Background
Retail banking services are essential to the banking sector, providing stable profits while enhancing market expansion, competitiveness, and overall stability During economic crises, the significance of these services becomes even more pronounced, prompting both domestic and foreign banks to prioritize their development.
The Vietnamese market is recognized as a promising retail banking sector, with a population of 90 million as of November 2013, yet only 20% hold bank accounts and one-third utilize banking services As public awareness of high-tech and banking services increases alongside improving living standards, banks are increasingly drawn to the retail sector, intensifying competition among financial institutions Consequently, banks are strategically investing in the development of retail banking services by expanding their business networks, upgrading technology, enhancing service quality, and diversifying their product offerings.
Techcombank, a pioneer in Vietnam's retail banking sector, has gained significant recognition for its retail banking services in recent years Despite its impressive achievements, the bank must address certain challenges to enhance its competitiveness and achieve its goal of becoming the leading retail bank in Vietnam in the near future.
To enhance the retail banking services at Techcombank, it is essential to assess their current quality and effectiveness By identifying areas for improvement, we can provide actionable proposals that will not only benefit Techcombank but also assist other banks in maximizing the potential of their retail banking offerings Therefore, I have initiated a research project focused on this critical evaluation.
“Developing retail banking services in Techcombank”.
Research objectives
The thesis aims at clarifying the following objectives:
Giving brief information about retail banking services and their benefits
Analyzing necessity of developing retail banking services in Techcombank
Evaluating achievements that Techcombank gained in the period
Proposing some solutions and recommendations to improve Techcombanks’ retail banking services.
Scope of the study
This article examines the state of Techcombank's retail banking services from 2010 to 2013, offering insights and recommendations for both Techcombank and the State Bank of Vietnam (SBV) to enhance their retail banking operations.
Research methodology
In this study, the author employs various methods, including comparative analysis, statistical techniques, and logical reasoning, to examine secondary data related to retail banking services This data is sourced from a range of materials, such as books, articles, annual reports, and online resources.
OVERVIEW OF RETAIL BANKING SERVICES 2.1 Background of retail banking services
Definition
Retail banking refers to the financial services provided to individual customers at local bank branches, including checking and savings accounts, credit cards, personal lines of credit, and mortgages While some retail banks may offer basic brokerage services, their primary focus is on personal banking needs, distinguishing them from commercial banking, which caters mainly to business clients.
Diagram 1: Complementary Dimensions of Retail Activities
Characteristics of retail banking services
Retail banking services contain some main characteristics:
Diversification of customers’ background: Customers of retail banking services include individual customers, households, small and medium enterprises
The scale of retail banking service’s transactions: The quantity of transactions is very huge, but the volume of each transaction is usually small
Products of retail banking services: Retail banks offer various products to customers
The basis of retail banking services’ development: Retail banking services become more popular and closer to customers thanks to modern technologies and professional staff
The nature of retail banking transactions: Retail banking services target at individuals customers, so transactions are quite simple and focus on savings, payment and card services
High-quality services are essential in the retail banking sector, as they significantly influence brand reputation and customer attraction Delivering exceptional service is crucial for the growth and development of retail banking offerings, ensuring client satisfaction and loyalty.
The high average operating expenses faced by banks stem from the need to serve a geographically diverse customer base, which complicates transaction processes This situation necessitates the expansion of the banking network and significant investments in online transaction capabilities.
Benefits of developing retail banking services
Retail banking services are transforming societal payment habits from cash to non-cash transactions, improving government management efficiency and reducing the costs associated with cash payments and issuance Additionally, these services accelerate the circulation of money and increase the availability of foreign currency through enhanced overseas remittance activities.
Retail banking services are essential for diversifying banking products, expanding market reach, and enhancing competitiveness, ultimately transforming the banking income structure Additionally, these services help mitigate risks in banking operations and contribute to annual revenue growth.
Retail banking services have emerged to address diverse customer needs, including money transfers, payments, and personal loans By utilizing these services, customers can save both time and money, allowing them to manage their income more effectively.
REAL SITUATION IN TECHCOMBANK’S RETAIL BANKING SERVICES 3.1 Background of Vietnam Technological and Commercial Joint Stock Bank
Techcombank’s scale
Table 1: The growth of business volume of Techcombank from 2010 to 2013
(Source: Techcombanks’ annual report from 2010-2013)
Achievements
In 2013, Techcombank focused on enhancing its retail banking services through diversified delivery channels, technological innovation, and improved management models This strategic approach led to significant achievements in the retail banking sector.
3.2.1 Cash flows from retail banking services
Cash flows from retail banking services at Techcombank have gradually evolved, establishing a significant role in the bank's operations However, in 2013, revenue from this sector represented only approximately 15% of the total revenue.
Techcombank consistently updates its interest rates to remain competitive and attract customers The bank also innovates new capital mobilization products, like "Super Kid" and "Flexible Principal Withdrawal," to cater to diverse customer needs Additionally, Techcombank offers promotional programs for savings account holders, including raffles and preferential benefits when purchasing food or enrolling in courses, enhancing customer value and satisfaction.
Techcombank has consistently demonstrated stable and sustainable fund mobilization across various customer segments In 2012, the total mobilization from retail clients surged by 34% compared to 2011 Although there was a slight decline in 2013, with mobilization reaching 70,275 billion VND, this growth was remarkable given the economic recession, positioning Techcombank as the second-ranked bank in the commercial banking sector.
Figure 1: The volume of capital mobilization from 2010 to 2013
(Source: Techcombanks’ annual report from 2010-2013)
Figure 2: Capital mobilization by types of customer in 2013
(Source: Techcombanks’ annual report in 2013) 3.2.1.2 Retail credit
The bank is expanding its retail credit offerings, which now include mortgages, auto loans, personal installment loans, and household business loans, to provide customers with the capital needed for business ventures or home purchases In 2012, mortgages accounted for 57% of total retail credit, reflecting a 20.7% decline from 2011, indicating a shift in customer focus towards household business loans rather than the real estate market.
IndividualsEnterprisesOther financial institutions
Figure 3: Loan outstanding structure by products in 2012
(Source: Techcombanks’ annual report in 2012)
The balance of loan outstanding of individuals decreased from 27,748 billion VND in
2012 to 22,934 billion VND in 2013, but it still accounted for approximately one- thirds in total loan outstanding of Techcombank
Figure 4: Loan outstanding structure by types of customer in 2013
(Source: Techcombanks’ annual report in 2013)
Mortgages Personal installment loans Overdraf facilities Household business loans Others
IndividualsEnterprisesOther financial institutions
Techcombank has launched new cards, including the Vietnam Airlines Techcombank Visa and the Mercedes-Benz Techcombank Visa Credit Card, alongside its standard credit, debit, and visa cards These offerings are designed to attract card users by providing exclusive benefits for shopping, car purchases, and flight bookings Notably, the number of Visa cards surged from 126,571 in 2011 to 382,930 in 2012, while retail customers grew from 2.8 million in 2012 to approximately 3.3 million in 2013.
The banks has built up the wide banking network in Vietnam With more than
With 300 branches and transaction offices across 44 provinces and cities, along with nearly 1,250 ATMs and 2,000 POS terminals, Techcombank is enhancing its presence and competitiveness in the retail market, delivering high-quality services to its customers.
Non-cash payments are increasingly popular, prompting Techcombank to prioritize E-Banking in its retail banking strategy Enhanced connectivity with online payment gateways like OnePay, Vban, and Smartlink enables customers to shop and pay on over 3,000 websites Additionally, Techcombank is refining its bill payment services, allowing customers to use F@st i-Bank for electricity, internet, and insurance payments The ability to transfer money through online cards and recharge phone cards further solidifies Techcombank's leading position in E-banking services.
In 2012, Techcombank had 66,000 E-banking users, facilitating 2.01 million Internet banking transactions, with a total transaction volume of 28 trillion VND.
Techcombank’s retail banking model aligns with global standards while catering to the unique Vietnamese business environment, positioning the bank as a leader in this sector The bank aims to become the best retail bank in Vietnam by clearly defining departmental responsibilities, enhancing specialization and operational efficiency Emphasizing risk management, Techcombank implements policies to mitigate credit risk and reduce bad debt The bank continuously updates its retail banking services to adapt to market realities and strategic goals Notably, Techcombank pioneered the customer loyalty program "Gắn kết bền lâu" and introduced competitive interest rates, such as a low 5.99% per year for mortgages and consumer loans in July 2013, to attract and retain customers.
Bank 1 st month First 3 months First 6 months
Table 2: Interest policy of some commercial banks in July 2013
(Source: http://www.baoxaydung.com.vn/news/vn/kinh-te/ngan-hang-giam-lai-suat- cho-vay-co-hoi-cho-nguoi-tieu-dung.html)
Techcombank recognizes that customers are essential to its success, evidenced by the addition of nearly 493,000 new clients in 2013, reflecting an 18% increase from 2012 Despite fierce competition, Techcombank has consistently achieved stable growth in its individual customer base, with an impressive average growth rate of 20% from 2010 to 2013.
Figure 5: The quantity of retail customers from 2010 to 2013
(Source: Techcombanks’ annual report from 2010 to 2013)
3.2.4 Marketing strategy and business network
The quantity of retail customers customer
Effective and ongoing marketing strategies enable new products to quickly reach customers through various channels, including mass media and websites Both internal marketing tactics and external communications play a crucial role in attracting clientele Marketing campaigns are actively implemented from the head office to branch locations, featuring initiatives like free account openings, reduced annual fees for cardholders, and enticing promotional programs offering prizes such as motorbikes, cash, and FIFA World Cup tickets for depositors and borrowers Techcombank's marketing strategy, centered on high-quality retail banking services, is successfully capturing customer interest.
Moreover, Techcombank also takes part in the social activities such as “2,000 Red scarfs to school”, contributing to Encouragement Funds… to promote the Techcombanks’ image
The number of bank branches is a crucial factor in identifying customer service positions, highlighting the significant impact of large banking organizations on the revival of retail banking From 2010 to 2013, Techcombanks notably expanded its business network, leading to an increase in branches and transaction offices This growth fosters a conducive environment for the development of retail banking services.
In 31 st December, 2013, Techcombank had the business network in 44 provinces with
Techcombank boasts a robust presence with its head office in Hanoi, complemented by two representative offices, one transaction center, 62 branches, and 258 transaction offices strategically located in central and populous regions On an international scale, Techcombank has established an extensive network, featuring approximately 12,000 acquirers and branches across 140 countries worldwide.
Techcombanks’ business network is evaluated as the quickest and strongest expansion in Vietnam banking system
Figure 6: The number of branches and transaction offices from 2010 to 2013
(Source: Techcombanks’ annual report from 2010 to 2013)
3.2.5 Researching and developing new products
Techcombank is committed to enhancing its retail banking offerings by developing innovative products that leverage advanced technology, thereby strengthening its competitive edge and expanding its market reach The Research and Development department plays a crucial role in evaluating and launching new products, which now include a comprehensive range of 80 retail banking services across 10 categories Among its unique offerings are Banassurance products, Super Kid accounts, and Techcombank Xsmile Additionally, Techcombank collaborates with renowned companies to introduce exclusive products such as the Vietnam Airlines Techcombank Visa Card, MercedesCard Platinum Card, Vincom Loyalty Visa Card, and Vip Vingroup Techcombank Visa Card.
The number of branches and transactions offices
Limitations
Techcombank primarily targets high-income customers in urban areas, focusing on upper-class demands, while overlooking the 70% of the Vietnamese population living in rural areas who have limited understanding of retail banking This gap in market segmentation also extends to underserved groups such as children, teenagers, and young professionals In contrast, Sacombank diversifies its approach by catering to medium-income customers, small traders, and female clients, demonstrating a more inclusive strategy in the banking sector.
Customer care policies have been inadequate, primarily focusing on VIP customers and neglecting small and low-income clients Additionally, there has been a lack of synchronization in customer care services between the head office and transaction offices Many staff members in these transaction offices, lacking proper training in banking operations, have demonstrated unprofessional attitudes towards customers.
Despite Techcombank's extensive range of retail banking products, they lack distinctiveness compared to offerings from other banks, failing to significantly highlight Techcombank's growth in this sector In contrast, Oceanbank, recognized as Vietnam's top retail bank in 2013, successfully launched a variety of retail products and services tailored to customer needs, focusing on detailed customer segmentation with innovative offerings such as the “Yêu thương cho con” savings accounts, “Tỷ phú” cards, and “Lộc phát tài” accounts.
The distribution of ATMs is uneven, with a significant concentration in major cities like Hanoi, Ho Chi Minh City, and Da Nang, where over 50% of Techcombank's ATMs are located Conversely, some provinces lack any Techcombank ATMs Additionally, the placement of ATMs within cities raises distribution concerns, as some are situated too close together, while others are hard to locate in high-traffic areas such as supermarkets and universities Furthermore, ATMs often run out of cash during peak withdrawal times, such as Christmas and Tet Holiday, exacerbating accessibility issues for customers.
(Source: Techcombanks’ annual report in 2013)
Causes resulting in limitations
Ho Chi Minh Binh Duong
Economic fluctuations significantly influence customer psychology and behavior, often leading to concerns about risks associated with banking services During economic crises, the potential for bank bankruptcies and liquidity issues heightens customer anxiety regarding their financial security Additionally, customers frequently express worries about information security in online banking, as the threat of hackers and criminals stealing personal data and funds remains a persistent concern.
Many Vietnamese people have a long-standing habit of holding cash and making cash payments, which hinders the growth of non-cash payment methods The technological proficiency among the population, particularly among the elderly and those in rural areas, is relatively low, leading to challenges and psychological barriers in accessing retail banking services Additionally, there is a prevalent preference for conducting transactions in person at branches or transaction offices rather than using E-banking services, stemming from a lack of trust in technology These factors contribute to the limited popularity of high-tech banking services, falling short of banks' expectations.
Techcombank has overlooked market and customer segmentation, resulting in the exclusion of many potential clients Additionally, the ease of replicating banking products highlights the challenge for banks to innovate and offer unique financial solutions.
SOLUTIONS AND RECOMMENDATIONS 4.1 Solutions to Techcombank
Improving quality of human resource
Human resources are crucial for enhancing retail banking services, as effective recruitment, training, and employee treatment policies maximize workforce potential Consequently, focusing on the improvement of human resource quality is essential for the long-term development of retail banking services.
Techcombanks’ recruitment process is highly appreciated because of its profession and modernism Applicants need to experience 4 rounds including:
CV, IQ Test, teamwork and interview before becoming Techcombanks’ staff However, Techcombank should depend on applicants’ position to give a suitable discussion question in teamwork
Techcombank recognizes the importance of enhancing staff professionalism and updating skills in banking operations, which is why it has established a dedicated training center to offer courses for both new and existing employees The bank is also committed to addressing various key issues to ensure continuous improvement in its workforce.
Evaluating the result of training course and staffs’ progress which bases on quality and effectiveness of work after training process
Proving further training such as domestic and oversea courses for the talents
Maintaining the cooperation with Bank Skills Training & Consultancy to supply well-trained banking staff
Techcombank should implement a tailored treatment policy that aligns with each position to motivate employees and recognize the contributions of high performers, fostering their loyalty to the bank Offering competitive salaries is essential to attract well-trained talent, while carefully considering regulations around rewards and penalties The bank provides various incentives, such as a 13th-month salary, KPI-based bonuses, profit-sharing, and merit-based pay Additionally, Techcombank's welfare programs are designed to meet diverse employee needs, including AON Insurance, birth and retirement allowances, support for club memberships, healthcare, sports activities, car benefits for eligible employees, special rewards for top performers, preferential loans, and opportunities for contests and collective events.
Improving quality of organizing and managing retail banking services
Techcombank prioritizes the renovation of its management methods and the restructuring of its retail banking model to align with international standards and support the growth of its retail banking services The head office must enhance its management capabilities to effectively oversee branch activities Additionally, Techcombank is focused on refining its risk management framework and advancing its information management system under the guidance of the supervisory board.
Techcombank aims to enhance its retail banking services by systematically aligning activities from the head office to its branches, ensuring high-quality customer service To achieve optimal results, it is essential to clearly define the roles and responsibilities of each department Additionally, branches and transaction offices will evolve into professional retail organizations, featuring dedicated service departments tailored to individual customer needs.
Customer care service is crucial for ensuring customer satisfaction, which is vital for the survival of banks like Techcombank in a competitive market Establishing a dedicated customer care center can help provide timely advice and address inquiries with a polite and enthusiastic staff It's essential to promptly resolve customer complaints and communicate feedback effectively Additionally, offering gifts to VIP and potential customers can strengthen relationships and encourage loyalty to the bank.
Besides improving the quality of existing products, Techcombank also has to concentrate on researching and developing new retail banking products to attract customers
Market research and the retail banking product department play a crucial role in introducing new offerings to customers By analyzing customer preferences and leveraging Techcombank's strengths in the retail market, this department can create innovative banking products tailored to different demographics, such as age, career, and income It is essential for Techcombank to present a diverse range of retail banking products that stand out from competitors.
Managing the quality of service
Customers’ value products of other banks, choose some strategic and profitable products for long – term investment and enhance cross – selling among clients
To attract new customers, it is essential to diversify saving account options, offer retail credit with flexible interest rates, and implement appealing promotional programs Enhancing bancassurance products and insurance partnerships will increase their popularity among consumers Additionally, renovating ATM functionalities, such as enabling account deposits at ATMs, is crucial Techcombank should continue collaborating with renowned brands, like Vietnam Airlines and Mercedes-Benz, to release co-branded Visa cards Furthermore, integrating the Techcombank ATM card with various applications like bus cards, student cards, and company cards will boost card usage and expand the retail network.
Techcombank should ensure that its marketing activities are professional and comprehensive across all branches and transaction offices Organizing traditional events to showcase banking products can effectively engage customers During celebrations such as the bank's foundation or national festivals, offering unexpected promotional programs can enhance its public image Additionally, utilizing mass media channels like television, radio, and newspapers, along with calls, emails, leaflets, and brochures, can effectively advertise Techcombank's products.
Regular assessments and surveys of service quality are essential for Techcombank to evaluate and enhance its offerings effectively Implementing a mystery shopper program can provide valuable insights into customer interactions, staff expertise, and facility conditions Additionally, conducting periodic customer satisfaction surveys via questionnaires, emails, phone calls, or interviews will enable clients to share feedback on products and retail banking services These initiatives not only help address customer inquiries but also inform strategic improvements in Techcombank's retail banking services.
Improving Techcombanks’ financial capacity
Financial capacity is one of the competitive advantages in retail banking market, so Techcombank need to increase financial capacity to improve its strength and position
To enhance owners' equity, Techcombank should focus on increasing retained earnings, which serve as a crucial internal funding source By doing so, the bank can reduce its reliance on external financing and avoid diluting existing shareholders' control It is essential for Techcombank to strategically determine the retained earnings ratio to boost owners' equity while still providing dividends to shareholders Additionally, the bank should consider issuing stocks or transferable bonds as external financing options to strengthen its financial position When pursuing these external funding methods, Techcombank must be mindful of issuance fees and the potential dilution effect to select the most suitable approach.
To enhance its financial capacity, Techcombank should focus on improving asset quality by promptly addressing non-performing loans through strategies such as selling bad debts to VAMC, utilizing provisions, and liquidating collaterals Additionally, refining the credit process and enhancing the skills of credit officers are essential steps to mitigate credit risk effectively.
Recommendations to The State Bank of Vietnam
Vietnamese economy has faced many difficulties since the economic crisis in
2008 SBV has to make efforts to stabilize macro economy It should launch bailouts or give policies to raise living standard and help corporations deal with finance and production problems
Streamlining administrative processes and reducing unnecessary formalities in retail banking services are essential for enhancing customer appeal This approach not only simplifies access to financial information for clients but also enables banks to effectively promote their products through modern financial information gateways.
The State Bank of Vietnam (SBV) must enhance its regulatory framework to align with international standards while safeguarding customer interests Additionally, it should introduce new regulations and unified development strategies, along with a flexible exchange rate management mechanism, to address the evolving needs of the banking sector and respond effectively to market fluctuations.
To promote a shift from cash payments to electronic transactions, it is essential to reduce the reliance on cash and encourage the use of card services The State Bank of Vietnam (SBV), along with press and communication agencies, should collaborate to effectively communicate the benefits of electronic payments to the public, aiming to transform payment habits across society.
Ensuring the security of electronic banking services and protecting customer information is crucial Additionally, implementing policies that incentivize the use of card payment services, such as tax reductions, should be actively pursued.
The State Bank of Vietnam, in collaboration with commercial banks and the General Statistics Office, must develop a comprehensive list of retail banking products that meets international standards This initiative will establish a systematic reporting framework for retail banking products, enhancing customer access to information about banking services and improving the management capabilities of banks.
The State Bank of Vietnam (SBV) must prioritize the monitoring and supervision of banking activities to ensure their safety and soundness It is crucial to enhance regulations on banking activity adequacy in line with international standards promptly Additionally, the processes and methods of monitoring and supervision should be meticulously evaluated for effectiveness Implementing an early risk alert system is essential for identifying financial institutions facing difficulties through remote monitoring and credit assessments.
The future of commercial banking is expected to be dominated by retail banking, with foreign banks bringing expertise that intensifies competition for Vietnamese banks, particularly Techcombank To stay competitive, Techcombank and its peers must adopt best practices, enhance management skills, and develop strategic plans focused on advancing their retail banking services.
Chapter 4 of the thesis analyzes the current state of Techcombank's retail banking services and proposes solutions to enhance material facilities, human resources, and financial capacity Additionally, it recommends specific measures for the State Bank of Vietnam (SBV) to assist Techcombank in addressing its weaknesses and strengthening its position in the retail banking market.
During a recession, commercial banks face operational challenges and are shifting their focus towards retail banking services, which offer significant profit potential Retail banking primarily serves individuals and small to medium-sized enterprises (SMEs) by providing a variety of products through multiple delivery channels This transition benefits not only the banks but also the economy and customers alike.
Since the 1990s, retail banking services in Vietnam have significantly evolved, playing a crucial role in the advancement of the banking sector and overall financial system Commercial banks highly value the importance of these services, recognizing their substantial contribution to the industry.
Techcombank recognizes the significance of retail banking services and has made substantial investments to upgrade its technology and enhance its retail banking system To establish itself as the leading retail bank in Vietnam, Techcombank must implement extensive strategies focused on improving the quality of its retail banking offerings.
The thesis titled "Developing Retail Banking Services in Techcombank" focuses on evaluating the state of retail banking services at Techcombank from 2010 to 2013 It identifies the limitations faced during this period and explores their underlying causes, while also proposing solutions and recommendations to enhance service quality in the future.
During the research process, the thesis has certain restrictions
I hope that teachers, lecturers and other readers can give me some comments and contributions to perfect my thesis