LV thạc sỹ_An evaluation of selected retail banking services at vietcombank

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TABLE OF CONTENTS
TABLE OF CONTENTS.......................................................................................i
ABBREVIATION..................................................................................................1
ACKNOWLEDGEMENTS..................................................................................2
LIST OF TABLE...................................................................................................3
LIST OF FIGURE.................................................................................................4


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ABBREVIATION
VCB
SBV
WTO
WB
ATM
POS
BOD
HO
IT
ICT
GDP
FDI
LC
P/E
PIN

Bank for Foreign Trade of Vietnam
State Bank of Vietnam

World Trade Organization
World Bank
Automated Teller Machine
Point of sale
Board of Director
Head Office
Information Technology
Information Technology and Communication
Gross Domestic Product
Foreign Direct Investment
Letter of Credit
Profit on earning
Personal Identification Number


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ACKNOWLEDGEMENT
First and foremost, I would like to express my sincere gratitude to my
supervisor, Dr. …l.
I wish to also acknowledge the contributions from officials of some of the
commercial banks that I contacted for taking time out of their busy schedule to
answer some questions concerning my work. I am also greatly indebted to the
bank’s departments which provided me data and information.
Last, but not the least, I thank my families for their support and
encouragment and my dear class mates who always keep contact each other and
exchange ideas and documents to pursue my interests.


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LIST OF TABLES


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LIST OF FIGURES


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INTRODUCTION
1.

Research topic

AN EVALUATION OF SELECTED RETAIL BANKING SERVICES AT
VIETCOMBANK

2.

Rationale

- In fact, along with the development of economic growth, the big

coporations and enterprises always seek the support and the guarantee in financial
capacity through establishing their own banks. These bank have a absolute
advantage in providing financial services to big corporations which are their
traditional customers and making profits for all the bank system. These banks
begin to turn to a potential retail banking market. In addition, the development of

wholesale banking and retail banking is difficult to separate and becoming mutual
factors in the development of the banks because when the banks supply wholesale
banking products for businesses, they also provide a package of retail banking
products to businesses’ employees.
- With 89 million people of population today, Vietnam is clearly a huge

market for retail banking serives. According to a recent report by a consulting
firm, Bain & company, Vietnam banking industry is still in an ealier stage of
development at which by 2007 only 2% of Vietnam’s 84 million people have ever
taken out a bank loan and only 5 million have a personal bank account. Since then
it is natural to expect that these figures have increased but they shall not be
signigicantly improved. In the past several years, Vietnamese people have
witnessed and enjoyed a greater choice of retail banking services ranging from
housing loans, auto loans, saving loans to bancasurrance, guarantee. To catching
the huge and new demand, general banking and retail banking services in
particular in our country is being developed very rapidly. The bank is constantly
launching products, services and technologies to bring many benefits for
customers, boosting turnover in social capital and promote economic development


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- Based on the growing trend of retail banking services of commercial

banking system of Vietnam, Bank for Foreign Trade of Vietnam (Vietcombank)
has been implementing supply most of the banking products and services sold
retail customers. A full awareness of the market importance of retail banking
services in the context of international economic integration today, Vietcombank
constantly improve the products and services retail banking, and applications use
modern technology to develop products and services retail banking, to meet social

needs. One of the activities that mark the full development, demonstrates the
correctness of the above strategy is the achievement in the areas of retail banking
services. Besides wholesale services which have an international reputation for
economic organization (coporate banking), Vietcombank is known as a trusted
address for individual customers with a variety of services and modern retail
banking services as a flexible loan product, payment cards, ATM system,
diversified capital mobilization, the online banking service, remittance services.
- It could be said that the period form 1995 to moment is not a long period in

Vietcombank’s history but 45 years is the period witnessed many changes to the
methods and operations in retail banking in a bank that has advantages in
wholesale banking. From a few thousand retail customers in the early 90s, now the
number of individual customers has reached 3 million (over 30% market share in
Vietnam) and continual development of both quantity and quality.
- Having recognised the potentials in retail banking and experienced the

difficult conditions by Vietcombank, the evaluation and developing for retail
banking services is chosen as the topic for this MBA thesis. To study mentioned
problems, VCB must push strategies to expand retail banking through using
product diversification as a tool. It is also research purpose of this thesis. The
study will research and offer some lessons and strategies for VCB based on
analyzing current situation and its competence.


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3.

Research objectives

-Systemize theoretical theories of retail banking and wholesale banking,
potentials for developing retail banking and expansion from wholesale banking to
retail banking.
-Analyze and evaluate selected retail banking products and realize pending
issues of developing retail banking services at VCB.
-Propose solutions to develop retail banking services at VCB.

4.

Research questions

-What is retail banking and how important is it in commercial banks’
operation ?
-Why need to expand from wholesale banking to retail banking ?
-What is the current state of the development in retail banking services at
VCB?
-What are solutions to develop retail banking services at VCB?

5.

Literatutre reiview

-Development of retail banking services was identified as an important part
in the development strategy of commercial banks in Vietnam, starting from the
grasp opportunities from new markets, from the application of systems and
technology used to create many new products and services, efficient distribution
methods, enhancing the relationship between clients and banks.
-The banks can use product diversification as a tool to develop retail banking
services. Product diversification may also achieve competitive advantage for
banks through economics of scale and other synergies from using the banks

resources and capabilities across different product lines. Ahmed Ebrahim and
Iftekar Hasan (2002) had the study to assess the value relevance of product
diversification in US commercial banks, results show that annual abnormal returns
have more significant positive relation with changes in the noninterest component
of bank earnings compared with changes in the interest component of earnings.
Alank Reichert and Larry D.Wall (2000) had swept away most of the barriers
limiting the affiliation of banks with nonbank financial services providers. The
focus now shifts to financial services executives who must decide which
combinations provide the best opportunities to increase shareholder wealth.
Existing empirical evidence suggests that an important consideration in this


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decision is the potential gain from portfolio diversification into new activities. The
available empirical evidence also suggests that the potential for such gain clearly
exists. However, the results provided by this article emphasize that the efficient
combination may change over time, perhaps for reasons such as the
macroeconomic environment or technology. Allen N. Berger , Iftekhar Hasanb,
Mingming Zhouc (2010), diversification is captured in four dimensions: loans,
deposits, assets, and geography. Kevin J. Stiroh (2002), the U.S. banking industry
is steadily increasing its reliance on nontraditional business activities that generate
fee income, trading revenue, and other types of noninterest income. This paper
assesses potential diversification benefits from this shift This shift toward
noninterest income has contributed to higher levels of bank revenue in recent
years, but there is also a sense that it can lower the volatility of bank profit and
revenue, and reduce risk.

6.

Theoretical background

In this study, a simple model will be applied:
Leding interest rate = Fund mobilization interest rate

+ Operating

expenses rate + Risk premium rate + Gaining profit rate
Where:
+ Lending interest rates is the lending interest rate which applied for each
retail product;
+ Fund mobilization interest rate is the fixed deposit interest rate with term
12 months;
+ Operating expenses rate is calculated by dividing the operating expenses
(include: the salary, rent house, depreciation, materials…) to everage individual
outstanding loans.
+ Risk premium rate is based on budget risk expense divide everage
individual outstanding loans ;
+ Gaining profit rate is calculated by formula: Gaining profit rate =
Interest margin – Operating expenses rate - Risk premium rate.
- In Vietcombank, Lending interest rate = Fund mobilization interest rate +
Interest margin. So that Interest margin must cover all the components: Operating
expenses rate, Risk premium rate, Gaining profit rate and also ensure the


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competitive lending interest rates in the market. Based on the data conducted by
VCB’s report from 2008-2010, I will employ the model above to analyze the effect
of product diversification on cost and profit efficiency.

Research methodology
-The methodology used in the thesis is quantitative analysis. The data of
thesis consists of two sources, including primary data and mostly secondary data.
The secondary information and data will be obtained from newspaper, annual
report, magazine, internet, books…Other secondary data regarding VCB will be
acquired from VCB and other related sources of information such as SBV, VBA...
While the primary information and data will be collected through deep interview
with officials of VCB.
Research scope
-The study was conducted at Vietcombank only as follows:
Time: The time research is a period from 2008- 2010 and 1st quarter of 2011
Products: The research focuses on some current retail products at
Vietcombank like: auto loans, housing project loans, unsecured loans.
Geographic scope: The primary data would be collected in the whole system
at Vietcombank
-Limitations: This research focuses mainly on financial aspects of evaluation
of selected retail banking services at Vietcombank and the data were 2008-2010. It
also gave out solutions to develop retail banking services at Vietcombank only, not
for the whole economy and other banks. Limitations of the thesis also lie on its
sole research on the developing retail banking services, instead of comparing
working model on developing retail banking services at Vietcombank to those of
other banks who have succeeded in this field. So this search is for Vietcombank, if
it were applied for another, we should take further and supplemental study.
Research structure
-This paper has been specifically written to provide its readers a
comprehensive picture of wholesale banking and retail banking, the development
of retail banking services at Vietcombank at present, and propose solutions to
develop retail banking services at VCB in the coming time. Following this
introduction are three chapters. Chapter 1 will discuss on theories about retail
banking and wholesale banking, potentials for developing retail banking and the

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expansion from wholesale banking to retail banking. Chapter 2 will outline
overview of Vietcombank’s business result and it also accesses the development of
retail banking services at Vietcombank. These assessment will supply all
achievements, constraints and causes of constraints of development in retail
banking services. Chapter 3 will propose solutions to further develop retail
banking services at Vietcombank. The chapter researches all solutions based on
strategic orientations of Vietcombank and the retail banking trends. The solutions
were executed base on studying both theoretical aspect and the assessment reality
of developing in retail banking services.


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CHAPTER 1. A COMMON CONCEPT OF
WHOLESALE BANKING AND RETAIL BANKING
1.1. Wholesale banking of commercial bank
1.1.1. The concept of wholesale banking services
The concept of wholesale banking was first used in the late '60s of the 20th
century in England (David Cox, Shelagh Hefernan in England, George H. Hempel,
Linda Allen in the U.S.). Because the formation and development of wholesale
capital markets, then the banks begin to participate in this market and make loans
with money from depositors. Wholesale banking is the term used for transactions
between banks and large customers (companies) or dealing with large amounts (up
to deposit and lending hundreds of thousands to millions of dollars or pounds).
This term also refers to the wholesale’s transactions between banks made through
inter-bank market which separate from clients. Wholesale banking’s activities

embeded with the development of wholesale market, and then the development of
multi-national banks and applied flexibly in international finance activities.
Depending on the financial conditions in each countries, there are different
definitions of wholesale banking such as:
-In the U.S, wholesale banking services is the bank’s services between
commercial banks (Merchant Bank) and other financial institutions. In particular,
Merchant Bank is defined as a business major bank which provide the
international trade finance, long-term loans to companies and issuance guarantee.
Merchant Bank does not offer banking services to individual customers.
- According www.saga.vn, wholesale banking services is providing complete
financial statements to enterpises and banking services to other institutional clients
such as pension funds as well as government agencies. These services include
lending, cash management, commercial mortgages, working capital loans, leasing,
mandate services, ... Most of banks divide wholesale banking activities into


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different services varied by enterprises size like: big enterprises, small and
medium enterprises.
In summary, combining the above definitions, we have the concept of
wholesale banking servcies as follows: “Wholesale banking services is the
provision of services by banks to the clients such as large corporate clients, midsized companies, real estate developers and investors, international trade finance
businesses, institutional customers (such as pension funds and government
entities/agencies), and services offered to other banks or other financial
institutions. In essence, wholesale banking services usually involve high value
transactions”.

1.1.2. Characteristics of wholesale banking services
Banking is an industry of economic service sector in the international

economy, and is a division of financial services in general, such as public finance
services and operation services on financial market, thus wholesale banking also
has common features of economic services such as:
-The number of customers is small: The targets of wholesale banking are
mainly large-scale enterprises so the number of customers are not much. Normally,
with a wholesale and retail banking, the number of wholesale’s customer accounts
from 10% to 30% of customers.
-Big value transactions and the average cost per transactions is small.
-Services and implementation processes are often complex, take a lot of time.
For example, to lend a big business, banks often have evaluated the projects longer
than a personal loan.
-The revenue from the customers are enormous: With about 10% of
customers can bring 50% of income for the banks. Therefore, the business risk of
wholesale banking is very high when customers come to other banks with better
conditions.


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-The average of operating costs is low: Wholesale banking often does not
require much equipment in distribution network and human resources as the
number of customers in wholesale banking is less than retail banking.

1.1.3 The roles of wholesale banking services
For the economy
Through the wholesale’s lending, the banks provide a large amount of capital
for businesses to meet the goals of economic- social development. Especially, in
the current integration, wholesale’s services have a big role with the growth of the
economy. Besides, the payment through bank with large transaction value reduces
the cost of using cash, saves social costs. In addition, wholesale’s services also

create favorable conditions for the development of other bank’s services, to help
banks diversify business activities, reduce risk, thereby create a stable, sustainable
finance for the country.
For commercial banks
If the retail banking decides the scale of funding mobilization, the wholesale
banking decides the scale of lending. For banks, the credit is specific and primary
in the creation of profit. Profit is the basic for the survival and growth of
commercial banks.
With a intermediary payment function, wholesale banking make the payment
on a large scale regualarly, so that the banks also collect a lot of service fees. In
addition, it also facilitates the other banks’ services development easier. For
example, the salary payment for the employees is developed by opening deposit
accounts of the company in banks. Besides, due to the number of customers is less
but it occupies a large proportion of sales transactions so the banks can save
transaction cost based on advantages of the size of transaction.
For customers
Through the provision of credit, wholesale banking plays an important
channels for injecting capital firms to carry out investment projects or import and
export goods while self-funding becomes droughty. This is one of the key factors


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to determine the success of the business plan and profitability of the company. The
quick and schedule disbursement will help businesses save a lot of time and costs,
improve efficiency of their capital, thus contributing to profit growth.
Besides, by the funding mobilization services from businesses, the banks
help them store, manage and balance money effectively. Wholesale banking is also
intermediate payments to the company due to the quick, convenient, safe payment
instrument, help to promote the cash flow and the reproduction of companies.

With the customers are banks, through the mobilization of capital between
banks, the electronic payment services also has the opportunity to develop through
the application of modern payment instruments, reducing the risk and high
economic efficiency.

1.1.4 The services of wholesale banking.
Mobilization capital
Commercial banks can mobilize capital from banks and large companies in
many varity of products, including current account, term deposits, issuing valuable
papers … Two kind of mobilization capital that banks often offer to their
customers inlcudes:
-Current accounts: of the wholesale’s

customers often have very big

balance of payment because there are a lot the needs of business transactions and
inter-bank payments between banks. Customers who choose this type of deposit
often have the purpose of ensuring safety and utilities in payment transactions
through the bank.
-Term deposit: is a significant sources of mobilization capital from big
enterprises and credit instituations. However, because of the regular demands in
transactions, customers only deposit in short term
In addition, commercial banks could raise capital from other sources such as
deposit, deposit to guarantee payment, the other deposits ... or issuing valuable
papers such as promissory notes, certificates of deposits, saving certificates and
bonds.


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Credit
This is typical and most important activity in wholesale banking. The kind of
credit includes:
-Loan: this is a kind of credit which has the highest proportion and is
popular credit service of commercial bank. Basing on loan term, loan includes two
types: short-term loan (to invest in liquid assets), medium- long term (to invest in
fixed assets, implement project to develop production and business). In the kind of
loan, project finance and co- finance are typical loans and accupied a high
outstanding loan rate.
+

Project finance: This type of loan to help accelerate investment in

infrastructure and production in Vietnam.
+ Co-finance: is the process of providing credit with the participation of
two or more financial institutions and one financial institution is a clue in
financing for all or a part of projects.
-Discount: the banks can discount commercial papers and other short-term
valuable papers for big enterprises and can re-discount them to other banks. With
this service, the banks help enterprises recover capacity payments and accelerate
capital flows.
-Guarantee: is the commitment of banks, which is made on a document to
commit to the beneficiary. If at maturity, the obligor does not perform the
commitments stated in the contract, the bank will be on behalf of the guarantor to
implement the commitments.
-Financial leasing: is a transaction between two entities, including the
owner and the user of property, in which the owner (lessor) transfers property to
the lessee use in a given period and the lessee must pay money for the owner.
-Factoring: this is a kind of providing credit to the seller through the
acquisition of receipts arised from the sale of goods which is agreed upon in the

sale contract.


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Payment services
-Domestic payment: includes payments between enterprises and payments
between banks. Payments between enterprises through banks is extracting money
from the account to pay into other account of beneficiaries through the
professionally accounting of banks. There are a lot of methods of payment through
the banking system, such as payment by authorized payment, collection, transfer
automatically or periodically...
- International payment: this service is often applied for the import-export
companies as payment for goods between the seller or the buyer. The international
payment transactions are usually done through primary methods such as letter of
credit (L / C), collection, transfer money.
Trading foreign currency
-Dealing foreign currency in the inter-bank foreign exchange market: is a
kind of trading foreign currency between commercial banks through inter-bank
market
- Foreign Exchange with enteprises: Exporting enterprises often have
demand to sell foreign currency which received by exporting to take VND or other
currencies. Besides, they also need to buy and sell foreign currency following
forward contracts or option contracts to hedge exchange rate risk. Meanwhile,
importing enterprises often need to buy foreign currency for payment of mature
import contract and purchasing foreign currency by forward or option contracts to
hedge exchange rate risk.
Treasury services
-Collection and payment at counter: The banks receive money from
customers who have demand on savings, deposit money in current account,

repaying loans, transfer money, foreign exchange ... Besides, the banks also pay
money for customers who have demand to withdraw money from savings, current
account, loan account.


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-Collection and payment by banks: The banks are on behalf of customers to
collect money from buyers, pay salary, pay for customers’ partners.
E- banking services
E- banking services is a combination between the banks with internet
activities. E- banking services for wholesale banking‘s customers are mainly
Home banking and Internet banking. The customers of E-banking services are
mainly banks, enterprises, organizations which aimed to use consultant services
and seek information.
Other services
In addition to the above services, wholesale banking also provides other
services such as box services, mandate services,..

1.2

Retail banking of commercial bank

1.2.1 The concept of retail banking
“Retail banking is typical mass-market banking where individual customers
use local branches of larger commercial banks. Services offered include: savings
and checking accounts, mortgages, personal loans, debit cards, credit cards, and
so”
Retail banking means mobilizing deposit form individuals and providing
loan facilities to them in the form of home loans, auto loans, credit cards, etc, is

becoming popular. This used to be considered by the banks as a tough proposition
because of the volume of operations involved. But during the last couple of years
or so, banks seem to have realized that the only sustainable way to increase
deposits is to look at small and middle class consumer retail deposit and not the
price sensitive corporate depositors.
With annual income of population is growing every year. The banks are
trying to seize this market through a series of innovative additions to their
products, services, technology and marketing methods. Fixed and unfixed
Deposits, (cluster deposits which can be broken into smaller units to help meet
depositors’ overdraft without breaking up entirely), centralised database for any


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branch (whereby the customers can access their account in any branches where
the account is maintained), room services (whereby the customers are visited at
their residences offices to enable them to open their accounts), automatic teller
machines, tele banking network, extended banking time, courier pickup for
cheques and documents, etc are some of the privileges extended to the customers
by the banks in are eagerness to cultivate the retail market. In short, in the bold
new world of retail banking, the customers are like king.

1.2.2 Characteristics of retail banking
The features of retail banking also are common features of economic
services, so in those characteristics, we can summay through the following
contents:
-The target customers of retail banking are enormous: individuals,
households and SMEs with a big of numbers and variety kinds of services.
-The number of products and services is diversified, but the value of
individual transactions is not high. Products of retail banking include the products

of liabilities (funding), assets (loans) and other products which diversified in
variety and rich in form. However, the number customer of retail banking is big,
so to serve each customer of retail banking, the banks must also spend the same
cost as a wholesale ‘s customer so the average cost per transaction of retail
banking is often big.
-Retail banking services developed primarily based on technology and
human resources. The development of retail banking services depends on the level
of development of information technology in the economy and in each bank.
Typically, E- banking services are applied modern technology to expand and
improve the quality of products. In addition, to provide products and services to
individual customers, retail banking needs a great number of staffs and
professional expertises.


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-Simple services, easy to implement: Retail banking’s goal is individual
customers, so it focuses on products and services such as deposit accounts, loans,
credit card ...
-The average of operating cost is high: The number of customers is crowded
but spread everywhere so the transaction is not convenient. Thus, to serve these
customers, banks often have to expand and invest on online trading with high cost.
-Management methods and the form of marketing in retail banking is more
complex than wholesale banking by the network client is widespread.

1.2.3 The role of retail banking
For the economy
Retail banking services contribute to exploit the resources of the economy
and contribute to the implementation of national monetary policy. This role is
expressed through facilitating the cash flow, take advantage of the tremendous

potential of capital from individuals, SMEs to develop the economy, improve
people's life, limit the using cash in payment, save cost and time for both banks
and customers.
The more developmet retail banking services are, the more specialization the
banks provide products and services to customers, bring services closelier to users,
reduce social costs and improving business efficiency of other subjects.
The development of retail banking services based on advanced and modern
technology, present civilization of the national economy because it alters directly
the economy from cash payment to non – cash payment economy . By using noncash payment, retail banking services improve the efficiency of State management
in currency, control commercial frauds, tax evasion and corruption.
For banks
Today, if any bank hold the opportunity to expand retail banking services for
a huge population that are short of financial services in the emerging economy,
they will become global giants in the future. Thus, retail banking services has an
important position in the activities of commercial banks in the world, the global


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retail banks will play a key role in the list of top 20 global banks ranked by The
Banker magazine in 2015. The Vietnamese Commercial Banks have been
developing retail banking services because this is an inevitable trend, consistent
with the general trend of the banks in the region and in the world, ensure for the
banks manage the risk effectively, supply the high quality services to customers,
orient business, objective market, to help the banks achieve optimal business
performance.
In the financial perspective and bank management, retail banking brings
revenue stability, certainty, reduce risk by outside factors because this is an area
that less affect by economic cycles. Revenues will increase if the banks attract
more customers to use their services. Developing retail banking services is the

most effective way to change the structure of the bank’s income. With complex
market conditions, credit activity becomes riskier, so if the bank only depends on
the revenue from credit interest, it will be uncertain. Thus, developing retail
banking services will increase revenue for banks.
Retail banking services plays a key role in expanding markets, improving
competitiveness, creating medium and long term capital for the banks, diversifying
the banks’ activities... Retail banking expands cross-sold between individuals and
businesses with banks, thereby it increases network and develops the existing
customers and potential of commercial banks.
Developing retail banking services will bring many benefits from raising
capital, credit and services to commercial banks. Beside relatively stable period
capital, commercial banks can use the balance of current accounts, issuing card
accounts, deposit accounts ... to raise funds with low interest rates.
For Customers
Because this sector has advantage in scale and scope so as the more people
join in, the lower cost and more convenient the users. The development of retail
banking services based on advanced technology to save manpower and reduce
operating costs, thereby it reduces the cost of services for customers. Customers


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will get the better services because retail banking brings to customers the
convenience, safety, savings in payment process and using their income.
Especially for SMEs, through capital funding and other utility of billing,
retail banking facilitate business and production process smoothly, rhythmically,
contribute to accelerate the production and circulation of goods.

1.2.4 The services of retail banking
Capital mobilization

The banks raise funds from individuals and SMEs mainly in the form such as
cash deposits, term deposits, savings deposits, issuance of valuable papers.. In the
form of retail mobilization, savings occupies a big part of banks’ capital, create a
long-term capital to finance the credit activities of banks. In the worldwide, there
are two main types of savings:
-Unmature Savings: when the senders want to withdraw money, they must
notice to the banks before a period of time. But today, the banks often allow
customers to withdraw money without notice.
-Purpose - Savings: senders deposit in banks to use for a specific purpose
such as buy houses, pay study cost. With these customers, banks often provide
credit to compensate deficiency when they use follow the purposes of savings.
Credit
Retail banking provides loans to individuals (such as studying oversea loan,
installment loan, car loan, housing loan, investment securities, trade gold, buy real
estate…) and loans to households and SMEs (such as busniness loan, overdraft,
limit loan). In the credit industry, commercial banks are always active and
dominant in providing credit to individual customers. In general, now the
commercial banks have developed diversified and rich credit products for
individual customers. Now the banks often focus on key group loans such as
salary payment loan, consumption loan, study oversea loan, auto loan, traveling
loan, housing loan, installment loan... About regulations and procedures,


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individual lending is continue to comply following the credit regulations of
financial institutions.
Overall, the proportion of loans to SMEs and individuals is growing in total
outstanding loans of banks, and it contributes to increase turnover and profits for
the banks. However, individual loans often have high management costs because

the value of loans is often small and dispersible. In addition, the borrowers are
often sensitive with factors such as interest rate, term and procedures so the banks
are affected by competitive factors in the market and self- interest of customers.
Payment services
On behalf of clients, the banks make payments for purchasing of goods and
services such as issuing and balance check, provide electronic payment network...
They implement these services by opening current accounts for customers. The
common services of payment include checks, payment cards, collection, order for
payment, commercial paper. With the provision of non-cash payment services,
banks bring to individuals and SMEs a lot of utilities in payment. With these
services, banks can increase their income from fees and develop other services.
E- banking ervices
In recent years, with the development of information technology, banks have
developed a lot of modern services, brought utilities for customers and satisfied
the demands of customers. With these modern services (such as phone banking,
internet banking, mobile banking, home banking), customers can check account
balances; check recent transactions; seek information about exchange rate, interest
rate, products and services of the banks; access information on individual
accounts, make transactions at home or office via your computer connected
internet...
Other services
In addition to the above services, services for SMEs include international
payment services, foreign exchange, guarantee. Services for individuals include
remittance services, collecting / order to payment, transfer money, and safe box.


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1.3

Potentials for developing Retail banking

1.3.1 Foundations for developing Retail banking
Globalization process along with new opportunities and new risks is one of
the factors which promote the issuing new products.
The globalization process makes an opportunitie for commercial banks in
developing countries access to modern banking services in developed countries.
Trends in meger or acquisition an internal bank by multi-nation financial
coporation will help to acquire the knowledge and experience in product
development as well as risk management and they becomes inevitability and
motivation for the growth process. Besides, the threats from economic
globalization is creating potential risks that customer need to diversify investment
channels and avoid risks through management asset services for private banking.
These are the demands from the market during the globalization.
Income and living standards are increasing that arise the demands of new
financial services.
Along with the development of the economy, income of populations is
improving and it arises the demands for buying house, car, daily expenditure...So,
series of retail banking product were issued to satisfy the demands of customers.
Besides, it also arises the demands in saving and investment correspondingly. The
banks as a financial intermediary in the economy can not ignore the role of
satisfying customer needs through product portfolio management and investment
consulting in addition to traditional saving products. Increasing income also means
that the learning, expanding knowledge or the needs of entertainment, traveling,
entertainment demands increase correspondingly. Besides, the customers also have
quick, convenient transactions and safe payment demands. They are big
motivations for the development of new methods, new payments such as online
buying ticket, online trading systems and internet banking. They are becoming the
trends, useful payments and becoming popular in the world.

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The development of new products is the reaction of the banks with
changes in the legal environment (such as tariffs, non-cash payments, electronic
documents...).
Sometimes, the fluctuations of legal system is an important premise for the
development of new banking products or improving the existing products. For
example, the Finance Ministry's regulations in salary payment of the entire public
units or state enterprises must be paid through the banking system. This is a
strategy to develop non-cash payment nation as well as clear financial activities in
the state enterprises. Government’s regulations have created a wave of competition
in the banking system in building specialized products, adding new facilities to
attract more customers. Besides, there are some examplies of regulations on cash
management in the securities companies. In the booming development of the
securities companies, there is a situation that

the securities companies used

investors’ money without customers’ allowance. So, it arises lawsuits between
investors and securities companies. From this situation, the Ministry of Finance
had regulation to request securities companies that must transfer money in
securities account securities to the banks’ account. This regulation requests the
banks that must design new series products to connect the system of banks and
securities companies. The changes and constant improvement of the legal
environment will a great motivation for the development of the banking system
products.

1.3.2 Opportunities in Retail Banking
Retail banking has immense opportunities in a growing economy like

Vietnam. The rising of Vietnamese middle class is an important contributory factor
in this regard. The percentage of middle to high-income Vietnamese households is
expected to continue rising. The younger population not only wields increasing
purchasing power, but as far as acquiring personal debt is concerned, they are
perhaps more comfortable than previous generations. Improving consumer