olutions to develop payment transaction via POS in viet nam

Rationale Point of Sale POS is a form of payment transaction using payment cards through card accepting devices provided by banks or service providers.. " However, in order to achieve t

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN HUYỀN NHUNG

SOLUTIONS TO DEVELOP PAYMENT TRANSACTION VIA POS IN VIET NAM

GIẢI PHÁP THÚC ĐẨY GIAO DỊCH THANH TOÁN

QUA POS TẠI VIỆT NAM

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2018

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN HUYỀN NHUNG

SOLUTIONS TO DEVELOP PAYMENT TRANSACTION VIA POS IN VIET NAM

GIẢI PHÁP THÚC ĐẨY GIAO DỊCH THANH TOÁN

QUA POS TẠI VIỆT NAM

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS BÙI QUANG HƯNG

Hà Nội - 2018

DEACLARATION

The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in the other’s research and article

The other’s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if require)

is given

The author is responsible in front of the Thesis Assessment Committee, Hanoi, School of Business and Management, and the laws for above-mentioned declaration

ACKNOWNGEMENT

During the study of this thesis, I received enthusiastic support from HSB, my company, the other organizations and my friends I would like to express my deepest thanks to all the collectives and individuals who have facilitated me to help during study and research this thesis

First and foremost, I would like to thank the Faculty of Business Administration (HSB), Hanoi National University, and the teachers who have provided the knowledge to throughout the learning process

I would like to express my gratefulness to Dr Bùi Quang Hưng, who has enthusiastically instructed, and provided valuable contributions to me to complete this thesis

I also would like to express my sincere thanks to the Board of Directors and

my collage at National Payment Corporation of Vietnam(NAPAS), our partners and member banks, for facilitating and assisting me in process of data collection, providing the relevant documents, answering the interview and the questionnaire to help me to complete this thesis

Despite my efforts in the research process, the thesis still have inevitable shortcomings due to limited conditions, so I wishes to receive comments and feedback for further improvement

TABLE OF CONTENT

LIST OF ACRONYMS i

LIST OF TABLES ii

LIST OF FIGURES iii

LIST OF CHARTS iv

1 Rationale 1

2 Objects of research 2

3 Scope of research 2

4 Aims of research 3

5 Research methodology 3

6 Thesis Structure 4

CHAPTER 1: OVERVIEW OF PAYMENT TRANSACTIONS VIA POS AND TREND OF TECHNOLOGY IN THE WORLD 5

1 The concept of payment transaction via POS 5

2 History and development of POS 8

3 POS technology development trend in the world 9

3.1 mPOS technology 11

3.2 NFC Technology 14

3.3 QRCode Technology 18

3.4 Biometric technology 21

CHAPTER 2: PAYMENT TRANSACTION VIA POS IN VIETNAM AND IMPLEMENTATION STATUS IN NATIONAL PAYMENT CORPORATION IN VIETNAM (NAPAS) 25

1 Payment transation via POS in Vietnam market 25

1.1 Overview of POS payment market in Vietnam 25

1.2 Trend of POS technology in Viet Nam 35

2 The status of POS payment at National Payment Corporation in Vietnam (NAPAS) 40

2.1 Introduction about National Payment Corporation in Vietnam 40

2.2 Status of POS payments at Napas 44

CHAPTER 3: EVALUATION OF THE IMPLEMENTATION OF DEVELOPING POS TRANSACTIONS IN VIETNAM AND NAPAS 55

1 Achievements 55

1.1 General achievements of POS payment market 55

1.2 Napas achievement 64

2 The shortcomings and limitations of payment via POS 66

2.1 From bank who provide service 66

2.2 From merchant 68

2.3 From NAPAS 68

2.4 From customers who use services 73

3 Reasons 74

3.1 Legal framework 74

3.2 Market plans 76

3.3 POS’s technology and infrastructure 78

3.4 Communication 79

CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO DEVELOP TRANSTION VIA POS IN VIETNAM 80

1 Porpose solutions 80

1.1 The legal corridor 80

1.2 The market planning 82

1.3 The technology 84

1.4 PR activity 90

2 Recomendation 91

2.1 Recommendation with the State Bank 91

2.2 Recommendation with the ministries and other departments 92

2.3 Recommendation with NAPAS 93

2.4 Recommendation with banks 95

CONCLUSION 96

APPENDIX 97

i

LIST OF ACRONYMS

No Abbreviations

2 Napas National payment corporation in Vietnam

5 ICSO International card switching organization

ii

LIST OF TABLES

Table 2.1: Merchant Discount Rate in Vietnam 33

Table 2.2 Comparision among POS & ATM transaction volume, 33

Table 2.3 Numer of card and POS of Napas member banks 44

Table 2.4 POS transactions volume between Napas and whole market 49

Table 2.5 POS transaction value between Napas and whole market 50

Table 2.6: The POS payment transaction number and transaction value by member banks 51

Table 2.7 Fee revenue of POS transaction from 2013 to 2016 52

Table 2.8: Fee for POS payment service of NAPAS 53

Table 3.1 List of related legal documents and policies to non-cash payment 60

Table 3.2 Comparison of growth rate of POS transaction number over the years 65

Table 3.3 Comparison of growth rate of POS transaction value over the years 65

iii

LIST OF FIGURES

Figure 1.1 Transaction process on POS (off-us transaction) 7

Figure 1.2 Card transaction flow on POS (on-us transaction) 8

Figure 1.3 mPOS devicet 12

Figure 1.4 NFC technology 15

Figure 1.5 QR Code 18

Figure 2.1 The model of on –us POS transaction by domestic card 29

Figure 2.2 The model of off-us POS transaction by domestic card 29

Figure 2.3 Model of POS transaction by international card 29

Figure 2.4 Progress of implement Merchants acceptance 30

Figure 2.5: Napas structure organization 42

Figure 2.6: Samsungpay event in Ho chi Minh 46

Figure2.7: The payment service model of Samsung Pay 47

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LIST OF CHARTS

Chart 1.1 World mPOS Payment Predictions (Unit: Billion) 14

Chart 1.2 Top 10 country use QR code in payment in thẻ world 21

Chart 2.1 Growth rate in number of POS machine in Vietnam 2007-2016 25

Chart 2.2 Market share by number of POS in 31/12/2016, 26

Chart 2.3: The proportion of the number of cards in 31/12/2016 27

Chart 2.4: The growth rate in number of cards during period 2006-2016 28

Chart 2.5 Proportion of domestic and international of payment transaction value via POS in 2012-2016 period 34

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ABSTRACT

Over the past years, the activity of payment via Point of Sale (POS) in Vietnam has made positive changes The number of POS terminal and payment acceptance point has increased steadily over the years Card payment turnover through POS also increased significantly with an average growth rate of 29% per year The infrastructure of service payment via POS as well as the legal system, mechanism and policies have also made significant improvements to promote POS transactions In addition, POS payment services have been developed by the banks

in terms of POS network and quality of service to bring maximum convenience to customers

In spite of the achievements, POS payment market in Vietnam has many limitations to improve and more potential to exploit Despite the growth of POS transactions in Vietnam over the years, the number of actual transactions have not met expectations The number of POS transactions accounts for only about 9% of total ATM / POS transactions Meanwhile, in several countries in the region and the world, card transactions via POS of the people occupy a very high rate, more than 90% In a market that is considered to have as much development potential as in Vietnam, surely POS payment services will have more opportunities to grow

From the real situation of the market and services, I desire to find and overcome the limitations and difficulties to promote payment transactions via POS, from which to propose solutions to promote payment transactions through POS (Point of Sale) in Vietnam Before going into detailed research, I would like to introduce about the Rationale, objects, aims and scope, research methodology, as the following

1 Rationale

Point of Sale (POS) is a form of payment transaction using payment cards through card accepting devices provided by banks or service providers Merchants are those who provide goods and services on the market (hotels, restaurants,

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supermarkets, travel agencies ) are installed or deployed the traditional POS

or new mobile POS technology (mobilePOS-mPOS)

With the aim of developing non-cash payment in Vietnam, promoting POS payment transactions is one of the key tasks of the Non-Cash Payment Development in Vietnam 2011 - 2015 and Vision 2020 to be approved by the Prime Minister in Decision No 2545 / QD-TTg dated 30/12/2016 on the project of development of non-cash payment in Vietnam for 2016-2020 Specifying the objective in Clause 2, Clause 1, "a", by the end of 2020, the ratio of cash on the total payment means is lower than 10% b) To strongly develop card payment through accepting devices card at point of sale; To gradually increase the number and value of card payment transactions through card-accepting devices By the end

of 2020, the entire market will have 300,000 POS devices installed with a transaction volume of around 200 million transactions per year "

However, in order to achieve the above objectives, the determination and efforts of the whole banking sector, especially the monitoring of the State Bank to coordinate the ministries, branches and National Payment Corporation of Vietnam (Napas) in regulating related policies to develop card payment transactions Through the research, I found that there are still many limitations in the expansion

of network Merchants and development of POS transactions:

- The legal system and policies are still inadequate

- The planning and market development are not synchronous and effective

- There are limitations in the POS system

- Consumers' habits for cash-payment are still hard to change

- Communication has not been focused and properly oriented

Finding out the shortcomings, difficulties to propose solutions to promote payment

on POS is very necessary and should be implemented soon

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 Understanding the development of the card payment market in Vietnam from 2013 to 2016, especially focusing on POS payment transactions, including the development of payment facilities, POS network, payment connection infrastructure and transaction results (number and value of payment transactions)

 Reserching POS payment services of banks, the legal system for POS card payment, the role of the National Payment Corporation of Vietnam in POS payment From there, this study analyzse the advantages, disadvantages and limitations when developing payment

on POS in Vietnam

 Learning about the development trend of POS technology in the world; The status of the deployment and application of these technologies in Vietnam

 Proposing solutions to promote payment through POS in Vietnam based on market research as well as advantages, disadvantages and limitations mentioned above

4 Aims of research

- Understanding the status of POS payment in Vietnam

- Understanding the advantages and disadvantages of developing payment via POS

- Understanding the trend of POS payment technology in the world and Vietnam

- Proposing solutions to promote POS transactions in Vietnam, focusing on analyzing the role of the National Payment Corporation of Vietnam and the company's solutions combined with the Ministries, branches, the State Bank

of Vietnam and commercial banks

5 Research methodology

- Approach: Theoretical approach, then based on practical experience to assess the advantages and disadvantages of the card payment market via POS in

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Vietnam From there, the solution can be applied in Vietnam to promote this payment method

- Methods and techniques of research:

 Research based on the information available, provide analysis and evaluation to find the right solution

 The methods used include statistics, description, comparison, graph Methodology of solving, combining theoretical and practical research Based on that, through the collected data sources, the author selects, sorts the data to calculate the indicators and information necessary for the assessment of the status of bar connection activities The author also uses tables, graphs to express a visual, lively information in the thesis

6 Thesis Structure

In addition to the introduction, conclusion, table of contents, index of abbreviations, tables, firgure and references, the main contents of the thesis are presented in four chapters:

- Chapter 1: Overview of payment transactions via POS and trends of technology in the world

- Chapter 2: POS transaction Payment markets in Vietnam and implementation status in the National Payment Corporation of Vietnam (Napas)

- Chapter 3: Evaluation the implementation of developing POS transactions

in Vietnam and Napas

- Chapter 4: Solutions and recommendations to develop the POS transactions in Vietnam

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CHAPTER 1: OVERVIEW OF PAYMENT TRANSACTIONS VIA POS AND

TREND OF TECHNOLOGY IN THE WORLD

1 The concept of payment transaction via POS

First of all, to understand the concept of POS transactions, we need to understand the concept of POS - Point of Sale

As defined by Worldbank, POS is the device used to manage the sales process through the interface that the salesperson has access to at the locations where the transactions are made As defined by MasterCard, POS is understood to be a supervised or unsupervised device located at a Merchant, which allows the Cardholder to make the purchase of goods or services provided by Merchants through the use of cards and / or contactless cards, in accordance with the standards and security requirements of the back end device

As defined in the draft circular on bank card activity of the State Bank of Vietnam, point of sale POS (Point of Sale (POS), Electronic Data Capture (EDC), Mobile Point of Sale (mPOS and other types of card access devices) are card readers, terminals that are equipped and used by Merchants or installed on the network of the organization Card issuers, card payment organizations that cardholders can use to withdraw cash, transfer funds, pay for goods or services or use other services

As such, POS can be understood as a device used mainly for the purpose of performing payment transactions to purchase goods or services provided by Merchants or other services such as inquiries, cash withdrawal, bank transfer Basically, POS consists of two popular types: wired POS and wireless POS (using GPRS, 3G, Wifi) A wired POS system operates over a telephone line When making a payment, the card accepting unit should have a telephone line available to connect the POS to the system Wireless POS is more convenient as they are using GPRS or ADSL technology without the need of a fixed line With the use of GPRS technology, wireless POS equipment not only helps to expand the coverage area but also increases the flexibility for payment transactions This type of device is suitable for all types of card accepting units that need flexibility and mobility in sales,

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payments such as sales and delivery, home remittance, bill payment at banquet tables, applications Transportation, yachting The two types of wired and wireless POS equipment are equally structured, including POS machines, network cables with Internet connection and electrity power

When modern POS payment technology has not been born, traditional POS machines are considered as a superior payment solution with many outstanding features and benefits for all parties POS machines help merchants greatly improve their payments, helping them improve their sales performance With a relatively simple transaction process, POS machines are an optimal choice to replace the familiar cash payment method

For the concept of "POS transactions," in Vietnam there is no specific concept

of POS transactions As defined in Circular No 35/2012 / TT-NHNN on

"Regulations on fees for domestic debit card services", "POS transactions" are card transactions conducted through card readers at accepting units POS (POS) for payment of goods, services, account balances, refunds at the request of cardholders, cash withdrawal and other card transactions at POS

On the other hand, a payment transaction refers to transactions involving financial transfer from one side to another

Thus, within the scope of this topic, POS transactions refer to transactions involving financial transfer from one party to another, namely, payment for goods, services on POS, excluding non-financial transactions such as balance inquiry The process of POS card payment is described as follows:

2 Thu ngân thực hiện quẹt/cắm thẻ vào máy POS và nhập số tiền thanh toán

6 In biên lai giao dịch

7 Khách hàng

ký tên trên biên

lai giao dịch

Figure 1.1 Transaction process on POS (off-us transaction) Source: NAPAS

The payment process mentioned above applies to both domestic and international cards Specific:

Step 1: Customers request payment by card

Step 2: Cashiers of Merchants swipe / plug the card into the POS machine and enter the payment amount

Step 3: Customers enter personal identification number (PIN) (with domestic debit card) International card does not require the customer to enter a PIN

Step 4: Customer information and billing information is transferred from the Acquirer to NAPAS (with domestic debit card) or card organizations such as Visa, MasterCard, JCB, UnionPay, Amex (with international card), for authentication

Step 5: NAPAS/International switching Card Oragnization forwards customer information to respective Issuers

Customer

requests to

pay

2 Cashier swipe/plug the card into POS and enter the amount

3 Customer enters

the pin (for domestic

customer information

to Napas/ICSO 5 Transfer the

customer information

to CI to authentication

6 Response the result

6 Response the result

6 Print the transaction reciept

7 Customer signs

the receipt and

fishish the payment

Customer Merchant Issuer Bank Napas/ICWO

Acquirer Bank

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Step 6: Issuers reply the authentication results If the information is verified

by the Issuer, the transaction is approved Merchants print transaction receipts Step 7: The customer sign the transaction receipt which is printed out and the payment process completed Employees at Merchants are responsible for checking the cardholder's signature on the receipt with the signature on the card to protect the customer and minimize the risk to the customer

With on-us transactions, which are issued by Bank A, perform transactions on POS machines of Bank A, the transaction processing process is simpler, without involvement of intermediaries such as Domestic switching organizations and International card organizations For customers, the transaction process remains unchanged

Khách hàng ĐVCNT (POS)

NHTTT = NHPHT

Figure 1.2 Card transaction flow on POS (on-us transaction) Source: The

author

2 History and development of POS

In 1970, the first POS device was introduced by IBM At this point, the POS device is connected to a computer, which has a main processing function, while the POS device only displays information without the ability to process transaction Continuing its first POS development, in 1973, POS models were introduced by well-known manufacturers such as IBM System 3653 and NCR2150, along with other computer manufacturer such as Rigitel, TRW, and Datachecked That same year, the UPC / EAN barcode scanner came out and integrated on the POS system

In 1978, the POS equipment was upgraded, incorporated more applications and operated on an Apple computer for the purpose of ordering for customer and was connected to a remote printer Then, in 1986, the POS equipment is upgraded

Customer Merchant POS

Issuer = Acquier

Currently, POS retail systems are the most sophisticated and convenient computers in the commercial field In fact, most POS systems also integrate existing solutions including accounting, inventory tracker, ordering and sales, customer relationship management (CRM), service management, renting services, activity reports and payroll modules Features on POS are available, but users are only dedicated to a certain application such as retail management software, business management and POS software To this day, POS has been developed and distributed globally

3 POS technology development trend in the world

Although widely deployed and used in many part of the world, POS machines have been showing many limitations, specifically:

- High POS investment cost This is one of the major obstacles as

banks deploy more POS machines at merchants With a wired POS machine, the investment cost of buying equipment is about 5 million VND / machine For wireless POS line using new technology, the price is much higher It does not include warranty, maintenance, upgrades, new functions (when needed) With such a high cost, if the payment volume at the Merchant is so small, the bank will not

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be able to offset the cost This is considered one of the factors that prevent banks from investing in POS machines

- The majority of POS machines being used in the market are wired

machines, which when operating, a fixed line phone is required This means that merchants who want to accept payments on POS must have a phone line available Moreover, the quality of service will depend on the quality of transmission If the transmission line is not good, it will affect the speed of transaction processing, cause unsatisfactory psychology to customers and ultimately affect the services of both Merchants and banks

- The installation or configuration of POS equipment is not simple

and must be done by bank staff or equipment suppliers that can not

be performed manually by the Merchants's employees

- When a fault occurs or the bank wants to perform maintenance of

the equipment, the bank's technician must go to the merchant to bring back the equipment for maintenance, repair and installation at the Merchants later on Consequently, maintenance costs require human resources, time and money of the bank, while disrupting payment services at Merchants

- It is difficult to expand new POS features and services (for example,

the ability to connect POS machines to merchants' sales systems )

- Not suitable for small business units, as the sales volume may not

cover the costs Thus, it makes it difficult for banks to expand the POS card payment service to all types of merchants

In recent years, with the explosive growth of mobile devices, the emergence and popularity of new payment platforms (such as electronic wallets) and the development and completion of e-commerce infrastructure thanks to the application

of information technology, POS systems have gradually changed and developed in the direction of: Turn mobile phones into a new payment means next to payment

Thirdly, the need to use some means of payment outside the card, which is relatively independent of the banking system of financial technology companies, also makes them spend a great deal of effort in developing, promote their own systems and payment instruments Typical examples are Paypal, Apple with Apple Pay, Google with Google Pay or Samsung with Samsung Pay

Some of the payment technologies which are currently used in the world:

3.1 mPOS technology

Mobile POS or mPOS is a point-to-point solution for accepting payment cards on mobile devices This is a modern technology that allows payment of different types of cards, from domestic cards to international cards (Visa, MasterCard, JCB, Amex, UnionPay), suitable for all types of services, from restaurants, cafes, small businesses, individuals businesses to companies that provide delivery and COD services at home to ensure safety and efficiency

In order to be able to use mPOS to pay for goods or services, a Merchant should have a set of equipments including a card reader connected to a mobile phone installed with a payment card application, possibly with a PIN pad and bluetooth printer There are now many types of card readers that include a PIN pad with a PIN code input function Therefore, Merchants only have to use a small

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device instead of two separate devices, enabling Merchants to be more flexible on the process of making payment by customers at any time, anywhere

Figure 1.3 mPOS device, source: internet

mPos technology has the following advantages and disadvantages:

Advantages:

- Helping the customers to pay quickly and conveniently:

This is the first advantage that this technology brings to customers Paying through mPOS help customers pay bills or purchase goods and services quickly, conveniently They do not have to wait and queue long because the payment can be made anywhere Since then, customers will be more satisfied and the merchant also benefit from not losing customers due to customer long queue to pay

- Supporting Merchants in sales and payment process from basicly anywhere: MPOS gives Merchants the opportunity to sell anywhere, allowing them to grow their business in a variety of ways Whenever a sales location is a pavement outside a store, any location, or delivery wherever required by the customer, merchants can accept payment by card through an compact mPOS device that they carry Sales and payment by card are no longer restricted to the store

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- Reducing cost for banks:

The cost of investing in mPOS devices is much lower than the cost of a traditional POS Although mPOS solutions come with a few related costs such as hardware, software and maintenance, these types of costs are usually much lower than traditional POS solutions

In addition, with mPOS, customers can choose to print transaction receipts or send via SMS, email if not required The paperless nature of mPOS technology reduces costs (previously spent on paper and printing)

- Is currently supported by the international card payment platform:

Payment cards (especially international cards) can be used with mPOS due to mPOS standard compatibility and network card payment systems This is a great advantage for this payment technology to grow quickly and widely

Disadvantages:

- The quality service is not stable

Quality of service depends very much on the quality of the connection, the service requires mobile phones / tablets with Internet connection to transfer data Therefore, the quality of service will be influenced by countries or regions where the Internet and 3G networks are unstable

- Safety and security

By making payments through a card reader connected to a mobile device, this service is likely to face risks associated with counterfeit devices, hacked

or unreliable mobile payment applications resulting in stolen card information

Moreover, on the customer side, customers often have a psychological anxiety when making transactions on the mobile phone of an individual, resulting in them not selecting this service for payment

Experience in developing and applying this techonology in payment

The original mPOS solution was limited to small card acceptors However, mPOS today is becoming a popular payment According to the World Bank survey, from 2011 to 2012, the number of mPOS payment points operated worldwide

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increased by 111%, from 4.5 million to 9.5 million The market expects that number

to continue to rise to 38 million by 2017 and be extended to large card acceptors (Source: paymentscardsandmobile)

According to a Timetric report, global mPOS payment transactions reach $ 0.5 billion by 2012 and are projected to increase to $ 5.4 billion by 2018

Chart 1.1 World mPOS Payment Predictions (Unit: Billion) (source:

paymentscardsandmobile)

In the world, this solution has been implemented in countries such as Australia, Belgium, France, USA In Asia alone, mobile payment is widely used in Korea and Japan Even small eateries in Seoul, Tokyo, customers can easily swipe cards on this mobile payment device In Japan, mPOS is also widely used in payment, especially suitable for low value payments However, in these countries, the vast majority of cards used in payment are chip cards with high security levels

In Vietnam, more than 90% of cards issued are debit cards and magnetic cards Therefore, when applying mPOS payment technology in Vietnam, issues related to card transaction security should be paid special attention

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when in direct contact or close proximity NFC is developed based on the principle

of identification through radio frequency signals with a maximum data transfer rate

of 424 Kbps The NFC card is a very thin, simple (writeable) record and does not need to be powered

Due to the relatively short data transmission distance (within 4 cm), transactions via NFC technology are considered safe Equipment equipped with NFC is usually a mobile phone Smart cards will attach chips inside (often called tags) Mobile phones can communicate directly with this card In addition to communicating with the card, the phone can also communicate with other devices such as a phone or other electronic entertainment device that supports NFC.A lot of NFC model testing projects are being implemented in countries around the world In Asia, there are many projects using NFC technology that have been successfully tested and deployed such as Singapore, China, Korea, Japan, Thailand, Australia and Sri Lanka

Figure 1.4 NFC technology, source: internet

For NFC to work, two devices are required, one is the reader (usually the phone) and the other is the target (usually the other phone, nfc card, speakerphone, device that accepting payment .) The reader will actively generate radio waves (basically electromagnetic radiation) sufficient to power the target device in passive mode Therefore, the NFC card does not need the energy to operate, which when needed it will be taken from the reading device This is an extremely important

This payment technology is often used for payments in the form of electronic wallets Both Apple Pay and Google Pay now use this technology for their billing applications

The advantages and disadvantages of NFC payment technology are as follows:

Advantages:

- Convenient payment technology

Convenience is a very important factor and attracts the attention of many customers NFC is really a convenient payment technology because this technology is the perfect combination of mobile devices with e-wallet All that NFC requires is a simple touch when making payment transactions

- Helping to improve customer services

With the convenience mentioned above, NFC technology is a very fast and efficient payment method Convenient payment transactions will help the card accepting units to improve the level of customer satisfaction in service, while increasing the productivity and efficiency of service delivery

- Safety

NFC communication ensures security when two devices must be touched to enable this feature Short range transmission will minimize intermediate attack attempts

In addition, with NFC technology, e-wallet is integrated on the mobile phone

of the customer So, just like a wallet, when a customer loses a cell phone, it means that the entire credit card and customer information can be accessed immediately However, with smartphones, phone passwords can become a more secure layer of information for customers In addition, credit cards with integrated NFC are much

17

more secure than credit cards using magnetic stripe The PIN is required when performing a payment transaction, and the cashier of the card accepting unit does not have physical access to credit card information Therefore, customer information is protected more securely

Disadvantages:

- Complicated deployment

NFC deployment involves the adoption of both the accepting device and the billing data storage device, not to mention there is currently no agreement on a common worldwide NFC standard for communication and payment This has led to complex, costly NFC deployments, which are currently only available to large card organizations

- Concensus in using NFC of all units:

Customers who want to use and experience NFC technology are eager to be used everywhere However, if the card acceptors disagree with the NFC integration, consumers will not be able to use the technology NFC users can not use the bonus system at their favorite stores, nor in any unit that does not accept NFC

- Security

Another major risk of NFC is the computer or the phone card is accessed by unauthorized action and hacking data As mobile phones become more modern, more and more like a handheld computer, and more vulnerable to virus attacks Hackers will probably want access to these minicomputers because more information is integrated on only one device

Experience in developing and applying in payment

Singapore has adopted a model whereby three telecommunications service providers, SingTel, M1 and Starhub, have built a shared NFC infrastructure The service provided by SingTel to a contactless payment service provider, EZ-Link, allows users to make payments on their mobile device at over 20,000 POS devices accepting EZ-Link payments like taxis, supermarkets and fast food chains M1 also signed an agreement with EZ-Link so that users can make payment transactions at

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EZ-Link's card accepting units Although widely tested, services based on NFC

technology that have been officially launched are still very limited

In China, NFC payment service has been officially provided by the largest operator in the world, China Mobile and China UnionPay card in more than 14 provinces and cities in China including Shanghai, Guangzhou,

In Korea, the most popular service is to buy train tickets According to SK Telecom, in 2012, more than two million people used mobile phones to pay for tickets The second largest telecommunications service provider in Korea - KT said

it has 80,000 active users using NFC phones to buy train tickets and pay for bus, subway or taxi fare (Source: Startupbootcamp)

In addition, NFC technology is deployed in countries such as France, USA, Netherlands, Sweden, South Africa, …

3.3 QRCode Technology

The QR Code (Quick Response Code) is also known as the fast response code, which is a matrix code (or two-dimensional bar code) developed by Denso Wave (Japan) in 1994 The term "QR" come from the word "Quick Response", because the person who created it intended to allow the code to be decoded at high speed

Figure 1.5 QR Code, source: internet

A QR Code can contain a web address, time of an event, contact information, email address, SMS text, text message content or even location positioning

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information, or Payment request Depending on the QR Code reader that when scanned, it will lead to a web site, call a phone number, view a message In simple terms, the QR code is interchangeable hypertext by image, any website address (URL) can also be converted to QR code, so any website can open automatically when users scan QR code When users scan the QR code, the content associated with the QR code will be received thanks to the ability to automatically launch the corresponding application on the smartphone / tablet

QR code is similar to bar codes on products used to track warehouse management and product prices in business The difference between traditional QR code and bar code is the amount of data held and shared Traditional bar codes have straight lines, one-way lines, and can only store 20 numbers, while two-dimensional

QR codes can store thousands of alphanumeric information QR code holds more information that helps a lot for businesses

To be able to generate QR code code, anyone can create it for free via the online tools on the Internet

QR code technology has the following advantages and disadvantages:

Advantages

- Quick and convenient

QR Code technology gives customers a fast and convenient payment method With the fact that more and more people are using smart phones, integrating the payment technology with QR Code is actually easier

When a customer requests a payment, they simply open the QR payment application, perform a scan of the payment code generated by the card issuer, and the customer's phone screen displays payment information for customers

to check and confirm The transaction will be completed shortly thereafter This is a payment technology not only convenient for both customers but also for the card accepting units In addition, QR Code also helps the card accepting agency to provide customers with a new modern payment utilities, helping them attract more customers

- Safety and security

In addition, the payment process will have different security authentication steps Thus, customer information will also be safer

- Low in cost and quick deployment

Compared to other payment technologies such as NFC, QRCode deployment

is relatively inexpensive without a special display or reading device, as the QRCode code can be selected for display on the computer screen or through simple billing printing, QRCode reader is just a camera currently available

on most mobile devices Therefore, unlike NFC, QRCode is more commonly deployed to small payment technology providers, within a limited territory

Disadvantages:

- Data transmission may be dependent on transmission quality

When the network quality is not good, the speed of scanning code and data transmission can be a long process This makes customers impatient and dissatisfied with the payment service

- Safety and security

Units that apply the technology to pay by QR Code without the application

of security measures as prescribed, will easily lead to loss of data during the transmission between the two devices

- Limited range of customers:

Base on the fact that not every customer owns a smartphone, so not everyone can access this payment technology

Experience in developing and applying in paynet

Originally invented in 1997 with the original purpose of tracking equipment in the car manufacturing process in Japan, today QR Code is used extensively in the world

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in many different fields such as inventory goods, product information, personal information storage, used at bus, train, subway, buying goods anywhere, communicate, promote

Countries using QR Codes the most are the United States, followed by Britain, Australia, etc In Asia, China, Singapore and Korea are also among the top 10 QR Code users in the world By the end of Q1 / 2014, the top 10 most used QR Codes

in the world, including the US, UK, Australia, Malaysia, Canada, Germany, China, Singapore, South Korea and Denmark

Chart 1.2 Top 10 country use QR code in payment in thẻ world

(source: http://www.qrstuff.com )

3.4 Biometric technology

Biometric Technology is a technology that uses the physical properties, individual biological characteristics of individuals such as fingerprints, iris, faces, etc to identify This is considered to be the most effective personal identification tool that is commonly used, due to its unique and stable characteristics fingerprint recognition is considered one of the most reliable biometric methods

Fingerprint recognition technology works by the principle that when the finger is placed on a fingerprint reader, the device immediately scans the finger

Singapore, 1.3

%

Hàn Quốc, 1.2% Đan

mạch, 1.2%

Khác, 16.9%

22

image and inserts it into the system The system handles fingerprints, converts to digital data, and then compares the fingerprints to the data stored in the system Users will not have to create, save or remember passwords (eg passwords for bank cards)

After fingerprints, some other forms of biometrics such as iris scanning, facial recognition, electrocardiogram-based authentication, voice recognition will be common in the future

Biometric technology has the following advantages and disadvantages:

Advantages:

- Convenient

An undeniable benefit of biometric technology is the convenience it gives customers Rather than memorizing and re-entering usernames, passwords that are easy to forget and confuse, users who use biometric fingerprint scanning technology are able to complete authentication

This makes the transaction done faster and more convenient than other technologies

- Security

Biometric authentication can change the perception that when things are easier to do, it is less secure Multiple-letter passwords are increasingly failing in security because nearly all passwords can be cracked by supercomputers, no matter how complex the password is Currently, the best option for consumers is two-factor authentication: Allows users to add an additional layer of protection (possibly a randomly generated code / character) Validating the two elements is safer, but many people find this feature significantly reduces the usability of the service In theory, biometric technology will allow the complete removal of all types of passwords, but still ensure the security of the user This feature will also help unlocking more advanced security features, secure protection for banking services without the need for two-factor authentication

Disadvantages:

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- Risk of losing information

Biometric information can be stolen or attacked by virus software, spam, etc Therefore, protecting the privacy of biometric features is essential to avoid being hit by a virus which can lead to unappropriate and misused of the data causing harm to the owner of such biometric properties In addition, because biometric properties are unique to each subject, there should be alternatives

in case the owner loses biometric properties In addition, the sampling and transmission of biometric feature information from the sampling site to the testing site must be encrypted to avoid exposure

Experience in developing and applying in payment

Goode Intelligence released a new forecast report that by 2017 more than one billion users will access banking services via biometric systems In the latest report - "Biometric Technology in Banking; Market and Technology Analysis, Acceptance Strategy and Forecast 2015-2020, "Goode Inelligence also predicts that

by 2020, biometric technology will be the main method for authenticating IDs when accessing bank services, using banking services such as withdrawing cash from ATMs, paying for goods and services on POS, etc (Source: SecureID News)

According to a survey conducted by the Mobey Forum on the current state of the biometric technology in the banking industry, 22% of 235 respondents said they had provided biometric services to their customers and 65% are planning to provide this service in the near future More than half have plans to provide fingerprint identification technology to customers 70% said that authenticating users during login and payment or transaction confirmation is the most important use for biometric technology in financial services (Source: paymentscardsandmobile)

It can be seen that these technologies originated in developed countries, have taken strong development steps and even competed with traditional payment methods (such as traditional POS or COD), and It is currently taking the lead in emerging markets This are due to many reasons, firstly in developed countries, the payment infrastructure has been perfected, people have a strong belief in e-

Thirdly, in developing countries like Vietnam, where POS expansion and development are not reaching their full potential, these new payment technologies will have a lot of development potential to fill in the market gap that traditional POS technology can not compensate for, with price advantages, fast deployment capabilities, convenience and compliance with small business and mobile commerce practices

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CHAPTER 2: PAYMENT TRANSACTION VIA POS IN VIETNAM AND

IMPLEMENTATION STATUS IN NATIONAL PAYMENT

CORPORATION IN VIETNAM (NAPAS)

1 Payment transation via POS in Vietnam market

1.1 Overview of POS payment market in Vietnam

a The POS network

Over the years, the number of POS machine that developed by the banks has growth significantly The number of the POS machine’ development during the period 2006-2016 is shown in this chart:

Chart 2.1 Growth rate in number of POS machine in Vietnam 2007-2016

Source: Vietnam Banks Card Association, sbv.gov.vn After 11 years, from about 10000 machines in 2006, the number of POS machine has reach the level of 270.605 machines at the end of 2016 The average growth rate

of POS machine is about 24%/year

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From the chart, with 270.605 POS machines in 31/12/2016, we can see that the number of place that accept the card payment in Vietnam is not too high On average, there is only 2.5 machines in 1000 peoples in Vietnam accept the card payment In other Asian countries, the rate is higher (5 in Thailand and 8 in Malaysia)

According to the data of Vietnam Banks Card Association, the POS machines in the market are deployed mainly by the major banks such as Vietcombank, Vietinbank, BIDV, Agribank The total percentage of these 4 major banks in 31/12/2016 is 81% The following percentage of these banks is 32%, 30%, 13%, 6% alternately

Chart 2.2 Market share by number of POS in 31/12/2016,

source:Data of VBCA

b The card payment

According to the data of Vietnam Banks Card Association, in 31/12/2016, the whole market has over 104 million cards issued by Vietnamese banks The domestic cards account for approximately 89% and the international cards account for 11% In terms of debit card, credit card and prepaid card, the proportion are

Market share by number of POS in 31/12/2016

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90.9%, 4.5% and 4.5% respectively The domestic debit card still has the large proportion in the total number of cards issued by banks (88%)

Chart 2.3: The proportion of the number of cards in 31/12/2016

Source: Data of VBCA During the period 2006-2016, there is a significant increase in the number of cards (in 2016, it is about 20 times higher than 2006) According to Timetric Company in the UK, the annual growth rate of the card market in Vietnam for the period 2013-2017 will reach 10.79%, from 57.3 million cards in 2013 to 86.4 million cards in 2017 Howerver, in 31/12/2016, the total number of cards issued in the market has reached over 104 million cards Thus, the growth rate of payment cards has and will certainly far exceed the expectations and predictions of market analysts

The below chart shows the growth rate of the number of cards in Vietnam during the period 2006-2016:

90.90%

4.50% 4.50%

The proportion of debit card, credit

card, prepaid card in 31/12/2016

Debit card Credit card Prepaid card

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Chart 2.4: The growth rate in number of cards during period 2006-2016

Source: data of VBCA, sbv.gov.vn

In terms of the number of card per capital, each person in Vietnam own more than 1 payment card in average However, a person usually owns many kind

of cards of different banks Due to the data of the State Bank of Vietnam, the number of personal payment deposit account which is used for payment services issued by the banks such as card services, non-cash payment services except cards

is nearly 68.7 million accounts in the end of 2016

c The POS payment connection model

Card transactions are generally classified into two categories: on-us

transactions and off-us transactions

- On-us transactions are the card transactions of banks that accepted at the POS provided by these banks The model of work is following:

Number of cards over the years

Number of cards Growth rate

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NHTTT = NHPHT

Figure 2.1 The model of on –us POS transaction by domestic card,

source: the author

- Off-us transactions are the card transactions which are created at the POS at merchants of card payment banks It will be transacted to banks that issued the cards through NAPAS Every off-us transactions that connected with domestic cards are transact and resolve through the NAPAS system Card transactions at the POS at the merchants of card payment banks will be transacted through NAPAS to the card issuance banks

NHPHT NHTTT

NH A

NH B

Figure 2.2 The model of off-us POS transaction by domestic card,

source: the author

With the international cards, all payment transactions via POS are routed to the international card organization systems

NHPHT NHTTT

Figure 2.3 Model of POS transaction by international card,

source: the author

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d The POS business model in Merchant network

Following the policies of State Bank in promoting non-cash payments, banks have recently concentrated on develop the card network and increase the number of merchants In addition, the development of merchant network helps banks attract more customers It also contributes to the promotion of banks brand, increases the competitiveness of banks in the market, rise up the revenue and profit of banks

In Vietnam, there are two ways for the banks to develop merchants: development and outsourcing companies Currently, banks prefer self-development Due to the business plans and bank policies, the target about the development of POS and merchants will be assigned to branches Based on the information about the potential and qualified merchants, banks will establish the relationship and implement the following steps:

self Sign the contracts that accept the card payments with merchants

- Set up the specifications install the POS machine at merchants

- Provide the documents, give guides and training about accepting the card payments to merchants

Figure 2.4 Progress of implement Merchants acceptance

(source the author)

With this model, banks will manage the monitoring and training merchants