Deepening share of wallet of current customers paid off for FE Credit

FE Credit has played a pivotal role in VPBank's performance in 2018

Sustained growth in sales and operating income

In the first quarter of 2019, FE Credit continued the strong momentum of 2018 and witnessed a 20 per cent increase in total sales contracts and disbursals on a year-on-year basis.

This growth was accompanied by a 55 per cent increase in the number of contracts on personal loan cross sell and top up to existing customers, demonstrating FE Credit’s ability to successfully mine its 10 million customer database.

Additionally, FE Credit managed to achieve three-fold growth on new credit card signups compared to the first quarter of 2018. This was also supported by double-digit growth in net receivable balances and card spending.

Overall, FE Credit’s revenue momentum remains strong, powered by new customer acquisition, volume growth, and net margin improvements.

Since the beginning of this year, FE Credit has consciously focused on increasing the wallet share of existing customers rather than acquiring new-to-bank customers, and this is visible in its business results.

Disbursements growing strongly with improving margins

Total disbursements across all products in the first quarter of 2019 grew 18 per cent higher than planned and than in the first quarter 2018, and FE Credit believes it is well ahead of the industry.

Specifically, the disbursements growth in personal loans to FE Credit’s existing customer base and Credit cards line utilisation were stronger than planned, which means that its conscious efforts to deepen its share of the wallets of existing customers are working.

Its disbursement on personal loans to existing customers grew four-fold compared to new-to-bank personal loans, which itself also grew in the double digits. This strong growth means that the FE Credit brand is preferred as the first choice by both new and existing customers.

In line with the strategy to increasingly focus on existing customers, FE CREDIT maintained stable acquisition of new contracts in consumer durables loans, and focused on growing two-wheeler loans, personal loan and credit card, which are higher margin businesses.

In addition, FE Credit is continuing to focus on its core products which are two-wheeler loans and consumer durables loans, and maintained its large market share in both areas which are excellent platforms to attract new customers and enable an upgrade of their lives.

This shift is reflected in the rise in net interest income in the first quarter of 2019, which is the outcome of focusing on higher margin products.

Managing operating costs even as volumes grow strongly

In line with the strong business growth in 2018, FE Credit consciously and diligently increased its headcount in specific customer-facing units such as sales and customer service. FE Credit also specifically added capacity in key functions like digital business and process transformation to continue its manual-to-digital transition, and eventually drive significant operational efficiency and cost saving.

Whilst this has resulted in a short-term upswing in operating expenses, FE Credit is confident that its CIR (cost/income ratio) will reduce in the long term, due to the investments in digitisation and process transformation.

For example, FE Credit has transformed many processes from manual to digital, and it is consciously driving down avoidable costs, such as card delivery, paper statements, physical application forms, and manual data entry, by using innovations such as digital card, e-statement, e-contracts, and digital sales end-to-end.

Rising adoption of digital platforms & positive results from transformation

FE Credit’s digital sales shows strong momentum following its recent enhancement of the customer journey on “$NAP,” FE Credit’s automated lending platform. Having learnt from the first few months, FE Credit streamlined processes to minimise drop offs on $NAP and launched a targeted digital campaign in March.

This campaign yielded strong results which far exceeded its targeted KPIs. The customer response and organic downloads grew by almost 200 per cent within one month, and FE Credit intend to drive higher adoption of each digital apps with customers, so as to reach the No.1 ranking in consumer finance apps in Vietnam.

These early results show that Vietnamese customers are tech-savvy, to not just conduct e-commerce transactions and online payments but also to self-apply and sign-up for financial solutions in a self-directed manner, anytime, anywhere. This is a promising outcome and increases FE Credit’s confidence that the digital channel will become a significant contributor to sales volumes.

FE Credit’s digital transformation journey continues, with significant enhancements across digital channels by deepening its partnerships with leading fintech players to deliver a superior customer experience.

Robust risk management and improving portfolio quality

The NPL (non-performing loan) indicator in the first quarter stayed flat at 5.9 per cent in line with full year 2018, despite the typical sales volume slowdown during and after the Tet holiday. This demonstrates that FE Credit’s portfolio quality continues to improve on new bookings, and the overall portfolio quality is maintained.

Sustainable growth path

FE Credit is confident that it will continue to grow its operating income and net profits in line with prior years and maintain its portfolio quality with its improved risk management standards.