[Vnbiz] How young consumers could shape Vietnam's banks (full version)

[Trinh Quang Long]

>From McKinsey Quarterly

On Sat, Apr 19, 2008 at 2:00 PM, Tai Phan <k.phan007 at gmail.com> wrote:

> [ Vietnam Business Forum ]
>
>
> Saturday April 19, 2008 *GLOBAL INSIGHTS*
>
> *How young consumers could shape Vietnam's banks*
>
> *NIGEL P. ANDRADE, JENS LOTTNER and CHRISTIAN ROLAND*
>
> Young adults, 21 to 29 years old, will play a large role in shaping
> Vietnam's small but growing retail-banking market. These young consumers are
> less wary of borrowing, likelier to use remote channels, and more open to
> foreign banks than are their elders. And on most banking-related issues, the
> generation gap in preferences and attitudes is larger in Vietnam than in the
> 11 other Asian markets we examined as part of a study involving about 13,000
> urban banking consumers across the continent.
>
> Despite strong growth in recent years, retail banking in Vietnam remains
> small. Banking assets, for example, amounted to about $75 billion (some 123%
> of GDP) at the end of 2006, compared with $226 billion (110%) in Thailand
> and $302 billion (195%) in Malaysia. What's more, less than 10% of
> Vietnamese have a banking relationship. But like the rest of the country's
> economy, the banking sector is likely to continue its rapid expansion.
>
> Our analysis suggests that retail-banking revenues could grow by more than
> 25% annually over the next five to 10 years _ one of the highest rates of
> increase in Asia _ thanks to a vibrant economy with growth approaching that
> of India and China, rising household income, and the low penetration of
> banking services.
>
> To clarify the factors that might shape Vietnam's nascent financial
> sector, we surveyed about 400 of the country's banking consumers as part of
> our 2007 Asian personal-financial-services study. The pool represents urban
> households with annual incomes of more than 57 million dong, or about $3,500
> _ almost 70% of the population of the cities.
>
> Already, Vietnamese banking consumers 21 to 29 years of age hold, on
> average, more products than their elders do: 2.3 per respondent, compared
> with 1.9. Ninety-one-percent of the young adults had savings accounts,
> compared with 55% of the respondents 30 years or older. Eighty-nine-percent
> owned debit cards, compared with an average of 40% among the rest of our
> survey pool. In addition, young adults were much more willing than their
> elders to use remote-banking channels, such as telephones or the internet
> (Exhibit 1), if banks could address their security concerns.
>
> In fact, the gap between young adults and the rest was much greater in
> Vietnam than in other Asian countries we surveyed. When we asked Vietnamese
> consumers whether they would use internet banking in the future, for
> example, a 34-point gap separated young adults from those over 30, compared
> with 6 and 8 points in China and India, respectively.
>
> Young adults were also more inclined to take out loans: 45% agreed that
> borrowing could improve their lifestyle, compared with 31% of the older
> adults. These young customers were also less likely than their elders to see
> borrowing as dangerous or unwise. On questions about loans, the generation
> gap was again much more pronounced in Vietnam than in the other countries in
> our study, including China and India (Exhibit 2).
>
> State-owned banks hold more than two-thirds of Vietnam's banking assets,
> deposits, and loans. But local private-sector banks, such as Asia Commercial
> Bank and Sacombank, have made inroads into this heavily contested sector and
> could gain further by tapping into the youthful enthusiasm we tracked. In
> addition, under Vietnam's World Trade Organization commitments, the country
> agreed to open its banking sector to foreign banks in 2007. Foreign retail
> banks, though they still face obstacles, could benefit from latent demand
> once some of the restrictions facing them today _ for instance, on the
> expansion of their branch networks _ are eased.
>
> Sixty percent of our respondents said that the entry of foreign banks into
> the country will be beneficial for them, with young adults (73%)
> particularly amenable to the idea. This finding reveals a greater openness
> to foreign banks than we saw in the other countries, where the percentage of
> those who felt that foreign banks would benefit them ranged from 22%
> (Taiwan) to about 54% (the Philippines). In a separate question, most
> Vietnamese banking consumers also said that dealing with local institutions
> remained important. The two results indicate that the Vietnamese are willing
> to consider any bank, local or foreign, that offers them the best deal for a
> particular product or service.
>
> The Vietnamese survey also revealed clear regional differences, with
> respondents in Ho Chi Minh City expressing more open-minded attitudes than
> their compatriots in the north (Exhibit 3). Forty-two percent of our
> respondents in Ho Chi Minh City said they would try mobile banking, for
> example, compared with 24% in Hanoi. Only 39% in the south said it was
> unwise to borrow for anything except a house, compared with 46% in the
> north.
>
> Nigel Andrade is an associate principal in McKinsey's Singapore office,
> where Jens Lottner is a principal and Christian Roland is a consultant.
>
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-- 
**************************
Trinh Quang Long,
long76 at gmail.com / long at ciem.org.vn
**************************
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