Develop electronic banking services through mobile communication network – mobile banking at vietcombank

FOREIGN TRADE UNIVERSITY BANKING AND FINANCE FACULTY ---***---GRADUATION THESIS DEVELOP ELECTRONIC BANKING SERVICES THROUGH MOBILE COMMUNICATION NETWORK – MOBILE BANKING AT VIETCOMBANK

FOREIGN TRADE UNIVERSITY BANKING AND FINANCE FACULTY

-*** -GRADUATION THESIS

DEVELOP ELECTRONIC BANKING SERVICES THROUGH MOBILE COMMUNICATION NETWORK –

MOBILE BANKING AT VIETCOMBANK

Student Name: Nguyễn Hải Yến Student identity number: 1001030414 Class: A2 – High Quality Class –

Banking and Finance Faculty Year: 49

Instructor: MSc Nguyễn Thị Hồng Nguyên

Hanoi, April, 2014

Preface 1

CHAPTER 1: LITERATURE FRAMEWORK ABOUT MOBILE BANKING4 1.1 Definition of mobile banking 4

1.2 Developmental fundamentals of Mobile Banking 6

1.3 Features and utilities of mobile banking services 7

1.3.1 Classification depends on how information flows 8

1.3.2 Classification depends on application 9

1.4 Technology options of Mobile Banking 11

1.4.1 Server-side Technologies 11

1.4.2 Client-side Technology 14

1.5 Benefits of development of electronic banking services through Mobile Banking.15 1.5.1 For banks 16

1.5.2 For customers 17

1.5.3 For telecommunications companies 18

1.6 Factors affect the development of mobile banking services 18

1.6.1 Macro factors 18

1.6.2 Micro factors 21

1.7 Model and business trends in electronic banking services via mobile in the world 22

1.7.1 Bank – led model 22

1.7.2 NonBank - led Model 23

CHAPTER II: CURRENT SITUATION OF MOBILE BANKING DEPLOYMENT AT VIETCOMBANK 26

2.1 Current situation of mobile banking deployment in Vietnam 26

2.1.1 Bank – led model 26

2.1.2 Telco – led model 30

2.2 Current situation of mobile banking deployment at Vietcombank 32

2.2.1 Overview of Vietcombank 32

2.2.2 Overview of electronic banking services of Vietcombank 33

2.2.3.Current situation of mobile banking deployment at Vietcombank 37

2.3 Empirical assessment of customer acceptance of mobile banking 49

2.3.1 Methodology of the survey 49

2.3.2 Composition of Survey Participants 49

2.3.3 Customer Perception of Mobile Banking 50

CHAPTER III: SUGGESTIONS AND RECOMMENDATIONS TO DEVELOP MOBILE BANKING SERVICES AT VIETCOMBANK 53

3.1 Diversify products and services of mobile banking 53

3.1.1 Bank – led model 53

3.1.2 Partnership model of bank and telecommunications company 55

3.2 Improve management and supervision capacity to ensure mobile banking services quality 55

3.2.1 Steps in management activity of mobile banking 56

3.2.2 Enhance the sale management activity of mobile banking 56

3.3 Increase product promotion and advertisement 62

3.3.1 Advertisement on mobile phone 62

3.3.2 Advertisement on Facebook 62

3.3.3 Advertisement in application such as film, game, newspaper run in mobile phone 63

3.4 Develop the security and privacy technology 63

3.5 Promote the cooperation relationship with mobile network providers 64

3.6 Expanding customers network, improving customer service quality 64

3.7 Recommendations 65

3.7.1 With State Bank of Vietnam and other authorities 65

3.7.2 With board of managers of VCB 67

CONCLUSION 68 REFERENCE

APPENDIX

LIST OF ABBREVIATIONS

VCB: Joint stock commercial bank for foreign trade of Vietnam

Vietcombank: Joint stock commercial Bank for Foreign Trade of Vietnam

SBV: State Bank of Vietnam

ATM: Automated Teller Machine

WAP: Wireless Application Protocol

LAN: Local Area Network

SIM: Subscriber Identity Module

GPRS: General packet radio service

UMTS: Universal Mobile Telecommunications System

3G: Third-generation technology

E- Commerce: Electronic commerce

USSD: Unstructured Supplementary Service Data

HTML: Hypertext Markup Language

ACB : Asia Commercial Bank

VIB: Vietnam international Bank

HD Bank: Ho Chi Minh City development joint stock commercial BankM-Commerce: Mobile commerce

SMS: Short Message Service

PIN: Personal Identification Number

SAT: SIM Application Toolkit

LIST OF TABLES AND FIGURES

Table 1.1: Classification MB services based on how information flows 9

Table 1.2: Services in Mobile Accounting 9

Table 1.3: Services in Mobile Brokerage 10

Table 1.4: Services in Mobile Financial Information 11

Table 2.1: Methods Launch Mobile Banking 27

Table 2.2: The features are implemented through SMS Banking 28

Table 2.3: The features implemented by means of downloading applications, web-based 29

Table 2.4: Features and fees of mobile banking services at VCB 38

Table 2.5: Promotion programs of MB at VCB 40

Table 2.6: VCB Mobile – B@nking Bubgeting 46

Chart 1.1: Account penetration in the world by area 24

Chart 1.2: Proportion of mobile phone penetration in comparison with banking services 25

Chart 2.1: Registered customers of BankPlus services 31

Chart 2.2: Penetration rate of E-bank services 35

Chart 2.3: Number of transactions and average transaction value/month year 2003 36

Chart 2.4: Net income proportion of E – banking 2003 36

Chart 2.5: Results of VCB SMS banking 42

Chart 2.6: SMS banking profit and number of SMS 43

Chart 2.7: Number of customers using services 44

Chart 2.8: Propotion of transactions of VCB - Mobile iB@nking 45

Chart 2.9: Number of customers registing Bankplus services 46

Chart 2.10: Market share of Bankplus service 47

Chart 2.11: Types and number of transactions performed via BankPlus 48

Chart 2.12: Overview of Survey Participants’ Net Monthly Income in VND 50

Chart 2.13: Advantages of Mobile Banking 51

Chart 2.14: Disadvantages of Mobile Banking 51

Chart 2.15: Preferred Mobile Banking Applications 52

Figure 2.1: Development timeline of Mobile Banking at VCB 34

Figure 3.1: Sales Process 58

1 Study background

Today, with the development of technology, mobile phone has become moreand more popular than ever before On average, each person possesses a mobilephone Because of advantages such as portability, easy integration with hightechnology into, service providers have cooperated to introduce many modernservices with superior features through mobile phone with a view to meeting thehigher and higher demand of customers Besides, the number of people who havebank account increase more and more together with the higher demand forshopping, making payment, and the popularity of mobile phone create the modernpayment method, which is Mobile Banking

Mobile banking is a service that provides electronic banking solution throughmobile phone channel allowing customers to conduct e-banking services includingbut not limited to financial and non – financial transtions on account, bank card.These transactions are made very fast, convenient and safe by applications onmobile phone (Mobile Client) or browser on mobile phone (Mobile Web)

Mobile banking application in banking section has been deployed widelyaround the world for many years, however, in Vietnam Mobile Banking has juststarted by commercial banks in the recent years Mobile banking transactions havejust stopped at information inquiry, money transfer, recharge phone, game accounts,etc The other complicated transactions such as bill payment, air ticket buying, stocktransactions, insurance premium payment, hotel booking, etc are just veryprimative

In the strong development trend of e-commerce and mobile commerce, alongwith a legal framework to support this trend, it has shown that Mobile Banking isthe right way of the development for banks, which want to develop moderndistribution channels, increase utility, strengthen competitiveness and bank imagefor current customers and potential customers

At VCB, electronic banking services via mobile phones have had fundamentalservices such as VCB-SMS B@nking, VCB-Mobile Banking, BankPlus Current

needs of customers using other sophisticated features on mobile phones is veryhigh Therefore, deriving from the practical demand for development of modern

Mobile Banking at VCB, the author chose the topic “ Develop electronic banking services through mobile communication network - Mobile banking at Vietcombank", which will be significant in terms of theory and practice with a view

to meeting the demand of the whole VCB systems in developing a new modernsuperior service distribution channel

2 The objectives of study

The thesis is subjected to the following objectives:

- Analyze Mobile Banking models in the world

- Analyze development situation of e-banking services through MobileBanking of Vietnam

- Suggest oriented development models of Mobile Banking at VCB

3 Subjects and scope of research

The research subjects of this thesis is the development models of MobileBanking applications in retail banking section in the world and Vietnam Besides,the thesis also research on the real suitation of electronic banking servicesdevelopment through mobile communication in Vietnam and Vietcombank

The content scope of this thesis is the Mobile Banking services activites andfeatures of VCB The space scope is Vietcombank Finally, the time scope is fromthe year 2001 to the end of 2013

4 Methodology and sources of materials

In order to obtain the objectives of thesis, the author applied these followingresearch methods:

- Data collection method:

+ Collect secondary data from tables, reports of retail banking department atVCB

+ Collect information from newspapers, magazines, internal news of banks,communication with staffs, who are directly working on Mobile Banking services

+ Collect primary data through a survey in order to examine the degree ofcustomer acceptance for various Mobile Banking services and the customer’s willingness

to pay for them

- Data analyzing method:

+ Use a descriptive statistical methods, analysis, synthesis methods of measurement,description and presentation of the data from which to draw conclusions based on the dataand information collected Descriptive statistics use the method of charts, graphs and dataaggregation methods to summarize data, highlight important information

5 Structure of the thesis

In addition of preface, conclusion and reference, the thesis includes 3 chapters

as follows:

Chapter 1: Literature framework about Mobile Banking

Chapter 2: Current situation of Mobile Banking deployment at Vietcombank Chapter 3: Suggestions and recommendations to develop Mobile Banking

services at Vietcombank

CHAPTER 1: LITERATURE FRAMEWORK ABOUT

MOBILE BANKING

1.1 Definition of mobile banking

Is mobile banking a subset of Internet banking (Muller - Veerse (1999)?Whereas, it is true in some aspects, this definition is too narrow to include allfeatures of mobile banking In this paper mobile banking definition is derived fromthe definition of the broader category of mobile commerce, which in turn is asubcategory of electronic commerce

The definitions of electronic commerce, electronic business, and the relatedbusiness models are constantly evolving Following both academic and industrybased literature sources, Mitchell (2001) defines electronic commerce as “muchmore than buying and selling on the internet: electronic commerce is about doingbusiness electronically, both within enterprises and externally, using computernetworks and mobile communications” This definition is general enough to be used

as a reference point Mobile commerce and mobile banking are discussed in thenext two subsections

- Mobile commerce

The phrase mobile commerce was originally coined in 1997 by KevinDuffey to mean “the delivery of electronic commerce capabilities directly into theconsumer’s hand, anywhere, via wireless technology” Many choose to think ofmobile commerce as meaning "a retail outlet in your customer’s pocket."

Mobile Commerce bears the unique characteristics not found in any traditionalforms of commerce as follows:

Ubiquity: Ubiquity means that the user can avail services and carry out

transactions largely independent of his current geographic location (“anywhere”feature) This feature can be useful in many situations, e.g to cross-check priceswhile standing in a supermarket or while one the move

Immediacy: Closely related to the feature of ubiquity is the possibility of

real-time availment of services (“anytime” feature) This feature is particularlyattractive for services that are time-critical and demand a fast reaction, e.g stockmarket information for a broker Additionally, the consumer can buy goods andservices, as and when he feels the need The immediacy of transaction helps tocapture consumers

at the moment of intention so that sales are not lost in the discrepancy betweenthe point of intention and that of the actual purchase

Localization: Positioning technologies, such as the Global Positioning

System (GPS), allow companies to offer goods and services to the user specific tohis current location Location based services can be, thus, offered to meetconsumers’ needs and wishes for localized content and services

Instant connectivity: Ever since the introduction of the General Packet Radio

Service (GPRS) mobile devices are constantly “online”, i.e in touch with thenetwork (“always-on” feature) This feature brings convenience to the user, as time-consuming dial-up or boot processes are not necessary

Pro-active functionality: M-Commerce opens, by the virtue of its ability to

be immediate, local and personal, new avenues for push-marketing, such as and product offers Services like “Opt-in advertising" can be offered, so that a usermay choose the products, services and companies, which he wants to be keptinformed about The Short Message Service (SMS) can be used to send brief textmessages to consumers informing them of relevant local offerings that best suittheir needs This feature ensures that the “right” (relevant) information can beprovided to the user at the “right” place, at the “right” time The user too does nothave to fear missing some potentially crucial information or getting it too late

content-Simple authentication procedure: Mobile telecommunication devices

function with an electronic chip called Subscriber Identity Module (SIM) The SIM

is registered with the network operator and the owner is thus unambiguouslyidentifiable The clear identification of the user in combination with an individual

Personal Identification Number (PIN) makes any further time-consuming,complicated and potentially

inefficient authentication process redundant

- Mobile banking

The combination of the two fields and mobile commerce and banking hasintroduced a new concept "Mobile banking" So what is mobile banking?

Mobile banking can be defined as the ability to conduct bank transactions via

a mobile device, or more broadly – to conduct financial transactions via a mobileterminal This definition is a suitable working one as it includes not only basicservices such as bank account statements and funds transfer but also electronicpayment options as well as information based financial services (e.g alerts onaccount limit or account balance, access to stock broking)

1.2 Developmental fundamentals of Mobile Banking

For 50 years, financial institutions have been on a quest to satisfy theircustomers’ need for more convenience First came the automated tellermachine (ATM), which New York’s Chemical Bank introduced to the Americanpublic in 1969 It did little more than dispense cash at first, but the ATM evolvedover time to become a true bank-away-from-bank, providing a full suite of financialtransactions

Then came Internet banking in the mid-1990s, which enabled consumers toaccess their financial accounts using a home computer with an Internet connection.Despite its promise of ultimate convenience, online banking saw slow and tentativegrowth as banks worked out technology issues and built consumer trust Today,Internet banking has reached a critical mass According a research report on trend in

electronic banking spring 2010 (Source: www.theraddonreport.com), online

banking penetration now exceeds 50 percent of U.S households

Despite the obvious benefits, in fact, online banking transactions still existcertain limitations The biggest problem is the flexibility Even with a laptop, it’salmost impossible to stay connected in virtually any location on the planet Facedwith that certain restrictions, banks and telecommunication companies quickly

began working together to develop banking services based on mobile devices.

With the advantages of compact, convenient, users can easily carry mobilephone to everywhere, it has become increasingly popular around the world.Currently, out of five billion mobile users in the world, 1.08 billion are smart phone

users (Source: http://www.go-gulf.com/) This figure in Vietnam, according to a

report by the Ministry of Information and Communications, up to May 6/2013, thetotal number of mobile phone subscribers across the country is over 137 million,making up for 70% of the population

If mobile phones only deliver voice data, then their use as a vehicle to deliverbanking services would be limited Most phones, however, also provide text-messaging capabilities, and a growing number are Web-enabled That makes themobile phone an ideal medium through which banks can deliver a wide variety ofservices This is the foundation for the introduction of electronic banking servicesvia mobile - Mobile banking

In the early 2000s, banks faced challenge caused by mobile banking.Customers felt too difficult to see the financial information on the small screen ofmobile phone, which is very popular at that time

Up to now, thanks to the increase in terms of size as well as the modernfeatures of mobile devices, smart phones have made considerable efficiency in thedevelopment of mobile banking services Consumers also became interested inusing the services Mobile banking has created opportunities for banks to retaincurrent customers, build customer group of highly knowledgeable about technology

by providing value-added services and attracting more new customers

1.3 Features and utilities of mobile banking services

Features and utilities of mobile banking services that banks can providedepend on the development of mobile and telecommunication technologies

The first mobile banking services appeared in the market in the form of mobilemessage, which is called as SMS Banking service Due to privacy restrictions andlimitations on the volume of information transmitted through message, the featuresthat it offers simply the access and account information management Today, with

the development of communication technology such as GPRS, UMTS, 3G andcommunication technology has created a new platform, which is the basis for thedevelopment of mobile banking services with features diversity - related to financialtransactions such as money transfers, bill payment, etc.

Mobile banking services provided can be categorized in two ways:

1.3.1 Classification depends on how information flows

One way to classify these services depending on how information flows is the

‘Push/Pull' nature ‘Push' is when the bank sends out information based upon anagreed set of rules, for example your banks sends out an alert when your accountbalance goes below a threshold level ‘Pull' is when the customer explicitly requests

a service or information from the bank, so a request for your last five transactionsstatement is a Pull based offering While "pull transaction" is a two-way interactionbetween banks and customers, "push transaction" is 1- way interaction from bank tocustomers

The other way to categorize the mobile banking services, by the nature ofthe service, gives us two kind of services – Transaction based and Enquiry Based

So a request for your bank statement is an enquiry based service and a request foryour fund's transfer to some other account is a transaction-based service.Transaction based services are also differentiated from enquiry based services inthe sense that they require additional security across the channel from the mobilephone to the banks data servers

Based upon the above classifications, we arrive at thefollowing taxonomy of the services listed before:

Table 1.1: Classification MB services based on how information flows

Push Based Pull Based Transaction

 Bill Payment Alerts

 Account Balance Enquiry

 Account Statement Enquiry

 Cheque Status Enquiry

 Cheque Book Requests

 Recent Transaction History

1.3.2 Classification depends on application

- Mobile Accounting

Mobile Accounting is sometimes characterized as transaction-based bankingservices that revolve around a bank account and are availed using mobile devices.Not all Mobile Accounting services are however necessarily transaction-based Amore precise definition of Mobile Accounting would therefore characterize it as

“availment of account-specific banking services of non-informational nature”.Mobile Accounting services may be divided in two categories to differentiatebetween services that are essential to operate an account and services that areessential to administer an account

Table 1.2: Services in Mobile Accounting

Mobile accounting Account Operation Account Administration

Money remittances & transfers Access administration

Standing orders for bill payments Changing operative accounts

Money transfer to sub-accounts Blocking lost cards

Subscribing insurance policies Cheque book requests

- Mobile Brokerage

Brokerage, in the context of banking- and financial services, refers tointermediary services related to the bourse, e.g selling and purchasing of stocks.Mobile Brokerage can be thus defined as transaction based, mobile financialservices of non-informational nature that revolve around a securities account.Mobile Brokerage, too, may be divided in two categories to differentiate betweenservices that are essential to operate a securities account and services that areessential to administer that account.

Table 1.3: Services in Mobile Brokerage

Mobile Brokerage Account Operation Account Administration

Selling & purchasing financial Access administration instruments (e.g

securities)Order book administration

- Mobile Financial Information

Mobile Financial Information refers to non-transaction based banking- andfinancial services of informational nature Mobile Financial Information servicesinclude subsets from both banking and financial services and are meant to providethe customer with anytime, anywhere access to information The information mayeither concern the bank and securities accounts of the customer or it may beregarding market developments with relevance for that individual customer Theinformation may be customized on the basis of preferences given by the customerand sent with a frequency decided by him The information should be provided,ideally, on both, pull and push basis Information services are an integral part ofMobile Accounting and Mobile Brokerage but they may

also be offered as a stand-alone, independent module, i.e Mobile FinancialInformation can be offered without offering Mobile Accounting or Mobile

Brokerage but vice versa is not feasible.

Table 1.4: Services in Mobile Financial Information

Mobile Financial Information

Account Information Market Information

Balance inquiries / Latest transactions Foreign exchange rates

Returned cheques / cheque status Stock market quotes and reports

Credit card information Product information & offers

Branches and ATM locations

Helpline and emergency contact

Information on the completion status

1.4 Technology options of Mobile Banking

This section addresses the front-end component or consumer-facing MobileBanking Technologies This component of the end-to-end mobile banking valuechain is typically supplied or customized by either a mobile banking vendor or thespecialized technology unit within a bank

These Mobile Banking Technologies can be categorized into twoenvironments:

Therefore, it does not require users to install any software or device requires a speed mobile processor but still can perform most types of transactions Thus,browser-based application is suitable for mobile devices with slow processing speedand low memory capacity.

high-1.4.1.2 Wireless Application Protocol (WAP) Banking

WAP banking is another form of the Electronic banking that enables the user

to communicate interactively with the bank For this communication the client usesonly GSM mobile phone with WAP service With its options and the method ofcontrolling WAP banking reminds an easy form of Internet banking All thecustomers having GPRS handset and GPRS connectivity can simply visit our WAPPortal and navigate through the user-friendly menu to seamlessly carry out variousenquiry based transactions while on the move Mobile banking (WAP) is a range ofelectronic banking services available through mobile communication network based

on WAP technology These are financial services for mobile users to checkaccounts, make transfer, pay bills or spending, manage company accounts orprocess instructions

WAP banking has been adopted by many banks around the world, such asDeutsche Postbank AG, comdirect Bank, Stadtsparkasse München (Germany),Nordea Bank (Finland), Credit Suisse (Switzerland), Maybank (Singapore), Bank ofAmerica,etc

WAP banking was popular in the early advent of mobile banking services, asmobile phone at that time was very limited as the small screen, poor visibilityscreen, low processing speed However, with the stormy development of thetelecommunications industry, mobile devices are increasingly improved, upgraded

in form, features, processing capabilities, speed, memory leading to thereplacement WAP banking gradually by means of web-based mobile banking

1.4.1.3 Web-based Mobile banking

Basically, web browser-based mobile banking service is also distributedthrough the internet access on mobile phones However, the difference compared to

WAP banking lies in the interface of the web page, which is displayed Webbrowsers are written in hypertext markup language (HTML) - a markup language isdesigned to make web pages with the piece of information is presented on theWorld Wide Web User interface of standard web services is given in some formadjusted, modified to be able to display on mobile devices that have smaller screensizes Therefore, mobile banking service based on web browser brings users thesimilar look, feeling and usage to experience of using internet banking service on apersonal computer.

1.4.1.4 Messaging-based applications

For message-based applications, communication between banks and customers

is done through text messages These messages can be generated automatically fromthe bank whenever an event occurs as determined before; for example, when atransaction is made on the customer's account It is also possible that this message issent by the bank as a feedback or confirmation of customer requirements Amessage from the client can be the transaction or request information from banks

The method is based on the messaging-based applications is known as SMS

banking Requirement for registration is to send a standard message to a regulatednumber of banks The server receives the SMS, decodes information and followsrequirements The outstanding advantage of SMS banking is simple to use andperform banking transactions

14.1.5 USSD (Unstructured Supplementary Service Data)

Mobile banking services are deployed via USSD is the service of collaborationbetween banks and telecommunications companies USSD is a protocol for high-speed interaction between users (subscribers) and applications via the GSM mobilenetwork The outstanding advantage of USSD is that it allows integrating multipleservices on a single head number, enabling you to browse the menu and improveinteraction speed up to 7 times as fast as SMS due to session – based mechanism Inthe world, USSD is one of the access channels to value-added services because ofits simple, convenient usage Compared to SMS, USSD instantly interacts withservice providers / banks, therefore, customers should not need to wait long , be

able to browse menu Hence, users can use multiple utilities for a single session, and

do not need to remember syntax for SMS (generally complex, long and changeablewith the requirements for different transactions) In addition, USSD is compatiblewith all phones, whether it is a high -end or medium phone

After all necessary information is entered, and connection to the server isestablished, data is transmitted Before data is transmitted, there will have a safetyinspection step through PIN identification step The increase of safety and security

is the main advantage of client-side technology compared with server-sidetechnology

1.4.2.1 SIM - based application

The SIM Application Toolkit (SAT) allows for the service provider or bank tohouse the consumer’s mobile banking menu within the SIM card The SIMApplication Toolkit (commonly referred to as STK) is a standard of the GSMsystem which enables the SIM to initiate actions which can be used for variousvalue added services The SIM Application Toolkit consists of a set of commandsprogrammed into the SIM card which define how the SIM should interact directlywith the outside world and initiates commands independently of the handset and thenetwork This enables the SIM to build up an interactive exchange between anetwork application and the end user, and access or control access to the network.The SIM also gives commands to the handset, such as ‘display menu’ and ‘ask foruser input’ STK has been deployed by many mobile operators around the world formany applications, where a menu-based approach is required, such as mobilebanking and content browsing

When users want to interact with the bank, simply follow the desired menuoption, enter the required data in the appropriate information When all clientinformation has been entered, the encrypted data will be converted to SMS and sent

to the bank This application works similar to SMS banking The difference is thatcustomers do not need to remember and prepare orders, therefore, STK is like atranslator between the customer and the bank

STK has the advantages such as do not require large memory, high processingspeed mobile devices, complicated software to install; customers do not have toremember the structure of standard message according to bank‘s regulation.However, due to specific mandatory requirement to use a special SIM, the biggestobstacle problem with STK is that the clients must change SIM if they want to usethe services of many different banks At the same time, the SIM will also need to bechanged when a new application is installed on the SIM

1.4.2.2 Mobile Application

Along with the development of the internet, mobile technology (GPRS/ wifi/3G/ 4G,…), and especially the great growth of the mobile industry (smart phone)has created a strong improvement in mobile banking service There are manypossible ways to implement various services based on different technologyapplications as described above Of course, each solution has its own advantagesand disadvantages, however, mobile application up to the present, is regarded asmore comprehensive in terms of convenience, security, diverse features, easyupdates, For this reason, this technology is now being considered the first choicefor development goals of mobile banking services in most banks in the world such

as bank of America (U.S.), Citibank (U.S.), Barclays (UK),

1.5 Benefits of development of electronic banking services through Mobile Banking

To explain the assessment of the economic experts about the inevitable trend

of development of mobile banking services, in the following sections, this paperwill make an analysis of the benefits of mobile banking services brought to banks,customers, and telecommunication companies

1.5.1 For banks

Banks can realize operational efficiencies by adopting an integrated channelstrategy that includes mobile banking As shown in Figure 1.1, the cost ofprocessing a transaction via mobile phone can be as much as 10 times lower thanvia an ATM and as much as 50 times lower than via a branch

1.5.1.1 Opportunities for operational efficiencies

The more transactions that banks can drive to mobile phones, the greater thepossibility that they can close poorly performing branches and increase operatingefficiencies by shifting the focus of branch employees from transactions to moreadvisory-type services that will lead to greater sales or cross-selling rates

1.5.1.2 Opportunities for revenue growth

Mobile banking offers banks several opportunities for increasing revenues.These include monetizing the value of customer analytics, delivering greater real-time access to products and services, and conducting targeted marketing campaignsbased upon the knowledge of consumer preferences that banks collect

+ Expanding distribution and coverage models

Mobile banking gives banks the potential to expand beyond their geographicalfootprint as well as ability to cross-sell and up-sell products to existing customers.Banks that harness these additional mobile financial services capabilities can see aprofound impact on the nature of the banking relationship

+ Monetizing the value of customer analytics

Unlike supermarkets, department stores, and other businesses that see only onedimension of consumers’ spending habits, banks have a broader view of what theircustomers buy and where they like to shop This puts banks in a specific position todevelop a new line of business focused on bundling data analytics for retailers andother entities vying for customer intelligence — while maintaining the privacy ofindividual customers’ information Merchants could employ such aggregatedinformation to target customers more effectively than they might through othermeans In addition, banks could use this knowledge of their core customers tostrengthen their own abilities to acquire new customers, cross-sell existing

customers, improve decisioning capabilities, and provide better customer service —resulting in significant value streams for banks

+ Delivering greater real-time access to products and services

Mobile banking could provide bank customers with the ability to compareoptions at time and place of purchase At the same time, banks could offer theseshoppers complementary services, such as financing or leasing options, insurancequotes (through partnerships), and more

+ Offering discounts and purchasing incentives to bank customers

By establishing relationships with manufacturers and retailers that could offerbank customers discounts while they research product options at the point of sale,banks can position their mobile channel as something more than just a convenientway to pay

+ Conducting targeted marketing campaigns

Similarly, banks could conduct a variety of targeted marketing campaigns tocustomers who use mobile banking For example, banks could pinpoint shoppers’physical locations to make relevant offers to their customers, such as offering themtemporary line increases In addition, banks could leverage the mobile bankinginterface as a real-time, tailored advertising engine by using behavioral analyticsthey compile to develop campaigns tailored to customers’ shopping preferences Additionally, banks might be able to offer their customers “smart” coupons whilecustomers are in stores shopping for a flat-screen television or digital camera Thecoupons would come from alliances banks form with the products’ manufacturers and/

or retailers — and banks would receive a fee for each coupon used

1.5.2 For customers

1.5.2.1 Convenience

Unlike Internet banking services, with which customers can only accessservices in locations with internet connection, Mobile banking services allowcustomers to perform any financial transactions anywhere with mobile connection.With the widespread level of mobile network today, Mobile banking services canmeet the needs of customers anytime, anywhere, not affected by the location and

time Therefore, only Mobile banking services can bring customers thatconvenience.

1.5.2.2 Time and Cost Saving

Instead of going to the bank, queuing to be served, customers perform all theirtransaction at one place that they want with mobile banking services This with alltransactions done at the place I want to help our customers can save huge amounts

of time and travel costs to invest in the student other profits In addition, theprovision of standardized services, irrespective of the service attitude of the staff atWet transactions, helping customers avoid psychological discomfort due to poorservice attitudes - factors may lead to the decision to leave the bank

1.5.3 For telecommunications companies

Mobile banking not only brings benefits to customers, banks, but it alsobenefits telecommunications companies, which cooperate with bank to adoptmobile banking services

Due to the integration trend, in the competition war of market share, besidesbanks, telecommunications companies are not exceptions Faced with difficultiesand challenges, cooperation with banks to adopt mobile banking services helpstelecommunications companies to increase high value added financial services forcustomers, which are supported with financial solutions, transaction managementcapacity and minimum arising risks by banks In addition to diversification ofservices, telecommunications companies also benefits from the growth revenuefrom these services and build stronger competitive capacity The cooperation withprestigious banks enhances the reputation and brand images for thesetelecommunications companies

1.6 Factors affect the development of mobile banking services

1.6.1 Macro factors

1.6.1.1 Technology platform

The progress of science and technology has a great impact on the development

of modern banking services It is the technical basis for applying banking facilities,new tools in business activities, building and designing products with high

technological content such as Mobile banking services.

- Core banking system of banks:

Core banking - Centralized online real-time banking or core bankingenvironment is an integrated system of computer applications in the management ofbanking operations, which includes the modules of basic operations such as bankdeposits , loans, customer information, accounting systems, budgeting, cash, used

to record transactions, manage bookkeeping, calculation of interest, deposits, trackrecord customers,

Core banking is the inevitable trend of banks in the modernization of bankingtechnology and development of banking system because it is primary factor tocreating competitive advantages of each bank Due to characteristics that canintegrate multiple modules and focus processing date at the same time, the corebanking technology is the platform to develop banking services

Therefore, the ability to build, design and manage product depends largely onthe core banking system The more modern and superior the core banking is, thebetter the ability to build, design and manage products is

- The development of telecommunications network:

The launch of mobile banking service is the handshake between the bank andthe network service provider Therefore, the ability and development level ofservice not only depend on the bank but also directly are influenced by thedevelopment of telecommunications networks

The factors to assess the level of development of telecommunicationsnetworks are represented by the figures on the number of customers using theservice, the number of dealer distributing network services, data transmissiontechnology, the stability of the system in providing network services, the numberand quality of the supply network, etc

- The development of the mobile industry

The year 2013 marks 40 years since the introduction of the first mobile phone

in the world Over 40 years of development, today, mobile phone has become anindispensable equipment in the lives of many people

Along with the development of mobile technology is the development ofmobile banking services Each adoption mode of Mobile banking services iscompatible, consistent with the ability of the mobile phone.

1.6.1.2 Legal environment

Regarding the current specific legal framework for the development of mobilebanking services in Vietnam, there is not an official document from the State Bankfully regulate clearly about the Mobile banking services concept, rights, roles andresponsibilities of all stakeholders involved in the provision of services, forensuring data security and sharing of customer information between banks andnetwork provider In reality, to be able to adopt Mobile banking services thereshould be close coordination among the parties such as banks, network operators,service providers, therefore, the legal basis lacking uniformity, transparency leads todifficulties in the construction, development and services management Forexample, problems still exist when dealing with cases of disputes occurring duringthe provision services between banks, service providers and customers such as how

to ensure the rights of the parties When benefits are not guaranteed, the customerdoes not have enough confidence to use the service, the service will becomeincreasingly difficult

1.6.1.3 Economic environment

The economic environment affects the provision of modern banking servicestowards the impact on financial markets On financial markets, the increase in thequantity and quality of bank pushes banks in an environment of increasingly fiercecompetition

Mobile banking services with the advantages of attracting customers,increasing competitiveness, strengthening bank image in the eyes of clients in thetechnology revolution Therefore, the introduction of mobile banking services is amatter of course from the impact of the economic environment

1.6.1.4 Socio - cultural environment

Social trends

and demographic factors such as age, income, educational level, living habits,consumption habits, have a certain impact on the development of bankingproducts and services, especially, these factors show a fairly profound effect on themodern banking services

- Educational level

Due to the specific characteristics of the product, the electronic bankingservices, especially Mobile banking services require the user an understandingelectronic payment technology in general and knowledge, understanding the use ofmobile devices in particular

Thus, educational level is one of the primary factors affecting the level ofdevelopment of Mobile banking services

- Age

The age factor affects the development of mobile banking services because itdirectly affects the preference and the ability to use new technologies, thewillingness to accept a new thing of customers For example, customers in the agegroup of 18-35 are young people, who are in favor of technology, innovation,accept to use the new service which has the ability to bring many benefits to theusers Meanwhile, the older clients are generally loyal to psychological and familiarservice Therefore, the approach to those customers will take longer and be morecostly

- Income

Income directly affects the affordability of customers, so it affects thecustomer decision whether to use another bank's new product or not becausecustomers have to pay an additional expenses for the bank transaction

1.6.2 Micro factors

1.6.2.1 Current rivals

The rapid increase in the number of banks in Vietnam makes market sharecompetition become more and more fierce Besides, the trend of internationalintegration has brought both opportunities and challenges for the economy ingeneral and the banking and financial sector in particular

In order to create dominance, enhance their competitiveness, banks are forced

to diversify product portfolio, increase utility, to meet the needs of customers inorder to attract customers Therefore, the direct competition between the rivals willpromote the development of services

1.6.2.2 Business partners

Cooperation with partners in the provision of Mobile banking is the companyproviding telecommunication network services Therefore, the development ofMobile banking services also depends on the development of thetelecommunications company Currently, in Vietnam, the asynchronous technicalinfrastructure of the telecommunications company leads to certain difficulties whenbanks supply and develop services

1.7 Model and business trends in electronic banking services via mobile in the world

Currently, to adopt mobile banking services in the world, partnership modelcan be divided into two major categories: Bank-led model and Non Bank-led model.The common point of these two models are the involvement of bank, the networkprovider and/ or mobile commerce company to bring a service that allows users toaccess to financial services and banking services anytime, anywhere via a mobilephone However, in each model, the role and responsibilities of the various partieswill vary depending on the conditions of infrastructure, cultural policy, social,living habits, of each country

1.7.1 Bank – led model

- Characteristic of market: Bank – led model are applied to developed

countries where banking services were well developed, most people have bankaccounts, or have regular access to banking services such as Europe, America,

- Management model: under this model, the relationship of cooperation

supplying services between banks and network providers, banks play the role ofproviding content and services using telecommunications networks as a support tool

to help customers access to banking system

- Evaluate strengths and weaknesses

+ Advantages: Banks have long years of experience in the banking and financesector will design, supply services as well as perform billing management andrisk management

+ Disadvantages: This model forces customer in order to use the service mustopen a bank account In addition, educational level must be high enough to haveeasy access to services In developing countries, where most people are stillloyal to cash consumption habits, most people do not have access to bankingservices, it is unlikely to implement this model on a large scale

1.7.2 NonBank - led Model

Characteristics of market: Non bank – led model (possibly mobile company or

a third independent party, often mobile commerce company), especially develops inmarkets with the following characteristics:

+ The majority of the population has no or little access to banking and financialservices

+ The custom of consumption is mainly cash, no payment habits by means ofnon-cash

+ There is a large proportion of mobile service users in society

+ The people demand payment, money transfer with small amount of value andvolume

- Management Model

+ Mobile company / independent 3rd party (not banks, telecom companies):provide and operate technology infrastructure for the service , build entirefeatures of the service, recruit and manage agents (for models with theparticipation of agents)

+ Banks: manage cash flow, ensure security surplus funds, provide services,authorize agents to collect and make payment for customer using services (forthe model with the participation of agents )

+ Agent (if any) be authorized to collect and make payment for the customer

- Evaluate strengths and weaknesses

+ Advantages:

For the model with the leading participation of agent and / or company: To usethe service, customers simply are mobile subscribers, no need for a bank account Infact, the average level of bank account penetration in population worldwide is only

50 % (source: Demirguc - Kunt and Klapper 2012) Meanwhile, the coverage of

mobile phones globally has amounted to an estimated 85 % of the population (in 2011 )and is expected to increase to 90 % in 2014 Therefore, this model is capable ofdeployment on a large scale, particularly in the sectors with difficult access to bankingservices On the client side, the service is simple, convenient, time saving,

For model by independent 3rd party as the leading: Due to the face that service

is managed and operated by an independent 3rd party, not a bank or a telecomcompany, Service can be deployed simultaneously to multiple banks and manydifferent networks This brings convenience to customers who have many differentbank accounts

Chart 1.1: Account penetration in the world by area

(Source: Demirguc – Kunt and Klapper 2012)

Chart 1.2: Proportion of mobile phone penetration in comparison with

In addition, for the model with the participation of agents: To be able todevelop services, one important factor is the network of collecting cash and makingcash payment - the extended arm of the bank The investigation, selection, trainingagents also cost time and resources Besides, after dealers start operating, there must

be continuous inspection, monitoring everything to ensure compliance withregulations and avoid the arising risks

CHAPTER II: CURRENT SITUATION OF MOBILE BANKING DEPLOYMENT AT VIETCOMBANK

2.1 Current situation of mobile banking deployment in Vietnam

2.1.1 Bank – led model

Among models used for mobile banking development, bank – led model wasintroduced first and has played the vital role in Vietnam

Banks are increasingly aware of providing a channel, which offers convenientbanking transactions, has flexibility and portable This will bring good opportunitiesfor having customer satisfaction and retaining existing customers as well asattracting many new customers, who are young, energetic, high - tech lovers

Due to the strong development of mobile market, 3G technology, wifi, and anincreasing number of people using mobile phones, and smart phone users, methods

of providing mobile banking become more modern Up to July 2012, there havebeen 26 Vietnamese commercial banks, which provide mobile banking servicesthrough mobile phone text message With the advantage of easy usage, simpleoperation, reasonable price and no application installation, SMS banking hasbecome a popular concept with customers

Some banks choose web-based method such as Maritime Bank and ACB tooffer a wider variety of banking services to customers This approach allows thecustomers, who have internet access are able to use banking services through thebank websites

Meanwhile, many banks invest in the provision of mobile banking servicesthrough the application settings The enhanced security, the simple interface design,more suitable phone screen are the advantages of this method First bank developingthis method is Dong A bank On 01/23/2008, Dong A bank introduced mobilebanking product with transactions operated through DongA Mobile Internetapplication installed on the mobile of clients Up to the present time, the number ofbanks developing mobile banking services based on application setting hasincreased dramatically, including VCB, VP, VIB, MB,

Another method of providing mobile banking services is quite common acrossSIM applications or USSD These two methods are implemented throughcollaboration between banks and telecommunication companies The popular model

in Vietnam is BankPlus offered by Viettel cooperate with such banks as VCB,VietinBank, VIB, BIDV, An Binh Bank, HD Bank, MB,

Table 2.1: Methods Launch Mobile Banking

Method Lauching Banks

Application VCB, BIDV, Đông Á, MSB, HSBC

Sim-tool-kit VCB, VietinBank, VIB, BIDV, An Bình Bank, HDBank, MB,

LienVietPostBank, Agribank

In general, from the most primitive form of Mobile banking services, within 5years, in Vietnam there has been the presence of adequate methods of mobilebanking service provision Although a number of methods are still primitive,mobile banking services promise growing stronger in the future

In specific, for SMS banking method, features provided are quite limit Mostbanks today offer only balance inquiries, basic banking information queries (ATMlocations, interest rates, exchange rates, ), phone recharge, and proactivenotification account balance/ credit card fluctuations Some banks, such as Dong A,Techcombank, MSB, ACB, Vietinbank provide additional features such as billpayment, wire transfer, e- recharge through the messages that client send to themessage operator according to standard message syntax However, theeffectiveness of this service is not high The first reason is that it is hard to usebecause customers must remember the message syntax prescribed by the bank.Besides, it is the poor security because the message content is usually stored in theoutgoing box of the phone Data sent from the phone to the bank is not encryptedand digitally signed so safety is not high

For example in the case of VietinBank, money transfer feature through SMS isprovided with security made by the message syntax consisting of a static passwordcharacter by registered customers Although complex message syntax increasessecurity information, but this is not really the solution to ensure the safety oftransactions Due to the limitations mentioned, in order to control risks of financialtransactions using messaging method, banks just provide information or performfinancial transactions with a low line.

Table 2.2: The features are implemented through SMS Banking

Criteria VCB VietinBan k BID V VIB Dong A TCB MSB ACB

(Source: Websites of many commercial banks)

Compared to SMS banking methods, the method of downloading application

is more superior over safety and user-friendly interface, and it provides customers awider variety of features such as information inquiries, transfer, bill payment,electronic recharge, savings online, information management, etc However, due to

the fact that most banks are implementing this method in the early stages so thefeatures are still very basic In addition, this method is only suitable for smartphones and requires customers to install applications Therefore, the targetcustomers of mobile banking services through the downloading application arequite limited, mainly concentrated in the office population, with knowledge oftechnology.

Table 2.3: The features implemented by means of downloading applications,

web-based Criteria VCB VietinBank BIDV VIB SCB TCB MSB ACB

(Source: Websites of many commercial banks)

Some banks provide services by method of WAP mobile banking to simplifyuser participation and more quickly in the introduction of many utilities tocustomers However, the number of customers generally have not achieved as

Currently, due to the fact that there is no centralized and transparent database

of electronic banking services in Vietnam, the precise quantitative informationabout the development of mobile banking services for the purpose of research thisstudy is limited Estimated up to May 7/2012, there were 26 commercial banksproviding SMS Banking service with over 4.1 million customers, performing over2.2 million transactions , and 19 commercial banks providing mobile bankingservices to over 2.9 million customers, performed 11.9 million transactions (asshared at the Banking Vietnam 2013 conference of Payment Department, StateBank of Vietnam) Accordingly, the number of users and transactions via MobileBanking is too small compared to the potential of the 90 million people of ourcountry

2.1.2 Telco – led model

The typical model of telco–led model in Vietnam is BankPlus service modeldeveloped by Viettel It is also the first network provider developing mobilepayments services linked to the bank BankPlus services are provided through theapplication pre-installed in the customer's phone SIM Conditions for participationare people who are Viettel subscribers and open accounts at banks associated withViettel to deploy the service Currently, services are supplying basic utilities such asbalance inquiries and transaction history, fund transfer and bill payment Firstlydeployed with Military Bank in 2011, up to now, Viettel BankPlus services havepresented in 7 other banks: Vietcombank, Vietinbank, BIDV, HD Bank, ABBANK,VIB, Agribank

Viettel also continuously improves services to become more convenient andattractive by the implementation of USSD and WAP BankPlus In addition todistribution through affiliate banks, selling and promoting aggressively deployment

in both the trading points of Viettel Thus, the number of registered customers touse increased rapidly in 2013 As of the end of the month 10/2013, there were640,000 new clients compared with late 2012 Especially in the September andOctober, on average, each month there are about 165,000 new customers registering

BankPlus It is expected that customers will continue rising in time when Viettelexpand cooperation with 3 other banks and deployment features of bill payment forelectricity, water, taxi, plane tickets.

Chart 2.1: Registered customers of BankPlus services

(Source: Retail banking Department of VCB)

The two oldest MobiFone and VinaPhone network providers are starting tostep into the race to develop payment services on mobile banking with thepromotion of payment services deployment via USSD It is expected that the servicewill be introduced to customers in early 2014

Thus, we can see the development of mobile banking services in Vietnam isgenerally still at an early stage Vietnam market has many advantages such as higheconomic growth and stability, a young population, the high-tech equipmentpreference, popular mobile communications However, the legal framework is stilllimited, economic growth is not uniform across regions, differences in literacylevels among strata as well as the banks have not provided a solution mobilebanking that is really attractive and useful are the reasons why the number ofcustomers using the service is still relatively modest Some banks are increasingtheir investment in research and development Mobile Banking Services such asTienphong Bank , VIB , VietinBank , Vietcombank With these efforts from banks ,

more likely in the near future , mobile banking services in Vietnam will grow moreprosperous as predicted by many experts.

2.2 Current situation of mobile banking deployment at Vietcombank

2.2.1 Overview of Vietcombank

JSC Bank for Foreign Trade of Vietnam, formerly known as Bank for Foreigntrade of Vietnam, was established on 01/04/1963 from the Foreign ExchangeBureau (of the State Bank of Vietnam) Being the first state commercial bankchosen for pilot privatization by the Government, Joint Stock Commercial Bank forForeign Trade of Vietnam officially came in to operation on 02/06/2008, aftersuccessfully implementing the equitization plan through IPO Vietcombank (stockcode: VCB) officially listed on the Ho Chi Minh Stock Exchange (HOSE) on30/06/2009

During more than 50 years of development, Vietcombank has contributedsignificantly to the stability and growth of national economy, upholding the role of

a major foreign trade bank in facilitating efficient domestic economic growth aswell as influencing considerably on regional and global financial community

Originated as a specialized bank for foreign trade, Vietcombank nowadays hasbecome a, providing customers with a wide range of leading financial services ininternational trade; traditional services such as capital trading, capital mobilization,credit, project financing…etc., and modern banking segment such as forex tradingand derivatives, card services, e-banking and so on

Vietcombank has many advantages of applying advanced technology into theautomatic banking system, products development, e-banking services, based on itshigh technology foundation Products such as Internet Banking, VCB Money, SMSBanking, Phone Banking have always attracted a great deal of customers by itsconvenience, promptness, safety, efficiency, creating the habit of non-cash

payments amongst the mass

After more than a half-century operating in the market, Vietcombank currentlyhas almost 14,000 employees, more than 400 branches/ transaction offices/representative office/ affiliates both in Vietnam and abroad, including Head Office

in Hanoi, 1 Operation Center, 1 Training Center, 79 branches, over 330 transactionoffices all over the country, 2 subsidiaries in Vietnam, 2 subsidiaries and 1representative office in other countries, 6 joint ventures In addition, Vietcombankhas also developed an Autobank system with about 2000 ATMs and more than43,500 Points of Sale nationwide Bank’s operations are supported by a network ofmore than 1,700 correspondent banks in 120 countries and territories.

Vietcombank’s team of professional employees with excellent ability inbanking and finance have a good sense for modern and integrated businessenvironment…Thanks to their contribution, Vietcombank remains the primarychoice for large corporations, domestic and foreign enterprises as well as millionsindividual customers

For more than a decade, Vietcombank has continuously rated as "Best Bank inVietnam" by prestigious institutions around the world on many important operationfields

With wisdom and enthusiasm, every generation of Vietcombank’s employeeshas been and will always be endeavoring to establish a sustained development withambition to became a bank has a wide range, great admin ability, working scopethat could influenced the region and overseas in the near future

2.2.2 Overview of electronic banking services of Vietcombank

As a pioneer bank and having many advantages in the development ofelectronic banking services, Vietcombank was soon introduced VCB-iB @ nking tocustomers in 2001 After suspending the provision of services to complete legaldocuments and database clients, up to 2006, Vietcombank introduced a widervariety of gadgets on VCB-iB@nking and constantly increased features to serve theneeds of customers Also in 2006, Vietcombank launched services via mobilemessaging VCB-SMS B@nking, allowing customers to query information from theswitchboard 8170 By 2012, Vietcombank consecutively introduced two newservices developed in mobile platform which are VCB-Mobile B @ nking andBankPlus