Decoding the Growth Motivation of Top Private Banks in Vietnam

One example of this model is Techcombank, which is pushing its growth strategy through diversifying customer segments and providing personalized financial advice and solutions tailored to each customer file, thanks to its digital and big data capabilities. This will be the driving force for Techcombank to achieve its ambitious goals for the 2021-2025 journey: making it to the Top10 banks in Southeast Asia and reaching a market capitalization of $20 billion…

After its remarkable business growth in 2023, Techcombank’s stock (code: TCB) has become a phenomenon in the stock market since the beginning of 2024, with a strong increase. Many notable highlights have been highlighted, including impressive business results with pre-tax profit of VND 22,888 billion, exceeding the full-year plan. Criteria such as capital adequacy ratio (CAR), CASA, customer growth, fee income ratio to total operating income, equity ratio to total assets… all maintain a Top position in the banking group. It is worth mentioning that Techcombank is expected to propose a cash dividend payment of at least 20% of post-tax profit annually. Let’s decode the reasons behind TCB’s skyrocketing growth…

In 2023, Techcombank attracted an additional 2.6 million new customers, double the number of new customers attracted in previous years. In which Techcombank cooperating with Masan to create the Winlife ecosystem helped the bank gain about 1 million new retail customers while the digital channel helped attract 1.2 million customers. The number of new SME customers in 2023 also increased by over 50% compared to 2022.

This unprecedented growth in the number of customers marks the rapid penetration of Techcombank into new segments, including the mass market and the high-income customer segment, supported by its digital capabilities and ecosystem of partners.

Currently, Techcombank has one of the most digitized customer portfolios of any bank in the world. About 94% of individual customer transactions are conducted online, and the bank’s digital banking platform records over 50 logins per customer per month.

With the desire to increase customer understanding as well as enhance the service experience on the digital platform, Techcombank has made strong investments to establish the Adobe’s Experience Cloud platform, enabling the creation of super personalized experiences, with marketing campaigns and content and messaging adjusted to each customer.

Diversifying into new segments and fields

Efficient digital transformation together with risk and cost control at key chokepoints serve as a motivation for the bank to confidently step into 2024 despite a challenging economic landscape.

According to Techcombank, its business activities on the digital banking platform record an astonishingly effective cost-to-income ratio (CIR), with the cost-to-income ratio being up to 14 percentage points lower than the branch channel. Meanwhile, at Techcom Securities Company (TCBS), thanks to the application of technology and digitization to most processes, the cost to serve 1 customer is now only about $20 compared to over $300 in 2016, creating ample room for strong expansion of the company.

The emergence of the digital and big data revolution has opened up new opportunities. According to the bank’s leaders, the data and digital capabilities that Techcombank has cultivated over the past decade are helping the bank become a pioneer in capturing new growth opportunities in expanded customer segments.

SMEs: “The ace” for 2024 growth

Another important growth area of Techcombank is the small- and medium- enterprises (SME) segment. In 2023, Techcombank attracted more new SME customers than in 2022 by over 50%, while also focusing on launching and improving service products to help customers address business “pain points” such as how to efficiently collect and manage money, optimize idle cash flow, and promptly access loans to not miss out on business expansion opportunities…

According to Techcombank, with over 5 million households doing business nationwide, this is a very dynamic segment of Vietnam’s economy, contributing over 30% of GDP. Understanding the difficulties in managing cash flow of individual businesses, Techcombank introduced suitable payment and collection solutions in 2023 for businesses, including payment services through convenient QR code scanning method and new Account Identification feature.

With this solution, shop owners can generate more QR codes for multiple points of sale. All transactions received via QR codes will be reported separately for each point of sale, helping shop owners easily separate funds between personal and store funds. Each transaction via QR Shop is automatically reported on both Techcombank Mobile and Techcombank Business applications, helping store owners easily track the total number of transactions and total revenue by day/week/month for each store with intuitive charts.

The number of transactions via QR code payment method of individual businesses increased 3.3 times in Q4 compared to Q3, attracting businesses to choose Techcombank as their main transaction account. This is evident through the average CASA balance of this customer group being 1.7 times higher than the average CASA balance of the regular customer group not using this solution. The same payment and collection solution has also been provided to micro-business customers, helping the number of customers in this segment using Techcombank’s services increase by 2.6 times compared to Q3, reaching 327,000 customers by the end of 2023, including 187,000 new customers.

A popular product among business customers is the Bao Loc deposit certificate, which has been integrated into the digital channel in 2023. With attractive interest rates and easy transfer anytime, anywhere, Bao Loc deposit certificates help businesses optimize the profitability of idle cash flow. In addition, the convenience and smooth experience of online transactions without any extra transaction fees for customers owning Bao Loc deposit certificates are also a plus point that helps this solution to be well received by businesses.

In 2023, the total number of SMEs approved for pre-credit limit by Techcombank increased impressively by 124% compared to the same period last year. The total pre-approved credit limit for small and medium enterprises increased by 140%, while the actual disbursement according to this program increased by 120% compared to the same period. Unsecured loans for small businesses have increased by 150% compared to 2022. With the aim of helping customers “not miss out on good business opportunities just because of a lack of capital,” Techcombank will continue to promote its pre-approved credit programs for small and medium businesses in 2024.

Lending to small and medium businesses is a segment that still has a lot of room for development due to the large number of small and medium-sized enterprises operating in Vietnam and the dynamic nature of the economy. Increasing lending to this segment not only helps generate new revenue for Techcombank but also helps promote comprehensive financial goals, helping small and medium enterprises easily access loans and capture growth opportunities.

Focus on serving targeted customer segments, rather than competing on price

For many years, Techcombank has built a solid position by choosing the target segments as high-income individual customers and the leading corporations in Vietnam leading their target segments.

In the retail banking sector, the bank does not compete on price but instead chooses to provide quality services with costs appropriate to financial solutions tailored to each customer’s individual needs. Techcombank currently holds over 50% of the high-income customer market share in Vietnam. In this retail banking portfolio, this segment is contributing half of the operating revenue. For this priority customer portfolio, Techcombank is not just a service provider but also acts as a wealth management advisor, helping customers increase wealth accumulation as well as their own and family’s prosperity.

Similarly, in the Corporate Banking and Financial Institution area, Techcombank has built strategic partnerships with leading groups in Vietnam. In the Real Estate – Construction sector, the bank has developed relationships and specialized services across the entire value chain from investors, project developers, project implementation contractors, building material suppliers… to homebuyers. The bank’s management shared that being able to establish deep, stable, and high professional relationships in supporting value chains for reputable projects in Vietnam is a valuable asset that Techcombank has accumulated over decades. With that success, Techcombank is gradually expanding this value chain approach to other sectors of the economy. A typical example of applying this strategy to a new industry is the “Winlife” project in collaboration with Masan, bringing Techcombank’s innovative payment solutions and attractive reward programs to millions of customers through the nationwide network of over 3,000 Winmart convenience stores. When accessing value chain-based industries, Techcombank’s deep relationships with key customers in the chain become a foundation, from which the bank develops a comprehensive solution set to meet payment, credit, and investment needs… providing for all participants in the value chain, from suppliers to ultimate consumers.

Thanks to its deep experience in serving customers along the value chain, Techcombank can access the best customer portfolios, creating differentiated value in the market. This has helped the bank maintain leading asset quality with almost zero bad debts for SME portfolios, while also establishing a strong position with over 50% market share in the high-end individual customer segment. The close relationship based on mutual understanding and trust between the bank and members of the value chain helps minimize risks and increase opportunities for cooperation between all parties. This is one of the factors that has helped Techcombank maintain the highest ASEAN market ROA over the years.

This is an important differentiating value that other banks find difficult to replicate, helping to attract new customers, helping the bank better meet the housing needs of customers as it is still always the most preferred asset channel for Vietnamese people, and creating the most attractive profit margin segment. Therefore, dominating the absolute advantage in this segment helps Techcombank continuously maintain the leading ROA in the ASEAN market in recent years.