THEORETICAL FRAMEWORK OF BANK MARKETING
The basics of bank and banking activities
1.1.1 Definitions of banks – commercial banks
A bank is a government-authorized institution that accepts deposits, pays interest, clears checks, and provides loans It serves as a financial intermediary, offering various financial services to customers, and some banks even have the authority to issue currency.
A commercial bank is an intermediation which accepts demand and time deposits, makes loans to individuals and organizations, and provides services such as documentary collections, international banking, trade financing
Figure 1.1: The modern services of commercial banks
Not all banks offer the same services as shown in the chart, but the variety of banking services is increasing quickly This growing diversity allows customers to conveniently meet all their financial needs at a single bank location.
The rapid expansion of services in the financial sector has significantly accelerated in recent years due to increasing competition among financial institutions, rising customer demand, and advancements in technology.
Growing competition: The competition of financial industry is becoming tougher when banks and competitors expanded their business activities This pressure is projected to boost the industry to develop further
Reauthorization process: The banking industry is stimulated also by loosening regulations, thus lowering the control power of government
Rising cost of capital: Growing competition and loosened regulation system resulted in rising average cost of capital of deposits – the basic source of banking capital
In response to rising operational costs, banks are increasingly adopting automated systems to replace traditional labor-intensive methods This shift is particularly evident in key processes such as deposit reception, clearing, and credit provision, marking a significant technological revolution in the banking sector.
Geological expansion is essential for banks to thrive, as automatic systems and technological advancements require economies of scale To achieve this, banks must open new branches and headquarters, even in remote locations, to tap into new and potential markets This strategic expansion is crucial for their survival and growth in a competitive landscape.
Globalization has led to a significant expansion of mergers and acquisitions beyond national borders, with the world's largest banks now competing on a global scale This heightened competition increases the risk of bankruptcy, particularly due to the limitations of the current deposit insurance system.
The nature of Marketing in banking operation
There are various definitions of bank Marketing The research on this matter clarifies the nature of Marketing, thus making Marketing more useful in the banking operation
1) Bank marketing is the aggregate of functions, directed at providing services to satisfy customers’ financial (and other related) needs and wants, more effectively and efficiently than the competitors keeping in view the organizational objectives of the bank
2) Bank marketing is every effort of the bank to satisfy customers’ needs and wants to maximize the profit in return
3) Bank marketing is the state of mind of clients which the bank seeks to satisfy In other words, by satisfying customers, the bank is able to gain maximized profit
4) Bank marketing is the general management approach being based on the awareness of business environment
5) Bank marketing is a function of management activity directing the designed banking service/product to a specific market segment
The primary role of bank marketing is to understand and address the needs and desires of customers while delivering superior services compared to competitors The effectiveness of bank marketing is ultimately measured by the revenue it generates.
The role and functions of Marketing for the development of banks
1.3.1 The role of Bank Marketing
Marketing plays a crucial role in addressing the fundamental economic challenges faced by the banking sector Like any business, banks must identify and tackle these economic issues effectively, leveraging marketing strategies to enhance their solutions Key economic concerns include profitability, resource allocation, and customer demand, which banks must navigate to succeed in a competitive landscape.
• Identifying the types of products and services that the bank needs to launch
• Organizing the process of supplying products and services and perfecting the exchanging relationships between customers and banks
• Solving conflicts of interest between customers, employees and bankers
The Marketing department of the bank deals with these difficulties by operations such as:
• Collecting market information and researching consumers’ behavior (how customers use banking products, what motivates them to choose banking services and what types of banks are appeal to them)
• Researching demand for banking products and services
• Researching the variety of products that other financial institutions are offering on the market
• Participating in the adjustment of interest policy, discount rate for customers and the improvement of business procedure
Marketing serves as a crucial link between banks and the market, acting as both a target for services and an operational environment It enables banks to identify market factors and understand customer needs, while also adapting to their changing demands Furthermore, marketing is essential for guiding capital flow, optimizing capital mobilization, and aligning resources with market needs effectively Through effective marketing strategies, banks can coordinate the efforts of all departments and employees to enhance customer satisfaction and meet their evolving requirements.
Effective marketing establishes a bank's competitive position, hinging on the marketing department's understanding of the bank's strengths, techniques, and the specific needs of its target market To achieve this competitive edge, the banking department typically concentrates on three key areas.
• Firstly, the uniqueness of the product or service
• Secondly, the importance of informing that uniqueness to the customers
• Third, the ability to maintain the competitive position of the bank
1.3.2 The functions of Bank Marketing
To effectively meet market demands, the marketing department must conduct thorough market research to identify customer needs, desires, and evolving trends By closely integrating market research with product design activities, marketing standardizes the development process for new service products, ultimately delivering enhanced services that align with market requirements.
The marketing department plays a crucial role in identifying and selecting potential customers by understanding their preferences for specific products Additionally, it supports banking services, enhances customer service at transaction locations, and develops innovative distribution channels to effectively meet customer needs.
To enhance the consumption function, banks need to prioritize understanding customer interests and equipping tellers with effective sales techniques Consequently, investing in staff training is essential for improving service and driving customer satisfaction.
Support function : The support function facilitates the implementation of the above three functions and enhances the safety of banking business
These four functions are closely related and mutually supportive to each other Out of these four functions, ‘Fitting the needs of the market’ is the most important function.
The characteristics of Bank Marketing
1.4.1 Bank Marketing is Financial Services Marketing
Bank services are distinctive with 5 characteristics: Intangible, inseparable, unstable, non-storable and unmeasurable
The characteristics of banking services significantly influence service management, particularly in marketing operations Banks enhance their credibility by emphasizing the tangibility of their products through imagery and symbolism in advertisements These advertisements highlight not only the services offered but also their advantageous features The inseparability of banking products and services is evident in the banks' offerings, as the provision of these products often occurs simultaneously with their consumption, resulting in a lack of storability for banks.
1.4.2 Bank Marketing is Content Marketing
Bank marketing is notably more complex than that of other industries due to its diverse and sensitive nature, particularly in delivering banking products that involve various stakeholders, including facilities, customers, and bankers The role of staff is crucial in the supply chain and product transfer processes To enhance the professional effectiveness of bank employees in client service, banks are increasingly adopting content marketing strategies This involves comprehensive training programs that equip staff with essential marketing knowledge and standardize educational levels Additionally, banks are revising salary and bonus structures to motivate employees and improve organizational frameworks and human resource distribution.
1.4.3 Bank Marketing is Relationship Marketing
Relationship marketing focuses on fostering long-lasting, mutually beneficial relationships between banks and customers by delivering high-quality services at competitive prices This approach enhances both economic and technical connections while building mutual trust It prioritizes the development of strong monetary relationships, particularly with existing customers, while also attracting new prospects Additionally, relationship marketing underscores the importance of service quality, which is influenced by various factors and stakeholders.
The operation of Marketing in the banking sector
1.5.1 Researching on the business environment of the banking industry
1.5.1.1 Content of research on banking business environment
A macro-environment study encompasses various factors, including the geographic, demographic, economic, socio-cultural, political, legal, and environmental technology landscapes These elements are largely beyond the control of banks, highlighting the necessity for the Marketing department to gather comprehensive, precise, and timely information By forecasting fluctuations in these factors, bankers can effectively adapt their operations to align with the evolving environment.
Micro-environment study: internal factors of banks are as follows:
1 Equity capital and potential development
5 The quantity and relationships of different departments
6 Units supporting banking operations (consultancy, advertising, informatics, )
7 Customers and competitors of the bank
The marketing department should effectively leverage the bank's internal resources while simultaneously understanding customer needs and expectations Establishing an informative system that monitors the business environment is crucial for achieving these goals.
Many banks have established Marketing Information Offices to gather, process, analyze, and provide essential data for informed marketing decisions Their informative systems encompass both internal sources, such as statistical reports and financial accounting, and external sources, including newspapers, magazines, and corporate annual reports Additionally, the organization of marketing research focuses on key tasks to enhance decision-making.
• Identifying problems and determining research objectives
• Selecting the source of information
Defining Bank Marketing strategy
1.6.1 Types of Bank Marketing strategy
Bank Marketing strategies frequently have operational framework longer than one fiscal year Therefore, constructing a timely and appropriate Market strategy is vital for the survival of the Bank
Approaches and types of Bank Marketing strategy
1 Marketing strategy based on product life cycle
2 Marketing strategy based on competitive position
3 Marketing strategy based on market demand
1.6.2 Basic content of a Bank Marketing strategy
Market segmentation of the banking industry are currently divided into 4 groups as following:
1 By types of client: The market can be divided into individual-client market and corporate market
2 By products or services offered: Currency Trading & Banking Services
3 By demographic: separates a market by demographic indicators including gender, age, household type, education level and income
4 By Psychographic: separates a market by lifestyle as well as values and beliefs
5 By behavior: behavioral segmentation for banks focuses on tactical analysis of credit data, propensity models and data gleaned on online banking activities and credit card transactions
The most promising market consists of clients with a high demand for a variety of products that the bank can provide more effectively than its current and future competitors.
The SWOT model is a widely used analytical tool for evaluating potential markets, focusing on four key areas: Strengths, which highlight the bank's unique selling points and competitive advantages; Weaknesses, identifying the bank's shortcomings in achieving specific objectives; Opportunities, which refer to external factors that enhance the bank's ability to pursue its goals; and Threats, encompassing external changes that could hinder the bank's operations and success rate.
A successful bank marketing strategy is built upon a thorough analysis of the business environment, enabling the development of tailored solutions for various operational periods This strategy encompasses the 7Ps: Product, Price, Place, Promotion, People, Process, and Physical Evidence, ensuring a comprehensive approach to meet customer needs effectively.
Product: The products and services offered by the bank determine the image and imprint of the bank inside the consumers’ mind
Price: The amount of money that the clients must pay in order to use the services and products offered by the bank
Place – Distribution network: The banking industries have two main channels of distribution network: Traditional channels & Modern channels
Figure 1.2: Distribution network of the banking industry
People: The unique assets of a bank that cannot be imitated
Process: Newly emerging products are highly evaluated providing that they are standardized, tested
Physical evidences: The evidences is vital for consumers to put their trust in the products of the bank
1.6.4.1 Types of organizational models for Bank Marketing department
With this type of organizational model, Marketing activities are spread among various departments within the bank
Figure 1.3: Organizational model of banks without Marketing department
This organizational model originated from the objective requirements of banking operations and the importance of Marketing department to the modern banking business performance
Figure 1.4: Organizational model of banks having independent Marketing department
According to each type of Marketing department, there is a distinctive organizational model
Firstly: The organizational model of the functional Marketing department
Figure 1.5: Organizational model of the functional Marketing department
Secondly: T he organizational model of the product Marketing department
Figure 1.6: Organizational model of the product Marketing department
Thirdly: T he organizational model of the product Marketing department
Research Dep Marketing stategy Dep
Dep Customer relation Dep Public
Credit services Investment services Trustee services Other services
Dep Customer relation Dep Public
Figure 1.7: Organizational model of the geographical Marketing department
1.6.5 Performance evaluation of bank Marketing
1.6.5.1 Objectives and requirements of bank Marketing evaluation
The objectives of bank Marketing evaluation are measuring and assessing scientifically the process of achieving Marketing goals during specified durations
The evaluation must comply with requirements as follows:
- The input information must be reliable and testable
- Testing techniques and methods must be proportionally combined to have unbiased results
- After the evaluation, specific and practical solutions should be addressed and followed
- The supervisory members must possess solid understanding about bank
1.6.5.2 Contents of Marketing strategy evaluation
3 Overall evaluation of Marketing strategy
CURRENT STATE OF BUSINESS PERFORMANCE AND MARKETING
Overview of Techcombank
Founded on September 27, 1993, Techcombank was one of the first Vietnamese joint stock commercial banks to be established in the context of a transition to a market economy
At the beginning, Techcombank had a total chartered capital of VND 20 billion, and the head office was originally located at 24 Ly Thuong Kiet, Hoan Kiem, Hanoi
• Increased charter capital to VND 51.495 billion
• Established Techcombank Ho Chi Minh Branch – the start of the rapid development of Techcombank in major cities
• Established Techcombank Thang Long Branch and Nguyen Chi Thanh Transaction Office in Hanoi
• Established Thang Loi Transaction Office under Techcombank Ho Chi Minh
• Increased the chartered capital to VND 70 billion
• The head office was moved to Techcombank Building, 15 Dao Duy Tu Street, Hanoi
• Established Techcombank Da Nang Branch
• Increased charter capital to VND 80.020 billion
• Opened Transaction Office Number 3 at Kham Thien Street, Hanoi
2000-2001 • Established Thai Ha Transaction Office in Hanoi
• Increased the chartered capital to VND 102.345 billion
Techcombank has entered into a partnership with Temenos Holding NV, a global leader in banking software, to implement the GLOBUS banking software system across its entire operations This strategic move aims to enhance the bank's ability to meet the increasing demands of its customers effectively.
• Established Chuong Duong Branch and Hoan Kiem Branch in Hanoi
• Established Thanh Khe Branch in Da Nang
• Established Tan Binh Branch in Ho Chi Minh City
• Was the joint stock bank with the largest distribution network in Hanoi
It included 1 Head Office, 8 Branches and 4 Sub-branches in major cities of Vietnam
• Increased charter capital to VND 104.435 billion
• Prepared to issue new shares to increase Techcombank’s chartered capital to VND 202 billion
• Officially issued F@stAccess-Connect 24 (in co-operation with Vietcombank) on December 5, 2003
• Successfully deployed the Globus software system on December 16,
• Established ‘Cho Lon’ (Big Market) Branch in Ho Chi Minh city
• Increased chartered capital to VND 180 billion on 31/12/2003
• June 09, 2004: Launched the new logo for Techcombank
• June 30, 2004: Increased charter capital to VND 234 billion
• August 2, 2004: Increased charter capital to VND 252.255 billion
• November 26, 2004: Increased chartered capital to VND 412 billion
• December 13, 2004: Signed contract to buy switching software and card management software of Compass Plus
• Established first-level branches in Lao Cai, Hung Yen, Vinh Phuc, Bac Ninh, Nha Trang (Khanh Hoa province), Vung Tau
Techcombank operates several transaction offices across Vietnam, including locations in Da Nang (Techcombank Phan Chu Trinh), Lao Cai (Techcombank Cau Kieu), and multiple offices in Ho Chi Minh City such as Techcombank Nguyen Tat Thanh, Techcombank Quang Trung, and Techcombank Truong Chinh Additionally, there are branches in Hanoi, including Techcombank Cua Nam, Techcombank Hang Dau, and Techcombank Kim Lien.
• On July 21, 2005; September 28, 2005 and October 28, 2005: Increased charter capital to VND 453 billion, VND 498 billion and VND 555 billion respectively On September 29, 2005: Launched Compass Plus card switching and management software
• On December 3, 2005: Upgraded Globus software to the latest version of Tenemos T24 R5
• Received the prize for ‘Innovative International Payment’ service from Bank of New York, Citibank, Wachovia
• February 2006: Issued ‘Loc Xuan’ deposit certificate
• May 2006: Received the Gold Cup for ‘Social progress and sustainable development’ awarded by the General Confederation of Labor of Vietnam
• June 2006: Call Center and hotline 04.9427444 officially came into operation 24/7
• August 2006: Moody’s, the global leading credit rating agency, has announced the credit rating of Techcombank, the first commercial bank in Vietnam to be ranked by Moody’s
• August 2006: Annual General Meeting approves the plan for 2006- 2010; Partnered with Bao Viet Life to launch Bancassurance products
• September 2006: Completed the Super Account System with new products including Multi-functional savings account and periodical savings account
• November 24, 2006: Raised charter capital to VND 1,500 billion
• December 15, 2006: Techcombank Visa card was launched
• Total assets reached nearly VND $ 2.5 billion
• Became the second largest commercial bank with nearly 130 branches and transaction offices at the end of 2007
• HSBC increased its stake to 15% and directly supported Techcombank
• Structured the formation of corporate customer service, established the Credit Management and Risk Management Division, and improved the structure of Banking and Personal Banking
• Upgraded the core banking system T24R06
• Outstandingly improved the card services with over issued 200,000 cards of all kinds
• Became the first and only Vietnamese bank recognized by Financial Insights for leading technology application in market development solutions
• Deployed the program “Confidential customer” to evaluate the quality of services of Techcombank’s dealers and transaction points
Techcombank has recently introduced a range of innovative products, including the Deposit Savings Program ‘Deposit Techcombank, receive Mercedes’, and Savings Custody services Additionally, they have launched consumer credit options and enterprise products like ‘Sponsor Sponsorship’ The bank is also enhancing its high-tech offerings with solutions such as F@st i-Bank, F@st S-Bank’s securities fund manager, and an E-payment gateway for online payment solutions, along with the F@stVietPay e-commerce platform.
In 2007, our company was honored with the prestigious 'Top Trade Services' award, recognizing our exemplary performance in the 11 sectors of Trade and Services that Vietnam committed to upon joining the WTO, as awarded by the Ministry of Industry and Trade.
• February 2008: Received the title of ‘Most qualified service of 2008’ by the readers of Sai Gon Marketing Magazine
• March 2008: Launched Techcombank Visa Credit Card
• May 2008: Deployed ATM (Automatic Teller Machine) system
We successfully modernized our technology by upgrading to the T24.R7 core banking software, enhancing our connectivity as a member of Smartlink and BankNet, and integrating with HSBC's ATM system Additionally, we launched a Free Customer Service hotline, providing 24/7 support at 1800 588 822.
• June 2008: sponsored Sao Mai 2008 contest
• August 08, 2008: Debt Management and Asset Management Company (AMC) was launched
• September 2008: Received the Gold Star Award 2008 by the Young Businessmen Association
• September 2008: Raised the stake of strategic partner – HSBC from 15% to 20% and the chartered capital to VND 3,165 billion
• September 2008: Launched the Techcombank – Vietnam Airlines – Visa Card
• October 19, 2008: Received the ‘ Prestigious Securities Brand’ and
‘Vietnam Leading Joint Stock Company’ awarded by the State
• July 2009: Raised the charter capital to VND 4,337 billion
• September 2009: Increased the chartered capital to VND 5,400 billion
• September 2009: Signed a loan agreement for 16 of A321 air planes with Vietnam Airlines
• September 2009: Launched the product ‘Online Savings’
• Received ‘Top 500 largest enterprises in Vietnam 2009’ awarded by the Vietnam Report
• Received the ‘Bank of excellence in international payment’ awarded by the Wachovina Bank
• Started the conversion strategy with the support of the world-class consultant – McKinsey
• Deployed the Overall Strategic Transformation program, announcing Techcombank’s mission, visions and core values Simultaneously carried out the restructure of business, business management and transformation of corporate culture
• April 2010: Received the ‘International Star for Leadership in Quality Award’ by BID – International Business Initiative
• May 2010: Received the title ‘National Brand 2010’
• May 2010: Received the ‘The most dynamic commercial bank’ award in East Asia by IFC, a member of the World Bank
• June 2010: Received the ‘Best International Bank of Vietnam’ award in 2009 by Citi Bank
• June 2010: Increased the chartered capital to VND 6,932 billion
• July 2010: Received the ‘Best Bank in Vietnam 2010’ awarded by the Euromoney magazine
• August 2010: Received the ‘Vietnam Gold Star Award 2010’ awarded by the Young Businessmen Association and Best Vietnamese Brand Award 2010 by Sai Gon Liberation Newspaper
• March 2011: Received the ‘Standard Telegraph Rate’ awarded by the Bank of New York
• April 2011: Ranked in the ‘Top 500 leading enterprises in Vietnam’ from VNR 500 and received the ‘Credit Product of the Year’ award from the Vietnam Economic Times
• May 2011: Received the ‘World Confederation of Business Award’
• June 2011 to August 2011: Received 8 honorable prizes of prestigious international organizations, including:
• ‘The Best Bank in Vietnam’ – ‘Best Bank in Vietnam 2011’ ; ‘The Best Cash Management Bank in Vietnam 2011’ and ‘The Best Trade Bank in Vietnam’ awarded by the Finance Asia Magazine
In 2011, Alpha Southeast Asia Magazine recognized the leading financial institution in Vietnam, awarding it titles such as "The Best Bank in Vietnam," "The Best Cash Management Bank in Vietnam," and "Best Trade Bank in Vietnam," solidifying its reputation as the premier commercial bank in the country.
• “Best FX Provider in Vietnam” – Best Foreign Exchange Provider in
• “Vietnam Retail Bank of the Year” by Asian Banking and Finance
• December 2011: Received “Best domestic bank in Vietnam” – Best Domestic Bank in Vietnam by The Asset Magazine
• Total assets reached VND 179,934 billion, which was highest among commercial joint stock banks
• Moved the Head Quarter to the Vincom building in the center of Hanoi Capital
• Received 20 international awards in 2 years, notably were ‘ The best bank’ awarded by The Asset, the Asian banker
We are excited to announce the opening of our new office in a Grade A building located at 9-11 Ton Duc Thang Street in the heart of Ho Chi Minh City This expansion reflects our commitment to delivering top-quality products and services to our valued customers in the Southern region.
• Received 13 domestic and international awards, including ‘Best Bank of Vietnam’s’ , ‘Best Monetary and Financial Management’ , ‘ Best
Bank in Vietnam’, ‘Best Employer of the Year in Asia in 2013’ , and
A Vision: Techcombank aspires to be the best bank and a leading business in Vietnam
• To be the preferred and most trusted financial partner of our customers, providing them with a full range of financial products and services through a personalized/customer centric relationship
• To provide our employees with a great working environment where they have multiple opportunities to develop, contribute and build a successful career
• To offer our shareholders superior long term returns by executing a fast growth strategy while enforcing rigorous corporate governance and risk management best practices
1 Customer first: what we do is only valued if it is truly beneficial to our customers and colleagues
2 Innovation: Make improvements to lead the way
3 Team work: At Techcombank, you will not have good performance without cooperation
4 People development: People with proven capability will bring the organization competitive advantages and remarkable successes
5 Accountability: Be committed to overcoming difficulties and achieving great successes
Figure 2.1: The organizational structure of Techcombank
Business performance of Techcombank during 2012-2016
In 2016, the total mobilization capital of Techcombank VND 172,110 billion, 21% over
In 2015, Techcombank achieved a remarkable increase in mobilization value by nearly VND 30,000 billion, showcasing its effective design of mobilization products This growth reflects a growing client trust in the bank Additionally, the bank successfully managed its bad debts, reducing the total bad debt value to below 3%.
In 2015, Techcombank experienced a significant 30% increase in outstanding loans, surpassing VND 40,000 billion This upward trend continued in 2016, with an 18% rise in loan value, primarily driven by the business segment and corporate product offerings.
Over the past year, Techcombank has demonstrated significant value to its clients, notably serving major customers like Vingroup, which was recommended to the bank by McKinsey five years ago As of December 31, 2016, Techcombank's Capital Adequacy Ratio (CAR) stood at 13.12%, well above the State Bank's required minimum of 8% This strong financial position indicates that Techcombank is well-prepared to meet the Basel II standards in the near future.
As of December 31, 2016, the total bad debt of Techcombank was about VND 2,246 billion, equivalent to 1.57% of total outstanding loans, decreasing slightly from 1.67% in 2015
Chart 2.1: The capital operations of Techcombank during 2013-2016
After the IPO in November 2014, Vietnam Airline was officially placed on stock exchange market on 3rd January 2017
Techcombank has announced the sale of 10 million shares of Vietnam Airlines, reducing its holdings to 15.58 million shares Initially, Techcombank acquired these shares at over VND 22,000 each, resulting in an investment of VND 570 billion.
Total capital mobilization has led to outstanding loans amounting to significant investments Over a two-year period, this investment has grown to VND 1,280 billion, reflecting a remarkable ROI of 120% Following the sale of 10 million shares, Techcombank generated VND 500 billion to offset the initial capital invested.
In 2015, Techcombank experienced significant challenges in its foreign exchange activities, resulting in a loss exceeding VND 80 billion, which adversely affected its overall business performance However, 2016 brought a turnaround, as the bank's foreign exchange trading generated an impressive revenue of nearly VND 178 billion.
In 2016, Techcombank achieved a significant milestone by ranking second in the card-issuing market, following HSBC and Vietcombank The bank received prestigious nominations from Visa, including the "Leadership in Co-Brand Products 2016" and "Highest Average Spend for Visa Affluent Debit 2016." Its flagship offering, the Techcombank – Vietnam Airline Co-Brand Card, saw impressive market penetration, with a total of 36,000 cards issued by the end of the year, reflecting a remarkable 31% increase in payments and transactions.
Techcombank achieved a remarkable pretax profit of nearly VND 3,997 billion in 2016, nearly doubling from VND 2,037 billion in 2015 In the fourth quarter, the bank reported a profit before tax of over VND 1,132 billion, representing a 2.3-fold increase compared to the same period last year Following this impressive performance, Techcombank became the second-most profitable bank in the private sector after nine months of 2016, with experts closely monitoring its quarterly earnings The bank's rapid growth resulted in a return on equity (ROE) of 17.7% for 2016, almost double that of the previous year, while its return on assets (ROA) reached 1.5%, surpassing the State Bank of Vietnam's targets for commercial banks.
Although net interest income (net interest income from lending activities) only rose by VND
900 billion, thanks to profit from other services and activities, the bank’s profit margin still went up
Thus, in 2016, Techcombank was the bank with the highest profit among commercial joint stock banks Previously, MB - Military Bank also announced earnings results in 2016 reaching approximately VND 3,700 billion
Chart 2.2: Quarterly business results of Techcombank in 2016
Unit: VND billion Source: Techcombank 2016 Annual Report
Chart 2.2: Yearly business results of Techcombank 2012-2016
Unit: VND billion Source: Techcombank 2016 Annual Report
Pre-tax Earnings After Tax Earnings
Pre-tax Earnings After Tax Earnings
Facilities & Technological advancements of Techcombank
In Vietnam, approximately 45% of the population, or around 41 million individuals, are active Internet users Among them, nearly 21 million people own smartphones, while about 30 million engage with social media platforms like Facebook, Instagram, and LinkedIn.
The future of digital banking in Vietnam looks bright, as evidenced by Techcombank's data showing a remarkable 73% increase in e-banking users from 2014 to 2015 Additionally, the number of regular users grew by 45%, while the average transaction volume rose by 25% Notably, online payment transactions surged by an impressive 42%, highlighting the rapid adoption of digital banking services in the country.
Since 2002, Techcombank has implemented the SWIFT payment system, enabling seamless international transactions through a global electronic communications network This innovation led to an impressive straight-through processing ratio of 98%, earning Techcombank international recognition from prestigious banks like Standard Chartered, Bank of New York, and Citibank in 2003 and 2004 By September 2009, the bank had expanded significantly, boasting 200 branches and transaction offices across 40 cities and provinces, along with 500 ATMs and 2,000 POS machines.
Techcombank is part of a card alliance system that includes nearly 20 major domestic banks, such as Vietcombank, Military Bank, and Habubank This partnership enables Techcombank cardholders to conveniently withdraw cash and conduct payments or transfers at ATMs and POS terminals of other banks within the alliance across the country.
Techcombank prioritizes customer convenience by implementing advanced projects that facilitate easy access to remote information Customers can utilize Techcombank Home Banking tools, including Techcombank Mail Access, Techcombank Mobile Access for mobile information retrieval, Techcombank Voice Access via the 1900 1590 automated service, and a dedicated Call Center for direct consulting support.
Since its inception, Techcombank recognized its lack of financial management expertise and focused on leveraging technology as a competitive advantage The bank is committed to investing in technological applications to streamline business processes, efficiently manage substantial workloads, enhance management activities, and mitigate banking risks, all while adapting to the industry's capital flexibility.
Banks are modernizing their services to enhance customer benefits from banking products while leveraging technological advancements from other institutions For instance, Techcombank has invested in a core banking system software to improve its operational efficiency and service offerings.
In 2003, Techcombank adopted the 'Globus' banking management software, leveraging its capabilities to introduce a range of high-tech products The latest iteration, 'T24r5', was implemented in December 2005, featuring advanced multi-server support that enhances system performance This allows T24r5 to process up to 1,000 banking transactions per second, accommodate 110,000 unique visitors (including 10,000 direct users and 100,000 online users), and manage 50 million client accounts, significantly boosting transaction efficiency and information retrieval speed.
Techcombank has successfully enhanced its network by integrating with Vietcombank's ATM and POS systems, which has expedited the issuance of its F@stAccess card In 2003, the bank acquired Compact Plus's card switching and management software, enabling it to issue its own cards, manage payment acceptance points, and connect with other banks while mitigating potential risks As a result, Techcombank has become the third bank, following Vietcombank and ACB, to achieve full online integration across its system, positioning itself one to two years ahead of its competitors in technological advancements.
Current situations of Marketing performance of Techcombank
The government has established a stable and peaceful environment, fostering non-violence and continuous enhancements to the legal system to support socio-economic development Through effective policies that regulate the market and interest rates, this intervention provides banks with specific benefits and restrictions, ultimately increasing stability and minimizing the risk of crises.
Circular 39/2016/TT-NHNN and Circular 43/2016/TT-NHNN, effective March 15, 2017, introduced enhanced standards for interest rates, loan durations, and consumer finance These regulations contribute to a more reliable banking industry by frequently updating the regulatory framework, ensuring that certified products and services offer greater benefits to clients.
Economic cycles significantly impact banks, with stable economic growth providing businesses ample opportunities to expand and increasing the demand for loans High per capita incomes and low unemployment boost consumer demand and savings, leading to more consumer loans Conversely, during economic downturns, capital absorption diminishes, and borrowers struggle to utilize disbursed loans effectively, leading to late payments and disruptions in the scale and quality of banks' credit activities.
Fluctuations in interest rates and market rates significantly influence banks' interest rates High inflation complicates capital mobilization, necessitating that deposit interest rates align with market trends to attract capital and fend off competition Elevated deposit rates lead to higher lending rates, negatively affecting the investment climate Consequently, the purchasing power of the Dong declines, while gold and foreign exchange prices rise, resulting in inevitable challenges in capital mobilization and exchange rate risks.
The exchange rate between the VND and USD experiences significant fluctuations, with the USD/VND rate changing hourly in the official market These rapid variations can lead to major shifts during the trading day, creating both opportunities and risks that greatly impact the mobilization of foreign currencies essential for supporting export activities.
Vietnam's rich cultural values and unique social elements have evolved significantly alongside its economic development, leading to higher civil intellectual growth and improved living standards These cultural values are essential for the society's sustainability and prosperity, prompting widespread protection of cultural factors Additionally, cross-cultural interactions influence consumer sentiments, lifestyles, and development prospects, particularly in sectors like banking Social factors, including population size, education levels, and quality of life, play a crucial role in shaping banking operations.
In the past five years, Vietnam has experienced a significant socio-cultural transition that has positively impacted the banking industry Young and middle-class consumers are increasingly embracing banking services to meet their financial needs, such as funding education abroad, starting new businesses, and purchasing homes and vehicles.
Techcombank faces competition from both major commercial banks like Vietcombank, Vietinbank, BIDV, and AgriBank, as well as non-state rivals such as VPBank, VIBank, and ACB In response to its competitors' aggressive expansion of their banking networks, Techcombank is enhancing its competitive edge by investing in advanced technology, state-of-the-art facilities, and a highly skilled workforce.
Techcombank stands out among its competitors due to its commitment to technological advancement Since 2000, the bank has implemented the Terminos management system, allowing clients to conveniently deposit and withdraw cash at various locations, setting it apart from others in the industry Furthermore, since 2013, Techcombank has launched 25 significant technological projects aimed at automating commercial processes, enhancing data management, and improving customer relations.
Depositors play a crucial role in the banking industry, as their support is essential for its survival and growth Techcombank effectively mobilizes resources through multiple channels, including deposits, the interbank system, and capital trust investments.
Borrowers have significantly less power than banks when it comes to obtaining loans They must meet stringent credit requirements set by the banks, which ultimately decide whether to approve or deny the loan based on the borrower's credibility and the potential returns on the loan.
Techcombank is now catering to a diverse customer base, reflecting the broader trends in the banking industry Notably, children can open savings accounts at Techcombank with the assistance of their guardians.
Techcombank faces increased competition from both domestic and foreign banks due to Vietnam's recent comprehensive opening policies in the banking sector The influx of foreign banks poses a significant challenge, as they bring substantial capital resources, advanced technology, and highly skilled personnel, gradually infiltrating the domestic banking market.
The threat of new entrants in the banking industry has historically been low, as the State Bank of Vietnam (SBV) has not issued any new bank licenses in the past decade However, with the service sector mandated to open at least 70% in 2015 and reaching full 100% openness by 2020, the landscape is changing Consequently, the imminent entry of numerous international brands is expected to increase competitive pressure in the banking market.
Basically, banking products and services can be classified into the following five categories:
The substitution risk for banking products is minimal, as banks are recognized as the most reliable and secure financial institutions They offer these services at competitive prices while maintaining high standards of professionalism in their operations.
2.4.3 The organization of the Marketing department in Techcombank
2.4.3.1 The organizational chart of the Marketing department
Figure 2.2 The organizational structure of Marketing Department in Techcombank
2.4.3.2 Main targets of the Marketing department
1 Support and develop business activities of Techcombank by product advertisement, branding, distribution channels and customer service
2 Research markets, consumer behavior and general development policies of the banking systems
2.4.3.3 Main missions of the Marketing department
1 Segment the market and propose appropriate customer segments and target markets
2 Construct, propose and develop strategies for business development and main & complimentary products
3 Construct and effectuate strategies for Marketing, Customer Care and Customer Relation
4 Provide professional support related to Marketing activities for grassroots units
5 Develop and implement regulations on the use of Techcombank's name and symbol design
The Marketing department of Techcombank has operated professionally with high level of expertise, thus forming a high competitive ground for Techcombank compared to other
-g competitors during the harsh business environment of banking industry This fact was reflected by the business performance and achievements of Techcombank during the past years
2.4.4 The mixed Marketing strategy of Techcombank
SUGGESTED SOLUTIONS TO MARKETING OPERATION OF TECHCOMBANK
Operation plan of Techcombank
In the 2016 annual stakeholders' meeting, a decision was made to focus on sustainable development for Techcombank in 2017, with all profits from 2016 allocated to this plan Additionally, Techcombank aims to increase its chartered capital through an IPO in the future Key objectives for Techcombank by the end of 2017 include achieving significant growth and enhancing financial stability.
• Outstanding loans value will rise to VND 181,067 billion, 16% growth The ratios of credit group 3 and 5 will be lower than 2% if combined
• Total mobilization value is going to be VND 227.133 billion, 31% growth
• Target for profit before tax is expected to be VND 5,020 billion, 26% growth
• Total assets will be VND 279,017 billion, 19% growth
• ROA and ROE at the end of 2018 will be 1.65% and 18.22% respectively
• The revenue structure still bases on net interest income (approximately 75-77%), with the transition of revenue structure to fee income, from 13% to 19%
• Fully comply with the new set of adequacy ratios in banking operation
Techcombank prioritizes customer satisfaction as the cornerstone of its success, aiming to deliver comprehensive and innovative financial solutions With a commitment to excellence, Techcombank strives to establish itself as a leading domestic bank while competing effectively with global financial brands.
In 2017, Techcombank aimed to mitigate credit risk by shifting its revenue structure towards fee income, reducing reliance on outstanding credit The bank focuses on supporting small and medium-sized enterprises (SMEs) and ultra-small and medium-sized enterprises (USMES) to enhance Vietnam's overall economic performance With a strong track record in the SMEs sector, Techcombank offers a diverse range of high-quality products tailored to meet the needs of these businesses.
Solutions to Marketing operation
3.2.1 Products & Services – Enhance convenience of products
Techcombank has made significant strides in developing and transforming its product offerings to cater to a diverse client base However, there remains an opportunity to introduce additional product lines that align with the specific market segments served by Techcombank.
Techcombank is currently targeting young, successful individuals who seek banking products and recognize the advantages of financial solutions While the bank has successfully introduced key offerings such as auto loans, home loans, and education loans, it currently lacks essential services like travel and marriage loans Given the cultural context of Vietnam, there is a significant demand for these financial packages, as many young Vietnamese are eager to leverage personal finance options for marriage and travel, enhancing their quality of life and security Additionally, these offerings align well with Techcombank's marketing strategy and its segmented market approach.
As societies evolve, a variety of innovative financial solutions have emerged, including payment services through social networks, mobile transfers, cardless ATM services, and automated bill payments These advancements aim to simplify processes, save time, and enhance convenience and transparency for consumers To implement these products effectively, a strong collaboration between banks and third-party providers, such as media companies and utility suppliers, is essential Consequently, Techcombank must develop a robust technological infrastructure, particularly in IT management and technology services, to support these advancements.
3.2.2 Price – Competitive prices to attract prospects
- Attracting more prospects such as medium-earning households and individual clients, students, large SMEs of different industries
- Retaining existing clients by promotions and favorable discounts as well as attractive rates
- Saving large amount of fee such as non-charge automatic payment, low-cost interbank cards or free-of-charge services
- Earning more profit without hurting the consumer confidence and trust
In today's stable economy, creating appealing plans for customers is crucial, particularly as bank clients are increasingly sensitive to interest rates This strategy proves to be highly effective for both households and individual clients.
Corporate customers provide a significant and cost-effective source of mobilization for the Bank To optimize this idle capital, it is essential to invest and manage payments effectively Additionally, timely renewal and supervision of interest rates are crucial, especially since the base and reference interest rates have remained unchanged since May 2016, indicating a stable and balanced strategy with minimal market fluctuations.
Small and medium-sized enterprises (SMEs) in Vietnam have a significant demand for loans and financial solutions, presenting an ideal market for Techcombank to offer incentive loans with effective supervision The interest rates for SME products are attractive, particularly for suppliers and merchants associated with major conglomerates like Cotecon and Vinamilk However, underprivileged SMEs still face challenges due to the high rates applied to them.
3.2.3 Place – Widen the online distribution network & channels in the South
Techcombank's distribution network in the Southern region remains underdeveloped, particularly in the rapidly expanding areas of Ho Chi Minh City As demand for loans and financial solutions rises, this presents a significant opportunity for Techcombank to penetrate the market and increase its market share.
Techcombank's TSO acts as vital connection points between the bank and its customers, transforming consumer perceptions and desires in key regions To stay ahead of competitors, it is essential for Techcombank to engage with potential clients in these areas proactively As part of its 2017 development plan, the bank aims to establish at least 200 additional connection points in major cities such as Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, and other economic hubs across Vietnam.
Internet Banking stands out as a key feature of this plan, with the branch network and ATM system functioning through an e-bank platform that requires standardization for improved efficiency With over 20 million users engaging in Internet Banking and Home Banking, the online channel proves essential The benefits of online banking include 24/7 accessibility, convenience for clients, and cost-effectiveness.
3.2.4 People - Construct an advanced system of human resources
In 2016, Techcombank excelled in nationwide talent recruitment through diverse initiatives like Management Trainee programs and Job Fairs Their internal systems, including Job Cat and the Techcombank Talent Pool, highlight the bank's commitment to human resources Recognizing that, in the banking industry, products can be easily replicated, Techcombank understands that its employees are its most valuable assets.
The Marketing department at Techcombank is in need of fresh talent to adapt to the rapidly evolving landscape of marketing tools and techniques, including viral videos, social networks, and SEO To fully leverage these advancements, it is essential to organize training courses for staff on new techniques and market segments By harnessing expertise in consumer insights and banking market trends, the Marketing team can develop innovative action plans that capture greater audience attention.
To retain top talent and align the interests of shareholders, employees, and the bank, Techcombank should enhance its remuneration policy alongside staff training While the current compensation mechanism is competitive and includes performance-based bonuses, training funds, discounted credit programs, and employee stock ownership plans (ESOP), it is crucial to regularly adjust these policies to meet market standards This will ensure that dedicated employees remain committed to Techcombank and contribute to its success.
3.2.5 PR & Event organization – More engagement with media and construction of innovative events
To thrive in a competitive landscape, banks must prioritize understanding their customers' needs and desires Techcombank effectively targets four distinct customer segments: residential customers, small and medium-sized enterprises (SMEs), large enterprises, and financial institutions Each segment is approached with a tailored strategy, ensuring that Techcombank meets the unique requirements of its diverse clientele.
Techcombank faces a significant challenge in gaining visibility for its campaigns To enhance awareness of upcoming promotions and events, the bank should collaborate with PR agencies and high-traffic online news platforms specializing in economic and banking news, such as cafef.vn, vnexpress.net, vietstock.vn, thoibaonganhang.vn, and vietnamnet.vn These websites attract tens of thousands of daily visitors, and effectively utilizing online PR strategies could significantly increase client engagement with Techcombank's campaigns.
Techcombank's current initiatives have yet to make a significant impact on society, particularly among its intended audience To effectively engage young, successful individuals, the bank should focus on enhancing its image by offering premium products that cater to their desire for recognition and satisfaction.
3.2.6 Physical evidences – Invest in infrastructure for Marketing operation