Actual existences of bank branding in Vietnam- 123docz.net

CHAPTER 2: RESEARCH METHODOLOGY & EMPIRICAL FINDINGS

2.7 Why are Vietnamese banking brands not great?

2.7.2. Actual existences of bank branding in Vietnam

Through recent studies and reports from sate bank and financial organizations in Vietnam and in the world, we can recognize some problems and challenges to. Next are some challenges to commercial banks system in Vietnam as following:

 The largest challenge to Vietnamese commercial banks is factor inside banks that are capital size, limited human resource and technology progress. Most of them are lower than countries‘ in the area.

 Product and services in banks are mainly traditional and even poor when compare to other banks in the Asia. Service quality is not high,

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not follow up to customers‘ demand. Most banks mobilize capital from savings with the amount of capital account for 94% in total mobilization capital. Capital mobilization and credit operations are main activities in banks and they account for more than 80% total income.

 New products and services of bank seemly are modified from old those without innovation. As we see, almost Vietnamese commercial banks have no diversification in products and services, so they have to compete with each other by interest rate tool in order to attract customers. However, this tool also has advantage at a limit level.

 There is no product and service has breakthrough in technology or convenience. Customers have not many choices in using services at bank. In developed countries, banks have many kinds of business outside of banking service such as investment in funds, corporate bonds…

 Procedures of banks relatively complicated and often take much time of customers. For example, to one service, in foreign banks, it take only from 3 to 5 minutes but in domestic banks with the same service it often takes from 8 to 10 minutes even 15 minutes. This make much inconvenience for customers and many customers feel unsatisfied when they have to go bank to deal.

 Risk management in Vietnamese banks is not good. Danger from risk management is likely to happen to banks. This is many international financial organization warned. But, there is few banks are interested in that.

 Application in information technology is lower than countries in the area. This is expressed in number and quality of products and services in banking system.

 Service system in banking is relatively poor and monotonous, connectivity among services in bank are low.

 Payment system in banking has not reached standard yet.

 Online banking system has not reached standard and cached up the market demand.

a. Four general difficulties to banks

 Regulation from state bank (express through regulation to commercial bank about, recently the state bank required all commercial banks increase compelled reserve rate from 7 % to 15% or lending rate to stock market not beyond 3%. This make difficult to banks when many customers come to bank and then come back without any support because from the state bank regulation.

 Financial capacity of banks is limit and actually weak to foreign banks. Although in two year back now, most commercial banks increased chartered capital though several forms such as : selling strategic shares for foreign partners , issued more shares to shareholders…this capital, however, is smaller than foreign banks in many times. Therefore, commercial and joint stock banks in Vietnam need to improve risk management skills while develop capital in many aspects and from many sources.

 Banking technology: this is obstacle to domestic banks when compete with foreign. We can easily recognize this problem when contact with domestic banks. Many services can be done by technology but in Vietnam technology infrastructure is not strong enough to do.

 The last difficulty is human resource: with trend setting up bank in recently in Vietnam, labor force to bank is a serious problem to many banks, not only domestic banks but also to foreign banks. In a short time , there many banks are established, this situation leads to a

problem human in baking increasing suddenly while people have experience in bank are not enough to meet banks demand. Therefore, competition among banks becomes fierce than ever.

b. Some challenges to banks

 Competitive ability of Vietnamese banks are limited

As we know, foreign banks have strong finance resource, and advanced technology, diversified services during domestic banks actually bad at many aspects from capital to service quality to technology as well as management skills are not good and experience is not much.

For example, chartered capital of banks are relatively small (Incombank is 2.940 billion VND; BIDV is 3.746,3 billion VND, bank has the highest chartered capital is state bank with about 5.190 billion VND – similarly 320 million USD).

Average chartered capital of state owned commercial banks are from 200 to 250 million USD, only equal an average bank in Asian area; and to the joint stock banks have chartered capital from 1000 to 2000 billion VND, While foreign banks have large capital often 1 billion USD or over. Besides that, international commercial banks have nearly 6.000 services or products relate to credit or banking while domestic banks have maximum about 300 services and operation and only to provide traditional services such as union western , lending, borrowing, saving…

with new or modern services are limited or in the process of experiments

 Vietnamese banks are facing fierce competition from foreign banks To compete well, Vietnam banks must try to attract customers and get much market share within their traditional market. According to a recent report of UNDP(United State Development Program), 45% customers said that they are willing to using service of foreign banks not using those of domestic banks; 50%

the rest of customers said that they will chose foreign banks as where to put their money , especially exchange rate . Therefore, Vietnam banks are facing a challenge that is share market share to foreign banks on their traditional market.

 Competitions among domestic commercial banks are fierce

Not only competitive pressures from foreign banks, but also domestic banks must cope with fierce competitions from domestic banks. This expresses through promotion campaigns of banks over the past time. In a short time, banks continuously launched promotion campaigns for customers in order to attract customers to use its services. This expresses the competitive levels among banks are getting hot than ever. Through study process, reference from information channels as well as requests, we can find that one of the largest challenges to Vietnam banks are not open or not open to outside. Nevertheless, challenge here is how to overcome by them to prepare every thing when take part in globalization process and cope with it, which happened, happening and will happen in Vietnam market.

These are expressed in three problems as follow:

 Management system

Banking operation in Vietnam depends much on state bank. This expresses through state bank‘s regulations to banks. However, in the process of regulating to commercial bank‘s operations, state banks often cause difficulties for commercial bank. For example, monetary market managements are poor, lack of international standards, still old regulations are used and this makes weakness in banking operations in general. Especially, criteria such as capital safety, credit quality, accounting, audit and inspection in banking are not improved. Structure of banking system is still large and costly and has not a common model to manage and this make business operation and effect of banks are not effective and especially lower than countries in area.

Business model of Vietnam banks are still simple. Service and products are poor lack of management skills by international standard such as risk management, debt asset management, customer management, service, internal auditing control.

Training and distributing employees are not suitable to demand of banks.

 Manager quality

 Management information system :customer information, risk, growth , ineffective exploitability, lack of information in running

 Management ,model is still overlapped and cumbersome

 Marketing tools are less effective

 Technology and financial ability

Technology and financial ability have an important role in competition process of banks. However, technology in Vietnam is a bit weak compared to foreign banks. Banks are not really to modernize technology system in operation and management, although banks have imported much technology from abroad.

However, it is not make sure to help banks compete with foreign partners, which have much advantage in this field in the long time when they operating in Vietnam in coming years. Banks are not apply modern management methods such as Management information system (MIS) is not invested enough to help banks protect customers as well as banks when hackers attach banks. MIS are still in internal control level not suitable to system and therefore supervision system of commercial each bank as well as system are limited. Total financial power of banks is small, therefore to restrict mobilization capability and provide capital for the economy in general.

 Effect and operation quality of banks

Although banks have tried to improve service quality and diversifying types of services in banking and reached quite much profits in recent years but when compare to banks in area and in the world , we can see that most banks are weak to compete with competitors as well as weak in operation of banking . For example through some criteria about capital safety, bad debt, management costs are low when comparing to international standards. Most commercial banks have over-debt higher than permission from 1.5 to 2.5 times.

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