Forget toasters or even plain, old cash. Vietnam’s bankers are turning to beer, bed sheets, crash helmets and a variety of other unconventional incentives in a fiercely competitive drive to entice new customers.
A local commercial bank outlet with a board showing offered annual interest rates for savings both in Vietnamese dong and U.S. dollars.
Western Bank, one of the country’s small banks, is giving away a large can of German beer for one-month deposit of at least 7.5 million dong ($385). Some of its rivals are offering cars, trips to Europe, and blood pressure monitors – almost anything that will create a brand to stand out in a sea of bland.
“From a marketing point of view, there is very little differentiation – even the names sound the same: VietBank, VietinBank, VietABank, etc.,” Nick Singh, Director of Indochina Capital Advisors in Ho Chi Minh City, wrote in response to questions emailed by CNBC.com. Singh adds, though, that the promotions are not only about raising brand awareness. “The drive is as much a funding initiative as a strategic one. Deposits are the lowest cost source of funding for banks and hence these offbeat incentives.”
Market research suggests Vietnam’s banks have much more to work to do than offering freebies if they are going to get more Vietnamese to open up accounts. There are about 40 state-owned, private and foreign banks operating in the country, and all are vying for the business of a young population that is enjoying a relatively fast improvement in its standard of living. But that social and economic growth is outpacing general knowledge of the financial industry.
“Combined with increased affluence and economic opportunities, the appetite for financial services is likely to grow,” said Alan West, the Associate Director of Financial Research at Nielsen Vietnam in a report last month. “However, many people lack an understanding about financial services products, and firms should not underestimate the importance of education as part of the process of building relationships with new consumers.”
Nielsen surveyed 600 people in Hanoi and Ho Chi Minh City about their financial knowledge and use of banking services. The research firm found that just under half maintained a bank account, less than a quarter owned an ATM or debit card, and only 7 percent said they intended to get a credit card. Those surveyed told Nielsen that lengthy application procedures and burdensome requirements for financial documentation were key barriers to using banking services.
“State-owned banks need to improve their levels of service (for example, to stay open during lunch hours!), while private banks ought to do more customer segmentation and offer niche products to niche sectors (for example, young urban women have different needs than suburban male retirees),” observes Singh of Indochina Capital Advisors.
Vietnam’s banks aren’t doing much better at wooing businesses. In a recent Enterprise Survey by the World Bank, access to finance was named as the main obstacle to business in Vietnam. The poll showed more than 80 percent of Vietnamese businesses obtained financing for investment by their own means — mainly from family and friends — compared to just over 10 percent of businesses who tapped into banks. That significant imbalance, suggests the World Bank, represents a systemic inefficiency that inhibits the growth of business.
Despite that enormous untapped potential in the banking sector, the International Monetary Fund says Vietnam is actually in danger of over-banking, and expects to see significant consolidation in the months ahead. To survive, bankers will need to focus on more than kitschy giveaways, otherwise they might need that German beer themselves to drown their sorrows.
A local commercial bank outlet with a board showing offered annual interest rates for savings both in Vietnamese dong and U.S. dollars.
Western Bank, one of the country’s small banks, is giving away a large can of German beer for one-month deposit of at least 7.5 million dong ($385). Some of its rivals are offering cars, trips to Europe, and blood pressure monitors – almost anything that will create a brand to stand out in a sea of bland.
“From a marketing point of view, there is very little differentiation – even the names sound the same: VietBank, VietinBank, VietABank, etc.,” Nick Singh, Director of Indochina Capital Advisors in Ho Chi Minh City, wrote in response to questions emailed by CNBC.com. Singh adds, though, that the promotions are not only about raising brand awareness. “The drive is as much a funding initiative as a strategic one. Deposits are the lowest cost source of funding for banks and hence these offbeat incentives.”
Market research suggests Vietnam’s banks have much more to work to do than offering freebies if they are going to get more Vietnamese to open up accounts. There are about 40 state-owned, private and foreign banks operating in the country, and all are vying for the business of a young population that is enjoying a relatively fast improvement in its standard of living. But that social and economic growth is outpacing general knowledge of the financial industry.
“Combined with increased affluence and economic opportunities, the appetite for financial services is likely to grow,” said Alan West, the Associate Director of Financial Research at Nielsen Vietnam in a report last month. “However, many people lack an understanding about financial services products, and firms should not underestimate the importance of education as part of the process of building relationships with new consumers.”
Nielsen surveyed 600 people in Hanoi and Ho Chi Minh City about their financial knowledge and use of banking services. The research firm found that just under half maintained a bank account, less than a quarter owned an ATM or debit card, and only 7 percent said they intended to get a credit card. Those surveyed told Nielsen that lengthy application procedures and burdensome requirements for financial documentation were key barriers to using banking services.
“State-owned banks need to improve their levels of service (for example, to stay open during lunch hours!), while private banks ought to do more customer segmentation and offer niche products to niche sectors (for example, young urban women have different needs than suburban male retirees),” observes Singh of Indochina Capital Advisors.
Vietnam’s banks aren’t doing much better at wooing businesses. In a recent Enterprise Survey by the World Bank, access to finance was named as the main obstacle to business in Vietnam. The poll showed more than 80 percent of Vietnamese businesses obtained financing for investment by their own means — mainly from family and friends — compared to just over 10 percent of businesses who tapped into banks. That significant imbalance, suggests the World Bank, represents a systemic inefficiency that inhibits the growth of business.
Despite that enormous untapped potential in the banking sector, the International Monetary Fund says Vietnam is actually in danger of over-banking, and expects to see significant consolidation in the months ahead. To survive, bankers will need to focus on more than kitschy giveaways, otherwise they might need that German beer themselves to drown their sorrows.
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