Improving retail banking services at the bank for investment and development – ha thanh branch ha noi

points, the lifting of term institutions on deposits in VND; scalable banking services and the explosivegrowth of information technology, the commercial banks in Vietnam have achieved en

CHAPTER 1 INTRODUCTION

In the context of open economies, expanding trade and financial liberalization, the demand forfinancial banking services can grow fast and far beyond the capabilities of financial intermediaryinstitutions in the country.This is what attracts foreign financial institutions to dominate the domesticmarket, especially when the financial market barriers have been removed in Vietnam and from04/01/2007 Vietnam allows the establishment of financial institutions with 100% owned foreign capital

in Vietnam in accordance with the WTO accession commitments(9) The fact also shows that the demandfor financial banking services of the people are on rise, especially in city market The needs associatewith the forming process with the fast pace of the types of enterprises in the economy, as well as thetransformation of SOEs into joint stock companies That is the demand for stock trading, investmentadvisory, financial leasing, debt management, etc Also, the presence of foreign firms in the economyplays the role of a catalyst, promotes the emergence and rapid growth of market demand for thefinancial banking services These are services related to non-cash payments, automatic withdrawals,remittance services and trading of derivatives, such as Option, Future, Forward, etc Clearly, thedemand for various types of banking services is pioneer, breakthrough, plays the role of motivationstimulating the introduction and development of the supply of domestic services Thus, market of newmodern services of banks in Vietnam today is potential, ready to welcome financial instruments and

Whatever route of WTO commitments execution protects Vietnamese banks until 2010, but manyforeign banks in Vietnam are not afraid to plan to take the whole market shares in retail services

Competition among banks gets increasingly dratics, especially in the first class and the secondclass, where is the concentration of highly financial potential customers and strongly increased bankdensity

In recent years, competitive pressures increasing due to implementation of the roadmap toloosen regulations for foreign financial institutions, particularly in opening branches and transaction

points, the lifting of term institutions on deposits in VND; scalable banking services and the explosivegrowth of information technology, the commercial banks in Vietnam have achieved encouraging results

in the development retail banking services In general, banks began to focus attention and retailoperators, such as promoting the modernization of banking technology, development of new services,most gadgets and has been accepted by society as ATMs, internet banking, home banking, PC banking,mobile banking Indeed it marked a new development of the market retail banking service in Vietnam.This will be the basis for service development of non-cash payment (the proportion of funds raised fromthe population increased significantly and accounted for 35-40% of the total capital raised) Ways tomobilize increasingly diverse and more flexible, remittances through banks surged The commercialbanks in Vietnam has made significant improvements in financial capability, technology, governance,organizational structure and distribution network, product systems of banking services, contributing toservice development retail banking service, giving customers more and more new facilities in the

By the end of 2006, most banks have retail banking build software based on business process designwith the goal of freeing American customers the fastest processor in the professional division into twoparts : Division-counter trading and processing unit operations support This system has created a utilityinterface, the customer's account is connected across the system, creating a foundation to expand thenon-cash payments and provide the products and services to consumers retail banking

Bank of Investment and Development for Vietnam (BIDV), in addition to providing products ofcapital mobilization and credit activities, had the general direction in the evolution that the option of RBservices is long term business strategy, through this BIDV has planning strategies to develop itsservices However, the expansion of retail banking services of BIDV in Vietnam has not been vigorous,and retailing services of BIDV is not wellknown by customers as other banks’ Therefore, development

of retail banking services must be set as the top target

2 Background of the Study

Bank of Investment and Development for Vietnam which was established under DecisionNo.177 / / TTg dated 26th April, 1957 by the Prime Minister initially called the Bank for Construction

of Vietnam During development, the bank changed its name from Bank of Investment andDevelopment for Vietnam (06/24/1981) It adopted its present name on 14 November 1990

Ha Thanh Branch was established on 28.3.2000 with the mission of an major army, being apioneer, a newcomer in mobilization campaign, products, profession and new technology testing

In November, 2008, according the general direct of BIDV, BIDV – Ha Thanh branch andbranches across the country have completed the transition to operating under the organizational modelunder The Project TA2 The branch activities mainly on Hanoi central area includes 03 districts: HoanKiem, Hai Ba Trung and Dong Da, prove the large-scale operations and BIDV's new position in thearea

BIDV Ha Thanh which is a member unit under BIDV was decentralized to operate under thebranch level I model

With this organizational model, till early in 2010, BIDV Ha Thanh has total 112 employeeswith an average age of 27 years in which there are 80 people having the university degree or uper, therest has graduate from colleges or technical colleges.(www.bidv.portsl.com)

By this time, BIDV Ha Thanh’s banking network includes:

- Head office at 80 Tran Hung Dao, Hoan Kiem, Hanoi

- 04 transaction office, 02 saving funds

Capital resource mobilization is "material" for the business activities of commercial banks.Gradually hot competition on mobilization shows the importance of this activity for the overall businessactivities of commercial banks We can say, capital is the key, a key element of all developmentprocess

Recognizing the importance of the capital, BIDV Ha Thanh always respects the work of fundraising to ensure the scale of capital always on the growth as planned and ensure that all businessactivities of the branch is the most effectively.

BIDV – Branch in Ha Thanh is the first class branch under the BIDV system Since itsestablishment, the branch has been assigned to be a state-backed commercial bank branch with theorientation on operating as a retail model However, the result of new retail banking activities initially

be deployed in general at BIDV and Ha Thanh branch in particular is not commensurate with thepotential to persist and insisted the problems.So it is necessary to find uniform solutions for thedevelopement of retail banking services in BIDV Ha Thanh Branch

Beginning with the above fact, I have chosen the topic "Improving Retail Banking services at the Bank for Investment and Development – Ha Thanh Branch-Ha Noi" as the subject of thesis

research in the hope of contributing a small part in the work of strategic planning at the unit

2.1 Satement of the Problem:

Research and implement with the objective of evaluating retail banking services and advisesolutions to develop retail banking services in the coming period, the specifically, the topic will answerthe following questions:

2.1.1 What is the propose of the bank in term of

a Awareness on the existing product

b General policy of the bank in available products

c Mode of payment

2.1.4 What can be proposed to increase retail banking of BIDV

- Diversification & development of products and services retail banking

- Modernize technology

- Advanced degree in the direction of professional staff

- Diversity, distribution and implementation of effective delivery

3 Assumptions

There was no statistically significant difference in review questions on issues related to the business

4 Limit

- Not consider company clients, group clients.

- The subject review is qualitatively limited in retail banking services and related issues of the bank in recent times and the targets which do not belong to bank secrecy

5 Significance of The Research

Topics will be significant to many different objects as follows:

For banks: evaluating and proposing development of retail banking services appropriatelyFor customers: helping customers realize the benefits they may have in dealing with business with the bank and get better service

For researchers: this work is a test of his/her knowledge in business and his/her ability to engage in a research work

For the future research: this study can serve as benchmark information for related studies

6 The concepts

In this section, the researchers will present the concept of some phrases and words to have a unified understanding of these term

CHAPTER 2

REFERENCE OF DOCUMENTS AND RELATED RESEARCH S

1 The enterprise business strategy

1.1 Concept

In recent years, the financial banking services have changed dramatically with the explosion ofbanks changing the approach to the basic operations of commercial banks Initially, banks provideservices to the main subjects such as financial institutions, businesses, wealthy individual clients Places

to hold the transaction together is at banks, in the time frame specified, limited But in recent years,economic and social significant development has brought a comfortable and more affluent life forpeople not only in terms of income but also on higher intellectual level, increasing ability to to reach abroader consumer services in the economy, consumer habits This trend has brought to financialmarket opportunities to exploit the resources of the people as well as the ability to provide financialservices to residents So, retail banking services increasingly are on attention, investment anddevelopment

The term "retail banking" is originally from English The literally in providing retail bankingservices means providing products to consumers in small quantities It is contrary to the work ofproviding middlemen for large quantities by wholesalers In addition, there are many different existingunderstandings of retail banking services

According to the World Trade Organization (WTO): Retail banking is typical services of bankswhere individual customers can make transactions at branches (transaction office) in banks to performservices such as savings and checking accounts, mortgage loans, credit card services, debit cards andsome other services

According to experts of the Asian Institute of Technology-AIT: retail banks provides banking

branches , or clients can have direct access to banking products and services through the means ofinformation technology, electronics and telecommunications.

According Banking and IT Dictionary, Retail banking is for the masses, usually a group offinancial services including loans with gradual payment, mortgages, securities credit, receive depositsand personal accounts

Thus, we can come to a unified definition and overview of retail banking services: retail banking services can be understood as the banking services provided to each single individual, small and medium enterprises through a network of affiliates, or customers can have direct access to banking products through the means of information technology, electronics, computers, telecommunications activities (4)

The concept also shows that the difference between retail banks and wholesale banks is that wholesalerbanks provide services to large businesses, corporations, commercial banks and other financialinstitutions In the U.S as well as in Banks and financial dictionary of British banks, wholesale banking

is a commercial banks’ and other financial institutions’ service, and retail banking is for the generalpublic The size of a transaction of retail banking services is multiple time smaller than the wholesale

1.1.2 Characteristics of retail banking services

a) Clients

The object to serve is individuals, households and SMEs Thus the object to serve is reallylarge, including many components of society, banks must find out who the clients are, what needs tooffer products and customer care policies most relevant For individual customers, because of thedifferent level and consumer behavior, the demands for banking products are also different Forqualified customers who have knowledge of the monetary banking sector, thus they demand for modernbanking services, and pay attention to the customer care policices of banks; they are sensitive to price,interest rate and banks’ policies There fore, in retail operations, the market segmentation problem iswhat paid attention by banks in the process of product design, marketing and development of theirproducts

b) Scope of transaction

The number of transactions is large but the value is small Because services is provided forconsumping purpose, the value of transactions is less than wholesale while the range of clients is wide,diversifiled, the number of transactions is large However, to expand the scope of the transaction, banksmust attract customers by the diversity of transaction types and multiple forms of promotion as well asmany utilities included

c) Retail banking service products

Retail banking service products must be based on the foundation of modern informationsystems Today, when banks realize the potential of this activity, the question of modern technologyapplication is essential issues Moreover, due to the psychological and the knowledge of individualcustomers is very diverse, so they want either to have the best services with lowest cost or save time andexpect the transaction will be served whenever they wish Therefore, banks must use the initial equityinvested to establish major infrastructure on transaction places, modern IT systems to ensure theircustomers can directly use the product at the trading places of banks which are from banks, homes oroffices of customers

d) Developed retail banking distribution system

To supply the products for a wide range of customers, banks need to have more branches,transaction places, with a large number of employees to reach and meet the needs of large number ofcustomers Besides the traditional distribution channels, RBs now have many new distribution channel

to meet customer needs better and reduce fixed costs for banks

e) Rich and diverse retail banking service

RB Services directly server consumer demands, production and daily life Thus, it generallyconforms to the requirements of goods set out by the consumer, not the needs of middlemen financialinstitutions It is the practical usage satisfying people’s needs The people’s needs are diverse and rich,but they have the same requirements which are: high speed, convenience, accuration and safety needs.The products of RB’s services must also be sufficient in order to meet the customers’ needs

1.1.3 The benefits of retail banking service development

1.1.3.1 For economy

The development of services RBS accelerate the flow of money, improves people's life,contributing to reduce social costs by cost and time, information cost savings for both banks andcustomers It is essential to meet the convenience, the rapid and frequent changes in social needs

These services attract single small capital scattered in residential area where mainlyconcentrated capital in society They contribute to the exploitation and use of capital in the economymore efficiently, increase the monetary circulation in space and time, the volume of money moved fromone place to another, from customer to customer, and meet the needs for social and economic activities.They contribute to boosting business production, consumption, to the process of industrialization andmodernization of the country

The national economy develops, national income raises, people's life is increasingly improved.Income used for consumption will be also increased Thus, it is necessary to streamline the paymentsystem to be convenient, safe and satisfy to the customers’ diverse needs of shopping, spending This isthe base for banks expand card payments as well as increase the size and market share, build thecivilization of payment In addition, through the provision of services to meet the demands of individualcustomers, RB services will help improve people's life and consumption environment

Non-cash payment is the form of payment which is encouraged to use in production andbusiness transactions by the State The payment of cash leads to corruption, smuggling and tax evasion.Cash flows when paid through bank accounts are fully reflected in the books, vouchers, fully reflect therevenues of the business especially for SMEs, these businesses are required to fully account businessrevenue generated and out value added tax, corporate income tax payable So, RB services contributetos opposite corruption and commercial fraud, smuggling and tax evasion

Educational level of population will be increased because high tech applications of RB services.Therefore it is required for the user to consciously learn new knowledge in using internet, reference of

information contributing to the improvement of people's knowledge Helping people do not feelunfamiliar with the concept of automatic banking, banks without human, virtual bank.

Revenue for the national currency from remittances from abroad

Development of RB services will limit somewhat risks due to external factors as RB servicesector is less affected by economic cycles than other areas The supply of services to a larger number ofcustomers will distribute the risk for banks into objects of customers Also RBs system will build newfacilities to manage and improve the efficiency of banking operations which include foundation,infrastructure for development and application of technology banking; concentration management andonline data processing; improvement banking services quality, shortening trading time with customers,enhancing security

- Taking advantage of the funds in the customer's payment which is deposited on payment andcollateral account These accounts are non-interest or low interest payment ones which make theexpenditure into capital mobilization lower in order to to create a large gap between average interestrates for lending and average deposit interest rates

- The development of RB services means the expansion of the reach of the banking system toall population subjects thereby building diverse and wide client network, as the foundation for thedevelopment of banking services

- Expanding cross-trading between individuals and businesses with commercial banks selling), thereby increasing and developing an other modern network of potential customers of banks.

(cross Increasing performance to meet the customers’ needs of commercial banks, Thereby,increasing adaptability, competitiveness of commercial banks to contribute to strengthen the country'sfinances

1.1.3.3 For clients

Because this is an industry having advantages of scale and scope, the more people join, thelower cost, the more convenient for users The development of RB products of services based onadvanced technology helps save manpower and reduces operating costs by the utility and specialization

of each type of service: reducing the cost of printing, counting, storage and transportation of money,saving manpower to implement, thereby reduce service costs to customers Customers will be servedbetter because retail banking services activities bring convenience, safety, savings to the customer in thepayment process and use of their income, so customers will have more opportunities to choose products

of service

Especially for SMEs, through capital funding and other utility of payment, retail bankingoperation facilitate business and production process to be conducted smoothly, rhythmically,contributing to promote production and circulation of goods

1.2 Retail banking services & factors affecting the development of the services

1.2.1 Retail banking services

1.2.1.1 Mobilization

One of the activities of commercial bank capital is mobilized capital Thus mobilization areimportant activities of the business generally and especially businesses operating in monetary – bankingsectors The activities contribute to make capital for banks to do other business activities Withoutmobilization of capital, banks will not have enough capital to finance their activities On the other hand,through mobilization of capital, banks can measure the prestige as well as the confidence of customersfor banks

RBs focus on mobilizing idle capital in the residential area and from SMEs, but the most areraised from deposits of individual customers This is money deposited in a bank by clients to save, topay, or make payment for their needs.

Characteristics of the funds raised from individuals:

- Ability to raise capital is concentrated in some areas and a number of clients: raising capitalthrough deposit accounts of payment, savings, valuable papers, mainly in the urban centers which havethe development of economic and social, industry, services and technology aspects

- Cost should be not equal among geographical areas and time: Based on economic, social andinterest rates conditions in regions, banks’ demand, each bank will have its appropriate interest ratesproposed for individuals

- Cost is relatively high compared to other mobilized resources for example from economicorganizations, from other credit institutions

The cause of the above characteristics is due to the different funding structures, due to the level ofcompetition among localities Because of the difference between the ability to raise capital and funding costs ofthe different areas, it should be identified: creating capital should not be only focused on only one area but beexpanded into areas where the cost is low, considering the goal to minimize the cost of raising capital and goals

to maximize growth, increasing the stability of capital because there are many banks which can raise the mostfunds have the cheapest cost and also have competitive opportunities in the area

The role of resources mobilized from individual customers to bank s :

- Significantly contributing to the capital growth of banks Mobilizing private capital is one oftwo main parts of commercial banks in raising capital beyond capital from other economic sectors.Rapid increasing mobilization of private capital contributes to accelerate the growth of capital, as well

as it is a good sign showing the widening internal resources in the population

- Creating major medium, long-term capital source for banks The ability to mobilize medium –long term capital primarily focuses on residential areas, it is difficult to mobilize from the rest areasincluding organizations, while the area often major demands for medium, long-term capital Along with

the socio-economic development, the people's life is improved and enhanced, it would correspond to anincrease in savings rates, it is certain that the residential’s resources will continuously increase Theproportion of medium, long-term capital mobilized from people in medium, long-term capital structure

of commercial banks is able to be stable in the future, although the competition on the market will bemuch more severe

- Raising relative stability and sustainability for capital resources The stability of capital fromindividuals is presented on following aspects:

+ Low cash flows: the money which individuals deposit in banks often is idle in nature, themain purpose is interest, as a provision for expenditure needs in the future So the ability to transfer thecash flow is quite low for a period of time

+ It is less affected by seasonal factors: seasonal factors is less common in the majority due tothe nature of cash flows as well as for heterogeneity consuming demands

+ Trading habits: the common mode of payment of Vietnamese citizens is by cash, the banktransfer payment is not a popular mode The balance of trading account; therefore, gets more stable

However, the stability of the cash flows is also relative because of the effect of followingcauses:

+ Lack of information: Ability to access to the flow of information on the activities of thebanks are not uniform among customers, or even contradictory The problem of informationasymmetries between banks and customers often causes detrimental tends for the operation of banks,especially by false information with the purpose of sabotage

+ Weak ability to analyze: the information that customers get is mostly word of mouth which isnot based on any scientific analysis at all Weak ability to analyze also contributes to asymmetricinformation problem become more serious

+ Decision depends on only one person: thus the customer's decision was emotional andsubjective in nature Banks’ plan for the purpose of using this capital resource thus becomes moredifficult

+ The protection for the depositors’ benefits is not clear: if an element which can bringdetrimental results to the depositors appears, being worried that the benefits will not guaranteed canmake great affection to the withdrawal decision The low flow of cash so that is relative.

- Helping to build diverse and large network of clients, as a foundation for the development ofproducts of retail banking services

In addition, banks can raise capital through the issuance of valuable papers of the short, mediumand long term

1.2.1.2 Retail Credit

Retail credit services include personal loans (such as abroad study loans, home installmentloans, car loan, or loans for gold trading, real estate ), lending to households and SMEs (each lenderloans, overdraft loans, limited loans )

This is traditional products of commercial banks, contributing to their income Along with thedevelopment of social economy, the proportion of loans in personal loans of commercial banksoutstanding loans increases This means that banks' income will raise Retail credit account for theincreasingly important part in portfolio of commercial banks in the world

Characteristics of retail credit products:

- Widely and continuously growing market: The more development of social and populationsize is, the more the needs for raising the quality of people’s life promotes the demand for theseproducts

- Customers of these products are often interested in the amount of repayment rather thaninterest rate Thus banks can lend with a reasonable interest rate

- Ability to repay change quickly when customers change working conditions or health Hardlycould the ability to offset from other sources in the case happen Banks should have their preventivemeasures for themselves

- The value of each loan is small and dispersal Therefore, it leads to increasing administrativecosts for each loan for banks

- Simple technique loans without requirement for highly trained personnel.

- There are a large number of existing clients delaying to repay, so it is required loaningevaluators to be well-delivery of lending and good professional ethics

1.2.1.3.Payment services

In a more and more developing society, payment services account for an increasingly importantposition in the operation of RBs To meet the demand for payment to customers, banks provide paymentservices for customers having trading accounts at banks, including payment accounts and savingaccounts in various forms Thereby, it will allow customers to pay for their needs through bankingproducts and services such as check, payment order, money transfer

Check is an unconditional money transfer order made by issuer on printed form as prescribed,which ask the organization providing payment services to deduct money from his deposit account to paymoney to the beneficiary named on the check or pay check holder Banks provde their individual clients

a check card in order to sign on when paying for goods or pay someone Checks which can be used towithdraw cash from banks (crossed checks), or used to pay the seller directly instead of paying in cash(certified checks, checks transferable)

Order to collection, order to payment, remittance, L / C payment are traditional non-cashpayment methods of commercial banks

Based on the advancement of IT, the form of non-cash payments are increasingly diversified,with more utility and safety Besides the people’s education is increasing, the demand for paymentservices applying high technology is also raising Thereby, non-cash payments are becoming increasingproportions of payment forms of the economy By the provision of above services, banks can earncharges having low risks and make revenue ratio in retail operations increase

With the provision of non-cash payments services, banks give many benefits to individuals andSMEs on payment Thanks to this number of customer, commercial banks can increase their incomefrom service fees and it will be the base to develop other services The most common is that by the