Banks to profit from trust factor unconditional trust banking bonanza

Considering Vietnam local banking institutions crashed in the late 1980s, this is truly a tall feat. In a recent survey conducted by TNS Vietnam, known as VietCycle, bank account ownership has risen from a mere 12 per cent in 2001 to 35 per cent in 2006. Though these figures cover the total urban population of Hanoi, Ho Chi Minh City, Danang and Can Tho, it is clear to see that the way in which Vietnamese save their hard earned cash is changing rapidly. Gone are the days of converting money into gold and or hard currency. However, as they say old habits are hard to break.

Today, 63 per cent of all urbanites with savings are still keeping their money in a safe place, whether under the mattress, or in their own personal home safe. As banks and credit institutions continue to open up in Vietnam at an alarming rate, these institutions shall do all in their powers to entice more and more customers to come through their doors and store their wealth in their vaults.

So, the question arises, which of these banks has the best head start on becoming Vietnam market leader? The survey results show that Vietcombank has double the top-of-mind (ToM) awareness of all banks in Vietnam, both local and foreign, with 31 per cent of consumer spontaneous recognition. In Hanoi, Vietcombank ToM is even stronger with almost half of all respondents mentioning the brand as their first recall (46 per cent).

At a somewhat distant second in terms of Top of Mind awareness are Agribank, EAB and ACB banks, each with 13 per cent to 14 per cent of spontaneous awareness. In Ho Chi Minh City ACB is the leader with respect to ToM.

It comes as no surprise that Vietcombank is also the leading bank with respect to the measure of bank used most often with 23 per cent of the total banking share in Vietnam. However, both Agribank and EAB are close behind in the total share of banking service users. However, each market measured in the survey has a different banking leader. For example, Ho Chi Minh City has two banks tied as the banks used most often in Vietcombank and ACB, while Hanoi is led by Vietcombank again, but closely followed by Agribank. Danang most used banks are the Agribank and the EAB, while Can Tho is the only market where one bank, in this instance the EAB, has a clear and dominant position in terms of most used with over 30 per cent of those surveyed mentioning it as their most used bank.

When dissecting the profile of bank users, the obvious potential consumer is the wealthier consumer. At present, of the four cities surveyed, the income class AB ($501 household income per month and above) has 50 per cent penetration with respect to using banks. This segment of income class today represents some 20 per cent of Vietnam urban population. The second most users of banking services are the middle income class or the CD income class ($251-500 household income per month). This segment represents 55 per cent of urban households and has a 36 per cent banking usership rate. Finally, the lower income class, EF, which equates to about a quarter of Vietnam urban population, has only a 20 per cent usership.

Most banks that were mentioned in the survey have similar products and banking services, but yet each bank appears to appeal to certain consumers for their specific banking offers. The two most used services for most of Vietnam banking consumers are clearly ATMs (automated teller machines) and savings accounts. Other services such as term deposits, credit cards and money transfers vary greatly between institutions.

The survey also highlighted that banking services will continue to grow in 2007. It is estimated that an additional 9 per cent to 10 per cent growth in usage of the next 12 months. Thus, an estimated 44 per cent of all urban Vietnamese will be utilising one service or another in the near future. When looking at which bank would receive the lions share of these new consumers, Vietcombank, followed by Agribank, EAB and ACB seem to be the institutions of choice, making up close to 80 per cent of preference.

Outside of availability and awareness of preferred financial institutions in Vietnam, three attributes appear to be driving consumer choice when selecting a bank. They are in order of importance, premium and prestige, trustworthiness and reliability and feelings of security. Thus, a banks success and trustworthiness are the true indicators of consumer sentiment and ultimately drive banking selection.

In an effort to cash in on the banking bonanza occurring in Vietnam today, both local and foreign banks need to pay more attention to the needs and associated importance that these new banking consumers are looking for to ensure that their vaults continue to grow along with Vietnamese consumers wealth.

Source: Vietnam Investment Review No. 792
December 18-24, 2006