Conversion of revenue structure becomes a trend of commercial banks when credit is forecasted to be more tightened.
When the financial market is developing in the modern trend, consumers also tend to update the new and show interest in using payment cards, saving money online, shopping online, etc. Consumers are changing so banks have the basis to diversify services, while also reduce costs for customers services at low cost.
In fact, in the past time, banks have opened many modern financial services since when developing the payment segment, especially non-cash payment, it provide banks with many advantages. In particular, when people leave more money in their accounts for making payment, banks can mobilises a large amount of liquid deposit with lower costs for flexible usage in its business activities. Consumers also benefit when reduced costs will enable banks to support fees for technology financial users. When payment services are used by consumers as a habit, it is also when the bank earns a lot of profits from cross-selling business activities such as connecting with retailers, enjoying fees from selling insurance via bank (bancassurance), etc.
A leader of Hochiminh City Development Joint Stock Commercial Bank (HDBank) said that HDBank’s income from services only contributed a low proportion in 2018, in which new growth mainly focused on bancassurance. Meanwhile, HDBank found that there is still a lot of potential to exploit in services segment such as credit cards, electronic payments, guarantee, etc. Therefore, this leader expects HDBank will continue to lead in service income growth with 70 percent growth in 2019.
Also expected to promote payment services in 2019, Military Joint Stock Commercial Bank (MB) will cooperate with an experienced international financial partner to promote card payment, guarantee and bancassurance. MB is also aiming to increase service income to 50 percent in 2019.
At the same time, Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) also said it is upgrading the bank’s high-tech core banking system to enhance it strong and safe enough to serve the upcoming retail banking strategy of the bank. According to VietinBank’s representative, the bank’s central goal is to improve the capability of developing bank card, insurance, transaction and securities products for small and medium enterprises (SME) and individual customers.
Almost all large and small banks in the country are pursuing the development strategy to stick to the payment segment. A financial expert assessed that in the near future, commercial bank profits will be largely contributed by the revenue from the service segment instead of relying on credit activities and that will make the banking industry’s operation healthier. This becomes even more important for banks when the State bank of Vietnam (SBV) tends to tighten credit growth.
However, banks rushing into the service segment will also create fierce competition. The advantage is no longer falling into big banks, but on the contrary, it will be the time for small and medium-sized banks to boom in the payment segment when the Basel II standard due date is close.
Typically, since 2018, banks, although small in size, are having many advantages when pursuing Basel II standards. Accordingly, some banks have been operating effectively based on this international governance standard and minimising risks in banking operations. Some banks have been allowed by SBV to apply Circular 41, including the cost and implementation of data warehouse, the data management framework and the automated capital adequacy ratio (CAR) calculation tool. Changes in the bank’s business strategy and operation as well as the need for staff training on regulations and new systems have been well implemented by banks, so in the near future, banks will quickly get many new successes from payment services.
