VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL *************** HOANG THI NGOC NHUNG BUSINESS STRATEGY DEVELOPMENT FOR RETAIL BANKING SERVICES IN BIDV HAI BA TRUNG MASTER THESIS HA NOI 2021 VI[.]
INTRODUCTION
B ACKGROUND OF THE STUDY
Since the economic bailout package during the 2008 economic crisis, Vietnam banking industry has been accelerating for more than a decade Anh
Between October 2016 and October 2019, Vietnam experienced steady credit growth, reaching 9.89% in October 2019, close to the three-year average of 11.2%, indicating a consistent expansion of credit in the economy This growth attracted more players to the Vietnamese banking sector, which, according to the State Bank of Vietnam (SBV) report, comprises five state-owned banks and thirty-five joint-stock commercial banks Additionally, foreign banks and financial groups began entering the market through branches and representative offices, further diversifying the banking industry.
The increasing number of players in Vietnam’s banking sector, combined with government policies on bank system equalization, has intensified market competition Consequently, banks are focusing more on developing retail banking services, which has become an essential strategy in a highly competitive environment According to Omarini (2016), retail banking has played a crucial role for local commercial banks since the 2008 financial crisis Despite Vietnam’s large population and a per capita GDP of US$2,700 in 2019, financial inclusion remains limited, with only 31% of the population owning bank accounts, and low ownership rates of debit and credit cards at 27% and 4%, respectively (World Bank, 2019).
The development of retail banking services has become a significant phenomenon as many commercial banks aim to expand their retail business models However, local Vietnamese banks have struggled with sustainable development due to high non-performing loans (NPLs), with the NPL ratio exceeding 5%, which hampers service quality and long-term growth Many banks prioritize retail credit growth over enhancing the quality of retail banking services, often neglecting customer needs and demands Additionally, Vietnam’s accession to the World Trade Organization in 2006 opened the market to foreign financial institutions, bringing experienced players with advanced systems capable of delivering high-quality retail banking services This increased competition poses challenges for local commercial banks to improve their retail banking offerings and maintain market share.
BIDV Hai Ba Trung, established in 2009, is one of the largest branches of the Bank for Investment and Development of Vietnam (BIDV) The branch is dedicated to providing high-quality banking services to customers in the Hai Ba Trung area As a key location within BIDV’s network, BIDV Hai Ba Trung aims to meet the financial needs of individuals and businesses with professional and reliable banking solutions.
Ba Trung District in Hanoi hosts BIDV Hai Ba Trung, a bank offering comprehensive retail and corporate banking solutions, including lending, savings, international payments, money transfers, and card services Despite over ten years of operation, the branch experienced a significant decline in sales revenue and profits in 2018, primarily due to a decrease in its retail lending portfolio, which shrank from VND625 billion at the end of 2017 to VND543 billion at the end of 2018 The branch struggled to attract new customers, relying heavily on existing clients for credit; this indicates a need to improve its retail banking strategies Consequently, the researcher has chosen "Business strategy development for retail banking services in BIDV Hai Ba Trung" as the focus for their master’s thesis.
R ESEARCH PROBLEMS
The retail banking industry is experiencing significant transformation driven by new technology, increased regulation, and the expansion of digital channels, making the market more competitive than ever Today, community banks, credit unions, and national banks compete for the same customers, with online banking shifting focus from geographic location to factors like regulation, technology, and advertising budgets (Vennli, n.d.) Future industry leaders will leverage data and analytics to gain a competitive edge by turning customer data into actionable insights, enabling personalized and strategic decision-making Incorporating the customer’s voice into the banking strategy before investing in costly initiatives is essential to avoid wasted resources To succeed in this rapidly evolving landscape, banks must prioritize customer-centric approaches to differentiate themselves and identify sustainable growth paths.
R ESEARCH OBJECTIVES AND QUESTIONS
This research project explores how BIDV Hai Ba Trung can enhance its retail banking services through strategic improvements The primary objectives include analyzing the current retail banking strategies employed by BIDV Hai Ba Trung, identifying its competitive advantages compared to other local banks, and formulating strategic recommendations to support its business growth Understanding these elements will provide insights into effective ways to strengthen BIDV Hai Ba Trung’s market position in the retail banking sector.
This article aims to identify the key strengths, weaknesses, opportunities, and threats related to the retail banking services currently offered by BIDV Hai Ba Trung It analyzes BIDV Hai Ba Trung’s competitive position within the local retail banking market to evaluate its market standing Additionally, the study proposes strategic development recommendations to enhance and improve the retail banking services provided by BIDV Hai Ba Trung, supporting sustained growth and competitiveness.
S COPE OF THE STUDY
In terms of geography, the study focuses on policies at BIDV Hai Ba Trung
In terms of time range, the analyzed policies are in the period from 2017 to 2019.
S IGNIFICANT OF THE STUDY
In today’s innovation-driven society, banks must swiftly adapt to ongoing change to stay competitive Developing a robust business strategy enables financial institutions to anticipate and respond effectively to evolving market demands, ensuring sustained growth and relevance in a dynamic economic landscape.
S TRUCTURE OF THE STUDY
The thesis consists of five chapters, as following:
Chapter 1: Introduction: In this chapter, background of banking industry and policies of BIDV Hai Ba Trung relating to retail banking services will be clarified The proposal of research scope and subject are also mentioned in this chapter
Chapter 2: Literature Review: Chapter 2 is developed for the purpose of collecting scientific research related to previous retail banking services These departmental studies are the premise for the development of the thesis Specifically, this chapter explores concept of business strategy and determines key criteria of retail banking services
Chapter 3: Methodology: In this chapter, the researcher will analyze the suitable methods for the research Porter's Five Forces Model, Value Chain Analysis and Competition Analysis will be described in this chapter The relevant studies will also be analyzed to reinforce the thesis
Chapter 4: Analysis and Finding: Chapter 4 focuses on analyzing the current business strategy relating to retail banking of BIDV Hai Ba Trung through the methods in chapter 3 Based on the analysis results, the writer will draw on the weaknesses and opportunities of BIDV Hai Ba Trung in the field of retail banking
This study will include a comparative analysis between BIDV Hai Ba Trung and several other local banks to identify key differences and advantages Based on the findings, strategic recommendations will be developed to enhance the development of retail banking services The goal is to optimize competitive positioning and drive growth in the retail banking sector.
Chapter 5: Conclusion and Recommendations: In this chapter, the researcher will summarize the key findings which are accumulated during the writing process It also highlights the limitations of the study as well as recommendation for future researches.
LITERATURE REVIEW
F RAMEWORK OF BUSINESS STRATEGY
Implementing an enterprise services framework provides a long-term strategic solution by offering a standards-based architecture that connects all banking solutions through a comprehensive integration platform This platform facilitates seamless information sharing across systems and channels, simplifying integration and reducing the need for numerous interfaces The framework enables new solutions to be easily plugged in and share capabilities across all components, fostering a cohesive and flexible technology environment It supports the integration of multiple solutions developed in different programming languages, effectively orchestrating communication and activity flow across diverse systems, leading to unprecedented connectivity and efficiency in banking technology.
Strategy is a comprehensive plan designed to achieve long-term, overall goals amid uncertainty, serving as a blueprint for an organization’s desired future and key actions (Dhami, 2019) In business, it involves carefully planned, flexible actions aimed at optimizing opportunities, mobilizing resources, securing advantageous positions, and responding to challenges and threats A business strategy combines proactive management initiatives with reactive responses to unforeseen market developments to enhance competitiveness and performance Business strategies operate at three levels: corporate, which sets long-term goals for growth, diversification, and mergers; business level, which translates the company’s mission into concrete strategies for specific markets; and functional, focused on operational decisions in areas like marketing, production, and finance (Campbell et al., 2011) Effective strategy development ensures organizations can direct efforts, gain a competitive edge, and adapt to changing conditions.
In business, adopting multiple strategies across different levels is essential, as relying on a single strategy is insufficient and inefficient A well-structured organization typically operates with three strategic levels: corporate, business, and functional These layered strategies ensure comprehensive planning and effective management, addressing overall corporate objectives, competitive positioning, and operational efficiency Implementing a multi-level strategic approach enhances a company's ability to adapt to market changes and achieve sustainable growth.
C ONCEPT OF RETAIL BANKING
Retail banking is primarily focused on providing consumer-oriented financial services, including checking and savings accounts, home loans, and personal loans, with retail banks typically located in accessible and convenient areas These banks prioritize serving individual customers, with tellers and branch managers trained to address consumer account needs, while commercial transactions are handled at designated stations Retail banks actively promote their products through in-branch signage, brochures, and cross-selling efforts, aiming to increase customer engagement and product uptake Customer Relationship Management (CRM) techniques are increasingly used to monitor satisfaction, gather feedback, and identify opportunities for service improvements To attract new customers, retail banks implement diverse advertising strategies such as TV, radio, print media, and event sponsorships, often offering cash incentives for new account openings, with customer information assessed via credit applications to determine creditworthiness.
Organizations can automate crucial business processes that span multiple systems and departments, improving efficiency and accuracy For example, a unified account opening process allows data to be entered once and automatically shared across platforms such as tellers, account processing, online banking, mobile apps, and alert systems Additionally, digitizing and redesigning the online car buying experience empowers customers by placing control over the purchasing process into their hands, transforming traditional interactions with lenders and sellers.
Retail banks have traditionally competed through extensive distribution networks, leveraging economies of scale via network effects, branding, and infrastructure investments, but these benefits plateau beyond a certain size (World Bank, 2019) Consequently, most retail banking markets are dominated by a few large institutions that operate at similar efficiency levels, with regulatory changes prompting adjustments rather than innovative shifts in business models Additionally, retail banks have lagged behind other consumer industries in enhancing customer experience, with few demonstrating innovation in customer interaction or branch formats Historically, marketing efforts have focused on brand building and loyalty, with a reputable brand serving as a trust-based moat to protect against new entrants.
In the modern economy, banks' established moats often hinder their progress more than they protect from new entrants Four key shifts are transforming the global retail banking landscape, compelling banks to rethink their strategies to stay competitive (Omarini, 2016) Urgent action is necessary as these changes accelerate, with a few large winners expected to dominate their core markets and expand internationally within the next three to five years, leaving smaller institutions struggling for relevance These shifts include changes in traditional distribution methods, customer experience, productivity and returns, and the unbundling and re-bundling of banking services (Limited, 2007).
Before the 2007 financial crisis, retail banks' deposit shares were closely linked to their branch networks Over the past decade, this connection has weakened as banks reduce branches, often due to increasing customer willingness to engage with banking products online or via mobile devices Despite this shift, customer readiness for digital banking outpaces actual digital sales, requiring banks to accelerate their digital strategies to meet evolving consumer expectations Some banks have proactively embraced digital and remote channels for customer interactions, gaining a competitive edge through decisive innovation.
Banks should set aspirational targets for sales and service across multiple channels, proactively encouraging less motivated customers to adopt digital channels rather than merely reacting to consumer preferences Leading institutions focus on optimizing their branch networks by leveraging advanced analytics and combinatorial optimization algorithms that analyze granular customer data—such as digital propensity, travel willingness, transaction patterns, and branch characteristics—to maximize net present value Developing sophisticated digital sales capabilities is essential; this involves employing advanced digital marketing strategies, utilizing first- and third-party data—including geospatial and browsing behavior—and implementing an agile operating model with cross-functional marketing teams to effectively convert digital inquiries into sales, enabling rapid progress in digital transformation.
Customer experience in retail banking now demands simple, intuitive, and seamlessly connected interactions across physical and digital channels Leading banks are adopting strategies from digital-native sectors, focusing on redesigning critical customer journeys—particularly high-impact sub-journeys like account opening—to achieve significant improvements in satisfaction Prioritizing these touchpoints, which often have the greatest influence on overall experience, enables banks to systematically enhance service and boost satisfaction by 15-20% Additionally, experience leaders emphasize delivering a seamless multi-channel experience, especially for complex journeys such as financial advice or issue resolution, by integrating digital tools like robo-advice and empowering frontline staff with personalized, data-driven recommendations Banks are shifting incentives towards long-term customer relationships and leveraging vast customer data to offer relevant, real-time personalized products and offers—such as location-specific discounts—to foster loyalty and increase share of wallet.
Larger retail banks have traditionally been more efficient than smaller competitors due to shared services and extensive distribution networks, leading to higher productivity gains and better returns However, beyond a certain scale, further efficiencies become difficult to achieve, though recent technological advancements are set to change this dynamic Innovations such as robotic process automation, machine learning, and artificial intelligence are driving a new wave of productivity improvements, reducing costs significantly across customer-facing, middle-, and back-office activities This technological shift is transforming banking operations, especially in capital markets, by replacing manual processes with automation and algorithmic trading Additionally, the transition from physical to digital channels enables large-scale banks to acquire customers at substantially lower costs through better data utilization for targeted marketing As digital investments increase, the productivity gap between large and small banks will widen, leading to industry consolidation where dominant firms emerge with superior technology and brand recognition To capitalize on this trend, banks must adopt advanced technologies such as natural language processing and AI for customer interactions and internal processes, while also strengthening their brands to improve customer engagement and conversion rates in the increasingly digital marketplace.
The increasing trend of unbundling in financial services reflects a shift away from one-on-one banking relationships towards fragmented service offerings, with customers often holding separate accounts for mortgages, unsecured loans, deposits, and investments Digital adoption accelerates this fragmentation, creating opportunities for new entrants to target profitable segments through niche products and superior customer experience, often competing with aggressive pricing While incumbent banks have broad access to customer data, innovative fintech and technology firms leverage platforms, APIs, and data insights to challenge traditional models—particularly in payments and consumer financing—by focusing on targeted segments with ambitions to own the entire banking relationship over time The ongoing unbundling mirrors similar shifts in industries like music and transportation, where digital distribution initially destroyed value for incumbents but ultimately led to ecosystem dominance by firms capable of orchestrating comprehensive platforms To counter these threats, banks must develop new capabilities, notably by maintaining access to transaction data and financial behavior insights—traditionally their strength—while adapting to a landscape where such data may be accessible through third-party providers Retaining ownership of the transaction layer enables banks to gain a complete view of consumers’ financial activities, an advantage that may eventually be maintained without solely relying on primary checking-account relationships, as payments and transaction providers could capture significant customer spend volume.
Financial aggregators can leverage their ability to capture a wide range of customer activity to build valuable analytics insights, enabling the development of innovative products and features Unlike traditional banking products that have remained largely unchanged for decades and are difficult to modify due to organizational structures, agile firms can utilize these insights to create unique offerings—such as automatically optimizing checking account funds for returns based on spending behavior without transferring to separate accounts Banks also have the potential to expand beyond traditional financial services by integrating broader offerings Their superior access to financial information allows them to deliver faster, more accurate offers for large-ticket items like homes and cars, potentially owning the entire customer journey—including browsing, booking, and transaction processes For example, a Northern European bank has developed a mobile app that combines house searches, viewing bookings, budgeting, transactions, and assistance with setting up utilities and renovations, illustrating how banks can innovate in customer-centric ecosystems.
D EVELOPMENT FOR RETAIL BANKING SERVICES
Retail banking encompasses a range of services such as savings and checking accounts, credit and debit cards, and loans designed for consumers The rise of digital channels has transformed retail banking, with banks expanding their product offerings to include investment services like wealth management, brokerage accounts, private banking, and retirement planning The shift towards internet and mobile banking has significantly enhanced customer access, reducing the need for frequent branch visits and offering more convenient online services Technological advancements are also focused on improving operational efficiency, with 39% of retail banking executives citing cost reduction as the primary benefit of technology, alongside growing efforts to enhance the overall customer experience.
Vietnam’s retail banking market has gained significant attention from local banks over the past five years, marking a strategic shift toward consumer-focused financial services In recent years, these banks have made substantial advancements in developing robust retail banking offerings, which now represent a core area of growth Many local banks have outlined aggressive development strategies, with approximately ten aiming to become market leaders across various banking sectors within the next two years Additionally, a rise in retail banking profits and strategic management restructuring underscore the sector’s increasing importance in the overall banking landscape.
In 2015, Vietnam's economy is recovering, supported by the implementation of free trade agreements that attract more foreign banks and promote investment The ongoing restructuring of small and weak banks aims to establish a more stable banking sector, enhancing overall competitiveness in retail banking Vietnam's long-term economic stability provides a solid platform for financial institutions to expand, while deeper integration into international markets offers opportunities to access modern banking products and services Changing consumer behaviors towards non-cash payments are increasing demand for retail banking services, especially among the younger generation that favors innovative digital solutions, creating significant potential for e-banking growth Additionally, government focus on microfinance encourages banks to develop customized products and leverage their networks to better serve customers.
Banks in Vietnam are restructuring through mergers and acquisitions and retail banking is being bolstered With a 60 percent of Vietnamese under the age of
Customer demand is increasingly for convenient, consistent, and accessible financial services, particularly in personal loans, credit cards, and wealth management Leading Vietnamese banks like BIDV and VietinBank exemplify how long-established institutions are evolving to meet modern retail banking trends by enhancing their competencies and strengthening their brands both domestically and internationally Meanwhile, newer banks such as Tien Phong Commercial Joint Stock Bank are pioneering technological innovations to improve banking services and stay competitive in the evolving financial landscape.
M AIN FEATURES OF RETAIL BANKING SERVICES
Retail banking primarily offers consumer-focused financial products such as checking and savings accounts, money market instruments, residential home loans, and business financing solutions These banks are strategically located in accessible areas to serve a wide customer base effectively Key features of retail banking services include convenient branch locations, a variety of personal banking options, and tailored financial solutions designed to meet individual and small business needs.
Most retail banks prioritize the needs of individual consumers over commercial account holders, with teller cages primarily serving walk-in retail customers Retail bank tellers are specifically trained to handle consumer checking and savings accounts, while branch managers focus on resolving customer-service issues related to these accounts In contrast, commercial account transactions are usually managed at one or two dedicated stations designed for merchant accounts, ensuring efficient service for business clients (Donohoe, 2019).
Retail banks strategically utilize their internal and external spaces to enhance service cross-selling, with in-branch displays promoting key financial products Inside branches, customers encounter standing floor signs highlighting interest rates on mortgages and savings accounts to attract attention Additionally, desks equipped with deposit slips often feature brochures showcasing a variety of checking and savings instruments, encouraging customers to explore and select suitable financial solutions (Donohoe, 2019).
Customer Relationship Management (CRM) practices are increasingly adopted by major retail banks to enhance customer engagement Retail banks utilize their websites to guide current and prospective customers to branch locations and gather valuable feedback on both online and in-branch banking experiences This feedback allows banks to monitor customer satisfaction, assess the potential for new products and services, and identify opportunities to improve overall customer service inside branches.
Retail banks are governed by state regulations that influence their hours of operation, prompting them to develop strategies to maximize customer service Recognizing that customer hours often do not align with bank hours, most banks offer ATMs capable of handling deposits, balance inquiries, and fund transfers to meet banking needs 24/7 Additionally, many banks expand their service locations to include major grocery stores, retail superstores, gas stations, and convenience stores, providing accessible banking services near customers' homes, workplaces, and shopping areas for enhanced convenience (Donohoe, 2019).
Retail banks focus on increasing new customer acquisition through diverse marketing strategies, including television, radio, print advertising, and sponsoring national and local events They often offer cash incentives worth up to several hundred dollars to encourage new account openings The primary goal is to expand their customer base by attracting both potential and existing clients Banks gather detailed information from credit applications to evaluate creditworthiness and determine the approval of new accounts, ensuring they target the right customers effectively (Donohoe, 2019).
METHODOLOGY
F RAMEWORK OF QUALITATIVE RESEARCH METHOD
Qualitative research is a systematic scientific approach that aims to develop a comprehensive, narrative understanding of social or cultural phenomena, emphasizing natural settings and interaction among variables According to McMillan and Schumacher (1997), it involves an inductive process of organizing data into categories and identifying patterns or relationships, allowing meanings to emerge organically from the research context This method relies on observations, interviews, and document reviews, with open-ended questions providing detailed, direct quotations, and the researcher playing a central role As described by Mason (2002), qualitative research encompasses diverse approaches that share a focus on interpretation, understanding, and context, often grounded in an interpretivist perspective sensitive to social complexity Unlike quantitative research, which seeks objective measurements and aims to eliminate researcher bias to explore relations and make predictions, qualitative research offers flexible methodologies such as ethnographic, naturalistic, and participant observer techniques to explore human experiences in depth.
Qualitative research is characterized by unique ironies, such as the fact that selecting the appropriate research method is less critical for qualitative researchers compared to quantitative ones Despite this, the field has developed a vast array of research methods, reflecting its diversity For many qualitative researchers, their overarching framework or paradigm holds the greatest significance, as their chosen research methods often serve as expressions of this underlying paradigm (Willis, 2007).
Qualitative research design offers flexibility by incorporating a variety of accepted methods and structures The four most commonly used types are Phenomenology, Ethnography, Grounded Theory, and Case Study, each providing unique approaches to exploring complex social phenomena These designs enable researchers to gain deep, contextual insights and foster a comprehensive understanding of their subject matter Utilizing these qualitative methods enhances the richness and validity of research findings, making them essential in diverse academic and professional fields.
Phenomenology is a term often used in various contexts, but it specifically refers to a type of qualitative research focused on studying phenomena—events, experiences, or concepts that exist as integral parts of the world This research approach aims to describe phenomena that are not fully understood or explicitly explained, often because their impacts and details remain unclear While phenomenological studies may not always offer definitive explanations, they serve to raise awareness and deepen insight into these phenomena, enhancing our understanding of the human experience (Paley, 2016).
Ethnography is a vital branch of anthropology that provides a scientific description of human societies by offering a "portrait of a people." It involves immersive fieldwork, where researchers live among and interact with the communities they study over extended periods, focusing on shared cultural parameters such as geography, religion, tribe, and lifestyle This methodology is particularly valuable in counseling settings, as it helps practitioners understand how cultural factors influence individuals' responses to problems, fostering cultural awareness and sensitivity Ethnographic data analysis employs an "emic" approach, meaning it interprets findings from the perspective of the community, often using local language and terminology to describe behaviors, including those considered mental health issues in Western medicine.
However, within the population under study, the behavior may not be characterized as illness but as something else - as evidence that the individual is ―blessed‖ or
Ethnographic research can be challenging if researchers lack familiarity with the social customs and language of the studied community, risking misinterpretation from an outsider’s perspective To ensure accuracy, ethnographers often revisit the field to verify their interpretations with informants, thereby validating their data before publishing findings (Hackett).
Grounded theory is a qualitative research methodology that allows theories to emerge directly from collected data, emphasizing a systematic yet flexible process of data collection, coding, and analysis to develop new insights about a phenomenon Unlike traditional approaches, grounded theory does not start with a predetermined theory; instead, it generates theories from data that explain how people experience and respond to events This approach is particularly valuable in healthcare, where the development of new theories can lead to innovative solutions for complex problems For example, research has described the stages of grief—denial, anger, acceptance, and resolution—which, while long observed, are formally defined through grounded theory to better understand and support the bereaved By applying these insights, healthcare professionals can recognize signs of abnormal grief and provide appropriate assistance, thereby improving support for individuals coping with loss.
A case study, as defined by Thomas, involves a holistic analysis of persons, events, decisions, or systems using multiple research methods, applicable in social and life sciences It can be descriptive or explanatory and may employ qualitative or quantitative approaches, focusing on individual units like persons, organizations, or institutions Case studies can explore a single entity or a series of cases to investigate causation and underlying principles, whether prospectively or retrospectively They provide in-depth insights into complex variables and conditions that illuminate specific phenomena, making them a powerful research design for generating rich, detailed information beyond what other methods typically offer.
Qualitative research is a highly versatile method that employs various data collection techniques, including testing and interviewing It can range from simple descriptive accounts of individual events to complex analyses of social situations over time The most advanced form, the extended case study, follows the same actors across a period, allowing researchers to examine changes and adaptations within social contexts (Duff, 2018).
A NALYZING TOOLS
Porter's Five Forces is a strategic model developed by Harvard Business School professor Michael E Porter to analyze industry competitiveness and profitability This framework identifies five key forces—industry competition, potential new entrants, supplier power, customer power, and the threat of substitutes—that shape every market By assessing these forces, businesses can understand industry structure, identify strengths and weaknesses, and develop effective strategies to enhance long-term profitability Widely adopted since its publication in 1980’s "Competitive Strategy," Porter's Five Forces helps determine industry attractiveness, competition intensity, and potential barriers to entry, making it an essential tool for corporate strategic planning and competitive analysis.
Industry competition, the first of Porter's five forces, pertains to the number of competitors and their capacity to undercut a company's prices A higher number of competitors offering similar products or services reduces a company's market power, as suppliers and buyers will gravitate towards those offering better deals or lower prices Conversely, when competitive rivalry is low, a company gains greater power to set higher prices and negotiate favorable terms, leading to increased sales and profitability (Chappelow, 2020).
The potential of new entrants significantly impacts a company's market power, as low barriers to entry reduce the time and investment needed for competitors to become effective rivals When entry barriers are weak, established companies face greater threats to their market position, making it challenging to maintain profitability Conversely, industries with strong barriers to entry are advantageous for existing firms, enabling them to charge higher prices and negotiate better terms, thereby strengthening their competitive advantage (Koedijk et al., 2019).
The Power of Suppliers in the five forces model determines how easily suppliers can increase input costs, influenced by the number of suppliers, the uniqueness of their inputs, and switching costs for companies Fewer suppliers increase a company's dependence, giving suppliers more bargaining power to raise costs and seek additional advantages Conversely, a large number of suppliers and low switching costs enable companies to maintain lower input expenses, enhancing profitability (Kowalschek, 2013).
Customer power significantly influences market dynamics by enabling buyers to negotiate lower prices and better deals This power depends on factors such as the number of customers a company has, the importance of each customer, and the costs associated with acquiring new customers or entering new markets A smaller, more concentrated customer base enhances individual customers' bargaining power, allowing them to push for favorable terms Conversely, companies with numerous small, independent customers can often command higher prices, leading to increased profitability (Chappelow, 2020).
Threat of Substitutes- The last of the five forces focuses on substitutes
Substitute goods or services that can replace a company's offerings pose a significant competitive threat Companies offering unique products with no close substitutes have greater pricing power and can negotiate better terms Conversely, when close substitutes are accessible, customers can easily switch, reducing the company's market power and ability to set higher prices (Carbo et al., 2017).
Competition analysis is essential in developing an effective business marketing strategy for banks, enabling them to differentiate their products and services to attract the target audience Conducting competitor evaluations by grouping them into strategic categories allows for a clearer understanding of direct competition and market share opportunities Key aspects to analyze include competitors' products or services, profitability, growth trends, marketing goals, past and current strategies, organizational structure, strengths and weaknesses, and sales volume, which can provide a competitive edge Utilizing a competition grid simplifies comparing similar offerings by considering factors such as location, price, website presence, and additional features, helping banks identify their product’s market position Overall, this approach guides targeted differentiation and enhances competitive advantage in the banking sector, as supported by Fleisher and Bensoussan (2007).
R ESEARCH PROCESS
During the implementation of the thesis, the author has carried out the following research steps:
Step 1: Study the document to determine the theoretical framework and rationale for retail banking services This step mainly serves the research in chapters 3 and 4 In this chapter, the author mainly collects materials on the textbooks of the Academy of Finance, the National Economy, and the financial and economic journals The document overview section mainly collects data on economic and financial newspapers and magazines; doctoral thesis, master thesis refers to on thesis library In this part, the author mainly uses descriptive statistical methods to list and present basic concepts and important contents in chapter 1
Step 2: Collect documents and data for analyzing the current situation of retail banking services in the period 2017-2019 Conducting an analysis of the current situation of retail banking services at BIDV Hai Ba Trung
This step is primarily focused on Chapter 4, where the author gathers secondary data, including audited summary reports and consolidated financial statements of BIDV Hai Ba Trung These data are then processed to develop simulation models, providing valuable insights for the analysis.
This chapter employs descriptive statistical methods, synthesis, analysis, and comparison to collect and evaluate data on the management and utilization of business capital It aims to assess the results, identify limitations, and uncover the causes of shortcomings in retail banking services at BIDV Hai Ba Trung Additionally, the study critically analyzes previous research to identify gaps and new insights, highlighting areas that have yet to be explored or implemented by earlier authors.
Step 3: Based on the conclusion of analysis of the management and use of business capital, proposing a number of solutions to enhance the efficiency of retail banking service at BIDV Hai Ba Trung
This step primarily focuses on Chapter 5, where the author gathers secondary data from official documents on the Ministry of Finance portal, academic journal articles, and relevant publications This comprehensive data collection enables thorough analysis, informed judgments, and the development of effective solutions to improve efficiency in retail banking services.
DATA ANALYSIS AND FINDINGS
C URRENT SITUATION OF BIDV H AI B A T RUNG
BIDV is one of Vietnam’s leading retail banks, with a strong customer base exceeding 7.7 million retail customers as of 2015 The bank significantly expanded its rural and agri-retail banking presence in the Mekong River Delta following its 2015 merger with MHB, which added 40,000 new customers Between 2010 and 2014, BIDV's total loans grew from 254.2 trillion VND (approximately $11.4 billion) to 445.7 trillion VND (about $20 billion), achieving an average annual growth rate of 15%, driven by improved credit quality and strategic business enhancements Additionally, the bank successfully reduced its non-performing loan (NPL) ratio from 2.9% in 2012 to 2.37%, reflecting strengthened credit risk management.
In 2013, BIDV achieved a notable improvement in its retail business, reaching a retail credit growth rate of 2.03% in 2014 This success has established BIDV as a leader in retail banking sectors such as retail credit, retail deposits, and retail services Since 2010, BIDV has continuously expanded its network, particularly across key regions in the north and south of Vietnam, including Hanoi and Ho Chi Minh City, as well as major cities and towns Today, BIDV operates 185 branches, 1,822 ATMs, and 13,054 POS machines, enhancing its accessibility and customer service capabilities.
To enhance service quality and expand product offerings, BIDV transformed savings counters into transaction offices, aligning with the State Bank of Vietnam’s 2013–2015 review aimed at removing inefficient credit institutions This network streamlining improved operational efficiency, risk management, and corporate governance, embodying BIDV’s motto, “Efficiency in business and safety in operation.” Alongside traditional banking growth, BIDV has also developed robust e-banking services to meet modern financial needs.
BIDV now serves 1.1 million internet users and 3.3 million active mobile users, offering three mobile banking applications: BIDV Smart Banking, BIDV Lifestyle, and BIDV Mobile Since 2012, BIDV’s online payment systems have connected with service providers like Vnpay and Onepay, as well as major card services including VISA, MasterCard, and BIDV’s own Ready debit card In 2014, BIDV expanded its international acceptance by integrating Japan Credit Bureau (JCB), making JCB the fourth global card accepted via ATM and POS terminals alongside Visa, MasterCard, and UnionPay This strategic partnership with JCB enhanced BIDV's product offerings and strengthened its competitiveness in the Vietnamese banking market Additionally, BIDV has implemented advanced IT projects such as the Multilateral Profit Analysis System to improve operational efficiency and service quality.
BIDV has enhanced its banking infrastructure by implementing "Supplementing IBMB functions" and a "Treasury system" to improve customer service and comply with central bank governance standards The bank has also actively participated in the Rural Finance Project (RFP I, II, and III), funded by the World Bank, which aims to support agricultural development, rural growth, and poverty reduction, benefiting over 135,000 low-income households and small businesses in rural areas Additional BIDV funding facilitates increased access to loans for individuals in need Moving forward, BIDV plans to expand its retail credit and payment services to meet Vietnam’s growing income levels and rising demand for advanced financial products such as consumer finance, credit cards, car loans, and remittances, positioning itself as a comprehensive retail banking provider (Wang, 2016).
C URRENT SITUATION OF BIDV H AI B A T RUNG RETAIL BANKING STRATEGY
4.2.1 BIDV Hai Ba Trung level of strategy
To assess the strategic level of BIDV, it is essential to understand its organizational structure, particularly that of BIDV Hai Ba Trung BIDV employs a vertical banking structure, similar to most Vietnamese banks, with divisions based on branch and transaction office levels The headquarters, located at 35 Hang Voi, Ly Thai To, Hoan Kiem, Hanoi, oversees the entire system and directly manages BIDV’s primary branches across Vietnam Beneath these branches are affiliated transaction offices, supporting the bank's operations and expansion within the country.
Ba Trung is a tier 1 branch and has six affiliated transaction offices The organizational structure of BIDV Hai Ba Trung is as follows:
Figure 1 BIDV Hai Ba Trung Structure
BIDV Hai Ba Trung operates under the strategic guidance of the BIDV Head Office, which is responsible for setting long-term corporate strategies BIDV HQ directly determines development orientations and targets for the branch system to follow, ensuring alignment with overall corporate goals These policies establish broad, long-term objectives that guide the bank’s growth and operational priorities for years to come.
As a tier 1 branch, BIDV Hai Ba Trung is responsible for both the business level strategy and a functional level strategy This stems from the fact that BIDV
Hai Ba Trung serves as both a management unit for affiliated transaction offices and a direct participant in the bank's operational activities It plays a crucial role in setting business goals and development strategies for its subordinate offices, ensuring alignment with BIDV's overall corporate objectives By establishing clear strategic directions, BIDV Hai Ba Trung promotes cohesive growth and operational efficiency across its branches, supporting the bank's broader objectives and sustainable development.
BIDV Hai Ba Trung should develop comprehensive functional level strategies to enhance branch operations and improve business management efficiency across affiliated transaction offices These targeted strategies are essential for driving overall growth and ensuring consistent performance Additionally, transaction offices within BIDV Hai Ba Trung are key contributors to this strategic process, playing a vital role in formulating and executing strategies that strengthen their individual functions and align with the bank’s overall objectives.
BIDV Hai Ba Trung plays a crucial role in implementing both business and functional strategies within the bank’s overall strategic framework Each level of BIDV branches contributes to developing distinct strategic initiatives, ensuring alignment with the bank’s broader objectives This dual involvement highlights BIDV Hai Ba Trung's commitment to driving both operational efficiency and business growth, reinforcing its position as a key player in BIDV’s strategic success.
4.2.2 BIDV Hai Ba Trung shift of retail banking
Retail banking has evolved through four key shifts: traditional distribution, customer experience, productivity gains and returns, and unbundling & re-bundling According to BIDV Hai Ba Trung, the current strategic focus is centered on unbundling and re-bundling, as this approach generates the highest profits.
BIDV Hai Ba Trung’s traditional product distribution method closely aligns with that of most Vietnamese banks, initially relying on direct customer approach due to limited technology Traditionally, banks waited for customers to visit transaction counters, but with technological advancements, BIDV Hai Ba Trung has expanded its distribution channels The bank now leverages telesales and social media platforms to promote and sell products, reflecting a significant development in its distribution system This diversification of distribution channels enhances the bank’s overall profitability by reaching more customers effectively.
BIDV Hai Bà Trưng is committed to enhancing customer experience through technological advancements, aligning with banks’ broader strategy to boost customer satisfaction The bank continually updates its BIDV Smartbanking app with new features, such as improved loan services and savings account management, notably in 2020 Additionally, BIDV has transitioned from traditional ATMs to CRM systems with automatic deposit functions, reducing wait times at branches and increasing overall customer satisfaction.
Ba Trung acts as an intermediary, creating branch-level strategies to inform customers about these innovations
Currently, BIDV Hai Ba Trung is still focusing its strategies on the first two shifts of the Retail Banking service.
E VALUATION ON BIDV H AI B A T RUNG RETAIL BANKING SERVICE
This section analyzes BIDV Hai Ba Trung’s retail banking strategy using Porter’s Five Forces Model, focusing on industry competition, barriers to new entrants, supplier power, customer power, and the threat of substitutes The analysis highlights how these factors influence BIDV Hai Ba Trung’s competitive position in the retail banking sector Understanding these forces helps identify opportunities and challenges unique to retail banking services, enabling the bank to develop effective strategies for market growth and customer retention.
BIDV Hai Ba Trung primarily targets corporate clients and focuses on commercial transactions and services, distinguishing it from many other Vietnamese commercial banks that serve a broader retail clientele While BIDV traditionally emphasizes business banking, the rapid growth of retail banking presents new opportunities for both BIDV and BIDV Hai Ba Trung to expand their customer base and enhance service offerings in the evolving financial landscape.
Ba Trung in particular have gradually changed direction, focusing more on individual customers
Between 2014 and 2018, Vietcombank shifted its focus toward retail banking by increasing the share of retail loans in standard products and sectors with high output interest rates, while restricting loans for valuable paper mortgages and low NIM sectors The bank promoted retail credit growth through its transaction offices, enhancing credit quality control and developing individual customers, particularly the priority segment Concurrently, Vietcombank restructured its organizational model and implemented transformation projects aligned with international standards, realigning business activities to focus more on retail banking This included transforming the retail operation model with targeted customer segmentation, tailored policies, and expanding sales channels such as direct sales, electronic platforms, and third-party partnerships, alongside improving marketing professionalism The bank also prioritized digitizing retail products and services, simplifying procedures for personal credit products and cards, and refining credit processes These strategic initiatives yielded positive results, with personal credit increasing by 32.7% compared to 2017 and reaching a 36.9% share by the end of 2018, up from 31.7%.
Since 2014, Vietinbank's retail segment has experienced significant growth, marked by comprehensive improvements in brand awareness, sales strategies, customer service, and investments in facilities and human resources The bank has continuously diversified its products and expanded sales channels to better serve individual customers Between 2014 and 2018, outstanding personal debt increased annually by nearly 35%, reaching VND 247,000 billion, with the proportion of outstanding loans rising from 17% to 29% This rapid growth contributed to a strong increase in retail income, which now constitutes a substantial share of the bank's total revenue.
Since the end of 2016, VIB has aimed to become a large-scale, high-quality retail bank by 2010 through the implementation of the "Excellent transport model," focusing on product development, customer service, sales channels, risk management, and system automation As a result, between 2017 and 2018, VIB's retail outstanding loans exceeded those of many other major private banks, which remain heavily concentrated in the corporate segment.
Agribank continues to lead the system with the highest personal loan balance, exceeding VND 600,000 billion, solidifying its position as the top bank in personal lending Following closely, BIDV holds the second position with over VND 300,000 billion in personal loans Vietinbank ranks third, and Vietcombank closely competes in fourth place, both possessing personal loan portfolios of more than VND 200,000 billion Among commercial joint stock banks, VPBank, Sacombank, ACB, and SCB each reported personal outstanding loans well over VND 100,000 billion in 2018, highlighting significant growth in personal lending across these financial institutions.
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Between 2014 and 2018, the personal loan ratio within the banking sector remained a key focus area The country's strong position during this period was primarily maintained by two major banks, with BIDV playing a significant role However, BIDV's growth in personal credit, especially in credit card offerings, was relatively stagnant, indicating areas for potential improvement in expanding consumer lending.
(ii) Potential of New Entrants into the industry
Vietnam’s retail banking sector presents a significant growth opportunity, with an emerging trend driven by both domestic and foreign banks Among foreign entrants, banks with 100% foreign capital, such as Shinhan Bank, HSBC, and Standard Chartered, are intensifying their focus on retail banking services, directly competing with local banks like BIDV and BIDV Hai Ba Trung Currently, Vietnam’s system includes nine fully foreign-capital banks, but Shinhan, HSBC, and Standard Chartered are leading the charge in retail banking, targeting individual customers and expanding market share Other foreign banks remain primarily focused on corporate clients and investment banking, leaving retail banking as a key growth area This analysis evaluates the market entry potential of these three banks from the perspective of retail banking opportunities in Vietnam.
BIDV Hai Ba Trung primarily raises capital through corporate funds, reflecting its strategic focus on business clients rather than individual depositors Unlike Vietcombank, Vietinbank, and MBBank, which attract significant retail deposits, BIDV Hai Ba Trung’s dependency on enterprise funds limits its ability to deploy retail banking services effectively This capital structure challenge results from BIDV HO’s corporate-level strategy, not necessarily the direct responsibility of BIDV Hai Ba Trung.
BIDV Hai Ba Trung primarily serves officers, employees, and workers from power companies, corporations, and organizations that have established longstanding relationships with the bank These customers often receive their salaries through BIDV Hai Ba Trung’s convenient card payment system, strengthening their loyalty and satisfaction with the bank's services.
BIDV Hai Ba Trung leverages its existing customer relationships to build a valuable database for mobilizing inexpensive deposits and promoting cross-selling of various financial products and services to individuals The branch currently serves approximately 27,000 individual customers and households, along with 5,000 corporate clients Despite this sizable customer base, only around 270 customers engage in regular transactions, highlighting a gap between potential and active engagement Notably, just 15 large corporate clients and 520 VIP individual customers generate approximately 70% of the branch’s profits, primarily through home loans and business loans exceeding 5 billion VND.
BIDV Hai Ba Trung currently serves 2,764 individual borrowing customers, excluding over 1,000 credit card users, and 662 corporate borrowing customers While the overall growth in the number of borrowing customers remains modest, BIDV Hai Ba Trung has a stronger customer base than other State-Owned Banks but trails behind some Commercial Banks The bank's robust short-term funding sources and high-quality services enable it to effectively attract large corporate clients and individual customers seeking comprehensive banking solutions.