Mr. Phan Huy Khang, Vice Chairman and General Director of Sacombank, tells VET of what's needed to be succesful in Vietnam's retail banking market.
■ Vietnam’s retail banking market has been attracting a lot of attention from local banks over the last five years. How would you assess the development of local banks in retail banking and how do you view the potential of the market over the next few years?
In recent years local banks have made huge steps forward in developing banking services, with the retail banking segment becoming a key focus nowadays. This can be seen through the development strategies of local banks in the last two years, with about ten setting a target of becoming the leader in different banking sectors. Many banks have announced higher profits in retail banking and restructured their management team towards bolstering retail banking.
In 2015 Vietnam’s economy is recovering, with free trade agreements taking effect that will encourage more foreign banks to invest in Vietnam. The restructuring of small and weak banks will help the banking sector develop more stably. These factors will increase competitiveness in retail banking.
■ What are the opportunities and threats for banks when moving into retail banking?
There are many opportunities Vietnam’s banks can take advantage of in this market. First of all, Vietnam’s economy in the long term will be stable, creating a platform for financial institutions to develop, and the deeper integration into international financial markets presents a chance for Vietnam’s banks to interact with modern banking products and services in the international market. Secondly, the habits and behavior of consumers is changing towards non-cash payments, pushing up demand for retail banking services. Thirdly, the younger generation prefers modern products and services, which creates a great opportunity for e-banking services. Fourthly, the attention of State agencies on microfinance also helps banks to develop products and services that maximize their networks, to serve customers.
However, there are some threats posed as well. The requirement of the Master Plan on Re-organizing Financial Institutions force local financial institutions to be more active in meeting international standards and reducing operational risks. Secondly, under the WTO Vietnam must remove all technical barriers in the banking sector to make it more attractive to foreign banks, which will make the market more competitive, especially as foreign banks form joint ventures and cooperation with local banks becomes being better understood. Foreign banks and their developed management systems, high quality products and services, and experience will have huge advantages compared to local banks.
■ In the context of all banks focusing on retail banking, competition is unavoidable. How can local banks attract more customers and increase their market share?
In order to increase their competitive capacity and develop sustainably in the retail market, local banks must improve all of their activities, in particular increasing the quality of their products and services and customer care, selecting “core-banking” as a competitive advantage to differentiate themselves from others, applying new technology for payment methods and diversify service providers, maintaining their existing market share, and paying more attention to expanding their markets in terms of competing with foreign banks.
■ What are the most important criteria in being successful in retail banking?
In order to succeed in retail banking the most important factor is to truly focus on customers, recognizing their needs and making sure the bank helps customers in the best way possible. Banks also need to set an organized strategy for developing products and services, which involves not only providing customer services but also providing practical financial services. Moreover, banks must always be creative in developing modern products and services. When telecommunications develop the internet is more widely used and the trend towards non-cash payments will develop, with e-banking certain to replace the habit of using cash.
■ Can you tell us about the achievements of Sacombank in retail banking in Vietnam? What contribution does retail banking revenue contribute to total revenue?
With a strategy of being the leader in retail banking, Sacombank has recorded some significant achievements. It now serves around 4 million individual customers, which is the result of ceaselessly developing and investing in products and services and winning customer trust through the various rewards it has received recently, such as Bank of the Year in Vietnam 2014 from The Banker, Best Domestic Bank in Vietnam 2014 from The Asset, Leadership in Debit Payment Volume 2014 from Visa, and Best Emerging Market Bank 2014 from Global Finance.
Retail banking has contributed over 90 per cent of total mobilized capital, 70 per cent of outstanding credit, and over 80 per cent of total revenue.