Reviewing the Financial Ecosystem of Commercial Banks

9 June, 2025

“The Evolution of Vietnam’s Banking Sector: A Strategic Shift Towards Customer Value Maximization and Ecosystem Integration”

Over the past decade, Vietnam’s banking industry has achieved impressive growth in terms of credit outstanding, new account openings, bank cards, and branch expansion. However, these traditional growth drivers are reaching their limits as the market nears saturation, evident from the recent news of 86 million bank accounts at risk of deletion due to biometric verification issues and banks closing down branches. This indicates that customer acquisition and branch expansion are no longer optimal strategies in the increasingly competitive market, where maintaining and improving service quality are paramount.

Faced with the limitations of traditional growth levers, banks are shifting their focus to a deeper customer value extraction strategy. Instead of solely attracting new customers, they aim to maximize value from existing customers by offering complementary products and services through a diverse financial ecosystem. This ecosystem includes subsidiaries specializing in various related fields such as financial investment, wealth management, and insurance. This strategic shift is imperative for banks to sustain growth, especially as integrated financial ecosystems become a competitive advantage in retaining customers.

The role of commercial bank subsidiaries

The diagram below illustrates the financial ecosystem of banks through their subsidiaries. The strategic orientation, investment level, and contribution to the banks’ consolidated profits vary among these subsidiaries.

Techcombank is a notable example of a bank that has successfully built an ecosystem of subsidiaries, effectively integrating them into its overall development strategy. Its securities company, TCBS, plays a crucial role with its strong performance in bond issuance advisory and diverse investment product offerings, catering to the increasingly specialized needs of customers. TCBS not only ensures stable revenue but also contributes significantly to Techcombank’s consolidated profit, accounting for 17.5% of the total in 2024. This reflects the subsidiary’s outstanding financial performance and strategic importance as an extended arm of the bank in its journey towards a comprehensive financial group.

Source: Consolidated

VPBank also showcases its strategic vision through the development of its subsidiary ecosystem, with FE Credit, a consumer finance company, taking center stage. Notably, FE Credit contributed more than 25% to the bank’s consolidated profit during a particular period. More importantly, this subsidiary helped VPBank penetrate a distinct customer segment with low income and limited access to traditional banking services. While this customer group presents higher risks, it also offers substantial profit potential when approached systematically.

In contrast to the aggressive approaches of Techcombank and VPBank, ACB takes a more cautious route in growing its subsidiaries. Its securities company, ACBS, established in 2000, has a long history that coincides with the inception of Vietnam’s stock market. However, ACBS has yet to make a significant impact, ranking within the top 10 in market share. Its profit contribution to the parent bank is estimated at only 3 to 5%. Recently, with increased capital support from ACB, ACBS’s margin activities have improved profits significantly. ACB’s choice to prioritize safety, risk control, and a sustainable growth model aligns with its conservative investment appetite.

A contrasting picture emerges when examining the ecosystem development of state-owned banks such as VietinBank, BIDV, and Vietcombank. Despite their superior financial resources and extensive customer networks nationwide, these banks have not established robust integrated financial ecosystems. Their securities companies, including VietinBank Securities, BIDV Securities, and VCBS, have minimal market presence and are often absent from the top 10 rankings. Even their affiliated fund management companies manage modest assets compared to the parent banks’ total assets under management.

Maximizing Customer Value and Risk Management in the Integrated Model

Building a financial ecosystem is no longer merely about product diversification but has become a strategy to comprehensively exploit each customer’s lifetime value. Given individuals’ and enterprises’ diverse financial needs, ranging from savings, loans, insurance, financial investments to asset management, having specialized subsidiaries enables banks to offer integrated financial solutions. The success stories of TCB and VPB, with their subsidiaries contributing up to 20-25% of consolidated profits, underscore the importance of developing subsidiaries and, ultimately, evolving into comprehensive financial groups.

Source: Consolidated

To establish an effective financial ecosystem, technology and data are prerequisites. Over the years, banks have invested trillions of dong in next-generation core banking systems, AI-powered customer behavior analysis platforms, and big data infrastructure for personalized product offerings. This foundation enables banks to seamlessly integrate their subsidiaries, proactively offering tailored financial solutions throughout customers’ financial journeys. Alongside technology, the role of human capital has also evolved. Bank employees are transitioning from mere product sellers to comprehensive financial advisors, capable of providing insurance, investment, and personal financial planning advice. This transformation fosters stronger customer loyalty and opens up revenue streams from advisory fees and ancillary services.

However, opportunities come with inherent risks if the integration process is not well-managed. Banks that own subsidiaries in fields like securities, insurance, or fund management face the potential risk of contagion, especially during market turmoil. A clear and present danger is the rapid increase in margin activities at securities companies, coupled with the market’s lack of effective oversight mechanisms for internal capital flows between banks and their subsidiaries. Without clear capital control measures, banks may inadvertently become sources of indirect financial leverage for risky investments.

Given this reality, establishing a consolidated supervisory framework is imperative. Lessons from financially advanced countries like Singapore (MAS model) and the UK (FSA) highlight the need for a unified supervisory body with comprehensive risk data aggregation powers, consolidated financial reporting standards, periodic stress testing, and higher capital requirements for systemically important financial institutions. In Vietnam, where banks often serve as central nodes in vast ecosystems, the current legal framework’s fragmented supervisory responsibilities pose risks that are difficult to manage and control.

Developing a subsidiary ecosystem is a strategic move and an inevitable trend for banks to build competitive advantages. However, sustainable development mandates a robust legal framework, transparent governance mechanisms, and effective internal risk management. A financial group’s strength lies in its ability to generate superior profits, operate with stability and transparency, and demonstrate resilience in the face of market fluctuations. This long-term development goal should guide Vietnam’s banking system as it modernizes and integrates comprehensively.

Lê Hoài Ân, CFA – Võ Nhật Anh, UEL