Importance of the topic
In the era of economic globalization, a closed-door policy hinders a country's economic growth, as nations increasingly seek to engage and collaborate with one another International Payment is crucial for economic development, serving as an essential mechanism in global trade It facilitates seamless transactions of goods and services between individuals and organizations across borders, simplifying the establishment of economic exchange relationships between countries.
Banks serve as intermediaries by safeguarding customers' rights and providing guidance on payment methods, which minimizes transaction risks and fosters customer trust Additionally, if customers struggle to meet payment obligations, banks can assist by negotiating credit documents to offer financial support.
International payment services serve as a significant revenue stream for banks, enhancing their scalability and competitiveness An effective international payment system facilitates credit flow in import and export activities, boosts foreign currency trading, and supports trade and commercial finance Additionally, banks can improve their liquidity by utilizing temporarily idle capital from margin trading while processing international payment transactions.
In today's information-driven world, commercial banks can no longer afford to operate with slow systems and limited information Managers are continuously striving to enhance and modernize their institutions to attract more customers and increase profits This relentless pursuit has sparked intense competition among banks as they vie for customer loyalty.
According to the Vietnam Report, Saigon – Hanoi Commercial Joint stock Bank (SHB) is among the top ten which are the most prestigious banks in Vietnam in 2016
The International Banking Centre (IBC) at SHB plays a vital role in generating significant profits for the bank This highlights the importance of conducting research to assess the current state of international payment activities at SHB and to provide recommendations for improving operational efficiency.
Research Aims
This research provides an overview of the Intellectual Property (IP) activities at the International Banking Centre of SHB, detailing the primary IP services offered to clients and the bank's status from 2014 to 2016 Following a comprehensive survey, the thesis analyzes the collected data and presents recommendations to address existing challenges, ultimately aiming to enhance operational efficiency and elevate the bank's reputation.
Scope and focus
The survey conducted at SHB's Head Office in the International Banking Centre examines the implementation of the bank's processing system, utilizing statistical data from the years 2014 to 2016.
Research Questions
The thesis focuses on answering the following questions:
What are the procedures of main methods of international payment at SHB?
How did the international payment activities at SHB perform in the period
What are the achievements and limitations in International Banking Centre of SHB in the period 2014 – 2016?
Research Methodology
Field study is crucial for any descendant research, as it provides practical insights This thesis reflects the author's findings from a three-month internship at the IBC – Head Office of SHB, where issues were identified through the analysis of collected data.
Trinh Linh Dan – K16 ATCD 3 the author’s own observation A qualitative analysis was applied into the research with the approval of the author’s intern instructors.
Research Design
The thesis includes 4 main parts as follow
Chapter 1: Theoretical Framework of International payment
Chapter 2: : International payment activities in SHB from 2014 to 2016
Chapter 3: Evaluating operation efficiency of International banking centre at SHB in the period 2014 – 2016
Theoretical Framework of International payment in
Basic knowledge of commercial banks
According to the Bank of England (n.d.)., “A bank is a financial institution that accepts deposits from the public and creates credit.”
From the above notion of bank, a commercial bank can be understood as a form of bank that accepts deposits and issues loans to financial organizations including individuals and businesses
Commercial banks offer a variety of services that allow customers to invest their money, including savings accounts and certificates of deposit Additionally, these banks provide various types of credit, such as car loans, mortgages, and business loans, to meet the financial needs of individuals and businesses.
1.1.2 Activities of the commercial banks
According to Simpson, C S (2017, March 30 th ), the commercial banks have three main activities, which are accepting deposits (or make loans), providing safety and acting as payment agents
Commercial banks play a crucial role in the financial system by accepting deposits from customers and securing capital from investors or lenders They utilize these funds to issue loans, purchase securities, and offer a variety of financial services, thereby facilitating economic growth and providing essential support to individuals and businesses.
Individuals and organizations utilize these credits to acquire goods or enhance business operations, leading to increased savings that benefit banks When banks can lend money at higher rates, it further stimulates economic growth and financial stability.
Trinh Linh Dan – K16 ATCD 5 financial cost than they need to pay for assets and working costs, they profit This extremely fundamental idea represent in the old "3-6-Rule."
Commercial banks prioritize customer safety and comfort by providing secure financial services Historically, individuals relied on physical assets like gold and silver, but today, the risks of loss from theft or disaster when keeping cash at home are significant Additionally, holding cash can lead to missed opportunities for earning interest Fortunately, modern banking solutions, such as checks and credit or debit cards, allow customers to conduct transactions safely and efficiently, minimizing these risks.
Commercial banks maintain vaults and offer clients the option to lease space in the form of secure storage boxes This service allows clients to safely store valuable items while also enhancing the bank's liquidity by providing an opportunity to generate additional cash.
Banks serve as crucial intermediaries for payment transactions both within a nation and internationally They facilitate commerce by issuing credit and debit cards, enabling account holders to purchase goods conveniently Additionally, banks coordinate wire transfers between different institutions, simplifying business exchanges As a result, merchants can reduce the need to handle large amounts of physical cash, as they can accept payments through checks and electronic transactions provided by banks.
Definition and roles of International Payment in commercial banks 5 1 Definition of International Payment
International payment (IP) has been defined by various parties, yet a precise consensus remains elusive This article aims to present a general understanding of IP, with additional resources available for further exploration in the references section As noted by Prof Nguyen, V.T (2007) in "International Payment and Trade Finance," the concept of international payment encompasses essential financial transactions across borders.
International payment refers to the process of fulfilling financial obligations and receiving monetary benefits between individuals and organizations from different countries, or between a nation and an organization, facilitated through banks and related partners.
International payment encompasses both economic and non-economic sectors, though in practice, these areas are often intertwined Since international payment activities are primarily rooted in commercial contracts and predominantly facilitate trade, they are typically categorized into trade payments and non-trade payments.
Trade payments for goods and services are determined by international market prices, with importers and exporters bound by commercial contracts that outline the roles and responsibilities of each party These contracts specify payment methods, currency, trading conditions, and other essential terms to ensure clarity and compliance in international transactions.
Non-trade payments refer to transactions that do not involve the exchange of goods and services in foreign trade These payments include fees for diplomatic missions abroad, travel and accommodation expenses for overseas delegations, gifts and grants from foreign individuals to domestic recipients, as well as contributions from foreign charitable organizations to local organizations and unions.
1.2.2 The roles of International Payment
In agreement with Prof Nguyen, V.T (2007), classified by participants of the economy, International Payment does the following duties
In today's globalized economy, international payments serve as a crucial connection between local and global markets, facilitating import and export activities, foreign investment, and international finance As foreign trade becomes a priority for economies worldwide, the volume of international payment activities is significantly increasing, highlighting their importance in enhancing economic interactions on a global scale.
IP is very important in the process of purchasing goods and services between individuals, corporations and different nations If IP does not exist, the foreign
Trinh Linh Dan – K16 ATCD 7 faces challenges in developing economic activities However, if industrial park operations are executed swiftly, securely, and accurately, the flow of goods and money between buyers and sellers can be managed effectively and efficiently.
Intellectual Property (IP) activities play a crucial role in enhancing the economy by facilitating import and export operations, stimulating both direct and indirect foreign investments, and promoting services like tourism and international collaboration Additionally, IP activities attract increased remittances and financial resources while supporting the integration of domestic financial markets into the global economy.
Banks play a crucial role as intermediaries in transactions by facilitating payment activities at the request of customers, safeguarding their interests, and providing guidance to minimize risks during foreign transactions Additionally, customers lacking sufficient capital for international payments often seek financing from banks, which actively support import and export activities to enhance customer confidence and ensure smooth transactions.
In the realm of foreign economic relations, banking systems are crucial, facilitating essential functions such as international payments, trade financing, foreign currency trading, and underwriting in foreign trade Banks serve as a vital bridge in international payments, ensuring safety and efficiency for participants while also providing financing support for enterprises engaged in import-export activities.
1.2.2.3 For the import and export enterprises
International payment is a critical final step in foreign trade contracts for import-export businesses, effectively concluding a complex and often risky process of buying and selling goods and services Ensuring the security of international payments is essential for safeguarding import transactions.
Trinh Linh Dan – K16 ATCD 8 and export contracts including the full and right receipt of goods as stated on the contracts, profit – making business
Implementing intellectual property (IP) strategies with international clients allows Vietnamese enterprises to gather valuable insights from both domestic and foreign markets By leveraging this market information and assessing their economic potential, these businesses can formulate effective strategies to mitigate risks and enhance operational efficiency.
1.2.3 Conditions to make International Payment
As stated by Prof Nguyen, V.T (2007) in International Payment and Trade Finance, the conditions on currency, place and time of payment to make international trade are regulated as follow
In foreign trade, payments for goods can be made in the currency of the exporting country, the importing country, or a third country's currency When the currency used for calculation matches the payment currency, there are no foreign exchange rate issues However, if the calculation currency differs from the payment currency, the buyer and seller must agree on the exchange rate.
In the foreign exchange market, various types of exchange rates exist, requiring traders to agree on the appropriate rate for conversion Key factors to consider include the official exchange rate set by the Central Bank, the interbank exchange rate, and the retail market exchange rate, as well as the method of exchange (cash or account transfer) and the means of transfer (remittances or telegraphs) Participants typically opt for the market exchange rate applicable to telegraphic transfers in the currency's issuing country, which is usually the average of the bid and offer rates.
Exporters typically prefer payments in their local currencies or in appreciating currencies, while importers favor paying in their local currencies or in depreciating currencies However, the majority of recent commercial contracts are denominated and settled in USD and other strong foreign currencies.
1.2.3.2 Conditions on place of payments
Main methods of payment for International transactions
Remittance is a payment method where a customer, known as the remitter, instructs their bank to transfer a specified amount of money to another individual, referred to as the beneficiary, at a designated address within a specified timeframe.
There are two forms of remittance, which are Mail Transfer and Telegraphic transfer
According to Prof Nguyen, V.T (2007), a Mail Transfer (M/T) involves the transfer of funds via bank draft sent by mail to the receiving bank, while a Telegraphic Transfer (T/T) refers to a remittance method where the remitting bank issues a telegraphic payment order sent to the receiving bank through fax, TELEX, or SWIFT The remittance procedure can be outlined in detail.
After signing a commercial contract, the exporter ships both the goods and necessary documents (such as the invoice, bill of lading, and insurance) to the importer The importer’s bank then verifies these documents; if the importer agrees to make the payment, they issue a payment order via M/T or T/T to their bank Upon confirming that the documents and payment order meet the required conditions, the remitting bank withdraws the funds from its account, providing a debit note to the importer Subsequently, the remitting bank instructs the paying bank to process the payment to the exporter Finally, the paying bank completes the transaction by transferring the funds and issuing a credit note to the exporter.
The Draft or Documentary collection method is utilized when the buyer cannot accept the cash in advance method, or when the seller is unwilling to accept the open account method, as noted by the World Bank.
The Draft or Documentary Collection Method involves the seller shipping goods and creating a draft or bill of exchange directed at the buyer through an intermediary bank This draft serves as an unconditional payment order that adheres to specific terms Prior to transferring the title of the goods, the necessary documents are clearly outlined.
The documentary collection method involves four key parties: the buyer, the seller, the collecting or presenting bank (buyer's bank), and the remitting bank (seller's bank) This process consists of four main steps, which are visually represented in the accompanying chart.
Figure 1.1 Procedure of Documentary Collection
The seller initiates the process by sending a draft to the remitting bank, which acts as an intermediary to forward the draft to the collecting or presenting bank This bank then makes the relevant documents available to the buyer Upon reviewing the documents, the buyer has three choices: to pay immediately, to defer payment to a future date, or to refuse payment altogether.
Upon payment of the draft, the title documents are released to the buyer, enabling them to take possession of the goods It's important to note that the transfer of title to the goods occurs only after the draft has been paid.
Trinh Linh Dan – K16 ATCD 12 accepted, both the buyer and seller are protected However, nothing prevents the buyer from refusing a draft for payment
Exporters may encounter challenges in retrieving shipped goods, necessitating warehousing, insurance, or disposal at the collection point if buyers refuse or default on payment In such situations, sellers might need to resort to legal action or arbitration for collection While using drafts carries inherent risks, they are generally more cost-effective for buyers compared to letters of credit.
According to the World Bank, there are two main types of drafts used in trade: Sight Drafts and Time Drafts A Sight Draft is utilized when the exporter and importer have agreed that payment is due immediately upon the buyer's bank receiving the draft and shipping documents Essentially, a Sight Draft is an order from the seller to the buyer, requiring payment of a specified amount upon the draft's presentation.
A time draft is a financial instrument used in international trade, allowing sellers to release merchandise to buyers before payment is received, based on agreed credit terms To facilitate this, exporters require a written commitment from buyers to make payment on a specified future date When a bank receives a time draft, it is instructed to deliver the accompanying documents only after the buyer has formally accepted the draft, which signifies their agreement to pay at the predetermined date.
A Letter of Credit is a bank-issued document requested by the buyer to secure payment to the seller It ensures that the seller will receive the agreed amount within a specified timeframe, contingent upon meeting the buyer's product specifications and documentation requirements.
A Letter of Credit is a specialized financial instrument used for facilitating payments in international trade, ensuring secure transactions between buyers and sellers Both the applicant and beneficiary benefit from its unique features, but it is crucial for both parties to understand the limitations of a Letter of Credit.
A Letter of Credit (L/C) does not guarantee full payment; it ensures payment only when the specified terms and conditions are met through the presentation of required documents The reliability of this guarantee is influenced by the stability of the issuing bank and the political and foreign exchange stability of the country in which the bank operates.
A Letter of Credit (L/C) does not ensure that the goods described in the accompanying documents have been delivered Banks focus solely on the documentation related to the L/C rather than the actual goods or services The quality and quantity of the shipped products rely on the seller's honesty and integrity in manufacturing, packaging, and arranging delivery.
Criteria to evaluate International payment operation towards commercial banks
1.4 Criterion to evaluate International payment operation towards commercial bank
According to Prof Nguyen, V.T (2007) in his book "International Payment and Trade Finance," the evaluation of international payment operations involves both direct and indirect indicators These criteria are essential for assessing the effectiveness and efficiency of international payment processes.
The four key absolute indicators for assessing IP activities include revenue generated from these activities, profit derived from them, costs associated with them, and the number of complaints resulting from the bank's errors Additionally, relative indicators play a crucial role in evaluating performance.
Generally, there are twelve relative indicators to assess international payment activities They are Profit from IP activities on Revenue from IP activities, Cost from
Intellectual Property (IP) activities significantly influence various financial metrics, including the revenue generated from IP activities relative to total revenue and profit margins The profitability derived from IP activities is crucial for assessing total profit, equity, and asset performance Moreover, the rising profits linked to IP activities highlight the importance of investing in new technologies Additionally, the effectiveness of IP staff can be measured through profit and revenue contributions, while monitoring the number of complaints in relation to total transactions is essential for maintaining operational efficiency.
The set of indirect indicators for IP activities’ evaluation include six factors
Enhancing and supporting foreign currency trading is crucial, particularly when considering the quantitative relationship between international payment turnover and the foreign currency trading turnover of commercial banks over time.
Enhancing and supporting import-export financing is crucial, as it highlights the quantitative relationship between the international payment turnover and the import-export financing turnover of commercial banks over time.
Enhancing and supporting various banking services, such as underwriting, is crucial for commercial banks This involves analyzing the quantitative relationship between international payment turnover and underwriting turnover over time, highlighting the interconnectedness of these financial activities.
Enhancing and supporting credit operations is crucial, as it reflects the quantitative relationship between the international payment turnover and the average credit balance of commercial banks over time.
Increased capital, particularly in foreign currency, is a crucial indicator, highlighting the quantitative relationship between international payment turnover and the foreign currency deposits held by commercial banks over time.
Finally, the sixth is enhancing and consolidating the prestige of domestic and international banks This indicator is expressed by the ranking hierarchy or awards granted by reputable international organizations
Besides, when analysing the factors that affect IP activities, it is essential to mention several objective and subjective factors that have no less important influence on IP activities
Objective factors influencing trading environments encompass economic, political, and legal aspects Economic factors include the growth rate, openness of the economy, foreign investment climate, and the connection between domestic and international financial markets Political factors involve issues such as war, terrorism, and civil unrest Legal factors pertain to international law, its restrictions, and potential conflicts with national laws.
Subjective factors comprise scale of bank’s operation, bank’s business strategies, international payment staffs, technology development, customer service policy, traditional value and other businesses
The current accounting system lacks the capability to separately track indicators related to the cost of intellectual property activities and investments in new technologies Additionally, data collection from banks is restricted due to information security concerns Consequently, this thesis will focus on analyzing specific key indicators that are accessible to the author.
International payment activities in SHB in the period 2014 – 2016
Research methodology
The research primarily relies on data from the Information System Department of Saigon – Hanoi Commercial Joint Stock Bank (SHB), encompassing business results and international payment activity reports over three years (2014, 2015, 2016) Additionally, the thesis incorporates various external sources, including books, magazines, and economic websites, to enrich its findings.
2.1.2.1 Comparing by absolute number method:
The equation below is to calculate the difference between criterions
Where y0 is the previous year’s criteria y1 is the following year’s criteria is the difference between criterions
This method is used to compare the data of the year given and the previous year to see the variation and find their causes and solutions
2.1.2.2 Comparing by relative number method
The equation below is to calculate the growth speed of criterions
Where y0 is the previous year’s criteria y1 is following year’s criteria is the growth speed of economic criterions
This method assesses the variation in economic criteria over a specified period By comparing the growth rates of individual criteria across different years, as well as the growth rates among various criteria, we can identify underlying causes and develop effective solutions.
Various methods can be employed for data analysis, including graphical methods, statistical description methods, and proportion analysis methods The graphical method utilizes graphs to visually represent and comment on research subjects The statistical description method involves collecting criteria to summarize and evaluate the subjects of the research In contrast, the proportion analysis method focuses on examining the structure of data tables, such as income statements, to calculate the proportions of different criteria.
General information of SHB and International payment activities in SHB in
Saigon – Hanoi Commercial Joint Stock Bank (SHB) was established under Decision
Since its establishment, SHB has experienced over 22 years of significant growth, becoming one of Vietnam's leading commercial banks This success is attributed to its comprehensive development strategy and commitment to social corporate responsibility, as highlighted in key decisions such as No 214/QÐ-NH5, No 93/QÐ-NHNN, and No 1764/QÐ-NHNN.
Guided by the motto "Solid partners – Flexible solutions," SHB adopts an innovation-driven business strategy that prioritizes customer benefits and shareholder prosperity This approach ensures high levels of satisfaction among customers and partners through the delivery of specialized, convenient, high-quality, and competitive banking products and services, all backed by a professional service style.
After the successful acquisition of Hanoi Housing Bank (Habubank), as of 31/06/2015, SHB became a large-scale financial institution in Vietnam with total
Trinh Linh Dan – K16 ATCD boasts impressive assets of VND 170,000 billion and a charter capital of VND 9,000 billion, serving over 2 million personal and institutional clients with a dedicated workforce of more than 5,000 employees The bank operates a vast network of over 400 branches and transaction offices across Vietnam, along with three branches in Laos and Cambodia Over its 22-year history, SHB has received numerous prestigious national and international awards in recognition of its collective and individual achievements, including the Second Class Labour Medal presented by the President of Vietnam during the bank's 20th Anniversary celebrations.
SHB aims to establish itself as a premier modern multi-functional retail bank in Vietnam, aspiring to evolve into a robust financial holding group that adheres to international standards With a focus on cutting-edge technology and a highly skilled workforce, SHB seeks to create a comprehensive network both domestically and internationally The bank is dedicated to providing partners and customers with convenient, cost-effective, and high-quality banking services and products.
SHB is dedicated to developing tailored strategies for each sector, ensuring that shareholder benefits are prioritized The bank is committed to maintaining and enhancing its value for sustainable growth, ultimately maximizing returns for its shareholders SHB promises continuous growth to meet the expectations of both shareholders and investors, fostering a prosperous future for the bank.
At SHB, customers are our top priority, and we are dedicated to understanding their needs through a professional and modern approach to service We are committed to offering a diverse range of convenient, friendly, and efficient banking products and services that ensure a quick and satisfying experience for all our clients.
At SHB, the development of human resources is a top priority, fostering a professional and reliable environment for our dynamic and youthful staff We take pride in our culture, emphasizing creativity and solidarity to create growth opportunities for all employees.
SHB prioritizes integrity and transparency across its entire network by enhancing capacity management, risk management, and internal control and audit processes This commitment to transparency ensures that all activities are conducted with the highest ethical standards, fostering trust and accountability within the organization.
Trinh Linh Dan – K16 ATCD 24 renovation, SHB always sets out competition strategy, make the difference, listen, learn new things, reform and renovate
SHB is a modern, multifunctional retail bank recognized for its unique qualities and strong reputation both domestically and internationally The brand name of SHB serves as a valuable asset and a source of pride for the bank's staff.
SHB's development strategy is tailored to each stage of growth, employing a competitive differentiation approach that prioritizes understanding customer needs and market dynamics A robust risk management system is in place to ensure safe and sustainable operations The bank fosters a strong corporate culture that serves as a spiritual foundation across its network Additionally, SHB is committed to building a skilled workforce through professional training, ensuring efficient operational processes The production strategy focuses on developing services and products that will enhance income steadily, leveraging a modern technology platform to drive growth.
The map below illustrates the structure of organization at Saigon – Hanoi Commercial Joint stock Bank
Figure 2.1.Structure of SHB’s organization
2.2.2 Real situation of International Payment activities in the period 2013 -2016 2.2.2.1 International payment regulations in SHB
The international payment process at SHB involves transferring funds, making L/C payments, and executing collection orders in foreign currencies This is conducted within the SHB system and in collaboration with both domestic and international financial institutions, utilizing the IBS or Swift networks, among other systems.
The regulation on participants, including correspondent bank, issuing bank, advising bank, confirming bank, nominated bank, reimbursing bank, presenting bank, negotiating bank and remitting bank, is listed as following
In international payment transactions, a correspondent bank is selected by SHB to facilitate the process The issuing bank, requested by import customers, commits to pay in USD via a letter of credit (L/C) to foreign beneficiaries An advising bank provides advice on the L/C as instructed by the issuing bank, while a confirming bank validates the L/C at the issuing bank's request The nominated bank is designated by the issuing bank to handle payments or negotiations, whereas the reimbursing bank is tasked with reimbursing another bank that has made a payment or discounted L/C documents The presenting bank accepts and submits documents to the payees, and the negotiating bank is where customers present L/C documents to request discounts or authorize collections Lastly, the remitting or sending bank receives documents from the collection order.
The units that are allowed to perform IP activities of SHB are International payment departments at SHB’s headquarter and branches, receiving direct instruction from Board of Director
IP activities are integrated into the international payment system of SHB, utilizing key methods such as Letters of Credit (Import and Export L/C), Payment Collections (Import and Export), and Remittances (Money Receipt and Money Transfer) Additionally, commercial contracts are settled in the currencies of the exporting and importing countries, particularly for cross-border payments between neighboring nations, adhering to specific regulations set by the General Director The applicable laws include the ICC and UCP.
600, URC 5222, URR 725, Government and State Bank of Vietnam’s Resolutions, Agreements signed by SHB’s General Director
2.2.2.2 Processes in implementing some main methods of payment in SHB
With the method of remittance, IBC of SHB provides customers with overseas money transfer and overseas money receipt
The process of overseas money transfer is described as follow
At SHB's headquarters, the International Payment department reviews payment orders and related documents to ensure they comply with SHB's regulations and verify the customer's balance.
If documents are found to be invalid, IP staff will guide customers on how to amend or supplement them to ensure legal compliance Conversely, if the documents are valid and the customer's balance is sufficient, IP staff will proceed with the money transfer via mail or telegraph Should customers wish to modify their documents, they must submit a written claim.
Evaluating operation efficiency of International banking centre
Factors affect operation efficiency
3.1.2.2 Manually checking safety in International Payment activities
SHB's Head Office staff and supervisors are tasked with ensuring compliance and identifying potential risks when processing payment documents Currently, SHB's international payment system lacks the capability to automatically detect issues related to fraud or document errors As a result, IP staff must manually verify embargoed countries and banned goods This reliance on manual checks poses a risk to the entire banking system, especially if staff are not promptly updated on new information, economic fluctuations, or threatening political situations.
3.1.2.3 Incomplete exploiting needs of customers
The demand for local currency trading at banks is on the rise, with many customers opting for domestic services even when engaging in overseas transactions However, the uptake of IP services remains limited, both at SHB and other banks, indicating that SHB has not effectively tapped into the full potential of its customers' needs for IP services.
SHB is currently facing challenges in processing times, which remain slower than those of other banks due to an increasing volume of daily transactions and a lack of flexibility in their payment processes Although the bank has a strong source of foreign currencies, the misallocation of funds in nostro accounts results in delays, forcing IP staff to wait for necessary payments and ultimately hindering overall operational efficiency.
3.2.1.1 Incomplete exploiting employees of international payment department The level of automation of IP activities is so poor that besides making the main tasks of implementing payment, IP staffs also have to do many other manual works such as
Trinh Linh Dan – K16 ATCD 47 printing, stamping, carrying and organizing accounting records, which took a lot of their time
3.2.1.2 Regular overwork – load for IP expert team at SHB’s Head Office
The centralized international payment system at SHB leads to a disparity in professional qualifications, with branch-level IP staff having less expertise than their counterparts at the Head Office Additionally, the nature of international transactions, which operate across varying time zones, often requires Head Office employees to work late hours, extending their shifts until 9:00 PM on regular days and potentially until midnight during peak transaction periods.
The staff at the Head Office of SHB often experience high levels of stress due to their demanding work schedule, which includes managing hundreds of daily transactions and responding to numerous phone calls and emails from branch employees This pressure can lead to late transactions and errors, ultimately reducing the effectiveness of IP activities.
The challenges faced by the female workforce in Vietnam are prevalent across many commercial banks, including SHB Women often encounter disadvantages due to family responsibilities and the need for maternity leave, which can result in a diminished labor pool both in quality and quantity.
3.2.1.4 Weaknesses of facilities and equipment
Many offices experience slow computer and printer speeds, which can hinder timely transactions Often, multiple printers are available, but only one is functional, forcing staff to rely on a single machine that frequently operates beyond its capacity This situation leads to delays as IT personnel wait for repairs Additionally, the internal network at SHB often becomes congested during peak hours, resulting in extended transaction times and delays in urgent payments.
3.2.1.5 Non – disclosure of details of international payment operations in the bank’s website
Compared to other banks offering international payment services, customers may find it challenging to access relevant information on SHB's website The bank only provides a basic overview of its service package, lacking detailed information on transaction fees and the comprehensive documentation needed for payment processing.
3.2.2.1 Ups and downs in the world economy in the period 2014 – 2016
The economic growth in European countries, particularly those burdened by public debt, remains sluggish as the financial and public debt crises are not fully resolved While high-growth economies like China previously enjoyed an average GDP growth rate of 10% per annum, this dropped to just over 7% in 2014 Underdeveloped economies negatively impact social conditions, leading to spending cuts, increased taxes, and unemployment rates soaring to 10% in some regions, often resulting in large-scale protests and political instability Amid global economic volatility, Vietnamese businesses have primarily engaged with nearby partners in Asia, with SHB focusing on markets in the Middle East, such as Saudi Arabia and Kuwait.
3.2.2.2 Complicated political situation in the period 2014 – 2016
Following the 2013 Ukraine crisis, instigated by the United States and certain Western nations, the U.S experienced a decline in presidential prestige and governmental unity Concurrently, several European countries faced significant domestic challenges, including France's diplomatic setbacks with African nations, the UK's impending referendum on Irish separation and potential EU exit, as well as ongoing immigration issues and a series of terrorist attacks attributed to Islamic extremists.
Trinh Linh Dan – K16 ATCD 49 organization highlights the tense relations between Vietnam, China, and the Philippines due to ongoing conflicts in the East Sea These political challenges complicate the process of intellectual property (IP) management, resulting in delays and increased time for documentation to navigate these unstable political environments.
3.2.2.3 Unsystematic documents related to import – export activities of the government and related departments
The import and export activities of enterprises significantly influence the banking sector's international payment (IP) operations, with a robust foreign trade environment positively impacting SHB's IP turnover Recently, the Vietnamese government has introduced various policies and laws aimed at promoting exports while restricting imports However, these measures have created challenges for Vietnamese businesses and have inconsistencies with international laws and commitments Consequently, the adverse effects of an unhealthy legal environment on import and export enterprises have negatively impacted SHB's IP activities.
3.2.2.4 Customers lacking of knowledge about IP activities
Many customers struggle with understanding legal terms, leading to potential loopholes when signing contracts This lack of knowledge can hinder their ability to pursue legal action in case of discrepancies Additionally, new businesses often lack familiarity with foreign trade techniques, international practices, and payment methods, making them vulnerable to accepting unfavorable contract terms Errors in letters of credit (L/C) can further complicate matters, potentially resulting in invalid payments.
Recommendations
Development orientation of International Banking Centre in SHB
SHB is focused on increasing its market share in international payment activities and enhancing its international banking operations by diversifying and improving product quality while ensuring regional integration To achieve these goals, SHB will develop a comprehensive strategy for external business growth to boost competitiveness and profitability Key initiatives include creating interconnected products and services to expand market presence, investing in facilities and refining the organizational model for effective strategy implementation, and exploring new relationships with correspondent banks to enhance transactional connections Additionally, SHB plans to conduct surveys for establishing representative offices abroad, increase trading volumes to attract major export companies, and expand Foreign Currency Trading to meet customer needs and manage foreign debt effectively Training and developing professional staff in International Banking and Commerce (IBC) is crucial, alongside investing in advanced technology to drive product innovation and enhance the bank's competitiveness.
Suggestions to improve operation efficiency
Below are several suggestions for the improvement of International Banking Centre at the Headquarter of SHB that this thesis could recommend
4.2.1 Continuing to improve IP staff’s knowledge
SHB should frequently host workshops to facilitate knowledge exchange and address challenges in payment processes Additionally, the bank can enhance employee skills by sending them to domestic and international organizations for training in payment systems, foreign currency trading, language proficiency, legal frameworks, and international practices, ensuring they stay updated with evolving global standards in intellectual property activities.
4.2.2 Establishing and expanding overseas correspondent banking system
SHB should establish a robust agent bank network and foster relationships with new banks across various countries to streamline payment processes Additionally, it is crucial to maintain and strengthen ties with long-standing foreign banking partners By ensuring swift and efficient payment solutions, SHB can enhance its reputation in the international market, thereby expanding and solidifying its business relationships.
4.2.3 Developing customer policy and marketing system to attract customers
SHB should focus on developing new products that offer diverse utilities for customers while ensuring quick and precise risk management to guarantee absolute safety and compliance with international standards.
To attract customers seeking high-quality products at reasonable prices, SHB should focus on technological innovation, implement discounts, lower service fees, and provide promotions for large and loyal clients.
To enhance customer service and ensure swift delivery, SHB must establish a well-structured distribution network with strategically located outlets that are easily accessible to customers.
To effectively promote its products, SHB must choose engaging and concise advertisements that capture customer attention This approach necessitates that employees possess strong communication skills and a deep understanding of their roles to ensure successful marketing efforts.
Trinh Linh Dan – K16 ATCD 52 can explain customers clearly about the IP process Moreover, the good communication skill of staffs creates customers’ trust, safety and comfort when they use services
SHB should enhance its consulting services by offering comprehensive information about partners, products, intermediary banks, and correspondent banks involved in international trade contracts Additionally, regularly forecasting market volatility will empower customers to mitigate risks effectively.
4.2.4 Strengthening risk management in International Payment operations
SHB is required to adhere to legal documents and regulations set forth by the Government and relevant ministries while developing its own regulations, processes, and professional guidelines, as well as during the actual implementation of the payment process.
SHB must consistently update external information to effectively manage and revise internal documents in response to changes, ensuring compliance with government regulations.
Teams of specialists in the fields of economics, finance and market must be formed to take timely actions in developing and adjusting appropriate policies and strategic orientation
To mitigate risks in international payments that could impact the bank's reputation, management must consistently monitor both domestic and international markets This proactive approach enables the identification of errors and the recognition of potential risks in international payment activities, ultimately enhancing the quality of the international payment system.
4.2.5 Continuing to modernize facilities and technology in International
Implementing a robust banking modernization program is essential, focusing on continuous upgrades and the development of innovative software for online transactions Key initiatives include the "Send and Withdraw Anywhere" program and the "Connecting Payment" program, which enhance customer convenience and streamline financial operations.
“Money transfer through Internet or SMS” program, etc
SHB leverages technology to enhance its product and service offerings, including credit and debit cards, as well as Western Union money transfers Additionally, the bank utilizes the advantages of the financial switching network, Banknet, to improve its international payment operations.
Proposals to the Government and the State Bank of Vietnam
The Government of Vietnam is committed to enhancing legal document systems that align with international standards while reflecting the country's unique characteristics, thereby establishing a regulatory framework for intellectual property (IP) activities These legal documents must explicitly outline the regulations, rights, responsibilities, and obligations of all parties involved, including the seller, buyer, and bank, throughout the entire international payment process, from contract signing to payment completion.
The government should speed up the implementation of trade policy in order to encourage and promote exports, strictly manage imports and ensure the stability of the international payment balance
To ensure consistency in the issuance and implementation of legal documents regarding international payments in Vietnam, a collaborative effort among key agencies, including the Customs General Department, Ministry of Industry, and the People's Court, is essential These documents should be tailored to align with Vietnam's unique economic conditions and characteristics.
To enhance the efficiency of the external economy, the government should focus on expanding international economic relations through a diversified and multi-lateral approach This strategy involves not only maintaining Vietnam's market share in established markets but also exploring and entering new potential markets.
Export subsidy must be used efficiently to help organizations increase their export competitiveness In addition, Government should continue to enhance foreign
Trinh Linh Dan – K16 ATCD 54 investment, promote services, develop tourism and export labour to import more foreign currency
Reforming administrative procedures is essential to facilitate export and import activities by minimizing cumbersome processes This streamlining not only saves time but also reduces costs, ultimately benefiting businesses engaged in international trade.
4.3.2 Proposals to the State Bank of Vietnam
In the upcoming period, the State Bank of Vietnam (SBV) should implement a flexible management policy for the foreign exchange market to safeguard businesses from the impacts of exchange rate volatility By maintaining a diverse basket of suitable currencies, the SBV can achieve both the stability of the exchange rate and the necessary flexibility in its monetary policy.
Currently, USD lending rates remain stable, leading businesses to favor direct purchases of foreign currency over bank deposits This shift, combined with high lending rates, results in inadequate foreign currency for international payments Consequently, the State Bank of Vietnam (SBV) must establish a foreign currency interest rate that effectively balances the goals of controlling inflation, reducing the trade deficit, and enhancing the attractiveness of the Vietnamese Dong (VND).
The State Bank of Vietnam (SBV) should enhance the diversity of foreign currencies available in the market and expand trading methods, including term contracts, options, and swaps Additionally, it is essential to develop loan operations in both domestic and international markets.
The State Bank of Vietnam (SBV) must establish robust foreign exchange reserves to stabilize the foreign currency market during exchange rate fluctuations Additionally, a strategic plan for managing foreign currency related to imports and exports, along with effective control of the free market exchange rate, is essential This approach aims to prevent foreign currency speculation and arbitrage, which can trigger a foreign currency crisis in the market.
International payment has become a crucial function for commercial banks today Despite significant achievements, SHB's international payment operations have raised concerns that require further research to address existing limitations Drawing on knowledge from the Banking Academy and practical experience from an internship at SHB's International Banking Centre, this thesis analyzes the international payment activities at Saigon – Hanoi Commercial Bank during the 2014-2016 period.
International payment activities have significantly contributed to SHB's overall sales and revenue, despite facing challenges related to workforce, facilities, and marketing strategies, alongside economic crises While the International Banking Centre has received numerous awards for its international payment services, it continues to encounter common issues This thesis analyzes and evaluates these operations and proposes several solutions aimed at enhancing the efficiency of international payment activities.
This thesis emphasizes the significance of payment activities at SHB and aims to provide insights for enhancing the bank's international payment operations Acknowledging the limitations in knowledge and practical experience, the research may contain errors and incomplete ideas Constructive feedback from teachers and students is highly welcomed to refine the study further.
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