Strengthening card issuance and boosting income from card activities at joint stock commercial bank for foreign trade of vietnam

With the flexibility and utility that card services bring to all stakeholders, bank cards have been created, changing the ways of spending, transactions of social community and increasin

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

-

NGUYỄN DUY ĐỨC

STRENGTHENING CARD ISSUANCE AND BOOSTING INCOME FROM CARD ACTIVITIES AT JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

TĂNG CƯỜNG CÔNG TÁC PHÁT HÀNH THẺ VÀ TĂNG THU

TỪ HOẠT ĐỘNG THẺ NGÂN HÀNG TMCP NGOẠI THƯƠNG

VIỆT NAM

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2020

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

-

NGUYỄN DUY ĐỨC

STRENGTHENING CARD ISSUANCE AND BOOSTING INCOME FROM CARD ACTIVITIES AT JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

TĂNG CƯỜNG CÔNG TÁC PHÁT HÀNH THẺ VÀ TĂNG THU

TỪ HOẠT ĐỘNG THẺ NGÂN HÀNG TMCP NGOẠI THƯƠNG

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 PHẠM VĂN HỒNG

HÀ NỘI - 2020

DECLARATION

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 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 required) 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

Date………

INDEX

INDEX i

LIST OF TABLES iv

LIST OF DIAGRAMS, DRAWINGS v

INTRODUCTION 1

1 Rationale 1

2 Research objectives 2

2.1 General objectives 2

2.2 Specific objectives 2

3 Research questions 2

4 Objects and scope of the research 2

5 Research methodology 3

5.1 Data collection methods 3

5.2 Data analysis methods 3

6 Research structure 3

CHAPTER 1: THEORETICAL BASIS FOR CARD ISSUANCE AND BUSINESS AT COMMERCIAL BANKS 4

1.1 Card service of the commercial banks 4

1.1.1 Definition of card service 4

1.1.2 Classification of card services 5

1.1.3 Characteristics of card services 7

1.1.4 Significance of card service 7

1.2 Issuing and trading card services at commercial banks 9

1.2.1 Card issuing proccedures 9

1.2.2 Card service business activities at commercial banks 10

1.3 Factors influencing card issuance and business activities 18

1.3.1 Subjective factor 18

1.3.2 Objective factor 20

CHAPTER 2: ACTUAL SITUATION OF CARD ISSUANCE AND BUSINESS

ACTIVITIES AT VIETCOMBANK NAM 23

2.1 About Joint Stock Commercial Bank for Foreign Trade of Vietnam 23

2.1.1 Formation and development history 23

2.1.2 Function and misson 24

2.1.3 Business results 25

2.1.4 Card service business results 27

2.2 Analysis of the actual situation of card issuance and business at Vietcombank30 2.2.1 Card issuance activities at Vietcombank 30

2.2.2 Card payment activities at Vietcombank 32

2.2.3 Risks and risk management activities 35

2.2.4 Marketing activities and customer services 41

2.2.5 Technology system investment 44

2.3 Analysis of factors affecting card issuance and trading at Joint Stock Commercial Bank for Foreign Trade of Vietnam 46

2.3.1 Subjective factor analysis 46

2.3.2 Analysis of objective factors 52

2.4 Evaluation of card issuance and trading activities at Joint Stock Commercial Bank for Foreign Trade of Vietnam 55

2.4.1 Achievements 55

2.4.2 Limitation 56

2.4.3 Cause of the limitations 57

CHAPTER 3: SOLUTIONS TO STRENGTHEN CARD ISSUANCE AND BOOST INCOME FROM CARD ACTIVITIES AT VIETCOMBANK 59

3.1 Orientations and objectives of card business development at Joint Stock Commercial Bank for Foreign Trade of Vietnam 59

3.2 Some solutions to enhance card issuance and increase card revenue at Vietnam Joint Stock Commercial Bank for Foreign Trade of Vietnam 60

3.2.1 Completing distribution channel system 60

3.2.2 Strengthen the prevention of card service risks, especially in card

counterfeiting 62

3.2.3 Technology investment 64

3.2.4 Diversify products, develop separate card product lines for each customer segment 66

3.2.5 Improve the quality of human resources 67

3.2.6 Solutions to increase revenue from card services 68

3.3 Recommendations 69

3.3.1 Recommendations to the Government 69

3.3.2 Recommendations to the State Bank of Vietnam 70

3.3.3 Recommendations to Vietnam Bank Card Association 71

CONCLUSION 73

REFERENCES 74 APPENDIX

Appendix 1: Card issuance procedures at Vietcombank

Appendix 2: Card payment procedures at Vietcombank

LIST OF TABLES

Table 2.1: Business results of Vietcombank 25

Table 2.2: Sales of card services by types of card 28

Table 2.3: Revenue from card services by activities 29

Table 2.4: Card issuance results at Vietcombank 30

Table 2.5: Revenue from card payment at Vietcombank 33

Table 2.6: Risks on card counterfeiting Vietcombank 35

Table 2.7: Card fraud risk management instruments 38

Table 2.8: Risk Provision Fund for card business at Vietcombank 40

Table 2.9: Card service marketing activities 41

Table 2.10 Vietcombank’s customer policies 43

Table 2.11 Technology infrastructure for card business at Vietcombank 45

Table 2.12: Brand value of Vietcombank 47

Table 2.13: Vietcombank’s human resources 50

Table 2.14: Some training activities for staffs involving in card operation at Vietcombank 51

LIST OF DIAGRAMS, DRAWINGS

Hình 1.1: Quy trình phát hành thẻ 9

Hình 1.2: Quy trình thanh toán thẻ 12

Biểu đồ 2.1 Năng lực tài chính của Vietcombank 48

Biểu đồ 2.2: Hệ thống máy ATM, POS của Vietcombank 49

INTRODUCTION

1 Rationale

Card is a multifunctional personal financial product based on the application of modern information technology, bringing many benefits to customers Card service contributes positively to improving the civilization of payment, increasing the competitiveness for the banks With the flexibility and utility that card services bring

to all stakeholders, bank cards have been created, changing the ways of spending, transactions of social community and increasingly affirming the position in the business activities of commercial banks Therefore, strengthening the issuance and boosting income from card activities is indispensable and objective to the global integration trend; contributing to implementation of diversification of services and modernization of banking technology in the process of integration into the region and the world

Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) is one of the leading commercial banks in Vietnam with a wide network of branches covering the whole country Being aware of the benefits that card operation brings to the bank, over the years, Vietcombank has been promoting the issuance, attracting card users, increasing the revenue of card services among all branches in Vietcombank system As one of the commercial banks that started to provide card services quite early compared to other banks, Vietcombank has obtained many positive results in the service business, particularly as follows: the number of customers using cards at the bank has been constantly increasing with 33,213 customers in 2018 (an increase of 21% compared to 2017); Income from card services at Vietcombank in 2018 reached VND 1,598 billion (an increase of 57.75% compared to 2017 and completed 112% of the assigned plan)

However, besides above achievements, the card issuance and business activities

at Vietcombank still have many limitations that need to be overcome In the evaluation report of the Card department at Vietcombank, it is pointed out that customers mainly use cards at the bank to withdraw cash from branches or ATMs; Sales from goods and services at small merchants are not commensurate with the market potential

International card users are mainly business people who want to go abroad and tourists This has not met the desire of the bank's Board of Directors on creating a modern non-cash payment instrument to bring convenience to customers, reducing cash circulation This situation requires Vietcombank to promote marketing, advertising and propaganda about card services so that customers know and be more aware of the utilities that card services bring, from which helping the branch develop proper business plans for its card products and services, creating important conditions

in promoting card issuance and increasing revenue from the bank's card services

From above situation, the author chose the topic “Strengthening card issuance and boosting income from card activities at Vietcombank” as the master thesis

2 Research objectives

2.1 General objectives

The overall objective of the research is to find solutions to enhance card issuance and increase revenue from card activities at Vietcombank, from which contributing to improving the efficiency of business operations of the bank

2.2 Specific objectives

- Systemize the theoretical basis for card issuance and business activities at the commercial banks

- Analyze the status of card issuance and business at Vietcombank

- Propose solutions to enhance card issuance and increase revenue from card activities at Vietcombank

4 Objects and scope of the research

- Objects of the research: Card issuance and business activities at commercial banks

- Scope of the research

+ About destination: Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)

+ About time: Data for the study was gathered during the period of 2016-2018

5 Research methodology

5.1 Data collection methods

Summary, select and analyze information from textbooks, specialized books, previous researches related to card issuance and business activities at commercial banks; select information relating to bank card business activities

Summary and analyze data collected from Vietcombank to study the situation of card issuance and business at the bank, thereby proposing solutions to enhance issuance and increase revenue from card activities

5.2 Data analysis methods

Statistical method: Data collected from Vietcombank's annual reports, financial statements, information disclosure, statistical offices, annual reports of the State Bank and some commercial banks, economic and financial magazines; Handle information

on the status of card issuance and business at Vietcombank

Methods of analysis: Analyze the actual data through bank reports and documents Compare, analyze and synthesize the fluctuations of the figures over the years, from which summarizing current situation of the bank's card service business in the past, present and development directions in the future

Synthesis method: Screening and summarizing from facts and theory to propose solutions and steps to carry out research objectives

6 Research structure

Chapter 1: Theoretical basis for card issuance and business at commercial banks Chapter 2: Actual situation of card issuance and business activities at Vietcombank

Chapter 3: Solutions to strengthen card issuance and boost income from card activities at Vietcombank

CHAPTER 1: THEORETICAL BASIS FOR CARD ISSUANCE AND

BUSINESS AT COMMERCIAL BANKS

1.1 Card service of the commercial banks

1.1.1 Definition of card service

In Vietnam, the concept of bank card is specified in Article 2 of the Regulation

on issuance, payment, use and bank card support services, which was issued together with Decision No 20/2007/ QD.-NHNN dated on May 15, 2007 of the Governor of the State Bank of Vietnam, in particular: Bank card is an instrument issued by a card-issuing organization for conducting card transactions under the conditions and terms agreed upon by the involved parties

Bank card service is one of the banking services Card services include all services attached to payment cards, creating the utilities for the payment cards and being provided to customers in order to satisfy payment, cash withdrawal, bank transfer needs via the customers’ carda At the same time, the banks shall charge this service (Frederic S.Mishkin, 1995)

Bank card services include all types of transactions between the banks and the customers (individuals or organizations), based on the process of processing and transferring digital data to provide banking products and services (Hoang Tuan Linh, 2003) Based on the concept of card services as above, the card service can be generalized as follows:

- Bank card services require high-tech service development, deployment and management system and inter-network coordination of an entire multinational network

- The payment card service provides customers with a safe and convenient cashless payment method

- Card service provides customers with a safe but flexible method to store money and perform financial transactions such as withdrawals, transfers, etc at ATMs and other transactions on the internet

- In order to provide this type of service to customers, banks have to spend huge investment costs in building a card issuance and payment system

- Bank card services are highly identical, with little product differentiation So

to win the competition, the banks often focus on activities related to product marketing, after-sales services rather than researching to make a distinction in product characteristics

1.1.2 Classification of card services

* According issuance themes

Card issued by a bank: a card issued by a bank to a customer so that the customer can use his account or a bank-issued account for payment or use of banking services

Cards issued by non-bank organizations: Cards issued by non-bank organizations with the same process and scope of payment as cards issued by banks such as Amex, JCB

* According to credit limit:

Gold Card: is a card issued to customers who need to pay large amount of money, usually to merchants This type of card has different characteristics depending

on the region and each country, through which limits for withdrawals and deposits will

be set accordingly

Standard Card: This is the most basic and common type of card nowadays According to statistics, up to 160 million people in the world use this type of card every day The limit depends on each bank

* According to the technology of card making:

Braille cards: Cards are made in braille engraving techniques, the necessary information is embossed on the card, so there is very little amount of information and

it is easy to be counterfeit Therefore, currently, such cards are rarely used

Magnetic stripe card: A magnetic stripe card stores information and only stores information that is unencrypted, so it is less secure and easy to be counterfeited Especially, very little information is stored

Smart card: The card has an electronic chip to store information that can store

up to 200 latest transactions, and is highly secure and difficult to fake because it is encrypted

* According to using ranges:

International card: Cards issued by a domestic bank but can be used for payment both inside and outside the territory of that country or issued overseas but used for payment inside the country such as ANZ Card, HSBC card, etc International card is a card issued by a card issuing bank in Vietnam, used and paid inside and outside of Vietnam or a card issued overseas but used and payment in the Socialist Republic of Vietnam

Domestic card: The card is issued by a local bank and is allowed to use local currency payment in local currency Domestic card is a card issued by a card issuing bank in Vietnam, used and paid within the Socialist Republic of Vietnam

* According to the payment characteristics:

Credit Card: also called deferred or late payment debit card in which the cardholder is allowed to use the card to pay for goods and services, withdraw cash within the credit limit approved by the card issuing bank under the contract

Debit Card: This card is directly related and attached to the cardholder's deposit account With this type of card, when buying goods and services, the money is immediately deducted from the cardholder's account and immediately credited to the account of the accepting unit There are two types of debit cards, including online and offline cards

Cash Card: a card used to withdraw cash at ATMs With the function of withdrawing money, transferring money in the same banking system and paying value-added bill services such as payment of airline tickets , electricity and water bills, phone card topup at the ATMs Each time the money is withdrawn or transferred, payment will be deducted immediately into the cardholder's account

* According to the object responsible for payment:

Personal card: card issued to individuals who need and meet the conditions

to open the card at the banks The cardholder is responsible for making payment on the card with his/her own money or may issue additional cards

Cards of individuals authorized by the company: Cards issued to an individual

of an organization or a company, in which the organization or company is the card

holder and authorizes that person to use the card and be responsible for payment of expenses on the card with the funds of the company or organization

1.1.3 Characteristics of card services

Currently, in the context that information technology is increasingly developed, the card becomes a means of payment with many advantages and superior features, and is becoming more and more common Particularly, card services have the following characteristics:

* Flexibility:

With a wide variety of cards, the card is suitable for all types of customers, from high-income customers golden cards), to low-income customers (standard cards), which can be used to withdraw cash or pay for goods and services The card is considered as the "electronic wallet" of the cardholder, helping the cardholder to control his/her own spending activities

* Convenience:

The card is a cashless payment method, bringing many benefits to customers that no other means of payment such as checks, collection orders, payment orders can bring With the cards, customers can pay for goods and services at any card acceptance point without having to carry cash In addition, cardholders also enjoy many utilities provided by the card issuing banks

* Safe and high speed:

The card is based on sophisticated and modern technology, which is difficult to fake, so the card is highly secure When losing the card, the cardholder needs to promptly notify the issuing bank to promptly lock the customer's account to avoid being stolen data and withdrawn money

The card is compact in size, easy to carry around and convenient for shopping or

is eligible for paying a large amount of goods without having to worry about carrying money or not

1.1.4 Significance of card service

With its main role as a product, payment service, card service has brought many benefits to the users The biggest advantage that card products bring to the economy

and society is to provide a safe, civilized and modern means of payment The specific roles are presented as follows:

* Significance to the card users

As a means of payment of goods, services, bank cards allow cardholders to purchase goods and services at any facility that accepts cards or withdraw cash at bank payment counters or at automated teller machines equipped everywhere

In addition, bank cards (credit cards) are forms of payment loans, in which the banks provide advanced cash to customers' transactions, providing customers with with a scalable financial transactions

* Significance to the banks

Card services bring many benefits to the banks, and also affect other banking operations Along with the expansion of the bank card market, the process of socialization

of banking products and services has been expanding quickly By owning a compact bank card, the image of the bank has become closer to the daily life of the community Along with the development of card business, the bank's technological capacity has been increasingly improved, the bank has invested a modern banking technology facility, connected online to domestic and international financial and monetary institutions, expanding and improving the quality of its products and services

* Significance to the card acceptor

Acceptance of the card gives the card accepting establishment an opportunity to expand the market and sales Bank card is a way to expand the financial capacity of the cardholder, help the cardholder to spend, increase purchasing power, stimulate demand

Card accepting establishments benefit from the bank's customer policy In addition to providing the necessary machinery and equipment for payment, the banks also attach credit preferences, payment services with "card payment acceptance contract" as a closed policy

When paying with cards, the card accepting establishments can avoid the case where the customers use counterfeit money, at the same time reduce transaction costs, and accelerate capital turnover

* Significance to the economy

As a means of non-cash payment, bank cards help to reduce the amount of cash transaction Almost all card transactions in the national or global scope are conducted and paid online, all information about card transactions are processed through convenient, modern machinery and extremely fast payment system, contributing to the speed of capital flow With modern technology, the banks are capable of all transactions, creating a macro management platform for the state bank and national monetary policy implementation Card payment creates a modern civilized trading environment, which is a factor to attract tourists and foreign investors

1.2 Issuing and trading card services at commercial banks

1.2.1 Card issuing proccedures

The issuance of a bank card must be based on the legal basis of the State, and must comply with the regulations of international card organization Besides, the rules issued by the bank management also play an important role There are many different types of card issuance, but generally there are 2 main types, including issuing new cards and reissuing cards Both types are implemented by the following procedures:

Image 1.1: Card issuing proccedures

Step 1: Receiving card application:

When customers want to use credit cards, they come to the issuing bank to complete some necessary procedures such as filling in card issuance application forms, submitting some other documents such as ID card or passport, etc Profile provided by customers must include information such as name, address, company, legal capacity,

Card holder

Issuing bank

Bank account

etc Customers can request card issuance in the form of mortgage, credit mortgage or deposit, depending on the financial capacity and the bank's regulations

Step 2 : Review the application:

Based on customes’ application, the evaluation department will conduct verification of the application and issue a decision to accept or reject the application The bank often reviews the application submitted, financial situation (with the company customer) or regular income of customers (with individuals) to consider customer solvency With accepted documents, the bank will proceed to sign a contract with the customer

Step 3: Customer classification for card isssuance:

If the application is considered to be completely appropriate, the bank may conduct customer classification and have a separate credit policy for each customer group

Step 4: The bank issues the card to the cardholder:

The bank requires the cardholder to sign and register the sample signature at the bank After that, depending on the card issuing bank, necessary information such as floating name of cardholder, card number, validity period, bank code, company name (if any), etc will be printed on the card At the same time, this information will be encrypted and a personal identification number (PIN) for the cardholder will be determined, from which the cardholder's data will be entered into the system for management

When the bank delivers the card to the customer, a PIN will also be provided Cardholders are required to keep card information confidential If a loss occurs due to

a leaked PIN, the cardholder is solely responsible

1.2.2 Card service business activities at commercial banks

1.2.2.1 Card issuance

Card issuance activities of a bank include management and implementation of card issuance, use and customer debt collection Each process is closely related to customer service and bank risk management Financial institutions and banks that issue cards must formulate regulations on card issuance, use and debt collection

After the procedure for issuing and delivering the card to the customer is completed, the bank will perform the management of customer information; manage customers’ use of cards, including handling all requests related to customers’ use of cards, updating all customer card use transactions into the system; collecting debt (for credit card): The bank will send customers the statement listing all card transactions periodically After that, the bank will collect the debt according to the amount announced on the statement; Providing services to customers; Clearing organization with international card organizations

When implementing card issuance activities, in addition to receiving card issuance fees collected from cardholders, collecting interest from late payment statements, banks are also entitled to exchange fees paid by card payment banks thanks

to card payment fee via international card organization This is the most basic part of the financial institutions and card issuers Based on this revenue, financial institutions and card issuers will offer interest exemption and other incentives to customers, thereby increasing card usage as well as revenue from card using

1.2.2.2 Card payment

The card payment activities of the bank include the following activities: (i) Building and managing the customer information system of the merchants: Performing the approval and signing of card acceptance contracts with units accepting cards, which specify the discount level with card payment acceptance transactions; (ii) Manage the operations of the card accepting network; (iii) Arrange payment for card usage transactions to merchants

The process of card payment at the bank when a transaction arises is carried out through the following steps:

Image 1.2: Card payment procedure

Step 1: Cardholders use the card to pay for goods, services or withdraw cash at the merchants When receiving the card from the customer, the merchant is responsible for checking the validity of the card If the card is valid, the merchant will provide goods, services or cash to the customer

Step 2: The merchant conducts transactions with the customs clearance bank and sends the card payment invoice to the paying bank Card payment invoices are kept at the card payment bank This invoice will be used as the original document for checking and resolving the complaint (if any)

Step 3: The payment bank credits the account of the merchant

Step 4: Conduct payment with international card organization and other members Every day, the bank synthesizes all data of card-related transactions issued by other banks and transmits data to international card organizations

Step 5: The international card organization will notify the payment bank After receiving the data from the payment bank, the International Card Organization will credit the bank Data transmitted by the International Card Organization includes paid payment banks, fees payable to the International Card Organization, and transactions being searched

INTERNATIONAL CARD ORGANIZATION

1- good and service purchase

Step 6: The international card organization will transmit data to the issuing bank Step 7: The international card organization will issue a debit note to the issuing bank

Step 8: On that basis, the issuing bank will send the statement to the cardholder

c : Cardholder pays debt to issuing bank: After receiving the statement, the cardholder will pay for the goods and services consumed

In some cases, the merchant must contact the issuing bank or international card organization (on behalf of the issuing bank) to apply for a credit card payment license Payment authorization means a bank issuing a card directly or notifying an international card organization to prepare a card transaction by providing a license number or with appropriate handling requirements for the license application

Card payment is a modern form of payment, mainly used by machines The main types of equipment used for card payment activities at commercial banks include: invoice scrubbers; automatic licensing machine; automatic teller machine

1.2.2.3 Risk management

Card business activities of the bank face many different risks, affecting the bank's reputation and the interests of customers using cards Some basic risks in card issuance and payment are as follows:

Risks during card issuance

Risks of card issuance information are cases where customers provide fake information about themselves, income, and financial capacity for the Bank to be issued

a card In addition, it is also the case that one person takes another person's personal information to request an ATM card issuance at the bank, then takes the card to spend

on someone else's account This case occurs when the Bank employee does not strictly control the customer file, does not compare the information on file with the information of the card issuer The common case is the case of the card issued in a series to pay salaries for employees A representative of the organization will then ask for a card at the bank and sign himself The employee will then receive the card without giving it to the actual cardholder

Risks during card issuance

- Stolen card information: Nowadays, online shopping becomes popular When making a purchase, customers must enter their card number and personal information Therefore, cyber criminals steal this information to make another fake card, then withdraw money In addition, they can attach stolen devices on ATMs to steal information when customers withdraw money They then use this information to forge another card to steal money Cases of stealing information are as follows:

Card theft: in this type of risk, criminals insert into a card reader slot of an ATM

a piece of plastic capable of holding the card and preventing the device from releasing the card While the cardholder is trying to solve the problem, the crook will take

advantage of this time to steal the pin code and access the cardholder's ATM account

Data theft with camera: The criminal installs cameras - a device that reads cards into ATMs to steal account data and pin numbers The camera is usually placed in a tray containing fake leaflets next to the keyboard, a convenient location to record all the actions of the cardholder as well as store data With wireless technology, all data will be stolen The data obtained will be used to create fake tags At the same time, the captured pin number will be used to withdraw the cardholder's money

Counterfeit reader (skimmer): Skimmer is a device that steals data on the word sequence These devices are shaped like regular ATM card readers They are usually mounted close to or above the real card reader A fake card reader can steal and store information about account numbers, account balances, and verification codes associated with each cardholder of more than 200 ATM cards Normally, customers will mistake the skimmer as part of a cash machine The crook will instruct the victim

to swipe the card into the skimmer first, then continue with other transactions, or they will announce that the skimmer is a card cleaning tool that helps increase the performance of the magnetic cards When a victim swipes the card into the skimmer, the card data is stolen The fraudster then takes advantage of the information to make payment transactions without presenting the card

Fake Pin pad or other fake devices: This is a form of putting fake Pin pad on actual keyboard Fake Pin pad is usually of the same size and appearance as the real, extremely thin, transparent As a result, people who use ATMs are almost unable to

recognize it and should still conduct transactions normally This device will steal and store battery data of each transaction Fake Pin pad will be canceled shortly after The recorded pin number will be downloaded Combined with fake ATM cards created through stolen information, fraudsters will steal the cardholder's money

Reverse the transaction: This method uses a series of variants to create an causing situation on the ATM that causes the host operator to reverse the transaction because the money has been collected by the ATM There are many similar forms of money traps However, in reality, a part of the money withdrawn was taken by the crooks

error The card is not and cannot be sent to the actual cardholder: This situation happens when the card has been issued and the cardholder does not actually receive the card because the card is lost during delivery and receipt The reason is that the customer’s address is changed differently from the original registered address, or the Bank mistakenly deliver to another customer (due to the same name, etc.) or the fraudster intentionally does not deliver to the customer to steal money

Risks in card payment

Risks from Merchant's employees: This is the case when Merchant's employees associate with criminals to make fake cards, thereby taking money from the Bank without any purchase or sale of goods In addition, there are some cases where merchant's employees take advantage of customers' loopholes to swipe the card multiple times for the same bill

Risks from online transactions: Along with the trend of cashless payments and online transactions, the type of high-tech crime is increasing High-tech criminals often steal personal information and account number information that cardholders provide on online shopping sites to make a fake card and then take money from customers Therefore, commercial banks have to regularly advise their customers not

to log in to strange links because there are often viruses that steal information In

addition, customers should not provide personal information on untrusted websites

The risks in card issuance and payment directly affect the profitability and reputation of the Bank providing card services and causing annoyance to cardholders

Therefore, card issuers need to pay special attention to card business risk management activities Risk management departments at the banks conducting card business activities should perform the following risk management activities:

Check card payment data:

+ Check the report of potential trading risks and high risks

+ Prevent and investigate counterfeit card usage

+ Manage the list of accounts related to the cards that have been reported stolen

or lost

+ Receive and check fake or suspicious transaction notices, verify fake or suspicious transactions from international banks, card organizations or other sources of information

+ Update information on the list of stolen and lost cards of the international card organization

Resolve fake or suspicious cases

+ Determine the validity of suspicious transactions

+ Cooperate with relevant authorities in investigating and handling counterfeiting contract violations

+ Organize training for merchants' employees and cardholders on counterfeiting prevention measures

The more the card business develops, the more investment in risk management

is Experts in this field are often experienced and knowledgeable about cards and technology to be able to prevent, predict, and detect fraudulent activities in the card industry

1.2.2.4 Marketing and customer service activities

Like other businesses, card business requires banks to focus on marketing and customer service Theoretically, marketing and customer service in card business is a relatively broad concept, covering all the methods to find customers, helping them reach and decide on the choice of this non-cash payment method and become a long-term customer of the bank Marketing activities include basic activities:

+ Contact individual and business customers who have the potential to use the card, persuade them to sign in the card usage contracts through the general utility of bank cards and the advantages of card services provided by the bank

+ Maintaining relationships with cardholders, encourage consumption of cardholders through the development of promotions, reward points

+ Meeting with potential goods and service suppliers, persuading them to sign contracts to accept card payments, provide services to merchants: Installing card reading equipment, guiding the process of card acceptance, conduct card payment equipment maintenance

+ Conducting advertisements for merchants in general or potential merchants in particular through card advertisement programs

+ Develop reasonable promotional policies for merchants by ranking, calculating service points or the amount of transaction value at the unit, thereby developing a policy of discount and discount for cardholders and merchants

However, the important factor and plays a decisive role in marketing activities is the human factor The marketing staff must be strong at card business, understand the card market and have the ability to conduct marketing

1.2.2.5 Technology system investment

The card is a high-tech product, so the advanced technology system platform, international standards, stable operation are essential elements to enhance the card service business

Solutions of technology platform of each bank are selected in accordance with the development strategic direction of that bank In order to develop card services, banks must invest in an international standard technology platform including customer information management system, usage management and payment card system to meet requirements of international card organizations This system must be connected online to the data processing system of international card organizations In addition, banks also have to invest in a system of equipment for card issuance and payment such

as card printers, automatic card payment machines, ATMs, etc In order to develop

card business, The bank must ensure the deployment of a modern technology system

to keep up with the requirements of the world

1.3 Factors influencing card issuance and business activities

1.3.1 Subjective factor

Subjective factors affecting the commercial card issuing and trading activities

of commercial banks include: bank brand; financial capability of the bank; distribution channel system; Bank customer policies These factors are presented in detail as follows:

1.3.1.1 Bank brand

Brand is a factor that directly affects the issuance and trading of card services

by commercial banks Because the brand, image is the oil that the bank creates in the hearts of its customers and is the unique feature of each bank

The more a bank has a brand and a higher reputation, the more products it offers are appreciated by customers and the number of customers using it is increasing This is a premise for the bank to expand business development Card services are similar This is a new type of service and customers do not have much understanding about the products and services In addition, products are also risky services Therefore, customers will tend to choose reputable banks with high brands to use the service to ensure the safety of transactions The higher the brand's reputation is, the better the bank will have to develop, increase revenue from card services and vice versa

1.3.1.2 Financial capability of the bank

In order to enhance and increase revenue from card services, the banks need to have strong financial resources This factor plays a very important role in developing new card products to enhance the competitiveness of the banks Banks with financial strength can ensure scalability to invest in infrastructure systems for card business such as ATM networks, POS machines, etc

The financial potential also determines the trust of customers in the bank Customers tend to believe in large, reputable banks with healthy financial capacity They believe that these banks will provide better services, including card services

When in need, customers often look to the banks with stronger brands than the unknown banks Therefore, branding and increasing financial capacity are what any bank wants to achieve to develop business operations in general and increase revenue from card services in particular

1.3.1.3 Distribution channel system

The distribution channel is the direct means to bring card products to customers The distribution channel plays an active role in capturing customers' needs, from which the bank can take the initiative in improving and perfecting products, creating favorable conditions for supplying products to customers

The bank's distribution channel system can be divided into two types, including traditional and modern distribution channels For traditional distribution channels, the bank distributes card products through branches, transaction offices or through correspondent banks With the strong development of modern technology, expanding the network does not necessarily need to establish new branches However, with the actual situation in our country and the level of knowledge as well as the habit of the majority of people, the expansion of the system of branches, transaction offices and correspondent banks is necessary to attract customers and brand promotion and revenue increase from card products business

Besides, modern distribution channels are necessary conditions for developing card products The application of modern technology has changed the bank distribution channel Modern distribution channels such as automatic teller machine (ATM) will facilitate customers to use th services Modern distribution channels will help to overcome the limitations of time and space of transactions between customers and banks, helping the bank to save money on each transaction and increase the bank's income As a result, the bank can boost its card service business

1.3.1.4 Human Resources

People are the center of all activities, the key to success or failure in all areas of the economy The card service management team is the one in direct contact with the card business and fraudulent activities in the card field Experience, a sense of vigilance, strict compliance with the bank's regulations on card business activities of

the card service management staff will contribute to detect, prevent and limit risks and risks loss to the bank during the business process Since then, the management of card services shall be more effective

On the other hand, bank officers are the ones who directly make cards, manage cards, understand the cards so the cards fraud caused by these officials are the most sophisticated ones which are difficult to detect, causing great losses for the banks Therefore, the ethics, experience and qualifications of the card service management staffs also have a great impact on business performance, risks in the bank's card business as well as on management of card services at commercial banks

1.3.2 Objective factor

1.3.2.1 Legal basis of the bank

The environment is considered to be an important factor affecting commercial card business of commercial banks A coherent, complete and effective legal environment can ensure the rights of all parties involved in the card issuance and payment process Thanks to that, the new bank shall have a solid basis to make investments to expand and develop card business

In any country, the card issuance and payment activities of banks are conducted within a certain legal framework That legal framework is expressed through specific regulations and regulations on card business Such rules and regulations may encourage the business and use of the card if they are reasonable to suit the actual situation, but they will have the opposite effects if they are too strict or too loose, not suitable with bank card business conditions

1.3.2.2 Competition among the commercial banks

Financial - banking market is growing strongly In a trend of the world where the proportion of services is increasing, there are many business organizations involved in providing financial services in general and card services in particular In particular, the participation of foreign banks and financial institutions in banking activities is making competition in this field increasingly fierce

Competitive pressures force the banks which want to survive and develop to maximize their financial potential, constantly develop new products and services, including card translation, to meet the maximum needs of customers with the lowest price

1.3.2.3 Factors related to customers using card services themselves

a Consumption habits of the population

The consumption habits of the people have a great influence on the card business of commercial banks Consumption habits of people will create an environment for card payment A market where people only have cash consumption habits will not be a good environment to develop the card market Only when the payment is made primarily through the banking system will the card services really promote its use This means that the card service business activities of new banks have conditions to develop

b Literacy level

A modern form of payment applied to the environment with low literacy level will reduce the effectiveness and vice versa, when the literacy level of the people is high, the income is stable, the demand for non-cash payment is indispensable This is a favorable condition for any banks who wish to invest in promoting card service business

The people's intellectual level is expressed through the people's awareness of the card, a means of multi-utility payment, thereby forming a habit of using the card A high educational level means that the economy develops in all aspects, accesses to world civilization, and applies with scientific and technical achievements to serve people For example, through the internet, people can save time and effort to buy everything they need and pay by cards with bank accounts without coming to the shopping points

c Card users’ income

High income means higher living standards At that time, human demand was not merely about buying goods but buying and selling with the maximum degree of agreement Card service products will meet this need When the standard of living is raised, the demand for tourism and entertainment of people is also higher Card

products and services are the most effective means to meet this need This is the basis for banks to boost business, increase revenue from card services

On the other hand, only high and stable income can meet the bank's conditions when issuing cards When customers' income is low, even if customers want to use the card, the bank cannot meet it When a customer's card transaction is not performed, the bank will gain revenue from the service fee Since then, the bank's card service business will not be developed and revenue from card services will be low

CHAPTER 2: ACTUAL SITUATION OF CARD ISSUANCE AND BUSINESS

ACTIVITIES AT VIETCOMBANK NAM

2.1 About Joint Stock Commercial Bank for Foreign Trade of Vietnam

2.1.1 Formation and development history

JSC Bank for Foreign Trade of Vietnam, formerly known as Bank for Foreign trade of Vietnam, was established on 01/04/1963 from the Foreign Exchange Bureau (of the State Bank of Vietnam) Being the first state commercial bank chosen for pilot privatization by the Government, Joint Stock Commercial Bank for Foreign Trade of Vietnam officially came in to operation on 02/06/2008, after successfully implementing the equitization plan through IPO Vietcombank (stock code: VCB) officially listed on the Ho Chi Minh Stock Exchange (HOSE) on 30/06/2009

During more than 56 years of growth and development, Vietcombank has contributed significantly to the stability and growth of national economy, upholding the role of a major foreign trade bank in facilitating efficient domestic economic growth as well as influencing considerably on regional and global financial community

Originated as a specialized bank for foreign trade, Vietcombank nowadays has become a multiple sector bank, providing customers with a wide range of leading financial services in international trade; traditional services such as capital trading, capital mobilization, credit, project financing…etc., and modern banking segment such

as forex trading and derivatives, card services, e-banking and so on Vietcombank has many advantages of applying advanced technology into the automatic banking system, products development, e-banking services, based on its high technology foundation Products such as Digital Lab, VCB Internet Banking, VCB Money, SMS Banking, Phone Banking have always attracted a great deal of customers by its convenience, promptness, safety, efficiency, helping to create the habit of non-cash payments amongst the mass

After more than a half-century operating in the market, Vietcombank, one of the biggest commercial banks in Vietnam, currently has more than 16,800 employees, more than 560 branches/ transaction offices/ representative office/ affiliates both in Vietnam and abroad, including Head Office in Hanoi, 111 branches, over 441 transaction offices all over the country, 04 subsidiaries in Vietnam, 03 subsidiaries in other countries (Vinafico

in Hongkong, Vietcombank Money Transfer Company in US, a subsidiary bank in Laos),

01 representative office in Singapore, 01 representative office in Ho Chi Minh City, 01 representative office in US (officially coming soon), 03 administrative units (Training and Human Resources College; 01 Cash Processing Centre in Hanoi and 01 Cash Processing Centre in HCMC (officially launching in 2019) and 4 joint ventures.In addition, Vietcombank has also developed an Autobank system with over 2.536 ATMs and more than 60.000 [NMY(R-H1] merchants nationwide Bank's operations are supported by a network of more than 1.856 [NMY(R-H2] [NMY(R-H3] correspondent banks in 176 countries and territories around the world Vietcombank's team of professional employees with excellent ability in banking and finance have a good sense for modern and integrated business environment, etc Thanks to their contribution, Vietcombank remains the primary choice for large corporations, domestic and foreign enterprises as well as millions individual customers

2.1.2 Function and misson

Joint Stock Commercial Bank for Foreign Trade of Vietnam has the following functions and mission:

- Mobilizing short-term, medium-term and wild-term capital of all economic sectors and people in the form of demand deposits and term deposits; issue promissory notes after obtaining permission from the State Bank

- Receive investment trust and development capital from domestic and foreign organizations and individuals when permitted by the State Bank; Borrowing capital from the State Bank and other credit institutions

- Providing short-term, medium-term and long-term loans to organizations and individuals engaged in agricultural, forestry and fishery production and business and processing agricultural products in the area depending on the nature and ability of the sources

- Discount commercial bills, bonds and valuable papers; Contributing capital and joint venture in accordance with applicable laws; Perform services between customers; Providing foreign exchange services according to Decision No 194/QD-NHNN of the Governor of the State Bank of Vietnam on October 9, 2006

2.1.3 Business results

During the period of 2016-2018, Vietcombank had strong and comprehensive transformation Business activities in this period achieved impressive results with the rapid growth of total assets, capital mobilization and credit In 2018, Vietcombank was the first bank in terms of profit scale and budget contribution in the banking industry, being the first commercial bank in Vietnam to bring the NPL ratio to less than 1%, classified by Basel II capital safety standards During its operation, Vietcombank has increased its investment in modernized IT infrastructure and synchronously implemented transformation projects in order to gradually achieve the best standards and practices Some targets of the bank's business results for the period of 2016-2018 are as follows:

Table 2.1: Business results of Vietcombank

Unit: Billion dongs

Total assets

787,935 1,035,293 1,074,027 247,358

31.39 38,734

3.74

Mobilized capital

601,994

726,734

823,390 124,740

20.72 96,656

13.30 Credit outstanding

balance

460,913

543,434

639,370 82,521

17.90 95,936

17.65

Total income

14,929

17,540

25,667 2,611

17.49 8,127

46.33

Net profit after tax

6,851

9,111

14,622 2,260

32.99 5,511

60.49

NPL ratio

1.48

1.11

Source: Vietcombank

Vietcombank's total assets continued to grow strongly, reaching VND 1,074,027 billion in 2018, an increase of 3.74% compared to 2017 The mobilized capital of the bank in 2016 was VND 601,994 billion and 726,734 billion VND in 2017, increased

by 20.72% In 2018, Vietcombank's mobilized capital continued to grow, reaching VND 823,390 billion, increasing 13.3% compared to 2017 This result was thanks to the bank's flexible mobilizing capital in line with the market situation, ensuring capital sources for credit growth in the right direction; Strictly control the programs/groups of customers allowed to mobilize competitive interest rates on the basis of ensuring the overall benefits of Vietcombank; actively expanding payment and collection accounts for the State Treasury and the social insurance

Although the credit balance is constantly growing, the bank always controls the loan quality well Over the years, Vietcombank has stepped up checking and supervising credit activities at all branches; strictly abide by the laws and regulations of Vietcombank on credit extension; Assigning the members of the Board of Directors in charge of a number of branches with debts with big problems of the system such as Quang Nam branch; Hue; Bac Kan,etc.; strengthening supervising and directing debt collection for each branch Every year, the bank inspects 100% of branches in the whole system, 04 Divisions/Departments/Centers at its Head Office, 02 Subsidiaries and audits 22 topics across the whole bank to promptly detect and remove potential risks, propose solutions to violations at the units As a result, the NPL ratio at the bank over the years has decreased from 1.48% in 2016 to 0.97% in 2018, bringing VCB the first bank in Vietnam to control the NPL ratio to 1 % according to Basel II capital safety standards

In recent years, Vietcombank has stepped up its synchronous deployment of proactive and flexible operating solutions to adjust to the business environment, with the goal of becoming the number one bank in Vietnam, one of the 100 largest banks in the region, one of the 300 largest financial banking groups in the world and is governed by the best international practices by 2020 As a result, the bank's business results are constantly growing with many positive results This is a premise for the bank to effectively implement social security policies that contribute to the country's economic development

2.1.4 Card service business results

Card issuance and payment activities at Vietcombank is a professional activity

of the entire bank Profits from card services at the bank have not been accurately calculated because some business service expenses have not been separately accounted and are still in the cost of international payment activities Therefore, at present, it is only possible to accurately assess the results of card business through the revenue from payment and issuance of banks

During card payment activities: Revenue from Vietcombank card payment is

mainly from payment of fees from merchants and ATMs Specifical calculation for the transaction of goods and services is as follows:

*

Payment discount level (minimum 2.5%)

+

Revenues from transactions

at ATMs

+

Revenues are allocated by international card organizations and card associations

to payment banks

Revenue distributed by international card organization and card associations to Vietcombank as a paying bank is the revenues for repayment, reimbursement and cash withdrawal and cash advance transactions at counters issued by other bank cards to spend at Vietcombank

During card issuing operation: Vietcombank's revenue from card issuance is

derived from revenue from fees (issuance fee, annual fee, deferred payment fee, fee for changing limit, card re-issuance fee, etc.), card credit interest collection and exchange fee paid by the international card organization to the issuing bank

on

+

credit card interest collection

+

Revenues from international card organization and card associations allocated to issuing bank (average of 1.75%)

Revenues collected by the international card association and card associations for Vietcombank are revenues for spending transactions spent by cardholders outside the system The average is 1.75% of the amount used outside the system Credit card interest income of Vietcombank is calculated on the cardholder's unpaid spending when it is due

In the period of 2016-2018, the revenue from Vietcombank card services by each card type is as follows:

Table 2.2: Sales of card services by types of card

Unit: Billion dongs

2017 This result was thanks to Vietcombank always takes the lead in diversifying and developing card services associated with the security and privacy criteria to bring more payment options and experiences to customers Currently, Vietcombank is offering customers 7 types of cards including Visa, Master, Connect 24, JCB, UnionPay; Amex; Diner All cards are designed to provide maximum financial support for organizations, businesses and individuals With these card products, cardholders can

simplify the payment process and manage arising costs, improve spending control efficiency

Thus, thanks to the utilities provided by the card service along with the safety and security level of the card service, Vietcombank's card revenue is increasing day by day This confirms the bank's right development strategies and orientations to help Vietcombank create a competitive advantage and maintain its market share in the market

The two main business activities of within Vietcombank’s card services include revenue from card issuance (card issuance fee, annual fee, allocation fee of merchants) and revenue from card payment ( payment at merchants; at ATMs; revenue allocation from merchants) Revenue from these activities at Vietcombank during the period of 2016-2018 is as follows:

Table 2.3: Revenue from card services by activities

Unit: Billion dongs

70.77 Revenue from card

37.41 401

53.25

Source: Vietcombank According to the table, revenue from card payment activities accounts for a major proportion of the bank's total card business revenue, accounting for more than 70% The revenue from card issuance at Vietcombank in recent years only accounted for about 26-30% due to fierce competition, so most banks accept the issuance of free cards, or reduce annual fees to attract customers to open cards

In general, in recent years, due to the awareness of the difficulties of the economy, the increasingly fierce competition of the market, Card Center as well as Vietcombank's branches have continuously tried to maintain and develop card business activities As a result, the bank's results of providing card services have

achieved positive results, the increasing service revenue has contributed to improving the overall business performance of the whole system

2.2 Analysis of the actual situation of card issuance and business at Vietcombank

2.2.1 Card issuance activities at Vietcombank

Since the first days of card issuance, Vietcombank has built a smooth issuing process from the central to the branches The central government issues general regulations, limiting the maximum and minimum limits for each card class, fees and charges, and information to be collected fully from customers During the period of 2016-2018, card issuance activities at Vietcombank achieved the following results:

Table 2.4: Card issuance results at Vietcombank

American Express 5,643 5,243 8,943 -400 -7.09 3,700 70.57 Visa Platinum 2,131 1,573 2,355 -558 -26.18 782 49.71

American Express 1,654 1,321 984 -333 -20.13 -337 -25.51 American Express 586 243 458 -343 -58.53 215 88.48

Source: Vietcombank

With domestic debit cards: Connect24 is a domestic debit card issued by

Vietcombank to individual customers to use to withdraw money from personal accounts opened at banks With the international standard ATM transaction system developed on the basis of Vietcombank on-line online payment technology system, Connect24 card is increasingly attracting customers to use With Connect24 card, customers can perform automatic transactions at ATMs nationwide such as cash withdrawal, bank transfer, statement printing, account balance, etc and make payment during purchasing goods and services at Vietcombank's merchants Thanks to the diversity of utilities and the increasing level of population's knowledge and income, the number of Connect24 domestic debit cards isin 2016 and 798,573 cards in 2017, increasing by 18.39% Until 2018, the number of cards issued in the whole system reached 984,563 cards, increasing by 23.29% compared to 2017 Domestic debt cards are mainly issued mainly in big cities like Hanoi, Ho Chi Minh, Hai Phong which have developed economic conditions

With international debit cards: International debit cards being issued at

Vietcombank include: MasterCard; Connect 24 Visa; UnionPay; Cashback Plus, American Express; Visa Platinum Over the years, the number of international debit cards issued at Vietcombank continued to increase, increasing from 166,832 cards in

2016 to 248,463 cards in 2018 This result was achieved by the whole system's efforts

in developing international debit cardholders as well as the effectiveness of its marketing programs However, the most important reason is that in the current period, the international debit card product is increasingly suitable for the Vietnamese market thanks to its simple issuance procedures Without collateral, the cardholders can still use the cards to spend domestically and abroad In addition, out of the total number of international debit cards issued annually, MasterCard and Connect 24 Visa are the two cards with the highest number of annual issues because these are two prestigious card brands which play an important role in supporting, managing customer spending transactions

For credit cards: Since the first day of card issuance, Vietcombank has built a

smooth issuing process from Headquarter to branches The headquarter sets general

rules, limits maximum and minimum credit limits for each card class, fees and charges, and information to be collected from customers Most customers are required

to mortgage or deposit to issue cards Thanks to various features and convenience as well as stable service quality, the number of international credit card products issued

by Vietcombank is increasing day by day, bcoming a leading prestigious card product

in the market and is very popular to the customers with brands of major card organizations in the world including Visa; Master Card; JCB; UnionPay; Amex Platinum; Visa Platinum; Vietnam Airlines; American Express; American Express In

2016, the number of credit cards issued at banks was 42,748 cards, increasing to 67,349 cards in 2018, contributing to improving the efficiency of card service business activities at banks

Thus, in recent years, although the competitive environment for card products has become increasingly fierce Most of the new banks participating in the card market have implemented many preferential policies for customers using cards such as fee waivers, discounts, and activation fees for customers when issuing cards, etc However, with great efforts of all card officers from the Central to branches at Vietcombank, the number of card issued by the bank has increased over the years Because from the time of making the plan for card issuance targets, Vietcombank's Board of Directors did not focus on promoting cardholder development but determined that the development of card products of the bank would be towards improving the quality of the card services, increasing utilities for customers, thereby increasing card usage sales, contributing to improving the number of cards issued annually

2.2.2 Card payment activities at Vietcombank

Card payment activity has always been Vietcombank's strength since the card service was started in Vietnam and this is also an activity that always plays an important role in Vietcombank's card business development plans in recent the years

In the 2016-2018 period, revenue from card payment activities at Vietcombank is as follows: