Overseas money transfer service of join stock commercial bank for investment and development of viet nam transaction office branch 1

This is known as a good opportunity for the commercial banks to conduct diversified development with increasingly big scale of international payment services in general and overseas mone

ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN DUY QUÝ

OVERSEAS MONEY TRANSFER SERVICE OF JOIN STOCK

COMMERCIAL BANK FOR INVESTMENT AND

DEVELOPMENT OF VIET NAM_ TRANSACTION OFFICE

BRANCH 1

DỊCH VỤ CHUYỂN TIỀN RA NƯỚC NGOÀI

CỦA NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM – CHI NHÁNH SỞ GIAO DỊCH 1

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2022

ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN DUY QUÝ

OVERSEAS MONEY TRANSFER SERVICE OF JOIN STOCK

COMMERCIAL BANK FOR INVESTMENT AND

DEVELOPMENT OF VIET NAM_ TRANSACTION OFFICE

BRANCH 1

DỊCH VỤ CHUYỂN TIỀN RA NƯỚC NGOÀI

CỦA NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM – CHI NHÁNH SỞ GIAO DỊCH 1

Chuyên ngành: Quản trị kinh doanh

Mã số: 8340101.01

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS PHẠM THỊ THANH HOÀ

HÀ NỘI - 2022

DECLARATION ON HONOR

I have carefully read and understand about the violations to the academic honesty My commitment obliges me to conduct myself according to the honor code and not violate the academic honesty

ACKNOWLEDGMENTS

The author would like to express the sincere thanks to the Board of Rectors and lecturers from Vietnam National University, Hanoi School of Business and Management who are enthusiastic to teach, convey the experience and support the author during the author’s study at the institution Especially, the author’s sincere thanks and gratitude are extended to Assoc.Prof.Dr Pham Thi Thanh Hoa for her valuable instructions, support, criticism and corrections during the development of the study

Your valuable comments and feedback are highly appreciated as the thesis does retain some unavoidable shortcomings

TABLE OF CONTENTS

LIST OF ABBREVIATIONS IN ENGLISH i

LIST OF ABBREVIATIONS IN VIETNAMESE iii

LIST OF TABLES iv

LIST OF FIGURES v

INTRODUCTION 1

1 Necessity of the study 1

2 Overview of thesis-related studies 3

3 Research objectives and tasks 5

4 Subjects and scope of the research 5

5 Research method 6

6 Structure 6

CHAPTER 1: SOME LITERATURE REVIEWS ON OVERSEAS MONEY TRANSFER SERVICE OF THE COMMERCIAL BANKS 7

1.1 Concept and characteristics of overseas money transfer service 7

1.1.1 Concept of overseas money transfer 7

1.1.2 Characteristics of overseas money transfer 8

1.1.3 Overseas money transfer roles to commercial banks 11

1.2 Constituents of overseas money transfer service 12

1.2.1 Subjects of overseas money transfer service 12

1.2.2 Subjects of overseas money transfer service 15

1.2.3 Means of providing overseas money transfer service 19

1.2.4 Evaluation criteria for scalability of overseas money transfer service 24

1.3 Factors affecting the overseas money transfer service 27

1.3.1 Objective factors 27

1.3.2 Subjective factors 29 CHAPTER 2: EXISTING CONDITIONS OF OVERSEAS MONEY TRANSFER SERVICE IN THE PERIOD OF 2005 - 2020 BY THE JOIN STOCK

COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIET

NAM (BIDV) – TRANSACTION OFFICE BRANCH 1 32

2.1 Overview about BIDV - Transaction Center 1 Branch 32

2.2 Strengths of overseas money transfer service at BIDV - Transaction Center 1 Branch 36

2.2.1 Customer strengths 36

2.2.2 Brand strengths 36

2.2.3 Information Technology strengths 37

2.3 Existing conditions of overseas money transfer service provided by Transaction Center 1 Branch in the period of 2005 - 2020 38

2.3.1 By scale 38

2.3.2 By purposes 41

2.3.3 By subject 44

2.3.4 By country and region 46

2.4 Evaluation of existing conditions of overseas money transfer service provided by Transaction Center 1 Branch in the period of 2005 - 2020 49

2.4.1 Achievements 49

2.4.2 Restrictions 51

2.4.3 Root causes 53

CHAPTER 3: ORIENTATION AND SOLUTIONS OF EXPANDING THE OVERSEAS MONEY TRANSFER SERVICE OF THE JOIN STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM (BIDV) – TRANSACTION OFFICE BRANCH 1 TO 2025 56

3.1 Orientation on expanding the overseas money transfer service provided by Transaction Center 1 Branch to 2025 56

3.1.1 Context of overseas money transfer service provided by Transaction Center 1 Branch in the period of 2025 - 2020 56

3.1.2 Orientation on expanding the overseas money transfer service provided by Transaction Center 1 Branch to 2025 58

3.2 Solutions of expanding the overseas money transfer service provided by

Transaction Center 1 Branch to 2025 59

3.2.1 Continue improving the management and control efficiency of overseas money transfer service 59

3.2.2 Enhance Marketing activity in overseas money transfer service 61

3.2.3 Develop the specific customer policy 62

3.2.4 Continue improving the service quality and diversify products and services 63 3.2.5 Modernize banking technology 65

3.2.6 Enhance survey and study from other banks 66

3.3 Some possible recommendations 67

3.3.1 Continue improving the procedure and process of entire Bank 67

3.3.2 Enhance the technology investment & development, study to improve the utilities for the international money transfer service 68

3.3.3 Focus on expanding the agent banking system, support the branches in the training activities, developing the customer policy to improve the competitive competence 69

3.3.4 Drastically create the healthy competition environment among BIDV branches 70

CONCLUSIONS 71

LIST OF ABBREVIATIONS IN ENGLISH

Ngân hàng TMCP Đầu tư

và Phát triển Việt Nam

2 CPTPP

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Hiệp định Đối tác Toàn diện

và Tiến bộ xuyên Thái Bình Dương

5 EVFTA European Union – Vietnam Free

Trade Agreement

Hiệp định Thương mại Tự

do giữa Việt Nam và Liên minh Châu Âu

6 EVN Electricity of Vietnam Tập đoàn Điện lực Việt

Nam

7 FDI Foreign Direct Investment Đầu tư trực tiếp nước ngoài

Banking Corporation

Ngân hàng TNHH một thành vi n H C

11 MUTRAP The Multilateral Trade

13 SWIFT Society for the Worldwide

Hiệp hội viễn thông liên ngân hàng và các tổ chức tài

Telecommunication chính quốc tế

16 VALC Viet Nam Aircraft Leasing

Company

Công ty Cổ phần cho thuê máy bay Việt Nam

LIST OF ABBREVIATIONS IN VIETNAMESE

2 CTRNN Chuyển tiền ra nước ngoài

11 TKV Tập đoàn Than – Khoáng sản Việt Nam

LIST OF TABLES

Table 2.1 Business performance of BIDV -Transaction Center 1 Branch in the period

of 2018-2020 32

Table 2.2: The ranch’s net service income structure for 03 years 35

Table 2.3 Revenue of overseas money transfer 38

Table 2.4 Market share of overseas money transfer 39

Table 2.5 Overseas money transfer service revenue at Transaction Center 1 Branch 40 Table 2.6 Number of overseas money transfer transactions by purposes by years 42

Table 2.7: Number of overseas money transfer transactions by customer, by years 45

Table 2.8: Number of overseas money transfer transactions by continents, by years 47

Table 2.9: Number of overseas money transfer transactions by country, by years 48

LIST OF FIGURES

Figure 1.1: Procedure of overseas money transfer service 7 Figure 2.1: Deposit growth rate of BIVD - Transaction Center 1 Branch in the period of 2018 -2020 33 Figure 2.2: Credit growth rate of BIVD - Transaction Center 1 Branch in the period of 2018 -2020 34 Figure 2.3: Profit before tax in the period of 2018-2020 36 Figure 2.4: Number of overseas money transfer transactions by years 44

INTRODUCTION

1 Necessity of the study

In the context that the international integration, commerce and investment are actively joined by Vietnam, facilitating natural persons and legal person development, the increasingly diversified overseas money transfer demand of the organizations and individuals is recognized with increasing volume The General Department of Customs unveiled that 2018 witnessed the record of nationwide import and export value, obtained US$ 543.90 billion, increase by over 5.1% against that in 2019 This was the third consecutive year, Vietnam trade balance of goods was surplus (export surplus) with record surplus up to nearly US$ 19.1 billion, similar figure of 2019 and

2018 was US$ 517.26 billion and 480.17 billion, respectively It was unveiled that foreign trade is sharply developed, i.e., payment service for import-export Contracts and invoices are ever eventful Besides, the State Committee for Overseas Vietnamese revealed that over 5.3 million of Vietnamese people residing, working and studying at other countries in the world With the demand on international remittance into Vietnam, the overseas money transfer demand of Vietnamese individuals is found with

a series of potential for exploitation This is known as a good opportunity for the commercial banks to conduct diversified development with increasingly big scale of international payment services in general and overseas money transfer service in particular to successfully improve its competitiveness

The overseas money transfer is characterized by a series of advantages such as streamline, fast, convenience and lower costs against other international payment forms Therefore, this is recognized as a potential service product, powered by fast development speed and high percent in the international payment service However, some transaction problems are faced by many users of this service such as: unclear money transfer period, disqualified security policy, restrictions on foreign exchange, etc., resulting in problems that how commercial banks should do to increase and expand the overseas money transfer service, including the Joint Stock Commercial Bank for Investment and Development of Vietnam - Transaction Office Branch 1

The Joint Stock Commercial Bank for Investment and Development of Vietnam

(BIDV) - Transaction Office Branch 1 has launched the overseas money transfer service since 2005 and currently initiated both intensive and extensive service development According to the statistics, in the period of 2005 - 2020, over 3,000 money transfer transactions were annually initiated on average with average sales revenue of over US$ 12 billion/year Key markets of the ranch’s international money transfer service are located at developed countries, focusing on many powerful corporations, universities and hospitals such as USA, China, the United Kingdom, European countries, etc In addition to businesses that need to make payment for importers, exporters, money transfer for investment, loans for foreign debt repayment, etc., the individuals’ overseas money transfer purposes are extremely diversified such

as money transfer for tuition fee payment, health treatment, tourism, business trip, overseas residence, labor export, etc During the service is provided, in addition to the achievements, the Branch also faces with difficulties such as restricted management capacity and resources, improper and non-timely infrastructure, plants and equipment assigned to the international money transfer transactions, improper significance of marketing for overseas money transfer service, non-diversified products, cut-throat competition of services at system level and branch level

From 2011 to 2020, a series of sharp development steps were triggered by Vietnam Banking Industry to successfully reach the international integration process

In addition to becoming a member of WTO, Vietnam’s adhesion to AEC and CPTPP has opened up an ocean of opportunities for Vietnam Banking system Such agreements impact the Banking industry by promoting economic growth, credit demand and international payment and commerce services through import-export, indirect and direct investment, etc However, the overseas money transfer service is currently found with a series of unexploited opportunities meanwhile the tate’s relevant policies are not really favorable for the Bank to maximize its capacity in integration

Overseas money transfer service is oriented to be further developed in the coming time by BIDV - Transaction Center 1 Branch Therefore, the problem is that how to increase and expand the ranch’s service to satisfy the customers’ demand and

improve the business performance Moreover, no studies on overseas money transfer service provided by BIDV- Transaction Center 1 Branch have been launched That is

why, the topic: “Overseas money transfer service of Join Stock Commercial Bank

for Investment and Development of Viet Nam_ Transaction Office Branch 1” is

selected to study

2 Overview of thesis-related studies

Up to now, some outstanding studies are related to the topic, namely:

Maciej Makowski (2007) with master thesis: “International trade: Cost and efficiency of selected payment instruments” to analyze the advantages and disadvantages of some popular international payment forms, including the international money transfer By releasing the evaluation factors on performance of such forms, the study orients towards selection of effective payment form in international payment

ui Thi Thu Hang (2011) with master thesis: “Development of international payment operations at the Joint Stock Commercial Bank for Foreign Trade of Vietnam

- Dak Lak ranch” to systematize the theoretical issues on international payment development of commercial banks The author also analyzes the existing conditions of international payment development in the period of 2007 - 2010 of VCB Dak Lak and recommends the possible solutions to develop the international payment operations at Dak Lak Branch

Hadeel S Yaseen (2012) with the study: The Positive and Negative Impact of Remittances on Economic Growth in Middle East and North Africa Countries” analyzed the impacts of international remittance flow on economic development and draw out the remarkable relation between the international remittance and economic growth in such countries

Do Viet Anh Thai (2014) with the study “Role of legal environment for the international payment operations” specified the legal environment impacts on international payment, which the legal environment creates the reliable legal foundation for international payment development, supported by effective mechanism

so that the legal regulations are strictly enforced

Nguyen Thi Thanh Thuy (2015) with master thesis “Perfecting the international money transfer operations at Vietin ank Da Nang” focused on analyzing the international money transfer at VietinBank, Da Nang Branch, shortcomings and restrictions to find out the root causes and recommend the solutions to perfect Vietin ank Da Nang’s international money transfer operations

Nguyen Thi Hong Duyen (2015) with master thesis “Improvement of international payment quality at Agribank Hai Duong” investigated the factors affecting the international payment quality and existing conditions of international payment at Agribank, Hai Duong Branch The solutions of improving international payment quality at Agribank, Hai Duong province branch were suggested

Matthew Lourey (2016) with the study: “Transferring Money from Vietnam to Abroad: Options for Foreign Individuals and Companies” analyzed some characteristics of money transfer from Vietnam to abroad for the individual and corporate customers The article introduced some notes on procedures and documents

on transferring money from Vietnam to abroad

It is possible to recognize that the demand on international remittance into Vietnam, the overseas money transfer demand of Vietnamese individuals and legal entities is found with a series of potential for exploitation This is known as a good opportunity for the commercial banks to conduct diversified development with increasingly big scale of international payment services in general and overseas money transfer service in particular to successfully improve its competitiveness Upon reference to the topics related to the study, the thesis has focused on addressing some uncovered issues as follows:

+ Evaluation criteria on extensive and intensive service expansion and factors affecting the expansion of overseas money transfer service have been presented by the thesis

+ The thesis sketches out the overview about the Joint Stock Commercial Bank for Investment and Development of Vietnam - Transaction Center 1 Branch, its strengths

of providing the overseas money transfer service, analyzed the existing conditions of expanding the overseas money transfer service at BIDV - Transaction Center 1

Branch Accordingly, the achievements and restrictions of BIDV - Transaction Center

1 Branch are evaluated during overseas money transfer service is provided and root causes of such advantages and disadvantages are specified;

+ The thesis suggests the solutions by evaluation criteria groups to create a good premise to develop the overseas money transfer service at the Branch in BIDV development strategy in the period of 2025 - 2030 Moreover, some recommendations are also put forward to BIDV - Head Office to empower the branches to expand the overseas money transfer service

3 Research objectives and tasks

3.1 Research objectives

By analyzing the existing conditions of overseas money transfer services provided

by BIDV - Transaction Center 1 Branch in the period of 2005 - 2020, the study proposes the orientation and solutions of expanding the Branch's overseas money transfer services to 2025

To recommend the solutions of expanding the overseas money transfer service

provided by BIDV - Transaction Center 1 Branch to 2025

4 Subjects and scope of the research

4.1 Subjects of research

Overseas money transfer service of the Join Stock Commercial Bank for

Investment and Development of Viet Nam – Transaction Office Branch 1

4.2 Scope of research

 Research period: the period of 2005 - 2020 and orientation to 2025

 Research space: overseas money transfer service at BIDV - Transaction Center

1 Branch

Chapter 3: Orientation and solutions of expanding the overseas money transfer service

of the Join Stock Commercial Bank for Investment and Development of Viet Nam (BIDV) – Transaction Office Branch 1 to 2025

CHAPTER 1: SOME LITERATURE REVIEWS ON OVERSEAS MONEY

TRANSFER SERVICE OF THE COMMERCIAL BANKS

1.1 Concept and characteristics of overseas money transfer service

1.1.1 Concept of overseas money transfer

Overseas money transfer is defined as a method of moving the international payment vehicles which the customers (money transfer applicants) request their bank

to transfer certain money to another person (beneficiary) in certain abroad locations by money transfer selected by the customers

 Service procedure:

Figure 1.1: Procedure of overseas money transfer service

Source: 2019 BIDV Money Transfer Manuals

(1) Applicant and beneficiary are assumed to execute a contract, specifying that the method of payment is money transfer and goods and services are provided

(2) The applicant requests the bank to transfer certain amount to the beneficiary (3) The bank transfers as required by the applicant, transfers and orders the beneficiary bank to make payment to the beneficiary

(4) Payment is made upon receipt of money from the applicant bank, the credit note

is delivered to the beneficiary

Overseas money transfer service may be classified by some criteria as follows:

 By how to send payment order:

- Mail Transfer (M/T): Payment order is directly mailed by the transfer bank to the agent bank, requesting such bank to make payment to the beneficiary as directed M/T

is late but inexpensive Nowadays, M/T is relatively restricted

- Telegraphic Transfer (T/T): Payment order of transfer bank is described in the contents of the telegraph delivered to the agent bank, requiring this bank to make payment to beneficiary as directed through telecom network so-called as SWIFT (Society for the Worldwide Interbank Financial Telecommunication) when both transfer bank and acquirer are SWIFT members Today, T/T is the most modern and popular T/T is faster, safer and more accurate than M/T, however, it is more expensive

- Money transfer for direct and indirect investment purposes

- Other money transfer types such as money transfer of investment interest, loans, loan repayment, sponsor, financing, etc

 By money transfer time:

- Payment in advance: Such term of payment is a commitment of importer to exporter

in the foreign trade contract regarding total or partial payment of goods before delivery

- Payment after shipment: In such condition of payment, importer requests their bank

to make payment for the exporter's consignment after consignments are fully received

In fact, the milestones as money transfer basis in foreign trade transactions are agreed by the parties However, it is generally the time after the goods are well received by the importer

1.1.2 Characteristics of overseas money transfer

- Characteristics of participatory parties:

The State involves in the overseas money transfer service to perform its State management functions, demonstrating by promulgating the legal documents on overseas money transfer under the authority to establish the proper legal environment for overseas money transfer service development, suspension of overseas money

transfer service for credit institutions and other organizations; study and recommendation of policy on expanding and developing overseas money transfer service; examination, inspection and settlement the violations to the laws committed

by the overseas money transfer service providers and users under its authority In the overseas money transfer service, the State management function is related to at least two States In order to successfully perform the State management functions on overseas money transfer service, the countries must closely work with each other to establish the proper legal environment for overseas money transfer service development, nationally and internationally The State management role and functions, pertaining the overseas money transfer service shall be more complicated and burdensome against the functions of managing the domestic payment operations

Participants of overseas money transfer service are enterprises that need to open

an account to fulfill the payment obligations under the transactions or international sales contracts However, under perspective of overseas money transfer service, the payment obligations are generally originated from the international goods sales contracts and compliance with the international laws and national laws The subjects

of such contracts must be entrepreneurs, supported by the Certificate of Business Registration and qualified with the requirements to execute the international goods and service sales contracts Hence, in fact, the Parties who need to open account to make payment for foreign partners are importers and exporters

The Decree No 101/2012/ND-CP specifies that: “Non-cash payment service providers include the State Bank of Vietnam, banks, foreign bank branches, the People’s Credit Funds, microfinance organizations and other organizations” The 2010 Law on Credit Institutions defines that payment service may be only provided by organizations which are entitled to perform all banking operations SBV, banks and foreign bank branches may provide all banking services, including overseas money transfer service

- Content-related characteristics of overseas money transfer service: Overseas money transfer service is characterized by relatively wide contents, including opening the foreign currency account, organization and participation into the payment systems

offered by the commercial banks in various countries and account opening, using payment services provided by importers and exporters in various countries On other words, overseas money transfer service is constituted from various phases and related

to all parties from various countries such as the Government, enterprises and banks while the international payment service mainly relates to importers and exporters and banks of countries when importers and exporters of such countries must make payment for their counterparts in other countries Under any perspectives, it is important that participants of overseas money transfer service shall take note about which currency is used as payment currency in overseas money transfer service

- Characteristics of payment currency: Overseas money transfer service is supported by currency unit for liability payment originated from the international commerce activities or payment for goods and services as prescribed by the import-export contracts, in which the payment for consignment from import-export contract makes up a high percent of overseas money transfer service The contractual payment currency may be the local currency of the host country or local currency of partner’s country As the local currency is not freely converted in developing countries like Vietnam, payment currency in overseas money transfer service, import-export contract and investment is generally foreign currency Foreign currencies as payment currency

in international trading transactions are USD, EURO, GBP, JPY, etc., as agreed by the parties or complied with the international trading practice Therefore, the special attention should be paid to understand the State regulations on exchange rates, monetary policies, stability or fluctuation of foreign currency to consider whether the payment currency is used in overseas money transfer service

 Advantages:

- Operating procedure of such method is simpler than that of other methods Moreover, the low transfer fee and less banking service charge are recognized According to the advance payment or deferred payment, buyer and seller may make use of their capital and actively launch during delivery and payment

- In the money transfer method, the bank only plays as the trusted payment intermediary to enjoy the commission, free from legal liabilities to the applicant and beneficiary

 Disadvantages:

- Due to simple feature, such method is found with the highest number of risks Payment and delivery are not simultaneously initiated and no third party is available to guarantee the payment or delivery payment obligations of importer and exporter Re-buyer’s benefits are risks of the seller and vice versa Payment or delivery depends on willing of importer and exporter Advance payment assigns risks to the importer while post-payment assigns risks to the exporter Risks of conduct, foreign currency, anti-money laundering, etc., especially fraud may be higher Therefore, such method is only applied when both parties have the long-term and reliable trading relationship and relatively small items of import and export are paid such as costs related to import and export, freight, insurance premium or use fee in non-trade payment, capital transfer and repatriation of investment profits

1.1.3 Overseas money transfer roles to commercial banks

First, overseas money transfer accelerates other services offered by the bank,

facilitating the customer attraction and expansion of business market share for commercial banks

As a financial intermediary, commercial banks perform its business functions in the fields of monetary, credit and banking services Through the multi-universal business, the relationship is setup not only for the domestic corporate customers but also other international economics organizations Accordingly, commercial banks become a player of overseas money transfer service Overseas money transfer is known as the international bank function of commercial banks

Overseas money transfer helps the banks to better serve the customer’s various demands on financial services related to overseas money transfer Overseas money transfer is recognized as an add-on to empower other operations initiated by the banks, such as development of overseas money transfer service, enhancement of import and export credit transactions, bank guarantee in foreign trade, trade financing and other international banking operations, retaining the traditional customers and further attracting many prospects

Second, overseas money transfer facilitates the increased income earned by the

commercial banks The banks involving in traditional trading methods mainly obtain revenue from credit operations, only very modest percent is made up by its non-credit service revenue In the context of increasingly complicated market conditions, credit operations are found with excessive risks Hence, it shall be very unstable if credit-based revenue is only relied esides, the customer’s increasingly high and diversified demand on non-credit services is known as a good premise for commercial banks to gradually transform its business model by gradually reducing the reliance on credit operations and increasing the income from non-credit service activities Thanks to acceleration of non-credit service and overseas money transfer service development, a more stable and safer revenue source in the income structure may be obtained by the commercial banks In addition to increase in deposit service, facilitating credit operation expansion, through overseas money transfer, the remarkable revenue source may be earned from payment service fee and foreign currency trading, etc

Third, overseas money transfer increases the commercial banks’ liquidity

Overseas money transfer service not only facilities the customer attraction, increase in payment deposit balance but also helps the banks to capture the temporary idle foreign currency financial resources from the enterprises in the form of pending escrow during overseas money transfer service method is initiated for the customer, especially documentary credit forms

Forth, overseas money transfer enhances the bank’s foreign trade relation

Thanks to overseas money transfer, the bank’s scope is extended out of the national scope, integrated with other banks in the world, enhancing the prestige in the international market Accordingly, the bank is facilitated to further develop its agent relationships, exploiting the financing resources from foreign banks and financial resources in the international financial market to satisfy its capital demand

1.2 Constituents of overseas money transfer service

1.2.1 Subjects of overseas money transfer service

 Overseas money transfer service in foreign investment

Investors as organizations or individuals launch the business investment in the host country, including domestic investors, foreign investors and foreign capital

economic organizations, among which:

- Domestic investor refers to individual with the local nationality, organization having no foreign investor as member or shareholder

 Foreign investor refers to the individual with foreign citizenship to be structured and incorporated under the foreign laws to launch its business investment in the host country

- Foreign investment capital enterprise refers to enterprise having foreign investor as member or shareholder

 Overseas money transfer service in direct foreign investment from local country

to foreign country

Investor as organization/individual as prescribed by the law on foreign investment includes: Economic organization duly incorporated and operated under the laws; Cooperatives, affiliation of cooperatives duly incorporated and operated as prescribed by the laws; Credit Institutions duly incorporated and operated as prescribed; Household business as prescribed by the laws, individuals holding the nationality of the local country; Other organizations involving in business investment

as prescribed by the laws

 Overseas money transfer service in indirect foreign investment from local country to foreign country

- Investor as self-employed economic organization involving in direct foreign investment includes: Security Company, Fund Management Company, Securities Investment Funds (foreign direct investment via Fund Management Company), Securities Investment Company, Insurance Business Enterprise, Commercial Bank, General Financial Company and State-owned Investment and Business Corporation

- Investor as the trusted economic organization which is entitled to undertake the foreign indirect investment trusts include Fund Management Company and commercial bank

- Investors as individual residing and having nationality at the local country (domestic worker) who are working for the foreign organizations in the local country participate into the share bonus program issued in the foreign countries

 Overseas money transfer service in foreign loans and loan repayment for the Enterprise

Borrower (resident) receives the credits from Lender (non-resident) through execution and performance of foreign loan agreements in the form of loan agreements, deferred goods sales contracts, loan trust contracts, financial leases or contract on debt instrument issuance of the Borrower

- Borrower (resident) is enterprise, cooperative, cooperative affiliation, credit institutions and foreign bank branch incorporated and operated in Vietnam

 Overseas money transfer service in foreign loans of economic organizations

- Lender as economic organization is licensed by the Prime Minister to offer loans to the non-residents

- Foreign borrower is non-resident

 Overseas money transfer service in goods import

- Goods Buyer/Importer on the foreign trade contract is the resident (organization/individual) In the event that the buyer/importer is the individual having

no Certificate of Business Registration, then such individual is only entitled to import goods to serve for personal consumption purposes without business purposes

- Goods Seller/Exporter on the foreign trade contract is the non-resident (organization/individual) or the foreign resident

 Overseas money transfer service in service import

- Service Buyer/Importer on the foreign trade contract is the residents (organization/individual)

- Service Seller/Exporter on the foreign trade contract is the non-resident (organization/individual) or the foreign resident

 Overseas money transfer service in launching the bidding projects

- Depending on specific money transfer transaction, the transaction’s related subjects may include: investor, principal contractor and subcontractor

- Principal contractor/subcontractor may be the domestic or foreign contractor

 One-way money transfer from Vietnam to abroad initiated by the residents as Vietnamese citizens, or non-residents as foreigners

- Overseas students/their relatives transfer the costs related to overseas study purposes

- Patients/their relatives transfer the costs related to abroad disease treatment purposes

- Persons involving in business trip/their relatives transfer the costs related to overseas business trip purposes

1.2.2 Subjects of overseas money transfer service

1.2.2.1 Overseas money transfer service in foreign investment

Upon receipt of the foreign investment capital, the foreign investment capital enterprises need to:

- Transfer the legal investment profit and revenues after the fiscal year is ended or after the direct investment in the local country is completed

- Make payment for investment capital transfer value/project: Foreign Invested Enterprises (FIEs)/Foreign Investors execute the BCC Contract to transfer from foreign currency account in the local country into transferor’s foreign account to make payment for investment capital transfer value/project (from the sources that the Transferee transfers to FIEs/Foreign Investors involving in the BCC Contract)

- Transfer to reduce the project’s investment capital/charter capital of FIEs: FIEs/Foreign Investors execute the BCC contract to transfer foreign currency from the local account to the Foreign Investor’s foreign account to reduce the contributed capital/investment capital of Foreign Investor

- Transfer to return the investment capital: FIEs/Foreign Investors execute the BCC Contract to transfer foreign currency from the Foreign Investor’s local account to foreign account for the contributed capital/investment capital in case of FIEs’ dissolution and termination or finishing, liquidation, and termination of investment project under BCC Contract

1.2.2.2 Overseas money transfer service in direct foreign investment

 overseas money transfer of foreign currencies is initiated by the investor before the Foreign Investment Certificate is issued for the purposes as prescribed by the law

on foreign investment, including: market and investment opportunity survey; field trip

survey; documentary study; collection and acquisition of documents and information related to the investment project selection; summary, evaluation and appraisal, including selection and employment of consultant to evaluate and appraise the investment project; organization of conferences and seminars; establishment and operation of foreign contact office related to establishment of investment projects; participation into the international bidding, deposit, escrow or other financial guarantee forms, cost and fee payment as required by the Bid Solicitor and investees related to conditions of bidding, conditions of investment project launch; M&A, deposit, escrow or other financial guarantee forms, cost and fee payment as required

by the seller, company or as prescribed by the laws of the investee’s country and territory; contract negotiation; asset acquisition or lease to facilitate the development

of foreign investment project

 Overseas money transfer of capital is made into foreign account of the economic organization which is established/ invested by the Investor

 The capital is transferred in the form of medium and long term loan from special FDI account into foreign account of the economic organization which is established/ invested by the Investor

1.2.2.3 Overseas money transfer service for indirect foreign investment from local country to foreign country

 The foreign currency capital is transferred from the special self-employed foreign account to launch the foreign indirect investment by the self-employed organizations

 The foreign currency capital trusted from the special escrow account is transferred to launch the foreign indirect investment by the trustee (In the event that the economic organization assigns the trustee (Fund Management Company or Commercial Bank) to launch the foreign indirect investment)

1.2.2.4 Overseas money transfer service in foreign loans and loan repayment

 Borrower transfers the foreign currency from the local account to the foreign Lender to make loan repayment (principal, interest and fee repayment) for foreign loans which are not required to register/register changes at SBV

 Borrower transfers the foreign currency from the local account to the foreign Lender to make loan repayment (principal, interest and fee repayment) for foreign loans which are required to register/register changes at SBV

 Guarantor transfers foreign currency from the local account to foreign Lender (Beneficiary) to fulfill the debt repayment obligations (principal, interest and fee repayment) of foreign loans as committed at the foreign loan contracts and guarantee commitment between the related parties

 Borrower (Guaranteed) transfers foreign currency from the local account to make repayment for mandatory acknowledgment of debt (including guarantee fee) to the Guarantor as foreign non-residents

1.2.2.5 Overseas money transfer service in foreign loans

 Lender transfers the loan disbursement from the local account to the orrower’s foreign account for example Japanese Enterprise offers loan to Vietnamese partners to expand their production & business scale

1.2.2.6 Overseas money transfer service in goods and service import

 Money transfer for advance payment of Import Contract

 Money transfer for payment after shipment under the Import Contract (after the Customs Declaration is available)

 Money transfer for payment of Service Supply Contract before service is provided

 Money transfer for payment of Service Supply Contract after service is provided

1.2.2.7 Overseas money transfer service in launching the bidding projects

 Investor/Principal Contractor makes foreign currency transfer from local account to the contractor’s/ subcontractor’s foreign account for the foreign expenses related to package performance

 The foreign contractor's executive office makes foreign currency transfer from the current account at BIDV to foreign account for the foreign contractor with the payment for each phase/component of the package by the Employer/Principal Contractor

 The foreign contractor's executive office makes foreign currency transfer from the current account at BIDV to foreign account for the foreign contractor with the remaining payment after the Project is completed

 The residents as economic organizations in the local country make foreign currency transfer for payment of goods and services acquired and consumed in foreign country to serve for the successful bidding foreign projects

1.2.2.8 Overseas money transfer service in local country used by the foreigner

 Organizations (residents, non-residents) make foreign currency transfer to make salary, bonus and allowance payment for the foreign workers to be received at their designated foreign account

 The foreign workers transfer foreign currency from salary, bonus and allowance source into their foreign account

 Foreigners (inheritors) transfer the foreign currency from their inherited sources distributed by the person leaving the estate to their foreign account

 Foreigners (taker) make overseas money transfer for the given or offered amount

 Foreigners make oversea transfer of foreign currency from other legal revenue sources

1.2.2.9 One-way overseas money transfer service of residents as the local residents, not non-residents as foreigners

 International students/their relatives transfer the deposit to the foreign competent authorities/foreign training institutions so that the international students as the local residents are qualified to be issued with visa/letter of admission (when visa is not granted)

 International students/their relatives transfer study expenses/pocket money

 International student’s relatives transfer to their legal representative (as (i) Natural parent/siblings for the juvenile international students, (ii) Guardian designated for the international students, etc.)

 Enterprises having the overseas study consultancy services to the international students or their relatives are authorized to visit BIDV for transactions

 Patients/their relatives transfer the deposit to the overseas health treatment facilities/competent authorities so that the patients as the citizen of the local country may be qualified to receive visa

 Patients/their relatives transfer the hospitalization fees and pocket money to the patients

 Persons involving in business trip/their relatives transfer the costs related to overseas business trip purposes

 Visitors/ their relatives transfer the costs related to foreign tourism and visit purposes

 Residents as local citizens transfer the allowances to their relatives in foreign country

 Residents who are local citizens living and working abroad and entitled to inheritance transfer the inherited amount to their account opened in such country

 Immigrants make overseas money transfer for immigration purposes

1.2.2.10 Other overseas money transfer services

- Money transfer for goods acquisition in the form of cargo transshipment

- Reimbursement and compensation transfer related to cargo/service transshipment

- Transfer of establishment and operation costs for foreign representative offices into their account

- Money transfer into economic organization’s foreign currency account to perform the commitments, agreements and contracts with the foreign partners (goods and service acquisition, etc.), obligations related to the foreign loans

1.2.3 Means of providing overseas money transfer service

Commercial banks’ means of providing overseas money transfer service are initiated through the applicable telecommunication facilities, including: Mail, telex and SWIFT

Mail refers to a mean of message since development of international payment service Up to now, this mean is still used but not popular In Vietnam, this mean is

still applied for some special circumstances such as Non-use of Telex or non-license of SWIFT system

As a public facility, Telex is not secured and not supported by a general standard for overseas money transfer transactions Currently, this mean is rarely used in overseas money transfer operations and only activated as an option in case of optical fiber transmission line failure Meanwhile, SWIFT telecommunication is very effective and valid to recover most of disadvantages of two aforesaid means This is a globally and locally popular used vehicle

Established in 1973, SWIFT is a Society for Worldwide Interbank and Financial Telecommunication with 239 banks in 15 participatory countries Up to now, SWIFT

is affiliated with over 9,000 financial institutions in 209 countries and territories In order to become a SWIFT member, banks and financial institutions must fully satisfy the conditions, including the documents required by SWIFT and the most popular connection system This is a society that members are banks and financial institutions; each participatory bank is a SWIFT shareholder The international banks as SWIFT members are facilitated to transfer or exchange information with each other Each member is assigned with 1 trading code, so-called as SWIFT code Members exchange information/transfer money to each other in the form of SWIFT messages, as a standardized data field and symbol format messages so that the transactions may be recognized and automatically processed by computer

SWIFT provides the security telecommunication services and interface software

to banks and financial institutions Its operating motto is to serve the banks, rather than profit seeking However, in fact, SWIFT business development is known as a very big figure A small problem to calculate one-day revenue earned by SWIFT is at least USD 200 million (60,000 financial institutions x US$ 10,000/month), average rate of a SWIFT message is US$ 0.25/message Such rate depends on number of messages to

be traded per day and applicable SWIFT application version As its nature is to control the whole world’s cash flow, WIFT security is extremely high, this system has been never hacked

 SWIFT advantages:

- One-door connection capacity: Using SWIFT network, only one window is used

to approach the whole financial world by the financial institutions It means that one telecommunication system may be used to contact other service providers, agents, partners and customers As an international network of financial institutions, SWIFT provides the telecommunication services integrated with the science and technology and standardized system to enable the customers to launch their business in an effective, convenient and safe manner In the past, various interfaces, standardized systems and security systems were used for each market premise by the financial institutions Thanks to SWIFT network, a series of domestic and international market facilities may be well connected with unique SWIFT window by the financial institutions The financial institutions may reduce remarkably the resources to maintain many telecommunication systems at the same time, including time and manpower for management, programming, control, administration and security, etc The SWIFT customers are also facilitated to minimize costs and remarkably shorten time to penetrate into the market of new offerings SWIFT network not only recovers the backward technology problems but also offers a series of benefits to the world’s financial community in general In the current context, the financial institutions require

a telecommunication network to have capacities such as safe, timely and serviceable telecommunication which may save and transit the message and deliver the data files with high performance Such requirement is fully satisfied by SWIFT telecommunication services with high safety, reliability, availability and reasonable price SWIFT network may satisfy the future increasingly high demand on message flow rate

- Risk mitigation: SWIFT network reduces a series of risks incurred by banks and financial institutions, concretely:

 First, reduce number of failed transactions: Obviously, SWIFT telecommunication network of financial institutions may minimize the risks of failed transactions by two aspects: Providing one-door connection window, SWIFT eliminates the errors arisen from performance on various telecommunication systems SWIFT may be used to deliver message in an agreed standardized form to various

market facilities and other organizations SWIFT telecommunication system may also supersede the transactions via telephone and fax and may reduce the risks of message loss or missing or incorrect address

 econd, the WIFT telecommunication network also secures the message’s key code, validity and authentication to ensure data safety A series of risks may be minimized during data processing by the financial institutions

- Increase the connectivity

Connectivity increase is known as a critical step to improve performance and minimize risks in the current environment when the demand on shortening payment period is increasingly high Thanks to WIFT’s automatic system, the financial institutions’ transaction orders may be originated and executed right on due date In the past, in order to ensure that such transactions are conducted on due date, its order must be submitted a day before It means that the buffer time is required so that the information may be delivered at correct destination Payment transactions are increasingly approached to the goods and service exchange transactions, shorting the trading period and reducing the possible risks since contract execution till contract completion Risk time shall be shortened Thanks to SWIFT, the financial institutions may participate and automate the direct contacts with any commercial partners, agents

or banks, supported by reasonable price WIFT’s telecommunication network and standardized forms enable the financial institutions to process the messages without manually editing, unless it is required by the regulation or practice It means that the information available at the message must be clear, undisputed and readable SWIFT messages are messages (MT103, MT202, etc.) to be standardized by SWIFT organization with contents specified and agreed by the SWIFT system banks Therefore, SWIFT telegraph contains clearer, more accurate and secured payment contents than that of other T/T or M/T In addition, SWIFT software system enables to standardize information since it is included into message SWIFT reduces errors from delivering information from a source to another one

- Reduce costs: Using the fre-of-charge standardized forms provided by SWIFT may reduce costs such as: Reduce transactions via Telex, fax, telephone, automatically

regulate the cash flows and securities, enhance the controllability for forex transactions, improve the accuracy and reduce amendment and redoing SWIFT delivery network also reduces costs such as: reduce network fee for many senders, reduce safety fee for using various telecommunication networks, software costs and maintenance expenses of various connection components The more the trading traffic

is, the lower cost of each message shall be

- Enhance security and connection speed: By connecting with SWIFT network, the financial institutions are not required to further use other supporting networks This reduces the telecommunication process as number of telecom system and its costs are reduced during use Each network is provided with a security system When a unique network is used, costs of such security systems shall be minimized SWIFT is secured telecommunication networks which may verify delivery date and guarantee the delivery High security is required by the financial institutions having high trading value so as to avoid loss due to payment failure SWIFT provides the financial institutions with instant connection to their partners and agents to actively operate on the financial market More effective management of cash flow may be obtained by understanding accurate information about their account balance Easy connection also facilitates the financial institutions to select agents from the market with high stability, low risk exposure and simple tax requirements, etc SWIFT position is ceaselessly improved to help the members to reduce costs and minimize risks

 SWIFT remittance method:

The remittance method is characterized by 3 options: direct method, indirect method and chain method Depending on applicable method, SWIFT MT103 message becomes payment message or notice of payment only Distinguishing payment message or notice message is depended on how to use the fields in MT103 format

- Direct method: If Sender and Receiver are also beneficiary bank, having NOSTRO account relationship for the currency type to be traded, and then WIFT MT103 (Single Customer Credit Transfer) shall be prepared and directly delivered by Sender to Receiver (the bank holding NOSTRO account) to initiate payment order as required by the applicant In this case, MT103 is the payment message The direct

method is prioritized by banks as payment is quickly initiated without via intermediary bank, the money transfer fee is 20% lower than that of indirect method, favorable for trading and amendment

- Indirect method: If SWIFT MT103 Sender and Receiver have no direct account relation for the trading currency type, or they have account relation but do not want to use such relation, then a third-party bank shall appear in the transactions In this case, MT103 only contains payment contents - acting as the notice message to the beneficiary bank, and the Sender must conduct a payment order by preparing a SWIFT payment message between MT202 (General Financial Institution Transfer) banks to a third bank (the bank holding NOSTRO account) to request to debit their account to make payment for MT103 receiver This method is so-called as indirect method

- Chain method: When more than 2 intermediary banks in the payment chain, or MT103 message is sent from a bank to another one to be initiated via two or more intermediary banks, this payment method is so-called as chain method Generally, this method is applied when payment is initiated via intermediary banks, holding account

of the sender and intermediary bank of the bank holding the beneficiary account

1.2.4 Evaluation criteria for scalability of overseas money transfer service

1.2.4.1 Extensive scalability criteria

 Obtained money transfer revenue and service charge

Revenue is a very important criterion to evaluate the international money transfer service development The higher operating revenue means increasingly high number of service users and greater service market share Therefore, the international money transfer service is evaluated to be more perfect Revenue from money transfer service is calculated by total value of each money transfer item As each item value is different, the general revenue formula (quantity x selling price) cannot be used

Increase in operating revenue is effectively measured by the bank’s operating performance when the international money transfer service is developed

The biggest benefit offered by the service is the service charge It contributes to increase the bank's profit Service charge is applied for each incoming and outcoming money transfer item In addition to collected fee, the international money transfer

service also facilitates other profitable operations for the bank such as forex trading, increase in customer base to further use other retail banking services, etc

 Number of money transfer customers and service market share

Market share is known as an important criterion to evaluate any business activity usiness’s profit and success is offered by the customer, or in other words, the customer is the employee’s salary payer anking field is not an exception The higher the number of customer is, the better the banking offerings shall be to the customer’s highest satisfaction In the competitive conditions today, each bank is assumed to ceaselessly improve its position to create a good image for market share expansion The international money transfer service is considered to be developed when it is powered by high service quality to attract more customers

 Number of agent banks

Agent banks are the financial institutions, providing the services on behalf of other financial institutions, similar or not similar with it

The agent relationship plays a very important role in the banking services nowadays In order to render the international banking services, especially the international payment, each bank must establish the agent relationship with the financial institutions and banks in various countries, particularly countries signing the Bilateral Trade Agreements

Establishment of agent relationship is a very first step of setting up the bilateral cooperation relationship between two banks by exchanging SWIFT CODE - as the separate code of each bank to be used in the global interbanking transactions and legal documents for the purposes of international payment services Any banks may face with restrictions when certain financial markets are penetrated Such restrictions may

be related to space (due to territory), time (due to different time zone), business practices, connection capacity, information and relationships with customers, markets, trading practices, local laws, etc Therefore, this organization is required to use the services provided by another financial organization to perform certain transactions to achieve the highest business performance That is why, agent bank is available and successful to affirm its roles to banking services, especially the international money

transfer service The higher the number of agent banks is, the more developed and potential the bank’s international money transfer service shall be

 Number of provided services

This criterion demonstrates the service’s diversity offered to customer by the bank Diversity is an important feature of banking service Diversified services satisfy all customer demands, facilitating various customers to access to the products and services Accordingly, the banking service is developed The diversity must be conducted in relation with the bank’s available resources Otherwise, launch of excessive products may make the bank do business in an ineffective manner due to resource discretion

1.2.4.2 Intensive scalability criteria

 Short service time

Time is a relatively important criterion to develop the international money transfer service The interested customer shall spend more time to carry out a money transfer transaction Service time here includes consultancy and trading time with the customer and time that the money is received by the beneficiary The shorter time is, the developed the service shall be thanks to removing the unnecessary steps in combination with the modern technology, fast transaction, increasing the customer’s satisfaction

- Minimal operating errors

Operating errors are related defects during the international money transfer operations are initiated This is an important risk evaluation criterion of the international money transfer The fewer the operating errors are, the lower the service supply risk shall be Accordingly, the service quality shall be increasingly improved, minimizing the costs incurred by the banks and enhancing the customer’s satisfaction

- Simple and safe operating procedure

The service quality is significantly affected by the operating procedure The operating errors are minimized by strict operating procedure However, the too strict procedure results in longer service time and lower customer satisfaction It means that the operating procedure must be designed to ensure the shortest operating time and

minimize the risks exposed by the banks

- The highest customer satisfaction

Like service providers in general, the banks proving services must also satisfy the customer’s demands The increasingly high and perfect service quality shall not only best satisfy the current customer’s expectations and desires but also successfully attract more prospects, increasing competitiveness of such bank Attitude and professionalism of banking staff shall make the customers to be satisfied with the services The higher the customer’s satisfaction is, the better the bank rating shall be The praises and high evaluation shall create a good prestige for the service users and high scalability to the bank’s service supply market

- The most modern banking technology to be applied

Banking technology is also recognized as an important factor The banking technology comprises of application software of international money transfer, computer and transmission line system, etc The service supply shall be more smooth and effective thanks to more modern banking technology and smooth transmission line, minimizing the service supply time and customer complaints

- Money transfer service charge

When any sales or services are planned to launch, the most important factor concerned by users is service price Service price or service charge is collected by the bank Competition is one of factors to attract more banking service users Service charge is a price of a service type and also one of traditional competition methods that are often applied by commercial banks, provided that the corresponding service quality

is ensured

1.3 Factors affecting the overseas money transfer service

1.3.1 Objective factors

 Legislation system:

When overseas money transfer service is used, the parties must strictly adhere

to the legal regulations such as regulations on the State roles and functions in developing the exchange rate policy, inspection, supervision of overseas money transfer service; conditions for the enterprises to open foreign currency account to pay

for foreign customer, conditions of providing overseas money transfer service, etc Unlike the legislation system, governing the domestic payment activities, the legislation governing the overseas money transfer service is more complicated as it contains not only laws of a country but also laws of at least two countries (export and import countries), international laws (relevant agreements on overseas money transfer service, etc.) and international practices widely established and recognized in the practice of overseas money transfer service

Legal risks in overseas money transfer service may be originated from the policy change made by a country: If the foreign currency management policies and regulations on overseas foreign currency transfer of import countries are suddenly changed, the delivery and payment shall be obstructed Changes in foreign trade and tax policies, etc., applied by the export countries may make the participants to expose

to risks such as high tax rate or goods subject to import and export prohibition, etc Especially since Vietnam’s adhesion to CPTPP, EVFTA, etc., the commitments

on legal environment in the banking field are also a great concern of Vietnam commercial bank system This requires SBV to review the regulations from the applicable legal documents, consider the compatibility/conformity with the regulations/commitments of CPTPP and other free trade agreements participated by Vietnam, especially the commitments on overseas money transfer service supply

 Socio-economic and political environment

Commercial bank is a financial intermediary organization, bridging the saving sector and investment sector of the economy Therefore, changes in the socio-economic and political environment have significant impacts on service of commercial banks If the socio-economic and political environment i stable, the services offered by commercial banks shall be favorable for services of commercial banks as this is also a condition for economy’s production process to occur as usual, ensuring capacity of players’ capital absorption and return in the economy The money transfer service in general and overseas money transfer service in particular have close relationship with the economy’s capital flow When the economy is obtained with high and stable growth, capital flow in the economy is quickly circulated among countries, i.e., the