The mid-year edition of The Nielsen Company’s Personal Finance Monitor indicates that these financial service companies have a tremendous opportunity to gain new customers and launch new services, but will have to do some work to fully realize that potential. In a monthly survey of 600 people in the two main cities of Ho Chi Minh and Hanoi, Nielsen found that almost half of respondents maintained a bank account, with saving and transactional accounts the most common.

“Vietnam’s population is young and increasingly exposed to new products and services, and they are open to investigating how these can complement their lifestyles.  Combined with increased affluence and economic opportunities, the appetite for financial services is likely to grow.  However, many people lack an understanding about financial services products, and firms should not underestimate the importance of education as part of the process of building relationships with new consumers,” said Alan West, Associate Director, Financial Research at Nielsen Vietnam.

As only half of the potential market (4 million people) currently use banking, insurance and other financial services, there is significant latent demand that can be tapped.

Make it easier and raise awareness of financial services offerings
Key barriers to banking identified by survey respondents included lengthy application procedures and the amount of financial documentation required to establish accounts.  Although these issues were not barriers to the other half of the desired market, a large number of these consumers still used non-bank sources for savings, investing and other financial functions.  For example, just 10 percent saved their money in banks and only 2% of the target market had bank loans, while 6 percent sought funds from other sources, such as family and friends.   Investing in one’s business was the top place (61%) to put spare cash, followed by gold (35%) and real estate (23%).

Credit still a “taboo” for Vietnamese
While ATM/debit card ownership is growing (almost a quarter of respondents said they owned one), Vietnamese consumers shy away from credit:  just 7 percent of respondents said they intend on obtaining one in the future.  Primary reasons given included no demand, or a desire to use cash, followed by a lack of knowledge about the product.

Banking customers largely loyal
81 percent of survey respondents still only use a single bank for their financial services needs.   This is changing, and whilst “switching” is rare, the number of consumers taking on secondary banking accounts is on the rise.

Protection at the top of insurance customers’ minds
74 percent of respondents indicated “protection” is the reason they purchase an insurance product.  Interestingly, 68% perceive insurance as a form of savings.  Life insurance, education and accident insurance are currently the top products used by survey respondents.

Internet banking penetration still in early stages
Just 1 percent of current bank customers use such services offered by their banks, despite the fact that Vietnamese – especially those age 35 and younger – tend to use the Internet more than many of their Southeast Asian neighbors.  The key reasons given for not accessing this channel included awareness (they didn’t know about such services or how to use them) and safety.  Nevertheless, just as ATM use has increased since consumers have become more familiar with the machines, online banking will also likely take hold in the next few years.

Non-product features as important as product features
The importance of customer service, convenience and reputation cannot be overstated: the top reasons for selecting banks included competitive interest rates (60%), the bank was viewed as prestigious (56%), highly recommended by others (52%) and good customer service (50%).  Meanwhile a lack of ATMs or the lack of branches close to home and poor customer service were the main reasons for switching banks.

Few countries have developed as rapidly as Vietnam has over the last decade – its growth has averaged 7.5 percent per year since 2000.  But the economic downturn has affected almost all countries to some degree.  Will the global recession derail the extraordinary progress Vietnam has made?  Nielsen has prepared a study “Boom or Doom in Vietnam in 2009?” to look at this very question.

Success has bred confidence: Vietnamese are the 9^th most confident consumers in the world. And opportunities clearly remain, with AT Kearney rating Vietnam as the most attractive retail market in the world, ahead of larger countries such as Russia, India and China. In 2008, Vietnam attracted 1,171 new foreign direct investment projects with a value of $60.2 billion – triple that of 2007.

Household income is growing, with the average household now claiming a monthly income of US$300, while households with incomes of more than 4 million VND (about US$ 229) have grown from 20 percent in 2002 to over 80 percent in 2008. Internet penetration is surprisingly higher in Vietnam than other developing nations, with 23 percent having internet access compared to 22 percent in China and just 7 percent in India.  And perhaps most remarkably, Vietnam leads all other countries in Asia Pacific – even Japan and Korea – in spend on new technology.

But even Vietnam is not immune to global trends.  Food price inflation hit a record high of 28.3 percent in August 2008, although it has since moderated to 14.8 percent in February 2009. GDP growth is predicted by the International Monetary Fund to slow to 5 percent, and the Vietnamese government is preparing a $6 billion package to stimulate the economy.

From a consumer standpoint, the biggest concern is inflation. While most categories’ growth has slowed somewhat, they remain stronger than most other countries.  Areas where Vietnamese consumers say they will cut back are:

• Fast food
• Carbonated soft drinks
• Eating out
• Going out to bars and coffee shops

Despite expressing some concern, Vietnamese consumers remain quite positive.  Significant growth opportunities remain in the country in most consumer goods categories, and companies that continue to invest and innovate will secure a strong long-term future once the economy improves.  Vietnam is country that remains highly attractive to companies, as growth opportunities are abundant.  Half of the population is under age 30, which means labor costs are lower and consumption demand is high.  Tourism continues to grow strongly – up 7 percent in 2008 – as more people discover the energy, beauty and culture Vietnam has to offer.

Read the full report here.

Three out of five UAE consumers have shopped at Calvin Klein and Christian Dior, while one in three have shopped at Gucci, Nielsen reported. 

Globally, UAE shoppers ranked as the second biggest purchasers of Gucci (31%) and Chanel (21%), and third in terms of purchases of Giorgio Armani (19%). 

If money were no object, UAE survey respondents named Chanel and Louis Vuitton as the most coveted luxury brands.

Overall, one in three (31%) UAE consumers said they currently buy designer brands.  Of those, 43% said they believe designer brands are significantly higher quality than standard products, while three in five (59%) said they wear designer brands to project social status.

“Unlike most countries in Nielsen’s Global Luxury Brands survey, which chose two or three luxury brands as their clear favorites, UAE consumers stood out for their purchasing habits of several high-end fashion brands,” Piyush Mathur, regional managing director of UAE, North Africa and Pakistan, Nielsen, noted.  “The  rapid economic growth and new wealth of this country is demonstrated by  consumers’ insatiable appetite for luxury designer brands.  The luxury  brand has become an integral part of UAE lifestyle.”

View the full press release.

Read coverage of Nielsen’s findings in USA Today.