CHAPTER 2: CURRENT STATUS OF THE DEVELOPMENT OF NON-CREDIT
2.2. Current status of the development of non-credit services at Techcombank in
2.2.1 Analysis of the non-credit service development results at Techcombank in the 2013 - 2017 period
Table 2.2 Revenues from non-credit services of Techcombank (2013-2017) Unit: Million dong
Indicators 2013 2014 2015 2016 2017
Revenues from non-credit services
898,042
1,212,760
1,109,136
2,802,672
5,698,503
Revenues growth from non-credit services (%)
3.16
1.35
0.91
2.53
2.03
Total operating revenues
5,647,836
7,007,422
9,343,942
11,833,153
16,343,806 Revenues from
non-credit services /Operating
revenues (%)
16% 17% 12% 24% 35%
Source: Audited consolidated financial statements of Techcombank for the 2013 - 2017 period
The above table shows that non-credit activities have brought significant revenues to Techcombank but the growth has not been really stable as well as has not achieved its strategic objectives.
In 2015, the growth rate was 9%, which shows that Techcombank encountered many difficulties in developing non-credit services. After 2015, there were be high growth rates between 2016 and 2017, above 200% compared to that in the previous year.
The non-credit Operating revenues ratio increased 24% in 2016 to 35% in 2017.
This change is caused by the fact that 2011 - 2015 is the period when commercial banks in Vietnam in general and Techcombank in particular suffered from the significant impact of the economic downturn. After restructure of the banking system, the banking system including Techcomabk became stable in 2015.
Table 2.3 List of non-credit products of Techcombank
Cash and
payment Deposit
Securities trading
Insurance commission
Securities issuance guarantee
Other services
*Domestic payment
*International payment
* Payment card
*Payment account
* Savings account
*Account management
*Trading securities purchase and sale
*Investment securities purchase and sales
*
Bancassurance distribution via bank branches
* Bond issuance consultancy
* Bond brokerage / securities via bank channel
* Electronic banking services
*Foreign currency trading
* Treasury services and Asset
Management
Source: Data from General Accounting Department of Techcombank
At present, there are four main types of services being developed by Techcombank and accounting for nearly 70% of total revenue from credit activities
(2017), including payment and cash services, card services, Insurance commission, Bond brokerage.
2.2.1.1. Cash and payment services
Payment and cash are the traditional services of commercial banks, thus they account for a large and stable proportion of non-credit services.
Techcombank’s network currently has 314 branches/transaction offices in 45 provinces and cities across the country. The North, Central and South provinces are oriented centrally in key economic areas of the big cities to serve customers.
With the advantage of such payment network, Techcombank’s Revenues from payment activities always grew in scale as well as proportion over the years, specifically:
Table 2.4: Revenues from cash and payment services of Techcombank ( 2013 -2017)
Indicators 2013 2014 2015 2016 2017
Cash and payment service 728,309 909,938 1,125,544 1,270,342 1,465,532
Non-credit operating
revenues 898,042 1,212,760 1,109,136 2,802,672 5,698,503
Proportion 81% 75% 101% 45% 26%
Source: Audited consolidated financial statements of Techcombank for the 2013 - 2017 period
- Size: Although non-credit Operating revenues has fluctuated, Revenues from cash and payment services was maintained at the stable growth in recent years, increased from 728 billion dong (in 2013) to 1,465 billion dong in 2017, an increase of nearly 737 billion dong in 5 years:
- Proportion: Revenues from cash and payment services always accounted for a large proportion of total non-credit Operating revenues and reached 26% in 2017. The absolute amount was 1,465 billion dong, helping Techcombank become one of the leading commercial joint stock banks in non-credit operating revenues
Payment activities include domestic payment and international payment - Domestic payment
Over the past 24 years, Techcombank has paid great attention to making investment in modernizing its banking operations in general and its payment operations in particular by successfully implementing a payment modernization project which allows connection to the State Bank of Vietnam as well as other banks. Specifically, Techcombank provided domestic remittance, account management services, deposit remittance, balance management, account services management and supply, salary payment services
- International payment
With a network of nearly 800 dealer banks around the world, Techcombank’s international payment transactions were fast and highly appreciated. International payment services include overseas education remittances, overseas currency exchange remittance, barter payment, overseas remittance, collection of documents by immediate payment or deffered payment as a collection bank, letter of credit and document sending as a negotiating bank, discount bank or credit confirmation bank, discount of export documents
2.2.1.2 Insurance commission
Bancassurance is a combination of the “bank” and “insurance” terms, simply understood as insurance cross-selling bank. According to experts, Bancassurance is considered as the basic supplement to traditional insurance supply method through dealer channel and direct sale. The products of this distribution channel have been
developing drastically in countries around the world and become one of the main distribution channels of insurance products in many places.
Bancassurance activities at Techcombank are carried out in both non-life and life insurance sectors but mainly in the life insurance sector. Beside risk management, Techcombank was also very interested in reducing risk for customers. With life insurance products, Techcombank provided customers with package financial services to assist them in actively making their financial plan now and in the future, meeting their sustainable and long-term needs.
Table 2.5: Revenues from insurance commission of Techcombank ( 2013 -2017)
Indicators 2013 2014 2015 2016 2017 Insurance
commission
-
30,000
337,000
574,000 Non-credit
operating revenues
898,042
1,212,760
1,109,136
2,802,672
5,698,503
Proportion 12% 10%
Source: Audited consolidated financial statements of Techcombank for the 2013 - 2017 period
Insurance was one of the key products of the bank in the 5 year strategy. In 2017, Techcombank’s Revenues from insurance commission increased by 44%
especially in the last months of the year when Techcombank signed the exclusive distribution agreement with Manulife Insurance. As a result, insurance has become the main chargeable product with the highest growth in sales in 2017 (Growth rate of 70%), raising the proportion of insurance commission in total Revenues from charges from 13% in 2016 to 19% in 2017
2.2.1.3: Securities issuance guarantee
Bond channel has brought a great profit to banks, even the growth rate of bond income increased faster than that of investment capital in this channel. Bond income of BIDV in the first half of this year has tripled compared to the first half of last year, Vietcombank doubled meanwhile MBBank 1.5 fold. Compared to 2011 and 2012, the commercial banks’ absolute Revenues from this type of asset increased 1.5 to 2.3 times.
At Techcombank, in addition to providing medium and long-term loans to corporate customers, TCB promoted the issuance of bonds to customers, a capital mobilization method with more advantages than bank loans.
In 2017, Techcom Securities’ consultancy and issuance volume grew by 33%
compared to 2016, continuing to maintain the leading position in bond brokerage market, thereby increasing Revenues from securities issuance guarantee charges, 11% higher than the previous year and accounting for 8% of the total gross profit of 337 billion dong in 2016 and 375 billion dong in 2017.
Table 2.6: Revenues from Securities issuance guarantee of Techcombank ( 2013 -2017)
Unit: Million dong
Indicators 2013 2014 2015 2016 2017
Securities issuance guarantee
336,504 374,551
Non-credit operating revenues
898,042 1,212,760 1,109,136 2,802,672 5,698,503
Proportion 12% 7%
Source: Audited consolidated financial statements of Techcombank for the 2013 -
2.2.1.4: Foreign currency trading
In order to meet the need of building modern commercial banks with multi- functions, over the past years, Techcombank’s business activities have been organized in the direction of diversification of banking products including foreign currency trading and international payment that have been paid attention to and enhanced effectively, thereby enhancing the competitive position and creating a separate image of Techcombank in the banking system.
In recent years, with the expanding network and high demand of customers, Techcombank has fully and timely met the services of foreign currency transactions. Techcombank has been dealing with customers in most strong foreign currencies such as USD, EUR, GBP, AUD, etc through the counterpart currency - Vietnamese dong or another currency. Foreign exchange products traded at Techcombank were spot foreign currency, forward transaction, swap transactions,foreign exchange option transactions.
Table 2.7 Foreign currency trading at Techcombank ( 2013- 2017) Unit: Million dong Foreign
currency 2013 2014 2015 2016 2017
Foreign currency trading revenues
872,712.00
519,655.00 1,677,845.00 1,027,292.00 1,105,028.00
Foreign currency trading cost
994,213.00
496,757.00 1,869,847.00 787,091.00 826,443.00
Profit or loss (121,501.00)
22,898.00 (192,002.00) 240,201.00 278,585.00
Source: Consolidated financial statements of Techcombank for the 2013 - 2017
Techcombank’s foreign currency trading and international payment has grown rapidly; however, drastic and stable development is required.
In 2013 and 2015, Techcombank’s losses were 121 and 192 billion dong respectively. Foreign exchange gains have been on the rise for the last two years, a sharp increase of 240 billion dong in 2016 and 278 billion dong in 2017. The cause is the impact of the recession and economic crisis, partly the current regulations on foreign exchange operations of the State Bank of Vietnam. As a result, Techcombank failed to self-exploit and balance the foreign currency source with import-export activities. Most foreign currency trading transaction was the spot contract. Forward contracts were very limited. Branches also traded in some foreign currencies such as swaps, options but the number of customers was still limited.
2.2.1.5: Card service
Techcombanks’ installation of ATMs and issuance of ATM cards and credit cards were very diverse. TCB has issued the following cards:
Fast access debit card, Standard/Gold/Platinum Visa debit card, gold, platinum, co- brand Visa debit card, Vincom loyalty card, Platinum Vip Vingroup card
Credit Card: Dreamcard, Techcombank Visa Card, VNA Techcombank Visa, Platinum Vip Vingroup Card, Platinum Mecedes card.
Card issuance in 2017: Approximately 4 million cards, including:
Domestic debit card: 2,848,444 International debit card: 617,628 Credit card: 527,144
Table 2.8: Card revenues of Techcombank in the 2013 – 2017 period Unit: Million dong
Indicators 2013 2014 2015 2016 2017
Card
revenues 121,000 189,000 236,372 381,000 859,640
Non-credit operating revenues
898,042 1,212,760 1,109,136 2,802,672 5,698,503
Proportion 13% 16% 21% 14% 15%
Source: Data synthesized by the author
According to data, the Card revenues has increased sharply over the years. In particular, Techcombank Visa credit card transactions was ranked the first in the Visa credit card market, increased 13.9%. The number of Visa card transactions have been leading in the banking sector since October 2017, which is also Techcombank’s efforts in increasing service quality and customer experience management.
Development of ATMs and POSs
Table 2.9: The number of ATMs and POSs over the years
2013 2014 2015 2016 2017
ATM (piece)
1,229
1,231
1,231
1,193 1,117 POS (piece)
2,689 3,300 3,800 4,370 4,865
Source: Annual reports and synthesized data by the author
Techcombank’s network of ATMs and POSs has grown steadily over the years, throughout the developed urban areas. Successful connection with international payment organizations such as Visa, Master, Diners Club and other domestic card systems such as Smartlink, Banknet have improved the performance of ATM systems clearly through the number of transactions and transaction turnover that has been increasing yearly. It is a significant and significant source of income of non-credit Operating revenues of Techcombank.
2.2.1.6 Securities brokerage
Techcombank’s securities brokerage service was carried out by Techcom Securities, one of the four member companies. Techcom Securities focused on two main segments of securities brokerage and investment banking services. At present, Techcom Securities is one of the top securities companies in the market, especially well known for bond issuance guarantee.
Table 2.10: Securities service of Techcom Securities in the 2013-2017 period Unit: Million dong
Foreign currency 2013 2014 2015 2016 2017 Net revenues from
trading securities
137,423
182,604
338,122
274,046
539,888
Expenses from trading securities and provisions
32,286
85,377
34,545
149,266
143,158
Gains and losseses 105,137 97,227 303,577 124,780 396,730 Source: Financial Statements of Techcombank in the 2013-2017 period Techcom Securities’ securities brokerage activities have developed rapidly and stably, specifically:
Income increased from 137,423 billion dong in 2013 to 539,888 billion dong in 2017, an increased of 402 billion dong in 5 years. Techcom Securities’ Revenues
from trading securities increased rapidly and quite stably from 105 billion dong to 396 billion dong in 2017, an increase of 291 billion dong in the 2013 - 2017 period.
Although the domestic and international stock markets have fluctuated sharply since 2008 and the downturn lasted from 2010 to 2013, Techcom Securities’
securities transaction still grew steadily and stabily compared to that of other joint stock commercial banks. At the end of 2017, gain fromtrading securities increased 317% compared with the same period of 2016.
2.2.2 Market share and the number of customers using non-credit services annually
Figure 2.3 Market share and the number of customers using non-credit services annually
(Source: Data synthesized by the author)
In general, Techcombank’s market share has also changed, increased steadily over the years. Techcombank’s market share was 5-7% of total market share of commercial banks. Moreover, Techcombank’s operation network constantly developed. At the end of 2017, there were 315 branches/ transaction offices in 45 provinces. With its market share and wide network, Techcombank has attracted a large number of customers using the service.
2.2.3. Customer satisfaction of non-credit services of Techcombank
Based on the survey results and criteria related to the development of non- credit products and services of Techcombank, the author presents the following results:
Top 5 non-credit services used by customers at Techcombank Table 2.11. Top 5 non-credit services at Techcombank
No. Non-credit services Percentage
1 Cash and payment 100%
2 Card 100%
3 Bond 85%
4 Foreign currency trading 45%
5 Bancassuarance 30%
Source: Survey of demand and customer satisfaction of non-credit services of Techcombank
From the above table, it can be seeen that 100% of Techcombank’s customers prefer to use payment services and card services. 85% of customers love bonds and 45% prefer to use foreign currency trading services and 30% prefer to use bancassurance. These are popular products of commercial banks. The non-credit products such as Cards, Bonds, Bancassuarance are the favorite products that demonstrate the customer’s deep understanding of technology, personal fianance and also prove Techcombank’s good customer care and experience management.
Top 3 highest and lowest levels of agreement on facilities, staff and rationality of products and services
Table 2.12: Top 3 highest and lowest levels of agreement on facilities, staff and rationale of products and services.
No. Criteria Agreement level
Top 3 highest levels of agreement
1
The staff of the Bank were polite, proactive in instructing customer in a thoughtful and dedicated manner
95% Strongly agree 5% agree
2 There were a variety of products 100% agree 3 Customers feel secure and comfortable when
carrying out transactions at Techcombank
90% Strongly agree 10% agree
Top 3 Lowest levels of agreement
1 The bank has many branches to facilitate customers’ transactions
35% Neutral 65% Disagree 2 The brochure provided customers with complete
and clear information
47% Neutral 53% Disagree
3 Competitive service charges 48% Neutral
52% Disagree Source: Survey of demand and customer satisfaction of non-credit services of Techcombank
Regarding satisfaction: The results show that the attitude of bank officers, diversified products and services made customers satisfied becaused they felt safe when carrying out transactions at Techcombank, which shows that Techcombank’s products and services meet the needs of its customers and Techcombank’s staff have clearly understood customer’s needs.
Regarding dissatisfaction: Distribution system and transaction points, ATMs were still limited, branches and transaction offices have not had convenient facilities such as private internet table, separate phone for customers. Customer care policies and specific product manual were still limited. Price and charge policy for some products and services was not really competitive.