NATIONAL ECONMICS UNIVERSITY EXCELLENT EDUCATION PROGRAM BACHELOR’S THESIS Major Banking Topic The development of international payment at Vietnam Joint Stock Commercial Bank For Industry And Trade Th[.]
THEORETICAL BASIS OF INTERNALTIONAL PAYMENT
INTERNALTIONAL PAYMENT AT COMMERCIAL BANKS
International relations among countries are manifested in many fields, such as economy, politics and foreign affairs exchange, culture, science and technology in which economic relations, mainly foreign trade, occupy the leading position, which is the basis for other international economic relations to exist and develop. The process of international activities leads to the need for payment and payment between owners in different countries, from which international payment activities are formed and developed In particular, the bank is an intermediary bridge between the parties.
“International payment is the performance of payment obligations and monetary benefits arising on the basis of economic and non-economic activities between organizations, countries, or between a country and international organizations, through the relations among the banks of the related countries”.
(Source:PGS TS Phan Thị Thu Hà (2013),Giáo trình Ngân hàng thương mại, NXB Đại học Kinh tế quốc dân.)
From the above concept, international payments serve both economic and non-economic activities In practice, however, these two areas of activity often intersect and do not have a clear boundary Moreover, international payment activities are formed on the basis of foreign trade activities and primarily serve foreign trade activities Therefore, in payment regulations, international payment activities are often divided into two clear areas: foreign trade and non-foreign payments.
Foreign trade is the payment made on the basis of import and export goods and commercial services provided to foreign countries at international market prices The basis for parties to buy, sell and pay for each other is foreign trade contract.
Non-foreign trade payment is the payment made not related to import and export goods as well as labor supply to foreign countries, that is payment for non- commercial activities.
Compared to domestic payment, international payment has some following characteristics:
International payment is governed by international laws and practices.
International payment activities involve entities in two or more countries, so those involved in international payment activities are governed by national laws, but also must comply with international legal documents The International Chamber of Commerce has issued UCP, URC, INCOTERMS, etc., inorder to establish a fair and equal legal framework for entities involved in international trade and payment activities, avoiding unfortunate misunderstandings.
Payment refers to the currency, location, means, methods and time of payment
When conducting international payment activities, it is necessary to clearly identify five important issues including currency, location, means, payment method and time The selection of any currency in the international payment is important because not all currencies has the ability to implement international payment, but the required currency must be strong and recognized by countries in the international payment activities After that, the selection of currency to match with the specific content of the international payment activities to bring the dependent effect and the following factors: quick payment, minimize risks to the minimum, meet the mutual benefits, etc., Therefore, when signing commercial contracts, credits or services, negotiators often agree on the currency used in the transaction, which is the currency of the importing country, the exporting country or the third country.
International payment activities are carried out largely through the banking system
Except for a very small number of import and export goods traded through non-quota ways, most of the country's import and export turnover is reflected in the international payment turnover of the commercial banking system In practice, exporters and importers are not allowed to make direct payments to each other but are legally required to pay via the banking system Paying through bank ensures payments are made safely, quickly and efficiently.
International payment mainly serves external economic activities
International payment mainly serves foreign economic activities, of which,most of them are for foreign trade transactions Payment is one of the important stages in the production and circulation of goods, so when the payment takes place, it means ensuring a sure end of a part or the whole of an exchange process goods and services The value of goods and services exchanged between entities in different countries is implemented and contributes to promoting foreign trade development only when international payment is well organized Therefore, international payment has become an important factor to evaluate the effectiveness of foreign economic activities in the context of increasingly expanded international relations.
International payment activities are often at risk due to currency fluctuations
Unlike domestic payments, international payments are often at risk due to currency fluctuations, a country's political instability, differences in laws, policy mechanisms, and geographical locations of the parties involved limits the understanding of the solvency of the importer Therefore, the bank's guarantee operations, credit activities of monetary organizations were born as a weak factor. Indispensable factors to support international settlement activities.
1.1.2 The roles of international payment
Today, in the trend of globalization, while the economy and international trade are growing, international payment has also become an essential and indispensable activity of commercial banks Obviously, the international payment activities of commercial banks are an indispensable link in the whole line of implementing a foreign trade contract.
1.1.2.1 The roles of international payment to commercial banks
Developing international payment to help commercial banks attract more customers and expand the market
In the process of participating in international payment activities, customers also want to meet many other needs of the bank's services such as financing import and export contracts, payment guarantee for contract performance, foreign currency trading, etc This will enable the bank to develop foreign exchange, guarantee and other international services, thereby helping commercial banks increase the number of customers and expand the business market
Developing international payment to facilitate for commercial banks to increase their revenue and profits
As the number of customers increases, the benefits of the bank will increase.Not only did the bank's revenue significantly grow thanks to fees collected from providing more services to its customers, but it also supported other activities of the bank Moreover, the bank has conditions to raise the mobilized capital, facilitate the expansion of credit scale, especially, the bank can increase foreign currency capital by temporarily managing the idle capital of businesses transact via the bank.
Therefore, international payment activities directly improve the bank's revenue and profits, as well as support and complement other activities, thus, it indirectly generates profits from its operations.
Developing international payment to open way for the expansion of banking scale and network
International payment helps the bank satisfy customers' demands better, thereby enhancing its reputation in the international market In addition to working with documents or issuing money order orders, commercial banks also show a duty of responsibility in advising customers to prepare the perfect set of documents.
International payments help the bank's operations go beyond the national scope, integrate with other banks in the world, enhance the bank's reputation in the international arena, help develop agent relationships, exploiting the capital sources of foreign banks and capital sources in the world financial market in order to better meet the needs of socio-economic development capital.
Developing international payment to reduce risk
CURRENT SITUATION OF THE DEVELOPMENT OF
OVERVIEW OF VIETNAM JOINT STOCK COMMERCIAL BANK
2.1 OVERVIEW OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE-THANH XUAN BRANCH
2.1.1 History of establishment and development of Vietnam Joint Stock Commercial Bank for Industry and Trade – Thanh Xuan Branch
English name: Vietnam Joint Stock Commercial Bank For Industry And Trade – Thanh Xuan Branch
The logo of the branch is used consistently with the logo of the whole banking system of Vietinbank From April 2008, Vietinbank has used a new logo with an earth symbol covering the ancient coin with two colors, blue and red:
Vietinbank- Thanh Xuan Branch is located in the Khu Noi Chinh, Nhan Chinh Ward, Thanh Xuan District, Hanoi City It was established in July 1993 in accordance with Decree 53/HDBT separated from the State Bank of Dong District. Planned under Industrial and Commercial Bank of Hanoi City Since April 1993, when renewing the organization, Vietnam Joint Stock Commercial Bank For Industry And Trade in Thanh Xuan district was transformed into the Industrial and Commercial Bank branch of Thanh Xuan Area directly under the Vietnam Joint Stock Commercial Bank For Industry And Trade, one of the largest banks in the whole country.
Up to now, Vietinbank Thanh Xuan has been in operation for more than 25 years Thanh Xuan District has 11 wards, which is considered one of the largest,densely populated districts, with many large state-owned enterprises, private enterprises and joint ventures operating in various fields With a wide operating area, diversified customers and the right motto "Development and success of the bank is the goal of the bank's business", although it is located in a fairlymodest position in Noi Chinh, Thanh Xuan, Hanoi, the Bank of Industry and Trade branch has been many customers come to and create regular relationships with customers.
From 2003, by implementing a one-door trading model under the unified INCAS program throughout the Vietnam Joint Stock Commercial BankFor Industry And Trade, the branch had a strong development both structuring and organizing. The current organization of the branch is as follows.
Figure 2.1: Organizational chart of Vietinbank Thanh Xuan
(Source: Organizational chart of Administration Department of Thanh Xuan
After implementing organizational arrangement according to the modern model, Vietinbank-Thanh Xuan Branch has not only perfected on the discipline, the activity, but its business operation has grown significantly The branch has been chosen by many private corporations and large corporations of the State to be the main service banks and reliable partners
The Board of Directors consists of 01 director and 04 deputy directors. Director is directly responsible for the implementation of business tasks and reports
Large corporate Dep Accounting Dep Human resources Dep
Small & large corporate Dep Treasury Dep
IT DepDebt management Dep information to the head office, the deputy directors usually work as assigned by the director.
Vietinbank Thanh Xuan includes 03 customer dep which are Large corporate customer, Small and Medium Enterprises (SMEs), Individual customer The tasks of these rooms are:
Proposing the Board of Directors in market development.
Deploying programs, work plans, business plans as well as marketing solutions to maintain and expand market development, brand promotion
Deploying banking products and services and providing them to customers within the scope of their assigned customers.
Creating and managing customer information records, receiving requests to change customer information, managing intermediary accounts as assigned by the branch, performing other tasks as required by branch manager
Managing activities of raising capital, balancing sources and using capital of branches.
Implementing capital relations with the Head Office, collecting information, proposing feedback on policies, products, and methods of capital mobilization by Vietnam Joint Stock Commercial Bank for Industry and Trade
Conducting foreign currency business operations.
Introducing capital mobilization products and currency trading products to customers; supporting other business departments to sell products; providing information on market and cost price for relevant departments to handle in business activities.
Ensuring solvency and foreign exchange status of the Branch; being responsible for the strict compliance with the regulations on the work of capital in the branch.
Being responsible for finding customers, developing credit operations with customers within the scope of handling
Suggesting credit limits and credit proposals.
Disbursing loans to customers based on the approved credit file;monitoring and managing customers 'operations and collecting debts and interests from customers' loans.
Selling products and services at the counter, dealing with individual customers and performing operations as prescribed.
Making payment of remittances to individual customers.
Implementing the prevention of money laundering for transactions arising under the provisions of the state and Vietnam Joint Stock Commercial Bank for Industry and Trade; detecting reports and promptly handling suspicious signs in emergency situations.
Being in charge of checking the legality, completeness, correctness of transaction documents;strictly complying with professional regulations and processes, authority and confidentiality provisions in all transactions with individual customers, fully implementing internal control measures before completing a transaction with customers.
Classifying debts into different groups of debts according to the regulations of the State Bank as well as the standards of Vietinbank.
Monitoring and recommending to management about how to deal with subprime debt.
Carrying out the operations of warehouse management, fund import and export, transporting money to transaction offices, transferring money to the State Bank or its partner and vice versa according to process of Vietnam Joint Stock Commercial Bank for Industry and Trade.
Coordinating with related units to measure the amount of cash transacted within a day, thereby proposing a reasonable amount of cash balance to ensure effective use of capital, limit the capital stagnation and improve safety of treasury.
Proposing to the managements about methods and conditions to ensure treasury safety and monetary security.
Monitoring and synthesizing monetary reporting, treasury safety.
Conducting cash collection and payment transactions for customers in accordance with regulations such as payment of account money, outward remittance, remittance payment, collection on behalf of internal branches.
Management and implementation of detailed accounting, general accounting; preparing reports on business activities according to the regulations of Vietnam Joint Stock Commercial Bank for Industry and Trade.
Conducting post-auditing on accounting operations of the branch, including transaction offices and savings funds.
Perform the task of financial management.
Proposal to advise the board of directors on the guidance of the implementation of financial regimes, accountingand financial management, saving internal spendingin accordance with the regime and regulations of Vietnam Joint Stock Commercial Bank for Industry and Trade.
Being responsible for the truthfulness, accuracy, reasonableness, timeliness of accounting data and regulations of the State and Vietnam Joint Stock Commercial Bank for Industry and Trade.
Conducting payment operations in accordance with the regulations of Vietnam Joint Stock Commercial Bank for Industry and Trade.
Gathering information for planning work.
Proposing and developing business development plans.
Developing implementation measures to implement monthly, quarterly and annual business plans of the branch.
Monitoring, collating, checking and monitoring the progress of business plan implementation, coordinating and supporting the units in the branch to prepare the results of the plan completion on each operation.
Running an overall assessment of the branch's business operations.
Being a member of board of directors as required.
Perform other duties as required by the branch.
Receiving information, providing data quickly, accurately, and fully in order to create favorable conditions for branch leaders in the managementto achieve high efficiency.
Supporting the branch offices, guiding the training of units to create informatics devices and information technology applications.
Establishment and administration of network systems, transmission lines and computer equipment.
Management of information technology application systems.
Performing the arrangement, recruiting employees, promoting promotions for employees Assisting the Board of Directors in managing the staff of the branch in accordance with the regulations of Vietnam Joint Stock Commercial Bank for Industry and Trade.
Researching and proposing options to continuously strengthen, improve and develop the organizational structure to suit the business operation requirements of the branch.
In addition, it also helps the Board of Directors in planning and taking measures to organize the training and retraining of professional, political and professional staff.
2.1.3 Business operations of Vietinbank - Thanh Xuan Branch
Branches accept deposits in VND and foreign currencies in the form of payment deposits, savings deposits, certificates of deposit of individuals who are Vietnamese or foreigners legally residing in Vietnam Deposit products of the branch for individual customers are relatively diverse and abundant, including payment deposits, demand deposits, flexible time-based savings deposits, bonus savings, promissory notes, certificates of deposit, etc.
The branch provides deposit products to corporate customers such as current accounts, deposits, demand savings accounts, term deposits and deposits products such as promissory notes, bonds, certificates of deposit and other types of deposit accounts In addition, Vietnam Joint Stock Commercial Bank for Industry and Trade as well as Thanh Xuan Branch also offer some new forms of deposits like investment deposits with floating interest rates, investment deposits with interest rates, ladder deposits, etc.
Raising capital from credit institutions
In each specific case, the branch also conducts borrowing operations of other credit institutions.
Vietinbank Thanh Xuan provides credit services to Vietnamese people and households as well as foreigners legally residing in Vietnam Main products of the branch include:
CURRENT SITUATION OF INTERNATIONAL PAYMENT OF
VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE
International payment activities of Vietnam Joint Stock Commercial Bank for Industry and Trade are organized vertically, from Head Office to branches In international payment, branches in Vietnam Joint Stock Commercial Bank for Industry and Trade are divided into two types:
Branches making direct international payments: They are branches satisfying all necessary conditions to directly handle transactions arising in international payment transactions Branches that make direct international payments will have autonomy and take full responsibility in carrying out their transactions within the limits The transactions at these branches are automatically transferred to the correspondent bank via the SWIFT system Transactions exceeding the limit will be forwarded to the VietinBank Trade Finance Center (VTFC) for processing.
Branches conducting indirect international payments: The branches do not yet have the conditions to directly conduct international payment operations The branch will receive the application and international payment demand of the customer, return it to the Trade Sponsor Center to make the transaction.
2.2.1 Organizational structure of international payment activities at
Vietinbank Thanh Xuan is a branch that makes direct international payments. The international payment operations are handled by the Department of Large Business Customers, with a staff of 10 people All international payment transactions at the Branch are focused on receiving and processing at the Department of Large Business Customers which is the focal point for receiving and checking the legality of international payment documents, consulting customers in necessary cases, forwarding documents to related departments and agencies (such as Treasury Department)to approve the purchase and sale of foreign currencies, VTFC in case of exceeding limits ) At the department of large corporate customers, the international payment transaction will be processed through two steps: the payment clerk receives the transaction, forwarding it to the inspector to check and approve the transaction if it is approved If there are still problems, errors, the controller will return the transaction to the payment processor for further processing.
The system of documents adjusting international payment activities at Vietinbank - Thanh Xuan Branch includes::
Regarding international exchange and trade finance operations:
+ Transaction process between VTFC and Source Branch;
+ The documents guiding the implementation of the Discount operation of export documents according to L/C, collection, money transfer; Opening L/C import business mortgaged by import shipment.
+ Money transfer process and amendments;
+ Guiding documents on standard forms of international wire transfer.
+ Regulations on management and use of checks;
In addition, international payment activities at Vietinbank - Thanh Xuan Branch comply with the law on foreign exchange management (Foreign Exchange Ordinance, Foreign Exchange Regulations ), anti-money laundering regulations, regulations on import and export, international practices (Incoterm 2010, UCP 500,
International payment process applied at Vietinbank Thanh Xuan: Basically, international payment operations have the following steps:
Transactors receive transaction records of customers
Entering data into the program
Transactors print documents to pay customers and store records
Next day, submitting documents with operational reports to Accounting Department
2.2.2 The situation of international payment under the import-export structure
Vietinbank with a long-standing reputation and agency relationship with banks around the world, has been trusted and selected by various of customers to conduct international transactions, especially import and export payments
2.2.2.1 International payment methods at Vietinbank Thanh Xuan
When being licensed to make direct international payments, VietinbankThanh Xuan has strived to provide good traditional international payment services,thereby gradually penetrating and finding a foothold in the market The development and expansion of these banking products and services have contributed to create a closed customer service cycle, creating competitiveness for the Branch Vietinbank Thanh Xuan classifies international payment activities into two clear categories: payments in foreign trade (import and export payments or trade payments) and non-trade payments (non-commercial payments).
Figure 2.2: International payment structure at Vietinbank Thanh Xuan 2017-
Proportion of import and export payment Proportion of non-commercial payments
(Source: (Source: Financial report 2017-2019 of Vietinbank)
In the structure of international payment at Vietinbank Thanh Xuan, non- trade payment revenue accounted for a large proportion of the total international payment revenue, an average of 90% per year in the period of 2017-2019; however, non-trade payment revenue tended to gradually decreasing This is a problem that Vietinbank Thanh Xuan needs to pay attention to find suitable solutions to develop international payment activities in a sustainable manner.
For non-commercial payment activities, Vietinbank Thanh Xuan implemented products for customers with the benefits and simple procedures as follows:
Transfer money abroad: Vietinbank Thanh Xuan is ready to meet the needs of money transfer of customers to anywhere in the world for many different legal purposes Based on direct relationships with more than 1500 correspondent banks around the world, Vietinbank is proud to be able to help any customers, regardless of Vietnamese or foreign customers, minimize costs and time incurred when transferring money.
Receive remittances: With a network of 155 branches and nearly 1,000 transaction offices and nearly 2000 ATMs nationwide, Vietinbank can help customers receive money easily and conveniently with attractive fees.
For import-export operations, Vietinbank Thanh Xuan implements 3 methods of international payment which are remittance method, collection method and L/C method.
Table 2.3: Export payment activities at Vietinbank Thanh Xuan
(Source: Report on Vietinbank Thanh Xuan's business activities in 2017 - 2019 )
The figures in Table 2.3 show that the total value of export payment by each method increasedgradually over the years Remittance is the payment method with the highest value of the total export payment value This form of payment reached the highest point in 2019 with the revenue from remittance of USD 296,500 thousand and accounted for the largest proportion in 2019 (accounting for 85.52%)
In contrast to remittance payment, the method of collection only accounted for a small value in export payment Specifically, in 2018, the value was only USD 1,320 thousand (0.39% of the total export payment value) By 2019, the proportion of this method increased, reaching 1.32%
The percentage of revenue from letter of credit was higher than the collection method, in particular in 2017, it was 18.20% (USD 60,432 thousand) and in 2018, it decreased to16.49% (USD 55,352 thousand) but increased to 17.45% (USD 63,623 thousand).
Table 2.4: Import payment activities at Vietinbank Thanh Xuan
(Source: Report on Vietinbank Thanh Xuan's business activities in 2017 - 2019 )
Unlike export payments, remittance in import transactions is normally not used by customers, accounting for about 6% to 14% and its percentage declined for
3 years In 2019, it accounted for only 6.64%, decreasing from USD 3,000 thousand to USD 1,572 thousand The proportion of collection of payment is lower than the other two methods This method only accounts for 4%-8% during the period from
2017 to 2019 In the 2017-2019 period, the L/C payment accounted for the largest proportion (81%-85%) but fluctuated considerably over the past 3 years
Figure 2.3: Payment structure according to different payment methods
(Source: Financial report 2017-2019 of Vietinbank)
In general, among the three international payment methods used at Vietinbank Thanh Xuan, the remittance method was the most popular, nevertheless, the proportion of this method gradually decreased over the years Obviously, the reason for the remittance method is preferred by exporters because it has a simple and easy process In addition, in international trade relations, Vietnamese businesses easily accept the payment methods requested by foreign parties Meanwhile, the remittance method is more advantageous for the foreign importer because the payment is dependent on the goodwill of the buyer, without any guarantee from the bank, the bank only serves the role as the intermediary to collect money.
The majority of international payment transactions at the Branch involved documentary credits L/C payment revenue had a continuous growthin import and export payment sales,although in 2018, the growth rate in export payment slowed,which shows the effort of serving and advising customers, focusing on voucher credit, forming the strength of the Branch
SOLUTIONS FOR DEVELOPING INTERNATIONAL
OPPORTUNITIES AND CHALLENGES OF VIETINBANK - THANH
From the ever-increasing demand and understanding and demands of customers, it has motivated banks to expand their services to increase competition, reduce risks in payment and comply with increasingly more complete requirements of the market.
The process of technology and development of e-commerce has completely changed the business environment between banks and customers, forcing banks to renovate the traditional service organization model to provide services modern with good quality, ensure fast, accurate and secure payment process.
Regional and international economic integration has created many opportunities for international exchange and cooperation, thereby enhancing the bank's prestige and competitive position in the international market In addition, the trend of globalization also helps financial institutions have access to modern technologies, learn from the experience of major banks in the world, and facilitate training of bank staff goods with high professional qualifications, meeting the requirements of tasks in the new period.
Market and import-export turnover not only of Vietnam but also Hanoi city has been increasing, contributing to raise the number and value of payments via banks.
Restrictions on the regulatory environment make it difficult for banks to compete Vietnam has not had a comprehensive legal system, low legal effectiveness, and unstable macroeconomic management policies The legal environment for banking activities is incomplete, greatly affecting banking business activities.
Although in recent years, the commercial banking system has made certain progress, the gap between domestic and commercial banks in the region and in the world is still very large in all aspects Therefore, when integrating, Vietnam's commercial banking system also encountered challenges and considerable pressure. First of all, Vietnamese commercial banks have a small financial potential, low asset quality, poor product portfolio, low service quality, and inappropriate organizational structure, lowmanagement and operation level and banking technology still has a significant gap compared with the regional and world levels.
At present, Vietnamese commercial banks only have the advantage of a wide network of branches distributing products and services, and customers However, these are not long-term and decisive benefits and will soon disappear when the banking sector is completely liberalized Additionally, integration will bring fierce competition in the Vietnamese banking market Foreign commercial banks currently only hold a minority market share in the Vietnamese financial and banking market but they will have a nearly comprehensive advantage in the future when the State's restrictions are imposed on commercial banks and Foreign credit institutions are gradually loosened to fulfill their commitments to open markets in the banking sector.
Currently, in the context of the COVID-19 epidemic taking place in countries around the world, including Vietnam, many economic sectors are directly affected by severe injuries such as tourism, hotels, and storage services residence, aviation, some import-export industries, agricultural exports, etc., causing damage to many businesses Firstly, in the first 6 months of 2020, the whole country will give priority to preventing epidemics, protecting the people and the whole society Under these circumstances, the State Bank announced to lower the basic interest rates, executive interest rates, instruct commercial banks to implement many solutions to support businesses, households and individuals who have been affected by COVID-
19 such as interest rate reduction, debt repayment structure, debt group retention It is expected that credit growth of the whole industry may reach low (from 10% - 12%) This will have a significant impact on the business activities of the bank.
In addition, the risks of international payment that can occur to the parties are also a major challenge not only for commercial banks but also for the customers and the customers agent of the bank.
ORIENTED DEVELOPMENT
In the period of 2020-2025, Vietinbank Thanh Xuan has built for itself a business development orientation with the following main objectives:
Expanding and developing the network, continuing to search for locations to open more offices and transaction points.
Controlling the growth rate, especially prevent and control risks in credit activities, payment activities, and treasury safety Carefully monitoring the activities of customers engaged in import and export business of key commodities as in Vietnam's foreign economic orientation for the period 2020-2025.
All business activities must be directed at customers, especially customers who have efficient, safe and sustainable business activities to achieve the best business results.
In addition to traditional products, focusing on promoting diversification of products and services, especially non-credit products and services, to renovate the structure of credit - service ratios in a breakthrough direction, improving competitiveness in the area.
General growth rate: capital sources increase from 20-25%/year, credit increases from 18-20%/year, the proportion of short-term credit outstanding is 60%, medium and long-term loans is 40%, the proportion of loans is non-state enterprises from 40-50% Service fee increase from 50-60%/year
3.2.2 Development orientation of international payment activities
On the basis of following the business development orientation of the whole branch, Vietinbank Thanh Xuan has built the orientation of international payment activities in the period of 2020-2022 with the following basic features:
- Firstly, expanding of international payment services at Vietinbank Thanh Xuan includes expanding the provision of existing services and developing new services.
- Secondly, prioritizing the development of services derived from the needs and acceptability of businesses, individuals and the available conditions of Vietinbank Thanh Xuan Instead of spreading resources across all services, it is necessary to identify and select services strategy with the highest efficiency to expand.
- Thirdly, the expansion of services in terms of quantity and quality of international payment requires Vietinbank Thanh Xuan to renovate mechanisms and policies on governance, investment in infrastructure, especially qualifications and capabilities of trading staff.
- Fourthly, implementing the flexible fee policy according to the actual requirements of the market purchasing power in each period on the principle of higher quality service, the higher the fee; providing a closed system of services with package prices It is possible to accept losses from one service to gain profits from other services with short-term losses to collect profits in the long term.
- Finally, customer classification, maintenance of traditional customers,especially large customers; developing customer service for new customers,focusing on business customers in industrial zones.
SOLUTIONS TO DEVELOP INTERNATIONAL PAYMENT
3.3.1 Improving the qualifications of staff
For any service enterprise, human resources are the key to success To develop and improve its competitiveness, Vietinbank Thanh Xuan needs to focus on developing human resources, meeting the development of international payment as well as increasingly diverse and strict requirements of customers At the bank, in order to perform the international payment operation, there must be a team of well- trained officials on international settlement professional, proficient use of equipment and facilities for international settlement Simultaneously branch
Consulting department is required for customers with experienced staff, in- depth knowledge, good foreign language skills, and can even attend with customers to negotiate and sign a commercial contract in order to negotiate to get the most profitable payment terms, such as consulting businesses on choosing a partner bank, the appropriate payment methods
On the other hand, the training of the international payment staff at Vietinbank Thanh Xuan must be conducted simultaneously as follows:
Building the core staff: Looking for employees with full experience and knowledge of international payment to serve as a foundation to help the branch grow strongly in this service segment.
Organize the reevaluation of the international payment activities of employees as well as review of the results these employees achieved during training or during probation; retain outstanding employees who meet the standards of professional knowledge as well as good working attitude to stay, in addition, unqualified employees may be given the opportunity to sign seasonal contracts or leave job In order to effectively screen staff, branches need to develop an accurate framework and criteria for employee evaluation.
All international payment officers at Vietinbank Thanh Xuan need to understand the basic principle "To survive and develop, it must change the way of thinking and business style" Each employee must be proactive at work, self- learning and improving knowledge by actively learning and attracting customers instead of waiting for customers to come to them.
It is necessary to combine the international payment knowledge training of international payment officers with the enhancement of the understanding of related fields such as transportation, insurance, customs, tax, etc and understanding of international trade practices Banks should create favorable conditions and have incentive policies for officials to self-study and supplement their professional knowledge Branches need to organize regular conferences, seminars and professional business exchanges to constantly improve the professional knowledge of VietinBank Thanh Xuan's professional staff Branches should combine on-the- job training and sending staff to study abroad.
In recruiting employees, the bank should develop a recruitment standards framework for potential candidates For example, a candidate with a university or higher degree or above majoring in foreign economics, international payment or fields related to international payment; have an English language proficiency score of 6.5 or above, proficiency in office informatics skills; candidates need to be knowledgeable about the processes and operations of Banking and Finance, international payment operations - trade finance, and the domestic law provisions related to foreign exchange management and international payment.
3.3.2 Improving and renewing technologies for international payment activities
Solution of modernizing application technology in banking of Vietinbank Thanh Xuan will help the branch overcome the following challenges:
High requirements on integration and nature of serving globalization.
Customers are increasingly diverse with higher requirements.
Competitive pressure among banking products and services of other banks in the area.
High-tech crimes are increasingly developing with very sophisticated tricks.
In order to develop international payment activities, branches need to continue investing in renovating and upgrading information technology systems in the direction of:
Completing the database of information systems in service of business management and administration, including:
+ External information database such as business environment undertakings and policies of state management agencies; policies and regulations of the State Bank
+ Internal information database including regulations, policies, business statistics, etc of the branch.
+ Database of customer information including financial information; non-financial information collected during contact, customer interviews, surveys, research at customers' business premises, information provided from other credit institutions.
Consolidating and upgrading the system of equipment to ensure uniformity, high processing speed, and ability to convert to the subsequent development stages.
Developing the main application software of the bank; build a comprehensive security system; build remote support system Particularly, it is necessary to continue developing SMS banking and internet banking services to assist international payment customers in quickly consulting, tracing and checking transactions being processed by banks.
3.3.3 Improving the quality and developing a range of related services
The branch should be aware of the close relationship between the 3 business aspects including import and export finance, international payment and foreign currency trading and consider these services as the service package the branch provides for customers to improve its efficiency and quality Therefore, the branch should actively implement diversification of the following services:
This activity promotes development of production, increases budget revenue, limits foreign borrowing and is the core basis for the development of international payment and other services Import-export finance credit will effectively exploit foreign currency capital from long-term framework agreements, preferential interest rates to import materials, equipment and techniques for export production, creating jobs jobs, creating foreign exchange revenue
Vietinbank Thanh Xuan develops forms of advanced loans on the basis of the opened L / C, buys all export documents, applies advance loan interest rates and discount preferential interest rates Join loans to invest in production and export processing to effectively use the mobilized capital while strengthening customer relationships to expand and develop international payment operations.
The branch should widely deploy the discount operation for the perfect set of export documents according to the letter of credit Because of the superiority of the discounting operation of appropriate documents of L/C, exporters can receive their money soon after delivery to continue the next production cycle In order to be able to compete to attract customers, Vietinbank Thanh Xuan is required to constantly improve its international payment expertise and widely implement this type of business It can be considered that the set of export documents under L/C is a set of valuable documents and is considered as a commodity for the bank to repurchase.
Diversification of import-export financing credit is required in the following forms:
- Packing credit: Package credit allows a bank to provide advance credit to exporters to purchase raw materials, process and manufacture exports Package credit is given when the export customer has received an export letter of credit from the issuing bank This export letter of credit will be kept at the bank as collateral. The advance credit will be refunded when the exporter receives money from the export documents.
- Factoring and Forfaiting: At Vietinbank Thanh Xuan, these two products are just at the research stage, not yet implemented Factoring is a form of short-term export financing, while Forfaiting is a form of long-term export financing, in which the bank will discount receivables from exports or discount long-term liabilities arising from Export of machinery and equipment of great value These financial support services for exporters will help increase the number of transactions, the type of international payment transactions at the branch, in particular, will help increase sales of exports, improve the structure of import and export goods and increase the foreign exchange capacity of the branch.
- Trust receipt: This is essentially an import financing operation, in which the bank will pay the exporter on behalf of the importer and vice versa, the customer undertakes to repay the payment plus interest to the bank after a certain period of time since the date of payment obligation (30 days / 60 days / 90 days / 180 days). The trust receipt is made according to the application for issuing a trust receipt of the import customer and is only approved by the bank if the customer has a trust limit at the bank.
Foreign currency trading is an indispensable banking service to close a cycle of capital transfer from import - production - export - collecting money This service ensures enough foreign currency for customers who import, export, borrow or pay via Vietinbank, giving priority to customers who are closed by Vietinbank. Branches should apply a number of foreign currency trading operations such as options, foreign currency swaps
RECOMMENDATIONS
Completing the legal system in international settlement activities
The system of legal documents governing international exchange operations includes international laws and conventions, sources of national laws, international practices and practices (sorted by descending legal character) However, the relationship between responsibilities and obligations between entities participating in international payments such as importers, exporters, L/C issuing banks,notification banks and collection banks in International payment methods so far have not been adjusted by any domestic legal documents.
Currently, domestic banks mostly use international practices and practices such as UCP 600, URR, URC and Incoterms 2000 in international payment transactions However, international practices are only arbitrary legal documents and there is no adjusted national law source, the legal nature is under national law, the contracting parties may exclude, modify or supplement the terms of international practices and practices Until now, commercial banks conducting international payment transactions still have to learn from different law sources such as civil law, commercial law, foreign exchange law, negotiable instruments law, international payment law, and even international conventions This has caused a lot of difficulties and problems for international exchange staff, difficulties for banks and it is very easy to make mistakes due to not fully understanding the law sources Therefore, the government needs to build and improve the legal framework in international settlement activities to be more suitable in the integration period
Improving the quality of macro-monetary management, credit, maintaining the floating exchange rate policy regulated by the State
Strengthening the State's management role in monetary policy to encourage and promote import and export activities is essential Moreover, the government needs to drastically reform administrative procedures in import and export management, streamline customs procedures, further combat anti-smuggling and domestic market management in order to increase budget revenue, protect households domestic production, strengthening foreign currency payment through banks Currently, the exchange rate of VND against other currencies such as USD, EUR constantly changes affecting import-export activities, so the State should have policies to regulate exchange rates as well as measures to encourage exports and import protection in the country.
Completing mechanisms and policies on the operation of commercial banks
The State Bank should continue to develop and improve the policies and mechanisms for banking activities, creating a comprehensive legal corridor for banking activities in all aspects including currency, credit, foreign exchange, payment in accordance with Vietnamese law, international standards and practices as well as bilateral and multilateral commitments to which Vietnam is a signatory The formulation and completion of a project to amend the Law on Credit Institutions should be oriented towards international economic integration, in which the State Bank has a relatively more independent right.
Renewing foreign exchange management policy
The State Bank should continue to renovate and manage foreign exchange management policies and exchange rate management mechanism The State Bank should regulate the exchange rate with the motto: "Flexibility in the short term and stability in the long term", accordingly, the exchange rate in the short-term fluctuates based on market prices, and is equal to the macro-finance measures to stabilize long-term exchange rates, creating confidence for businesses engaged in foreign trade activities and banks with international payment activities.
On the other hand, the exchange rate policy "Flexible in the short term and stable in the long term" also facilitates the development of foreign currency trading operations such as forward trading, call / put option, encourage businesses to use these types of transactions in order to increase profits or ensure to avoid losses for exchange rates.
The State Bank should continue to implement the exchange rate mechanism to loosen the amplitude, gradually reduce administrative intervention and improve the management capacity of the State Bank It is necessary to enhance the overall capability of the State Bank in managing foreign exchange transactions, improving the effectiveness of the foreign exchange management mechanism in the condition of current account liberalization and selectively control capital transactions in accordance with the roadmap to open financial markets.Another important task is to build a conversion framework for the Vietnamese Dong and reduce dollarization in the economy, creating a real strength for the Vietnamese Dong when participating in international payment activities
Providing solutions to accelerate the process of international integration in banking sector
This is a central task of the State Bank of Vietnam in the coming period In order to accelerate the process of international integration in banking sector, the State Bank with a vertical management role needs to update and disseminate information on liberalization, bilateral international commitments and multilateral trade, services, especially banking At the same time, it is necessary to selectively open gradually the banking service markets to foreign credit institutions.
Accelerating the process of international integration in the banking sector also requires the removal of unreasonable protections for domestic credit institutions, ensuring equality among domestic credit institutions and foreign credit institutions.
Supporting to improve the financial capacity of banks
In order to be able to integrate internationally in the banking sector, the first important task is to improve the financial capacity of domestic credit institutions,especially for state-owned commercial banks Over the years, the State Bank has provided additional funding to a series of state-owned commercial banks in order to better prepare their financial capacity before fully opening the domestic financial market However, improving the financial capacity of domestic credit institutions not only requires the support of the State Bank, it also requires the effort of the commercial banks themselves in providing accumulation of legal capital.
In addition, based on the periodic reporting system from commercial banks, the State Bank can make development forecasts for the period of 2020-2025 and develop the plan of service and network development These will be important guidelines for Vietnamese commercial banks to develop business operations in general and international payment services in particular.
The head office should make timely amendments to the international payment operation process, guidelines and implementation of new services
As analyzed above, the international payment operation process is the legal basis for implementing and implementing international payment activities at Vietnamese commercial banks Despite long-term operations in the field of international payment, but as we all know, after Vietnam joined the WTO and then signed a series of trade agreements, in order to comply with international practices, many regulations of the State on foreign exchange management, exchange rate policy and regulations on the field of international payment often change. Therefore, VCB Headquarter with the role of directing the international payment activities of the whole system, urgently research and promulgate official documents as well as documents related to the operation international payment so that branches can operate as regulations on international payment activities, lending mechanism for import and export finance and professional instructions such as instructions on mail transfer Using and guiding the implementation of new products and services of international payment.
At the same time, along with the fundamental changes of the whole system such as the application of ISO product quality management system or the operation of Modernization, business processes should be renewed in a timely and synchronized manner to avoid legal problems when conducting professional operations.
Supporting branches in all aspects
Vietinbank Thanh Xuan is just one of many newly established branches, aged 27 years compared to the nearly 32-year-old tradition of Vietinbank Vietnam.Naturally, the younger branches always face many difficulties and challenges when joining the areas, the market has many long-time rivals and fierce competition.
Practical experience shows that when first entering the market, banks always create competitive pressure by reducing interest rates, reducing service fees, and buying and selling foreign currencies for payment international.