Mr. Pham Hong Hai, General Director of HSBC Vietnam, shares his thoughts on the country's retail banking system.
Along with economic development the living standards of Vietnamese people have improved greatly and retail banking has gradually become one of the most important segments for commercial banks in recent years. The competition has made banks work ceaselessly to develop products and services and technology to adapt to the greater requirements of customers.
Taking e-banking and credit cards as examples, people now make use of payments via card and conduct transactions via the internet, which mean commercial banks need to invest in technology.
There is still a long road ahead for the banking sector, especially in retail banking, when the world is changing every day. Vietnam has a population of 90 million people and, as at mid-2014, only 20 per cent had a bank account and while almost 80 million debit cards had been issued the number of credit card issued was negligible.
Retail banking still holds great potential for banks, especially given that Vietnam’s population is young and the desire to own fancy new things and gadgets adds to its potential.
Together with the recent economic recovery, the opportunities for banks to participate in the retail banking market is huge, as people have more and more demands that require support from banks, such as buying their first home or saving for their children’s education or for retirement, and the demand for banking services that help with modern life, like credit cards, easier payments, and internet banking are also higher. There are major opportunities for banks in the retail banking segment.
But there are difficulties too. The cash culture is still alive and well in Vietnam. In the first six months of 2013, 85 per cent of bank card transactions were cash withdrawals. Knowledge and awareness among consumers about banking products and services remains modest and requires banks put more effort into information provision.
At HSBC, education and the spreading of knowledge about financial planning and the bank’s basic products have long been our focus.
Challenges for banks also include the degree of competitiveness in the market as well as the need to continually invest in branches and information infrastructure that a growing retail banking segment brings. Difficult economic conditions leading to bad debts are also a challenge being experienced by some banks.
Financial crime is also an issue in need of a solution, and banks must have appropriate management mechanisms and effective risk prevention strategies.
I believe that to succeed in Vietnam’s retail banking segment banks must grasp the changing trends in the market, understand the needs of customers, and be quick in terms of providing the products and services that best serve each stage of a customer’s life. Fighting financial crime is also important, as I mentioned, and the quality of customer service is key in obtaining and retaining a competitive edge.