G1_00147 DEVELOPING STRATEGY OF RETAIL BANKING ACTIVITIES OF BIDV PERIOD OF 2010-2015 CHIẾN LƯỢC PHÁT TRIỂN HOẠT ĐỘNG NGÂN HÀNG BÁN LẺ CỦA BIDV GIAI ĐOẠN 2010-2015 ASUARANCE We, the members of Group 2 — class GAMBAO1.CO1 hereinafter undertake: The thesis titled “Developing strategy of retail banking activities of BIDV pe
Trang 1GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION
CAPSTONE PROJECT REPORT
DEVELOPING STRATEGY OF RETAIL BANKING ACTIVITIES OF BIDV PERIOD OF
Tp Ho Chi Minh, 2010
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ASUARANCE
We, the members of Group 2 — class GAMBAO1.CO1 hereinafter undertake:
The thesis titled “Developing strategy of retail banking activities of BIDV period of 2010 — 2015” is merely our own research work
The data, contents represented in the thesis are used honestly and objectively The results from the study in this thesis haven’t ever been acclaimed in any other pieces
of research
We are honestly grateful to all the teachers, lectures, professors of GLOBAL
NATIONAL UNIVERSITY, GRIGGS UNIVERSITY for guiding us precious knowledge during the course of the GAMBA PROGRAM
We are grateful to the Bank for Investment and Development of Vietnam for helping us on the information, research figures, documentation during the thesis time
HoChiMinh city, November 30, 2010
Group authors of the Thesis
il
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TABLE OF CONTENTS
Page ))09:49)9)80(9)) 0 4 l Charter 1: THEORY BASIS 11101122 11111 1n TH ngư 4 1.1 Outline Of Retail Banking Activifles 5 5c S32 ri 4 1.1.1 Retail banking activities and the role of retail banking to the
1.1.2; Retsil banking models ii Piế NƠI uc nacconanosaseisseetaziduass6ikes2 5
Ld 3 NEW EOTĂ: cecocpieiistpiiagitrrtiii101666060114680002369010048563060/65396506106440500606ãt688 5 1.2 The Business Environment For Retail Banking In Vietnam 6 1.2.1 Macro = ScOnOnie: SRVITORIIGI Ec sisscccscansonesscemasnsnarconmasmeonsueensaasvants 6 1.2.2 Business environment for retail banking ¿55555 <<<<<< s52 8 1.2.2.1 Potential of retail banking market - 55133 ss sa § 1.2.2.2 Legal frame for retail banking actIVIty «555555 <<<<<ss 9 1.2.2.3 General view in retail banking activity of commercial banks in
HA CO GẬNHIUỀk¿sosroeuaodiioibiooibuatiidiiitraetiaiitggSlSX00005v8336001áG008g386460005283358096/49i668 11 Charter 2: PRACTICAL OF RETAIL BANKING IN BIDV IN PERIOD OF 2007-
nữ ` causunsaaaaasoassadiaanaasaaunaeaaaaaeeaaaaeaaaaaaaiairaaaaaaiaasaanaae 13 2.1 Practical Of Retail Banking In BIDV In Period Of 2007-2009 13 2.1.1 General view in BIDV 1S 1133 3 ng ng 13 2.1.2 Estimation In retail banking activities at BIDV . 5+ 14 5:1:2:1; DỨSHIESS s6tiviÿý GUEDIHE tua qua GGaaidtdqd giggGEtiti244xeã0 15 24:22, ADGA fetill DANkINg HOCUS ssscsscssmsscceerincrsssenmmrmmmenseassrezreas 23 2.1.2.3 About the customer basis developmert . - ««- 24 2.1.2.4 About the retail banking business network - ««- 24 2.1.2.5 About technology . - - HH ng ngu 26 2:12:86, AQOUt HE HIAFHDE su susessueaesbiessigslsic6og0)46026600040009590616659900616 08 26
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2.1.2.7 About operation administration and organization, management TMOME|IS ooo eee ceeecccececccccccccesuuecececececcccuseccecceccessecuuuuuseceececececsucueeeeseeeeeceeeeeees 26
2.1.3.1 About the business activify oufcorme 5+5 ++sss<ss++2 29 2.1.3.2 About management, business organized model and labor source 29 2.1.3.3 About customer base and distribution channel .- - 30 215A About technology atid products ccsccsessyssscrspecsesccgscassevaycsvenseerepesis 30 2.1.3.5 About retail marketing - ¿+ + 332x133 Ereeeersserreses 31
2.2.1 SWOT AnalÌySIs - TQ TQ HH HH ng vn re 32 2.2.2 Conclusion coming from the SWOT analÌysis - - 55-552 34 2.2.2.1 Developing the strong points — Taking up the opportunities 34 2.2.2.2 Making good its shortcoming — overcoming the challenge 35 2.3 Key Success Factors In Retail Banking Aspect Sector 36 2.3.1 Main factors leading to the successful competition in retail banking 36
59 11t Time sạc - co con ci0AGGGGGi-cue8888cn8310623886:36488 37 2:5; 132) OREVICE DOLWOIM cscs Q00203Gã22S0XS0A0000lQìBg8SAg 37 23,1:5, THO Giversity GỀ DO c:sssccccacsvesenssreenenmemrmecsyeness 37 Biel 0 E2 6ssiaibeaeabuaaididlnabdliadlsiaaa.setsulisgaaaiolasaaslavialBasbaalasdsslaulpls 37 Sai9:: i3: GRĐE VI ETvunhotggtn09102260017648061010100056010630468160600810ĐNMi00168010/00600593606)0531E400k4it0d20Hf6i 37 2.3.1.6 Marketing - - - - - S2 119111 1 1n HH, 38 2.3.2 Comparison in KSFs with a number of others banks 38 2.4 Five forces model analysis im retail banking actiVIty - 40 2.4.1 Competitive pressure of suppÏIer - «+5 5< + ss++<z*svsszseesss 40 2.4.2 Competitive pressure from cusftommer . ‹ ss++++ 4] 2.4.3 Competitive pressure from potential competifors 41 2.4.4 Competitive pressure from substitute products 4]
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2.4.5 Competitive pressure from the Iinternal industry 42 Charter 3: SOLUTIONS, RECOMMENDATIONS AND CƠNCLUSION 43 3.1 Strategy Of BIDV Retail Banking Activity Development-Stage 2010-201543 3.1.1 Determine the aims in retail banking activities of BIDV in stage 2010-
“0 5 43 3.1.1.1 Market alÏocation - - - c + 1331331113 vn 43 3.1.1.2 Main Indices of development program - «55s ss++s2 45 3.1.2 Centered dufles . - - + 2 33133311153 1111 211 1v ng vn vn 48 3.2 Basis solutions to carry out successfully the orientation to develop the retail Banking setivity Of BID vesss cc ascscucencsnscommarnaniaennmminmmenauaonnae 49 3.2.1 Strengthening the ability to the operation administration 49 3.2.2 Making perfect the management organizing model and retail banking RIO ANE ccc ence NRE BSCE SNSPR OES RSE SSC ESATO SRE SOSA EER SNR 50 3.2.3 Developing and maximizing the workforce vaÌue . - 50 3.2.3.1 The retail staff building planning route . - s55 «5- 51 3.2.3.2 Some solutions to develop the retail banking human source 51 3.2.4 Developing the customer base that is steady and maximizing the
3.2.4.1 Customers as obJects of retail banking of BIDV - 54 3.2.4.2 Main solutions to develop and maximize the customer value 54 3.2.5 Strengthening the research and development of products and series of
retail banking + + + 131112 1131 111 v1 9v ng 1n vyp 56 3.2.5.1 Development orienfafion - - - + 5 << xxx svvsesssseerreese 56 3.2.5.2 Solution to develop products/retail service as follows a7 3.2.5.3 Credit card products and consumption credit by mean of card
ðDGIHHDO toan ggggnasabt06624002863a6005964s59585)0380x163 65835 0138388g06wsskvoN68030838gã038 58 3:2, 54 Retail CREdIt PIOGUEE gaddoangit0590150410360)936665389569/460338899646p0 59
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3.2.5.6 Developing the non-credit services and strengthening developing the
3.2.6 Developing and raising effectively the network and distribution
KEDWE bvssonroosennauoatttinnortboniuittotuisgitti0G0107100000005810000331010103000008130017003600480090940400406000/01004/G01gnsnMl 61 3.2.6.1 Developing the traditional distribution channel network 61 3.2.6.2 Developing the E-banking distribution channel 62 3.2.7 Strengthening the medium activities and retail banking marketing 64 3.2.8 Raising the risk managing abiÏIfy . (55525 S333 szvveeses 65 3.2.9 Technological investment .- - - + 3333211131131 re 66 3.2.10 Building the financial policy and dynamic mechanisms 69 9:2:10.1, HWVWESEHIEHTE PONCY daagauonibooioieiiiiy03860601161595646385890830330634 69 3.2.10.2, Building dynamiiG trieCHAHÌSEf, co 2200006060002 066116.266662 dải 70
CONCLUSION 0 A 5 73 Eid) OF REPERENCES scan nie cand Ra AGO RRS 74
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ABBREVIATED WORD LIST
Agritank (VBARD): Vietnam Bank for Agriculture and Rural Development
ATM Automated Teller Machine
BIDV: Bank for Investment and Development of Vietnam
BSMS: SMS Banking
GDP: Gross Domestic Products
IBPS InterBank Payment System
POS: Point of Sale
SME: Small and Medium Enterprise
WB: World Bank
VCB: Joint Stock Commercial Bank for Foreign Trade of Vietnam
WTO World Trade Organization
WU: Vestern Union
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LIST OF TABLES
Page Table 2.1: The mobilized capital of individuals of BIDV compared to other
Danks: both 10 S128 ANG IN PANO cc cccccanesscosnssusscesarvevamessacceneesaonenenans 15-16 Table 2.2: Loan products of BIDV cccccccccceeseecssceeeseecesteceseeceseecesseeensass 17-18 Table 2.3: Retail credit debit balance of BIDV compared to other banks 19 Table 2.4: Retail banking business network . - - 5555 22< se scs 25 Table 2.5: The quantity of ATM, POS in period of 2007-2009 - eens 25
Table 3.1: Main indices of BIDV’s development program -. 5+ + 47-48 Table 3.2: Retail customer segments into 3 BOUNDS sasccisccsissssccsssvecssavessascasessssscccoeses 53
LIST OF CHARTS
Page Chart 1.1: Figures in Macro economics in Vietnam from 2005 to 2010 8 Chart 2.1: Mobilizing capital from residents and retail credit of BIDV from 2007
tO 2009 ieee cecccecccseeeesecenseecesseeeeseeeeeeceseeeceaceseeeecenseesecseeeeseeenaeeees 19
LIST OF PICTURES
Page Picture 2.1; BIDV"s Organization SUNCHING ccs cccinnnnianannammxnaenn 14 Picture 2.2: The street lined trarisiofDOH CEHEE cách hinh dat 16653866681644688 27 Picfure 2.3: Transapfion center lay OU:.¡::c.ccccniiciionoseecgeisiii04622440068901410 00568 ác,30g858 28 Prctore 2.4: Interior HraisNofOnOETET s.cccsisscsianssscsesescecsiimesnsnmnssonavanntovanesasscessines 28 RRs Pt | (16a cï ởẳẰằẳằdaidẳiằẰẰẳẰ-noierienmiaarsnnsis=neneasnsanrareaaaanreann 28 Picture 2.6: Main factors leading to the successful competition in retail banking 36 Picture 2.7: FIve forces model analysis in retail banking actIvify -: 40 Picture 3.1: The pyramid model to carry out segmenting custom€rs - - 55 Picture 3.2: Developing the acceptance points and card paymenf 5+ 63
VIII
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Appendix 9 Oriented retail banking business development plan in period 2010-2015 103
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Nowadays, developing activities of retail banking have become the tendency
to the development of banks all over the world This was clearly represented more
in the last financial crisis of 2008, in the meantime a series of big investment banks were going bankrupt, and many banks converted (changed) their activities to activities of financial banks, which put their targets for their activities on RETAIL BANKING as the purpose to get along
The Vietnam RETAIL BANKING MARKET is estimated as a new market and it is still potential In present time, almost financial banks in Vietnam realize the importance of the development of retail banking The competition among financial banks operating in Vietnam on the field of RETAIL BANKING 1s getting more and more severed with remarkable rivals that are strong Joint — stock commercial banks planned strategically from the beginning State - owned commercial banks with their strength on scale, resources have begun to be interested in the activities of retails banking, and foreign banks with their mature experience and modem technology have begun to penetrate deeper and deeper the field of retail banking Bank for Investment and Development of Vietnam (BIDV) is a commercial bank that has mature experience and gets advantages in supplying and offering the services in banking finance to the big businesses However, its activities for individual customers, households, small and medium -sized business (SME) are
‘actually inferior, as far as recent time, are not yet concerned to make progress compared to the potential of BIDV
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To carry out the purpose of steady development — safety — quality -— effectiveness, to deal with the requirements for international integration and gradually approach the normality and international criteria as well as not to miss opportunities towards retail banking that has potential in Vietnam, BIDV needs to develop activities on retail banking, putting these activities for growing and makes them become a core activity of BIDV In recent years, in order to rise its competitive ability, BIDV has been diversified stimulated a number of activities such as the development in investment of technology background, in services, extending branches network, transactions bureaus, ATM systems, E-banking distribution channels These are premises that are extremely important in order
to strengthen the retail banking services of BIDV in the coming time
The development of service for the retail banking has been considered as a choice of commercial banks, which tends to be everlasting and stable This choice is right because, in reality, any commercial bank that has set up a strategy of service develcpment would gain success, it can be seen as taking up the market and getting some stable revenue and it helps banks with a long — term development
However, the extension of service development of retail banking at BIDV has not strongly changed yet, the retail services of BIDV has been seldom interested by customers compared to other commercial banks Thus, this is still a relatively new activity at BIDV In order to realize fully the location, the importance of retail bankirg services, to confirm certainly the targets, the development orientation in coming time as well as confirm the carrying out path, it is necessary to have some strategy to develop the retail banking activities of BIDV in the period of 2010 -
2015
With this reason, our group has chosen the topic “Developing Strategy of retail banking activities of BIDV for the period of 2010 — 2015” as one to study on the thesis with a hope for contributing a little part in the operation of strategy of the organization
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2 Researching purpose
- To sum up the activities of retail banking of commercial banks
- “o analyze the actual activities of retail banking at BIDV, the outcomes and the linited drawbacks, causes
- "o suggest solutions and suggestions for strategic development of retail bankig activities at BIDV
3 Items and field to research
- tems: retail banking activities of BIDV
- Field: research on actual analysis and estimation in the retail banking activities
of BDV for the period of 2007 — 2009 then suggest some strategies of the develcpment of retail banking of BIDV for the period of 2010 — 2015
4 Reearch method
“his thesis used the dialectic materialism method combined with the analysis, synth«sis, statistics, comparison, based on the analysis the actual situation of commercial banks system in Vietnam, BIDV system, then confirming the drawlacks, giving the orientation, certain solutions
5 Tte structure of big exercises
Besides the introduction and conclusion, big exercises consist of chapters, as follow:
Chapter 1: Theory basis
Chapter 2: Practical of retail banking in BIDV in period of 2007-2009
Chapter 3: Developing strategy of retail banking activities at BIDV for the feriod of 2010 — 2015 Solutions, recommendations and conclusion
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1.1 Outline Of Retail Banking Activities
1.1.1 Retail banking activities and the role of retail banking to the commercial banks
Supplying the financial services for individuals or retail banking activities are one of the traditional activities forming the international commercial bank system Along with developing process of the Economy, the financial services of banks are diversified without let up and acceleration in order to apply for the need that is better and better of society Today, many commercial banks consider the retail banking activities as the core activity with the aim at building up, consolidating and developing a steady customer — centered background, then enlarge other activities
in business of banks
In present time, there are many concepts, definitions that vary in retail banking, but basically, it can be understood that retail banking activity is the banking activity that aims at individual customers, small businesses and in some cases, it can compose of small and medium — sized businesses (SME), this depends on certain strategy of development of each bank
To commercial banks, retail banking activities with its object that is a large number of individual customers, households that have been gaining the capital and stable income, certainly, dispersed and eliminated risks, have been contributing importantly in the extension of market, rising competitive ability, forming a steady basis for operation in commercial banks
Retail banking activities occupy more and more important places in operation
of commercial banks in the world, assure the stable development of banks Particularly, as seen from the last world economics crisis, while most of commercial banks were having strategy of concentration on retail banking activities, which could get along, many big investment banks that mainly served groups got difficulties, even went bankrupt (such as Merrill Lynch, Lemon Brothers, ) so, the
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present tendency to the development of retail banking activities is very common in almost commercial banks in the world
1.1.2 Retail banking models in the world
In present time, there is no standard model for organizations to the retail banking activities in the world Each bank depending on its characteristics and business strategy organizes the retail banking activity suitably However, it can be generally divided into 3 kinds of business organized models in retail banking as follow:
- The vertical organized model in retail banking: By this model, bank activities are divided into two separate sides: Wholesale banking and retail banking The retail banking activities are managed by the following basic blocks: card service managing block, financial service managing and individual investing block, payment service managing block, E-banking, service managing block, individual credit service managing block Each block will be in charge of all the functions, from the market research, product development, popularization of service product to the market following up and estimating products, product marketing, risk management, the activities dealing with operation
- The horizontal organized model in retail banking: It is the model that ranges particular assignments such as: sales management block, products development block, risks management, operation block, supporting block
- The mixed retail bank model: manages both horizontally and vertically By that way, some functions are managed vertically such as products development, service, following up and estimation on products, service Other functions are still managed horizontally such as products marketing, risks management, activities dealing with operation
1.1.3 Conclusion
Retail banking activities have become a developing tendency of commercial banks in the world In Vietnam, the economy and society have had fast growth steps, the legal environment has been gradually improved, per capita income has
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increased more and more, the needs of using financial banking services of people have also been going up quickly All the factors for convenience have been forming the great potential for the development of retail banking activities Taking opportunities, adapting the requirements for international economical integration and being suitable for the tendency of the general development of banks in the area and in the world Business in retail banking is an inevitable tendency of Vietnam banking
1.2 The business environment for retail banking in vietnam
1.2.1 Macro economic environment
In the past period of 2006 — 2008, international economy and Vietnam had some great variation, especially form late 2007 till now
In 2006 — 2007, the world economy passed by a fast — growing period Rich sources of capital looked for investment opportunities in developing countries
Vietnam economy had growth steps and strong development, the speed for GDP reached 8.3% annually in average, export — import turnover reached over 20% per year Year of 2007 inflation was 12.6% The access to the WTO with the assurance of liberation of services, the process in economic reform under the conditions of labor and convenient location, Vietnam has been considered as an attractive investment address seemed to China for the choice of oversea corporation From that print, powerful sources have been put into Vietnam strongly, under a lot
of ways, from the currency exchange to the FDI as well as indirect investments This has been also an operating period of retail banking that has begun to develop strongly along with a high growth in Card services, payment, and credit for consuming
To the year of 2008, Vietnam economy revealed some factors that were not stable after the hot growing stage and it was influenced by the negative effects of the global crisis that led to a decrease in economic growth: GDP reached 6.5%, inflation explosion at 19.9%, exportation, foreign investment and currency exchange all strongly decreased, the real — estate market froze, stock exchange had
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a continuously lasting decreased The State Bank of Vietnam carried out a tight monetary policy (increasing basical interest, withdrawing money from the flow, keeping the debt increasing speed not over 30 % ) This made the retail banking activities difficult, the retail credit activity of banks nearly ceased
From late of 2008,, with the purpose to recover and keep steadily the economic growth, the Government has carried out the policy on stimulating the demand on investment and consumption (free form tax, lessening tax, supporting interest in business, building the infrastructure, real - estate, education, medical care ) with the more flexible monetary policy (as increasing the interest for deposits that are reserve obligatorily, decreasing basical interest ) Therefore, activities in business of banks and especially in retail banking activities of commercial banks step by step have been improved
Although, in present time, activities of retail banking in Vietnam still have to face many difficulties and challenges, they are: the risk in inflation and the economical instability still exist, the income of the majority of people is not high, the technology is still poor, the legal environment still has many insufficient needs However, Vietnam economics is still predicted at rather high growth in next years (GPD will increase 5-7% per year) The basic of politics and society continuously settle down, people life is improved better and better, legal environment and the mechanism of Government policies are gradually perfect All these factors are opening the great opportunity for the retail banking activities that can develop in Vietnam
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Figures in Macro economics in Vietnam from 2005 to 2010
O Credit growth (%) @ Trade Deficit (billion USD) @ Current accounts
Source: Financial Investment newspaper No 352/2010 dated on 16/9/2010
Chart 1.1
1.2.2 Business environment for retail banking
In present time, the scale of retail banking market is still small, according to the report of some research organizations Until now there is only 17% of population in Vietnam who has account at banks But along with the reality in a steady social — political situation, the economic is growing, international integration
is more and more intensive, crowded population (as statistical result on 01/04/2009 with 85.8 million inhabitants in which 2/3 of population is in labor — age), per capita income increases better and better (GPD per capita in 2008 reached USD of 1,024, triple increase within 10 years) and the penetration of financial banking services are still at low level; Vietnam is estimated as a fully potential market about the development of retail banking service It is predicted that total revenue from retail banking field will increase about 25 — 30% per year within next 5 — 10 years
Some tendencies are influencing positively on the extension to the offer services, products of retail banking:
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- Urbanization tendency with population growth of 1% every year in big cities The population of cities will get a percentage of 27.9% up to 2008 Labor aged percentage (18-60 year olds) is considerable for 52% in population
- Consuming tendency increases more and more: Figures from TNS Vietcycle showed the materialized growth from 1999 to 2008 were as follow: under 15% of households in urban areas got income of 3 million Dong and less, over 45% of households got 4.5 to 20 million Dong monthly The saving average level of Vietnamese decreased from 17% of total revenue in 1999 down to 9% in 2008
- Consuming tendency is connected with technological access: the accessing ratio to the Internet is for 20.8 million people; the number of subscribers on table telephones and hand phones is 921/1000 just second to the USA, Singapore on the development growth
- Tendency to using bank service is getting more and more: speed of development of bank service reached annual 30% in last three years
1.2.2.2 Legal frame for retail banking activity
In general, legal environment to the activities of retail banking is insufficient such as: the regulations in non — cash payment are out of fashion, some papers of official organizations that were issued on the basis of the transactions method in an old way are not suitable for the modern process treated with modern technology any longer
In recent time, the Government and the State Bank of Vietnam have had some gradual steps for improvement on legal environment, which has contributed to stimulate the development of retail banking activities importantly in Vietnam as the issue of some policies that stimulate the retail banking activities such as: the project
of non — cash application, the regulations on salary payment by accounts, the decision No 20 referred to the issue of regulations on issuing, paying, using and offering the supporting service of bank cards, the mechanism of interests agreed with consuming loans,
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1.2.2.3 General view in retail banking activity of commercial banks in Vietnam
In recent years, under the pressure of competition that has been more and more severed about the supply for bank services and the fast running development of information technology, the banking division has had a quick growth on both the quantity and size Presently, there are 80 banks operating in Vietnam and most of them take part in retail banking field
- The state owned banks: BIDV is one of them, commercial banks almost do not organize the activity of retail banking that is actually professional, but along with the advantages in size and trade mark, they occupy a considerable market share
in the service of retail banking (ratio in capital of 2008 was 58%, 2009 was 61.22%; the credit ratio of 2008 was 57%, 2009 was 62.12%)
- The Joint — stock commercial banks: from the day of foundation, they confirmed to concentrate on the development of retail banking The market share in operation on retail banking of Joint — stock commercial banks continuously increased in years (capital raising market share in 2008 with 33%, in 2009 with 34.6%; credit market share in 2008 with 34%, in 2009 with 35.2%)
- Foreign banks: penetrated in the field of retail banking in Vietnam has been getting more and more (such as HSBC, ANZ, Citibank, ), especially when Vietnam was going to get rid of the entire subsidiary in Finance and Banking in
2011 following the assurance as joining the WTO The objects — individual customers that these banks had put an aim at are those who got high income
- Generally, the commercial banks that are operating retail banking activities
in Vietnam through the extension of branch network, transaction centers, application for information technology in bank activities (as the core banking program, installation of ATM system, POS, E — banking, Mobi — banking, Phone — banking, Contact center ) and diversify the products in service, promote the advertising programs, promotion, in order to attract customers
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- Except a small amount of foreign commercial banks operating in Vietnam with their modern retail banking technology and mainly concentrate on high income customers, generally, the service of retail banking of Vietnam commercial banks still have drawback, they are:
- Many of Vietnam commercial banks have not set up the development plans
of retail banking services synchronously yet, while their services have not been variable yet to adapt for the diversified need of customers; retail banking services now have many limitations
- The traditional transactions method has not been taken advantage of itself yet
in order to attract customers; marketing program and product promotion have not been done properly and professionally yet
- The use of modern technology is a tool to develop the activities of retail banking; which is still poor and has not yet gained the expectative outcome; the application for technology of banks is not sufficient, technological foundation is low, information security is not high, background of technologists are not sufficient
to requirements that need to be enlarged, develop retail banking services especially for new products
- The quality of the national informatic technology suppliers is not good
Information about retail banking activities of some commercial banks such as ACB, Sacombank, Techcombank, OCBC, China Merchant Bank, Siam Bank, HSBC, ANZ, as per Appendix 2
1.3 Conclusion
In conclusion, the environment of economics, politics, society has many advantages in coming time that can support the retail banking activities The market for retail banking in Vietnam is estimated as a market with potential, lots of opportunities for banks But on the other side, the retail banking activities in Vietnam still has to face considerable challenges when the local economy and world economy, are still stuck in the crisis period, the revenue of majority of people is still low and unstable, the general technology is much more shortcoming Meanwhile,
1]
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the competition among banks is getting more and more severed as well as among local banks and foreign banks that are more powerful and more experienced in the development of retail banking activities
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hapter 2: PRACTICAL OF RETAIL BANKING IN
BIDV IN PERIOD OF 2007-2009
2.1 Practical of retail banking in BIDV in period of 2007-2009
2.1.1 General view in BIDV
In present, Bank for Investment and Development of Vietnam (BIDV) is the Bank with 100% of state owned capital, its own capital to August 31°, 2010 is: 25,318,285 million VND BIDV now is the Bank with its size in assets and network just second to Agribank in Vietnam
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Business Slogan: Sharing opportunities — Successful cooperation
Organization structure:
HEAD OFFICE
BOARD OF DIRECTORS, GENERAL DIRECTOR, COMMI † Ï LES, DEPARILMENIS ñND DIVISIONS
De Nang Branch Head Office in Hanoi bvestmeet Jobe Stock Ca,
HCW City Branch Ie
hoe
HC City Branch Hand Offee in Hamel
Retail banking activities of BIDV have been offered to individual customer right since 1995 when BIDV became a sufficient commercial bank However, it was
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concerned with the development of retail banking activities with limitation at that time
Since September 1“, 2008- the point of time when the new model of
organization recommended by TA2 project consultants, BIDV stared to be concerned with this field as BIDV organizational model separated the retail banking block to the organizational structure and got a clearer target on activity The outcome of retail banking activities of BIDV in the period of 2007-2009 in
estimated and based on following main activities:
2.1.2.1 Business activity outcome (detailed in Appendix 04)
a Mobilized capital from residents:
Size and growth speed: the size to mobilize capital from residents had a rather good increase in 2007-2009 Total mobilized capital from residents in 2007 reached 52,095 billion dong, 2008 with 58,251 billion dong and 2009 with 86,610 billion dong The average growth was 13% per year
Structure, quality, effect: Mobilized capital from residents frequently took up the percentage of above 30% of total mobilized capital of the bank, it gained 35% in
2007, 31% in 2008, 38% in 2009 For years, the structure of residential deposits have transformed positively in VND, periodical deposit composed of valuable files (papers, dossiers) that increased continuously
Restraint: Besides the good outcome, the mobilized capital job in BIDV still has some restraints:
- Compared to other commercial banks, the size and ratio of mobilized capital
of individuals of BIDV are not high In 2008 and 2009, the mobilized capital of individuals of BIDV stood behind Agribank, VCB both in size and in ratio
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- The market share for mobilizing capital in residents in three years 2006-2008, continuously decreased from 13.54% of 2006 down to 9.14% of 2008 (An average
of 2.2% per year), especially in 2007 it decreased 2.85% due to the growth speed of the mobilized capital from individuals going down 13.96% in average, lower than the average speed of the whole system (35.28%)
In general view, the activity for mobilizing capital from individuals in last years has contributed positively to the growth of capital resources, adapting for the business development need as well as to help the BIDV trade mark come closer to customers
b Retail credit
In size and growth speed: the debit balance in retail credit in three years increased rapidly, gained the growth speed quite high, with an average increase of 33% per year, 2007 with 15,583 billion dong, 2008 with 15,562 billion dong (slightly decrease compared to 2007 due to the tightening policy in credit) and in
2009 with 18,578 billion dong
In structure, quality:
- The quality in retail credit was controlled, debt at group 4 and 5 were frequently below 2% in 2007-2009 However, due to bad debts occurred from some
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cases at certain branches, led to bad debts at the point of time on 31/12/2008 (3%) increased compared to 2007 (2.65%)
- Debit balance in retail credit by products in three years 2007-2009 continued
to be improved positively, the debit balance in loans for business and produce households increased gradually up to 31/10/2009 that reached 8,279 billion dong, occupied mainly 45% and loan proportion in the investment in stock exchange that gradually decreased Loan products in mortgage of credits, repo: Debit balance was
680 billion dong, now still occupied nearly 4% of total credit debit balance in retailing The proportion in loan supporting housing needs gradually increased in years, now occupied a proportion approximately 20% of total retail debit balance Loan for staff (officers), overdraft occupied a stable proportion at 8% in the period
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_ buy shares at the Se
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[E year 2007 year 2008 G year 2009 |
a Retail banking services
** Card business activity:
In size and growth speed: to be confirmed as one of the core services of retail activity, under the concentrated leadership, in the three years 2007-2010, the card
business activity had some strong growth steps
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- Total cards issued in 2007 reached 1,074,212 cards; 2008 with 1,510,724 cards and 2009 with 1,754,758 cards; in which, the number of debit cards for local use was 1,751,069 cards and international credit cards (newly issued from the beginning of 2009) was 3,689 cards The average growth speed in 2007-2009 reached 64% per year
- Card payment service through POS/EDC was officially opened since August
2007, which helped BIDV develop more new customers that were card accepting organizations, accelerated the convenience to BIDV card holders The effectiveness
in activity of POS system of BIDV is gradually improved, displayed at the value for collecing service fee that has a gradual increase, 2008 with 218 million dong, 2009 with 299 million dong
- Net service fee collecting has a rather good growth, 2007 reached 14 billion dong, 2008 reached 16.5 billion dong and 2009 with 22 billion dong, a 1.5 times in uncrease compared to 2007
- Along with the extension of connecting network for card payment, BIDV also riuised quality, increased the comforts for cardholders: invoice payment on
‘ATM, air tickets payment, phone card top up by ATM
Festraint: However, Card business activity at BIDV still has restraints:
- Position and market share of BIDV about local debit cards continuously decreased through years 2006, BIDV stood the 4" position (to VCB, EAST ASIA, and ICB) with 13.5% of market share; in 2008, BIDV still ranged the 5" but its marke share had decreased to 10,8% In 2009, although it still remained its 5" positim, the market share for debit card continued decreasing lightly down to 10,2%
-BIDV was the new comer to the international card market since March 2009, lit has not issued international debit card so the amount of such cards took just a
hittle bt
-The growth speed for local debit cards tends to go down In 2007, it reached 88%, ‘008 with only 40.6% and the first 10 months of 2009 only 13.5% increase
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The card business activity of BIDV in 2007-2009 gained certain outcomes; however, the growth speed of BIDV was still lower than the growth speed of the market, led
to the BIDV market share on card business divisions (card issue, card payment) that was having a tendency to gradually decrease and the difference between BIDV and other banks were more and more expanded
“* Other non-credit services:
In last 3 years, with the target in offering customers products, diversified services, adapting to the need of financial services most of all customized objects, other retail banking products such as invoice payment, wage pay- off, overseas national currency exchange, BSMS, BIDV Direct Banking were positively studied, applied and they had a quite fast growth speed Truly on:
- Local money transfer service: In the period of 2006-2008, the deployment
of service network allowed BIDV to develop the local payment service with a stable quality, increased the collection of service fees for BIDV
- Foreign country money transfer (overseas national currency exchange transfer): BIDV has developed many products of overseas national currency exchange transfer: WU, AFX, PER in which, the most brilliant work is express transfer of money (WU) In February 2006, BIDV became one of the six official agencies of WU, it has grown without let up over year on the number of transactions centers of WU from 294 of 2006 to 505 centers of 2008 The turnover and service fee collection had also a rather high growth In the first 10 months of
2009 with 92,309 transactions carried out, increased 1.5 times compared to 2007 with 58,303 transactions, the turnover of services reached USD 62 million, brought the collecting service fees at USD 494 thousand (equivalent to 8.8 billion dong)
- The Invoice payment service on electricity bills with Vietnam Electricity Corporation EVN has been expanded since 2006 in HCM city area Up to October
2009, this service was expanded over 12 branches Its payment turnover and the
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- However, the turnover of payment of services in electricity bill still remains
at low range, due to the product is in process of expanding, the situation for expanding the bill acceptance collection service still meets lots of difficulties
e Wage payment service (payroll service):
- To be deployed in the whole system since 2007 up today, there have been many companies that have carried out the payroll by BIDV system
- In 2008, there were 500,000 staffs receiving their wages through BIDV, the mumber of items of payment increased 125%, payment turn-over reached 11,000 billion dong with 176% increase, collected fee reached over 5 billion dong, increased 383% compared to 2007 It is special that the service has adapted to the policy in payroll by accounts for the objects who got salary from the state budget according to the decree No 20/2007/CT-TTg, instantly contributing positively to the development of card service and other services of BIDV: BSMS, local payment, enforcement of free capital sources in payment of the bank
e £-banking service groups:
These are middle products preparing for the internet banking service, Mobile Banking on the industrial background of BIDV in coming time
- BSMS service: This is a service for text massaging on the variation of the debit balance in account of individual customers who receive it by Mobiphone, has officially expanded since 2007, the service gained good results Up to 31 December
2009, there were 223,233 customers who used it (in which business took 23,679 and undividual 199,554) increasing 3.54 times to 2007 (63,000 customers) The growth
un the number of customers using the service as 54,400 customers per year Along
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with variable conveniences, the supply for information about account transactions has contributed the raise of service quality and the satisfaction of customers and instantly brought the service fee collecting sources that has been steady to the bank, fee collected in 2009 with 13.8 billion dong, 4.8 times increase compared to 2007 (2.91 billion dong)
- BIDV direct banking service: The service was officially expanded in June
2008 at BIDV Up to 21 December 2009; total customers using BIDV Direct banking service were approximately 37,060; in which individuals held 14,127 and businesses held 22,933 The service has contributed to the growth in the number of customers using e-banking Basically, the service has brought an accurate information channel, in time for customers and this was a good basis in order to help BIDV expand successfully the internet banking project in coming time
2.1.2.2 About retail banking products
BIDV had a list comprising sufficiently retail banking products that were fundamental in market (over 70 products belonging to 10 product flows divided into basic product groups: Deposits, credit, payment, cards, ATM service, POS, e- banking) adapted relatively sufficient need of individual customers
In 2007-2009, many products, services of retail banking appeared, which were invested to strengthen the technology and diversify contributed to the services offering customers who were individuals, instantly raised the revenue to the bank
In comparison with the products in present market, a lot of retail banking products
of BIDV have conveniences that are comparatively competitive, such as: (1) credit retail banking products with competitive interests, the validity for maximum loans
is rather long and free from collecting some of fees ; (ii) Deposit products allow customers deposit at one place, can withdraw at many places, prepaid interest with flexibility in 6, 12 months, attractive interests, flexible deposit withdrawals and interest receiving according to actual deposit time, chances to receive valuable rewards; (iii) card service products offer the functions in the bill payment, phone card top up
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2.1.2.3 About the customer basis development
The number of individual customers who use BIDV service has a big increase
in 2007-2009 1.1 million customers in 2007, 2008 with 2.1 millions and reached more than 3.16 million in 2009, occupies 2.8% of population There is about 17% of population holding bank accounts, BIDV has got a customer share with approximately 21%
2.1.2.4 About the retail banking business network
a Branch network:
The branch network and operation effectiveness of network were improved
considerably in three years 2007-2009 The rearrangement for the network has been
done due to the Decision No 13/2008/QD-NHNN has increased the number of transactions centers all over the system, has been the basis of the distribution channel for retail products Up to day, the BIDV network has been spreading throughout 63 provinces and cities, mainly concentrating on 2 areas of important economy of the South and the North The branch network all located in the central sites in urban areas, well-equiped and concentrated, they has comfortably commercial locations for the retail banking activity
Up to 31/12/2009, the system had 538 points of retail banking business metwork, ranged the third on size of network (after VBARD with 2,151 points and ICB with 844 points)
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b The ATM — POS network:
- The ATM network: continuously expanded in accompany with the speed of acceleration in number of transactions and turnover of transactions always stand high The ATM network of BIDV continuously developed over years, expanded over urban areas and was connected with 11 banks of Banknet, Smartlink and has connection with VISA Card payment By end of 2009, BIDV had 994 ATMs, holding 13.1% market share of ATM In 2008, the average quality of transactions per one machine got 36,324 transactions, 51% increased compared to 2007, average business turnover got 25,9 billion dong per machine - 42% increased compared to
2007 The average transactions frequency got 3,608 transactions per machine per month
- The POS network: the spreading development of the network met a lot of difficulties In 2008, the quantity of POS that were newly opened increased 72% compared to 2007 but in 2009, the newly opened quantity of POS decreased 51% compared to the whole 2008 BIDV POS network presently holds a modest market share at 3.5%
The quantity of ATM, POS in period of 2007-2009
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In the period of 2006-2008, BIDV carried out many projects in technological infrastructure system that served the general operation of BIDV as well as the retail banking activity separately toward the modern tendency, international integration, particularly in:
- Building the fundamental for infrastructure of information technological system unification from the center to branches which makes the basic for the development in retail banking as well as controlling the security of whole system
- Concentrating on expanding effectively the ATM/POS system, it expands the foundation of software solutions to develop the service products and simultaneously assures the steady operation, makes through the technical system serving retail banking service
2.1.2.6 About the marking
Generally, marketing for products and retail service in recent years are perfecting professionally, formally, continuously stick with the procedure in product expansion, marketing programs are connected closely with between promotional work and product PR, between the inside marketing form and the outside media, build the policy structure in marketing activity, study the market serving to strengthen retail banking activities
Step by step organize the task for retail banking market research and retail credit products, savings, other noncredit retail services Building the plan for training transaction skills to the staff of branches such as: sale skill to the individual customer relationship department and transaction staff at branches
2.1.2.7 About operation administration and organization, management models
Retail banking activity of BIDV were offered to individual customers nght Since 1995 when BIDV became an actual commercial bank, however it had a limitation in the concern Just in late years, especially after the time when it was
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expanded the organization model following to the recommendation of TA2 project consultancy, the massive retail banking was formed with separate organization structure, more suitably, it had a clearer target in action, the retail banking activities were concern with the leadership and control that was unificating from the head
office to branches, particularly in:
Organization model:
- At the head office: The units in retail block stuck with the functions, duties
as well as with the leadership of header, focus on assignment of business operation activities, researched on product development, managed and developed the network The cooperation among the units as department, offices at head office in organizing retail business was consolidated step by step and smoothly fitted more
- At branches: formed initially the retail banking business organization with the establishment of individual customer relation department Up to August 2009, there were 37/108 branches that had such department and 08/108 branches that had individual customer relation section belonging to customer relation department 44/108 branches that had individual customer service department, the rest of responsibility for serving individual customers was grouped into the customer service department
About the workforce for retail activity: up to 31dec 2009 it was 3,553 officers (occupied 25.4% of total labor of the present of BIDV), in which: the head office with 3 departments, the center with 116 officers; the division of branches had 3.437 officers (direct to retail banking: 2.282 officers, officers in charge of both retail activity and sale: 1.155 officers)
Structure, policy, procedure, regulations are step by step established
strengthened controlling risks
Trade mark recognition: Present point organizing form ` :
and transaction centers The street lined transaction center §f
(Picture 2.2 — source: BIDV)
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Transaction center lay out
WW VIC CUNG CAP THONG TIN
Picture 2.3 (source: BIDV)
Interior transaction center
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To sum up, in the periodical stage 2007-2009, the retail business activity at BIDV had the first step that was been concern with the development The retail banking activity has been contributing to the certain outcome to the general business activity of the whole system
2.1.3 Shortcomings, restraints and causes
Beside the achievements, the retail banking activity of BIDV in 2007-2009 still has shortcomings, restraints as follows:
2.1.3.1 About the business activity outcome
The outcome for retail activity has not been equivalent to the advantages and potentials of BIDV The retail banking business activity proportion contributed to the business results of the whole system is still little (approximate 10%)
The quality of retail credit has not improved yet, the main reason is that bad debts occurred due to the typical problems at some branches
The proportion for retail activity mainly in as mobilizing residential capital, debit balance in retail credit is further low compared to required target and to other banks
The size has a growth but the market share in some product flows: capital mobilization, credit, cards have a tendency to decrease compared to other banks 2.1.3.2 About management, business organized model and labor source There has not been a strategic plan for development of retail banking business activity The point of view in the business development of retail banking at many operating levels, especially branch levels that have not been unificated yet, not yet been concern reasonably with the retail banking business
The model for organization management and retail banking business is in process of making perfect, not yet specialized and lack of systematization:
- The arrangement for retail banking business activity at branches has not been professional yet, the individual customer relationship department at branches has not actually carried out in accompany with the required function yet, mainly still
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- In the management of retail banking activity, there has not been a throughout system from head office to branches yet, not unificated yet, not centered at certain addresses in branches yet The acceptance in expanding the new products at branches still dispersed over many departments (customer relation office and customer service office)
Structural designs, mechanisms, regulation in management, retail banking business are not sufficient yet, not standardized yet suitable for international normality;
Lack of synchronously dynamic mechanism of policy in order to stimulate and make convenient for the retail banking business development;
Ability to manage risks, ability to control and self control the retail activities are not high yet to avoid the moral risks and the operation risks
Lack of managing labor source that experienced in the retail banking field Knowledge, sale skills, experience of the sale staff is still limited The serving attitude is still poor The sale skills of staff are still weak, which have not trained by the criteria of retail activity
Training work, the development of labor source still have a lot of insufficiency, mot adapted to the requirements for retail banking activity yet
2.1.3.3 About customer base and distribution channel
The increase in customer base has not connected with the use of many services
of BIDV The ability and working effectiveness of retail banking at the branches are still low
It 1as not been located the target customers, therefore marketing policies, products, prices, distribution have not connected with every segment of custome’s, not served maximum the needs of customer yet
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2.1.3.4 About technology and products
Retail products are still inferior to the competition due to the formality procedure that is still complex, lack of convenience and functioning, the steady level of technology in product is low, card products is lack of diversification on convenience as well as card types
The building of products does not actually fit in every segment of customer so the product outcome is still little
It has not supplied product packages suitable for the need of customers yet Not had the watching system and estimated the effectiveness in each retail product yet
The information technological system serving the operation administration is still short Not exploited all the advantages of information technological yet in order
to serve the managing job and operation
Information technological projects are expanded slowly to the process
2.1.3.5 About retail marketing
- The image of retail banking activity of BIDV is not very sharp
- The assignment for actively finding, customer care is still weak
- The infrastructure supporting the marketing retail banking activity is not synchronic yet, some medium channels of BIDV (such as website, intranet page) being upgraded now
2.1.4 Lesson of experience
The retail banking activity of BIDV in 2007-2009 was the stage that was not oriented to develop retail activity clearly yet, but it got some certain achievements and it had the new organization model after the TA2 project with more concrete leadership in retail banking activity, had some positive change From that point, it can be confirmed, to expand effectively the retail activity, that it needs:
- The determined guidance of the leadership about retail banking activity
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