Retail banking - an attractive business

Retail banking, which remains not fully exploited so far in Vietnam, is expected to become more bustling in the near future, especially when foreign bankers land in the market.

Director General of the Technological and Commercial Joint Stock Bank (Techcombank) Nguyen Duc Vinh said that a lot of people among the 84mil Vietnamese people had demands for retail banking services. However, retail banking services have not developed in Vietnam.

According to Dr Nguyen Dai Lai, Deputy Director of the Banking Development Strategy Department, in developed countries, a bank can provide 1,000 banking products, while a Vietnamese bank can provide several tens to 100 types of services at maximum. The income from retail banking in Vietnamese banks accounts for 6-12% of the total turnover, while the ratio is some 50% in developed countries.

Mr Lai has stressed that the weakness and shortcomings of Vietnamese banks themselves are the culprits that prolong the existence of the cash economy.
In fact, domestic banks have been aware of the importance of developing retail banking services.
They have been trying to make heavy investment in retail banking development by opening many more branches. In addition, banks have spent a lot of money on core banking software and information technology items. They have also made every effort to push up the development of ATM systems, Internet Banking, Phone Banking and Home Banking.

Deputy Director General of the Bank for Development and Investment of Vietnam Le Dao Nguyen said that since 2006 the bank had considered retail banking development as its priority task.

In 2006, the net earning from services of the bank was reportedly VND520bil, up by 74% over 2005. The growth rate of 84% has been set up for this year; it is to be obtained mostly from modern retail banking services.

In general, the banking services provided by domestic banks prove to be backward and poor. Most banks are not providing services ‘over the counter’ while there is no self-service system.

Local banks now have different retail banking services, but they do not cooperate with each other. For example, big commercial banks all try to develop their ATM networks, but they cannot find a common voice to develop a single network, which can help reduce investment expenses.

Moreover, it is quite surprising that it still takes several days to remit money from one province to another while it takes just several hours to remit money from a foreign country to Vietnam.
Meanwhile, local banks have blamed the current situation on the lack of a legal framework for retail banking services to develop.

An official from the Vietnam Bank for Foreign Trade (Vietcombank) said that the currently applied legal documents stipulated manual transaction procedures, which require too much time to follow. Commercial banks always have to ask for permission from the central bank and have to wait for a long time if they want to launch a new banking product onto the market.

Experts are right when saying that an unexploited market means a potential market. That explains why foreign bankers are eyeing Vietnam’s retail banking market.

HSBC, Citibank and ANZ have announced their plans to conquer Vietnam’s retail banking market. When the author of the story called HSBC to ask about the formalities to get a loan for the purchasing of a house in installments, a HSBC staff said firmly that the bank would make the loan accessible for him.

Meanwhile, when contacting a domestic bank with the same question, the author was told he would need to fill in 10 different kinds of papers.

Source: VNE