FOREIGN TRADE UNIVERSITY BANKING AND FINANCE FACULTY ---***---GRADUATION THESIS DEVELOP ELECTRONIC BANKING SERVICES THROUGH MOBILE COMMUNICATION NETWORK – MOBILE BANKING AT VIETCOMBANK
LITERATURE FRAMEWORK ABOUT MOBILE BANKING 4
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 all features of mobile banking In this paper mobile banking definition is derived from the definition of the broader category of mobile commerce, which in turn is a subcategory of electronic commerce.
The definitions of electronic commerce, electronic business, and the related business models are constantly evolving Following both academic and industry based literature sources, Mitchell (2001) defines electronic commerce as “much more than buying and selling on the internet: electronic commerce is about doing business electronically, both within enterprises and externally, using computer networks and mobile communications” This definition is general enough to be used as a reference point Mobile commerce and mobile banking are discussed in the next two subsections.
The phrase mobile commerce was originally coined in 1997 by Kevin Duffey to mean “the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology” Many choose to think of mobile commerce as meaning "a retail outlet in your customer’s pocket."
Mobile Commerce bears the unique characteristics not found in any traditional forms 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 prices while 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 particularly attractive for services that are time-critical and demand a fast reaction, e.g stock market information for a broker Additionally, the consumer can buy goods and services, as and when he feels the need The immediacy of transaction helps to capture consumers at the moment of intention so that sales are not lost in the discrepancy between the 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 to his current location Location based services can be, thus, offered to meet consumers’ 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 the network (“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 content- and product offers Services like “Opt-in advertising" can be offered, so that a user may choose the products, services and companies, which he wants to be kept informed about The Short Message Service (SMS) can be used to send brief text messages to consumers informing them of relevant local offerings that best suit their needs This feature ensures that the “right” (relevant) information can be provided to the user at the “right” place, at the “right” time The user too does not have to fear missing some potentially crucial information or getting it too late
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 unambiguously identifiable 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.
The combination of the two fields and mobile commerce and banking has introduced 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 mobile terminal This definition is a suitable working one as it includes not only basic services such as bank account statements and funds transfer but also electronic payment options as well as information based financial services (e.g alerts on account limit or account balance, access to stock broking).
Developmental fundamentals of Mobile Banking
For 50 years, financial institutions have been on a quest to satisfy their customers’ need for more convenience First came the automated teller machine (ATM), which New York’s Chemical Bank introduced to the American public in 1969 It did little more than dispense cash at first, but the ATM evolved over time to become a true bank-away-from-bank, providing a full suite of financial transactions.
Then came Internet banking in the mid-1990s, which enabled consumers to access their financial accounts using a home computer with an Internet connection. Despite its promise of ultimate convenience, online banking saw slow and tentative growth 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 exist certain limitations The biggest problem is the flexibility Even with a laptop, it’s almost impossible to stay connected in virtually any location on the planet Faced with 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 mobile phone 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, the total 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 deliver banking services would be limited Most phones, however, also provide text- messaging capabilities, and a growing number are Web-enabled That makes the mobile phone an ideal medium through which banks can deliver a wide variety of services This is the foundation for the introduction of electronic banking services via 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 of mobile phone, which is very popular at that time.
Up to now, thanks to the increase in terms of size as well as the modern features of mobile devices, smart phones have made considerable efficiency in the development of mobile banking services Consumers also became interested in using the services Mobile banking has created opportunities for banks to retain current customers, build customer group of highly knowledgeable about technology by providing value-added services and attracting more new customers.
Features and utilities of mobile banking services
Features and utilities of mobile banking services that banks can provide depend on the development of mobile and telecommunication technologies.
The first mobile banking services appeared in the market in the form of mobile message, which is called as SMS Banking service Due to privacy restrictions and limitations on the volume of information transmitted through message, the features that it offers simply the access and account information management Today, with the development of communication technology such as GPRS, UMTS, 3G and communication technology has created a new platform, which is the basis for the development of mobile banking services with features diversity - related to financial transactions 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 an agreed set of rules, for example your banks sends out an alert when your account balance 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 transactions statement is a Pull based offering While "pull transaction" is a two-way interaction between banks and customers, "push transaction" is 1- way interaction from bank to customers
The other way to categorize the mobile banking services, by the nature of the 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 for your fund's transfer to some other account is a transaction-based service. Transaction based services are also differentiated from enquiry based services in the sense that they require additional security across the channel from the mobile phone to the banks data servers.
Based upon the above classifications, we arrive at the following taxonomy of the services listed before:
Table 1.1: Classification MB services based on how information flows
Other financial services like share trading.
Enquiry Based Credit/Debit Alerts.
Mobile Accounting is sometimes characterized as transaction-based banking services that revolve around a bank account and are availed using mobile devices. Not all Mobile Accounting services are however necessarily transaction-based A more 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 differentiate between services that are essential to operate an account and services that are essential 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
Brokerage, in the context of banking- and financial services, refers to intermediary services related to the bourse, e.g selling and purchasing of stocks. Mobile Brokerage can be thus defined as transaction based, mobile financial services of non-informational nature that revolve around a securities account. Mobile Brokerage, too, may be divided in two categories to differentiate between services that are essential to operate a securities account and services that are essential 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 refers to non-transaction based banking- and financial services of informational nature Mobile Financial Information services include subsets from both banking and financial services and are meant to provide the customer with anytime, anywhere access to information The information may either concern the bank and securities accounts of the customer or it may be regarding market developments with relevance for that individual customer The information may be customized on the basis of preferences given by the customer and 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 of Mobile 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 MobileBrokerage but vice versa is not feasible.
Table 1.4: Services in Mobile Financial Information
Balance inquiries / Latest transactions Foreign exchange rates
Statement requests Market and bank-specific interest rates
Returned cheques / cheque status Stock market quotes and reports
Credit card information Product information & offers
Information on the completion status
Technology options of Mobile Banking
This section addresses the front-end component or consumer-facing Mobile Banking Technologies This component of the end-to-end mobile banking value chain is typically supplied or customized by either a mobile banking vendor or the specialized technology unit within a bank.
These Mobile Banking Technologies can be categorized into two environments:
For applications based on server-side technology, data can be used to process the transaction, such as detailed information about accounts / cards typically stored in a secure environment on the bank's server.
The browser is an application software used to display web pages Browser – based applications create the user interface in server and transmit it to mobile devices This interface is then vividly displayed to the user with the help of a browser.The typical examples of browser - based applications are those based on Wireless Application Protocol (WAP) and Web - based The main benefit of browser-based applications is the data processing is done only by the server. Therefore, it does not require users to install any software or device requires a high- speed mobile processor but still can perform most types of transactions Thus, browser-based application is suitable for mobile devices with slow processing speed and low memory capacity.
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 uses only GSM mobile phone with WAP service With its options and the method of controlling WAP banking reminds an easy form of Internet banking All the customers having GPRS handset and GPRS connectivity can simply visit our WAP Portal and navigate through the user-friendly menu to seamlessly carry out various enquiry based transactions while on the move Mobile banking (WAP) is a range of electronic banking services available through mobile communication network based on WAP technology These are financial services for mobile users to check accounts, make transfer, pay bills or spending, manage company accounts or process instructions
WAP banking has been adopted by many banks around the world, such as Deutsche Postbank AG, comdirect Bank, Stadtsparkasse München (Germany), Nordea Bank (Finland), Credit Suisse (Switzerland), Maybank (Singapore), Bank of America,etc
WAP banking was popular in the early advent of mobile banking services, as mobile phone at that time was very limited as the small screen, poor visibility screen, low processing speed However, with the stormy development of the telecommunications industry, mobile devices are increasingly improved, upgraded in form, features, processing capabilities, speed, memory leading to the replacement WAP banking gradually by means of web-based mobile banking.
Basically, web browser-based mobile banking service is also distributed through the internet access on mobile phones However, the difference compared to WAP banking lies in the interface of the web page, which is displayed Web browsers are written in hypertext markup language (HTML) - a markup language is designed to make web pages with the piece of information is presented on the World Wide Web User interface of standard web services is given in some form adjusted, modified to be able to display on mobile devices that have smaller screen sizes Therefore, mobile banking service based on web browser brings users the similar look, feeling and usage to experience of using internet banking service on a personal computer.
For message-based applications, communication between banks and customers is done through text messages These messages can be generated automatically from the bank whenever an event occurs as determined before; for example, when a transaction is made on the customer's account It is also possible that this message is sent by the bank as a feedback or confirmation of customer requirements A message 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 regulated number of banks The server receives the SMS, decodes information and follows requirements The outstanding advantage of SMS banking is simple to use and perform banking transactions.
14.1.5 USSD (Unstructured Supplementary Service Data)
Mobile banking services are deployed via USSD is the service of collaboration between banks and telecommunications companies USSD is a protocol for high- speed interaction between users (subscribers) and applications via the GSM mobile network The outstanding advantage of USSD is that it allows integrating multiple services on a single head number, enabling you to browse the menu and improve interaction speed up to 7 times as fast as SMS due to session – based mechanism In the world, USSD is one of the access channels to value-added services because of its simple, convenient usage Compared to SMS, USSD instantly interacts with service 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 changeable with the requirements for different transactions) In addition, USSD is compatible with all phones, whether it is a high -end or medium phone
Client-side technologies are those applications, solutions and service offerings built or embedded on a consumer SIM or mobile handset In client-side applications, the consumer data is typically stored on the application, or entered by the consumer, and encrypted by the application in the SIM or handset.
After all necessary information is entered, and connection to the server is established, data is transmitted Before data is transmitted, there will have a safety inspection step through PIN identification step The increase of safety and security is the main advantage of client-side technology compared with server-side technology.
The SIM Application Toolkit (SAT) allows for the service provider or bank to house the consumer’s mobile banking menu within the SIM card The SIMApplication Toolkit (commonly referred to as STK) is a standard of the GSM system which enables the SIM to initiate actions which can be used for various value added services The SIM Application Toolkit consists of a set of commands programmed into the SIM card which define how the SIM should interact directly with the outside world and initiates commands independently of the handset and the network This enables the SIM to build up an interactive exchange between a network 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 for user input’ STK has been deployed by many mobile operators around the world for
Benefits of development of electronic banking services through Mobile Banking.15
When users want to interact with the bank, simply follow the desired menu option, enter the required data in the appropriate information When all client information 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 that customers do not need to remember and prepare orders, therefore, STK is like a translator between the customer and the bank.
STK has the advantages such as do not require large memory, high processing speed mobile devices, complicated software to install; customers do not have to remember the structure of standard message according to bank‘s regulation. However, due to specific mandatory requirement to use a special SIM, the biggest obstacle problem with STK is that the clients must change SIM if they want to use the services of many different banks At the same time, the SIM will also need to be changed when a new application is installed on the SIM.
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 many possible ways to implement various services based on different technology applications as described above Of course, each solution has its own advantages and disadvantages, however, mobile application up to the present, is regarded as more comprehensive in terms of convenience, security, diverse features, easy updates, For this reason, this technology is now being considered the first choice for 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 paper will make an analysis of the benefits of mobile banking services brought to banks, customers, and telecommunication companies.
Banks can realize operational efficiencies by adopting an integrated channel strategy that includes mobile banking As shown in Figure 1.1, the cost of processing a transaction via mobile phone can be as much as 10 times lower than via an ATM and as much as 50 times lower than via a branch.
The more transactions that banks can drive to mobile phones, the greater the possibility that they can close poorly performing branches and increase operating efficiencies by shifting the focus of branch employees from transactions to more advisory-type services that will lead to greater sales or cross-selling rates.
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 campaigns based upon the knowledge of consumer preferences that banks collect
+ Expanding distribution and coverage models
Mobile banking gives banks the potential to expand beyond their geographical footprint 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 a profound impact on the nature of the banking relationship
+ Monetizing the value of customer analytics
Unlike supermarkets, department stores, and other businesses that see only one dimension of consumers’ spending habits, banks have a broader view of what their customers buy and where they like to shop This puts banks in a specific position to develop a new line of business focused on bundling data analytics for retailers and other entities vying for customer intelligence — while maintaining the privacy of individual customers’ information Merchants could employ such aggregated information to target customers more effectively than they might through other means In addition, banks could use this knowledge of their core customers to strengthen 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 compare options at time and place of purchase At the same time, banks could offer these shoppers complementary services, such as financing or leasing options, insurance quotes (through partnerships), and more
+ Offering discounts and purchasing incentives to bank customers
By establishing relationships with manufacturers and retailers that could offer bank customers discounts while they research product options at the point of sale, banks can position their mobile channel as something more than just a convenient way to pay
Similarly, banks could conduct a variety of targeted marketing campaigns to customers who use mobile banking For example, banks could pinpoint shoppers’ physical locations to make relevant offers to their customers, such as offering them temporary line increases In addition, banks could leverage the mobile banking interface as a real-time, tailored advertising engine by using behavioral analytics they compile to develop campaigns tailored to customers’ shopping preferences Additionally, banks might be able to offer their customers “smart” coupons while customers are in stores shopping for a flat-screen television or digital camera The coupons would come from alliances banks form with the products’ manufacturers and/or retailers — and banks would receive a fee for each coupon used.
Unlike Internet banking services, with which customers can only access services in locations with internet connection, Mobile banking services allow customers to perform any financial transactions anywhere with mobile connection.
With the widespread level of mobile network today, Mobile banking services can meet the needs of customers anytime, anywhere, not affected by the location and time Therefore, only Mobile banking services can bring customers that convenience.
Instead of going to the bank, queuing to be served, customers perform all their transaction at one place that they want with mobile banking services This with all transactions 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, the provision of standardized services, irrespective of the service attitude of the staff at Wet transactions, helping customers avoid psychological discomfort due to poor service attitudes - factors may lead to the decision to leave the bank.
Mobile banking not only brings benefits to customers, banks, but it also benefits telecommunications companies, which cooperate with bank to adopt mobile banking services
Factors affect the development of mobile banking services
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 banking environment is an integrated system of computer applications in the management of banking operations, which includes the modules of basic operations such as bank deposits , loans, customer information, accounting systems, budgeting, cash, used to record transactions, manage bookkeeping, calculation of interest, deposits, track record customers,
Core banking is the inevitable trend of banks in the modernization of banking technology and development of banking system because it is primary factor to creating competitive advantages of each bank Due to characteristics that can integrate multiple modules and focus processing date at the same time, the core banking technology is the platform to develop banking services.
Therefore, the ability to build, design and manage product depends largely on the core banking system The more modern and superior the core banking is, the better 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 and the network service provider Therefore, the ability and development level of service not only depend on the bank but also directly are influenced by the development of telecommunications networks
The factors to assess the level of development of telecommunications networks are represented by the figures on the number of customers using the service, the number of dealer distributing network services, data transmission technology, the stability of the system in providing network services, the number and 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 an indispensable equipment in the lives of many people.
Along with the development of mobile technology is the development of mobile banking services Each adoption mode of Mobile banking services is compatible, consistent with the ability of the mobile phone.
Regarding the current specific legal framework for the development of mobile banking services in Vietnam, there is not an official document from the State Bank fully regulate clearly about the Mobile banking services concept, rights, roles and responsibilities of all stakeholders involved in the provision of services, for ensuring data security and sharing of customer information between banks and network provider In reality, to be able to adopt Mobile banking services there should be close coordination among the parties such as banks, network operators, service providers, therefore, the legal basis lacking uniformity, transparency leads to difficulties in the construction, development and services management For example, problems still exist when dealing with cases of disputes occurring during the provision services between banks, service providers and customers such as how to ensure the rights of the parties When benefits are not guaranteed, the customer does not have enough confidence to use the service, the service will become increasingly difficult.
The economic environment affects the provision of modern banking services towards the impact on financial markets On financial markets, the increase in the quantity and quality of bank pushes banks in an environment of increasingly fierce competition
Mobile banking services with the advantages of attracting customers,increasing competitiveness, strengthening bank image in the eyes of clients in the technology revolution Therefore, the introduction of mobile banking services is a matter of course from the impact of the economic environment.
Social trends and demographic factors such as age, income, educational level, living habits, consumption habits, have a certain impact on the development of banking products and services, especially, these factors show a fairly profound effect on the modern banking services
Due to the specific characteristics of the product, the electronic banking services, especially Mobile banking services require the user an understanding electronic payment technology in general and knowledge, understanding the use of mobile devices in particular.
Thus, educational level is one of the primary factors affecting the level of development of Mobile banking services.
The age factor affects the development of mobile banking services because it directly affects the preference and the ability to use new technologies, the willingness to accept a new thing of customers For example, customers in the age group 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 the users Meanwhile, the older clients are generally loyal to psychological and familiar service Therefore, the approach to those customers will take longer and be more costly
Income directly affects the affordability of customers, so it affects the customer decision whether to use another bank's new product or not because customers have to pay an additional expenses for the bank transaction.
Model and business trends in electronic banking services via mobile in the world
Currently, to adopt mobile banking services in the world, partnership model can 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 network provider and/ or mobile commerce company to bring a service that allows users to access to financial services and banking services anytime, anywhere via a mobile phone However, in each model, the role and responsibilities of the various parties will vary depending on the conditions of infrastructure, cultural policy, social, living habits, of each country.
- Characteristic of market: Bank – led model are applied to developed countries where banking services were well developed, most people have bank accounts, 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 of providing content and services using telecommunications networks as a support tool to help customers access to banking system.
+ Advantages: Banks have long years of experience in the banking and finance sector will design, supply services as well as perform billing management and risk management
+ Disadvantages: This model forces customer in order to use the service must open a bank account In addition, educational level must be high enough to have easy access to services In developing countries, where most people are still loyal to cash consumption habits, most people do not have access to banking services, it is unlikely to implement this model on a large scale.
Characteristics of market: Non bank – led model (possibly mobile company or a third independent party, often mobile commerce company), especially develops in markets with the following characteristics:
+ The majority of the population has no or little access to banking and financial services.
+ The custom of consumption is mainly cash, no payment habits by means of non-cash.
+ There is a large proportion of mobile service users in society.
+ The people demand payment, money transfer with small amount of value and volume.
+ Mobile company / independent 3rd party (not banks, telecom companies): provide and operate technology infrastructure for the service , build entire features of the service, recruit and manage agents (for models with the participation of agents)
+ Banks: manage cash flow, ensure security surplus funds, provide services, authorize agents to collect and make payment for customer using services (for the model with the participation of agents )
+ Agent (if any) be authorized to collect and make payment for the customer.
For the model with the leading participation of agent and / or company: To use the service, customers simply are mobile subscribers, no need for a bank account In fact, 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 of deployment on a large scale, particularly in the sectors with difficult access to banking services 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 telecom company, Service can be deployed simultaneously to multiple banks and many different networks This brings convenience to customers who have many different bank 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 banking services
(Source: GSMA Mobile Money for the Unbanked , Cira , Citi GTS )
In general, the model is not led by banks but it provides banking and financial services, which will result in difficulty in designing, building, adopting services. Telecommunications companies cannot be fully experienced as much as banks in payment and risk management Moreover, each country has a policy, specific regulations on payment, so the managers are still quite cautious when implementing this model.
In addition, for the model with the participation of agents: To be able to develop services, one important factor is the network of collecting cash and making cash payment - the extended arm of the bank The investigation, selection, training agents also cost time and resources Besides, after dealers start operating, there must be continuous inspection, monitoring everything to ensure compliance with regulations and avoid the arising risks.
CURRENT SITUATION OF MOBILE BANKING
Current situation of mobile banking deployment in Vietnam
Among models used for mobile banking development, bank – led model was introduced first and has played the vital role in Vietnam
Banks are increasingly aware of providing a channel, which offers convenient banking transactions, has flexibility and portable This will bring good opportunities for having customer satisfaction and retaining existing customers as well as attracting many new customers, who are young, energetic, high - tech lovers
Due to the strong development of mobile market, 3G technology, wifi, and an increasing number of people using mobile phones, and smart phone users, methods of providing mobile banking become more modern Up to July 2012, there have been 26 Vietnamese commercial banks, which provide mobile banking services through mobile phone text message With the advantage of easy usage, simple operation, reasonable price and no application installation, SMS banking has become a popular concept with customers
Some banks choose web-based method such as Maritime Bank and ACB to offer a wider variety of banking services to customers This approach allows the customers, who have internet access are able to use banking services through the bank websites
Meanwhile, many banks invest in the provision of mobile banking services through the application settings The enhanced security, the simple interface design,more suitable phone screen are the advantages of this method First bank developing this method is Dong A bank On 01/23/2008, Dong A bank introduced mobile banking product with transactions operated through DongA Mobile Internet application installed on the mobile of clients Up to the present time, the number of banks developing mobile banking services based on application setting has increased dramatically, including VCB, VP, VIB, MB,
Another method of providing mobile banking services is quite common across SIM applications or USSD These two methods are implemented through collaboration 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
Web-based VIB, MSB, ACB
Application VCB, BIDV, Đông Á, MSB, HSBC
Sim-tool-kit VCB, VietinBank, VIB, BIDV, An Bình Bank, HDBank, MB,
In general, from the most primitive form of Mobile banking services, within 5 years, in Vietnam there has been the presence of adequate methods of mobile banking 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 Most banks today offer only balance inquiries, basic banking information queries (ATM locations, interest rates, exchange rates, ), phone recharge, and proactive notification account balance/ credit card fluctuations Some banks, such as Dong A,Techcombank, MSB, ACB, Vietinbank provide additional features such as bill payment, wire transfer, e- recharge through the messages that client send to the message operator according to standard message syntax However, the effectiveness of this service is not high The first reason is that it is hard to use because customers must remember the message syntax prescribed by the bank.Besides, it is the poor security because the message content is usually stored in the outgoing box of the phone Data sent from the phone to the bank is not encrypted and digitally signed so safety is not high.
For example in the case of VietinBank, money transfer feature through SMS is provided with security made by the message syntax consisting of a static password character by registered customers Although complex message syntax increases security information, but this is not really the solution to ensure the safety of transactions Due to the limitations mentioned, in order to control risks of financial transactions using messaging method, banks just provide information or perform financial transactions with a low line.
Table 2.2: The features are implemented through SMS Banking
Money transfer in different systems x
III Get balance fluctuation notification x x x x x
(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 a wider 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 the features are still very basic In addition, this method is only suitable for smart phones and requires customers to install applications Therefore, the target customers of mobile banking services through the downloading application are quite limited, mainly concentrated in the office population, with knowledge of technology.
Table 2.3: The features implemented by means of downloading applications, web-based Criteria VCB VietinBank BIDV VIB SCB TCB MSB ACB
Money transfer in different systems x
ATM, interest rate, exchange rate, etc.) x x x x
(Source: Websites of many commercial banks)
Some banks provide services by method of WAP mobile banking to simplify user participation and more quickly in the introduction of many utilities to customers However, the number of customers generally have not achieved as expected.
Currently, due to the fact that there is no centralized and transparent database of electronic banking services in Vietnam, the precise quantitative information about the development of mobile banking services for the purpose of research this study is limited Estimated up to May 7/2012, there were 26 commercial banks providing SMS Banking service with over 4.1 million customers, performing over 2.2 million transactions , and 19 commercial banks providing mobile banking services to over 2.9 million customers, performed 11.9 million transactions (as shared at the Banking Vietnam 2013 conference of Payment Department, State Bank of Vietnam) Accordingly, the number of users and transactions via Mobile Banking is too small compared to the potential of the 90 million people of our country.
The typical model of telco–led model in Vietnam is BankPlus service model developed by Viettel It is also the first network provider developing mobile payments services linked to the bank BankPlus services are provided through the application pre-installed in the customer's phone SIM Conditions for participation are people who are Viettel subscribers and open accounts at banks associated with Viettel to deploy the service Currently, services are supplying basic utilities such as balance inquiries and transaction history, fund transfer and bill payment Firstly deployed with Military Bank in 2011, up to now, Viettel BankPlus services have presented in 7 other banks: Vietcombank, Vietinbank, BIDV, HD Bank, ABBANK, VIB, Agribank.
Viettel also continuously improves services to become more convenient and attractive by the implementation of USSD and WAP BankPlus In addition to distribution through affiliate banks, selling and promoting aggressively deployment in both the trading points of Viettel Thus, the number of registered customers to use increased rapidly in 2013 As of the end of the month 10/2013, there were 640,000 new clients compared with late 2012 Especially in the September and October, on average, each month there are about 165,000 new customers registering BankPlus It is expected that customers will continue rising in time when Viettel expand cooperation with 3 other banks and deployment features of bill payment for electricity, 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 to step into the race to develop payment services on mobile banking with the promotion of payment services deployment via USSD It is expected that the service will be introduced to customers in early 2014.
Thus, we can see the development of mobile banking services in Vietnam is generally still at an early stage Vietnam market has many advantages such as high economic growth and stability, a young population, the high-tech equipment preference, popular mobile communications However, the legal framework is still limited, economic growth is not uniform across regions, differences in literacy levels among strata as well as the banks have not provided a solution mobile banking that is really attractive and useful are the reasons why the number of customers using the service is still relatively modest Some banks are increasing their 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 more prosperous as predicted by many experts.
Current situation of mobile banking deployment at Vietcombank
JSC Bank for Foreign Trade of Vietnam, formerly known as Bank for Foreign trade of Vietnam, was established on 01/04/1963 from the Foreign Exchange Bureau (of the State Bank of Vietnam) Being the first state commercial bank chosen for pilot privatization by the Government, Joint Stock Commercial Bank for Foreign Trade of Vietnam officially came in to operation on 02/06/2008, after successfully implementing the equitization plan through IPO Vietcombank (stock code: VCB) officially listed on the Ho Chi Minh Stock Exchange (HOSE) on 30/06/2009.
During more than 50 years of development, Vietcombank has contributed significantly to the stability and growth of national economy, upholding the role of a major foreign trade bank in facilitating efficient domestic economic growth as well as influencing considerably on regional and global financial community.
Originated as a specialized bank for foreign trade, Vietcombank nowadays has become a, providing customers with a wide range of leading financial services in international trade; traditional services such as capital trading, capital mobilization, credit, project financing…etc., and modern banking segment such as forex trading and derivatives, card services, e-banking and so on.
Vietcombank has many advantages of applying advanced technology into the automatic banking system, products development, e-banking services, based on its high technology foundation Products such as Internet Banking, VCB Money, SMSBanking, Phone Banking have always attracted a great deal of customers by its convenience, promptness, safety, efficiency, creating the habit of non-cash payments amongst the mass
After more than a half-century operating in the market, Vietcombank currently has 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 transaction offices all over the country, 2 subsidiaries in Vietnam, 2 subsidiaries and 1 representative office in other countries, 6 joint ventures In addition, Vietcombank has also developed an Autobank system with about 2000 ATMs and more than 43,500 Points of Sale nationwide Bank’s operations are supported by a network of more than 1,700 correspondent banks in 120 countries and territories.
Vietcombank’s team of professional employees with excellent ability in banking and finance have a good sense for modern and integrated business environment…Thanks to their contribution, Vietcombank remains the primary choice for large corporations, domestic and foreign enterprises as well as millions individual customers.
For more than a decade, Vietcombank has continuously rated as "Best Bank in Vietnam" by prestigious institutions around the world on many important operation fields.
With wisdom and enthusiasm, every generation of Vietcombank’s employees has been and will always be endeavoring to establish a sustained development with ambition to became a bank has a wide range, great admin ability, working scope that 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 of electronic banking services, Vietcombank was soon introduced VCB-iB @ nking to customers in 2001 After suspending the provision of services to complete legal documents and database clients, up to 2006, Vietcombank introduced a wider variety of gadgets on VCB-iB@nking and constantly increased features to serve the needs of customers Also in 2006, Vietcombank launched services via mobile messaging VCB-SMS B@nking, allowing customers to query information from the switchboard 8170 By 2012, Vietcombank consecutively introduced two new services developed in mobile platform which are VCB-Mobile B @ nking and BankPlus.
Figure 2.1: Development timeline of Mobile Banking at VCB
(Source: Retail banking Department of VCB)
Being defined as the service platform for the group of electronic banking services, VCB - SMS B @ nking services have the highest penetration rate with35% individual customers at Vietcombank register by the end of 2013 The penetration rate of VCB-iB@nking services maintained 50% of VCB - SMS B @ nking regularly Meanwhile, due to the new implementation from 2012, the total number of customers using two services - Mobile B@nking and new BankPlus consist of only 2% of the bank's individual customers.
Chart 2.2: Penetration rate of E-bank services
(Source: Retail banking Department of VCB)
In the group of electronic services of Vietcombank, VCB-iB @ nking is mainstream service and most preferred by customers The number of customers using VCB-iB @ nking is fewer then VCB - SMS B @ nking but in terms of the number of transactions and volum of transaction, the VCB-iB @ nking still prevails.Because VCB - SMS B @ nking does not support payment feature, the utilities are not highly appreciated VCB-iB @ nking with the advantage of the interface, the popularity of internet, safety as well as deployment time, provide a variety of payment features, hence it has customers using most often.
Chart 2.3: Number of transactions and average transaction value/month year 2003
(Source: Retail banking Department of VCB)
If we only take into account for payment transactions on Internet Banking and Mobile Banking in 2013, the monthly average customers perform transactions on channel VCB-iB @ nking was 909.950, corresponding to an average transaction value of approximately 6,694 billion VND / month Meanwhile, the volume of transactions done on mobile banking channel (VCB - Mobile B @ nking and BankPlus) only averaged 156.289 transactions / month, and transaction value only made up for 1/40 of VCB -iB @ nking.
Chart 2.4: Net income proportion of E – banking 2003
(Source: Retail banking Department of VCB)
Correspondingly, net income of VCB-iB @ nking (including net income from fees and interest) accounted for 77% of total net income of the electronic banking services Net income from VCB - SMS B @ nking services come mainly from the SMS service and actively contributed 22% Meanwhile, only about 1% of the profit is due to two service VCB - Mobile B @ nking and BankPlus
2.2.3.Current situation of mobile banking deployment at Vietcombank
In order to supply mobile banking services to a variety of different customer segments, Vietcombank is implementing both models as the bank - led and Cooperation between Banks and telecommunications companies Like other banks in Vietnam, Vietcombank initially introduced to the customer VCB - SMS B @ nking services Subsequently, Vietcombank cooperated with Viettel to launch BankPlus services for customers of Viettel mobile subscribers Most recently, VCB
- Mobile B @ nking services as the bank – led model was officially launched in late 2012.
- Internal documents subjected to services:
Currently, with the exception of VCB - SMS B @ nking adjusted for interim regulation for providing information inquiry services through the mobile channel of Vietcombank Bank coming with the decision 264/QD-NHNT 06/11/2006 of General Director of Vietcombank , VCB -Mobile B @ nking and BankPlus are deployed in the form of guidance documents In the future , the early uniform regulation adjusted throughout the entire services on a mobile device platform is needed
In addition , the actual deployment process arose issues related to the transfer / sale phone numbers among customers Many branches are embarrassed when customers require registration to use mobile banking services but in theVietcombank system that phone number has been registered for a service by other customer Requesting client to provide proof of the right to use the phone number is not the optimal solution to determine the current status of the subscriber Thus ,Vietcombank also need specific guidance in this case to the branch soon.
2.2.3.1 Features of services offered and service charges
Empirical assessment of customer acceptance of mobile banking
A survey was organized to examine the degree of customer acceptance for various Mobile Banking services and the customer’s willingness to pay for them.
The customer acceptance of mobile banking was surveyed between March and April 2014 in Hanoi A total of 488 persons in the age-group of 18 to 65 years answered a questionnaire giving information on their perceived preferences and willingness to pay for different financial services offered in Mobile Banking.
Structure: The survey participants were asked about personal attributes, e.g. sex, age, profession and income so as to identify characteristics of potential customers The participants were asked about their usage of online- and home- banking, bank group, possession of mobile devices and their familiarity to Mobile Banking They were also requested to give their perception of advantages and disadvantages of Mobile Banking Finally, they were asked to give their favorite mobile banking transactions
Altogether 452 valid samples were collected 282 of them were from male and
170 from female participants, making a ratio of 62% male vs 38% female participants The largest group of survey participants, judged by profession, was that of students (42%), followed by the salaried class (29%) The largest group of survey participants judged by the age was that of 22-30 years old (68%)
Judging by net monthly income, the largest group of survey participants earned up to 5 million VND a month (56%), followed by those earning up to 5 to 10 million VND a month (18%)
Chart 2.12: Overview of Survey Participants’ Net Monthly Income in VND
Familiarity with Mobile Banking: 53% of the participants replied in affirmative to the question, whether their bank offered Mobile Banking services; 47% was not aware of such offers by their bank
12% of all survey participants (55 of 452) reported to have used mobile financial services, at least once 42% amongst them stated to be regular users; another 36% used Mobile Banking occasionally 11% reported having discontinued their usage 60% of Mobile Banking users were males
2.3.3 Customer Perception of Mobile Banking
In this section we present the customer perception of general issues concerning Mobile Banking.
The customer perception of Mobile Banking advantages was found to be overwhelmingly positive The most appreciated features were ubiquity and the overview over bank account The chart below presents customer responses from three different categories: a) amongst all 445 respondents; b) amongst 55 existing users; and finally c) amongst 390 non-users.
Chart 2.13: Advantages of Mobile Banking
Participants were asked about their perception of disadvantages of Mobile Banking Security concerns were found to be widespread On other issues there were differences in opinions Almost half of the non-users believed Mobile Banking were expensive while 93% of existing users rejected this notion.
Chart 2.14: Disadvantages of Mobile Banking
Interestingly, as many as 20% of existing Mobile Banking users did not see any disadvantage in it.
The following chart shows responses, which of the services participants could conceive to use.
Chart 2.15: Preferred Mobile Banking Applications
As the chart above suggests, Mobile Accounting enjoys high popularity 96% of the existing users of Mobile Banking utilise it and 64% of the 390 non-users can imagine using it Surprisingly, the Brokerage services turned out to be the least popular application even though they are often believed to be one of the most attractive features of Mobile Banking.