As soon as interest rates are almost equalled in most banks after the State Bank of Vietnam (SBV) keeps adamant with the ceiling rate of 14 percent per annum, commercial banks no longer use interest rates as a competitive weapon. Money is flowing out of smaller and less prestigious banks to larger ones. This is time banks are forced to improve their competitiveness rather go into rate races.
Many depositors decide to withdraw their money from small banks to place on bigger ones.
To keep customers, many small banks are lobbying customers enthusiastically, increasing service quality and improve their image in the eyes of customers. In many cases, competitive edge does not always belong to big banks.
On the surface, comparative advantages of large banks are long-time operations, large workforce, transaction points in prime locations, and broad operating networks in combination with other edges like capital sources, cooperation programme-based lending, and other incentives. For this reason, these lenders have the advantage of business prestige. Their capital mobilisation usually prevails that of small banks although their interest rates are a bit lower.
Vietnam now has approximately 100 banks but 80 percent of market share are kept by 12 biggest lenders, including four State-owned commercial banks, namely BIDV, Agribank, Vietcombank and Vietinbank. The State-owned quartet occupies 48.3 percent of total outstanding loans of the entire banking system. Target customers of these lenders are State-owned enterprises. Other in the Group of 12 keeps 37.1 percent. Their traditional customers are usually small and medium-sized enterprises (SMEs). They are also strong at retail banking.
However, there are quiet shifts in the increasingly fierce competition of the banking system. Apart from opening accounts at big banks, they also have accounts at smaller banks. Big banks close books at 4:00 p.m. while small banks serve till 5:00-6:00 p.m., even later, if we are forced to settlement payment to avoid interest penalty," said Ms Hong Hanh, chief accountant of an animal feed company. Besides, the attitude of service staffs at small banks is friendlier and more considerate. Transaction offices of Asia Commercial Bank (ACB) have receptionists who welcome and guide customers when they work with the bank. A few months ago, Standard Chartered caught the public attention when it applies self-penalty mechanism under which it will be self-fined if customers have to wait for more than 8 minutes and the fine will go to charity foundations.
In the past years, banks have quickly expanded their networks with many new branches. Small lenders also open small service offices in residential areas. Their spacious facilities and friendly service attitude are winning the sympathy of customers.
Ms Dang Tuyet Dung, Director of Personal Banking and Financial Services Division, Techcombank, said: Through in-depth customer surveys, Techcombank decides to select two elements, “Service" and "Utilities", as the lodestar for retail banking. These are very difficult service values but this is the best way to bring best service to customers to win their trust and passion.
Mr Tran Anh Tuan, General Director of Maritime Bank, added: “When interest rates are equated, people tend to put their deposits and savings into big banks where they feel more reliable. Apparently, smaller banks will have to struggle harder in this stage but they can take back advantage if they find out appropriate measures to strengthen the trust of customers who are always very careful at choosing a safe place to put their money in.”
Banks consider generating more added values for customers rather than merely strive for profit. For example, Techcombank optimises the value of capital sources of companies with the following aspects: Fastest collection, fastest payment, and most accurate payment. It also maximises sales by investment channels. This will help businesses save borrowing costs for due requests like payment for vendors, debt payment for contracts. This also means improving the quality of banking services.
Banks are designing savings deposit packages that generate most benefits for customers.
Retail banking is also a forefront of competition. Banks introduce many different products and services for customers like business financing, home purchase, car purchase or overseas study lending. Their card products are also diverse. In addition to domestic payment cards, they also issue debit cards, credit cards, international credit cards, co-branding cards for customers and partners.
Banks also frequently launch promotions and customer care programmes. The focus on customer care services rather than marketing investment proves that banks are heading for adding values for customers.
When small banks see that they are weaker than big banks, they will have to find their ways to improve their service quality, bring the sense of comfort and security for customers. They also pay more attention to customer care and consulting. In the long term, this will be a significant advantage. If big banks do not improve service quality, keep old working habits and belligerent attitudes, they will lose market shares to smaller banks.
As soon as interest rate advantages do not exist, small banks are impressively improving their service quality and considering it a new weapon of competition and a condition for sustainable development. Thus, the current advantages of large banks are not necessarily permanent edges for them. Disadvantages of small banks can be turned into motivation to build competitive advantages. The market share of big banks is being dented and it is hard to tell big banks or small ones to be eventual winners. Needless to say, customers - from corporate to individual - will enjoy more benefits from such competition.
Le Minh
Vietnamese
