Vietnamese banks are offering either cash incentives or equivalent enticements to customers who make remittance transactions.
Mai, a retired government employee in Ho Chi Minh City, received a gift set of stainless steel pots and pans after successfully conducting a remittance transaction at a commercial bank. Mai looked really happy with the gift which she said was a sign of good luck for the New Year. She said her son who works in the United States always wires a few thousand dollars to the family ahead of the Lunar New Year celebrations.
BIDV, one of the country’s largest banks by assets, is relying on cash incentives for customers who use its remittance services. For each transaction worth at least $200, customers will get $1.3 cash bonus.
Other large remittance players, including Dong A Bank and Sacombank, are giving out prizes in gold or overseas travel tours through lucky draws.
A remittance exec at Dong A Bank said that the bank handled about $1.43 billion in remittances last year, a 5 percent increase from the year before, adding that 42 percent the capital came from the United States.
“We forecast a 20-25 percent surge in the lead up to Tet,” he said.
For most remittance transactions, banks charge a fee and make money from the exchange rate.
Official statistics show that customers are becoming increasingly willing to exchange foreign currencies for Vietnamese dong at banks. According to Nguyen Hoang Minh, deputy head of the State Bank of Vietnam in Ho Chi Minh City, currency exchange accounted for 33.4 percent of total remittances in 2016, up from 31.2 percent in 2015 and only 20 percent in 2013.
Government regulators have relaxed their grip on transferring money home from overseas, allowing people the freedom to keep their dollars without the need to exchange their money into dong, as well as making remittances tax exempt, Minh added.
Overseas remittances, which are major source of income for Vietnam, equivalent to about 8-10 percent of its gross domestic product, have maintained annual growth of 10 percent since 2013.
The central bank said despite a slight decline to around $5 billion in 2016, Ho Chi Minh City remained a magnet for overseas remittances, accounting for 57 percent of the total remittances received by the country.
Vietnamese people overseas, mainly migrant workers, are increasingly wiring cash to their relatives to invest in local businesses and the manufacturing sector.
Statistics showed that between 2010 and 2013, only 27-30 percent of overseas remittances were funneled into businesses while the remaining went into real estate, bank savings or other assets in Vietnam. However, the tide turned last year when 70.6 percent of remittances went into local businesses and just 20 percent into real estate, with the remaining going to help relatives at home.
Vietnam recorded $12.25 billion in overseas remittances in 2015, slightly up from $12 billion in 2014, according to data released by the central bank.
More than half of the capital came from the United States, which had 1.5 million citizens of Vietnamese origin in 2010.
Experts forecast a decline in overseas remittances in 2016 given the fact the Trans-Pacific Partnership may well be scrapped under Donald Trump’s presidency, Vietnam, which was supposed to gain the most from the trade pact, will be viewed less attractive as an investment destination which could lead to a decline in remittance inflows.