Darin Williams, Managing Director, Nielsen Vietnam
With inflation and the cost of food, fuel and other basic necessities taking a bigger share of Vietnamese consumers’ wallets, it might not seem to be the best time for the country’s banks to think about expanding. But despite the fairly cloudy economic environment, Vietnamese continue to try to save money, whether for their own security, their children’s education or for the future, according to the new edition of the Nielsen Vietnam Personal Finance Monitor. With the number of Vietnamese consumers using banks is still relatively low, banks have ample opportunitiy for growth – provided they communicate with consumers in ways that resonate with them given the current mood.
Consumers are aware of the basic services offered by banks such as transactional and savings accounts, ATM/debit cards and loan services, but the number of people actually using them is limited. Just 32 percent said they maintain a transactional account and 31 percent use an ATM/debit card. Only 12 percent use banks for deposit accounts.
When it comes to other services, consumer awareness and usage drop significantly. For example, fewer than half (42%) are aware of credit card services, and they are used by just one percent of Vietnamese consumers. If the experiences of other countries in the region serve as an example, however, it’s just a matter of time before credit cards take off. In Indonesia, which has seen rapid economic growth like Vietnam has, credit card usage stands at five percent. In Hong Kong, 60 percent of consumers currently use one or more credit cards. Plastic has only been popular in Indonesia for the past 10 years, but the number of cards has been increasing at an average rate of 10 percent, while the value of transactions charged has gone up 28 percent each year. The grocery channel is the top place Indonesians swipe their cards, which are used primarily for routine household and personal expenses.
But banks in Vietnam are going to have to do some work to increase awareness and use of credit cards: over half the market does not fully understand what a card is and for those who do, there are some significant barriers to entry. More than one-third (36%) said they don’t see a need for one, while 19 percent were not knowledgeable about how they work. Another 18 percent thought that credit cards were complicated and inconvenient to use.
According to Nielsen research, consumers said they started using their banks because they featured “simple and quick procedures,” their prestige or the interest rates they offered. On the other side of the coin, they also identified several barriers that prevented them from using banks, saying that bank procedures were “lengthy” or that the financial/income information required was onerous.
Effective marketing and advertising can help overcome these perceptions. Currently, banks’ ad campaigns seem limited to building brand awareness, but beyond achieving that one goal, efficacy is limited in terms of differentiating brands. Those banks that focus on telling consumers how they are different from others, or dispel some of the myths about doing business with them will likely break through.
Another area of growth potential is the rural market. More than two-thirds (70%) of Vietnamese live outside of major cities, and while the income levels are currently well below those of urban denizens, the growth levels are actually very similar.
With three-quarters of rural families claiming to save every month and just eight percent using any sort of financial product (primarily savings accounts or insurance), the market is ripe for banks to expand their presence in these areas. Presently, there are only two major banks making a serious play in this sector.
These are unsettled times in Vietnam, but banks that create an easy customer experience and let consumers know they understand their concerns will be well positioned for continued growth now and even more so once uncertainty subsides.