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Banking & Finance

Purpose & intent

Released at: 06:27, 09/06/2015 Retail Banking

Purpose & intent

There's been a lot of determination on display in recent times by banks in attempting to acquire a greater market share in retail banking, which is where major profits may be made.

by Ngo Hai

Commercial banks have been aggressively promoting retail banking because, financial expert from BIDV Mr. Can Van Luc said, it’s become a key part of the banking business. Global financial crises have taught many about the weaknesses and risks involved in wholesale banking, while retail banking has proven advantages in ensuring financial balance and safety.

Clash of the “Titans”

In order to develop securely and stably with favorable growth, Mr. Luc suggests banks focus on expanding their retail banking activities as there are less risks than in wholesale banking, with loans being in smaller packages and the opportunity available to gain a substantial stable cash flow from services provided to individual customers. If developed well, retail banking is not just a stable but also a sustainable source of revenue for commercial banks.

Throughout Asia retail banking operations account for approximately 54 per cent of the total profits of banks. In Vietnam, though no specific figures have been compiled or published, Mr. Luc puts the figure at a modest 30 per cent or so. The potential, then, is significant and banks are expending a lot of effort in getting their fair share.

Among the “Titans” of the banking sector, Vietcombank was the first to enter into retail banking. It’s not only been the pioneer but has also been successful in retaining its lead in the card segment. It plans to expand its retail strategy this year by enhancing its service quality.

While the Titans have their titanic plans, other banks are also adopting strategies to compete for market share. For instance, at its recent annual general meeting Techcombank shareholders approved a business plan oriented at setting retail banking as one of its core portfolios. The bank will focus on building its capacity in developing and providing superior products, with the best service quality possible based on their advanced technologies and remarkable competence in risk management.

At VPBank, meanwhile, an executive emphasized that individual customers have been a core segment in recent times and are very much a part of its long-term development strategy. He believes the strategy has helped the bank record stable growth regardless of the tough times experienced by the market as a whole.

Seeking a larger slice

While he believes banks have invested heavily in the sector, Mr. Luc also thinks they are yet to possess sufficient investment resources to head in the right direction. Therefore, along with rapid growth, the banks may well face challenges in regards to information security and risk management.

To surmount these they need to consider many factors, some of which are essential, such their development strategy, their ability to thoroughly understand customer psychology and behavior, their ability to fully master technology, and their ability to manage risks and influence the market, among others.

Mr. Rahn Wood, Head of the Retail Banking Division at Vietnam International Bank (VIB), sees great potential for growth in Vietnam’s retail market this year. But the market will become increasingly competitive as banks won’t hesitate to outlay more resources in order to develop the sector as revenues from individual customers become more and more attractive. This year Vietnamese customers have been leaning towards financial products relating to education and also basic financial products.

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