Current Status of Electronic Banking Service Deployment in Vietnam and Overview of Bidv - Bac Giang Branch

CHAPTER 2

CURRENT STATUS OF DEVELOPMENT OF ELECTRONIC BANKING SERVICES AT BIDV - BAC GIANG BRANCH

2.1. Current status of e-banking service implementation in Vietnam and Overview of BIDV - Bac Giang Branch

2.1.1. Current status of e-banking service implementation in Vietnam

Developing e-banking services is an inevitable trend in the context of international economic integration. Digital payments have not only developed since the Covid-19 pandemic, but for quite a long time, in many countries around the world, not using cash has become a strongly promoted payment trend.

In Vietnam, since 2006, the State Bank of Vietnam (SBV) has submitted to the Prime Minister for approval the Project on non-cash payments. This project has been adjusted to suit the development of the economy and the development of non-cash payment technology. In recent times, non-cash payment activities in our country have been expanded in both scale and quality; there has been strong progress with many new, convenient and modern payment products and services based on the application of information technology.

In 2015, the NAPAS card system processed more than 90% of automatic teller machine (ATM) switching transactions, while the figure in 2019 was only about 40%. In the first months of 2020, when the Covid-19 epidemic occurred and especially during the period of social isolation, electronic payment activities took place smoothly and safely, payment via the internet channel increased by nearly 50% in transaction value while payment via mobile phone channel increased by more than 160% compared to the same period in 2019. These figures show that the large shift from ATM cash withdrawals to payment transactions in the past time has affirmed that the policies and guidelines on non-cash payments of the Government and the State Bank are on the right track.

In recent years, the technical infrastructure and technology serving non-cash payments in Vietnam, especially electronic payments, have been invested in, improving quality and promoting efficiency. Banks use

Advanced and modern payment technology, serving well for providing new services and non-cash payment methods.

The technical infrastructure serving card payments has been improved in quality, with focused investment and development; ATMs have been installed in large numbers; Card payment acceptance machines (POS) have now been installed in most establishments, distribution chains, retail stores, large hotels, and are gradually expanding to medical facilities, hospitals, schools, etc. and have grown steadily over the years, with an average annual increase of about 17-18%.

Commercial banks have provided more payment services based on bank cards; focused on improving the quality of card services, focusing on increasing the safety of bank cards.

According to the Payment Department (SBV), as of May 2020, the country had about 19.2 thousand ATMs, more than 277 thousand POS, about 78 commercial banks deploying payment services via Internet banking, 49 commercial banks providing payment services via mobile phones, 30 commercial banks and 6 organizations providing intermediary payment services coordinating to deploy payments with about 80 thousand QR Code points. The SBV has licensed 34 organizations to provide intermediary payment services, including e-wallet services (29); electronic payment gateway services, collection and payment support (28), electronic money transfer services (9).

Commercial banks are interested in, focusing on investing, updating and developing internal payment systems, with advanced techniques and technologies, centralized management, thereby allowing commercial banks to provide modern, diverse and convenient payment services and means, expanding the scope of supply nationwide. New and modern technologies in payment such as: Applying fingerprint authentication, facial recognition, using quick response codes (QR Code), encrypting card information, contactless payments, mPOS technology... are researched, cooperated and applied by banks, especially payment by QR Code associated with promoting payment via mobile phones in line with the development trend in the world and consumer behavior.

Statistics show that the transaction value through the interbank electronic payment system in the first 3 months of 2020 increased by over 21% compared to the same period in 2019. The total number of transactions through the financial switching and electronic clearing system

In the first 3 months of 2020, the number of transactions increased by 81.32% and the value increased by 145.32% compared to the same period in 2019. In the first 20 days of April 2020, the average transaction value through the interbank electronic payment system increased by 8.85% compared to the same period in 2019.

Although some results have been achieved, the development of e-banking services still has some limitations, namely: The infrastructure for digital payments has developed strongly in recent times, but is still not synchronized. Up to now, the ATM/POS system is still mainly concentrated in 5 big cities: Hanoi, Ho Chi Minh, Da Nang, Hai Phong, Can Tho, while the number of ATM/POS in small cities and rural areas is still limited.

Transactions via ATMs are mostly for cash withdrawals; the rest are for transfers and payments. Digital payment infrastructure on mobile phones, electricity, water, television, telephone, internet bills, insurance, personal finance, public administration... has been deployed but the scope is not commensurate with the market potential.

In addition, the connection between the card systems of banks is not really perfect. In addition, security incidents are also a major limitation of electronic banking services, in many cases customers have had their data stolen, fake cards made, money withdrawn illegally at ATMs or have to pay credit card debts that customers did not pay.

2.1.2. Overview of BIDV - Bac Giang Branch

2.1.2.1. History of establishment and development of BIDV - Bac Giang Branch

BIDV Bac Giang branch, formerly known as Bac Ninh Construction Bank, was established under Decree No. 233-ND-TC-TCCB dated May 27, 1957 of the Ministry of Finance, in charge of both Bac Ninh and Bac Giang provinces. In 1981, it was renamed Ha Bac Branch of Investment and Construction Bank. On December 20, 1996, the Chairman of the Board of Directors of the Bank for Investment and Development of Vietnam issued Decision No. 265-QT/TCCB on the dissolution of Ha Bac Branch of Investment and Development Bank to establish Bac Giang and Bac Ninh Branches of Investment and Development Bank. Bac Giang Province Investment and Development Bank was re-established and took over all activities of Ha Bac Investment and Development Bank. In 2012, it was officially renamed Bac Giang Branch of Joint Stock Commercial Bank for Investment and Development.

Some basic information:

Full name: Joint Stock Commercial Bank for Investment and Development, Bac Giang branch English name: Bank for Investment and Development of Viet Nam – Bac

Giang Branch

Abbreviation: BIDV Bac Giang

Address: No. 02, Nguyen Gia Thieu, Tran Phu Ward, Bac Giang City, Bac Giang Province

Date of establishment: 01/01/1997

2.1.2.2. Organizational structure of BIDV - Bac Giang Branch

The branch is headed by the Board of Directors, which manages and decides on personnel issues within the apparatus according to the authorization of BIDV Bank. Under the Board of Directors, it is divided into separate functional blocks as follows: Customer management block, risk management block, operations block, internal management block and affiliated blocks.

BIDV Bac Giang currently has 06 affiliated transaction offices including:

+ Le Loi Transaction Office: 345-347 Le Loi, Hoang Van Thu, Bac Giang City,

+ Ly Thai To transaction office: 97 Ly Thai To, Tran Phu, Bac Giang city

+ Luc Ngan Transaction Office: 20 Truong Chinh Area, Chu Town, Luc Ngan District, Bac Giang

+ Luc Nam Transaction Office: 462 Binh Minh Street, Doi Ngo Town, Luc Nam District, Bac Giang.

+ Tan Yen Transaction Office: 91 Pho Moi, Cao Thuong Town, Tan Yen District, Bac Giang.

+ Viet Yen Transaction Office: 598 Than Nhan Trung, Bich Dong Town, Viet Yen District, Bac Giang.

Figure 2.1. Organizational structure model of BIDV Bac Giang

(Source: Internal Management Department, BIDV Bac Giang)

2.1.2.3. Business performance of BIDV - Bac Giang Branch

a. Capital mobilization activities

The capital of BIDV Bank, Bac Giang Province branch is basically the same as other commercial banks, mainly mobilized from outside, mainly through deposits, in some special cases to meet the liquidity needs of BIDV Bank, Bac Giang mobilized from other credit institutions.

Table 2.1: Capital mobilization activities of BIDV Bac Giang

Target

Value (Billion VND)			Compare
2018	2019	2020	2019/2018		2020/2019
			Increase/decrease (billion VND)	Rate of increase, decrease (%)	Increase/decrease (billion VND)	Rate of increase, decrease (%)
Capital raising	3,594	4,313	4,399	719	20.01	86	1.99
Vocabulary financial regulation	932	951	985	19	2.04	34	3.58
Activity from business career	264	524	537	260	98.48	13	2.48
Residents' Activity	2,398	2,838	2,877	440	18.35	39	1.37

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• Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015 zt2i3t4l5ee zt2a3gsnon-credit services, joint stock commercial bank zt2a3ge zc2o3n4t5e6n7ts At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income. Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015 Unit: Billion VND 140 120 100 80 60 40 20 0 63.3 80.34 89.29 110.08 131.99 2011 2012 2013 2014 2015 Profit before tax (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services". 2.2. Current status of non-credit service development at BIDV Tien Giang. 2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times. Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,... 2.2.1.1. Payment services: In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc. Chart 2.3. Net income from payment services in the period 2011-2015 Unit: Million VND 6000 5000 4000 3000 2000 1000 0 3922 4065 4720 5084 5324 2011 2012 2013 2014 2015 Net income from payment services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment. 2.2.1.2. Treasury services: BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17]. Chart 2.4. Net income from treasury services in the period 2011-2015 Unit: Million VND 350 300 250 200 150 100 50 0 105 122 309 289 279 2011 2012 2013 2014 2015 Net income from treasury services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services. 2.2.1.3. Guarantee and trade finance services: BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance. Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015 Unit: Million VND 14000 12000 10000 8000 6000 4000 2000 0 5193 5695 2742 3420 8889 3992 11604 12206 5143 5312 2011 2012 2013 2014 2015 Net income from guarantee services Net income from Trade Finance (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area. are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future. 2.2.1.4. Card and POS services: As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services. In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system. Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments. Chart 2.6. Net income from card services in the period 2011-2015 Unit: Million VND 3500 3000 2500 2000 1500 1000 500 0 687 1023 1547 2267 3104 2011 2012 2013 2014 2015 Net income from card services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25]. Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area. Unit: Machine STT Bank name Number of ATMs Cumulative number of ATM cards POS machine 1 BIDV Tien Giang 23 97,095 22 2 BIDV My Tho 7 21,325 0 3 Agribank Tien Giang 29 115,743 77 4 Vietinbank Tien Giang 16 100,052 54 5 Dong A Tien Giang 26 97,536 11 6 Sacombank Tien Giang 24 88,513 27 7 Vietcombank Tien Giang 15 61,607 96 8 Vietinbank - Tay Tien Giang Branch 6 46,042 38 (Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21]) Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6). div.maincontent .content_head3 { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: bold; text-decoration: none; font-size: 14pt; } div.maincontent .p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent .s1 { color: black; font-family:"Courier New", monospace; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; } div.maincontent .s2 { color: black; font-family:"Times New Roman", serif; font-style: italic; font-weight: normal; 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• Current Status of Retail Banking Services Development
• General Assessment of the Current Development Situation of Electronic Banking Services in Vietnam
• Current Status of Ownership Structure and Performance of Vietnam's Banking Industry
• According to you, which electronic service distribution channel has the most development potential in Vietnam today: ATM, Pos, Internet Banking, Mobile Banking?

(Source: BIDV Bac Giang's business performance summary report)

Looking at the capital mobilization situation table of BIDV Bac Giang Bank, we can see the strong growth of capital mobilization activities. The total mobilized capital at the end of the period has increased rapidly over the years. In 2019, the mobilized capital balance increased by 719 billion VND to 4,313 billion VND, an increase of 20.01% compared to 2018. In 2020, the mobilized capital balance increased by 86 billion VND to 4,399 billion VND, an increase of 1.99% compared to 2019. The reason why BIDV Bac Giang's capital mobilization grew slowly in 2020 was due to the impact of the Covid-19 epidemic on all sectors of the economy, including the banking sector. The branch has proactively exploited capital mobilized from the population, because this is a cheap and highly stable source of capital.

b. Credit activities

Outstanding credit balance at BIDV Bac Giang Branch continuously grew in the period 2018 - 2020, from VND 4,063 billion in 2018 to VND 5,317 billion in 2020, showing that the branch's credit operations are increasingly expanding.

Table 2.2: Credit activities of BIDV Bac Giang

Target

Value (Billion VND)			Compare
2018	2019	2020	2019/2018		2020/2019
			Increase, decrease (Ratio) copper)	Rate of increase, decrease (%)	Increase, decrease (Ratio) copper)	Speed ​​of increase and decrease (%)
Total outstanding	4,063	4,754	5,317	691	17.01	563	11.84
Short limit	2,051	2,336	2,743	285	13.90	407	17.42
Central, long term	2.012	2,418	2,574	406	20.18	156	6.45

(Source: BIDV Bac Giang's business performance summary report)

By term, both short-term and medium- and long-term debt of the branch increased. However, the growth rate of short-term debt was faster than that of medium- and long-term debt in the period 2019-2020. The ratio of medium- and long-term debt of BIDV Bac Giang is approximately 49%, higher than the system level (38.46%). The reason is that BIDV Bac Giang provides long-term loans to a number of manufacturing enterprises such as Newwing Interconnet Technology Bac Giang; S-Connect BG Vina; Gigalane; Jeil Tech;... The increase in medium- and long-term debt with a high proportion in the total debt will cause the branch's credit risk to increase.

c. Other service activities

In addition to the two main activities of capital mobilization and lending, BIDV Bac Giang has also focused on developing service activities and achieved some positive results.

Table 2.3: Service activities of BIDV Bac Giang

INDICATORS

2018		2019		2020
Fees collected (Million) copper)	Proportion (%)	Fees collected (Million) copper)	Proportion (%)	Fees collected (Million) copper)	Proportion (%)
Pay domestic and international	3,509	13.3	4,298	11.37	4,728	10.61
Warranty service lead	15,226	57.9	26,841	71.01	28,905	64.89
Net fee revenue credit	2,641	10	1,218	3.22	2,510	5.63
Business foreign currency	1,629	6.2	1,063	2.81	1,458	3.27
Other services	3,286	13	4,377	12	6,943	16
Total translation net crop	26,291	100	37,797	100	44,544	100

(Source: BIDV Bac Giang's business performance summary report)

Net service revenue in 2018 reached approximately 26 billion VND, accounting for more than 40% of the service revenue market share in the area. Continuing the growth momentum, in 2019, the branch's net service revenue reached 38 billion VND, corresponding to a very high growth rate of 43%. In 2020, net service revenue increased to more than 44 billion, an increase of nearly 18% compared to 2019. This shows that BIDV Bac Giang's business and service provision situation has made many significant strides.

However, in the service revenue structure, traditional banking products and services continue to promote their advantages with high net revenue, accounting for over 50% of the total service revenue of the Branch. Modern banking services have developed, but the collected fees are still modest.