CHAPTER II: CURRENT SITUATION OF MOBILE BANKING
2.2 Current situation of mobile banking deployment at Vietcombank
2.2.3. Current situation of mobile banking deployment at Vietcombank
In order to supply mobile banking services to a variety of different customer segments, Vietcombank is implementing both models as the bank - led and Cooperation between Banks and telecommunications companies. Like other banks in Vietnam, Vietcombank initially introduced to the customer VCB - SMS B @ nking services. Subsequently, Vietcombank cooperated with Viettel to launch BankPlus services for customers of Viettel mobile subscribers. Most recently, VCB - Mobile B @ nking services as the bank – led model was officially launched in late 2012.
- Internal documents subjected to services:
Currently, with the exception of VCB - SMS B @ nking adjusted for interim regulation for providing information inquiry services through the mobile channel of Vietcombank Bank coming with the decision 264/QD-NHNT 06/11/2006 of General Director of Vietcombank , VCB -Mobile B @ nking and BankPlus are deployed in the form of guidance documents. In the future , the early uniform regulation adjusted throughout the entire services on a mobile device platform is needed .
In addition , the actual deployment process arose issues related to the transfer / sale phone numbers among customers. Many branches are embarrassed when customers require registration to use mobile banking services but in the Vietcombank system that phone number has been registered for a service by other customer. Requesting client to provide proof of the right to use the phone number is not the optimal solution to determine the current status of the subscriber. Thus , Vietcombank also need specific guidance in this case to the branch soon.
2.2.3.1 Features of services offered and service charges
Although it was developed quite early compared to other banks in Vietnam, but VCB SMS Banking service is still quite limited in functionality. Like the vast majority of banks in Vietnam, due to concerns about the security of this method, VCB has not deployed payment feature on SMS banking. Currently, in addition to information inquiry or proactively receive account balances fluctuations notification messages and credit card spending, customers can simply recharge mobile phone.
VCB Mobile B @ nking Services were presented to customers in late 2012 by the method of downloading application with the target audience are those using smart phones. Being the most modern banking services that Vietcombank offer to customers, service is deployed in the first phase with the basic features, which is to manage payment account information, transfer systems, bar bills and recharge phones. Expected in early 2014, VCB - Mobile B @ nking will increase much more new gadgets. Customers will be able to manage the account information of the savings and loan as well as to see the credit card statement . Utilities such as cash payments outside the system, fast cash transfer, loan payments, credit card payments, periodic payments will also be added.
Table 2.4: Features and fees of mobile banking services at VCB
Services Features Fees
VCB-SMS B@nking
Information inquiries 1.000 VND/SMS
Phone recharge 1.000
VND/session
Proactive message 8.800 VND/month
VCB-Mobile B@nking and BankPlus
Looking up for account and transaction information
11.000 VND/month Fund transfer in VCB system
Bills payment Phone recharge
(Source: Retail banking Department of VCB)
BankPlus service, which is the cooperation of VCB and Viettel, was officially deployed in January 2012. With this cooperation, VCB expect to provide more payment ultilities via mobile phone to common customers, who are currently Viettel subcribers. Meanwhile target customers of VCB – Mobile B@nking are those using smart phones or medium series, which can connect to internet, BankPlus services support all mobile phone series and do not require internet access.
BankPlus services’ features provided in the first phase deployment are similar to features currently deployed with VCB - Mobile B @ nking. In 2013, BankPlus service at Vietcombank had one more feature which is fund transfers in different systems from 15 July 2013 and extended deployment through USSD application on 23 August 2013.
In general, the deployment in Vietcombank Mobile Banking is still in the early stages. These features provided are fairly basic and donot create distinct advantage compared to other banks in the market. In the short term, Vietcombank need to diversify the features, offer more utilities to attract more customers.
2.2.3.2 The sale activities
Currently, in Vietnam the transaction performed through electronic banking services is still relatively new to many customers. Thus, the work of sales for e- banking services in general and Mobile banking services specifically should focus on communication, introduction to customer as well as guidance and counseling clients on how to use services.
However, media programs, sales promotion for Mobile banking services have not been implemented at Vietcombank strongly. Media message about services do not create really good effects with customers due to the limited communication channel. For VCB-Mobile B @ nking, in addition to the traditional advertising channels through the press, bank's internal channel, during the official starting time, media channels are only TV advertisement in relatively short time (02 months).
The sale and sale promotion are deployed rarely and lack of attraction.Up to Dec 2013, only a small number of promotions are made.
Table 2.5: Promotion programs of MB at VCB
No Services Program Content Deployment
Timeline 1 VCB-SMS B@nking 4% discount of recharge value
and have chance to get Ipad 2
From 15/10/2011 to 32/12/201
2 VCB-SMS B@nking Free charge for proactive message service within 2 months for customer registering VCB SMS B@nking
From 01/4/2012 to 30/6/2012
3 BankPlus & VCB - Mobile B@nking
Free charge for using service in first 3 months
From the official starting time
4 VCB – Mobile
B@nking
5% discount of Topup and get 30.000VND/billing
transaction
From 20/12/2012 to 30/3/2012
(Source: Retail banking Department of VCB)
For sales activities in the branch, at present, Vietcombank do not have a standard sales process applied to the entire system. Tools for sales at branch have not been provided. Therefore, the sales at branch are entirely proactive based on the situation of each branch. Many branches are just serving the needs of the customer but do not actively seek and reach potential customers. Consultancy, support, guidance and customer care after the sale are also not fully implemented. The less standardized sales processes and sales tools shortages along with pressure to complete the assigned targets give rise to a few issues at the branches.
The first problem associated with a very high number of virtual clients (client registered but do not activate and use the service). For VCB - Mobile B @ nking, customer activation rate / client registration is only 59 %. The reason is partly because customers are not aware of how to activate and use the service. VCB - Mobile B @ nking Services require customers after registration to download and
install the application on their phones. With many customers using smartphones of iOS operation system or Android operating system, the application download is usually done at the phone store or shop offering services related to phone.
Therefore, customers generally do not have an account on the Apple store or GooglePlay to actively download and install the application VCB -Mobile B @ nking of Vietcombank. If customers are not advised or guided specific procedures to use the service by tellers, it is quite complex with a number of clients, particularly with customers who register on VCB - iB @ nking. According to statistics from the Center for VCC customer service, the number of calls request advice on how to use the service accounted for 67 % of calls related to Mobile banking services.
The next cause is the attitude of the branch to sales targets. Branches emphasize on the number of registered customers using the services rather than to the actual number of customers using the service. For example in the case of BankPlus services, though this do not require customers to download and install the application, the number of virtual clients (registered customers without service activation and service use) is also very high. The rate service activation / registration of BankPlus service reaches only 59%. This shows that, Vietcombank should promote the development of quality customers and strengthen customer guidance in the future.
Another issue considered is that many customers are not aware of all service utility. Proactive SMS is a highly convenient feature for customers with competitive fees ( 8,800 VND / month) but the number of customers know and use it is still modest, accounting for only 30 % of customers use VCB - SMS B @ nking.
Because the registration is done by customers actively (through composing messages to send to the registration center of Vietcombank), the teller only register VCB - SMS B @ nking for customers without introducing proactive SMS features, it is very difficult to sell proactive SMS to customers. This situation is also reflected by the number of customers using the payment service is very low compared with the rate of customer activation. If the customer is more aware of gadgets, assured of the safety and security of the service, it will surely help enhance the efficiency of
service and cost savings to customers.
2.2.3.3 Results of mobile banking services - VCB-SMS B@nking service:
Considered being easy to use and common customer oriented, SMS Banking of Mobile Banking service attracts the largest proportion of customers participation.
By the end of 2013, the number of customers using service accounts for 35% of the bank's customers, equivalent to 2,685,000 customers.
Chart 2.5: Results of VCB SMS banking
(Source: Retail banking Department of VCB)
Among the features provided through VCB – SMS B @ nking, proactive SMS feature is major revenue source, accounting for 97% of VCB-SMS B @ nking. On average this feature contributes 2.06 billion each month, equivalent to 20% of profits from electronic banking services.
According to 2013 statistics, the number of proactive SMS messages sent to customers monthly is more than 7 million, nearly 10 times higher than the amount of information query messages generated monthly. Meanwhile, the number of phone recharge messages is on average of 93.716 messages, accounting for a very small percentage of the VCB-SMS B @ nking services of Vietcombank.
Chart 2.6: SMS banking profit and number of SMS
(Source: Retail banking Department of VCB) - VCB-Mobile B@nking service
Services are deployed within 02 months of internal testing before the official introduction to customers on 20/12/2012. However, in the first 04 months the number of service registered customers were still very low, only reached 2,146 customers / month. The main reason is that the service is deployed at the end of the calendar year and closed to the Lunar New Year. In addition, to use of the service, customers are require to register at the counter then it should not convenient for customers who would like to access services.
In the following months, along with the efforts of the branches in sale of the services to ensure targets assigned and allowing customers to sign up for the service on VCB-iB @ nking services, the service have a more powerful development. The number of clients registering in May 2013 increased to 4,126 customers increased 91% compared to the average of the first 04 months of deployment) and maintained relatively stable until December 9/2013 (number of customers registration reached 4,428 per month).
Overall, a year after implementation, the number of customers using the
service VCB - Mobile B @ nking reached a very small number of individual bank's customers. Customers are mainly in Hanoi, Ho Chi Minh City and such the provinces / cities as DakLak, Quang Ninh, Hai Phong. Private customers in Hanoi and Ho Chi Minh City accounted for 50.6% of customers using the service.
However, the sales result in these areas is still not commensurate with the potential.
The whole system reached only 65% of the sales target set for 2013.
Chart 2.7: Number of customers using services
(Source: Retail banking Department of VCB)
Another noteworthy point is the destruction rate / lock services surged in May and 6/2013 average 1,320 customers lock / cancel the service. Due to the policy of customer service is that free service charge within the first 03 months so as Vietcombank conduct maintenance service fee (the fee of 11,000 VND / month), customers have tendency to request cancellation of services. However, this number has been decreasing in recent months.
Chart 2.8: Propotion of transactions of VCB - Mobile iB@nking
(Source: Retail banking Department of VCB)
According to 2013 statistics, the large proportion of payment transactions performed on VCB – Mobile B@nking channel is fund transfer transaction in the same system. On average, there are 16,367 transactions conducted monthly, accounting for 63% of total payment transactions on this channel. Bill payment transactions make up for a very small portion with 625 transactions/ month on average. The number of linked service providers to settle bills on VCB – Mobile B@nking channel is still limited. The tranditional bill payment habit can explain for this modest number. Phone recharge feature reaches only 8,876 transactions/months averagely. Although this feature on VCB - Mobile B@nking is quite superior compared to VCB - SMS B@nking channel (cumtomers can recharge phone for others, and each phone recharge transaction is discounted 2%/card value), penetration rate of VCB - Mobile B@nking services is still very low in comparison with VCB - SMS B@nking. Therefore, the number of phone recharge transactions makes up for nearly 1/10 of VCB - SMS B@nking.
In terms of profitability, the current VCB-Mobile B @ nking revenues contribute modest portion of electronic banking services. After 9 months of official deployment, services revenue from frees was only 170 million. Meanwhile, the cost for the application provider partners – Smartlink partners for initial deployment and maintenance services is quite high. Specifically, service deployment costs 1.4 billion, cost of monthly subscription is 6,600 VND.
With the goal of 84% and 67% growth rate respectively for both 2014 and 2015, the service is expected to reach breakeven point in 2014. The investment cost for the initial launch is depreciated after 05 years expectedly.
Table 2.6: VCB Mobile – B@nking Bubgeting
2013 2014
Revenues from fees 850,400,000 6,075,852,266 Initial investment 279,396,000 279,396,000
Maintenance fee 220,000,000 0
Subcription fee 1,018,358,880 3,232,089,300
Total cost 1,517,754,880 3,511,485,300
Profit -667,354,880 2,564,366,966
(Source: Retail banking Department of VCB) - Telco Led model
BankPlus services cooperation between Vietcombank and Viettel was officially launched in January 2012. With this partnership, Vietcombank will hopefully provide more payment utilities to customers, who are currently Viettel subcribers. Sales activities are made at Vietcombank and transaction points of Viettel. Thus, in the first year of services implementation, the number of customers registered to use the the services was 68,735 customers.
Chart 2.9: Number of customers registing Bankplus services
(Source: Retail banking Department of VCB)
However, growth rate in 2013 did not have a remarkable change compared to the year 2012. The number of new services registers currently is more than 4,000 customers /month, equivalent to that of VCB-Mobile B@nking services. Although during 2013 BankPlus services at VCB offered fund transfer in different systems feature from 15 July 2014 and was provided through USSD application on 23 August 2014, the number of customer registering to use the services in 2013 was just 71,000. This number is still very small in the number of SMS B@nking customers, who are currently Viettel subcribers. Therefore, the potential of Mobile BankPlus is very huge.
Up to May 9/2013, Vietcombank's market share among the 07 banks providing BankPlus services is very modest, accounting for only 11% of the market. Despite being the second bank offers BankPlus after Military Bank, VCB‘s growth rate is lower than other banks.
Chart 2.10: Market share of Bankplus service
(Source: Retail banking Department of VCB)
According to 2013 statistic, customers mainly perform small value phone recharge and individual fund transfer in the same system. Especially, phone recharge feature is very preferred due to the convenience, simple conduct, high discount (current discount of 5.5% for the payment transactions of subscription free
and phone recharge on Mobile BankPlus is highest among phone recharge channels of Viettel). Although Mobile BankPlus just supports phone recharge of Viettel subscribers, each month there are 80,620 transactions on average, equivalent to 10 times as high as the number of transactions through VCB-Mobile B@nking services. Due to the longer deployment time along with higher accumulated BankPlus customers, in general, Bill payment and fund transfer transactions through this service are higher than VCB-Mobile B@nking.
Chart 2.11: Types and number of transactions performed via BankPlus
(Source: Retail banking Department of VCB)
In the aspect of advantages, due to no initial investment, this service has net earning right after official offering. After sharing fee with Viettel, Bankplus services bring to net profit of 1.2 billion in the first 9 months of 2013.
In short, Information about real situation of Mobile banking at VCB shows that VCB has many advantages meanwhile there still exists limitations when developing Mobile banking services.
The advantages come from the prestige and experience of a large bank of 50 years of operation. Vietcombank has always been rated as banks have the modern and stable technical infrastructure. Another advantage of VCB is that there is a large number of individual customers, with nearly 7 million clients. The simultaneous deployment of bank-led model and the partnership model helps VCB to reach more diverse set of customers, cross-sell retail services to customers of partners as well as
to learn management and sales experience.
However, VCB still exist limitations such as the internal documents are incomplete, features and services are not diverse and competitive. In addition, sales have not been working aggressively to implement promotional programs. There are few sale promotions, lack of regulation of sales processes and sales tools. If VCB can overcome the limitations soon in near future, it is certain that Mobile banking is growing rapidly and effectively.