligee (guarantor) does not perform or improperly performs the commitments stated in the contract, the guaranteeing bank shall perform the obligation on behalf of the guaranteed In essence, this is a form of credit with signature, no capital but risk because the guaranteeing bank must fulfill the guarantee commitment when the guarantor for some reason fails or performs obligations improperly + Financial leasing: Financial leasing is a contractual transaction between two entities, including the asset owner and the asset user, in which the asset owner (lessor) transfers the asset to the lessee in a certain period of time and the asset user must pay the rent to the asset owner The nature of a finance lease is a form of financing where, at the request of the lessee, the lessor acquires assets and transfers them to the lessee for use + Factoring: This is a form of granting credit to the seller through the acquisition of receivables arising from the sale of goods agreed in the sales contract This service is provided by a “factor” company that helps businesses sell their existing debts to have capital The “factor” company considers and evaluates the purchasing partner If agreed to finance, it will sign a “factor” contract with the seller The difference between the invoiced value and the factoring cost that generates income for “factor” companies is the financial cost of the Seller, which is often not small
Deposit, Payment Accounts and Treasury
- Deposit service: Receiving deposit means the act of receiving money from organizations and individuals in the form of demand deposits, term deposits, savings deposits, certificates of deposit, promissory notes, bills and other forms of receiving deposits on the principle of full refund of principal and interest to depositors as agreed
- Account payment service means the type of service in which banks provide payment facilities; payment services for checks, payment orders, collection orders, bank cards, letters of credit and other payment services for customers through their accounts
Account payment service includes payment services through domestic and international accounts
Banks are aiming to developing a safe and efficient banking payment system in line with international practices and standards, focusing on upgrading the interbank payment system and internal payment systems of banks to encourage customers to pay via bank, limiting the use of cash in payment The Bank closely cooperates with agencies, enterprises, organizations in providing services, consumer goods and public services (supermarkets, restaurants, hotels, tourism, water supply companies, electricity compnies, postal services and telecommunications companies, etc) This service helps to exploit customer deposits at low cost meanwhile banks increase revenue from payment fees
International payment service: as a guarantee from the bank so that customers can buy deferred payment from foreign partners This service allows banks to charge payment fees and seek profits in the purchase and sale of foreign currencies of various types in payment transactions
- Treasury service: is beneficial for both customers and banks The bank provides cash management services for customers Cash receipt and payment can be made at the bank counter or at the location where the customer requests This service helps customers save time and effort in collecting and paying amounts with the bank’s safety security and interest payment The bank benefits from maintaining customers’ account balance
NON-CREDIT SERVICES OF COMMERCIAL BANKS
1.2.1 Concept of non-credit services of commercial banks
In Barron Education Publishing House’s Banking Terminology Dictionary (the 5 th edition), Thomas P Fitch defined “Non-credit banking services are charge-based banking services that are not related to the credit extension provided for the agent banks or corporate cusomers Revenues from non-credit services can be a significant source of revenue for banks and financial institutions For examples, non-credit services include trust and receivables related to investment, global cash management, foreign currency exchange, etc
According to Deloitte Touche Tohmatsu’s “Surveying and Evaluating Non-credit Service of Vietnamese banks” project documents, non-credit services are any service or product other than credit services provided by a bank or an organization
Financial institutions that are not credit services Non-credit services are services provided by banks for customers to meet their financial and monetary needs in order to directly or indirectly provide the bank with a certain amount of income, excluding credit service
So, non-credit services are all banking services excluding credit services and also has all the features of banking services The main difference between non-credit services and credit services is that when performing non-credit services, banks collects no interest but service charges
The author can generalize and conceptualize non-credit services as follows:
Non-credit services are banking services that provide revenue for banks in addition to revenue from interest through proceeds from payment accounts, treasury service, chargable guarantee, consultancy, trust, foreign currency trading service, insurance brokerage fees, corporate bond brokerage fees
1.2.2 Non-credit service development of commercial banks 1.2.2.1 Concept of non-credit service development
From the point of view of dialectical materialism, development is a progression from low to high Development does not merely increase or decrease in quantity but also changes in the quality of things and phenomena Development is the tendency to move from low to high, from simple to complex, from poor to perfect through resolution of conflicts, quality improvement and compliance with the “Negative of Negative” trend So, in the simplest way, development means an increase in quantity and quality
Service development in width : means an increase in the quantity of non-credit service products
Service development in with has the same meaning as the service diversification
Beside traditional activities, it is also required to have access to and development of modern non-credit services; In addition to traditional non-credit services such as payment, funds, money transfers, etc., modern high-tech non-credit services such as e-banking must be combined From the micro level, diversification of non-credit services helps banks diversify their income structure, reduce risk in business and strengthen brand and reputation in the market At the macro level, diversification of non-credit services contributes to the provision of utilities to the national economy and the population and the development of the country’s economy
In the current trend of banking development in the developed economies, the bank is considered as a service supermarket, a financial grocery store with hundreds or even thousands of different services depending on the classification and depending on the level of development of the bank The banking sector in Vietnam has grown rapidly in the number of banks and network expansion for recent years At the same time, each bank has its own strategies for diversifying non-credit services For example, deposit service programs, financial advisory services, treasury services, high-tech banking services are increasingly being applied in life These service have never developed by banks before
Non-credit service development in depth : The non-credit service development in depth means that non-credit services are developted by creating new products based on the existing products through increased utility and improved quality of existing non-credit services to increase customer satisfaction
Service quality is a very important concept in the process of branding and implementing the marketing strategy of the bank It is a factor that has a great impact on the competitiveness of banks Many researchers around the world have made several definitions of the different aspects and levels of service quality When banks are no longer discriminated from one another based on the diversity of services, quality of service is vital to all banks Therefore, from the beginning, banks must have plans and strategies to continuously consolidate and perfect service activities on the basis of providing customers with fast, convenient and affordable utilities
In terms of quality of non-credit services, we refer to their utility In parallel with the development of non-credit services by scale, the quality of non-credit services is constantly increasing, helping customers become more satisfied with the benefits of non-credit services
According to Kotler (2000), satisfaction is determined on the basis of a comparison between the results obtained from the service and customer expectations and is considered based on the following three levels If the result is less than expected, the customer will feel dissatisfied
If the results are as expected, the customer will be satisfied
If the results are more than expected, the customer will be very satisfied and interested in that service Although there are many different concepts, the definition of customer satisfaction is always associated with the following factors:
Sentiment/ attitudes towards service providers, customers’ expectations of the provider’s ability to meet the demand, Service performance results / values provided by the service, customers’ intention to continue using the service, the customers’ positive attitude towards the quality of banking services after using non- credit services When customers feel satisfied about the quality of the bank’s non- credit services, the bank has met the demand equal to/ exceeding their expectations and customers intend to continue using the services of the bank in the next time
The author’s view on non-credit service development is as follows:
Development in both width and depth: Every bank must make a plan to develop a non-credit service system at the outset For existing non-credit services, it is imperative to improve them through the application of international standards and practices and maximization of the efficiency of these services to strengthen customer trust and maximize investment efficiency On the other hand, to develop the customer network and expand the market, it is also required to approach new technology However, investment should not be spread out to avoid waste and low efficiency Therefore, it is necessary to combine both development in width and the depth, ensuring the diversification of services associated with service quality
EXPERIENCE IN DEVELOPING NON-CREDIT SERVICES AND
1.3.1 Experience in developing non-credit services of banks around the world 1.3.1.1 Hang Seng Bank (Hong Kong)
Hang Seng Bank (Hong Kong) is one of the main members of the HSBC Group
Hang Seng Bank is one of the largest banks in Hong Kong and a world-class bank
Hang Seng Bank focuses on developing high-tech non-credit services that is given the top priority to providing information of services to customers such as online personal customer service, SMS banking, Apple Iphone, HSBC net, e-IPO service, e-banking security, e-market news, Hang Seng ecard, package services and investment capital management, online consultancy, payment and tax declaration, etc at reasonable and competitive charges Customers can download software applications free to use the online service of Hang Seng Bank anytime and anywhere
Hang Seng Bank undertakes to ensure the confidentiality of customer information and transaction history
Hang Seng Bank promotes the development of specialized insurance services, mainly long-term insurance services from 5 to 15 years Insurance policies provide Hang Seng with charges and relatively stable and long-term funds In 2011, Hang Seng’s net Revenues from insurance services was HK$ 11,061 million (US$ 1,428 million), accounting for 62.5% of total non-credit income and 32.5% of total operating revenues of this bank
The net interest Revenues from non-credit services at Hang Seng Bank accounted for 51.7% of total operating revenues in 2010 and 53.1% in 201
Standard Chartered Bank is one of the very successful banks in non-credit banking business Standard Chartered Bank focuses on high-tech services According to statistics, over 60% of its transactions are made via automated channels
Standard Chartered Bank always pays attention to exploiting the development of modern technologies Standard Chartered Bank has established a network of automated distribution channels such as Deposit Machines, Internet Banking, Phone Banking, Home Banking, Deposit Machines, ATMs, oral transaction guidance via SMS, etc to serve customers The use of these automated transaction channels brings efficiency, security, exclusivity and utility to the customer
Prior to working with customers, Standard Chartered Bank takes the time to understand the specific circumstances of the customers to be able to build a separate software package for them The goal of the bank is to create a partnership that goes beyond purely financial aspects and its approaches are determined by a firm commitment to customers’ future goals
Standard Chartered Bank has a large network of branches in more than 70 countries around the world but is currently expanding its presence in Asia, Africa and the Middle East
Standard Chartered Bank researches a wide range of niche products for each customer group such as individual customers, small and medium enterprises, treasuries, prioritized corporate customers, banks, Islamic customers
Standard Chartered Bank has enhanced the introduction of its image through charitable activities and sponsorship for the Liverpool Football Club, Carling Cup Champions (2011, 2012)
In 2010, Standard Chartered Bank’s net interest Revenues from non-credit services was 42.4%, accounting for 51.7% of total operating revenues In 2011, its net interest Revenues from non-credit services was 37.9%
1.3.1.3 Non-credit service development of Hong Kong & Shanghai Bank (HSBC)
Founded in 1865 with the headquarters located in London, HSBC is one of the largest banks in the world that provides the largest banking and financial services
HSBC has nearly 10,000 branches in 100 countries and territories across the continents To become “one of the leading financial service providers in the world”, in addition to commercial banking operation, HSBC has focused on developing services such as personal finance, consumer finance, corporate finance, investment banking and foreign exchange business, services for special customers In particular, the global services include ATM cards, payment transactions, insurance, asset management, etc As a result, HSBC has created a very diversified income structure, of which the revenue from customer service is only 24% from commercial banks, 33% from corporate sponsorship and from financial market business, 39% from personal financial services and consumer financial services, 4% from special customer service
1.3.2 Lessons for Vietnamese commercial banks
From the banking service development methods of some banks in some above countries, we can summarize and draw some lessons for Vietnamese commercial banks as follows:
Firstly, build and perfect the legal environment for banking services, especially e- banking
Secondly, create the necessary infrastructure for the banking service development, especially tools and facilities associated with and based on information technology
Thirdly, develop and improve the management capacity and professionalism of bank officers and employees
Fourthly, diversify the service products, connect the modernization of traditional services and modern services
Fifthly, focus on properly and develop the network rationally The reasonable network expansion is both a basis and a prerequisite for the banking service development
Sixthly, have a proper customer policy In particular, it is necessary to focus on building and developing customer information to expand customer network and provide safe and effective banking services Focus on the increasingly diverse and specialized needs of customers in the increasingly growing economy
Sevenly, focus on the propaganda and promotion of the banking service utilities in the public To expand and develop banking services, it is essential to make the public understand the facilities and safety of using banking services
Eightly, design the reasonable price methods The non-credit service price includes service supply fees and exchange rate Banks should provide reasonable and competitive charges and exchange rates.
CURRENT STATUS OF THE DEVELOPMENT OF NON-CREDIT
General introduction of Techcombank
2.1.1 Summary of the establishment, development and organizational structure of Techcombank
Summary of the establishment and development process of Techcombank
Techcombank is an abbreviation of Vietnam Technological and Commercial Joint Stock Bank or Technological and Commercial Bank
Techcombank was established on September 27, 1993 under License No
0040/NH-GP granted by the Governor of the State Bank of Vietnam on August 6, 1993; Business License No 055679 issued by Hanoi Economic Arbitration on September 07, 1993 with a chartered capital of 20,000,000 Vietnam dong divided into 4,000 shares, par value of 5,000,000 dong per share Techcombank’s headquarter is located at No 24 Ly Thuong Kiet Street, Hanoi City (At present, it has been moved to No 191 Ba Trieu Street, Hai Ba Trung District, Hanoi City)
The largest shareholder of Techcombank at the time of establishment was Vietnam Airlines with contributed capital of 6,000,000 dong There are also other major shareholders such as the Footwear Corporation, Textile and Garment Corporation and some other individuals
In the context of Vietnam’s transition to a market economy and the banking system in its establishment and development stage, Techcombank has shown a keen sensitivity to the potential demand for banking services With just 20,000,000,000 dong at the date of establishment, Techcombank has step by step grown steadily in both size and quality
- Increased the charter capital to 51.495 billion dong
- Established Techcombank -Ho Chi Minh Branch, the start of rapid development of Techcombank in big cities
- Established Techcombank –Thang Long Branch and Nguyen Chi Thanh Transaction Office in Hanoi City
- Established Thang Loi Transactio office under Techcombank- Ho Chi Minh Branch
- Increased the chartered capital to 70 billion dong
–Moved the headquarters to Techcombank building-No 15, Dao Duy Tu Street, Hanoi City
- Established Techcombank -Da Nang Branch in Da Nang
1999 - Increased the chartered capital to 80.020 billion dong
2000 - Established Thai Ha Transaction Office in Hanoi City
2001 - Increased the chartered capital to 102.345 billion dong
- Established a series of branches: Chuong Duong, Hoan Kiem in Hanoi; Hai Phong branch; Thanh Khe branch in Da Nang; Tan Binh Branch in Ho Chi Minh City
- Increased the chartered capital to 117.87 billion dong
- Run Globus software at all Techcombank branches
- Received the Excellent F.A.S.T Certificate (Automatic Telegraphic Transfer Handling) issued by the Bank of New York (USA)
- Inaugurated Techcombank- Cho Lon Branch in Ho Chi Minh City
- By the end of 2002, increased the chartered capital to 203.6 billion dong
- Inaugurated more branches: Hai Chau branch in Da Nang, Tan Son Nhat branch in Ho Chi Minh City
- Officially launched the new logo
- Received ISO 9000:2000 Certificate in the field of credit and payment from BVQI
- Received “Excellent bank in international payment with high STP rate” granted by Citibank, “Excellent bank in Telegraphic Transfer and payment” issued by Standard Chartered Bank
- Coordinated with the Vietnam Productivity Center (VPC) to implement the pilot CRM Techcombank (Customer Relationship Management) project at the Main Operation Center
- Increased the chartered capital to 412.7 billion dong by the end of 2004
- Set up first-level branches in Lao Cai, Hung Yen, Vinh Phuc, Bac Ninh, Nha Trang (Khanh Hoa Province), Vung Tau
- Put transaction offices into operation, namely: Techcombank- Phan Chu Trinh Branch (Da Nang), Techcombank-Cau Kieu Branch (Lao Cai), Techcombank -Nguyen Tat Thanh Branch, Techcombank - Quang Trung Branch, Techcombank-Truong Chinh Branch (Ho Chi Minh City), Techcombank - Cua Nam Branch, Techcombank- Hang Dau Branch, Techcombank- Kim Lien Branch (Hanoi City)
- 28/10/2005: Increased the chartered capital to 555 billion dong
- 03/12/2005: Upgraded the Globus software system to the latest version of Tenemos T24 R5
On November 24, 2006, the charter capital was raised to VND 1,500 billion
Received an international payment award from the bank of New York,
May 2006: Received the Gold Cup “For Social Progress and Sustainable
Development” of Vietnam General Confederation of Labour
On November 24, 2006: Increased the chartered capital to 1,500 billion dong
Increased total assets to nearly US$ 2.5 billion Became the second largest bank in Joint Stock Company with nearly 130 branches and transaction offices at the end of 2007
Upgraded the core banking system T24R06
2/2018: Received the title of “The most satisfactory service 2008” selected by Saigon Tiep Thi newspaper readers 8/8/2008: Launched AMC
9/2008: Increased the ownership proportion of the strategic partner- HSBC from 15% to 20% and increased the chartered capital to 365 billion dong
Received “500 Top Vietnamese Enterprises” award conferred by Vietnam Report
September 2009 Increase charter capital to 5400 billion Started the transition strategy with the world’s leading consulting support of Mckinsey
Deployed the overall strategic transition program, announced Techcombank’s mission, vision and core values At the same time, restructured the business and management model and transformed corporate culture
April 2010: Received “International STtar for Leadership in Quality Award” conferred by BID - Business Initiative Directions May 2010: Received the title of “National Brand 2010”
June 2010: Increased the chartered capital to 6,932 billion dong
03/2011: Received “Standard Telegraph Rates” from Bank of New York
“Vietnam Retail Bank of the Year” by Asian Banking and Finance 12/2011: Received “Best domestic bank in Vietnam” award conferred by the Asset Magazine
2012 Increased total assets 179,934 billion dong - the highest among commercial joint stock banks
Moved its headquarters to Vincom Building, Hanoi City Expressed a strong investment commitment to reach new heights
Increased the number of customers to a record of 2,800,000 dong
Received 13 domestic and international awards, including the Best Commercial Financing and Monetary Management Bank of Vietnam, the Best Bank of Vietnam and the Best Employer of Asia in 2013 and Vietnamese Gold Star Award
Increased the number of customers to 3.3 million Launched the new headquarters in South Vietnam located in Grade A building at No 9-11 Ton Duc Thang Street
Received 23 prestigious domestic and international awards in 2014, including the Best Bank of Vietnam, Best Retail Bank of Vietnam, Best Retail Bank of Vietnam and Best Commercial Financing and Monetary Management Bank in Vietnam, we undertake to continuously attempt to best meet the customers’ needs of products and services
Increased the owner’s equity to 14,986,050 trillion dong
2015 Increased the owner’s equity to 16,457,566 billion dong
Became one of the 2 Best Workplaces in Vietnam in the Banking sector selected by anphabe.com and its market research partner- Nielsen
Receveid HR Awards 2016 for “Salary, bonus and welfare policy”
Became the leading bank in terms of Visa card retail sales Techcombank’s efforts have been recognized by the Asian Banker and ranked among Top 500 Banks in Vietnam’s list of the healthiest banks in Asia Pacific in 2017
Drastically increased the chartered capital to sharply 11,655,307 billion dong Achieved 5 million individual customers, 114,000 corporate customers
2.1.2 Business results of Techcombank in the 2013-2017 period
Table 2.1 Some basic financial indicators of Techcombank from 2013 to 2017
Source: Consolidated Financial Statements of Techcombank in the 2013-2017 period 2.1.2.1: Performance indicators
At the end of 2017, despite the difficult macroeconomic conditions, Techcombank has completed basic business indicators well and ensured general activities’s safety and efficiency As of December 31, 2017, Techcombank had total assets of 269,392 billion dong with a chartered capital of 11,655,307 billion dong The chart below shows the total assets growth of Techcombank for the 2013-2017 period
Figure 2.1: Total assets of Techcombank ( 2013 -2017)
(Source: Synthesized by the author )
In addition, business performance indicators have reached outstanding achievements by the end of fiscal year 2017
Techcombank’ earnings before taxe in 2017 increased by 201% compared to that in
2016 and reached 8,036 billion dong nand ranked the first in commercial joint stock banks (excluding the equitized state-owned banks)
Performance indicators: ROE of 23.8%, ROA of 2.09% (2017)
Average income of staff was 24,000,000 VND per capita, continuing to be among the top commercial banks in Vietnam in terms of the average income
Figure 2.2: Total assets of Techcombank ( 2013 -2017)
Source: Consolidated Financial Statements of Techcombank (2013-2017) 2.1.2.2 Capital mobilization
In recent years, total mobilized capital of Techcombank grew well although in
2014, the lobal and domestic economy was more difficult and volatile The competition between banks has been fiercer, so the mobilized capital reduced
However, after the restructuring of the banking system, commercial banks, including Techcombank gradually was at the stable growth rate in the 2013-2015 period In 2016, the mobilized capital drastically increased to 22% By the end of
2017, Techcombank’s mobilized capital reached 170,970 billion dong
In recent years, Techcombank maintained a good credit growth rate of about 20% per year By 2017, Techcombank’s total outstanding loans reached 170,970 billion dong, 16% higher than that in the same period and asymmetric with the banking sector average of 17.3%
In addition to ensuring the growth rate of the outstanding loans, Techcombank also paid attention to proactively identify risks and manage credit quality Through the
2007-2012 period when the bad debt of the entire banking system in Vietnam increased drasticallu, Techcombank has early made investment in credit risk management, changed the management method from passive settlement of backlog to initiative to identify risks and have solutions to minimize and accept risks As a result, 3-5 debt ratio was maintained at a low level (1.61%) by the end of 2017, helping Techcombank to be among the banks with very low credit risk in the sector
In 2017, beside the major services related to deposit and credit operations, Techcombank speeded up service operations by developing many products linked to the application of technology such as Zero Fee Online money transfer on electronic banking for individuals and enterprises, combination of utility services such as online payment of electricity bills or monthly automatic payment, combined payment through the websites
Results of some main services:
Techcombank is a dynamic unit in the monetary market and has a partner network of both domestic and international banking and non-banking financial institutions
Short-term capital trading in the monetary market helped Techcombank effectively use its mobilized capital and ensure liquidity, contributing to generating good income for Techcombank Besides, monetary trading helped Techcombank meet the customers’ demand for foreign currencies in a full and timely manner In fact, foreign exchange trading is a service sector that helps Techcombank reduce bad debts and maintain the quite high capital adequacy ratio
From Techcombank’s results in 2017, it can be said that Techcombank is the best bank in the system of commercial banks in Vietnam It is evidenced by not only the high growth rates in the financial statements on capital mobilization, loans and performance results as analyzed above but also a series of awards and Certificates of merit of international accreditation organizations and international credit ratings.
Current status of the development of non-credit services at Techcombank in
2.2.1 Analysis of the non-credit service development results at Techcombank in the 2013 - 2017 period
Table 2.2 Revenues from non-credit services of Techcombank (2013-2017)
Revenues from non-credit services
Revenues growth from non-credit services (%)
Revenues from non-credit services /Operating revenues (%)
Source: Audited consolidated financial statements of Techcombank for the
The above table shows that non-credit activities have brought significant revenues to Techcombank but the growth has not been really stable as well as has not achieved its strategic objectives
In 2015, the growth rate was 9%, which shows that Techcombank encountered many difficulties in developing non-credit services After 2015, there were be high growth rates between 2016 and 2017, above 200% compared to that in the previous year
The non-credit Operating revenues ratio increased 24% in 2016 to 35% in 2017
This change is caused by the fact that 2011 - 2015 is the period when commercial banks in Vietnam in general and Techcombank in particular suffered from the significant impact of the economic downturn After restructure of the banking system, the banking system including Techcomabk became stable in 2015
Table 2.3 List of non-credit products of Techcombank
*Trading securities purchase and sale
*Investment securities purchase and sales
* Bancassurance distribution via bank branches
* Bond brokerage / securities via bank channel
Source : Data from General Accounting Department of Techcombank
At present, there are four main types of services being developed by Techcombank and accounting for nearly 70% of total revenue from credit activities
(2017), including payment and cash services, card services, Insurance commission, Bond brokerage
Payment and cash are the traditional services of commercial banks, thus they account for a large and stable proportion of non-credit services
Techcombank’s network currently has 314 branches/transaction offices in 45 provinces and cities across the country The North, Central and South provinces are oriented centrally in key economic areas of the big cities to serve customers
With the advantage of such payment network, Techcombank’s Revenues from payment activities always grew in scale as well as proportion over the years, specifically:
Table 2.4: Revenues from cash and payment services of Techcombank ( 2013 -2017)
Source: Audited consolidated financial statements of Techcombank for the 2013 -
- Size: Although non-credit Operating revenues has fluctuated, Revenues from cash and payment services was maintained at the stable growth in recent years, increased from 728 billion dong (in 2013) to 1,465 billion dong in 2017, an increase of nearly 737 billion dong in 5 years:
- Proportion: Revenues from cash and payment services always accounted for a large proportion of total non-credit Operating revenues and reached 26% in
2017 The absolute amount was 1,465 billion dong, helping Techcombank become one of the leading commercial joint stock banks in non-credit operating revenues
Payment activities include domestic payment and international payment
- Domestic payment Over the past 24 years, Techcombank has paid great attention to making investment in modernizing its banking operations in general and its payment operations in particular by successfully implementing a payment modernization project which allows connection to the State Bank of Vietnam as well as other banks Specifically, Techcombank provided domestic remittance, account management services, deposit remittance, balance management, account services management and supply, salary payment services
- International payment With a network of nearly 800 dealer banks around the world, Techcombank’s international payment transactions were fast and highly appreciated International payment services include overseas education remittances, overseas currency exchange remittance, barter payment, overseas remittance, collection of documents by immediate payment or deffered payment as a collection bank, letter of credit and document sending as a negotiating bank, discount bank or credit confirmation bank, discount of export documents
Bancassurance is a combination of the “bank” and “insurance” terms, simply understood as insurance cross-selling bank According to experts, Bancassurance is considered as the basic supplement to traditional insurance supply method through dealer channel and direct sale The products of this distribution channel have been developing drastically in countries around the world and become one of the main distribution channels of insurance products in many places
Bancassurance activities at Techcombank are carried out in both non-life and life insurance sectors but mainly in the life insurance sector Beside risk management, Techcombank was also very interested in reducing risk for customers With life insurance products, Techcombank provided customers with package financial services to assist them in actively making their financial plan now and in the future, meeting their sustainable and long-term needs
Table 2.5: Revenues from insurance commission of Techcombank ( 2013 -2017) Indicators 2013 2014 2015 2016 2017
Source: Audited consolidated financial statements of Techcombank for the
Insurance was one of the key products of the bank in the 5 year strategy In
2017, Techcombank’s Revenues from insurance commission increased by 44% especially in the last months of the year when Techcombank signed the exclusive distribution agreement with Manulife Insurance As a result, insurance has become the main chargeable product with the highest growth in sales in 2017 (Growth rate of 70%), raising the proportion of insurance commission in total Revenues from charges from 13% in 2016 to 19% in 2017
Bond channel has brought a great profit to banks, even the growth rate of bond income increased faster than that of investment capital in this channel Bond income of BIDV in the first half of this year has tripled compared to the first half of last year, Vietcombank doubled meanwhile MBBank 1.5 fold Compared to 2011 and 2012, the commercial banks’ absolute Revenues from this type of asset increased 1.5 to 2.3 times
At Techcombank, in addition to providing medium and long-term loans to corporate customers, TCB promoted the issuance of bonds to customers, a capital mobilization method with more advantages than bank loans
In 2017, Techcom Securities’ consultancy and issuance volume grew by 33% compared to 2016, continuing to maintain the leading position in bond brokerage market, thereby increasing Revenues from securities issuance guarantee charges, 11% higher than the previous year and accounting for 8% of the total gross profit of
337 billion dong in 2016 and 375 billion dong in 2017
Table 2.6: Revenues from Securities issuance guarantee of Techcombank (
Source: Audited consolidated financial statements of Techcombank for the 2013 -
In order to meet the need of building modern commercial banks with multi- functions, over the past years, Techcombank’s business activities have been organized in the direction of diversification of banking products including foreign currency trading and international payment that have been paid attention to and enhanced effectively, thereby enhancing the competitive position and creating a separate image of Techcombank in the banking system
In recent years, with the expanding network and high demand of customers, Techcombank has fully and timely met the services of foreign currency transactions Techcombank has been dealing with customers in most strong foreign currencies such as USD, EUR, GBP, AUD, etc through the counterpart currency - Vietnamese dong or another currency Foreign exchange products traded at Techcombank were spot foreign currency, forward transaction, swap transactions,foreign exchange option transactions
Table 2.7 Foreign currency trading at Techcombank ( 2013- 2017)
Source: Consolidated financial statements of Techcombank for the 2013 - 2017
Techcombank’s foreign currency trading and international payment has grown rapidly; however, drastic and stable development is required
Evaluation of non-credit service development results of Techcombank in the 2013-2017 period
2.3.1 Non-credit service development achievements of Techcombank in the 2013-
Techcombank has affirmed its strong brand and created a beautiful and prestigious image in the eyes of all customers The survey shows that customers understand the strengths of Techcombank and vice versa, Techcombank has gained the trust of customers More and more customers used more services Throught business expansion to related areas by linking with strong domestic and international strong brand partners such as Vingroup, Manulife, Novaland and Massan, Techcombank provided its customers with complete advanced services for different customers
TCB has successfully deployed Zero Fee transfer service on e-banking
Other electronic banking services, especially the free e-banking program, free money transfer in Techcombank as well as outside Techcombank attracted many new customers using the account, thereby increasing the proportion of demand deposits and its revenues The annual customer policies gave customer zero fee for card issuance and annual charges
The quality of non-credit services has been gradually improved on the basis of modern technology to meet the increasing demand of customers Deposit, account and payment services and other related banking services best met the payment needs of customers and the economy quickly - accurately - safely, enhancing the capital use efficiency in the whole economy Banks focus on exploiting the potential retail banking market
Non-credit services bring a large source of revenue to Techcombank at low risk Non-credit service income significantly contributed to total Operating revenues of Techcomnank in the current context of risky credit activities and many difficulties in securities investment and trading activities Non-credit activities are a profitable and less risky activity for Vietnamese commercial banks in general and Techcombank in particular
2.3.2 Weaknesses and causes of limiting non-credit service development of Techcombank in the 2013 – 2017 period
The new services have been researched but have not been widely deployed by Techcombank and there have not been any leading service, dominating market share clearly
Firstly, the research into new products has not been improved and the list of some non-credit service products was not diversified Although Techcombank has expanded many non-credit services, after all, the implementation of new products and services only ensured no shortage of products compared to other commercial banks Techcombank has not researched and tested the products that have been accepted by the market Currently, Techcomank’s services such as information, consultancy, management and capital investment have not been implemented yet
Distribution channels were not very convenient to serve customers
Secondly, the quality of some products failed to meet customer expectation:
+ Overseas remittance: The transaction counter has not met the requirements, it is essential to assign the specialized international payment officers The processing of orders was not fast and the payment methods such as checks, electronic payment still limited
+ Foreign currency trading: was still monotonous and has not been fully exploited The quality and utilities have not met the requirements of users, not really had any outstanding utilities compared to other commercial banks
+ Card service: Although the information technology infrastructure met the needs of customers, the demand for ATM card service of Techcombank, especially the withdrawal of salary through ATM, money transfer, etc was increasingly high
However, there were not enough Techcombank’s ATMs to meet the requirements of customers Moreover, there was no investment in upgrading the transmission line to prevent undue incidens, affecting the interests of customers and reputation of the bank ATMs were located at some public places such as supermarkets, restaurants, airports, railway stations, industrial parks, universities, etc , which also causes time constraints Because ATMs can not be located at open places for the security goal, ATMs can only be operated during office hours (if located in banks) or until 9-10 p.m (if located in supermarkets, restaurants, commercial centers, etc.) As a result, there are no ATMs that operate 24/24 hours nowadays In addition, the inspection of ATMs for customers was still slow due to the low flexibility and rigid handling of Techcombank when disputes occur between customers and it (ATM “swallowed money”, the transactions was unsuccessful but money was still reduced.)
Thirdly, Techcombank’s customer policy was still unreasonable in terms of human resources and customer care Techcombank has not synchronized among customers and between traditional services and modern services
+ For human resources: Techcombank has had a dedicated team to take care of specialized customers but the quality of human resources was not enough to meet the actual requirements of customers, thus affecting the service deployment at the branches Techcombank’s modern service has been just developed recently, so staff’s professional experience and knowledge and product quality have not met the expected requirements
+ For customer care: the customer care and management has had certain innovations through the adjustment of the organizational structure towards each group of customers but not developed an effective customer strategy yet As a result, customers could not capture all the information of potential customers and the feedback of customers who have been having transactions at Techcombank For example, for the POSs, Techcombank has not had any policy to encourage POSs in all types of services besides reduction in charges for POSs Techcombank has only focused on the development of quantity but has not really focused on improving product quality, which leads to the ineffective improvement of non-credit product quality and customer care to build and maintain the loyalty of customers to its branches
2.3.2.2 Causes a Subjective causes Limitations in organizing, directing, administering services and customer care
The directions of developing services in many transaction offices and branches wer not active Techcombank failed in pioneering in the implementation of new services Therefore, the current customer policies are not diversified and the benefit to customers still limited
Inappropriate arrangement of operation network: Techcombank has actively expanded its customer service network At present, Techcombank has 315 branches and transaction offices but they were mainly located in big cities and provinces The density of transaction points was not reasonable, creating unhealthy competition among commercial banks, even competition among branches in the same banking system, which makes it difficult for new offices and branches to attract customers, promote and introduce their products
Limited human resource quality: Although Techcombank’s staff are highly educated, most of them are young, dynamic and enthusiastic and want to dedicate themselves in their work but lack experience and skills in marketing and attracting customers The number of employees is not enough to meet the workload, thereby failing to meet the demand for high-tech non-credit service development such as e- banking, trust, etc b Objective causes Firstly, the socio-economic environment with negative developments has affected the banking service business The economy has had many difficulties and fluctuations for recent years, The continuous increase in the prices of key domestic commodities, especially petrol and oil, the main raw material inputs of the production process, has led to the higher price of consumables, raising the general price, which will affect the income of the population and the banking services
Secondly, the regulatory environment was limited, supervision and management of banking service provision was not appropriate Although the regulatory system formation was quite synchronous and increasingly perfect but still failed to meet the development requirements and law enforcement guidance in some banking activities was insufficient and not timely In addition, the management and supervision mechanism of banking activities has not kept pace with the modernization of banks and has not been in line with international practices and standards Currently, the management and licensing mechanisms for banking services are implemented by the State Bank of Vietnam (SBV) in two channels: establishment and operation license of credit institutions which specifies licenced business type and the regulations on each specific banking operation In fact, this mechanism is not consistent with the dynamism of credit institutions and management requirements of the State Bank of Vietnam SBV also has limited its ability to supervise banking service provision as it has not set up an effective supervision system yet, especially without the early warning of risks in banking operations Therefore, it has not really given effective support to banks in services in general and non-credit services in particular
SOME SOLUTIONS TO DEVELOP NON-CREDIT SERVICES AT
Non-credit service development strategy of Techcombank by 2017 and vision
Non-credit services have been implemented in a quite diversified manner at commercial banks The banks’ average revenue from non-credit services accounts for more than 20% to 35% of their total revenues In particular, the revenues from non-credit services are mainly from charges (about 60%) In addition, the revenues from non-credit services are also from business and investment services (such as foreign exchange, gold and financial services) With the current ratio of the revenue from non-credit services and revenue from business operations in 2017 of nearly 35%, Techcombank should try and have more specific strategies in developing non- credit services to achieve the expected ratio of 50% To achieve this goal, based on the overal development orientation of the Vietnam banking sector to 2020 and the actual operations of Techcombank in recent years, it is necessary for Techcombank to define the strategy and orientation for the non-credit service development by
2018 with a vision to 2020 as follows:
- Realize the viewpoint of comprehensive development in both width and depth: it is necessary to improve the quality of the existing types of non-credit services and expand the new services to meet the increasingly diversified needs of customers according to the market mechanism
- Develop based on the economic development orientation of the country and the banking sector: with the GDP growth of the economy, demand for non-cash payment, etc., it is required for Techcombank to determine the type of services to be developed, follow the overal direction and gain the support from the State
- Develop on the basis of catching up the development trend of customer needs in the future: income in the population gradually creates a high demand for accumulation and investment and especially consumption
- Develop based on a modern information technology platform: information technology plays a very important role in business and becomes the decisive factor for the success of enterprises A bank with a modern information technology system may easily expand services and banking utilities
- Develop in the trend of competition among banks and affirm the position and image of Techcombank: competition must be considered in two aspects that are domestic competition and international competition
- Develop and foster human resources to be competitive and adapt quickly in the integration process
- Prevent and limit the operation risks of non-credit services as a key measure to develop the non-credit services of Vietnamese commercial banks The preventation and minimization of risks of non-credit services should be understood and resolved on a comprehensive, consistent and synchronous basis
- Keep pace with banks in the world in order to quickly integrate into the international financial community but ensure that they are compatible with the socio-economic conditions of the country, the current capacity and qualifications
Solutions to develop non-credit services of Techcombank
3.2.1 General solutions to develop non-credit services of Techcombank 3.2.1.1 Improve the management capacity and quality of human resources
The human resources is the most important factor for the success of the service business As the characteristics of banking services are easy to imitate, if the technology of banks is equivalent, the quality of human resources will make a difference in the quality of service products among banks Therefore, Techcombank cannot ignore the improvement of human resources in which the training is important Training activities must be aimed at improving professional qualifications and equipping knowledge and complementary skills of staff, directing towards building the professional and modern working style Consequently, Techcombank needs to develop a good training and recruitment strategy for qualified staffs to ensure business requirements in the integration period Moreover, Techcombank must have a team of highly qualified staff who are good at how to use human resources and giving the Board of Direction useful adivice on the development and improvement of human resources development policy
3.2.1.2 Continue developing Information Technology in non-credit services
The technology application to production and business activities is an indispensable trend of enterprises nowadays Techcombank not only needs to prepare sufficient capital but first of all it needs to have a viable technology strategy, thereby researching and evaluating technology and timely identifying new technologies in the banking sector to be able to select the appropriate technologies The particular solutions are as follows:
- Reevaluate the existing technology on the basis of fully exploiting this available technology, at the same time, boldly eliminate the outdated technologies which are of no value to the production and business activities
- Concentrate its resources - human resources - technical research or hire international research experts to identify priority areas in the modernization of technology infrastructure and expand the accessibility to their services
- Renovate technology in parallel with the training of human resources in order to be capable of mastering technology and exploiting technological applications in the development and provision of banking services Training program should be long- term, ensuring the future development
- Establish a unified database system (with software to support business activities, management) to ensure the smooth operation throughout the system
- Ensure safety in the operation of technology during technology development
Because all resources are stored on the network, so an IT incident can lead to data loss or may delay the banking operations, affecting customers and the prestige of the industry; consolidate and maintain the operation of computers, servers and communication systems
3.2.1.3 Diversify services and distribution channels
Diversify and improve the existing products and services in combination with development of new products It is necessary to pay much attention to the improvement and expansion of the existing services such as capital mobilization, card services, payment services, domestic and international remittance, foreign exchange, Bancassurance, Funds, Bond brokerage, etc in combination of development of new modern services
Diversify forms of transaction and distribution channels of non-credit services
Techcombank needs to revise its existing distribution channel network to adjust the distribution channels appropriately to prevent too many branches/ transaction offices/ATMs from being located in the same area Enhance the efficiency and self- service of the ATM system to provide a variety of services at a cheaper cost, upgrade the ATM system to “miniature banks” across provinces and cities Expand the modern ATM system, allowing customers to automatically deposit via ATM as well as minimize the number of transactions at counter At the same time, develop a network of POSs and strengthen links among banks to improve efficiency and expand the use of ATM and POS cards Develop e-banking and home banking to take advantage of the development of personal computers, internet connectivity in the world trend towards 4.0 technology and develop phone banking, which is a popular low-cost model, convenient for both customers and banks Install bank kiosks, which is the installation of work stations on the street with high-speed internet connection
Taking a customer strategy as the key solution, Techcombank has segmented its customers to develop products, services and policies appropriate for each segment
Techcombank needs to improve its customer policies to improve customer satisfaction of its services such as enhancement of customer engagement with attractive policies that are more highly competitive than that of other state-owned banks and foreign banks In the coming time, Techcombank should overcome these weaknesses by taking some following measures:
Firstly: Complete the process of developing and deploying new customer policies to fit into the segments, increasing the diversity of these policies so that customers in many target groups can select the most appropriate policies for them
Secondly, pay attention to increasing the benefits of customers, including measures such as the lower price of services for customers who regularly use its services through customer care activities such as gifts and wishes on cellabration ceremonies, public holidays, Tet holidays, and special occasions of customers
Thirdly: For branches, need to manage customer information, synchronize the information system with other branches through the data and common servers of Techcombank The customer information management should be detailed, clear and complete in terms of personal information, transaction history and customer feedback about services, which plays an important role in concretizing customer care activities and making the detailed and accurate implementation plans for customer policies
Advertisement affects the non-credit service development at banks, which is reflected through the benefits of expanding the market and promoting services to customers, thereby attracting customers so that banks can develop their non-credit services At present, Techcombank’s marketing and advertisment is not paid much attention to products and services but brand promotion There are still weaknesses in the contents, forms of advertisement, lack of updated and effective information to customers Consequently, Techcombank should focus on resolving these shortcomings in advertising activities in the coming time
Techcombank needs to develop a marketing strategy for itself; thereby, making an action plan to expand market share and enhance its reputation in the non- credit service market; design and implement the advertising programs based on the events of the year; regularly implement promotion programs, incentive programs for customers using the non-credit services and reach an agreement on the highly competitive services such as e-banking, Bonds, Life insurance, remittance
Promoting the internal marketing is the fastest way to introduce new services to all employees in order to change profoundly their awareness of Techcombanl’s life in the development of new services Therefore, it is important to focus on the marketing skills of marketing staff because it will be a very effective advertising channel without cost
3.2.2 Particular solution to develop each type of non-credit service at Techcombank
3.2.2.1 Solutions to traditional non-credit services a Payment service
* Domestic payment Continue cooperating with local commercial banks to develop the bilateral payment network in order to speed up payment and minimize costs Understand customer demand for new remittance and payment services Strengthen the coordination, exchange of information, analysis of the international and domestic market situation to ensure the safety of payment activities