The development of e banking system of vietnam technological and commercial joint stock bank,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FACULTY -***** - GRADUATE THESIS THE DEVELOPMENT OF E-BANKING SYSTEM OF VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT-STOCK BANK Student: Bui Phuong Linh Student code: 16A7510076 Class: K16-ATCB Supervisor: Mrs Nguyen Phuong Lan (MA) Hanoi, May 2017 Banking Academy Graduate Thesis DECLARATION I hereby declare that this thesis is the product of my own work and effort It has not been applied or posted for any degree or previously submitted anywhere for any commercial or personal purpose All the sources I have used have been indicated and acknowledged by means of completed references Signature Bui Phuong Linh i Banking Academy Graduate Thesis ABSTRACT The constant innovations in telecommunication technology have change the face of banking sector Banks now target the provision of products and services through electronic channels, namely Electronic banking or E-banking Like other commercial banks in emerging economies, banking institutions in Vietnam have kept implementing E-Banking service and achieved initial outcomes This study examines the current situation of E-Banking development in Vietnam Technological and Commercial JointStock Bank by analyzing four most potential products: F@st i-bank, F@st Mobile, Cards and ATM/POS in the period of 2005 – 2016 The results have pointed out serveral auspicious attainments in developing E-Banking in Vietnam However, their limitations remain worth concerning and need to be dealt with in the forthcoming time Therefore, the final objective of the thesis is to make recommendations to the bank itself so that EBanking could be effectively exploited With great effort and devotion, it is my heartfelt hope to get to the bottom of all research subjects in the graduation thesis: “The Development of E-Banking system in Vietnam Technological and Commercial JointStock Bank” ii Banking Academy Graduate Thesis DEDICATION I sincerely dedicate this graduation thesis to my family, especially to my beloved mother, since she is the only reason and motivation for me to keep trying to have a happier life and she always encourages me every single day by her love iii Banking Academy Graduate Thesis ACKNOWLEDGEMENT First and foremost, I would like to extend my heartiest appreciation to all my lecturers in the Banking Academy of Vietnam, who have inspired me with knowledge of English as well as soft skills and beautiful memories throughout my four-year learning process My special gratitude goes to my supervisor, Mrs Nguyen Phuong Lan – Lecturer of Foreign Language Faculty – Banking Academy of Vietnam She provided great and enthusiastic immeasurable support, useful guidance during all stages of the study She even helps me to fix my every small mistake at late nights Those precious comments and encouragement really helped me and gave me motivation to complete the graduation thesis I am heartily thankful to the Vietnam Technological and Commercial Joint-Stock Bank, especially Ms Luong Hai Yen, who carefully consulted and guided me during my internship period at the bank I would like to emphasize that all my priceless experiences with Techcombank, where I had a great opportunity to experiences banking environment, change my attitude, thoughts and behaviors to become who I am today, were very memorable and full of learning and challenges Last but not least, I would like to express my sincerely thanks to my family and friends for their unconditional love and support Thanks to their encouragements and advices, I have more strength and patience to fulfill this important landmark Due to time constraints and limited capacity of the researcher, there will be inevitably a number of shortcomings in my graduation thesis Thus, in order to improve the thesis, I am looking forward to receiving feedbacks from the lecturers i Banking Academy Graduate Thesis LIST OF TABLES AND FIGURES Table Number Name of Table Table Total Actual Activities in 2014-2015 Table Transaction results using F@st Mobile in 20152016 Table Number of issued card and total payment value in 2005-2006 Table Issuance and payment fee Figure number Name of figure Figure Charter capital of Techcombank in 1995-2010 Figure Total Asset in 1995-2015 Figure Number of branches and customers in 1995-2015 Figure Total transaction amount in 2014-2016 Figure Total transaction volume in 2014-2016 Figure Growth rate in September-December 2016 Figure Number of payment card in March 2016 Figure Number of customers basing on segments in 2016 Figure Number of POS and ATM of Techcombank in 2015 ii Banking Academy Graduate Thesis LIST OF ABBREVIATIONS Abbreviation Explaination The Joint Stock Commercial Bank for Investment and Development of BIDV Vietnam Techcombank Vietnam Technological and Commercial Joint-Stock Bank Vietcombank Joint Stock Commercial Bank for Foreign Trade of Vietnam Deustch Bank Deustch Bank AG SWIFT Society for Worldwide Interbank Financial Telecimmunication ANZ Australia and New Zealand Banking Group Limited HSBC Hongkong and Shanghai Banking Corporation OTP One-time password KPMG Peat Marwick International and Klynveld Main Goerdeler ATM Automatic Teller Machine POS Points of Sale Moody Moody’s Corporation IT Information Technology Smartlink Smartlink Network System Ltd.Company VNBC Vietnam Bank Card PCI-DSS Payment Card Industry Data Security Standard USD The United States dollar VND Vietnam Dong EUR Euro ADSL Asymetric digital subscriber line EVN Vietnam Electricity iii Banking Academy Graduate Thesis TABLE OF CONTENTS I INTRODUCTION 1.1 Rationales 1.2 The Aim and Scope of the study 1.3 Research Methodology 1.4 Organization of the study 1.5 Limitation of the study .4 II THEORETICAL – BACKGROUND OF THE STUDY 2.1 Context for the development of Electronic banking 2.2 Background: .5 2.2.1 Definition and early stage of E-Banking 2.2.2 Types of E-Banking: 2.2.3 Benefits/ Roles of E-Banking 12 2.2.4 Possible problems of E-Banking 15 2.2.5 Criteria to develop E-Banking: 16 III EMPRITICAL RESULTS 18 3.1 Basic knowledge of Technical and Commercial Bank of Vietnam 18 3.2 Establishment and development of E-Banking of Technological and Commercial Bank of Vietnam 21 3.2.1 Establishment 21 3.2.2 Products 22 A F@st i-bank: 22 B F@st Mobile: 26 C Cards: 31 D ATM and POS: 37 3.3 Achievement and Problems 40 IV SOLUTIONS AND RECOMMENDATIONS 43 4.1 Solutions and recommendations: 43 4.2 Expectation: 45 iv Banking Academy Graduate Thesis V CONCLUSION 47 VI REFERENCES 48 v Banking Academy I Graduate Thesis INTRODUCTION 1.1 Rationales In the world history, there were several revolutions occurring such as The Socialist Revolution or The national democratic revolution,… Each revolution led to many opinions which were both positive and negative Nevertheless, there is one revolution that people can hardly deny its benefits, which is Technology Revolution Technology is now applied and used popularly and widely in any aspect of life, even in Banking and Finance System Specifically, I this research to find out the advantages and the impact of one typical kind of Technology used in Banking system – Electronic Banking In the modern 21st century, people are used to living in a fast, energetic and informative life Therefore, the birth of E-Banking system is inevitable Gradually, it becomes one of the essential parts of human's life When doing the research, I have found out that E-Banking system has been launched and experienced many times in many countries Though regarded as a potential market, E-Banking in Vietnam has not been matured It is only a new technology and has not been exploited to the maximum benefits As a result, it is of necessity to access the development of E-Banking, research limitations and overcome challenges For all the reasons above, and in order to contribute to improving the quality of banking services in Vietnam, especially in Techcombank - one of the most successful bank in applying E-Banking into the system, the researcher chose E-Banking and its development as the topic for graduation thesis, to find out more detailed about the system, the way it operates and its true value to the modern life Hopefully, the topic will provide readers with a detailed view of the current E-Banking system of the bank as well as help Techcombank and others have orientation and measures to improve electronic banking services in the new period Banking Academy Graduate Thesis c, Activities results: Table - Number of issued cards and total payment volume in 20052006 Year Quarter Quarter Quarter Quarter 2.2005 4.2005 2.2006 4.2006 Issuance cards 14,591 50,566 81,674 129,002 Total payment 240,038 629,821 559,575 713,393 volume Source: techcombank.com.vn The chart above illustrates the results of issuance and sales of payment card of Techcombank Overall, the figures gradually increase through each quarter According to reports of Techcombank Card Centre, the results were higher than expected In 2004, following VCB partner contract, Techcombank must issue 5000 cards, ATMs and 15 POS However, the chart proves that Techcombank issued 17000 cards, about 340% of target, in which there were 14500 personal accounts opened new This is due to the benefits for customers from the card and other online services Besides, the number of transactions and the total amount money transacted also rose greatly Thanks to modern technology, good connection between Techcombank’s and Vietcombank’s management system, guaranteed security, accuracy, the number of transaction grew up from around 20-30 transactions per day to more than 700 transactions per day at the end of December, 2006 Likewise, the sales result increased from 240 billion of money transferred in Quarter II 2005 to over 700 billion at the end of 2006 34 Banking Academy Graduate Thesis Figure - Number of payment card in March 2016 8,454,827 3,412,238 1,012,000 2,191,472 45,136,729 VCB Sacombank MSB Techcombank Other bank Source: techcombank.com.vn 10 years later, the number of payment cards have increased a lot According to the Market information in March 2016 (illustrated by pie chart above), the figure of Techcombank was 2,191,472, accounted for 3% of the total card market The number of customers having transactions are divided into three segments as the charts below Figure – Number of customers basing on segments in 2016 Number of individuals having transactions in 2016 1,250,000 Number of SMEs having transactions in 2016 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 1,210,000 1,200,000 1,150,000 1,120,000 1,100,000 1,050,000 1,050,000 1,000,000 950,000 2013 2014 2015 16,065 12,192 2013 35 12,858 2014 2015 Banking Academy Graduate Thesis Number of corporations having transactions in 2016 409 410 400 390 380 … 372 370 360 350 2013 2014 2015 Source: techcombank.com.vn Furthermore, income from issuance fee of Techcombank went up remarkably in the year of 2006 as the table follow This is due to the digital market and technological market that urge customers to change their way of spending Only one year after lauching new products, this result was beyond expectation Table – Issuance and payment fee in 2006 Month March ISSUANCE FEE AND PAYMENT FEE ISSUING CARDS POS ATM Total - - - - 45 12 57 April May 109 42 160 June 84 38 127 July 108 46 153 August 114 52 173 September 231 47 281 October 274 55 334 November 313 58 378 December 382 74 17 473 Total 1,613 456 67 2,136 Source: techcombank.com.vn 36 Banking Academy Graduate Thesis D ATM and POS: Feature: ATM, or Automatic Teller Machine, is machines having money inside located on streets so as to serve customer to withdraw money and check account balance POS, or Point of Sale, is machines approve payment through cards POS allows buyers to pay sellers in the form of card such as Visa or MasterCard and F@st Access Apart from traditional POS, Techcombank has co-operated with i-box Vietnam to introduce a whole new product, which is called mPOS By using this, customers can make payment through iboxPro – an appropriate application with a card reader machine Besides, the product is guaranteed by security standard PCI-DSS Source: tinhte.vn 37 Banking Academy Graduate Thesis Figures Figure – Number of POS and ATM of Techcombank and others in 2015 POS ATM 2,317 1,200 192,255 All banks 16,112 All banks Techcombank Techcombank Source:nganhangonline.com The pie chart gives information about the market share of POS and ATM number between Techcombank and the whole banking system at the end of 2015 According to this, Techcombank’s marketshare of POS and ATM was quite small for the whole banking system There was 2,317 POS in the bank network, which accounted for 1.21% The figure for number of ATM was higher, at 7.45% in compared with others About POS, there were some reasons that the market share was low Firstly, Techcombank have focused its resources into Internet Banking and F@st Mobile Hence, the bank will not put its concern too much Secondly, the fee applied for this service is quite higher than the common level of other banks Specifically, 2,2% per transaction through POS was the fee of Techcombank, compared to 1,7% of Vietcombank, 1,6% of TienPhongBank and 1,1% of Agribank Therefore, businesses concerned a lot and are tend to choose other’s services rather than that of Techcombank In terms of ATM, Techcombank must locate machines in reasonable distribution so as to make the network is divided into equal parts 38 Banking Academy Graduate Thesis Table – Number of transaction and volume through POS in 20152016 2015 Month Transaction amount 2016 Transaction volume (mil VND) Transaction amount Transaction volume (mil VND) January 66,899 173,105 92,418 267,966 February 52,499 140,985 57,726 171,092 March 59,527 174,825 72,108 243,596 April 63,156 170,743 71,206 225,154 May 64,105 210,304 77,835 285,867 June 65,480 183,148 75,702 240,455 July 69,201 183,014 83,578 252,138 August 66,846 178,494 73,675 217,773 September 59,399 161,460 69,908 195,940 October 72,037 200,059 78,329 226,666 November 77,996 238,460 91,767 325,727 December 86,587 268,107 106,795 326,553 Source: techcombank.com.vn The table compares the transaction amount and volume through POS between 2015 and 2016 Overall, there was a steady growth in both transaction amount and volume Moreover, it is obviously that the figures tended to peak at the highest point at the end of the year This was due to the demand for money because year-end was the period that people have to buy or sell many things and to prepare for new year ahead Moreover, Techcombank widened its POS network to many businesses for their payment system The more system installed, the more money transferred Especially, the birth of mPOS- a new payment method, contributed remarkably to this result 39 Banking Academy Graduate Thesis In short, ATM and POS are an effective transaction and payment method With the huge convenience and benefits to both customers and bank, it is certain that 2017’s result will be higher and beyond all expectations • Pro and con: Pros: ATM and POS provide a quick and accurate transactions In addition, through POS settings, it is also an income source for Techcombank when business registers to use • Cons: +) In terms of POS: Firstly, the service fees for POS is too high than other banks, which may lead the customers must take this into consideration in their business Secondly, mPOS system is not quite popular for all businesses Hence, the number of mPOS installed was still low +) In terms of ATM: Some ATMs of Techcombank does not have enough the minimum money or money with low face value (such as 50,000 VND, 100,000) For example, if a student wanting to withdraw a small amount of money – 100,000 VND, but a nearby ATM only has 200,000 and 500,000, he/she cannot withdraw from this ATMs Then she/he has to find another ATM or use ATM of another bank, which may charge her/him a higher fee This situation actually happens all around every day for every bank In addtition, the locations of some ATMs are not easy to find or the common hygiene of the locations are not good enough This will have negative impact on customers’ feelings when they come to ATMs to withdraw money or check their balance accounts 3.3 Achievement and Problems a Achievements: Techcombank itself has achieved many landmarks and success in EBanking system as well as its products Firstly, in 2013, Techcombank was reward “e Asis Award” with “ Electronic commercial solution to narrow digital gap” 40 Banking Academy Graduate Thesis Then, Techcombank was very honor to receive “The best banking personal service” awards and “The Best Electronic Bank in Vietnam” from Global and Banking & Finance Review The next, on 26/11/2015 in HoChiMinh City, Techcombank received awards namely: “Top banks having the highest Visa Debit Volume of Payment”, “Top banks having the highest Visa Debit Volume of users” and “Top banks having the highest Visa Debit Volume in 2015”, stood behind Vietcombank and HSBC One year later, in 2016, Techcombank won the prize “Leadership in Cobrand products 2016” and was the leader at “Highest Average Spend for Visa Affluent Debit 2016” Those prides prove that with all of effects to bring out the best services for customers, Techcombank now has been recognized and must try harder to become the best retail bank in Vietnam in the future ahead b, Problems: Inspired of success achieved, there are still some problems that Techcombank needs to improve or solve First of all, that applying technology and communicating into other banks is different Each bank is now using its own E-banking system Therefore, it is unavoidable to meet some problems when using different banks due to the systems are not be synced Secondly, the base for E-Bank is the data link Customers can use Ebanking product only when having Internet However, this link cannot work out well forever That is the reason why some may have trouble with connection They may have to wait too long of sometimes, the link is disconnected, which cause them dissatisfaction with the services Thirdly, it is the problems related to human resources Nowadays, in Techcombank, people who are professional in banking and finance are lack of technology and information and communication Most of them graduated from 41 Banking Academy Graduate Thesis economic and finance schools By contrast, those who are professional in technology lack of banking and finance knowledge Security is an integral part in every aspect of bank For E-Banking, this should be put as the very first concern Nevertheless, hackers or corporations with bad intention always want to attack into banking system Every month, in internal communication of Techcombank, there are many information about external email accessed into the system and people are warned about the importance of this issue Moreover, it does not related to only bank’s data but also for bank’s partner 42 Banking Academy Graduate Thesis IV SOLUTIONS AND RECOMMENDATIONS 4.1 Solutions and recommendations: According to existing weaknesses in E- Banking system in general and the system of Techcombank in particularly, there are some approximate solutions or recommendations The first is the solution for database of inter-bank Government can easily take part in building a strong, giant and fluent system between different banks For example, two or many banks can gather their information about clients to State Bank of Vietnam to filter out common customers Then those who are in the common list will be linked information from one bank to another This will simplify the process when transferring money or doing transaction because all the data are linked to each other Or the E-banking system of one customer A can automatically link to another account of A in another bank Secondly, Techcombank must exploit more about marketing online, which is shown the most clearly through the bank’s website The website must conclude all data, and information for customers to search online Therefore, it will lessen the time for both banks staff and users as well Some products on Techcombank website are not designed and updated enough information, or some are in Vietnamese, but no English version Hence, for foreign customers, the bank needs to focus on this segment of customer to attract them to use its services In addition, register process for E-Banking system needs to be more simplier and consume less time Actually, customers still have to go to branches to complete their registration Therefore, if Techcombank can create a system that allows clients to apply, check and open account or services online, it can be sure that many customers will choose Techcombank as their financial friend Apart from marketing online, traditional marketing is also important Techcombank should use other channels such as newspapers, media, slogan, standee, brochures,… or can be 43 a sponsor for Banking and Banking Academy Graduate Thesis Financial Competitions at university to broaden its brand and reputation as well For instance, every year, there are many competition as well as labour fairs organized at Banking Academy Techcombank should take this as a chance to promote the bank and gather new potential customers Thirdly is about human resources of Bank One of the biggest barrier in integration is the language (English) Nowadays, it can be easily seen that all transactions of informative technology and electronic trading use English, even in coming-ahead application In Techcombank, there are few employees who are fluently in English This is definitely a barrier for bank wanting to expand the market and creating new products or applying new application from developing countries Through 23 years of establishment and development, Techcombank is known as one of the best banks in training human resources with several annual training courses In reality, Techcombank is now implementing training courses However, the context of training courses usually are Risk Management, Communication Crisis, Complying Course,… which is only about bank operation only, not including personnel improvement Therefore, Techcombank should design more courses of English, especially English in Finance and Banking so that all the employees can improve their ability Moreover, the bank can invite foreign teachers or professionals in Banking and Finance and hold some talkshows as opportunities for staff to not only practice English but also widen knowledge gathered from many parts of the world Another problem in traning people in Techcombank is that employees only learn courses having test after training online Most of them still have not finished their personal courses such as Microsoft Office courses Therefore, Techcombank should find a way of how to attract all of them to learn and complete all the course It can be a obliged test or can be counted as one condition to raise salary after each period of six months To develop general electronic trading and particular E-Banking, it is essential for the bank to raise people’s awareness of the products and its benefits The most effective way to this is through marketing and communicating For 44 Banking Academy Graduate Thesis example, Techcombank should emphasize the advantages of those products for clients when they come to branches or on the website of the bank about the products In addition, Techcombank must guide customers how to use the application and product as well as the way to protect their information during using Moreover, the Customer Care Department should be upgrade to be more useful, easy to reach All the supporters must know exactly and detail about every product to serve the customer the best whenever they have problems The next issue that Techcombank should concern is Technology Techcombank itself is a Technology bank, so it will be ridiculous if a technological bank does not have the best technology Investment in technology is a long and effective strategy Techcombank not only need to consider which technology partner to co-operate for the new product but also focus on building a strong and security system Transaction related to account owner's name, transaction name and code, will easily be hacked if Techcombank does not have a good security network 4.2 Expectation: According to McKinsey consultant company, from 2011 to 2014, the percentage of the number of people using E-Banking in 10 Asian countries had increased more than times That figures of Indonesia and Vietnam was higher, more than times On the other hand, report from KPMG – one financial market researcher – proves that mobile devices will be the highest transaction channel in Asia Especially, in the future there will be an explosion of using mobile phone to transaction in South East Asia Data from Techcombank in 2015 showed that in comparison with 2014, the growth speed of the number of people using E-Banking was 73%, in which that number of transactions rose by more than 45% and the figures for online transactions increased by 42% As a consequence, with this growth speed, there is no doubt that in the future, E-Banking system will develop and expand in both quantity and quality 45 Banking Academy Graduate Thesis In the future, there will have some new products in E-Banking such as payment for insurance (many insurance partners), hospital receipts, investment in bond and securities (not only bonds), checking and approving international payment online, checking and allowance for loans, exchange currency online,… With such useful and various features, that Techcombank charge higher online service fees for user is acceptable since it brings many benefits and comfort Besides, it is possible that the bank creates a system that allows users to add or withdraw money without going to branches with zero fee for all transactions Up to now, VP Bank has launched Timobank, an application and product that customers only need to go to some special ATMs to add money in their account directly Techcombank should learn this technology and apply it into the bank system to simplify and save time for customers With a clear and right strategy, young, active and creative bankstaff, there is a strong belief that Techcombank can that and bring out the best service for all groups of customers Then, the bank will reach its goal for become the best retail bank in Vietnam in 2020 46 Banking Academy Graduate Thesis V CONCLUSION In general, E-Banking is not a whole new product for banks in all over the world In particularly, E-Banking in Vietnam is not mature enough to be confident to compete with other countries’ In the background of the current economy, when digital era plays an integral part of human lifes, it is easy to understand why E-Banking is the key product that most of Vietnamese banks focus on to develop Techcombank is not an exeptional case Especially, with the reputation of a technological bank, Techcombank is always the leader for establishment and development E-Banking for the common Banking and Finance system of Vietnam In this thesis, due to the limitation of resources, researcher can only evaluate some aspects of E-Banking system in the bank such as current products and their situation, advantages and disadvantages, exitsting issues and some appropriate solutions Up to now, Techcombank has released and launched many beneficial products for each targeted group of customers To sum up, each product has certain succeed in buiding an online banking channel for customers as well as contribution for the bank’s reputation with the gradually increasing figures However, for the highest development of the bank, it is necessary to have new policies, new products and solutions to enhance the system and obtain the targeted set up in the strategy of the period of 2015-2020 Hopefully, the study does bring reader a vision in the status of Techcombank’s E-Banking system 47 Banking Academy Graduate Thesis VI REFERENCES During the process of doing thesis, I have used and take these sources as references: Techcombank annual report year 2015,2016 Some article in website: - http://www.sbv.gov.vn/ - http://tapchitaichinh.vn/ - https://tinhte.vn/ - http://laodong.com.vn/ - https://endtimestruth.com/ - http://doc.edu.vn/ - http://cafebiz.vn/ - https://en.wikipedia.org/wiki/Online_banking - http://www.investopedia.com/ 48