Phân tích hoạt động kinh doanh thẻ giai dd 2006 2009 và xây dựng chiến lược kinh doanh thẻ giai đoạn 2010 2015 của ngân hàng BIDV

LUẬN VĂN THẠC SĨ Phân tích hoạt động kinh doanh thẻ giai đoain 2006-2009 và xây dựng chiếnlược kinh doanh thẻ giai đoạn 2010-2015 của ngân hàng BIDV THESIS TITLE TOPIC: The analysis of c

LUẬN VĂN THẠC SĨ Phân tích hoạt động kinh doanh thẻ giai đoain 2006-2009 và xây dựng chiến

lược kinh doanh thẻ giai đoạn 2010-2015 của ngân hàng BIDV

THESIS TITLE

TOPIC: The analysis of card business operations during the 2006 – 2009 period at Bank for Investment and Development of Vietnam (BIDV) and establishment of card business strategy for the 2010 – 2015 period.

1.2.2 Process of business strategy establishment

1.2.2.1 Vision of missions and values

1.2.2.2 Analysis of business environment

Macro-environmentIndustry environment (the M Porter 5 competitiveforce model)

1.2.2.3 Analysis of internal environment

Determination of core internal factors Performance of internal estimation

1.2.2.4 SWOT analysis

1.2.3 Selected business strategies

1.2.4 Organization of business strategies performance (the

functional strategy execution)

1.2.5 Estimation of business strategies

CHAPTER II: ANALYZING THE REAL SITUATION OF

CARD BUSINESS ACTIVITIES IN BIDV IN THE PERIOD

Page

6810101010131414141415

1515151616181818

BETWEEN 2006 - 2009

2.1 About Bank for Investment and Development of Vietnam

(BIDV)

2.2 The retail banking operation at BIDV

2.3 The real situation of card business operations at BIDV

2.3.1 Card business activities in Vietnam market

2.3.1.1 Result of card business activities in Vietnam market

2.3.1.2 The main characteristics of the card market Vietnam

for the period 2006-2008

2.3.1.3 Limitations of market card in Vietnam

2.3.2 Analysis of card business activities in BIDV in the

period between 2006-2009

2.3.2.1 Results from card business activities

2.3.2.2 Analyse the situation of the payment network

2.3.2.3 Assessment of card product development

2.3.2.4 Analysis of technology to support card business

2.3.2.5 Analysis of card risk management

2.3.2.6 Analysis of management, organizational models and

human resources

2.3.2.7 Analysis of the status of Marketing

CHAPTER III: COMPETITIVE STRATEGIES

ESTABLISH-MENT FOR CARD BUSINESS OF BIDV FOR THE 2010 –

2015 PERIOD

3.1 Vision and missions of Bank for Investment and

Development of Vietnam

3.1.1 General vision and mission

3.1.2 Vision for Retail banking operation

3.2 Establishing some objectives and visions for BIDV’s card

20

2023252525

2728

292936414243

4446

51

515151

business operations until 2015

3.3 Establishment of card business strategy

3.3.4 SWOT matrix for building business cards activities

3.3.4.1 Summary of external business environment analysis

3.3.4.2 Synthesis estimates opportunity's impact with respect to

enterprise

3.3.4.3 Synthesis estimates threat's impact with respect to

enterprise

3.3.4.4 Integrated analysis environment internally

3.3.4.5 The SWOT matrix

3.3.4.6 The EFE Matrix

3.3.4.7 The IFE matrix

525455555555565858595961626263

636364656566

6667676970

3.3.4.8 The I-E matrix

3.4 Selection of business strategies

3.5 Organization of business strategies performance

3.5.1 The human resource solutions

3.5.2 The financial solutions

3.5.3 The administration solutions

3.5.4 The technology solutions

3.5.5 The risk management solutions

3.5.6 The Marketing solutions

3.5.6.1 Solutions of products

3.5.6.2 Solution for development of card acceptance network

3.5.6.3 Solution of distribution channels

3.5.6.4 Solution of commercial promotion or communication

3.6 Estimation of business strategies

CONCLUSION

REFERENCE

70717272747575767777808182828384

List of tables

Table 2.1: Some performance results of BIDV as of 30/11/2009

Table 2.2: Results of the retail banking activities during the 2006-9/2009 periodTable 2.3: Data of trading card market of Vietnam from 2006- June/2009

Table 2.4: Data of trading card activities in BIDV in the period between 2006- first

6 months of 2009

Table 2.5: Number of debit cards according to area

Table 2.6: Number of POS according to area

Table 2.7: Number and exchange sales on ATM BIDV

Table 2.8: Results on the ATM card payments Banknetvn BIDV

Table 2.9: Results of Visa payment card on ATM BIDV

Table 2.10: The effective performance of ATM network in the region

Table 3.1: Objectives of core plans

Table 3.2: Target for building business card period 2010-2015

Table 3.3: Summary of external business environment analysis

Table 3.4: Synthesis estimates opportunity's impact with respect to enterprise

Table 3.5: Synthesis estimates threat's impact with respect to enterprise

Table 3.6: Integrated analysis environment internally

Table 3.8: The EFE Matrix

Table 3.9: The IFE Matrix

Table 3.10: The IE Matrix

Table 3.11: Planning the implementation of technology solutions to 2010

Table 3.12: Plans of products until 2012

List of index

Index 2.1: Organization chart

Index 2.2: Number of Debit card BIDV between 2006- September/2009

Index 2.3: Number of debit card of BIDV in comparison with main competitorsIndex 2.4: Number of POS BIDV between 2007- September/2009

Index 2.5: Number of POS of BIDV compared to main competitors

Index 2.6: The net fee of BIDV’s card service between 2006- the first 9 months in2009

Index 2.7: Number of ATM of BIDV in Vietnam market

Index 2.8: The growth and number of sales transactions on the ATM BIDV period

2006 to 2009 (projected 2009)

INTRODUCTION

In recent years, many economic and politic events have marked the success ofVietnam’s economy In the integrating situation with many opportunities andchallenges, banks has shown its importance in developing economy, especially inchanging the market which is naturally considered as cash-based as in Vietnam.Card service has become one of bank’s advantages and made up a noticeableproportion of banks’ service income Thus, from 2006-2009, there is an upwardtrend in the number of banks (including small commercial banks) which have jointcard market in Vietnam In 2009, this number increased twice as much as that of

2006 This indicates that card service is getting more and more important in thedevelopment strategy of banks, especially when there are a lot of difficulties inimproving traditional products Therefore, the competition between banks in cardmarket is getting harsher

Being one of the five largest commercial banks in Vietnam, Bank for Investmentand Development of Vietnam (BIDV) has shown its leading role in many fields,products and bank services In addition to advantages of a wholesale bank, BIDValso realizes opportunities and potential to develop in retail banking including cardservice

Making use of the advantages of the brand, BIDV has gradually approachedcustomers of this service and with great effort and study to improve the quality ofservice, BIDV has formed its position in the 5 leading units in trading card field.Trading card also brings BIDV high income in the total income of the banks.However, with the unstable situation of card market, BIDV also faces a lot ofdifficulties and challenges in competing with current and potential competitors inmarket

To contribute to the more development in trading card of BIDV as well as increase

the prestige and belief for customers when using card service, especially increasecompetitive capacity of BIDV in exploiting the market which has a lot of potential

customers, the team has carried out the study: “The analysis of card business operations during the 2006 – 2009 period at Bank for Investment and

Development of Vietnam (BIDV) and establishment of card business strategy for the 2010 – 2015 period”

The aims of the study

Generalization of basic arguments regarding the cards and card business,competitive strategy, business strategy and functional strategy

Specifying the real situation of card business at BIDV during the 2006 -2009period, analyzing the real situation and shortcomings in operation

Establishing the card business strategy for the 2010 – 2015 period, analyzing thefunctional strategies with the aim of improving the card business performance atBIDV, in which the analysis of Marketing strategy shall be focused

Object and range of the study:

About the trading card activity in Bank for Investment and Development ofVietnam and some domestic commercial banks

Methodology

Basing on the dialectical materialism in cooperation with statistics, analysis andsynthesize, compare data

Struture of the study

Apart from the introduction and conclusion, the structure of the study is divided into

1.1 Overview of card and card business at Commercial Banks

1.1.1 Overview of Card

Responding to strong economic growth and more complex and diversified methods

of goods exchange among different industries and different countries in the world,bank’s currency units therefore is developed accordingly to meet Customer’sdemand of payment and depositing money Besides, the world is currently enjoyingoutstanding achievements of information technology Information technology hasespecially brought numerous advantages to banks in creating and improving theirmodes of payment It is undeniable that the creation and development of bank cardhas become one modern an convenient instrument nowadays

In 1949 one businessman whose name is Frank Mc Namara has invented the firstcard called Dinners Club, which is the beginning of later card boom such as Amex(American Express) created in 1958, Bank American;

Later in 1960 Visa card, or JCB in Japan in 1961, and Master Card in 1966 withname Master Charge have been issued by International Card Association through itsmembers all over the world

Although card has been in existence for a long time, functions and advantages ofvarious types of card of different banks are not the same Therefore, one commondefinition of bank card is not concluded

Overall, bank card could be understood as follows: “Bank card is one non-cashpayment instrument issued by bank It is issued to customer to pay for goods orservices provided, or to withdraw cash at automatic teller machines or agent bankswithin deposit account balance or credit limit agreed between card issuing bank andcard holder Card invoice is bill of debt by card holder to Merchant.”

1.1.2 The classification of card

1.1.2.1 Based on card issuer

The card issued by bank: the card is issued by bank to customers so that they canuse their accounts or the accounts granted by bank for making payment or usingbanking services

The card issued by non-bank institutions: the card is issued by non-bank institutionswith the payment process and scope that is similar to the card issued by banks such

as Amex, JCB

1.1.2.2 Credit limits

Gold Card: this type is issued to customers on demand of making the payment ofbig amounts, particularly for businesspeople This card type has various features.The regulations of cash drawing and consignation limits are dependent on eachregion as well as each country

Standard Card: this is the most basic type and also the most common at present.According to statistics, there are about 160 million people using standard cardsdaily all over the world The card limit depends on the regulation of each bank.Normally, it is USD 1,000

1.1.2.3 Card-making technology

Embossing card: the card is made on the embossment technique, accordingly, thenecessary information are embossed on the card Thus, only a little information isembossed and easily counterfeited, and currently, such card types are rarely used.Magnetic stripe card: The card stores information basing on the magnetic stripe, andjust contains the fixed information not encrypted, thus its safety is poor and it iseasily counterfeited Also, very little information is achieved on the card type

“Smart card”: This type is equipped with the electronic chip to store informationand can reach up to 200 of the last transactions with the high safety and it is verydifficult to counterfeit thanks to the encryption

1.1.2.4 Based on using scope

International card: The card is issued by domestic banks but used for makingpayments inside and outside the territory or issued in foreign countries but used forinland payment For example, ANZ Card, HSBC card, etc International card is paid

by strong foreign currencies

Domestic card: The card is issued by domestic banks and used for domesticpayment in local currencies

1.1.2.5 Based on the nature of payment

Credit card: It is also called the delayed debit card, in which the cardholder isentitled to use the card for making payments of goods and services and for drawingcash in the credit limits approved by the issuing bank in accordance with thecontract

Debit card: This card has direct relationship and has been associated with thedeposit account of card holder This card type shall be immediately deducted fromthe cardholder’s account upon the goods and services purchase; at the same time, itshall be processed to the account of agencies accepting card The debit card has twotypes including online and offline

Cash card: This card is used for drawing cash at ATM machines or banks Based onthe specialized function of drawing, the amount of money in each time shall beshortly deducted from the cardholder’s account

1.1.2.6 Based on objects in charge of payment

Individual card: This card type is issued to individuals who have demand andsatisfy conditions to open card at banks The cardholders are responsible for payingexpenditures via the card by their own money or they can request for issuing sub-cards

Individual card authorized by a company: This card type is issued to individuals andorganizations The company who undersigns for issuing cards authorizes anindividual to use and take the responsibility for payment of expenditures via thecard by company’s money sources

1.1.3 Card business at commercial banks

1.1.3.1 Issue operation

Card issuance in banks is governed by applicable legal regulations of local countryand general conventions of international card association Besides, rules anddecisions of bank’s board of directors will play an important role

Bank’s card issuance includes process of management and implementation of cardissuance, utilization and debt collection from customer These three processes play

essential role and should be paid attention Each of them is closely related tocustomer service and bank’s risk management Financial institutions and issuingbanks have to develop regulations on card utilization and debt collection, such asminimum payment, date of statement printing, due date, fees and interest rate,maximum credit limit and preferential policies

There are different types of card issuance in banks However, two most populartypes are new issuance and re-issuance

While issuing card, banks obtain not only issuance fee from card holder but alsointerchange fee from bank of settlement through international monetary association.This is the basic profit of financial institutions and card issuing banks With thisincome, card issuing banks develop programs of interest exemption and otherincentives in order to enlarge the number of customer and increase revenue

Settlement bank will summarize all card transactions and transfer data tointernational card association (for international card)

Payment procedure is conformed as below:

 International card association records Credit to Settlement bank’saccount

 International card association is responsible for informing Debit toIssuing bank

 Settlement bank make payment to International card association

 Issuing bank sends account statement to card holder

Card holder makes payment to Issuing bank or Issuing bank will record Debit tocard holder’s account if card holder has account at Issuing bank

Card payment does not stop at recording Credit to Merchant as commitment Profit

on card payment is large out of total business profit, so competition in this area isharshly Therefore, banks always have to implement suitable marketing programsand good customer services as well as provide free additional services andadvantages to Merchants in order to enhance their competitive strengths

1.2 Business strategy

1.2.1 Concepts

There have been many definitions of a business strategy, however, it should beunderstood that the business strategy is one set of goals and policies decided by onecorporate with regard to the entrepreneur location method for improving its profitand establishing economic values for owners and shareholders The businessstrategy enables us to answer two key questions in the corporate performance,including: “Which markets should an entrepreneur take part in?” and “How is thecompetitive strategy of an entrepreneur performed?” Thence, the strategy isunderstood as “a series of complex activities to mobilize organizational resourcesfrom an agency that helps obtaining a certain goal”

1.2.2 Process of establishing business strategies

1.2.2.1 Vision of missions and values

In order to establish a development strategy for an entrepreneur, we need to clearlyidentify the vision of that entrepreneur in future, and missions which theentrepreneur must perform as well as which core values need directing towards Thespecific determination of above contents shall specify ambitions of theentrepreneur Besides, the statement made by the entrepreneur shall create a

foundation for the whole works of development strategy planning, and representcore values of the entrepreneur to determine regulations and principles under thesustainable foundation for an agency.

1.2.2.2 Analysis of business environment

Demographic environment: Demography is not only an issue of one country butalso a global concern Especially in the current context of economic integration,enterprises should pay attention to this environment

Political, legal environment: Enterprises should analyze, forecast businessregulations in relation to state management and applicable laws

Global environment: Good analysis of global environment will help enterprises totake proactive position in international economic integration

Industry environment (M.Porter’s 5 competitive forces model)

Mentioned in theory of professor Michael E.Porter (Harvard BusinessManagement), industry environment analysis should focus on following contents:analyzing current competitors, analyzing potential competitors, analyzing supplier,analyzing customer, analyzing alternative products

1.2.2.3 Analysis of internal environment

Determination of core internal factors

In fact, each entrepreneur cannot estimate all factors in its internal aspects due tothe large number of factors Therefore, in order to estimate the internal situation of

an entrepreneur, it is necessary to determine core internal factors and major factors

The aspects which we can review and estimate the internal environment include:Finance, administration, development research, marketing, information system,technology, and risk management.

Performance of internal estimation

Regarding target, the assessment of internal environment is to find out strengths andweaknesses in the entrepreneur’s internal environment and thence, it is possible toprovide necessary solutions Internal factors which need to be estimated include:Management, marketing, financial accounting, production and task, technology, andinformation system

1.2.2.4 SWOT Analysis

After analyzing factors of macro-environment and business environment, theentrepreneur should clearly determine opportunities and threats from externalenvironment as well as strengths and weaknesses in the entrepreneur’s internalenvironment to formulate bases for considering and establishing orientations andstrategic plans One of the most common techniques is the SWOT matrix-basedanalysis

The steps:

Step 1: The analysis of internal business environment, strengths and weaknesses,

building evaluation matrix Internal environment (IFE)

the most important weakness = 1, Weaknesses = 2,strong = 3, the most important strong = 4

(4) = (2)*(3)

 1.00

Highest total score is 4, the lowest is 1, average 2.5, The higher score indicatesstrong on internal business

Step 2: The analysis of the business environment, opportunities and threats to build

the matrix evaluation of External environment (EFE)

the little reaction= 1, the medium

reaction= 2, the above average reaction = 3 and the strong reaction = 4

(4) = (2)*(3)

 1.00

Highest total score is 4, the lowest is 1, average 2.5 The higher score indicatesmore businesses respond better to the environment

Step 3: The total of results and construction SWOT matrix.

Step 4: Develop a matrix Internal - External (I - E).

Step 5: Select from the identification of strategic business position in the matrix IE.

If business is located in the blue selection strategy S-O

If business is located in the yellow selection strategies and W- O, S-T

If businesses are in the red selection strategy W-T

Internal environment IFE

1.2.3 Selected business strategy

Strategically selected to ensure suitable environmental conditions; Compliance withforeign policy viewpoints and methods of management Board of Directors andBoard of Directors of the company; Compliance with the financial capacity materialand personnel of the enterprise

1.2.4 Organization of business strategies performance (the functional strategy execution

To organize the implementation of business strategy, enterprises need to buildfunctional strategies including human resource strategy, financial strategy,management strategy, technology strategy, risk management strategy, motivativedevelopment strategy, marketing strategy

1.2.5 Estimation of business strategies

Once establishing a business strategy, entrepreneurs also have to acknowledge thatthey sometimes need to make strategic adjustments if necessary Amendmentswhich are massively widespread should be avoided, but it is also required toconsider the necessity to adjust in mandatory situations Also, the estimation ofstrategy performance is a good opportunity for reviewing strategies of anentrepreneur Under many circumstances, although one established strategy whichseems to be completely logical and reasonable, it cannot be performed efficientlyjust due to some certain reasons such as lack of resource or unsuitable resource orpoor information system, etc While organizing implementation, the entrepreneur

needs to test and review specifically as well as to have reasonable intervention orcorrection However, modifications should be performed after havingcomprehensive estimations and careful considerations as well as seeing that the newstrategy can bring more benefits than the current strategy by far.

CHAPTER II: ANALYZING THE ACTUAL SITUATION OF TRADING CARD ACTIVITIES AT BIDV IN THE PERIOD 2006 - 2009

2.1 Introduction to Bank for Investment and Development of Vietnam (BIDV)

6 years after the establishment of National Bank of Democratic Republic ofVietnam, on April 26, 1957, the Prime Minister signed the Decision of establishing

Vietnam constructing bank (former of Bank for Investment and Development of

Vietnam (BIDV)), one member of Vietnam bank system During the 52 yearhistory, whatever name it is called, whatever model Bank for Investment andDevelopment of Vietnam (BIDV) is operated, it has been always a leading soldier

in the frontline of finance, contributing to Vietnam’s development

Bank for Investment and Development of Vietnam (BIDV) is a State’s enterprise ofspecial rank which is organized in the form of State general company (Group) that has united system including 112 branches and companies throughout the country, 3 units in cooperation with foreign countries ( 2 banks and 1 company), contributing capital with 5 credit organizations

The main operation and traditional activity of Bank for Investment andDevelopment of Vietnam (BIDV) is to invest in developing projects to carry outmain economic development program of the country Carry out fully service of abank serving all economic components and has close relations with enterprises,general companies BIDV always broadens retail relations with more than 400banks and payment relation with 50 banks all over the world

Some performance results of BIDV as of 30/11/2009

Table 2.1: Some performance results of BIDV as of 30/11/2009

(Source: - the BIDV annual report)

Organization chart

LAO-VIET BANK (LVB) LAO-VIET BANK

Subsidiaries (wholly-owned)

VIETNAM-RUSSIA BANK (VRB)

VIETNAM-RUSSIA BANK (VRB)

VID-PUBLIC BANK (VPB)

VID-PUBLIC BANK (VPB)

LAO-VIET BANK (LVB)

LAO-VIET BANK (LVB)

BIDV-Vietnam Partners Investment Management Joint-Venture Company (BVIM)

BIDV Information Technology Center

BIDV Information Technology Center

BIDV Tower Joint-Venture

BIDV Leasing Company (I, II) (BLC)

BIDV Insurance Company

Index 2.1: Organization chart

Estimates of some core aspects according to the international standards:

As of 30/11/2009, the total assets of BIDV reached 279,234 billion VND Thescope of total asset enables BIDV to maintain the second ranking in the domesticmarket, just after Vietnam bank for Agriculture and Rural Development

The total asset in the year 2008 increased to 20.3% as compared to that in 2007,which slightly fell as compared to the growth rate in the total assets from the year

2005 to 2007 due to the increase in scope of total assets

The credit activity still occupied the main proportion in the total assets, and it made

up 64% in the year 2008 The BIDV diversified the loan catalogue in many fieldssuch as: infrastructure, processing industry, trading, service, agriculture andforestry, maritime products, hotel and restaurant, etc The BIDV percent of short-term outstanding loans prevailed at 59.5%, with the medium and long term of12.8% and 27.7%, respectively Besides, the loan structure in VND occupied 76.5%

of the total outstanding loans

Together with the total assets growth, the owner’s equity increased to 40.5% in

2006 as compared to that of 2005, 90% in 2007 against 2006, and 19% in 2008against 2007 with the threefold increase in the owner’s equity against that of 2005

In addition to the scope growth, it was also shown that the proportion of non-creditoperations became higher in the income structure with the 14.5% in 2007, and the17.5% of total income in 2008 The proportion of extraordinary income (byrecovering off-balance sheet bad debts) fell, showing that the BIDV’s income wasgenerated mainly from core business operations, which is a more sustainableincome source

The BIDV always determines that the liquidity safety assurance is one of leadingcore duties to be performed The works of liquidity calculation management havebeen highly increased Especially, in challenging times for the liquidity in the wholeeconomy such as in 2008 and final months of 2009, the liquidity situation of BIDVstill assured safety as well as complete performance of required reserve rate asrequested by State Bank and the full satisfaction of capital sources in businessoperations

2.2 Retail banking services at BIDV

The BIDV retail banking operations have been provided for individual customers assince 1995 when BIDV set about shifting its operations with the aim of becoming a

full e-commercial bank However, the BIDV’s concern about developing retailbanking operations was still very limited During the period 1995-2005, the BIDV’sretail banking activities was mainly focused on developing the fund mobilization-based products and the fund mobilization activities from individuals Only in recentyears, BIDV has actually paid much attention to retail banking field Particularly asfrom the implementation of the organizational model based on recommendations ofthe project consultancy so-called TA2 (from 01/9/2008), the BIDV organizationalmodel has clearly separated the retail banking from the normal banking practice andits operating goals has been specified clearly The specific results have been shown

T6-2009 T9-2009

% Aver age perce nt duri ng the 06-09 perio d Absolute 07/06 Absolute 08/07

n 26.377 58.303 121% 98.429 69% 52.876 69.700 95% Fee collection

from WU

$ in mil 228.206 492.123 116% 729.780 48% 332.584 409.663 82%

O Items Unit

In the period 2006

T6-2009 T9-2009

% Aver age perce nt

BSMS services

VND in mil 2.907 8.460 191% 6.830 12.000

Table 2.2: Results of the retail banking activities during the 2006-9/2009 period

(Source: Report of Vietnam Bank Card Association year 2006 – June/2009)

Business scope: In general, from the period 2006-2008 to September 2009 the

BIDV retail banking business operation gradually developed The fund mobilizationactivity increased from VND 48.818 billion to VND 66.927 billion, with the growthrate of 35% The outstanding credit from retail activities also increased over theyears (except the year 2008 when the outstanding loans from retailing did notincrease compared to that of 2007 due to restrictive monetary policy of Vietnam’sgovernment) Also, the retail-based outstanding loans of the whole system reached9,342 billion VND in 2006 and 18,219 billion VND in September 2009 that isapproximately double higher than 2006 In regard to retail-based non-creditoperations, the number of customers using services over the years also increased,with the threefold increase in the domestic debit card number during the 2006-9/2009 period and the amount from 571 thousands to above 1.7 millions of cards.Additionally, the number of customers using the BSMS service threefold increased

Efficiency and quality: The quality and efficiency of retail banking services from

the 2006-2008 to 9/2009 period was relatively stainable The fund mobilizationactivities from individuals have been reasonably developed regarding to thecurrency types structure (the VND and USD structure of about 70-80%) as well asthe term structure (during the 2006-2007 period, the deposit of below the 12-monthterm varied from 36 to 39%, and the deposit from 12 month term and over occupied

55% of total proportion, among which the 12-month term made up the greatestproportion of 45% In 2008, due to the highly increasing inflation situation whichbrought about the mobilization interest increase, particularly for short terms forassuring the liquidity capability of banks and expectation for the successive interestincrease as well, the deposit proportion below the 12-month period at BIDVsuddenly increased to 65%, meanwhile, the deposit for the 12-month period andover reached 28%) For the retail credit operations, the rate of NPLs per the totalretail-based outstanding loans during the 2006-2008 period reached 2% Theretailed non-credit products contributed to the income source increase for the bank,with the charge increase of 82% from WU services, and the approximately fourfoldincrease from BSMS charge collection during the 2006-2008 period.

Market share, proportion: The BIDV’ s fund mobilization activities from

individuals still occupied a relatively big market share in the recent periods (2006:14%, 2007: 11%, 2008: 9,2%) The decline in its market share over the years waspartly due to the large number of newly established banks in the Vietnam banking-financial market In terms of card-related activities, the market share of card issuingranked fifth, and the number of ATM machines ranked third in the Vietnam market

2.3 Analysis of business cards activities in BIDV in the period between 2009

2006-2.3.1 Analysis of Vietnam trading card market

2.3.1.1 Results from business cards activities in Vietnam market

From 2002-2008 Vietnam trading card market saw great development of the cardmarket There were 20 commercial banks issuing domestic cards and 8 commercialbanks issuing international card The number of issued card was nearly 4 millioncards (domestic card: 3.5 million, international card: 0.5 million) To improvebenefits and serve different demands of customers, during the recent time,Vietnam’s commercial banks have continuously issued new cards with newbenefits: Vietcombank began issuing Connect 24 card and deployed VCB-ATMsystem Immediately, other commercial banks also issued initial card products as

Cashcard and then ATM GoldCard, ATM S-Card of Incombank, thousand-mile

card of BIDV, multi- function card of East Asia bank, FastAccess card of Industrial

and Commercial bank, SaigonBankCard of Saigonbank ACB e-card, Citimard of

ACB, VIB Value Card of VIBank, ATM Lucky of Eastern bank, etc From the

initial functions of ATM from taking VND, transferring money, Connect 24 was

gradually improved such benefits as taking USD, paying goods or services at units

accepting card, paying telephone fee, water fee, insurance, putting money from

ATM

With the boom of card products in commercial banks, there were positive changes

in Vietnam card market from 2006-2009 with the participation of new banks, the

dynamic issuance of domestic/international card and the network accepting develop

ATM/POS card throughout the country

In 2007, Vietnam’s government and State Bank implemented many policies and law

documents to promote issuance and payment through cards such as: Project of

paying without using cash, Regulations of paying salary through card, Decision No

20 about the regulations of issuing, paying, using and supplying services supporting

card activities at banks (replacing Decision No 371), Decision about the quota of

balance of anonymous card, Regulations of issuing and managing PIN code, etc

Result of trading card activities in Vietnam market:

International card

ATM (machine)

POS (machine)

Using sales (billion VND)

Payment sales (million USD)

Table 2.3: Data of trading card market of Vietnam from 2006- June/2009

(Source: Report of bank card association of Vietnam 2006- June/2009)

In the period 2006-2008 the number of bank participating in card market in

Vietnam increased, especially small stock commercial banks The number of bank

card market participants more than doubled in 2008 compared to 2006 This shows

that card service is getting more and more important role in development strategy ofbanks, especially in the current period of crisis when the development of traditionalproducts had been difficult Same time, competition among banks in card market isbecoming fiercer and more stress

Card market during this period achieved rapid growth in all areas of card issuance,card payment and network acceptance devices (ATM, POS) As for card issuance,domestic cards account for more than 90% of total cards issued The annual averagegrowth rate of domestic card (of which more than 99% of debit card) is 83%, butgrowth rates are decreasing over the years (in 2007 increased by 106%, but in 2008only increased by 59%) The annual average growth rate of international card is52% but the growth rate increased gradually over the years (in 2007 increased by31%, and in 2008 increased by 74%) Along with fast growth and strength of thenumber of cards in circulation, the number of ATMs also increased significantlywith the average growth rate of 65% per year, nearly double the growth rate of thenumber of POS (38% per year on average) The number of Debit card and domesticATMs in 2007 and 2008 increased rapidly under the effects of instruction 20/CT-TTg on August 24, 2007 of Premier Minister about paying via Salary account forpeople who receive salary from the State budget But to the first 6 months of 2009,under the impact of economic recession by the global financial crisis, growth of thenumber of cards issued and number of equipment ATM /POS has been dramaticallyreduced compared with the period 2006-2008

2.3.1.2 The main characteristics of Vietnam’s card market in the period

2006-2008

The trend of coalition and cooperation between banks gradually became themainstream with the participation of more banks The number of members of cardunion increases with the number of new banks in card market Currently, there aresome big card unions in Vietnam such as Banknetvn, Smartlink (previously known

as alliances between VCB and member banks), VNBC, etc Under the direction ofthe State Bank of Vietnam, the two largest card unions in Vietnam - Smartlink

Banknetvn - signed cooperation agreement in connection in 11/2007 and by May

2008, these two unions are connected together on ATM systems The number ofbanks participating in ATM network connections is increasingly expanded Incoming time, Vietnam will form in organizing national switch, connect all ATMsystems and equipments accepting cards of different banks into one unifiablesystem

As for the function of card, besides the basic features such as withdrawal, transfer,payment of goods and services, investment banks are focusing on developingbusiness services value increase and add more benefits for cardholder such asbilling payment (e.g pre-electricity, water, telecommunications, insurance, bookingair tickets, etc.), online shopping, banking services through mobile phones andinternet, area bonus in exchange for gifts

List of cards of the banks is also extremely diverse and rich, with cards reserved fordifferent users (such as cards for women, cards for young people, cards for businesspeople, cards for students, business cards for payroll, the card association and co-brand card) Developing various types of card products to best meet the demand ofdifferent customer segments is being a trend of significant market in Vietnam.Banks in Vietnam invested a lot in marketing activities, enhancement of their cardbrand through organizing annual promotions, sponsorship and TV Game-show,advertising on mass communications, etc

2.3.1.3 Limitations of the market card in Vietnam

Beside the very impressive growth figures in terms of quantity, there still exist somelimitations in Vietnam’s market in this period such as:

Banks thrive on the number (of card issuing, ATM), but service quality in generalhas not been improved respectively On the mass media, there are still manycomplaints from customers regarding the quality of card service and ATM activity.The bank mainly focuses on the development in terms of quantity but not focusing

on training and improving knowledge of card users

Awareness of card services is limited, mainly using cards to withdraw money,rarely use cards for payment

Network of accepted card payments is not wide Network of banks’ POS is notconnected Payment by cards is often charged some more fees by units acceptingcards Therefore, the development of payment by cards is limited

2.3.2 Analysis of trading card activities in BIDV in the period between

2006-2009

2.3.2.1 Results from trading card activities

2006-(Source: Report of bank card association of Vietnam 2006- June/2009)

Trading card activities between 2006-2008 of BIDV showing in main criteria havefollowing results:

Issueing activity

Activity of issueing card (mainly Debit card) of the whole system

Index 2.2: Number of Debit card BIDV between 2006- September/2009

(Source: Report of bank card association of Vietnam 2006- June/2009)

The average growth rate of the number of debit card is 64% p.a However, thisgrowth rate is decreasing In 2007, it was 88% but in 2008, it was just 40.6% Oneimportant factor which made the developing rate of debit card in 2008 is far lessthan that of 2007 was that the closed card in 2008 was up to 91,000 cards Thenumber of closed card continued increasing in the first 6 months of 2009 whichmade the net increase reach only 104,855 cards (increasing by 218,833 cards butdecreasing by up to 113,978 cards Thus, by June 2009, the number of debit cardsjust had the net increase of 6.9% compared to 2008 The reason of this situation isthat a large number of cards was issued in 2007, 2008 but customers haven’t takencards

Index 2.3: Number of debit card of BIDV in comparison with main

competitors

(Source: Report of bank card association of Vietnam 2006- June/2009)

BIDV’s developing rate of number of debit card is lower than the average rate ofthe market This leads to the continous decrease year after year in position andmarket share of BIDV in terms of domestic debit card In 2005, BIDV held thesecond position in terms of number of domestic debit card but in 2006, it fell tofourth position (after VCB, East Asia, and ICB) with 13.5% market share, in 2007,

it fell to fifth position (after VCB, East Asia, ICB, and VBARD) with 12.27%market share, in 2008, though still holding the fifth position, BIDV’s market sharewas just 10.8% In the first 6 months of 2009, though still maintaining the fifthposition, the market share of BIDV continues falling slightly to 10.2% The distancebetween main competitors as Vietcombank, Vietinbank and Agribank is broader.BIDV has just joint international card since March/2009 and just issuedinternational credit card, not international debit card Thus, the number of issuedcard is very few, and does not have any remark in Vietnam’s international cardmarket

Activities of issuing debit card according to branches:

Times in 2007

Times in 2008

Cumulative cards to June/2009

Rate (%)

Places that have largest cumulative cards

1 North economic

motivation area 138.721 97.986 438.149 27,1 Quang Ninh

2 Red river Delta 14.410 28.353 63.448 3,9 Thai Binh

3 North

mountainous area 50.693 62.772 140.501 8,7 Thai Nguyen

4 North Central 30.964 39.729

5 South Central 57.094 45.945 180.820 11,1 Binh Dinh

7 South economic

motivation area 109.941 109.594 456.542 28,2

Ho Chi Minhcity

8 Cuu Long Delta 51.406 43.719 114.762 7,3 Vinh Long

Table 2.5: Number of debit cards according to area

(Source: Report of bank card association of Vietnam 2006- June/2009)

Issuing domestic debit card has been implemented in 108 branches in the wholesystem The North economic motivation area and the South economic motivationarea represent the largest rate (more than 55%) However, the growth rate of theseareas is decreasing, especially in the North economic motivation area where itdecreases by 29.3% compared to 2007

Downward trend is also obvious in the South Central area, Highland and Cuu LongDelta In Red river Delta, the North mountainous area and the North Central area,this number slightly increases, but these three areas just represent a small rate(19.2%) Thus, they do not contribute much in the growth quantity of domesticdebit cards

Evaluation the activities of paying via POS

Activities of paying by card via POS of the whole system

Index 2.4: The number of POS of BIDV from 2007 to September, 2009

(Source: Report of bank card association of Vietnam 2006- June/2009)

BIDV has officially implemented the service of international payment by card viaPOS/EDC since August, 2007 This service has helped BIDV to develop newcustomers who are units accepting card, improve benefits for BIDV’s card holders.The effectiveness of POS system is being improved and expressed by the increase

of the value of service fee Fee from POS activities in 2008 was VND 218 million

In first 6 months of 2009 this fee was VND 165 million which increased by 80%compared to the same period last year

Index 2.5: The number of POS of BIDV compared to main competitors

(Source: Report of bank card association of Vietnam 2006- June/2009)

However, the development and expansion of POS network of BIDV have manydifficulties In 2008, number of new POS increased by 72% compared to 2007, but

in the first 6 months of 2009, the number of new POS decreases by 14.5%compared to 2009 The number of POS decreases in 2009 because in the beginning

of the year, BIDV checked the POS network and closed POS which do not workeffectively

POS network of BIDV just holds a market share of 3.5% Developing rate of POSnetwork of BIDV is much lower than that of main competitors such asVietcombank, Agribank and Vietinbank One of the important reasons is that POS

of BIDV has just accepted payment from BIDV’s cards and VISA while POS ofother banks accepts many payments by many international credit organizations(VISA, MasterCard, JCB, Amex, Diners Club, etc.)

POS according to area

Order Area Times in 2007 Times in 2008

Cumulative cards to June/

2009

Rate (%)

Places that have largest cumulative POS

Transaction

No 1 and Ha Thanh branch

Table 2.6: The number of POS according to area

(Source: Report of bank card association of Vietnam 2006- June/2009)

Paying by card service via POS/EDC of BIDV has been carried out since August,

2007 and now it has been implemented in 78/108 branches in the whole system.The South economic motivation area, the North economic motivation area and theSouth Central represent the largest rate in POS network of BIDV (71%)

In 2008, growth rate of POS network in almost all areas decreased sharply (TheNorth economic motivation area decreased by 68%, the South Central decreased by38.8%) Just the South economic motivation area increased slightly (22.5%) andCuu Long Delta increased by 17.2%

Evaluating criteria of collecting net service fee

Unit: VND in bill

Index 2.6: The net fee of BIDV’s card service from 2006 to the first 9 months in 2009

(Source: Report of bank card association of Vietnam 2006- June/2009)

Growth rate in the net fee of BIDV’s card service in 2006-2008 had a decreasingtendency (in 2007 increased by 75%, but in 2008 just increased by 17.8%) In 2009,this rate is more optimistic In the first six months of 2009, it slightly increased by20% compared to the same period last year Thus, activities of trading card at BIDV

in 2006-2008 had certain achievements, but the growth rate in terms of scale stilllower than the general growth rate of the market This leads to the situation that themarket share of BIDV in card business (issuing cards, paying cards) is decreasingand the distance between BIDV with main competitors is broader and broader

2.3.2.2 Analyse the situation of the payment network

Index 2.7: The number of ATM of BIDV in Vietnam’s market

(Source: Report of bank card association of Vietnam 2006- June/2009)

In 2005, BIDV has the second large ATM network after VCB However, in 2006,BIDV fell to the fourth position after VBARD, VCB, East Asia Bank with 14.3%market share In 2007, BIDV increased to third position in terms of ATM networkafter VCB and VBARD with 15.1% market share However, in 2008, although itheld the third position in terms of ATM network, the market share of BIDV hasdecreased to 13% In 2009, BIDV does not have the position in top 3 banks whichhave largest ATM network in Vietnam and Vietinbank takes the third position, themarket share of BIDV also decreases to 11.2%

BIDV is the first bank in Vietnam that has ATM network in 63/63 provinces andcities in the country The number of trading and trading sales via ATM increasessharply year after year This proves that using card is becoming Vietnamese habit

Year ATM The number of

Table 2.7: The number of transaction and transaction sales on ATM BIDV

(Source: Report of bank card association of Vietnam 2006- June/2009)

Index 2.8: The growth rate of the number of transaction and transaction sales

on the ATM BIDV from 2006 to 2009 (projected 2009)

(Source: Report of bank card association of Vietnam 2006- June/2009)

BIDV's ATM network has been continuously expanded over the years so thegrowth of the number of transactions and transaction turnover are always at veryhigh level In 2007, thanks to successful connection between BIDV and Banknetvn,the number of transactions via ATM BIDV increased by 90% compared to 2006;

sales of transaction records 290% increase compared to 2006 The number oftransactions and sales of transactions in 2008 increased by 51% and 42%,respectively compared to 2007 Proposed in 2009, the number of transactions andsales transactions on ATM BIDV continued to turn up 21% and 34% These figuresare relative optimistic if the number of ATMs in 2009 did not increase significantlycompared to 2008

The number of ATM BIDV mainly concentrated in big provinces and cities such asHanoi (163 machines), HCMC (212 machines), Hai Phong (25 machines), QuangNinh (31 machines), Danang (26 machines), Binh Duong (34 machines), Ba RiaVung Tau (26 machines), etc Sales of transactions via ATM in each year isgrowing at a high level, the average transaction amount per ATM in 2008 reaches to36,324 transactions, sales transactions average VND 25.9 billion per ATM.Frequency of successful transactions reached an average 3608 transactions perATM per month.

Year

Number of transactions withdrawal Number of

Charge (million VND)

Table 2.9: Results of payment by Visa card on ATM BIDV

(Source: Report of bank card association of Vietnam 2006- June/2009)

ATM system of BIDV officially accepted payment by Visa card in September 2006and accepted payment by cards of members of Banknetvn in January 2007 Thesuccessful connection with VISA and Banknetvn has dramatically improved theperformance of ATM system, expressed in the number of transactions and sales oftransactions constantly increasing every year, especially sales of charges fromVISA and Banknetvn continuously and consistently increase and become asignificant source of income in total income of card business (usually constituteover 40% of charges of card services).

Area

Charges on ATM (USD) (From January 2001 to September 2009)

Table 2.10: The effective performance of ATM network in the region

According to the table above, the area at the North economic motivation area hasthe highest average charge on ATM in the whole system (VND 13 million permachine), followed by the South Central with over VND 10 million per machine.The Mekong River Delta has the lowest figure (more than VND 3 million per