153 The role of marketing activities to bankcard and actual state of Ngân hàng nông nghiệp và phát triển nông thôn (AgriBank) cards

153 The role of marketing activities to bankcard and actual state of Ngân hàng nông nghiệp và phát triển nông thôn (AgriBank) cards

CHAPTER ONE: OVERVIEW OF BANKCARD

1.1 General introduction about bankcard

In 1960, Bank of American introduced its own bankcard, the BankAmericard

In 1966, fourteen United States banks formed Interbank, a new association with theability to exchange information on credit card transactions The following year,

1967, four California banks changed their named from the California BankcardAssociation to the Western States Bankcard Association (WSBA) The new WSBAlicensed Interbank to use the MasterCharge name and logo In the late 1960s,numerous financial institutions became MasterCharge (Interbank) members tocompete with BankAmericard Eventually, financial institutions interested inissuing cards in the U.S became members of either BankAmericard orMasterCharge In 1977, BankAmericard became Visa USA/ Visa International In

1979, MasterCharge changed its name to MasterCard to reflect its expandedservices At the present time, the leaders in the bankcard systems are Visa, MasterCard, Amex and JCB

Payment by bankcard quickly become popularity in other countries In 1960,the first plastic card was used in Japan marked the beginning of bankcard in Asia

The first plastic card of Barcaly Bank issued in 1966 also highlighted a new period

of development of bankcard in Europe

In Vietnam, the first card was accepted in 1990 It was the starting point forcard’s products and services in Vietnam Nowadays, bankcard presents all over theworld in diversified forms which meet every demand of cardholders Banks andfinancial institutions always try to improve bankcard to reach a friendly andconvenient payment method for customers

1.1.2 Concept and classification

Everyday millions of people all around the globe are using bankcards formaking credit card payments for their purchases However, the fact that not everycardholders know concept of a bankcard

* Concept:

.In simple terms: A bankcard can be described as a plastic card issued by a bank

or a financial institution, using which, the cardholder can gain access to thefinancial resources of the bank as a line of credit

* Classification:

There are many types of cards that can be used as alternative forms ofpayment Financial institutions issue some and banks issues others Many allow thebalance to be paid in full each month Some take the payment directly from thecardholder’s bank account while others require that the cardholder send payment tothe issuer Herein, I list some popular ways to divide bankcards

Figure 1 - Types of bankcards

Source: Developed for the report

* Payment method:

- Debit card: A plastic card used to initiate a debit transaction In general, thesetransactions are used primarily to purchase goods and services and to obtain cash,for which the cardholder's asset account is debited by the issuer

Debit card consist two basic types:

+ On-line debit card: An online-debit card deducts funds from the bankaccount immediately, as soon as the card is used There is no delay for processingthe transaction

+ Off-line debit card: An off-line debit card does not deduct funds from thechecking account immediately Transactions are processed like a regular credit cardand the funds are not deducted for 24-72 hours

Most issuers of debit cards are moving to this type of card rather than on-linedebit card

- Credit card: A plastic card bearing an account number assigned to acardholder with a credit limit that can be used to purchase goods and services and toobtain cash disbursements on credit, for which a cardholder is subsequently billed

by an issuer for repayment of the credit extended at once or on an installmentbasis

- Cash card: Cash cards are similar to pre-paid phone cards The card is worth acertain amount of cash and the retailer must use a special cash card reader to debitthe card Each purchase is deducted from the value left on the card until the pre-paidamount is spent These cards are just like cash – if lost or stolen, there is no way toretrieve the money on the card

* Issuer:

- Bankcards: Banks, financial institutions around the world distribute cards Acardholder borrows money against a credit line and repays those funds with interest

if the balance is carried over from month to month

These cards are used all around the world, such as: Visa USA, MasterCard…

- Travel and entertainment cards: travel and entertainment corporationsdistribute their own cards so they are not considered bankcards since they are notissued by a financial institution These cards are widely used by business for their

travel and entertainment expenses, such as American Express (AMEX), DinnersClub…

* Area of using card:

- Domestic card: Card is used in domestic only with legal tender of that nation

- International card: Card is used around the world, used strong currencies intransactions

1.2 Cards’ activities in commercial banks

1.2.1 Entities join card activities

Figure 2 - Participants in bankcard transactions

Source: Developed for the report

The figure shows 5 entities joining a bankcard transaction

* International card organizations: (ICO)

For example MasterCard or Visa International/Visa USA, they are worldwidepayment service organization composed of member institutions They set andenforce rules and regulations governing operational procedures, interchangeprocedures, and graphic design approval of their cards…

These organizations do not have a direct relationship with cardholders andmerchants

Any bank has international card must be a member of an ICO

The issuing

members

Internationalcardorganization

The acquiring members

MerchantCardholders

* The issuing members: The cardholder’s financial institution (usually calledthe issuing member, or issuer) is a licensed member of an ICO The issuer directlyissues the card to the approved cardholder The issuer may also benefit fromservices of a third party processor and/or association in processing information andpayments.

* The acquiring members:

The acquiring members, or acquirer, solicits, screens and accepts merchantsinto its bankcard program The acquirer is also a member of an ICO, and holds awritten agreement with the merchant to:

- accept the merchant sales drafts

- provide the merchant with credit card authorization terminals, instructions,and contracted support services

- handle and process the credit card transactions

The acquirer usually charges the merchant a merchant discount for handlingthe transactions The acquirer is licensed by an ICO agrees to follow the operatingrules and regulations of the two associations

In fact, many banks and financial institutions are both issuers and acquirers Asissuers, they maintain the cardholder relationship As acquirers, they maintain themerchant relationship

* Merchant:

The merchant can be virtually any company which meets the qualificationstandards of an ICO and an acquirer

The ICO usually require that the merchant be financially responsible and goodrepute The merchant has a written agreement with the acquirer to accept thebankcards as a payment and to abide by the terms of the agreement

1.2.2 Transaction process

* Issuing:

Figure 3.- Procedure of issuing bankcard

Source Developed for the report

+ Customer

- Customers fulfill and sign on the application and credit card agreement

- Required documents: photograph 3x4 or 4x6, Copies of Identity card, copies

of passport, visa or residence permit…

- Types of guarantee for card payment

+ Issuing banks

- Checking customer’s application, then decide to approve or not

- Approval: send customer’s request of opening card to card centre

Customer

and PIN over

Receiving new card and PIN from centreRegistration of issuing

- Receiving new card and personal identity number (PIN) from card centre

- Handing card and PIN over customer

- Guiding customer to use card

+ Card centre

- In responsibility of receiving information of customer from issuing banks

- Produce new card

- Deliver card to issuing banks

* Acquiring:

Figure 4.- Procedure of acquiring cards

Source Developed for the report

The acquiring procedure beginning with the cardholder:

(1) - The cardholder purchases goods or services from the merchant

(2), (3) - The merchant, in effect, sells the transaction to the acquire and isreimbursed the amount of the sales ticket by the acquirer

(4)

(3)

(2) (1)

Cardholder

Issuing members

Internationalcardorganization

(5)

(6)

(4) - The acquirer then summits the ticket to the issuer for payment, via theICO interchange and settlement system.

(5) - The issuer bills the cardholder

(6) - Finally, the cardholder repays the issuer for the goods or servicesoriginally purchased from the merchant

ICO are at the centre of the transaction process, maintaining the flow of fundsand information between issuing and acquiring members

The exchange of financial information is called clearing The exchange of theactual funds for the transaction and the fees associated with them is calledsettlement The term used to refer to the clearing and settlement system as a whole

is interchange

CHAPTER TWO THE ROLE OF MARKETING ACTIVITIES TO BANKCARD AND ACTUAL STATE OF AGRIBANK CARDS

2.1 Introduction of Vietnam Bank for Agriculture and Rural Development (Agribank) - Thanh Xuan branch

2.1.1 Foundation and development of Agribank Thanh Xuan

In 2007, Vietnam Bank for Agriculture Development - Thanh Xuan branchwas founded under Decision No 1292/QĐ/HĐQT/TCCB dated November 29th,

2007 by the Board of Directors of Agribank with the primary staff of 36 people Located in 90 Lang Street, Thanh Xuan District, a vast residential area withmany convenient economic conditions, Agribank Thanh Xuan has many advantages

to do business effectively Thanh Xuan branch operates its business mainly onThanh Xuan District and other Districts in Hanoi Being in the strategy oforganization network development of Agribank, Agribank Thanh Xuan has played

an important part in improvimg business performance of Agribank, as well ascontributed to shift economic structure, promoted the further economic-socialdevelopment of Thanh Xuan District in a comprehensive and sustainable way Since establishment, Agribank Thanh Xuan has continuously extended tradingnetworks, diversified items of business, currency, and credit, promoted capitalsources The branch is also focusing on improving the qualification of staff both inprofessional knowledge and skills as well as foreign languages, concerning aboutstabilizing and raising the networking and living conditions of employees Facilitiesare modernized, especially information technology, to serve the business better.From establishment, the branch always makes profits, the revenue is higher yearafter year, contributing to State budgets increasingly, creating credibility withcustomers

Source Secondary data of Administration Department of Agribank ThanhXuan

The pie chart shows the education degree of staff in the branch Staff andemployee in the branch has high education degree 86% of bachelor, major ineconomics, banking or financial field With a skillful and high education degree ofwork force, it is one of the most important advantages to build a strong andsustainable branch Continuously developed and widened, the staff and employees

in the branch has raised to 72 people at the present time

2.1.2 Organization structure

Through years of operation, Agribank Thanh Xuan has developed widely, atthe present time it has a business network of five dealing rooms They are: Thirtytwo (32), thirty three (33), thirty four (34), forty six (46) and Cat Linh dealingroom Agribank Thanh Xuan is organized under the model of a supervisor Board ofManagement including General Director and two Deputy Directors

Organization structure of Agribank Thanh Xuan is divided into functionalblocks as follows:

Figure 7.- Organization Chart

Source Secondary data of Administration Department of Agribank Thanh Xuan

2.1.3 Products and services

Agribank has been made an effort in developing traditional services as well asother modern and valued added services This has enabled Agribank to diversify itsown products suitable to each segment of customers At the present time, Agribankbecomes leading bank in developing products: Mobile banking, SMS banking,VNTop up, SMS remittance ( A transfer service), etc

To Agribank Thanh Xuan, inherited reputation and successes of Agribank, thebranch has its decisions, policies to proceed those successes Agribank Thanh Xuanposts in the account dependently, has its own seals, organizes and operates under

Services &

Marketing

Department

Administration Department

3332

General Director

Internal Supervision Director Deputy

Plan &

BusinessDepartment

Accounting

& Treasury Department

Dealing Rooms

Regulation on organization and operation of Agribank Agribank Thanh Xuanprovides products and services which serve:

- Personal customers: They are individual, households join transactions in thebranch The branch provide these customers: Individual account, loans, savings andinvestment, remittance, Agribank card, foreign exchange

- Corporate customers: They are target customers of the branch Money flowoften in a great number They are organizations, corporate… Services and productsinclude: guarantee service, international payment, account, lending, check services,valuable notes, payment, border payment, saving deposit, leasing, foreign exchange,factoring

- Financial institutions: Agribank hope to “provide various services in order tosatisfy customers coming from financial institution sectors” These services are:retail banking, foreign exchange, treasuring, financial trading, project basedlending

2.2 Marketing activities at Agribank Thanh Xuan

2.2.1 Organization of Services and Marketing Department

Figure 8 Services and Marketing Department

Source Secondary data of Administration Department

Head of Department

International PaymentsSection

Card Section

Services and Marketing Department has 6 staff with separate tasks and roles

in their own working field:

- Head of Department: be directly responsible for the work and plans ofdepartment to the Director, make plans and assign tasks to the staff to completeobjects of Department and the branch

- Marketing staff: 4 staff are in charge of Card section and 1 staff is responsiblefor Foreign exchange Trading and Factor Section

Establishment of Marketing Department helps the branch to carry outmarketing activities more professionally, exactly and effectively It is not like manyother branches where have not a marketing department Instead of that marketingactivities are carried out under Business Department or hired expertise from outside

At Agribank Thanh Xuan, the Department is specialized in marketing operationThis establishment is also a success of the branch

2.2.2 Current marketing activities

The most important function of the department is to research and then bringbanking services of the branch to more and more customers Services andMarketing Department provides banking services to customers: remittance, openingnew banking account, foreign exchange, mobile banking, factoring, internationalpayment…

+ Card Section: introduce and issue card, develop existing cards and research,create new types of cards

+ Marketing: Marketing role is to carry out strategies, advertise programmes…

to promote the image of Agribank as well as the branch, new products and services,promotion activities…to public

+ International payments Section: the section realizes operations related tointernational transactions: foreign exchange, factoring, international payment bySWIFT…

The work force of the department who are all young, creative, skillful andenthusiastic This is the advantages for the department to develop business Thedepartment has not been established for a long time, however, it gains certainsuccess:

Table 1.- Total profit of services (VND million)

2.2.3 The role of marketing to Agribank cards.

Tasks of Marketing Department was ruled in Decision No 107/QĐ/NHNo –HCNS dated August 25th, 2009 by the Director of the branch The decision ruledsome major tasks of Services and Marketing Department as follow:

- Doing transactions with customers, marketing and introducing bankingproducts and services; receiving feedback from customers about services, giveideas, guides to improve services in order to best serve customers.

- Giving opinions, plans to the Director of branch about: policies to developnew banking products and services, to improve procedure’s transactions, to buildmarketing plans, to promote promotion, advertisements, etc

- Serving activities related to marketing, promotion, press, medium…,activities related to marketing, promotion of organization of Party, Union, or YouthUnion at the branch

- Carrying out marketing activities at the branch, as well as location area

- Directly handling international payments, foreign exchange, remittance, etc

- Managing, controlling issuing and acquiring card operation at the branchfollowed rules of Agribank

- Directly organizing, developing card business of the branch in the workingarea followed the rules of Agribank

Marketing plays an important role in developing modern banking activities ingeneral, and in card services in particular In general, Marketing activities,promotion new products and services have been increasingly concerned andinvested

- Card products and services of Agribank has been advertised in mediachannels: television, radio, newspapers, banners in buses, left leaves, etc

- 24/24 supporting customer services on telephone from Card centre

- Service of Finding ATM/EDC by website, SMS (Service of findingATM/EDC by SMS has applied by all most mobile network: Viettel, MobiFone,Vinaphone, EVN, VietnamMobile)

- In addition, to be sponsor of some programmes in television, game shows,charity activities plays a significant role in advertising trademark of Agribank,helps the branch reach more and more customers