Banks in Vietnam need to address the almost non-existent understanding among most of the population about the products and services they offer.
Banks are now playing a more active role in consumer saving behaviour. In 1999 only one in ten urban consumers were saving money through banks, with the vast majority keeping their savings in nooks and crannies at home. Fast forward to 2014 and that figure is now one in two urban consumers and close to one in three rural consumers. However, despite this increased use of banks, the breadth and depth of understanding of banks and banking services among consumers reveals a market still largely in its infancy.
According to TNS’s VietCycle 2014 Banking & Insurance report, a study carried out among 1,000 urban and rural consumers nationwide aged 20-65, ATM cards remain the only product with any footing in the market, with six in ten consumers owning one nationwide, largely through VietCombank, Agribank and Dong A Bank, who together make up 78 per cent of all ATM cards in the market. Looking beyond basic ATM cards, the vast majority of banking products and services available to consumers remains unheard of, much less used.
Despite a strong push from banks to drive growth of credit cards and debit cards in Vietnam, only one in four urban consumers and one in ten rural consumers have even heard of credit cards, and much less of debit cards. Conversion from awareness to use is even lower, with only 5 per cent of urban consumers owning a credit card.
Nationwide, around half of consumers have heard of savings accounts and around one in three are aware of deposit accounts, though their actual understanding of each is likely to vary. Meanwhile, personal loans, mortgages and international money transfer services remain all but unknown to most consumers.
There seems to be a disconnect between what banks are offering and what is being absorbed and understood by consumers. While brand building is important in terms of creating social and emotional connections with consumers, there is a tendency to focus too much on brand building and not enough on the actual products and services being offered and, most importantly, the differences and benefits that these products and services can bring to consumers. Creating an image of trust and assurance are critical for banks, however, and these are cost of entry factors so shouldn’t be overstated. Indeed, a bank’s image ranked as least important when selecting a bank, after bank services (ATM networks, customer service, etc.), banking fees, and the selection of banking products on offer. It is critical to remember that most Vietnamese consumers are still very price conscious and this translates quite strongly into bank product selection. The question that banks need to answer for consumers is how do they benefit financially and what can they save to be able to spend.
When individual products are advertised to consumers, they tend to lack descriptions and in some cases simply state they have the product. The disconnect occurs in the lack of communication of product use, benefit and description to consumers as banks make unjustified assumptions that their present and potential consumer base actually knows what these products are used for and deliver. Again, looking at credit cards, the study has shown one of the key barriers to use is that consumers simply don’t know anything about the product. Another large portion of non-users claim they don’t need it, which basically is the same as saying “I don’t understand the benefit”.
It is also important to observe that some of the old paradigms of money in Vietnam are changing. What has traditionally been a cash-based society is slowly evolving with increased card use, and barriers to using cards are nowadays more about lack of information, as opposed to preference for cash, meaning that consumers are becoming more and more open to the idea of cards. Secondly, where managing the household finances is traditionally seen as in the realm of women, there is now a clear trend of males becoming more and more involved. In fact, one in two males now manage the household finances among affluent households, versus 15 years ago where the finances in seven in ten households were controlled by the matriarch.
As banks shift their focus of operations more and more towards individual consumers, delivering messages and communication that are in line with current understanding and sophistication of banking as well as responding to the changing paradigms around money and finances will be critical for the growth of retail banking in Vietnam. Thus, banks should better understand consumer needs and focus on a few key products and push education and understanding of the benefits and deliverables of these products in an effort to entice new users to these products and services.