Some solution to develop the card payment activity in viet nam joint stock comercial bank for industry and trade vietinbank for the period of 2012 2017

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS CHU THANH TAM SOME SOLUTIONS TO DEVELOP THE CARD PAYMENT ACTIVITY IN VIET NAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE_V

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

CHU THANH TAM

SOME SOLUTIONS TO DEVELOP THE CARD PAYMENT ACTIVITY IN VIET NAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE_VIETINBANK FOR THE PERIOD OF

2012 - 2017

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor 1: Dr Nguyen Thi Phi Nga Supervisor 2: Dr Pham Quy Long

Hanoi, 2012

TABLE OF CONTENTS

COMMITMENT i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF TABLE ix

LIST OF ABBRIVIATIONS xi

INTRODUCTION 1

CHAPTER 1: THE BASIC ISSUES ON THE CARD PAYMENT ACTIVITY 4

1.1 OVERVIEW OF THE BANK CARD AND REAL SITUATION OF THE CARD PAYMENT 4

1.1.1 Definition of the bank card and card payment 4

1.1.2 Classification of bank card and form of card payment 5

1.1.3 The of formation and development history of the payment card in Vietnam 7

1.2 PROCESS OF THE CARD PAYMENT 12

1.2.1 Overall process of card payment 12

1.2.2 The participation entities of the card payment 13

1.2.3 Charges and charges sharing rate in the card payment activity 14

1.3 THE ROLES AND THE MEANINGS OF CARD PAYMENT ACTIVITY 15

1.3.1 For the society- national economy 15

1.3.2 For the bank joining in the payment 18

1.3.3 Impact on the card owner and the unit accepting the card payment 22

vii

CHAPTER 2: THE FACTUAL SITUATION OF CARD PAYMENT IN

VIETINBANK 26

2.1 GENERAL INTRODUCTION ON VIETINBANK 26

2.1.1 The general introduction on VietinBank 26

2.1.2 The general introduction on VietinBank Card business Center 27

2.1.3 The process of formation and development of payment operation by card at VietinBank 30

2.2 THE POSITION OF VIETINBANK CARD SERIVES 32

2.2.1 The prominent speed of growth, leading in the quantity of market share 32

2.2.2 The quality and profit have not yet been proportional to the potential 37

2.3 THE FACTUAL SITUATION OF IMPLEMENTATION AND DEVELOPMENT OF PAYMENT SERVICE BY CARD IN VIETINBANK 41

2.3.1 The factual situation of implementation and development of card business and payment 41

2.3.2 The evaluation of real situation of conducting and developing the VietinBank’s card payment 54

2.4 SWOT ANALYSIS ON VIETINBANK CARD PAYMENT BUSINESS 59

2.4.1 External environment analysis- challenges and opportunities of VietinBank 60 2.4.2 Internal environment analysis- strong and weak point 68

2.4.3 SWOT matrix analysis 75

CHAPTER 3: SOME SOLUTIONS TO DEVELOP CARD PAYMENT ACTIVITY IN VIETINBANK 80

3.1 Focusing on the market segment, groups of lines and types of card which bring the sales of payment and profit 80

3.1.1 Exploiting the group of lines bringing the sales of payment and high profit 80

3.1.2 Increase the transaction according to the card forms and the transaction forms 81

3 2 Cover and scoop the whole open and potential market 83

3.3 Improve the card payment business effectiveness through marketing mix 7Ps 85 3.3.1 P1 - Product: 85

3.3.2 The price 92

3 3.3 Promotion and media 95

3.3 4 Place - Distribution channels 97

3 3.5 Human resource 99

3 3.6 The process 100

3 3.7 The physical evidence 102

3.4 SOME RECOMMENDATION 104

3.4.1 The recommendation to the government on the policy and legal lobby 104

3.4.2 The recommendation to some relevant merchants, boards, sections 105

REFERENCES 106 Appendix 1

Apenndix 2

Appendix 3

SOME SOLUTIONS TO DEVELOP THE CARD PAYMENT ACTIVITY IN VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND

TRADE FOR THE PERIOD OF 2012 - 2017

Chu Thanh Tam MBA Candidate, 2008 – 2010 Vietnam National University, Hanoi School of Business Supervisor: Dr Nguyen Thi Phi Nga and Dr Pham Quy Long

INTRODUCTION Reasons for the subject’s selection

Vietnam Joint Stock Commercial Bank for Industry and Trade_ VietinBank has been identifying that the retail bank’s service development is an important part in its development strategy, and especially, of which developing the payment service by card is considered as the core and basic products in the booming context of Vietnam Card market With the aim of becoming the number one financial group in Vietnam, one of the large targets of VietinBank is developing the card payment as the leader

Thus, it time to review “Some solutions to develop the card payment activity in

Vietnam Joint Stock Commercial Bank for Industry and Trade_VietinBank for the period of 2012-2017”

The objective of the research

The research objective is to systemize theoretical framework related to the business services of the bank card payment Then analysing the real situation and the card payment business of VietinBank, since then recommending the practical and applied solutions to increase the profits from the card payment activity of VietinBank matching with the potential, to shorten the gap with the first competitor and toward to occupy the market and become the leading bank of Vietnam and have the position in the local area

Scope of the study

Subject researchs and analyze in many subjects, many different fields of the experienced and deeply understanding persons in the financial sector in general and the retail financial sector in particular, since then building the synchronous and

practical strategy with the reality of this bank Due to the limited time and working conditions, the study scope of the subject is limited with researching some solutions to develop the card payment activity in VietinBank

The study entities are mainly 3 characters who are Merchants – Shops or supper markets use card payment method according to cash payment method, Customer – card owner and VietinBank staffs – people undertake VietinBank card payment serivce business

Research method:

Some methods of analysis, evaluation, comparison and collection are used to study and build the thesis, of which the analysis method (micro, macro environments analysis, value chain, SWOT matrix analysis) will be mainly used The used theoretical bases include the theoretical bases on card payment activity, factors impacting on the card payment turnover, the specific strategy of the banking service, etc combining with real survey in the variety Merchants, also referring the successful models of the foreign countries

New contribution of the subject

The subject will contribute the solutions matching with the reality and the present situation of VietinBank, these solutions are specific in contents, creativeness, and feasible to apply for VietinBank in term of becoming the leading bank of card payment service in Vietnam

CHAPTER 1: THE BASIC ISSUES ON THE CARD PAYMENT ACTIVITY

1.1 Overview of the bank card and real situation of the card payment

1.1.1 Definition of the bank card and card payment

Card payment is the payment method in which the card owner can use the card to pay for the goods and services purchase money or withdraw automatically cash through the card readers or the automated taller machines, or in other words, the card payment

is payment method without using the cash but the card

1.1.2 Classification of bank card and form of card payment

1.1.2.1 According to the payment characteristic of the card

Credit card: is the card allowing the card owners to implement payment, withdrawing

within the issued credit line according to the agreement with the card issuance bank

Debit card: is the card allowing the card owners to implement payment, withdrawing

within the amount of money in the payment deposit account of the card owners opened

in a bank

Besides the above two cards, there is Cash card: this is the cash drawing card in the

automated taller machine or the bank

1.1.2.2 According to payment scope

Domestic card: is the card which is limited in the scope of a nation

International card: is the card which is accepted all over the world, uses the strong

foreign exchange for payment

1.1.2.3 According to issuance entity

Bank Card: is the card issued by the bank in order to help the clients use amount of

money financed by the Bank This card is mainly used in Vietnam

Non-bank Card: is the tourism and entertainment cards issued by the large business

groups or the big petrol companies, the large shops, etc such as Dinner’s Club, Amex, etc

1.1.2.4 According to production technology

Embossing card: Based on the embossing technology; the first card was produced by

this technology At the present, this card is not been used no longer because its technology is too simple, easy for counterfeit

Magnetic stripe: Based on the letter technique with two magnetic tapes storing

information in the card’s back This card was used popular in the last 20 years, but there are some weaknesses: because the information in the card can not be coded by itself, the card only stores the fixed information, the data storage space is litter; it can not apply the coding technique, information security, etc

Smart Card: this is the newest generation of the payment card; the structure of the card

is the same as a computer

1.1.3 The of formation and development history of the payment card in Vietnam

1.1.3.1 History of formation and appearance of the payment card in Vietnam

In 1990, VietcomBank signed the contract of Visa card disbursement agency with French bank, this activity started the adoption of the payment card into Vietnam

In 1996, the Foreign Bank officially became the member of Visa International Organization Then, A Chau Bank, VietinBank Vietnam also became the official members of the Visa Card Organization

At this year, Vietnam Foreign Bank (VCB) issued pilot the first bank card, as well as the association of Vietnam card payment banks was also established with the four founders including VietcomBank, A Chau Commercial Joint Stock Bank, Joint Stock Commercial Bank for Import and Export (Eximbank) and First Vinabank

The legal corridor for the card activity at that time was only the Decision No 74 issued by Governor of the State Bank on 10/4/1993 regulating the “temporary regulations on issuing and using the payment card”

The card market in 2006, 2007 was eventful because Vietnam joined in the large playground- WTO, and the credit card service and ATM card were the efficient

“weapons” for the bank to penetrate the market

It can be said that VietinBank joined in this playground later than VietcomBank near half of the decade; the knowledge and the experience about the card of VietcomBank are the clear advantages and the competitive advantages of this leading bank

1.1.3.2 The development of payment card in Vietnam and some achievements

In over the last 15 years, the card service has been developed with the high speed, from when being considered as a property or a trademark of the successful person, at the present, the bank card becomes the popular payment tool

In Vietnam, there are 32 banks issuing the card, with about 130 different card trademarks, of which 54% are the local card trademarks The card service has had the

high growth rate in the recent years, 150-300%/year By the end of 2007, a number of the card issued by the banks are near 8,3 million of cards, in comparison with 3,5 million of cards in 2006 At the present, the payment density by card accounts for 6%

in the sum of the exchanges of non-cash payment tools Among the cards issued by the domestic issuance organizations, the local debit card (popular named ATM card) accounts for 93,87%, then the international debit card accounts for 3,65%, the international credit card accounts for 2,22% and the local credit card accounts for 0,31%

By the end of 2007, there were 4.300 ATM machines in all the country; over 23.000 places accepted the payment by POS card At the present, some main card unions in

Vietnam include Smartlink Company; East Asia Card Union, International Financial

Switching Joint Stock Company Banknetvn

In 2007, in the tendency of increasing the competitiveness, many banks issued the card forms with the high security, which was the CHIP card with the EMV standard and supplying many attached benefits for the customers

By the end of 2010, the growth rate of the card market was very great; there were 15.000 ATM machines in all country, over 40.000 places accepting the payment by POS card The two large unions, Banklet and Smartlink cooperated with each other and gathered the card payment for all the member banks

1.1.3.3 Some main obstacles in the progress of the card payment development

 The security issue of card payment is not been assured, leading to the disorder and unbelief of the card users The above situation is partly caused by the weak payment network management, low card production technology

1.2 PROCESS OF THE CARD PAYMENT

1.2.1 Overall process of card payment

Figure 1.1 : General payment-via-card process

(Sources: Card centre - VietinBank )

1.2.2 The participation entities of the card payment

The card owner: is the person whose name is written in the card and is entitled to use

the card to pay the amounts of goods and service purchase

Merchants: are the goods and services business sectors which sign with the payment

bank on accepting the card payment such as the restaurants, the hotels, the shops, etc

Issuance bank: is the bank which issues the card for the owner

Payment bank: is the bank which installs the card payment machines

International card organization and switching card organization: are the

organizations which connect the payment bank and the issuance bank For example: Smartlink and Banknet, Visa Card and Master, JCB, American Express, etc

1.2.3 Charges and charges sharing rate in the card payment activity

The card payment charges are the charges which the Merchants have to pay for the payment bank, means the bank owning this card payment machin The average charges which the Merchants have to pay for the bank are 2%

These charges are included the after-sale service charges including supplying paper to print the monthly invoices, hiring the card payment machine, providing the documents

and the advertisement instruments, after sales services …

These returned charges will be distributed, normally 50% of which will be paid for the financial switching organization

1.3 THE ROLES AND THE MEANINGS OF CARD PAYMENT ACTIVITY

1.3.1 For the society- national economy

 Reduce the social charges to organize the payment activity

 Limit the fraudulent, tax evasion, debt delayed payment, create conditions to anti-circulate the false money, money laundering

 The card payment facilitates the commercial exchange to occur without being limited by time and space

1.3.2 For the bank joining in the payment

 Benefits of the payment Bank are : Charge fee for card payment, Deposit fund mobilization, Foreign curency mobilization

 Benefit of the issuance bank are : Charge fee for card payment, Interest, Overdues fines

 Benefit of the Card organization: Switching charges, the member charges 1.3.3 Impact on the card owner and the unit accepting the card payment

 Impact on the card owner:

Strength: Customers do not have to draw cash for payment So that they get quickly

pay, convenience and safety, ability with the distance payment

Weaknesses: the risk of revealing the account information and password Many

Merchants receive the external charges on customers

 Impact on the Merchant accepting the card payment or the place of cash advance

In the viewpoint of the Merchants, there is the comparison table between the advantages and the disadvantages as follows:

Advantages: Reduce the risk of cash, Save time of checking the large number of

money, repaying the loose cash, Increase the sales revenue, Increase the satisfaction of the customers, Create the professional image of the Merchants in the customer’s eyes

Disadvantages: The Merchants have to bear a card payment charge from 1 to 3%

value of the purchased goods, The payment is based on the transmission line’s quality and network, machine techniques, Transparency on the goods revenue if being required by the tax office

CHAPTER 2

THE FACTUAL SITUATION OF CARD PAYMENT IN VIETINBANK

2.1 GENERAL INTRODUCTION ON VIETINBANK

2.1.1 The general introduction on VietinBank

Company profile

Name of company: Vietnam Joint Stock Commercial Bank for Industry and Trade ( Short for VietinBank)

Established in 1988 after being separated from State Bank of Vietnam

One of the four largest State-owned commercial banks of Vietnam,

Total assets account for over 20 percent of the market share of the whole Vietnamese banking system Charter capital: VND 370.000.000.000.000 ( 2010)

Operations network: 01 Transaction Centers, 149 branches, 527 transaction offices,

166 savings offices, 02 Representative offices, 04 Subsidiaries, 03 administrative units and 1200 automatic Telling Machines (ATMs) Has established correspondent relationship with 850 banks, financial institutions of 90 countries and territories all over the world

Being the founder of the following Financial Credit Institutions: Saigon Bank for Commerce and Industry, Indovina Bank (the first joint-venture bank in Vietnam), Vietnam International Leasing Company – VILC (the first financial leasing company

in Vietnam), Vietinbank Insurance Company Ltd In addition, VietinBank also is the official member of Vietnam’s Banker Association, Asian Banker’s Association, Society for Worldwide Interbank Financial Telecommunications (SWIFT), Visa International Services Association

2.1.2 The general introduction on VietinBank Card business Center

VietinBank Card Business Center was established in 2001 on the base of development and restructuring the model of personnel organization of the Card Team with only 10 persons

Card Business Center was officially established in 2009 with 30 person and now reach nearly 160 members now

Functions: Researching for the development, managing, executing, organizing for implementation, inspecting and supervising the card business in VietinBank and conducting the direct card business

Most of the cadres of the Center are at young age with good capacity and they are very dynamic and flexible in exploring the information and opportunities for the card service in the market

The appearance of Card business Centre contributes to bring VietinBank to be one of the biggest organizations of card issue in the market

Debit Card: G-card, P-card, S card, C card, 12 card, linked card…

Credit Card: Standard, Popular, Gold, Platinum Card

2.1.3 The process of formation and development of payment operation by card at VietinBank

VietinBank conducted researching and has officially entered into the market of card service since 2001 After more than 10 years of implementation, the card service of VietinBank has gained the significant achievements, which confirms the position and trademark in the market

The product of card service of VietinBank confirms the competition position in the market of debit card in Vietnam As the result, VietinBank becomes the leading bank in terms of issued debit cards

The total number of international credit cards issued by VietinBank gained quite big amount number, ranking the second in the card market with 30% the market share

Regarding on the network: Currently, the number of machines of the ATM system of

VietinBank increases to 2,000 machines The current quantity of POS also increases

up to 12,000machines and VietinBank becomes the second bank in the market in terms

of POS market share as of 2010

Increasing the utility, different value for the card product : VietinBank leads in the

market in the development of utility of Card service

2.2 THE POSITION OF VIETINBANK CARD SERIVES

2.2.1 The prominent speed of growth, leading in the quantity of market share

In term of the market share of quantity, VietinBank currently ranks the first in the market in the number of issued debit cards and coverage of the payment machines (The issued credit card still ranks the second, behind the VietcomBank), VietinBank passed other banks with the admirable speed; from the fourth and fifth position in

2009, this bank ranked the second in 2010 and at the current time, it gained the first I can be seen that VietinBank left many competitors behind and shortened the distance with the first competitor

2.2.2 The quality and profit have not yet been proportional to the potential

VietcomBank is still the biggest competitor of VietinBank, leading the market with 34% market shares Except VietcomBank, the market share of international credit cards basing on the sales of used cards of banks has no huge difference

Regarding on the absolute sales, the sales of payment of VietinBank just accounted for

about 15, 46% comparing to the sales of VietcomBank (this number had the

increasing trend comparing to year 2010: 13, 11%); The increase of sales of

VietinBank in Quarter 1 comparing the same period in 2010 had the feasibility: all

are > 200%; The quarter I, 2011 marked the huge growth of the sales of JCB cards at