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Local banks need to play top game
Local banks need to spruce up their act or risk an exodus of retail customers to foreign banks.
A Vietnam retail banking report 2011 released at the recent Asean Banker Forum 2011 pointed out Vietnamese banks lacked strategy positioning and had poor information technology (IT) infrastructure.
Vietnam’s private banks were competing fiercely but many of them chose identical strategies, resulting in thin margins and meagre returns, the report said. Furthermore, their spend on IT for retail banking services came in at a low 30-40 per cent of that of their Asia counterparts.
Eighty per cent of banks in Vietnam were planning to become retail banks, said Nguyen Van Dung, deputy director of the State Bank’s Ho Chi Minh City branch.
The mentioned-above report also stressed the rise of foreign banks in Vietnam. “While domestic banks have around 90 per cent share of retail banking market, foreign banks are fast becoming strong competitors by providing services with high technologies which local banks do not have,” the report stated.
Citibank has set up two retail banking branches, one in Hanoi and the other in Ho Chi Minh City along with a nationwide partnership network offering access to the 1,800-automated teller machine (ATM) network of Vietnam Bank Card. In an endeavour to expand their retail banking services, HSBC and ANZ recently launched visa platinum credit cards, providing exclusive privileges to their growing number of wealthy customers in the country.
“Many foreign banks are putting their eyes on retail banking sector in Vietnam and the competition in retail banking is fiercer and fiercer,” said Dung. According to Karolyn Seet, an analyst at Moody’s, Vietnam’s retail credit market has great potential for exploitation and the retail banking sector is expected to achieve 30-40 per cent growth in the coming years.
Only 22 per cent of the Vietnamese population of over 85 million people now use banking services and Vietnam has 33 million payment cards, 12,000 ATMs and 50,000 locations where cards can be used for payment (POS).
According to Dung, Vietnam’s average per capita income has continuously increased from $1,024 in 2008 to $1,200 in 2011 and is expected to hit $2,000 in 2015. This meant an opportunity for retail banking. He predicted non-cash payments would take off in the near term, especially among young office workers.
“Developing personal finance services is also an opportunity to expand markets. There is high potential growth and retail banking will enhance risk diversification in the business especially after the recovery phase of global economic crisis,” said Pham Anh Tuan, deputy general director of Techcombank.
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