INTRODUCTION
Rationale
From 2005 to 2009, Vietnam's commercial banking system primarily focused on wholesale banking, catering mainly to large enterprises However, the economic crisis revealed a gradual decline in profits across the banking sector due to intense competition and the State Bank of Vietnam's ceiling interest rates Additionally, the economic downturn forced banks to shift their target customers, recognizing the significant demand among the Vietnamese population for individual banking products such as home, car, and education loans, along with modern services like Internet and Phone Banking Consequently, from 2012 to 2015, retail banking services experienced rapid development, marking a "booming period" as banks increasingly targeted individual customers and small to medium enterprises This shift led commercial banks to continually innovate by launching new products and services, leveraging technology to enhance customer utility, stimulate capital flows, and support socio-economic development.
The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has emerged as a leader in providing a comprehensive range of retail banking products and services in Vietnam's commercial banking system Recognizing the significance of the retail banking sector amid ongoing international economic integration, BIDV is committed to enhancing its existing offerings and leveraging modern technology to develop innovative retail services that better serve the evolving needs of customers.
In an unstable asset structure and a saturated wholesale banking environment, it is crucial for commercial banks to prioritize the development of retail banking However, international economic integration presents significant challenges for banking service providers, as they face intense competition in the retail market from both domestic and foreign banks, which possess strong financial capabilities and extensive experience in modern banking service development.
BIDV is developing a competitive retail banking strategy to ensure rapid and efficient growth while effectively meeting customer demands This approach focuses on enhancing service quality and synchronizing operations to achieve optimal results.
“Developing retail banking services in Joint – Stock Commercial Bank for
Investment and Development of Vietnam”.
Objective
This study aims to explore the concept of retail banking services and the factors influencing their development It specifically focuses on assessing the current state of retail banking services at BIDV, evaluating both the achievements and limitations encountered Based on BIDV's strategic direction for retail banking service development, the thesis proposes solutions and recommendations to enhance these services effectively.
Subject and research cope
- Subject: Solutions developing retail banking service in BIDV
- Research cope: Retail banking service activities of BIDV from 2012 to 2015.
Research methodology
- Analysis, synthesis and evaluation of information from different sources and materials: newspapers and magazines, specialized journals, specialists‟ talks, the Internet, previous research and economists‟ points of view
The structure of thesis
The thesis is divided into 4 chapters with the detailed content below:
THE THEORY OF RETAIL BANKING SERVICES
The basics of retail banking services
Retail banking services encompass a variety of multi-utility offerings provided by banks to individuals, households, and small to medium enterprises These services are accessible through a network of branches and can also be directly accessed via information technology, electronic platforms, and telecommunications The evolution of retail banking services is driven by advancements in modern technology and distribution networks, enhancing the utility of banking for customers.
2.1.2 Characteristics of retail banking services
Retail banking services primarily cater to a diverse customer base, including individuals, households, and small to medium-sized enterprises (SMEs), such as privately owned businesses, partnership companies, and limited liability companies This expansive market presents significant potential, characterized by varying income levels, qualifications, interests, and preferences Customers in this segment are particularly attentive to customer care policies, pricing, interest rates, and banking methods Consequently, it is essential for banks to segment their retail banking market to implement effective marketing strategies and develop tailored products that meet the specific needs of these customers.
Individuals and households are small-scale customers focused on saving money, opening payment accounts, and borrowing for personal consumption In contrast, small and medium-sized enterprises (SMEs) are businesses that operate efficiently, enjoy stable revenue and profit growth, and seek to expand their operations while gaining access to advanced technology.
2.1.2.2 The quantity and scale of transaction
Retail banking services cater to individuals, households, and small to medium-sized enterprises (SMEs), representing a significant portion of transaction volume Despite the high frequency of these transactions, the scale remains relatively small when compared to the overall demand from individuals and SMEs Common retail banking activities include loans for purchasing homes, vehicles, or funding education, along with basic transactions like deposits, payments, and credit card applications Consequently, while these transactions are numerous and straightforward, their individual values tend to be modest.
The development of retail banking services is heavily reliant on the integration of advanced scientific engineering and modern technology Innovations in electronics, telecommunications, and the internet have significantly expanded the range of services available to customers For instance, automated teller machines (ATMs) enable cash withdrawals, while Internet Banking, Mobile Banking, and Home Banking offer convenience and accessibility Customers can now manage their accounts anytime and anywhere, marking a significant globalization of retail banking services.
2.1.2.4 Wide distribution network and diversified product
To reach a broader customer base and enhance operational reach, the bank must establish an extensive distribution network This requires increasing the number of branches, outlets, and transaction locations, supported by a dedicated team of knowledgeable and enthusiastic staff.
To strengthen retail banking services, banks must establish a broad distribution network and offer a diversified range of products that cater to varying customer needs Additionally, identifying the target market is crucial for promoting tailored services, allowing banks to concentrate on both the breadth and depth of their market offerings.
2.1.3 The main retail banking services
Commercial banks play a crucial role in the banking of debt assets by enhancing their capital for business operations and loan provisions They attract capital from individuals and SMEs through various non-term deposits, savings accounts, notes, and bonds While the contributions from each individual or SME may seem modest, the collective volume creates a significant and potential capital source for these banks To improve service quality and attract more customers, commercial banks have diversified their savings products, offering flexible terms and competitive interest rates For SMEs, the primary method of capital mobilization is through payment or demand deposits, which ensure the liquidity necessary for business transactions.
Traditional banking significantly contributes to high earnings through retail credit services, which encompass consumer loans, personal loans for various purposes (such as studying abroad or purchasing a car), mortgage loans, and loans for households and SMEs As socio-economic development progresses, personal and SME loans increasingly represent a larger share of commercial banks' total outstanding loans, making personal loans a crucial investment avenue However, these retail loans tend to be smaller and more dispersed, resulting in a higher average cost per unit of capital compared to other loan types Additionally, customers are highly sensitive to lending rates, terms, and procedures, leading commercial banks to face competitive pressures that impact profitability.
A bank card is a versatile financial tool issued by commercial banks, offering numerous benefits to customers It facilitates cashless transactions, allowing cardholders to withdraw cash, transfer funds, and check their balances at ATMs, as well as make purchases at various merchants For banks, card issuance and payment processes encompass essential activities such as lending, capital raising, and facilitating both domestic and international payments.
There are two primary types of payment cards: domestic and international International payment cards, such as Visa, MasterCard, JCB, and American Express, facilitate cashless transactions globally In contrast, domestic cards, issued by local banks, are primarily used for purchasing goods and services, as well as for withdrawing and transferring money at ATMs To enhance convenience, some banks also offer domestic debit cards with an overdraft limit for their customers.
Card services are crucial for commercial banks as they enhance capital generation, facilitate service charge collection, and bolster the retail bank's image in customers' perceptions By integrating technology applications, these services enable banks to effectively connect and leverage market opportunities, maximizing the benefits of infrastructure and information technology.
Currently, commercial banks utilize various payment methods, including internal money transfers, interbank transactions, and international transfers through foreign banks and clearing settlements Common payment forms encompass checks, payment orders, collection orders, letters of credit, and payment cards.
The transaction deposit account is a crucial advancement in banking technology, enhancing the efficiency, speed, and security of payment processes for businesses and individuals alike By offering non-cash payment options, commercial banks provide significant benefits to individuals and SMEs, facilitating easier transactions This service not only boosts bank revenues through service charges but also opens up opportunities for developing additional services, such as providing card services to individual customers through the establishment of personal payment accounts.
Overseas remittance services are offered by commercial banks and select institutions, enabling individuals to transfer money to and from abroad efficiently.
THE CURRENT SITUATION OF DEVELOPING RETAIL BANKING
Overview of Joint Stock Commercial Bank for Investment and Development of
3.1.1 The process of BIDV’s formation and development
The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) is the second largest commercial bank in Vietnam by total assets and the largest by total revenue as of 2015 As a state-owned enterprise organized as a conglomerate, BIDV collaborates with over 800 banks globally.
International transaction name: Joint Stock Commercial Bank for Investment and Development of Vietnam
Address: BIDV Tower, 35 Hang Voi Street, Hoan Kiem District, Hanoi City
Website: www.bidv.com.vn
Email: Info@bidv.com.vn
BIDV, originally established as the Bank for Construction of Vietnam on April 26, 1957, was founded under Decision No 117/TTg by the Council of Ministers Initially under the Ministry of Finance, the bank operated with 8 branches and a workforce of 200 employees Between 1981 and 1989, it underwent name changes to the Bank for Investment and Construction of Vietnam and later to the Bank for Investment and Development of Vietnam.
1990 to 27th April, 2012 The bank has been called Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) from this date until now
BIDV played a significant role in Vietnam's postwar economic rehabilitation and the execution of the first five-year plan from 1957 to 1965 To build socialism, Vietnam focused on two strategic tasks: combating American sabotage in the North and strengthening the South to achieve national unity.
(1965 – 1975), construction and development of national economy (1975 – 1989) and implementation of the reform in banking activity serving country‟s modernization
(1990 – now) In any circumstances, BIDV personnel always accomplish their mission – to be a solider of the Party on monetary financial front and investment and development of country
BIDV has been honored with numerous prestigious awards by the Party and the Socialist Republic of Vietnam, acknowledging its significant contributions over the years These accolades include the First-Class Independence Medal, the Third-Class Independence Medal, and the First-Class and Third-Class Labor Medals Additionally, BIDV has been recognized as a Hero of Labor during the renovation period and has received the Ho Chi Minh Medal for its exemplary achievements.
3.1.2 Business performance of BIDV in the period from 2011 to 2015
During the period of 5 years, BIDV‟s activities are stable and safe The total average assets increased by nearly 20%, confirming the position of the large commercial bank in Vietnam
Table 3.1: The result of BIDV’s business activity from 2011 to 2015
Lending (billion VND) 293,937 339,923 391,035 445,693 598,434 Profit before tax (billion
(Source: The annual report of BIDV)
As of December 31, 2015, total assets reached 850 trillion VND, marking a significant growth of 30.8% compared to the previous year and 2.34 times the amount in 2010 Fund mobilization, which includes customer deposits, the issuance of valuable papers, and deposits from the Vietnam Social Insurance, State Treasury, and Ministry of Finance, demonstrated robust growth, effectively meeting funding demands and ensuring the bank's liquidity Total capital mobilization amounted to 598,434 billion VND, reflecting a 24% increase and more than 2.46 times the figure from 2014.
By 2015, BIDV's outstanding loans and investments exceeded 804 trillion VND, marking a 26% increase since 2014 The charter capital saw a significant rise, increasing 2.6 times to 34,187 billion VND compared to 2010 This growth reflects BIDV's commitment to supporting enterprises, as evidenced by its profitability improvements, with a profit before tax of 7,473 billion VND in 2015 The bank achieved a return on assets (ROA) of 0.79% and a return on equity (ROE) of 15.5%.
Over the past five years, BIDV contributed 8,636 million VND to the State budget, with 1,927 billion VND in 2015 alone Recognized by international credit rating agencies like Moody's and Standard & Poor's, BIDV stands as one of the highest-rated banks in Vietnam Additionally, Forbes ranked BIDV among the top 2,000 businesses and 600 largest banks globally The bank has also received prestigious awards from the Party, State, and both domestic and international organizations, highlighting its excellence in areas such as monetary capital, information technology, retail banking, and e-banking.
In 2011, BIDV played a crucial role in enhancing liquidity for various commercial banks, notably aiding the consolidation of Saigon Bank, Vietnam Tin Nghia Bank, and Ficobank, while also providing timely support to DongA Bank under special control By 2015, BIDV successfully merged MHB into its system, achieving a remarkable and secure merger in just 55 days and completing the information technology transition within five months.
As of December 31, 2015, BIDV has established a comprehensive network across all 63 provinces and cities in Vietnam, comprising 1 headquarters, 182 branches, and 799 outlets The organization also includes 2 affiliated units, a staff training school and an information technology center, along with 2 representative offices in major cities like Ho Chi Minh City and Da Nang, and 6 international offices in Cambodia, Laos, Myanmar, the Czech Republic, Taiwan, and Russia Additionally, BIDV operates 4 subsidiaries: BIDV Securities Joint Stock Company (BSC), BIDV Insurance Joint Stock Corporation (BIC), BIDV One-Member Limited Liability Financial Leasing Company (BLC), and BIDV Asset Management Company Ltd (BAMC) The bank's extensive ATM network features 1,832 machines, complemented by 25,432 POS service machines.
BIDV has also established agency relation with more than 1,700 banks and branches in
BIDV operates in 122 countries and territories globally and is trusted by both bilateral and multilateral sponsors, including the World Bank, ADB, OPEC, AFD, Germany, France, and Japan, to manage over 150 ODA projects with a total commitment capital of $4 million The bank has also expanded its promotional activities and commercial investments in promising markets such as the Russian Federation, Europe, and Northeast Asia Notably, BIDV has made significant strides in penetrating the Japanese market and has established cooperation with MetLife, a leading US life insurance corporation.
From 2011 to 2015, BIDV demonstrated impressive and consistent growth across all key indicators, including total assets, fund mobilization, credit, retail, and services, with an average annual growth rate of 17% This performance solidified BIDV's position as a leading institution and played a crucial role in stabilizing the macro-economy while effectively supporting the government's monetary policy.
The situation business activities of retail banking services in BIDV
Capital mobilization is a crucial activity for banks, with raising funds from residents playing a significant role in overall capital acquisition Recently, BIDV has enhanced its existing products and introduced new offerings to better meet customer needs For instance, in traditional savings products, such as VND and foreign currency deposits, BIDV has adjusted interest rates and diversified terms to provide competitive pricing The bank has also launched attractive prize promotions to entice depositors Furthermore, BIDV has improved the balance between lending and deposits to ensure capital safety, enhance liquidity, and increase overall bank income.
Figure 3.1: The density and total raising capital from resident (Unit: % and billion)
It can be seen that, the total raising fund from citizen went up gradually over 4 years
In 2011, the capital mobilization structure improved significantly, with resident money deposits rising dramatically to account for 45% of total funds raised, surpassing the previous dominance of economic organizations This shift aligns with BIDV's strategic transition from wholesale to retail banking, positioning residential customers as the fastest-growing segment among the three customer groups.
In 2011, capital raised from citizens reached 129,205 billion, marking a 29% growth compared to 2010 By 2012, residential deposits experienced significant growth of 36%, making up 58% of total deposits From 2013 to 2014, residential deposits climbed from 211,232 billion (an 18% increase from 2012) to 248,962 billion (a 22.3% rise from 2013) Over four years, the share of residential deposits in total bank funding increased to 56.5% by 2014, up 11.5% from 2011, solidifying their dominant position in both size and market share.
For scale, BIDV‟s mobilizing capital from citizen has exceeded that of Vietinbank (in
2012), reached up and maintained the second position in the banking market (after Agribank) That contributed to the marked change in the structure of time deposit
- The density deposit in VND tends to rise over the year (from 86.2% in 2011 to 91.4% in 2015) The reason is that in this period, foreign currency exchange
From 2011 to 2014, the capital-raising landscape in Vietnam showed a stable trend in resident density The deposit interest rates for foreign currency were influenced by the State Bank of Vietnam's (SBV) interest rate ceiling, making demand deposits in foreign currency less appealing compared to those in VND.
Figure 3.2: The structure of raising fund from citizen by type of money (Unit: %)
(Source: The financial statement of BIDV)
Between 2011 and 2015, the term of deposit for periods exceeding 12 months saw a significant increase, rising from 19.25% to 43.1% In light of the current declining deposit interest rates, BIDV has introduced flexible products designed to encourage customers to shift towards longer maturity deposits, allowing them to benefit from higher interest rates.
Figure 3.3: The structure of raising fund from citizen by term (Unit: %)
(Source: The financial statement of BIDV)
No term Less than 12 monthsMore than 12 months
BIDV focuses on developing retail credit service for two main subjects: small and medium enterprises (SMEs) and individuals, households
BIDV offers short-term loans specifically designed for SMEs to address financial shortfalls in manufacturing and business operations Additionally, the bank provides credit line lending to support SMEs in fulfilling their working capital requirements, ensuring stable production and business continuity.
BIDV provides a diverse range of credit products tailored to meet the various needs of individuals and households, including home loans with terms of up to 20 years, unsecured consumer loans, car loans, initial public share offerings, installment payments, pledges, and the discounting of valuable papers.
Figure 3.4: The density and growth rate of BIDV’s retail credit from 2012 to 2015
(Source: The annual report of BIDV)
Between 2012 and 2015, retail credit experienced a significant growth rate, climbing from 24% to 44%, representing a 22% increase Additionally, the proportion of retail credit within total loans rose sharply from 13.5% in 2012 to 22.7% by 2015 By the end of 2015, the total scale of retail credit reached 181.373 trillion, highlighting its potential as a key revenue driver in retail banking services for BIDV The retail credit balance continues to grow steadily.
Between 2012 and 2015, the density and growth rate of retail credit significantly contributed to the overall outstanding loans, indicating that the bank successfully advanced its retail services during this period.
In recent years, BIDV, one of the four largest state-owned banks, has shifted its focus from state enterprise loans to prioritize small and medium-sized enterprises (SMEs) and retail activities The proportion of loans to state businesses significantly decreased from 37% in 2010 to just 20% in 2014, with private businesses and individual clients taking their place.
Figure 3.5: The lending structure by customers (Unit: %)
(Source: The income statement of BIDV)
From 2009 to 2014, state business loans experienced a significant decline, dropping from 35% to 20% In contrast, private enterprises and individual clients saw a gradual increase in their share of total capital during this period Specifically, private business loans rose from 51% in 2009 to 60% in 2014, while individual customer loans increased by 8%, reaching 18% in 2014.
BIDV, among the four state-owned banks, exhibits the lowest proportion of state enterprise loans, standing at 24%, compared to 32% for Vietinbank and 28% for Vietcombank, as reported by VPBS in 2014 This shift indicates BIDV's transition from a wholesale credit focus to an emphasis on retail credit.
Figure 3.6: The growth rate of loans for SMEs (Unit: %)
(Source: The annual report BIDV)
Over the past three years, there has been a consistent increase in the growth rate of SME credit, rising from 25.7% in 2014 to 28% in 2015 This growth is regulated by credit quality standards set by the Government and the State Bank of Vietnam (SBV) To support businesses, particularly SMEs, BIDV has proactively adjusted loan interest rates and implemented a credit package worth tens of billions of VND, focusing on priority sectors such as agriculture, fishery, and import-export activities.
Figure 3.7: The outstanding individual loan and the density of outstanding individual loan (Unit: Million VND and %)
2012 2013 2014 2015 the outstanding individual and household loan the density of outstanding individual and household loan
(Source: The income statement of BIDV)
Between 2012 and 2015, individual and household loans saw remarkable growth, increasing from 47,437,415 million VND to over 127,471,256 million VND, tripling in just four years Additionally, the composition of personal and household loans within the total loan structure also experienced significant enhancement during this period.
In 2012, individual and household lending accounted for 13.9% of total lending, but this figure increased to 21.3% by 2015 BIDV has successfully attracted a large customer base through a diverse array of credit products tailored for individuals and families, coupled with competitive interest rates and appealing promotions As a result, individual and household credit has become an increasingly significant revenue source for banks.
Evaluation business activities of retail banking services in BIDV
The catalogue for individual customers has been successfully finalized to address market demand, with a key highlight being the effective implementation of modern internet banking and mobile banking (IMBM).
From 2012 to 2015, BIDV developed a comprehensive range of over 80 competitive retail products across 10 different lines The bank consistently enhanced existing offerings and introduced new products aligned with its development strategy and customer needs As a result, BIDV's services saw significant success, with 35,550 enterprises utilizing BIDV's online business services and 1,279,070 individual customers benefiting from its online offerings, which ranked among the top 100 trusted products in 2015.
Secondly, the quantity of individual customers was extended (increasing by 4.03 million customers in the period from 2012 to 2015)
In 2015, the total number of individual customers reached 7.7 million, reflecting an average annual growth rate of 35% and a 2.1-fold increase since 2012 The VIP customer segment comprised over 5,600 individuals, accounting for 0.8% of all individual customers, with an impressive average growth rate of 45% during this period This data highlights the ongoing consolidation and expansion of the individual customer base.
Thirdly, the operation network is being promoted and is a very important foundation for market penetration, retail banking service development
As of now, BIDV operates a comprehensive network comprising 183 locations, including 1 headquarters, 182 branches, and 799 outlets across 63 provinces and cities in Vietnam, along with 2 affiliated units, 2 domestic representative offices, 6 international representative offices, and 4 subsidiaries Notably, in 2015, BIDV experienced significant growth with the addition of 63 branches and 284 trading departments since 2011 The bank's ATM network features 25,432 POS machines and 1,832 ATMs, interconnected with 33 banks nationwide BIDV ranks fifth in the number of ATM cards, holding a 9.7% market share in Vietnam's card market, reflecting a positive outcome amid the State Bank of Vietnam's stringent network expansion regulations.
Fourthly, BIDV has increased the utility of retail banking products and services
BIDV‟s products are not only diversified, but they also are high utility, so they meet many different customers‟ demands
When opening a deposit account at BIDV, customers receive an ATM card that allows for cash withdrawals at BIDV ATMs and other banks connected to the Banknet network This card can also be used for purchases at supermarkets and restaurants, as well as for money transfers and balance inquiries Notably, the Power ATM card enables customers to overdraft their accounts up to a predetermined limit set by BIDV.
With BSMS service, customers can check balances of payment, deposit and saving account and receive immediately notifications about the change of their account‟s balance at anywhere
BIDV has introduced a collection service as part of its Smart@ccount package for business clients Additionally, the bank has launched Vietnam's first Social Media Command Center (SMCC), enhancing customer care and improving its products and services.
In addition, the bank has classified customers according to the structure of deposits and credit Each group of customers has a mechanism in order to meet the suitable utilities
Therefore, BIDV is step – by – step raising the utility to the maximum so as to satisfy fastidious customers
Fifthly, retail banking activities of BIDV are safe and stable
In 2015, BIDV prioritized the safe management of its entire system by conducting thorough self-examinations alongside the Central Inspection Committee These reviews aimed to comprehensively assess BIDV's business activities, minimize risks, and ensure the utmost safety and security of customer personal information, while also reinforcing and enhancing the bank's reputation.
The retail banking sector has demonstrated impressive growth, consistently increasing its share of total income over the years This positive trend reflects the successful performance of retail banking operations.
In 2015, BIDV achieved a retail net income of 8,600 billion VND, surpassing its target by 141% This success led to BIDV being awarded "The Best Retail Bank of Vietnam in 2016" by The Asian Banker, marking the second consecutive year of receiving this prestigious accolade Additionally, on November 17, 2015, BIDV was honored as the only bank to win "The Vietnam Outstanding E-Bank" award for two consecutive years at the Vietnam Outstanding Banking Product/Service Award 2015 These accolades highlight BIDV's high-quality retail products, exceptional customer service, and strong brand reputation, reflecting the trust and cooperation of its customers.
In response to the challenging economic landscape characterized by fluctuating interest rates and limited VND capital resources, BIDV proactively enhanced its marketing efforts and customer outreach The bank adjusted its interest rates in alignment with market trends and introduced diverse capital-raising products to cater to varying customer needs Between 2012 and 2015, there was a significant increase in funds raised from citizens, which constituted a substantial portion of the bank's total mobilized capital By December 31, 2015, the total capital raised from citizens reached 582.855 billion VND, nearly five times the amount of 129.205 billion VND recorded in 2011 This shift resulted in a positive change in the proportion of mobilized capital from citizens, rising from 45% in 2011 to 73.5% in 2015.
BIDV prioritizes safety and quality in its retail credit strategy by thoroughly evaluating customers' financial situations before establishing credit relationships The bank adjusts lending rates to align with various types, terms, and market interest rates, ensuring flexibility that accommodates different customer needs This approach facilitates access to banking loans for individuals and enterprises, adapting to deposit interest rate changes and head office guidelines.
In 2015, BIDV's credit strategy prioritized small and medium-sized enterprises (SMEs), individuals, and households Over the four-year period starting in 2012, there was a noticeable decline in the percentage of medium and long-term outstanding loans, accompanied by a consistent increase in retail credit proportions This growth in retail credit was effectively aligned with customer demand, reflecting BIDV's commitment to meeting the financial needs of its clients.
2015, the scale of retail credit reached 181.173 billion VND, growing above 44% and accounting for 22.7% in the total outstanding loans The retail outstanding went up fourfold compared to 2014
Card Services concentrated on growth and expansion, resulting in a significant increase of 3.78 million new cards, bringing the total number of debit and credit cards to over 8.8 million.
In 2015, the bank operated a robust network of 1,832 ATMs and 25,432 POS machines, reflecting a growing interest in card quality Additionally, BIDV enhanced the convenience for cash holders by successfully integrating with Banknet and Smartlink, offering more utilities to its customers.
In addition to advancing the communication sector, the bank has successfully launched innovative products and services, including the VISA International Card, Homebanking, Western Union, Remittances, BSMS, and POS BIDV is recognized as a leading bank in Vietnam's retail banking sector, consistently receiving positive evaluations from customers for its professional service quality, quick and secure transactions, and dynamic banking image.
The reasons for limitation of developing retail banking services in BIDV
Despite the favorable conditions for the banking sector in Vietnam, particularly for BIDV, the bank faces significant macroeconomic challenges, including a weak internal economic force, an irrational structure, a payment balance deficit, and a high trade deficit rate Additionally, the global economic crisis has affected Vietnam's economy, leading to increased foreign investment flows and influencing the production and business operations within the community.
Vietnam's economic development remains limited, with a per capita income of just $2,233 in 2015, significantly lower than many regional counterparts The country continues to be classified among low-income nations, and cash transactions dominate the economy The preference for cash payments persists due to the lack of accessible and practical non-cash payment methods, resulting in a substantial portion of the population not utilizing available banking services.
Vietnam has a low rate of non-cash payments, with cash transactions accounting for 24% to 25% of total payments outside the banking system, compared to just 6.3% in Thailand and 9.7% in China This is largely due to people's cash payment habits and a lack of knowledge about banking services Additionally, the low growth rate of the macroeconomy restricts both the supply and demand for banking services.
The legal framework for retail banking services in Vietnam remains inadequate and inconsistent, despite significant progress in improving related legal documents The current banking legal system fails to comprehensively address all issues and align with international practices, particularly in electronic banking and international payment systems.
The legal framework governing Internet application services like E-banking and Homebanking is evolving at a sluggish pace, failing to keep up with advancements in technology and retail banking This lack of a robust dispute resolution mechanism contributes to customer reluctance in utilizing retail banking services.
The state administration has yet to fully and accurately assess the legal environment and operational conditions necessary to promote the safe and efficient growth of the banking system As a result, there is currently no comprehensive strategy or solutions in place to systematically support the development of retail banking services.
The State Bank of Vietnam
The management and oversight of banking activities in Vietnam are lagging behind modernization and do not align with international standards While the State Bank of Vietnam has made strides toward a more liberal policy environment, it still falls short in addressing the actual needs, particularly in retail banking services This includes inadequate conditions and procedures for granting permits for new services and establishing retail banking organizations Additionally, the State Bank's capacity for monitoring and implementing effective surveillance systems, especially in providing early warnings about risks in retail banking operations, remains limited.
As economic development progresses, the standard of living rises, leading to an increased demand for retail banking services and products Consequently, it is essential for retail banking services to enhance their offerings to effectively meet the evolving needs of customers.
Despite advancements in banking, a segment of the population remains hesitant to embrace modern banking services due to cultural limitations Furthermore, traditional cash payment customs and habits pose significant barriers to the development of innovative banking products and services.
BIDV faces increasing competitive pressure as rivals diversify their business activities and strengthen their market share and human resources In the context of integration, domestic commercial banks are investing in technology, enhancing the quality of their banking services Additionally, the rise of foreign banks, equipped with modern technology and expertise in the retail banking sector, offers high-quality services that can quickly render existing retail banking products obsolete, diminishing competitive advantages for BIDV.
In addition to external factors, BIDV must focus on internal issues that directly impact the bank's growth and the development of its retail banking services Addressing these subjective reasons is crucial for enhancing overall performance and fostering sustainable growth.
Despite BIDV's shift towards retail banking, it lacks a cohesive development policy for retail services that is consistently implemented across its branches This issue has persisted since the establishment of its retail banking department in 2008 and has not been adequately addressed As a result, BIDV's late entry into the retail banking market, coupled with the absence of a unified strategy, has led to fragmented management and development of retail products across branches, causing inconsistencies and uncertainty among customers.
The type of retail banking services are not sufficiently varied
BIDV's retail banking services lack diversification, failing to meet the growing demands of customers The utility of these services is limited, with frequent issues reported at BIDV's ATMs causing significant inconvenience Additionally, BIDV does not cater to high-income clients with services like property preservation and safe rental, contributing to the preference for foreign banks among retail customers in Vietnam.
Distribution channels are not really effective
BIDV's extensive network across 63 provinces is a significant strength; however, it poses challenges for the implementation of new technologies and the advancement of retail banking services Without effective coordination between the headquarters and branches, there may be inconsistencies in service quality across different locations.
BIDV's branch and outlet network lacks comprehensive long-term planning and effective evaluation, leading to limited access to retail banking services and reduced operational efficiency Consequently, the bank's promotional and advertising efforts are rendered ineffective, both directly and indirectly.
SOLUTIONS AND RECOMMENDATIONS FOR DEVELOPING
Orientation of developing retail banking service of BIDV
4.1.1 The growing trend of retail banking service
As of 2015, Vietnam's population was approximately 91.9 million, with urban residents making up 36.1% By 2050, the population is expected to reach around 140 million, with urban dwellers rising to 50% Concurrently, rising incomes have significantly enhanced living standards and quality of life This demographic growth and improved economic conditions present a promising opportunity for commercial banks to target the non-cash payment sector.
Vietnam boasts a youthful demographic, with 60% of its population under 30 years old, indicating a growing accessibility to banking products and services online In recent years, the country has experienced a significant rise in per capita income, increasing from $1,200, further driving the demand for digital financial solutions.
2010 to 2052 USD in 2014) Now, Vietnam‟s Gross Domestic Product is 2233USD per a person in 2015 and has potential to increase to 4000 USD in 2020 (according to
Mr Ayumi Konishi, Vietnam ADB Director) Therefore, the demand of personal expenditure and finance also go up
The service density of Vietnam's banking system is significantly lower than that of its regional counterparts, averaging only 5% to 6%, while urban areas see figures around 22% In contrast, Thailand and Malaysia boast service densities ranging from 70% to 80% However, experts anticipate a substantial increase in non-cash payments, particularly among young people, office workers, and civil servants, indicating a promising opportunity for the retail banking market in Vietnam.
Mrs Namita Lal, Retail Director of Standard Chartered Bank in Vietnam, forecasts that retail banking will experience a growth of 30% to 40% over the next decade, aligning the usage of banking services in Vietnam with that of Thailand and Malaysia Additionally, the Vietnamese government is actively promoting policies to encourage participation from non-state commercial banks and foreign banks in the country's banking sector.
In recent years, banks have realized the importance of retail market, so they started to face competition in order to dominate retail market share, such as Vietcombank,
Agribank, Techcombank, and Sacombank are leading the retail banking sector with a wide range of services In contrast, banks like ANZ, HSBC, and Citibank concentrate on individual strategies, particularly emphasizing card services such as Visa and credit cards Additionally, insurance companies play a significant role in the retail banking market by offering various individual insurance products.
The potential for capturing market share in retail banking is significant, as banks will inevitably encounter intense competition in the future To thrive in this environment, it is crucial for banks to establish a clear strategic orientation for their retail banking services.
4.1.2 Orientation for developing retail banking service of BIDV
Vietnam's economy is increasingly integrated into the global market, attracting numerous foreign banks to capitalize on its potential In this competitive landscape, BIDV recognizes the significance of enhancing retail banking services and focuses on expanding access for individuals and SMEs while also retaining its traditional large enterprise clients The rising demand for modern banking services compels BIDV to offer high-quality, innovative solutions to enhance the value of its retail market segment.
BIDV aims to establish a robust financial and banking corporation, focusing on profit maximization and risk minimization A pivotal shift in its business strategy involves transitioning towards retail banking, diversifying products, and expanding its customer base Although entering the retail banking sector later than its competitors, BIDV leverages its status as a prominent joint-stock commercial bank with a strong brand reputation in Vietnam's financial market By capitalizing on long-term partnerships and years of operational experience, BIDV is well-positioned to enhance its retail banking services.
BIDV aims to establish itself as a leading Vietnamese commercial bank in retail banking by 2020, positioning itself among the top three largest banks and aligning with advanced banks in Southeast Asia The bank seeks to capture a significant market share in outstanding retail credit, capital raising, and card services Additionally, BIDV is committed to offering a comprehensive range of high-quality retail products tailored to specific customer segments.
+ Market share: BIDV has the market share and scale of a Vietnamese leading retail bank BIDV‟s customers make up around 18% Vietnam‟s population (approximately
As one of the top three largest retail banks in Vietnam, the bank has demonstrated efficient operations, with retail business activities contributing approximately 26% to its total income in 2020.
BIDV's retail customers encompass individuals, households, and small to medium-sized enterprises (SMEs) The focus is on residential clients, including individuals and households with high to medium incomes, as well as SMEs operating in various sectors such as production, business, services, processing, aquaculture, agriculture, and import-export activities.
Modern banking products and services rely heavily on advanced technology, enabling banks to offer a comprehensive range of financial solutions BIDV emphasizes strategic offerings, including deposits, debit cards—holding a 17% share in the domestic market, 12% in international debit cards, and 14% in accepted cards—alongside e-banking, consumer credit, housing loans, and business loans for households Additionally, BIDV enhances the quality and utility of traditional products by streamlining service processes and simplifying transaction procedures, ensuring a customer-friendly experience.
+ Target area: types of urban area which have potential and many retail customers
BIDV enhances its retail banking services by developing accessible and modern distribution channels that ensure timely and convenient customer access The bank integrates traditional methods, such as branches and trading departments, with modern solutions like Internet Banking, Mobile Banking, ATMs, and Contact Centers Additionally, BIDV collaborates with agents to broaden its distribution network and deliver effective products and services to customers.
Solutions for developing retail banking services of BIDV
4.2.1 Improving the management and operation capacity of retail banking services
The human factor is crucial for the success of service businesses, particularly in the banking sector where services are easily imitated When banks operate with similar technological capabilities, the quality of human resources becomes the key differentiator in service excellence To enhance its retail banking services, BIDV must focus on improving management capabilities to boost competitiveness in the market.
- To improve managerial and executive capacity, BIDV should:
To enhance its retail banking services, the bank should refine its organizational model by fostering better coordination and clarity of responsibilities between the head office and branch sales departments Additionally, it is essential to develop a robust management and operational framework for retail banking activities, while integrating card services with network expansion and brand development.
To enhance management and executive quality, the bank must clearly delineate the powers and responsibilities of its departments, particularly at the retail business headquarters, while fostering better coordination with BIDV’s branches in retail service development Additionally, BIDV should implement a model for income-cost distribution for each service to effectively evaluate product performance and guide appropriate development strategies Regularly updating customer feedback and market demand changes is essential to seize business opportunities, ensuring that management responsibilities align with the growth of each product offered.
To foster a sense of responsibility among officials and employees, it is essential to implement a clear and effective bonus and commendation policy In cases where departments fail to meet their assigned tasks or lack adequate capabilities in the retail sector, the bank should provide guidance and training to enhance their professional skills through careful observation and monitoring.
4.2.2 Continuing to improve and develop the retail banking services
Developing capital mobilization from individuals and SMEs
Capital mobilized from residents is a crucial resource, representing a significant portion of the total capital for commercial banks' business activities This source of funds is highly competitive among banks When selecting a bank, individual clients typically consider factors such as safety, competitive interest rates, convenient locations, streamlined procedures, and staff professionalism To enhance its deposit products, BIDV should tailor its strategies based on customer demands and preferences.
Introducing innovative deposit products that offer numerous benefits can effectively attract resources from residents, particularly as individuals increasingly save for future goals like purchasing homes, cars, studying abroad, and traveling Additionally, banks should implement preferential interest rate policies for special customers, including those making long-term deposits, high-value depositors, and loyal, long-standing clients.
Promoting capital mobilization through diverse methods such as savings accounts, valuable papers, and high-tech deposit products with competitive interest rates is essential for attracting customers For instance, businesses can streamline payroll by utilizing deposit accounts and bills, while banks can offer overdraft cards to enhance customer convenience and financial flexibility.
The development and diversification of retail credit services will help bank spread risks in the portfolio of loan, investment and contribute to improvement the quality of bank credit
An analysis of BIDV's retail credit services reveals that while income from these services is significantly high, their overall market density remains moderate, and quality is increasingly regulated Despite this, BIDV's credit product offerings lack diversification and do not fully capitalize on their development potential The primary products available include loans for SMEs, employee loans, housing and car loans, and overdrafts on payment accounts However, the utilization of these services is uneven, with a predominant focus on SME lending and loans aimed at meeting accommodation needs.
In the near future, to implement and diversity successfully retail credit products, BIDV is required to:
To effectively meet customer needs, banks must conduct thorough research on market demand, assess competitor products, and analyze the competitive landscape Based on these insights, it is essential for banks to create a dedicated department focused on the continuous research and development of innovative products.
To broaden its customer base, the bank should target officials and employees within its organization as potential personal clients By offering appealing consumer lending options tailored to their needs, the bank can effectively enhance its outreach and strengthen customer relationships.
BIDV aims to enhance credit procedures by balancing safety and efficiency, making it easier for customers to access funds quickly To support SMEs, the bank will diversify credit products, including financial and operating leasing, while improving customer evaluation and information quality This approach ensures informed investments and risk management, ultimately enabling BIDV to expand its retail services, such as payment solutions, consulting, and ATM cards tailored for SMEs.
+ Promulgate appropriate policies to retain traditional customers Besides, the banks should frequently look for, be interested in new customers like labors whose stable income and enterprise whose high reputation
Developing non – cash payment services
Non-cash payments play a crucial role in retail banking, contributing significantly to bank revenues while benefiting society by lowering the costs associated with monetary circulation and reducing illegal cash transactions As society evolves, the adoption of non-cash payment methods continues to rise, reflecting a broader trend observed in developed countries Vietnam stands to gain by embracing and advancing these payment solutions to foster economic growth and modernization.
Currently, BIDV and other banks are issuing ATM cards and international credit cards while installing ATMs and POS systems in busy locations To enhance these services, BIDV should categorize customers based on their specific card types Domestic debit cards primarily serve individuals with medium incomes, such as employees receiving salary payments through their accounts and students living away from home In contrast, international credit cards are mainly offered to high-income individuals who frequently travel abroad.
To enhance competitiveness in the banking sector, BIDV should diversify card utilities by offering features like overdraft limits and facilitating bill payments through partnerships with service providers Additionally, reducing service charges will help BIDV attract more customers and stand out among its competitors.
BIDV is enhancing its operational reach by increasing the number of ATMs and POS machines while also connecting its network with other banks to reduce annual installation and maintenance costs Additionally, BIDV is improving the operational quality of its ATMs and POS systems, as well as enhancing the information transmission speed within its banking intranet.
Recommendations
The continuous economic growth, along with enhancements in the legal framework and financial infrastructure, plays a crucial role in the advancement of retail banking services in emerging countries This process is complex, highlighting the significant influence of government, central banks, and relevant ministries in fostering the development of these services.
A stable socio-economic environment is crucial for the effectiveness of banking operations, as people's psychology and spending habits evolve with their income and economic conditions When the economy experiences steady growth, individuals enjoy higher incomes and develop greater expectations for an improved quality of life, leading to increased spending and a heightened demand for loans To foster this environment, the government must focus on maintaining political and economic stability, managing inflation appropriately, attracting foreign investment, developing heavy industries, and raising citizens' incomes This, in turn, enables broader access to banking products and the growth of retail banking services Additionally, the government should promote cashless transactions by encouraging the use of cards for payments and salaries, which aids in income tax management and boosts state revenue.
The government must implement measures to research and finalize legal regulations for the retail banking market and services, along with tax policies that promote transactions through POS machines Additionally, it is essential to create a comprehensive legal framework for electronic banking and e-commerce, while establishing a modern electronic financial portal to ensure the effective functioning of the banking system.
The government collaborates with media agencies and newspapers to promote card services for various social classes while also partnering with the Ministry of Public Security to combat crime and enhance the security of electronic banking There is strong cooperation among banks, financial institutions, the Department of Customs, and the Department of Taxation Card associations and member banks are encouraged to strengthen their collaboration to advance interoperable connections among card organizations, aiming to create a comprehensive network of ATMs and POS systems across the market This initiative seeks to optimize resource use, maximize benefits, and reduce the costs associated with retail banking services.
The Vietnam Government must persist in developing and executing long-term strategies to reform the banking sector, enhancing the efficiency, transparency, and safety of retail banking activities Additionally, it is essential to progressively improve the legal framework for banks in alignment with market trends and international standards regarding capital conditions and supervisory requirements.
4.3.2 Recommendation for State Bank of Vietnam
The State Bank of Vietnam continues to lead the banking sector and must implement effective strategies to promote the growth of retail banking services, particularly at BIDV, while aligning with global trends in the industry.
Retail banking activities currently lack legal regulation, necessitating the State Bank of Vietnam (SBV) to establish comprehensive legislation to guide commercial banks in offering retail banking services This legislation will help prevent banks from inadvertently providing prohibited services or products, thus reducing potential waste and operational challenges Additionally, the legal framework for retail banking must maintain consistency with existing regulations and align with international standards to prevent small banks from circumventing the law, ultimately ensuring that retail banking services are safe, efficient, and sustainable.
The State Bank of Vietnam (SBV) has implemented binding regulations requiring commercial banks to share credit information This measure is designed to address the complex socio-economic landscape, ensuring the safety of the credit system and banks It aims to prevent individuals from using the same mortgage asset to secure loans from multiple banks.
The State Bank of Vietnam (SBV) must strengthen its role in banking by leading technological innovations, particularly in non-cash payment systems By facilitating non-cash transactions, SBV can enhance their efficiency and quality while promoting widespread participation, ultimately reducing cash reliance This initiative will enable commercial banks to broaden their modern payment card offerings and boost service revenue.
The State Bank of Vietnam (SBV) must adopt a more flexible approach to national monetary policy by adjusting base interest rates and ceiling rates to align with the current economic climate This adaptability is essential to prevent challenges for commercial banks in mobilizing funds and conducting credit activities effectively.
In response to the challenges posed by a volatile economy and the risks associated with large enterprise loans, modern banks are increasingly prioritizing retail banking services Recognizing this trend, the Joint-Stock Commercial Bank for Investment and Development of Vietnam (BIDV), a longstanding institution in the Vietnamese market, has shifted its operational focus from wholesale banking to retail banking, achieving notable success in this transition.
To enhance customer satisfaction and business efficiency at BIDV, the thesis emphasizes the delivery of modern, high-tech banking services that prioritize quality and maximize effectiveness for clients.
- Theoretical basic of retail banking services and developing retail banking services
- The current situation of developing retail banking services in Joint – Stock Commercial Bank for Investment and Development of Vietnam, evaluation results achieved, limitations and reasons
- Suggestion necessary solutions and recommendations for BIDV so as to improve gradually retail banking services alongside existing traditional products
This thesis reflects my personal insights, yet it acknowledges certain shortcomings in its analysis, evaluation, and proposed solutions I welcome constructive feedback from my instructor to enhance the quality of the work I would also like to express my heartfelt gratitude to my thesis advisor, M.A Nguyen Phuong Lan, for her invaluable support and guidance throughout the preparation of this thesis.