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.

As financial institutions determine the impact on their bottom line,  consumers also have choices to make. But how aware are they of the implications of this new regulation, and how likely are they to take advantage if the service is offered? To better understand consumer interest, characteristics, preferences and the best way to reach them, The Nielsen Company conducted an online study of 2,013 panelists in the March 2010 Nielsen Financial Track, which looks at financial product usage, accounts, balances and asset allocation.

Of the consumers surveyed, 26%, would opt-in to an overdraft program, 22% would not and 39% were undecided. Consumers who stated they would opt-in were more likely to have an overdraft in the last year. Consumers who were undecided never heard of the regulation or didn’t know much about it.

Identifying Customers that Want an Overdraft Option
Nielsen did further analysis of the survey respondents mapped against Nielsen’s dozens of lifestyle segments, which group consumers by demographics, census data, lifestyles, shopping patterns, media preferences and more.

Customers who said they would want an overdraft option were more likely to be in a group known as “Upscale Earners.” This group is comprised of home-owning families who work at well-paying management or white collar jobs. Additionally, they are also receptive to a variety of insurance products.

The main reasons they stated for opting-in included:

• Would like to be covered in case of emergency situations or an unexpected expense
• They have multiple users on their card and don’t always know their balance
• They want to avoid embarrassment at check out

Helping the Undecided Decide
A closer look at two of the four lifestage segments that indexed higher as undecided were “Working-Class USA” and “Fiscal Fledglings.” Those in the “Working-Class USA” group are a mixed portrait of consumers who are racially and ethnically diverse and range from being employed in white collar jobs to service industry jobs. Nearly nine out of 10 people in this group earn under $30k a year and many own their own homes. The “Fiscal Fledglings” have the lowest levels of income and assets. They are the least likely to have auto, life or residential insurance. This group will need the most financial advice to determine their best option not just for overdraft but to provide consultation for their financial future.

Both groups cited these reasons for their indecision included:

• They don’t have enough information about the regulation
• They are still thinking about it
• They had no idea there was an opt-in/opt-out option

Fit the Message to the Audience
“Regardless of a bank’s strategic direction for meeting the requirements of Regulation E, a comprehensive communication plan and consumer strategy is necessary depending on consumer needs, media and channel preference,” said Deborah Sumner, Vice President, Financial Services Practice Lead, at The Nielsen Company. “Customers interested in opting-in are interested in the service just in case, therefore messages that focus on unexpected expenses are more likely to resonate with this group. Whereas the undecided customers are more likely in need of financial education and awareness messaging, to determine their best option not just for overdraft but to provide advice for their financial future.”

Nielsen BuzzMetrics reviewed 8,000 discussion forums, 45,000 Usenet forums and more than 135 million blogs to gauge consumers’ thoughts on this law, with particular focus on the following issues:

• How are consumers reacting?
• How are card companies communicating changes?
• What actions do consumers plan to take?
• Who is to blame?
• Which companies are being implicated?

Online buzz spiked at the end of May 2009 as Congress passed the Credit CARD Act, and then tapered off until the end of February 2010, when the law went into effect.  Overall, however, this discussion about this issue paled in comparison to the rancorous health care reform debate, which took center stage for much of 2009.

Almost immediately upon the President’s signing the bill into law, online sentiment began to turn against it.  A USA Today post on the law received more than 600 comments – most of them quite negative.  Many people thought that the legislation did not go far enough in protecting consumers, while others felt the new law penalized those who were responsible credit users.  Meanwhile, there was widespread belief that card issuers would find loopholes for raising fees and interest rates prior to the law’s enactment.

Overall, consumers seem concerned about how the law changes the use and availability of credit.  They said that their credit issuers communicated with them primarily through statements or via a web site.  A fair number of people went online to search for information about the law and how it might affect them.  Financial and political web sites were the top destinations for online discussions, and searches on Google and other engines are being actively used by consumers to learn more about the law.  So what actions might consumers take in response to this law? Switching to cash or debit cards was the top action, followed by canceling credit cards.

“It was a little surprising to see the widespread negative or ambivalent consumer sentiment towards the credit card reform law.  What was initially hailed as an important step in protecting consumer rights quickly turned into an exercise of public mistrust of both financial service companies and the government.  As we have seen with the health care reform debate, many Americans think that companies will find ways around the law and find new sources of revenue,” said Ron Coyle, Lead Analyst at Nielsen BuzzMetrics.  “Now that the law is in effect, buzz about the topic will likely quiet down.  But it will be interesting to see how consumer sentiment about this law changes.”

“If the overall worth of IRA and 401K accounts continues to decrease, perhaps there is an opportunity for financial institutions to place more of an emphasis on CDs as a way to help consumers save with some guaranteed interest rate during these trying financial times,” said Jane Crossan, Vice President, Practice Leader for Nielsen Claritas.

Key Findings

• Non-interest checking accounts grew in 2008 where the head of household was over 35 years of age. However, average balances for non-interest checking accounts were down across all age groups.
• More households had a savings account in 2008 than at the end of 2007—and the type of savings vehicle was driven by the age of the head of household.
  – Older households had the ability to keep higher balances for money market accounts or were able to commit some of their savings to CDs.
  – The younger households kept their savings liquid in fixed-interest savings accounts.
• Money market account penetration decreased year-over-year driven largely by the under age 35 households.
• Fixed interest savings accounts increased for all three age groups, which include under 35, 35-54 and over 55
• The number of households with an IRA and 401K increased, but average balances plummeted for all age groups.

Credit, Loans and Investments

Along with the ability to take advantage of money market and CD accounts, the older the head of household, the more likely they are to have an outstanding non-mortgage credit balance of over $10,000. That level significantly increased for households in the 35-54 and 55+ age groups.

Personal loans also increased since the end of 2007 in the form of home equity loans, student loans and other unsecured personal loans. Penetration of revolving debt accounts, such as credit card debt, decreased which indicates that people were closing their credit card accounts. All the major credit card brands, including Visa®, MasterCard®, Discover® and American Express® showed a decrease in penetration from 2007 to 2008. However, average outstanding credit card balances were on the rise, indicating that households are not reducing the debt they have, but consolidating it to fewer cards.

Investments, including mutual funds, stocks, bonds and cash value insurance accounts all fell from Q4 2007. The only investment account to increase in penetration was the tax-advantaged college plans (529 Educational Plan).

“Banks appear to be neglecting the most important fundamental – that of customer experience,” said Alvin Huen, Director, Client Solutions at The Nielsen Company China.  “Despite many organizations trying to manage the problem of long queues, it’s still the number one problem affecting customer retention.”

Four out of ten high income consumers regard the bank at which they have their credit card account as their most used bank, while access to online banking follows a close second.

“More than 80 percent of high income bank customers are using Internet banking.  To attract and retain these customers, banks should focus on satisfying their needs by taking a customer centric view and offering a variety of convenient services to cater to today’s busy lifestyle,” said Mr. Huen.

The Nielsen China Personal Finance Monitor is the first survey of its kind, and was launched in 2002 to provide insight into the changing needs of a rapidly evolving market.  With access to 1,200 respondents across six key cities, the 2008 report is the first to include a high income consumer report.

Read the full press release here.

Of 3,000 people surveyed by Nielsen in early October, 84% reported being just as confident — or more so — in their primary financial institution as they were six months ago.  Ninety-five percent of those surveyed said they consider their financial assets at their primary bank to be relatively safe.

Although they remain confident in their personal banks, a significant percentage of the respondents said they had already been adversely affected by the current financial crisis. 

Twenty-five percent reported significant losses in their retirement savings.  Among consumers age 55 and older, that percentage was even higher: 29%. 

Another 19% told Nielsen their credit card debt had increased.  That trend was especially prevalent among younger respondents: 25% of 18-34 year olds in the study reported growing credit card debt.

Still, most respondents (88%) — especially older consumers — said they aren’t planning to change their current banking and investments relationships in the near term.

View the full press release.

Read coverage of Nielsen’s findings in USA Today.

As a comparison, TV ratings for selected major news events throughout the past two decades are included below.

View the full media alert.

Read coverage of Nielsen’s findings in TV Week.