CHAPTER 1 MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL DUONG THI HONG NGAN IMPROVING CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK MASTER OF BUSINESS ADMINIST[.]
RATIONALE
Globalization has become a pervasive trend impacting countries, organizations, and individuals worldwide Since Vietnam's accession to the World Trade Organization (WTO) in 2007, the country's financial market has seen significant advancements, with banks benefiting from improved fund mobilization However, competition among domestic and foreign banks has intensified, prompting a need for innovative strategies to ensure sustainable development One such strategy is consumer lending, which, despite its challenges, offers lucrative opportunities With a population of approximately 86 million as of the 2010 census, Vietnam presents a promising market for consumer lending, particularly due to its large demographic of young adults and adolescents.
Techcombank, a prominent commercial bank in Vietnam, has strategically focused on the retail market, where consumer lending constitutes a significant portion of its operations With a long-standing awareness of the consumer credit market, the bank officially entered this sector years ago.
Since its establishment in 2000, the bank has achieved significant milestones but must enhance its service quality to retain existing clients and attract new ones However, its benefits are diminishing due to stringent government regulations and intensified competition in the consumer lending market, with numerous banks, including foreign institutions, entering the sector As a result, Techcombank is experiencing reduced profitability while contending with a challenging and competitive landscape.
Since the potentials in consumer lending market and the difficult conditions that Techcombank is facing, consumer lending is chosen as the topic for this MBA thesis.
This research focuses on evaluating the quality of consumer credit services at Techcombank, ultimately leading to conclusions and recommendations aimed at enhancing the overall service quality of Techcombank's consumer lending offerings.
RESEARCH OBJECTIVES
The major objectives in the research are to:
The theoretical framework of service emphasizes the importance of service quality in consumer lending, highlighting its benefits to both consumers and financial institutions High-quality consumer lending services enhance customer satisfaction and loyalty, directly impacting a bank's overall performance To effectively assess service quality, it is crucial to identify and measure the gaps in service delivery, ensuring that consumer needs are met and expectations exceeded.
- Analyze and evaluate current situation of consumer lending service quality at Techcombank based on the gap between perception and expectation of customers.
- Realize findings of consumer lending service quality at Techcombank
- Propose solutions to improve consumer lending service quality at Techcombank
RESEARCH QUESTIONS
In order to achieve the objectives of the thesis, the following questions should be answered:
- What is consumer lending service and characteristics of consumer lending service? What models and methods are used to assess quality of service and consumer lending service quality?
- What is the gap between customer perceived service quality and customer expected service quality?
- How is consumer lending service quality at Techcombank?
- How to improve consumer lending service quality? What are the best ways to improve consumer lending service quality at Techcombank
RESEARCH METHODOLOGY
Sources of data
The data for this study are both primary data and secondary data.
Secondary data were collected from sources as following:
- Bank’s financial reports and annual report;
- Legal regulations and documents about bank; Đề án Kinh tế quốc tế
- And other media which can provide necessary information for the research
Primary data were obtained from in-depth interview and survey
Method of collecting data
The depth-interview method was utilized to gather insights from internal credit experts, managers, and staff at Techcombank Pre-prepared questions focused on evaluating the current quality of consumer lending services and identifying strategies for improvement.
A survey was conducted among customers utilizing the consumer lending service at 18 Techcombank branches nationwide, yielding 133 completed questionnaires The research utilized the SERVQUAL model, categorizing a total of 23 attributes across five dimensions.
The purpose of the survey was to determine customer’s expectation and perception, from that to find out gap between expected quality and perceived quality.
Data analysis
Statistical package for social science (SPSS) package and Excel were used to analyze the data collected.
SCOPES OF RESEARCH AND LIMITATIONS
The study was conducted at Techcombank only as follows:
The research time was a period from 2007-2009;
Subject: The research was conducted with focus on consumer lending service quality at
Customers: The research focuses on clients with using consumer lending at Đề án Kinh tế quốc tế
Geographic scope: the primary data would be collected in 18 branches at
Techcombank in the whole country.
This research examines the consumer lending services at Techcombank, utilizing data from 2007 to 2009 It specifically proposes solutions to enhance the quality of consumer lending at Techcombank, rather than addressing the broader economy or other banks The study's limitations include its exclusive focus on the consumer lending sector, without comparing Techcombank's model to those of other successful banks in the same field.
> So this research is for Techcombank, if it were applied for another, we should take further and supplemental study.
RESEARCH STRUCTURE
The research is divided into 3 chapters as below:
THEORETICAL BACKGROUND OF CONSUMER LENDING
DEFINITION AND CHARACTERISTICS OF SERVICE
Many definitions of service are available but all of them have a common idea that is intangibility and simultaneous consumption
Services are deeds, processes and performances (Valarie A.Zeithaml and Mary Jo Bitner, Service marketing, New York: Mc Graw-Hill, 1996, p.5)
A service consists of intangible activities that typically occur through interactions between customers and service providers, including employees, physical resources, or systems These services are designed to address and solve customer problems effectively.
The services sector encompasses all economic activities that produce intangible outputs rather than physical products or construction These services are typically consumed at the moment they are produced and provide added value through convenience, amusement, timeliness, comfort, or health benefits, which are significant to the initial consumer.
Services are intangible and cannot be physically experienced, meaning they cannot be touched, stored, or transported Unlike physical goods, services cannot be owned, resold, or returned Instead, they are delivered directly from the service provider to the authorized consumer upon request, emphasizing the unique nature of service transactions.
Services are perishable in two regards
Service delivery relies on allocated resources, processes, and systems within a specific timeframe If a scheduled service consumer fails to request or utilize the service during this period, the service cannot be provided, resulting in a lost business opportunity for the provider This means that the provider misses out on potential revenue and could have redirected those resources to another consumer For instance, a hairdresser may serve a different client if the original appointment is missed, and an empty seat on a plane cannot generate revenue once the flight has departed.
Once a service has been fully delivered to the consumer, it becomes irretrievably lost, as it has been utilized For instance, when a passenger reaches their destination, they cannot be transported back to that same location at that moment.
The service provider plays a crucial role in service delivery, as they must efficiently generate and provide services to meet consumer requests While many service deliveries occur automatically, the provider must proactively allocate resources and maintain readiness for effective service execution Equally important, the service consumer is integral to the process, actively participating from the initial request to the enjoyment of the service benefits For instance, a consumer must be physically present in a hairdresser's chair or on a plane to receive the service.
& seat; correspondingly, the hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the service.
Every service is distinct and cannot be replicated precisely due to varying factors such as time, location, circumstances, conditions, configurations, and allocated resources Even if the same consumer requests the same service again, the unique context of each delivery ensures that it remains a one-time experience.
The inherent retractability of service characteristics complicates the consistent delivery of services, presenting challenges in every instance Effective service marketing demands creative visualization to create a vivid image in the consumer's mind Consequently, these characteristics hinder service consumers from evaluating or comparing services before experiencing the actual delivery.
Mass service generation and delivery pose significant challenges due to inconsistent service quality The variability in both inputs and outputs, along with the complex interrelationships among processes, complicates the maintenance of consistent service standards Additionally, the human element plays a crucial role in the success of service-oriented economies.
DEFINITIONS OF SERVICE QUALITY AND CONSUMER LENDING
Service quality reflects how well the features and characteristics of a service meet consumer needs while considering acceptable price and delivery constraints.
According to Zeithaml & Bitner (2003), service quality is a targeted assessment based on customer perceptions of key service dimensions, including reliability, responsiveness, assurance, empathy, and tangibles In contrast, customer satisfaction encompasses a broader range of influences, integrating perceptions of service quality, product quality, pricing, and both situational and personal factors.
Service quality plays a crucial role in enhancing customer satisfaction by delivering consistent performance and tangible benefits For instance, customers expect a uniform experience at McDonald's restaurants, where they anticipate receiving high-quality food and service, regardless of the location This expectation underscores the importance of maintaining service standards across all outlets, as highlighted by Millend M Lele (1995: 126).
Customer satisfaction plays a crucial role in fostering harmonious relationships between companies and consumers It serves as a solid foundation for encouraging repeat purchases and cultivating customer loyalty Additionally, satisfied customers are more likely to share positive experiences through word-of-mouth recommendations, which can significantly benefit the company.
1.2.2 Overview of consumer lending service quality
Consumer lending encompasses various definitions, yet they all share a fundamental concept: it involves intangible and simultaneous consumption This form of lending allows individuals to access funds for personal use, facilitating immediate purchases and enhancing financial flexibility.
Consumer lending is a crucial form of credit financing that meets the needs of individuals and households for various expenditures, including housing, transportation, education, healthcare, and tourism, before they have fully saved the necessary funds.
Consumer lending, also known as retail lending, encompasses a variety of secured and unsecured loans, excluding mortgages and commercial loans This type of lending includes financing for vehicles, boats, home equity loans or lines of credit, signature loans, and investments in certificates of deposit, stocks, and mutual funds.
- Consumer lending includes loans for other personal financial needs, including the granting of overdraft lines of credit and the purchase of consumer loan accounts from retailers or other lenders
Consumer lending enables banks to provide a comprehensive range of lending products tailored for retail customers This suite includes personal loans, vehicle loans, mortgages, home-saving products, top-up loans, and loans with flexible repayment schedules, as well as equated-installment loans.
Retail banking encompasses the division that focuses on providing loans to consumers, which includes various types of financing such as credit cards, mortgage loans, and auto loans This sector also pertains to loans issued at both prime and subprime interest rates.
High interest rate: Scale of each loan is small and cost of loan is high, so interest rate of consumer lending is higher than other loan types
Economic cycles significantly influence consumer lending trends During prosperous economic periods, living standards rise, leading to increased demand for consumer loans, particularly around holidays when shopping peaks Consequently, this heightened consumer activity drives a corresponding rise in loan demand.
Customer lending demand is closely tied to income and education levels Individuals with higher incomes tend to borrow beyond their annual earnings, viewing loans as a means to enhance their standard of living rather than just a solution for emergencies For these customers, borrowing offers flexibility to invest in medium or long-term opportunities, allowing them to manage their finances more effectively.
The process of providing loans to customers is straightforward, but without strict control measures, banks face significant risks that can jeopardize their financial stability.
If the borrowers die, ill or lose job, the bank will be difficult to recover debt.
Mainly individual customers: Customers are mainly individuals
Assessing customer characteristics and conditions, such as dignity and legal status, poses significant challenges for credit officers This evaluation largely relies on subjective assessments, feelings, and experiences, making the loan assessment process sensitive and complex.
Difficult to assess customer income: Verification of income and expenditure of customers is difficult, often based on salary, accumulation It is not clear evidence
1.2.2.3 The benefits of consumer lending a) Benefits for banks
Consumer lending brings to banks benefits and advantages, including:
Consumer lending significantly boosts bank profits by providing funds to individuals and households, who pay higher interest rates compared to other lending types With a larger consumer market than enterprises, banks have the opportunity to tap into vast potential profits through this lucrative financial service.
Establishing habits that facilitate access to banking services and products is crucial as the rise in consumer lending positively influences production expansion This, in turn, boosts the demand for enterprise lending, creating a chain reaction As production increases, so do incomes and living standards, further driving the demand for consumer lending.
ASSESSMENT OF CURRENT CONSUMER LENDING SERVICE
OVERVIEW OF TECHCOMBANK
Techcombank, officially known as the Vietnam Technological and Commercial Joint Stock Bank, was founded on July 27, 1993 The bank aims to serve as an efficient financial intermediary, connecting savers with investors to meet the capital needs for business and economic growth during Vietnam's open-door era Its headquarters is located at 70-72 Ba Trieu Street, Hanoi.
After 16 years of operation, Techcombank has established itself as a leading bank in transactions with large corporations and financial institutions The bank's charter capital has seen significant growth, increasing from an initial VND 20 billion to a registered capital of VND 5.4 trillion, with total assets amounting to VND 92.581 trillion Additionally, Techcombank has expanded its network, boasting 52 branches and 160 transaction points across 40 cities and provinces in Vietnam by early 2010.
Table 2.1: Some main figures at Techcombank
Source: Annual reports at Techcombank.
Together with the successful of Techcombank, there are important contributions of leading domestic and international partnership Đề án Kinh tế quốc tế
Hong Kong Shanghai Banking Corporation-HSBC
HSBC has become TCB’s strategic partner since 2006, with 10% its stake Up to
In 2008, HSBC increased its stake in Techcombank to the maximum allowable 20% for foreign banks in local institutions As a strategic partner, HSBC provides valuable support to Techcombank in enhancing its management capabilities and technological expertise.
TCB has enhanced its management team by bringing in key executives from HSBC, including leaders for the Personal Finance Service division, Chief Risk Officer, CFO, Head of Collections, and IT security consultant This strategic move sets TCB apart from other Joint Stock Commercial Banks (JSCBs) that lack similar operational support from international partners Additionally, TCB has effectively utilized HSBC’s extensive ATM network to broaden its customer base and collaboratively market a diverse range of banking products, such as retail lending, deposits, trade finance, treasury services, derivatives, and remittances.
TCB has partnered with the national carrier, a shareholder of the bank, to create a co-branded credit card that provides cardholders with exclusive benefits from both Vietnam Airlines and TCB Additionally, TCB is enhancing this collaboration by facilitating aircraft leasing for six new planes in partnership with HSBC and Credit Suisse Currently, TCB manages cash and payroll functions for several subsidiaries and aims to deepen this relationship by introducing more products and services to the national carrier in the future.
The current banking management system will be enhanced through the establishment of specialized departments focused on strategic development and risk management Key bodies such as the Strategic Investment Council, Executive Committee (EXCO), Asset Management Committee, Human Resource and Compensation Committee, and Audit and Risk Committee will be created This initiative aims to improve management quality, control standards, and execution effectiveness within the organization.
In addition to its core banking operations, TECHCOMBANK has developed a membership bank and three subsidiaries, which include Techcombank Securities Company LLC, Techcombank Asset Management Company, and a one-member company focused on liabilities and assets management, known as Đề án Kinh tế quốc tế.
Figure 2.1: Organizational Structure at Techcombank
Source: Annual reports of Techcombank
2.1.3 Business performance of Techcombank over period of 2007-2009.
Following a prosperous economic period marked by significant investment projects, Vietnam's economy faced severe challenges in 2008 due to the global financial crisis, resulting in inflation, trade deficits, and a downturn in the stock and real estate markets To mitigate the negative effects of this crisis, the Government and State Bank implemented macroeconomic policies aimed at tightening monetary policy Concurrently, the worldwide financial crisis led to the collapse of several major financial corporations.
Techcombank, like other commercial banks, encountered significant challenges in its business operations Nevertheless, leveraging its substantial financial resources, the bank has successfully navigated these difficulties, achieving its established targets and solidifying its position as a strong and stable institution within the banking system.
By the end of fiscal year 2008, Techcombank's total raised funds soared to VND 41.365 billion, reflecting a significant increase of 64.54% from the previous year and comprising 68.68% of the bank's total assets This robust financial position enabled Techcombank to maintain strong liquidity during challenging economic conditions As a result, by September 2009, the total raised funds further increased to VND 65,000 billion.
By the end of 2009, total loans at Techcombank soared to VND 42,092,767 billion, marking a significant increase of 62% compared to late 2008 and 110% since 2007, while maintaining overdue loans below 2% Aiming to be the leading retail bank in Vietnam, Techcombank focused on expanding its retail market In 2007, retail market loans totaled VND 7,480 billion, but growth slowed in 2008 due to market challenges However, as the economy began to recover in early 2009, consumer demand surged, prompting Techcombank to diversify its offerings, including cards, home loans, overdrafts, and overseas study loans By the end of 2009, total retail market loans had reached VND 14,102 billion.
Techcombank prioritizes traditional products and services tailored for various enterprise segments, including large corporations, medium-sized enterprises (MMEs), small and medium-sized enterprises (SMEs), micro, small and medium enterprises (MSMEs), and business households In 2008, the bank restructured its organizational framework to enhance professional service delivery to business clients Through targeted market research, Techcombank developed competitive and flexible financial solutions The bank's focus on commercial banking services for SMEs remains central to its business strategy, which aligns with the consultancy of the International Financial Corporation (IFC) to meet the evolving demands of corporate customers Techcombank aims to establish itself as a leading institution recognized for diversification, reliability, quality, and efficiency.
Recognizing Techcombank's efficient operations and strong reputation, major multilateral financial institutions like the World Bank, Asian Development Bank (ADB), and Swiss State Secretariat for Economic Affairs (SECO) have chosen it as a disbursement bank This partnership aims to facilitate access to soft loans for SMEs, enabling them to invest in technology upgrades and acquire environmentally friendly, energy-efficient equipment.
By the end of 2009, Techcombank corporate outstanding loan had more than VND 28.010 billion, increasing by 74% compared to late 2008 and up 129% against late 2007.
Table 2.2: Structure of corporate customers.
Big corporate MME SME MSME
Source: Annual reports at Techcombank
Table 2.3: Total outstanding loan at Techcombank
Source: Annual reports at Techcombank
Lending to support business operations
Techcombank offers tailored financial services for SMEs aimed at optimizing cash flow and enhancing competitive advantage The bank's adaptability in meeting borrowing needs ensures timely loan provision, allowing businesses to effectively manage emergencies or unexpected cash shortages through short-term working capital and overdraft financing.
For large corporate customers, the Bank prioritizes the availability of funds for separate projects.
In 2009, Techcombank became a pioneer in supporting MSMEs and household businesses by introducing standardized financial packages, including "Micro-banking financing" and "supplier financing." These offerings feature clear term sheets, expedited lending processes, and flexible collateral options, making them ideal for trading households and MSMEs across diverse sectors.
Source: Annual reports at Techcombank International payment and trade finance
ASSESSMENT OF CURRENT CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK
2.2.1 Current situation of consumer lending at Techcombank
Techcombank has launched some consumer lending products including:
A comfortable home is a fundamental aspiration for every family Techcombank aims to support customers in achieving this dream through its innovative "new Đề án Kinh tế quốc tế home" product, which offers financing options for purchasing new homes, renovating existing properties, and transferring land-use rights.
Types of loan Credit limit Maximum loan
Buying new house, transferring land- use rights
Up to 70% of customer’s needs but not over VND 4 billion
Renovating house VND 30 million 120 months
- Interest rate: Depends on the existing regulations of Techcombank
+ Early repayment: customers have to acknowledge their early repayment to Techcombank and bear an early repayment fee depends on existing regulations of Techcombank
A car brings customers convenience, luxury and value in life- Techcombank is ready to finance the car of their dream.
- Loan amount and loan term
Maximum loan term Sorts of collateral
80% 48 months House, land-use rights
75% 48 months New car (100% new whose value > VND1 Billion). 70% 48 months New car (100% new, whose value < VND1 Billion).
65% 48 months Used car (imported- used car under 5000km, car used in high conference, tenders)
50% 36 months Used car (second hand cars, cars have components imported from China). Đề án Kinh tế quốc tế
- Interest rate: depends on the existing regulations of Techcombank
Overdraft of Techcombank is called F@stAdvance
F@stAdvance allows customers to overspend the amount in VND accounts opened at Techcombank to a certain credit line to have a standby amount for unexpected expenses.
Product Sorts of collateral Maximum credit limit
Maximum loan term Secured overdraft
Collateral can be house, land-use rights, savings book or other collaterals accepted by Techcombank
Loans granted based on the customer’s prestige (with his company’s confirmation of current job position, wages, working years, etc.) to secure the loan
- Interest rate: Paid daily and it depends on the existing regulations of Techcombank
- Currency: VND, USD, EUR,etc
Maximum credit limit Maximum loan term
Up to 70% of total overseas studying cost (including living expenses, tuition fees, insurance premiums, visa and passport fees, language studying fees, airfares, etc.)
- Interest rate: depends on the existing regulations of Techcombank.
+ Loan term under 12 months: interest paid monthly, principal paid basing on negotiation. + Loan term over 12 months: interest and principal paid periodically (monthly or quarterly).
+ Early repayment: Customers have to acknowledge their early repayment toTechcombank and bear an early payment fee depends on existing regulations ofĐề án Kinh tế quốc tế
When repaying a loan made in foreign currency, borrowers have the option to repay in either Vietnamese Dong (VND) or the original currency of the loan If the repayment is made in VND, the exchange rate applicable will be the one set by Techcombank at the time of the transaction.
- Funds will be transferred directly to university’s account.
2.2.1.2 Number of consumer lending customers
In recent years, consumer lending has seen significant growth, with the number of bank customers rising from 1,455 in 2007 to 1,831 in 2008, and reaching 2,929 in 2009 This increase reflects the strong brand development of Techcombank, which has garnered greater awareness and trust in its consumer products Over just three years, the customer base more than doubled, highlighting the bank's prestige and the quality of its offerings that effectively meet the needs of consumers.
Source: Annual reports at Techcombank
Table 2.6 : Outstanding consumer lending growth
Total outstanding of consumer lending loans 5.915 7.954 15.989
Source: Annual reports of Techcombank Đề án Kinh tế quốc tế outstanding consumer lending growth
Figure 2.4: Outstanding consumer lending growth
Source: Annual reports of Techcombank
This figure shows that outstanding consumer lending growth was high but not stable, it is affected many factors, in which mainly domestic and region economic situation In
In 2007, consumer lending experienced remarkable growth of 97%, reaching a total outstanding loan of VND 5.915 billion However, this growth sharply declined to 34% in 2008 By 2009, consumer lending rebounded significantly, achieving a growth rate of 101% and a total outstanding loan amounting to VND 15.989 billion.
Table 2.7 : Profit of consumer lending (VND million)
Total profit of the bank 709,740 1.615,855 2.252,897
Total profit of consumer lending 78,173 115,889 265,999
Source: Annual reports of Techcombank Đề án Kinh tế quốc tế
Figure 2.5: Profit of consumer lending
Source: Annual reports of Techcombank
Consumer lending profits have shown significant year-over-year growth, reflecting strong performance indicators in the sector In 2007, profits reached VND 78,173 million, accounting for 11% of total profits This figure surged to VND 115,889 million in 2008, marking a 48% increase, although its share of total profits decreased to 7% By 2009, consumer lending profits soared to VND 265,999 million, representing a remarkable 130% growth This trend underscores the increasingly vital role that consumer lending plays in banking activities.
Table 2.8: Turnover of credit fund
Average total outstanding consumer lending 5.915 7.954 15.989
Source: Annual report of Techcombank
The year-over-year increase in the repayment rate indicates an improvement in the bank's ability to manage loans, reflecting a rise in consumer lending quality In 2007, the total repayment amount reached NVD 11.830 billion, with a repayment return rate of 2 In 2008, this positive trend continued.
Between 2007 and 2009, the international economic project for consumer lending saw a significant increase, with repayments rising from VND 16.703 billion in 2007 to VND 39.972 billion by 2009 The repayment rate also improved, climbing from 2.1 in 2008 to 2.5 in 2009.
Table 2.9 Rate of overdue debt
Source: Annual reports of banks
Figure 2.6: Rate of overdue dept
Source: Annual reports of Techcombank
Techcombank maintains a low and stable rate of overdue debt, recorded at 3.4% in 2007, 4.5% in 2008, and 4.2% in 2009 This performance is commendable when compared to other banks, highlighting the effectiveness of its management strategies.
Techcombank employs a robust credit monitoring system to ensure effective oversight of its lending procedures Following the completion of the lending process, credit officers are responsible for closely monitoring customer payments in accordance with signed contracts They routinely visit customers to proactively identify any potential difficulties and work collaboratively to find solutions Additionally, credit officers are tasked with reminding customers of upcoming due dates to facilitate timely payments.
From 2007 to 2009, the International Economic Project outlined the obligations regarding the amounts owed, payment deadlines, and other related details Additionally, they maintain consistent follow-up with each customer until the payment is completed for the bank.
The bank boasts an efficient support system, leveraging an advanced informatics platform that provides real-time information on contracts and customers Additionally, the Collection Center enhances customer communication by notifying them through indirect channels, such as email or mobile phone, when loan repayment dates approach.
If a loan is overdue for up to 180 days, it will be handled by the Bad Debt Department, which specializes in managing bad debts This department may sell collateral to recover the outstanding debt Thanks to an effective system, Techcombank ensures high credit quality with a low rate of non-performing loans.
Table 2.10 : Rate of non performance loans
Non performance Loans(bad debts) 112 204 398
Source: Annual report at Techcombank
Techcombank has controlled quite good over debt of consumer lending The bank always keeps this rate under regulation of State Bank is 3%.
2.2.1 Measuring consumer-lending service quality at Techcombank
2.2.1.1 Result of in-depth interview
This research involved in-depth interviews with one high-level manager, two middle-level managers, and four staff members from various branches of Techcombank The purpose was to evaluate and propose solutions for enhancing the quality of consumer lending services Participants addressed questions related to consumer lending service quality, as outlined in Appendix 1 of the International Economic Project.
Managers and staffs who are in depth-interview are:
The first person is Nguyen Thanh Hung President of retail banking center
The second person is Ta Thu Van who is vice manager at center of credit retail assistance
The third person is Nguyen Bich Lien who is vice manager of retail banking center
The last 4 staffs from big branches at Techcombank - Hanoi, SGO, Thang Long, Dong Do: Au Thi Hoai Phuong, Nguyen Huyen Hai, Nguyen Phuong Anh, Nguyen Viet Thanh
They gave out some assessments about consumer lending service quality as follows:
Techcombank offers high-quality consumer lending services, evidenced by a strong growth rate and low bad debt levels, leading to increased profits over the years The bank's robust financial standing and excellent infrastructure enhance customer comfort during their visits However, there are some areas for improvement.
Interest rates and fees of consumer lending are higher than other banks, for example Vietcombank, BIDV, Agribank, Viettinbank Therefore, it is not easy to attract customers
Traditional consumer lending products tend to lack diversification, but banks like HSBC and ACB provide a variety of product packages, making it easier for customers to select suitable options Many individuals prefer these services for their convenience In contrast, Techcombank primarily sees customer engagement through two main offerings: home loans and auto loans.
SOLUSIONS TO IMPROVE CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK
A bank's success heavily relies on its human resources, which are essential for executing business plans and expanding distribution networks It is crucial for banks to not only have a large workforce but also to ensure that employees possess high qualifications and skills For Techcombank, developing human resources is a key objective within its business development strategy To achieve this goal, Techcombank is committed to improving both the quality and quantity of its workforce, aligning with the bank's operational needs and future customer demands.
These solutions will be focused on some areas as follows:
To enhance its workforce, Techcombank develops annual plans for employee expansion, aligning with the bank's growth strategy and current staffing levels The recruitment process is conducted transparently and fairly, aiming to attract qualified candidates with the necessary skills, professional expertise, and a strong sense of responsibility to fulfill job requirements.
To enhance the quality of its human resources, Techcombank must focus on both improving employee skills and increasing the workforce size While the bank employs a young, well-educated staff with degrees from reputable universities, many of these employees lack significant experience and practical skills, particularly recent graduates.
To address the skills gap, Techcombank should implement comprehensive training and retraining programs for both new and existing employees, collaborating with institutions like the Bank Training Center and Hanoi School of Business Internal training sessions will allow employees to share experiences and learn from one another, fostering a supportive work environment Regular meetings can enhance collaboration and ease job responsibilities, while internal training proves to be a cost-effective method that promotes understanding among staff Additionally, training programs should emphasize essential communication skills, active listening, and a positive attitude towards customer interactions to ensure exceptional service.
Techcombank must prioritize the development of a strong business culture among its employees, as they play a crucial role in conveying the bank's values to customers A well-defined culture not only attracts customers but also fosters their loyalty, making it essential for successful banking operations Many risks arise from employees lacking a solid understanding of business culture, negatively impacting both the bank's performance and its reputation Currently, several banks are recognizing the importance of integrating cultural training with skill development to enhance overall employee effectiveness.
To enhance employee equity, the bank must refine its human resource policies By promoting consumer lending, employees are motivated to excel both professionally and personally This approach restructures compensation based on job performance, rewarding hard work with higher salaries Additionally, consumer lending fosters a sense of responsibility among employees, further driving motivation and accountability.
Techcombank should enhance the working environment across its system to foster stronger relationships between employees and the bank By cultivating a positive corporate culture, Techcombank aims to ensure that all employees feel valued and proud of their roles, leading to increased job satisfaction and engagement This supportive atmosphere will not only promote employee retention but also encourage greater contributions from staff, ultimately benefiting the bank as a whole.
Techcombank emphasizes the importance of fostering a strong banking culture through key principles: Trust, Collaboration, Customer Care, Innovation, Professionalism, and Effectiveness These initiatives are designed to retain both talented employees and loyal customers, ensuring long-term success and satisfaction within the bank.
Diversifying products and services is essential for banks in Vietnam to thrive in the competitive consumer lending and finance market Additionally, this diversification is a crucial aspect of the State banking strategy aimed at boosting competition within the domestic banking sector.
Currently, Techcombank's consumer lending offerings are limited and less appealing compared to competitors, primarily consisting of housing and car loans However, there is a significant demand for consumer lending as citizens' living standards improve Therefore, it is essential for the bank to diversify its products and services to meet customer needs effectively The focus of this diversification will target several key aspects.
- Keeping market share for these traditional services.
- Improving competition ability of Techcombank in the market.
- Increasing more customer segments, market share for new services and products.
- Increasing profit for the bank
From above target, the bank needs to concentrate on 2 items:
- Improving traditional products and services
- Developing new products and services.
To enhance customer value, it is essential to integrate traditional and modern products and services, all developed through advanced banking technology and aligned with customer demands.
For traditional products and services:
Firstly, Techcombank has overview assessment about all traditional products and the bank needs to find factors what affect mainly traditional products, what are strengths and weaknesses of these products.
Secondly, measuring satisfaction of customers, from that, improving products suitable with demand of customers.
In order to reach success in developing new products, the bank needs to give its specific strategy.
Firstly, the bank needs to research and measure customer’s satisfaction and potential consumer lending market.
Secondly, basing on research market, the bank has to forecast customer’s demand in the future. Đề án Kinh tế quốc tế
Thirdly, building new products and services model based on assessment of potential market, customer’s demand, financial ability and orient of the bank.
Fourthly, the bank needs to assess success of services before launching them market
To effectively implement these initiatives, Techcombank needs to increase its financial investment Significant capital is essential for the development of both traditional and modern products and services, as these expenditures are tied to enhancing human resources, technology, marketing, and other critical factors.
In the banking sector, having quality products and competitive pricing alone is insufficient; banks must establish effective distribution channels to optimize service delivery to customers The development of these channels significantly influences the bank's overall performance and customer satisfaction.
- Expending market share and increasing image of the bank to customers
- Increasing competitive advantage and profit for the bank.
- Making comfortable and convenient for customers in transaction to the bank.
- Saving time and cost for the bank as well as customers in work.
In order to develop distribution channels effectively, the bank needs to conduct some actions as:
Techcombank should enhance and expand its distribution network to improve customer accessibility through branches and sub-branches This includes establishing regional branches in major cities such as Ho Chi Minh City, Da Nang, Hanoi, and Hai Phong, which will serve as data processing hubs and support centers for sub-branches Additionally, the sub-branches should focus on becoming key contact points for transactions, specifically targeting individual customers to boost engagement and attract new clientele.
To enhance its competitive edge against foreign banks, the bank should establish additional distribution channels by partnering with supermarket networks like Metro Cash and Carry and Big C, as well as collaborating with major distribution companies such as Phu Tahi and Mesa, and telecom suppliers like VDC and Viettel An effective distribution network is a significant advantage for local banks.
RECOMMENDATIONS
The government must urgently establish a comprehensive legal framework for consumer lending to adapt to the rapid changes in banking due to economic integration and technological innovation Current regulations, such as Decision 44/2002/QD-TTg, are outdated and need revision to accommodate electronic certificates, electronic signatures, and online banking transactions It is essential to define the formats of these certificates and designate responsible entities for their maintenance Additionally, the law must introduce penalties for emerging technological crimes, such as PIN hacking and card counterfeiting, to protect both customers and financial institutions.
Building a modern engineering and technology environment is essential for enhancing consumer lending activities through advanced technological services The growth of the communication and telecommunications industry enables banks to utilize virtual distribution channels, reaching a wider audience To modernize banking operations, there is a demand for specialized software that offers high synchronization and integration Strengthening the domestic software market will allow banks to reduce reliance on costly foreign imports Furthermore, specialization in management and operations will empower banks to deliver improved and more efficient services.
3.2.2 Recommendations for the State Bank
The State Bank must urgently issue clear and comprehensive guidelines for implementing laws in accordance with the National Code These documents should ensure policy consistency and encompass all aspects of consumer lending activities.
The State Bank must enhance management activities by closely monitoring the credit history of individuals across various banks Establishing effective communication channels for commercial banks regarding lending and customer control is essential Consequently, the State Bank should mandate that commercial banks and credit organizations engage with the Credit Information Center (CIC) system, recognizing it as both a right and an obligation for these institutions.
Experts highlight that Vietnam's consumer lending market is appealing due to its effectiveness and security Despite rising competition, both Commercial Joint-Stock Banks and State-owned banks are actively working to capture a larger share of this largely untapped market As a result, banks, particularly Techcombank, are committed to continuously enhancing the quality of their offerings to meet customer needs.
To enhance consumer lending service quality at Techcombank, it is essential to consider fundamental principles of consumer lending and the bank's current lending practices We evaluated service quality using the SERVQUAL method, which focuses on five key dimensions: tangibles, reliability, responsiveness, assurance, and empathy By analyzing the gap between customer perceptions and expectations, this thesis proposes effective solutions for improving the overall quality of consumer lending services at Techcombank.
The thesis is limited by its focus solely on the quality of consumer lending services at Techcombank, without exploring the overall quality of all products and services offered by the bank or comparing its consumer lending model to successful practices of other banks in the industry.
This thesis integrates theoretical frameworks and practical assessments derived from internal evaluations at the bank, along with the author's professional experience Despite these efforts, limitations in theoretical and practical knowledge are acknowledged Therefore, constructive feedback from lecturers and colleagues is highly valued Additionally, I would like to extend my sincere gratitude to Dr Dang Ngoc Duc for his invaluable supervision throughout the development of my thesis on International Economic Projects.
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Website: Source from internet: https://www.techcombank.com.vn/
Reports: Annual report finance of Techcombank in 2007, 2008, 2009 Đề án Kinh tế quốc tế
1 How long do you work for this position?
2 How do you appraise consumer lending service quality at Techcombank
3 In your opinion, what are reasons for disadvantages that you have just given?
4 Do you think that Techombank needs to improve consumer lending service quality.
5 Could you tell me about your solutions to improve consumer lending service quality. Đề án Kinh tế quốc tế
SERVQUAL SCALE ON SERVICE QUALITY
1 Company X promises to do something at certain time, the company will fulfill his promises.
2 When you have trouble, company X demonstrates his sincere attention in solving the trouble.
3 Company X conducts service for the first time.
4 Company X delivers service timely at the time as promised.
5 Company X informs to customer when the service will be delivered
6 Company X’s staffs serve you in quick and timely manner.
7 Company X’s staffs are ready to help you.
8 Bank’s staff never demonstrates they are busy when you need them.
9 Credit staff behaviors make you trust more and more.
10 You feel safe when doing transacting with company X.
11 Company X’s staffs always demonstrate their decent, courtesy attitude to you.
12 Company X’s staffs are qualified to answer to your questions.
13 Company X demonstrates its attention to you.
14 Company X has staffs that pay attention to you.
15 Company X pays special attention to what you concern most.
16 Company X understands your special requirement.
17 Company X has modern equipment and devices.
18 Company X’s facilities are eye-catching.
19 Company X’s staffs have neat costume.
20 Physical substances in service operation are eye-catching in company X.
21 Company X has convenient operating time. Đề án Kinh tế quốc tế
CONSUMER LENDING SERVICE QUALITY MEASURING SCALE
1 The bank always does as introduced, committed.
2 The bank’s interest and fees are reasonable and acceptable.
3 Rules and process of credit division are clearly and publicly
4 Time of loan application assessment is short
5 Abilities to assess loan applications of the bank are good
6 Bank’s credit staffs respond to you quickly and timely
7 Bank’s staff enthusiastically help you
8 Bank’s staff never demonstrate they are busy when you need them
9 Credit staff willingly come to your place to advise and support you
10 Bank’s staffs always demonstrate their decent, courtesy attitude to you.
11 Credit staffs always show accurately conducting operation.
12 Credit staffs are highly professional.
13 Credit staff have good ethic, never asking for something.
14 Credit staffs have high responsibilities in work.
15 Bank demonstrates its attention to you.
16 Bank pays special attention to what you concern most.
17 Bank has preferred policies for long-relationship customers and highly prestige customers.
18 Bank understands your special requirement.
19 Bank has modern equipment and devices.
20 Transaction places of the bank are convenient for you.
21 Staff’s uniform are neat in appearance
22 Bank has diversifying products that meet customer’s demands
23 Working time is flexible and reasonable. Đề án Kinh tế quốc tế
Please evaluate your work environment by assigning a rating from 1 to 5 for each question Use the following scale to guide your ratings: 1 being the lowest and 5 being the highest.
Thank you for your participation.
1 Have you ever used Techcombank consumer lending service? a Yes Continue the survey b No Stop the survey
On the left side, please show the extent of consumer lending service quality which you expect.
On the right side, I would like to rate your feeling would like to rate your feeling about consumer lending service quality which you have perceived
Expectation of consumer lending service at TCB
Perception of consumer lending service quality at TCB
1 The bank always does as introduced, committed.
2 The bank’s interest and fees are reasonable and acceptable.
3 Rules and process of credit division are clearly and publicly.
4 Time of loan application assessment is short
5 Abilities to assess loan applications of the bank are good
6 Bank’s credit staffs respond to you quickly and Đề án Kinh tế quốc tế timely
7.Bank’s staff enthusiastically help you
8 Bank’s staff never demonstrate they are busy when you need them
9.Credit staff willingly come to your place to advise and support you
10.Bank’s staffs always demonstrate their decent, courtesy attitude to you.
11.Credit staffs always show accurately conducting operation.
12.Credit staffs are highly professional.
13.Credit staff have good ethic, never asking for something.
14.Credit staffs have high responsibilities in work.
15.Bank demonstrates its attention to you.
16.Bank pays special attention to what you concern most.
17.Bank has preferred policies for long-relationship customers and highly prestige customers.
18.Bank understands your special requirement.
19.Bank has modern equipment and devices.
20.Transaction places of the bank are convenient for you.
21.Staff’s uniform are neat in appearance
22.Bank has diversifying products that meet customer’s demands
23.Working time is flexible and reasonable.
Đề án Kinh tế quốc tế
DIFFERENCE BETWEEN RESPONDENT’S EXPECTATION AND PERCEPTION
95% Confidence Interval of the Difference
Lower Upper Pair 1 REL1PER -
Đề án Kinh tế quốc tế
DIFFERENCE BETWEEN RESPONDENT’S EXPECTATION AND PERCEPTION
95% Confidence Interval of the Difference
Lower Upper Pair 1 RES1PER -
RES4EXP 1429 46291 0635 2223 001 Đề án Kinh tế quốc tế
DIFFERENCE BETWEEN RESPONDENT’S EXPECTATION AND PERCEPTION
95% Confidence Interval of the Difference
Lower Upper Pair 1 ASS1PER -
ASS5EXP 1203 38998 0534 1872 001 Đề án Kinh tế quốc tế
DIFFERENCE BETWEEN RESPONDENT’S EXPECTATION AND PERCEPTION
Paired Differences Sig (2-tailed) Mean Std Deviation 95% Confidence Interval of the Difference
Lower Upper Pair 1 EMP1PER -
EMP4EXP 0677 30638 0151 1202 012 Đề án Kinh tế quốc tế
DIFFERENCE BETWEEN RESPONDENT’S EXPECTATION AND PERCEPTION
95% Confidence Interval of the Difference
Lower Upper Pair 1 TAN1PER -
TAN5EXP 2857 65795 1729 3986 000 Đề án Kinh tế quốc tế