Confronting with the adverse effects of the COVID-19 pandemic, the banking industry still needed to increase investment in technology to ensure payment security and to try to reduce service fees for customers.
However, in that effort, banks were facing a ‘bottleneck’ that could not be solved alone, needing the sharing from partners to contribute to making the policy of fee exemption and reduction for customers most effective.
Continual exemption or reduction of service charges
In the period when the whole country was working together to prevent and combat the COVID-19 epidemic, the banking industry had continuously adjusted to reduce the service fee and expand the object of service fee reduction to support customers. The State Bank of Vietnam (SBV) had twice directed the Vietnam National Payment Joint Stock Company (Napas), commercial banks and branches of foreign banks, to exempt and reduce payment service fees; improve service quality to serve your online payment needs best.
At the same time, SBV issued Circular No. 04/2020/TT-NHNN, adjusting a 50 percent reduction of inter-bank payment transaction fees via inter-bank electronic payment system to support credit institutions to continue reducing expenses of interbank money transfer service for people, businesses. In particular, credit institutions applied free policies for money transfer transactions in support of prevention and control of COVID-19, drought, and saltwater intrusion through bank accounts.
The fee reduction had a significant impact on revenue. Still, statistics showed that up to then, 100 percent of banks had confirmed to carry out the fee exemption/reduction policy for customers for small value transactions (from 2 million dong and less). Moreover, about 63 percent of customer payment transactions via interbank payment transactions 24/7 via NAPAS were entitled to free or reduced fees.
It was estimated that the total amount of payment service fees that banks exempted or reduced for customers by the end of 2020 after two fee reduction periods was about 1.004 trillion dong.
Increasing investment in technology
Many banks had made tremendous investments in technology, increased their products and services with high levels of knowledge and technology. This investment was to carry out digital banking strategies to increase income from service fees and gradually reduce their dependence on credit.
The reality showed that to deploy the service, in addition to the cost of innovation and upgrading investment for technology, banks were still having to pay the costs to the service provider. The expenses included transfer fee to return the intermediary payment for interbank money transfer transactions; message charges paying to network operators in the process of using the service such as messages of fluctuations in the account balance, card spending, transaction authentication, notification of loan repayment schedule/card statement. Besides, banks also had to pay the costs to maintain the operation of the system.
Nguyen Hong Van, director of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s Card Centre, said that in the card service segment, banks had to invest a lot, with enormous costs for the infrastructure items of the card transaction processing system, the expense to operate and maintain ATM/card system (EDC).
Especially in the current period, banks also had to invest more in upgrading ATM/EDC system, processing system, multi-layer security system to comply with the requirements from the regulatory authority for assurance of service quality and safety for card payment transactions as well as to match the new and high-tech payment trends.
Need the sharing of partners
Banks had tried to reduce service fees for customers, but in that effort, there was a challenge that banks could not solve alone. While issuance and payment sales plummeted due to the negative impact of the COVID-19 epidemic, banks had to pay the message costs three times higher than regular text messages. Besides, there were many types of fees from Visa, MasterCard, both collected by the number of transactions and by the transaction turnover, leading to the situation of overlapping fee collection with the same transaction.
According to banks, the fee collecting of Visa and MasterCard indirectly affected card users when many shops and restaurants tried to refuse payment of cards to ask customers to pay cash or chargeback to customers. That somewhat limited the process of promoting cashless payments.
To accompany and share difficulties with customers, banks also needed to cooperate with the network and international card organisations through reducing texting and transaction fees. This would not only help ease the burden on banks but would also bring practical benefits to customers of both parties.
Recently, the Vietnam Banking Association had sent a written request to the Ministry of Information and Communications to direct telecommunications businesses to consider reducing message rates to the level similar to regular rates, which was applicable for individual messaging services. Or, at least, there should be a 50 percent discount on messaging rates currently applied to banks. With Visa and MasterCard, the Banking Association recommended that the two organisations had a policy of exemption and reduction of fees for local banks.
Dao Minh Tuan Chair of Vietnam Bank Card Association, said that currently international cards bearing the brand Visa, MasterCard accounted for more than 70 percent of the market. Thus, if Visa, MasterCard reduced fees, banks would have conditions for a fee reduction for payment acceptance points, in turn, promoting non-cash payment.
