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Banks are struggling to reduce transaction fees to support the economy. Source: Internet

Efforts to reduce fees

Around the beginning of April, the Vietnam Banking Association sent an official dispatch to the Ministry of Information and Communications about reducing message rates for financial and banking services. In particular, the banking sector has implemented many specific policies and solutions to support people and businesses affected by the disease, including programs to exempt and reduce electricity transaction fees to support users directly.

Along with the reduction of support fees for people and businesses, also due to the impact from the pandemic, banks said the card business situation was also affected. According to the Vietnam Banking Association, the card usage volume of large banks has continuously decreased since the beginning of the year.

As of March 2020, domestic card usage has decreased by 21% and card usage overseas by 28% compared to the same period in 2019. For the payment segment, card payment sales plummeted, especially in the first week of April 2020. The average payment turnover decreased by 78% over the same period and by 93% compared to March 2020. At some merchants, such as airlines, education, travel and hotels, the average payment volume of domestic and foreign cards in March 2020 decreased by 80% compared to the previous month. It is expected to continue to decline sharply in the coming months.

A VietinBank representative said that the products and services were implemented with reasonable fees for each type of customer, in collaboration with Napas, to provide free and reduced fees for transfer transactions on the iPay system version 5.0, but due to psychological effects customers still have no need to spend as usual.

Banks have difficulty

Obviously, in order to get the above achievements in fee reduction and exemption, the banking industry will have to "pay the price". According to banks, the fee reduction is facing obstacles due to investments in technology and service operation. In particular, the bank is only one party in the service supply chain to customers. The expenses payable to cooperative partners providing electronic banking services are also a burden. Most typical is the cost of telecommunications services for banks is many times higher than for normal messages.

Specifically, MobiFone and VinaPhone are applying VND820 per financial transaction message and VND500per customer care advertising message. Similarly, Viettel is VND500 per message (regardless of message type) and from 2019, Viettel has raised the rate to VND785 for financial transaction messages. Vietnammobile and Beeline apply VND280-400 per message for financial transactions and VND500 per message for customer care. In case of using SMS-Brandname subscription numbers of intermediaries, banks are subject to SMS charges directly from the network or their partners, the SMS Branding fee is about VND720 per message.

According to the Vietnam Banking Association, the message rates that telecommunications businesses are applying to banks are nearly three times higher than normal messages because messages between individuals are at VND250-300.

Therefore, most of the banks that have applied for exemption or reduction of transaction fees for customers have to compensate for the loss of telecommunications message service charges. This creates enormous pressure for banks to implement policies to reduce payment service fees and expand non-cash payment under the policies of the Party and the State.

Similarly, the business card situation is difficult, but the banks complain that they are subject to a variety of fees from Visa and MasterCard. According to the Vietnam Banking Association, in the fee collection structure of international card organizations, transaction processing fees account for a major part, including many types of fees collected by number of transactions and by sales transactions, resulting in a charge that overlaps with a transaction. For example, with a card transaction, Visa and Mastercard can charge fees such as: authorization, payment (settlement), brand fees, expenses in/outside Vietnam, service fees, and many others.

In this regard, according to a representative of VietinBank, with the scale of payment sales being in the top of the market, the cost of paying VietinBank's card organizations (especially the interchange fee) is up to trillions of VND every year, resulting in enormous cost pressure. However, due to increasing competition between banks, banks still have to reduce fees to retain customers, resulting in increasingly difficult payment performance.

Joining hands

Facing the aforementioned difficulties, representatives of banks have proposed a series of reduction of fees and charges. Accordingly, with telecommunications charges, the Vietnam Banking Association proposed the Ministry of Information and Communications to direct telecommunications businesses to consider reducing message rates to levels similar to normal message rates (for individual messaging services) or at least a 50% discount on message rates currently applied to banks.

From these recommendations, the Department of Telecommunications, Ministry of Information and Communications, has also received and sent a written request to mobile telecommunications businesses to study and consider reducing message rates for financial services.

Banks to accompany, share and reduce the burden of expenses for banks when implementing the policy of exemption and reduction of charges for using non-cash payment services. The department also asked these businesses to report the discount before April 27, but so far nothing has been announced to the public.

For international card organizations, banks also propose that Visa and MasterCard consider within the next 12 months to reduce a minimum of 50% of transaction processing fees for both payment banks and issuing banks.

At the same time, banks are applying the mechanism of collecting a single fee for one transaction, limiting the collection of overlapping charges. Besides, only charge for successful transactions, no fees for faulty transactions.

"In the immediate future, Visa and MasterCard should have solutions and policies to support fee reductions for Vietnamese banks (at least for 12 months). In the long term, it is necessary to consider and have appropriate fee policies to create favorable conditions and support Vietnam's card market to develop more stably and efficiently,”said a representative of VietinBank.

Commenting on the above, financial expert Dr. Nguyen Tri Hieu said that calling on domestic and international businesses and organizations to join hands to share with the banking industry or any other industry in the context of the Covid-19 pandemic will have positive meaning. Especially, with the trend of strong digital banking development, Vietnamese people gradually pay more attention to non-cash transactions, and benefit the international telecommunications networks and card organizations will cooperate with the banking industry. Therefore, according to experts, a reasonable cost for the banking industry will help both sides develop and take advantage of opportunities in the current economic situation.