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On a higher plane
It’s very much early days for premier banking services in Vietnam and the race among banks will become fiercer over time.
In retail banking, banks normally divide their customer base into mass and mass affluent groups. Mass customers are the foundation of retail banking and are generally provided and offered all basic retail banking products and services. Mass affluent customers are separated from the mass group based on certain criteria set by each bank, usually assets under management (AUM). Mass affluent customers are offered an exclusive set of products and better services packaged under the premier or priority banking umbrella.
In term of products, mass affluent customers are offered more products that meet their specific needs for personal financial planning and management. They are also offered better standards of services through dedicated relationship managers (RM), who look after all their needs and requirements. In transactional banking, mass affluent customers are also served at separate premier counters or even a premier centre that only serves premier banking clients.
In most cases banks spend a long time building their retail banking customer base before starting to divide it up and build business for mass affluent customers. Premier banking is a very lucrative segment that most banks wish to capture because they can do more with customers and therefore earn more from offering a range of services.
Local realities
In Vietnam, Vietcombank (VCB) started this type of special banking service first, through its own VIP banking model. Vietcombank has a VIP department that takes care of banking services for VIP customers who have a substantial business volume with VCB in terms of deposits or loans. To reach the status of a VIP customer and enjoy VIP banking privileges, individual customers need to meet certain standards, such as maintaining VND3 billion ($150,000) in deposits with the bank or taking out loans of around VND5 billion ($250,000).
There are a few key privileges for VIP customers, including being served at the VIP banking department where bank staff complete all forms and procedures. Customers do not have to visit different counters to complete different transactions and can enjoy coffee or tea in an air-conditioned lounge. Privileges also include waivers or discounts on banking fees, and better interest rates.
In recent years other local banks such as Techcombank, Sacombank, Asia Commercial Bank (ACB), and DongABank have followed suit and launched banking services for affluent customers. It is clear that these banks only offer premier banking services after they have built a strong retail banking customer base.
Meanwhile, three out of the five foreign banks with local licences have already provided premier banking services to customers in Vietnam. It seems that foreign banks launch premier banking as an entrance strategy in Vietnam. With premier banking they can overcome the constraint of a limited physical presence and at the same time leverage customer excellence to acquire better customers.
Challenges ahead
Firstly, in terms of product constraints, when customers take a look at product offerings by local banks for mass affluent customers they don’t see too much difference from those offered for mass customers.
Essentially, there are deposit products, loans, credit cards and basic transactional banking. There is no investment product offered to meet the specific needs of affluent customers, who have money to invest and expect a higher return.
There is no strong value proposition from premier banking except the “higher class” status attached to premier banking clients. Customers expect some regulatory changes so that banks can offer investment products and customers will then begin to care about the financial planning process.
Secondly, there is the matter of customer awareness or perception about premier banking. Since the value for premier customers is better price and better services offered in return for higher AUM at banks, many customers seem to only focus on pricing when they look at premier banking. While customers are focused on pricing, banks seem to ignore other value added services in premier banking such as financial planning and other personal advice.
With the race just beginning, more and more banks are joining in to take a share of the lucrative premier segment. But customers will not see any significant differentiation in the offerings from banks. Some banks are still in the preparation process and are considering when to join the race.
Some believe they should not rush in without developing a strong value proposition. Banks must understand the needs and wants of this rising affluent group before embarking on a new business that differs from what they are offering now to mass customers.
Dinh Chien
VNeconomy
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