Tài liệu Improving payment card service on point of sale (pos) in bank for investment and development of viet nam

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1 ACKNOWLEGEMENT First of all, I would like to thank all of the professors from National Economics University (NEU). Thanks to Program Directors, Coordinators of the program and Teachers who did try their best to provide us valuable knowledge during the MBA course. Through all subjects in this course, I gained and widened a lot of knowledge in general, market economy and business management in particularly. They are very useful for my current work and my future career, especially about economic foundation. I also would like to express special thanks to my thesis supervisors, Associate Professor, Dr. Tran Tho Dat, who provided me with valuable advises, guidance during the time I have done the thesis. I am grateful to my colleges, supervisors and managers of Bank for Investment and Development of Viet Nam for their valuable supports and providing me data during the preparation of this Thesis. Thanks to all people whom kind enough to grant me an interview or enthusiastically provide me their feedbacks in my surveys. 2 TABLE OF CONTENTS ACKNOWLEGEMENT ........................................................................................... TABLE OF CONTENTS ....................................................................................... ABBREVIATIONS ................................................................................................ LIST OF TABLES .................................................................................................. LIST OF FIGURES ................................................................................................ EXECUTIVE SUMMARY .................................................................................... CHAPTER 1: INTRODUCTION ........................................................................ 1.1. Rationale ......................................................................................................... 1.2. Research objectives ........................................................................................ 1.3. Research questions ......................................................................................... 1.4. Research methodology ................................................................................... 1.4.1. Research process ........................................................................................... 1.4.2. Data collection method ................................................................................. 1.4.3. Analyzing data .............................................................................................. 1.5. Research scope ............................................................................................... 1.6. Research structure ......................................................................................... CHAPTER 2: THEORETICAL BACKGROUND ON CARD AND PAYMENT CARD ON POS ................................................................................ 2.1. History and development of ATM card and payment card on POS .......... 2.1.1. History and development of debit card ......................................................... 2.1.2. History and development of credit card ........................................................ 2.1.3 History and development of ATM and POS systems ..................................... 2.2. Definition, classification, feature and transaction processing .................... 2.2.1. Definitions .................................................................................................... 2.2.2. Classification type of transactions on POS ................................................... 2.2.3. Feature and transaction processing ............................................................... 2.3. Member taking part in payment card on POS ............................................ 2.4. Payment card on POS general framework .................................................. 2.5. Role and benefit of cards and payment card on POS ................................. 2.5.1. Benefit of card and payment card to the economy ........................................ 3 2.5.2. Benefit of cards and payment card on POS to customers .............................. 2.5.3. Benefit of cards and payment card on POS to merchants ............................. 2.6. Factors affecting to payment card service on POS ...................................... 2.6.1. Habit of using cash in the economy .............................................................. 2.6.2. The guidelines and policies government for payment card service on POS ......... 2.6.3. The development of science technology ....................................................... 2.6.4. The infrastructures for using payment card ................................................... 2.7. Rules for a good payment card service on POS ........................................... 2.7.1. Security service ............................................................................................. 2.7.2. Convenient service ........................................................................................ 2.7.3. Speed processing: ......................................................................................... 2.8. Activities of Payment card service on POS .................................................. CHAPTER 3: CURRENT SITUATION OF PAYMENT CARD SERVICE ON POS IN BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM ............................................................................................................. 3.1. Introduction of BIDV .................................................................................... 3.1.1. General information of BIDV ....................................................................... 3.1.2. Fields of operation ........................................................................................ 3.1.3. Human Resources and Network: ................................................................... 3.1.4. Customers: .................................................................................................... 3.1.5. Technology: .................................................................................................. 3.1.6. Commitment: ................................................................................................ 3.1.7. Business reputation of BIDV: ....................................................................... 3.2. Overview of card service in BIDV ................................................................ 3.3. Current situation of payment card service on POS in BIDV ..................... 3.3.1. Type of card accepted at BIDV POS ............................................................ 3.3.2. Function ........................................................................................................ 3.3.3. Type of fee and ratio fee ............................................................................... 3.3.4. Criterion to become BIDV merchant ............................................................ 3.3.5. Process to establish a merchant ..................................................................... 3.3.6. Process of payment card ............................................................................... 4 3.4. Evaluation of current BIDV POS services ................................................... 3.4.1. Evaluation of transactions on BIDV POS ..................................................... 3.4.2. Evaluation of BIDV POS terminal ................................................................ 3.4.3. Evaluation of BIDV merchants ..................................................................... 3.4.4. Evaluation of solving problem ...................................................................... 3.4.5. Evaluation of customer’s satisfactions .......................................................... 3.4.6. Evaluation of revenue and fee on POS .......................................................... 3.4.7. Evaluation percentage of mean of payments ................................................. 3.4.8. Number of Merchants ................................................................................... 3.5. Gap between current POS services and required services. ........................ 3.5.1. Transaction.................................................................................................... 3.5.2. Terminal........................................................................................................ 3.5.3. Merchant........................................................................................................ 3.5.4. Solving problem............................................................................................ 3.5.5. Customer’s satisfaction.................................................................................. 3.6. Limitations and reasons ................................................................................ 3.6.1. Limitation ..................................................................................................... 3.6.2. Reasons ......................................................................................................... 3.6.2.1. Objective Reasons ..................................................................................... 3.6.2.2. Subjective Reasons .................................................................................... CHAPTER 4: SOLUTIONS TO IMPROVE PAYMENT CARD SERVICE ON POS IN BIDV ................................................................................................. 4.1. Solutions for marketing of card and payment card .................................... 4.1.1. Promoting advertisement of card and payment card ..................................... 4.1.2. Identifying market segment and targets ........................................................ 4.1.3. Build brand name of BIDV ........................................................................... 4.2. Solution for expanding and developing merchant network ........................ 4.2.1. Make merchants aware of benefit and utility of payment card ..................... 4.2.2. Having a suitable promotion and customer care program ............................. 4.3. Increasing investment for technical equipment and system for payment ........ 4.3.1. Investing and developing technology on POS services ................................. 5 4.3.2. Updating system in accordance with international card organization’ rule ................................................................................................................................. 4.4. Pay attention to develop human resource .................................................... 4.4.1. Reorganize Card department at branch more suitable ................................... 4.4.2. Developing human resources for card services ............................................. 4.5. Enhance utility of card and POS services .................................................... 4.5.1. Enhance research activities and develop card product .................................. 4.5.2. Connect between other banks and financial organization ............................. 4.6. Solutions for preventing and manager risk on payment card .................... 4.6.1. Enhance risk management activities and prevent risk ................................... 4.6.2 Make a choice reputable merchant ................................................................. 4.6.3. Limit the risk of payment card service on POS ............................................. CONCLUSION ..................................................................................................... LIST OF REFERENCES ..................................................................................... APPENDICES………………………………………………………………......... 6 ABBREVIATIONS ATM: Automatic Teller Machine BIDV: Bank for Investment and Development of Vietnam EDC: Electronic data capture HR: Human resource MOTO: Mail order/ Telephone Order POS: Point of Sale PIN: Personal identification number VCB: Joint stock commercial bank for foreign trade of Viet Nam 7 LIST OF TABLES Table 1.1: Data collection method...........................................................................14 Table 3.1: Number of POS in the Market in Viet Nam............................................34 Table 3.2: Requirement of minimum revenue. 38Table 3.3: Message code from POS terminal...................................................................................................................43 Table 3.4: Profile of respondent..............................................................................44 Table 3.5: Evaluation of transactions on BIDV POS...............................................45 Table 3.6: Evaluation of BIDV POS Terminal........................................................47 Table 3.7: Evaluation of BIDV Merchants.............................................................49 Table 3.8: Evaluation of solving problem...............................................................50 Table 3.9: Evaluation Customer’s satisfactions.......................................................52 Table 3.10: Revenues and fee divide by transaction types.......................................53 Table 3.11: Revenues divide by card type...............................................................54 Table 3.12: Percentage of mean of payments..........................................................54 Table 3.13: Gap between current services and requires...........................................57 8 LIST OF FIGURES Chart 1: The process of study of thesis...................................................................13 Chart 2: Members taking part in payment card on pos............................................21 Chart 3: Payment card general framework..............................................................22 Finger 3.1: Evaluation of transactions on BIDV POS.............................................45 Finger 3.2: Errors code reply from system..............................................................46 Finger 3.3: Number of POS terminal of some banks...............................................47 Finger 3.4: Evaluation of BIDV POS Terminal.......................................................48 Finger 3.5: Numbers of merchants divide by Business fields..................................48 Finger 3.6: Evaluation of BIDV Merchants.............................................................50 Finger 3.7: Evaluation of solving problem..............................................................51 Finger 3.8: Evaluation of customer’s satisfy...........................................................52 Finger 3.9: Revenues and fee divide by transaction types.......................................53 Finger 3.10: Revenues divide by card type..............................................................54 Finger 3.11: Percentage of mean of payment..........................................................55 Finger 3.12: Number of Merchants..........................................................................55 Finger 3.13: Gap between services and requires......................................................58 9 EXECUTIVE SUMMARY The payment goods and services by card on POS is a convenient and advance mean of payment and bring banks a lot of benefit from this service as well. Understanding the advantage of the mean of payment, BIDV has invested and developed this service since 2007. However, with the limited technology system and lack of experiences, the development of this service in BIDV is much less than other banks. More and more banks have concentrated on developing card services including POS services and merchant network. On the other hand, retail banking service including card services play an important role in banking activities. It is one of a channel bring a lot of benefit to the banks and make a close image of the bank with customers. For purpose of having a greater understanding of this issue, the thesis is designed to answer following questions: Firstly, what are expectations of merchants and customers of using card and card services? Secondly, what is current situation of payment card service on POS in BIDV? Thirdly, is there any gap between the current situation of payment card service on POS and the expectations of merchants and customers? Fourthly, which solutions considered consistent to expand merchant network in BIDV basing on the current conditions of the bank? Finally, which solutions should be taken to improve payment card service on POS in BIDV? Base on literature foundation of card, payment card on POS, model of payment card, the author would like to have a deeply understanding about this services, analysis and synthesis primary data and secondary data to give out result, limitation since then find out reasons. Primary data collected by in depth interviews and questionnaire survey. Secondary data collected mostly from the bank policies, regulations and reports. I made surveys with 50 customers who have either BIDV card or the card of other banks and have ever made payment on BIDV POS to get their expectations when they make payment by card on POS and get their point of views about BIDV POS service. I also made surveys with 30 BIDV merchants (include both managers and cashiers) to get their expectations when they use BIDV POS services and get 10 their feedbacks of quality of BIDV POS services. The content of survey include both questionnaire and evaluate by rate from 1 to 5 in which 1 is lowest and 5 are highest. I analyzed data by excel application software. Moreover, I in dept interviewed with 5 business customers and 5 managers at merchants to understand deeply about their needs. The survey revealed some key finding as following: BIDV payment card service on POS is not good enough in comparison with customer’s expectation. Ratio of error transactions are still high and processing time is still slow. BIDV POS terminal accepts not many types of cards. It is one of a barrier to approach potential merchants. Merchant networks have not been covered in the country yet. They are located almost in big cities. There are few merchants which are located in rural areas. Procedures to establish a merchant is still slow and complicated. BIDV has concentrated on customer care programs. However, it has not got a big result as expectations. Some merchant still surcharge cardholder when they make payment by card. Majority of customers prefer paying cash to card because of their habits. Most of people often uses mean of payment by card are businesses or the people who have a high income or go abroad frequently. They find the convenience of the mean of payment Both cardholders and merchants would like to accept any types of card of different banks at POS terminal. Transactions are processed speed and exact. 11 CHAPTER 1 INTRODUCTION 1.1. Rationale Payment card on POS is very popular in many countries in the world. Buying goods and services by card on POS has many advantages and brings customers convenience and safety. However, it has not been a habit of Vietnamese people, yet. One of reason why is that majority of Vietnamese often buy goods and services by cash. Minority of Vietnamese use card as a means of payment (only the people who have high income, often travel abroad or young generation)... Moreover, the infrastructure to support the payment cards on POS is still limited by the technologies, quantities of merchants, etc… However, Viet Nam is a developing country but we have joined the world trade organization and gradually integrated and caught up with other countries. So, the payment card on POS might change and become more popular and necessary to Vietnamese people if it has more support from the government, other financial organizations, banks and means of media, etc. In some recent years, several banks in Vietnam have concentrated on developing card services and payment cards on POS. Bank for Investment and Development of Viet Nam (BIDV) is one of the banks which pay attention to developing card services and payment card service on POS. However, its quantities and qualities of payment card service on POS in comparison with other banks are less advanced. Types of card excepted at merchants are limited. Ratios of fail transactions and fraud transactions are still high. Some commercial banks invest in card services later than BIDV. However, they have invested better modern technologies and taken experiences from previous banks. Therefore, they have provided better card services, even better than BIDV or VCB which is considered to be the leading banks in Viet Nam. Thus, developing and improving the payment card service on POS to catch up with the development of the world, to meet the needs of markets and customers are an important tasks for Vietnamese banks in general and BIDV in particular. I, myself, have worked in BIDV Card center for over 2 years. With the hope of performing a research relating to the payment card 12 service on POS in BIDV, I decide to follow this research topic “Improving payment card service on Point of Sale (POS) in Bank for Investment and Development of Viet Nam”. 1.2. Research objectives In order to solve the research problem above, the thesis focused on clarifying the objectives as below:  Exploring expectation of merchants and customers of using card and card services.  Analyzing current payment card services on POS in BIDV.  Giving out solutions and suggestions to improve payment card service on POS in BIDV. 1.3. Research questions Related to this thesis, I will concentrate on answering some following questions:  What are expectations of merchants and customers of using card and card services?  What is current situation of payment card service on POS in BIDV?  Is there any gap between the current situation of payment card service on POS and the expectations of merchants and customers?  Which solutions are considered consistent to expand merchant network in BIDV basing on the current conditions of the bank?  Which solutions should be taken to improve payment card service on POS in BIDV? 1.4. Research methodology 1.4.1. Research process The process of study of this thesis could be summed up in following chart: 13 CHART 1: THE PROCESS OF STUDY OF THESIS Objectives of payment card service on POS Expectations of merchants and customers for payment card Payment card service on POS analysis Solutions GAPS Interview with customers, manager, cashiers at merchant Questionnaires Current situation Of Payment card service on POS in BIDV Source: Author’s idea 1.4.2. Data collection method Secondary data: Secondary data collected via internal source of BIDV. They were collected mainly base on BIDV’s report, regulations and official documents of BIDV, internet and newspapers within 4 years from 2007 to 2010 and used as the data for a desk research. Secondary data is use to analyze the current situation of payment card service on POS in BIDV Primary data: Qualitative and quantitative methods were collected to get the information. Qualitative data is collected through in-depth interview with very important person (VIP) and managers. This data helps researcher to understand clearly about their needs and expectations when they make payment by card. 14 Moreover, the researcher would like to know about their point of view when they use BIDV payment card service, find out their expectations. While quantitative data is collected through customer survey through Email, telephone and meet in person. I brief the method as follows: Table 1.1: Data collection method Data collecting method Respondent/ interviewer Number of persons Business customers 5 Manager at BIDV merchant 5 In-depth interview Customers who have ever made payment on BIDV POS Survey Managers of merchant, Cashier at merchant who swipe card in person 50 15 15 Aim  To understand clearly about the needs and expectations when they make payment by card.  Exploring their view when they use BIDV payment card service, find out their expectations.  Finding out their expectation and trouble of customers, when they make payment by card. According to their point of view, finding out weakness, strong, advantages, disadvantages of BIDV payment card services Source: Author’s idea 1.4.3. Analyzing data Basing on data collected to analyze current situation about payment card service on POS in BIDV. Moreover, according to information from interview, survey to find out expectation of customers and merchants in order orient and suggest some solutions to develop payment card service on POS. 15 1.5. Research scope With the aim to limit research scope, thesis is concentrated on analyzing and evaluating in following scope:  Payment card service on POS objective: widen merchant network, meet the need of customers, merchant and make them satisfy with payment card and improve this service.  Scope of the research: Payment card service on point of sale (POS) at BIDV merchant which is located in the north of Viet Nam.  Time period is chosen from 2007 – 2010 1.6. Research structure Chapter one: Introduction Chapter two: Theoretical background on card and payment card on POS Chapter three: Current situation of payment card service on POS in BIDV Chapter four: Solutions to improve payment card service on POS in BIDV 16 CHAPTER 2 THEORETICAL BACKGROUND ON CARD AND PAYMENT CARD ON POS In this chapter, the author presents key concepts and relevant theory regarding card and payment card on POS. All theories are quoted from MasterCard international organization and Visa international organization. 2.1. History and development of ATM card and payment card on POS 2.1.1. History and development of debit card Debit cards are a new method to transact cash between a buyer and a seller of goods or services. They replace the interest-bearing debt created by using credit cards and restrict the user to the actual amount of money contained in his account. When the card is used like an ATM card, or for online purchases, some banks and credit unions charge fees. The First National Bank of Seattle issued the first debit card to business executives with large savings accounts in 1978. These cards acted like a check signature or a guarantee card, where the bank promised the funds would cover the transaction without the customer needing a check to complete the transaction. The bank only issued debit cards to those customers who had a long history with the bank and were in good standing, because like a check, the funds were not immediately removed from the account. In 1984, Landmark implemented the first nationwide debiting system, built on the credit card infrastructure and ATM networks already in place. By 1998, debit cards outnumbered check usage around the world. Its preference over checks continues to grow every year. 2.1.2. History and development of credit card The credit card boom began in earnest in the 1960s, when bank-issued cards from MasterCard and Visa became popular. By harnessing the electronic transaction ability of large banks, MasterCard and Visa eclipsed the previously dominate Diners Club, a company which processed transactions independently. More access 17 to processing systems mean that consumers could use cards at more retailers and restaurants; the more establishments that accepted credit cards, the more popular they became. In the 1980s, American Express, which was originally marketed to businesspeople, and Discover became market forces. Consumers could now choose between bank- and store-issued cards, as well as independent credit card companies like American Express and Discover. China, India and South Korea provide the biggest opportunities for credit card growth. As emerging economies, the capitalist public policies of these countries and increased tourism mean credit card companies are gaining customers overseas. Although growth is predicted to be somewhat slower in Latin America and Eastern Europe, credit cards continue to penetrate these regions as well. Simply, the more formerly socialist and communist countries turn to capitalist-based economic systems, the more opportunity for credit card industry growth worldwide. In a 2008 U.S. Department of Commerce Report, Scott Schmith wrote that growth in exports and the larger economy equates with growth for the credit card and electronic payment industry. Therefore, as the global recession subsides, credit card industry growth is expected. Yet the timing of that growth is debated. The banking consultancy Tower Group predicts that moderate growth in the credit card industry will not begin until 2011. This is due to the potential for stricter government regulation of credit cards, as well as trends toward debit card spending and high credit delinquency rates, Tower Group says. 2.1.3 History and development of ATM and POS systems Barclays Bank in the United Kingdom developed and installed the first automatic teller machine (ATM) in 1967. However, it did not resemble the one as today. Customers weren’t given a plastic card instead they received paper vouchers that had a value of 10. The customer would insert the voucher into the machine in exchange for a 10 pound note. 18 In 1969, Chemical Bank of New York installed the first modern ATM at its Rockville Center office in Long Island. Although the first ATM card – accepting ATM came about in 1969, the first ATM card didn’t come about until 1972. In the year between 1969 through 1972, customer had to have credit card to utilize an ATM. City National Bank of Cleveland issued the first ATM cards that allowed customer to debit money directly from customer’s bank account. Customer could only withdraw money from ATMs with these cards. Customer could not use them to make purchases. The term “ATM card” and “debit card” are largely interchangeable. The reason customer could not make a purchase with their City National Bank debit card wasn’t that the card wouldn’t allow it. The point of sale (POS), technology and infrastructure had yet to be developed. In 1976, grocery chains in Massachusetts, Angelo’s and Starmarket, installed the first known POS system. Large chain gas station began testing POS systems in the early 1980s. 2.2. Definition, classification, feature and transaction processing 2.2.1. Definitions Service means a type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two key components of economics, the other being goods. Examples of services include the transfer of goods, such as the postal service delivering mail, and the use of expertise or experience, such as a person visiting a doctor. POS/EDC (Point of Sale/Electronic Data Capture) means the card acceptance device provided to the Merchant by acquirer bank to perform transactions. Payment by card on POS is a service which is provided by merchant and banks for cardholder. It allows cardholders to make payment of goods and services through POS terminal at merchants. Card means a mean of payment issued by the Issuing Bank to the Cardholder. Credit cards are plastic cards that allow users to get a cash advance or buy items on credit. Credit is borrowed money that must be paid back within a certain time 19 frame. Credit users are typically charged interest on the borrowed money if the money is not paid back in full within that time. Debit card is a plastic card, often issued by a bank that can be used to purchase items; the money is deducted instantly from the balance of the account connected to the card. Using a debit card is similar to spending cash. Authorization Response Code means the code provided by the Issuing Bank to indicate its approval of the transaction and is printed or written on the transaction receipt. Transaction means POS/EDC transaction to pay for goods/services or to withdraw cash. Card-not-present Transaction means a transaction made without the Cardholder and the Card being present. Card Present Transaction means a Transaction in which the Cardholder and the Card are both physically present. Transaction receipt means the document evidencing card transactions by the cardholder; PIN (personal identification number) issued to the cardholder and issued to withdraw cash or obtain the other services at ATM (automatic teller machine) 2.2.2. Classification type of transactions on POS Sale transaction is performed when cardholders have demand to make payment by card. Cash transaction is performed when cardholder would like to take cash at merchants. Balance Transfer transaction allows cardholder transfers money in their account to other account on POS. Balance Inquiry transaction is performed when cardholders would like to know their balance in their account. Void transaction is performed when cardholders would like to cancel their previous transaction. Condition to be performed is that the transactions have not been settled. Adjust transaction is performed when cardholders would like to increase or decrease amount of transactions. Refund transaction is performed when cardholders or merchants would like to cancel transactions without voiding transactions. 20 Card verify transaction and Offline transaction are performed to be booked goods and services in advance. Normally, it is useful for hotel services. Change pin transaction - cardholders would like to change pin Settle transaction is performed to load all transactions that were performed before. The purpose is to be paid for merchant by acquirers. 2.2.3. Feature and transaction processing POS machines feature a thin slot through which customers slide the magnetic strip of their debit or credit cards. Magnetic strips contain account information which the machine reads and transmits through a telephone connection to the financial institution that issued the card. Retailers type the amount of the transaction into the machine and the customer's bank approves or denies the transaction. Most POS machines have keypads on which cardholders enter their personal identification numbers (PIN). POS terminals also print transaction receipts that require customer signatures when PINs are not used. Here under is transaction processing in details: (1) Cardholder requests to make payment by card (2) Cashier checks information on card and swipe or insert card through POS terminal, key in the amount the transaction is for. (3) The terminal then sends detail transaction to acquirer which checks card to request authorization and processing. (4) Message is continue sent to Card organization for checking. In this case, issuer and acquirer are the same. Message will be sent back to merchant. Transaction is approved or declined. (5) If issuer and acquirer are different, message is sent to issuer for checking card (card limit, card status, balance…) and request authorization. (6) Message is sent back to Card organization for processing (7) Message is sent back to acquirer for processing (8) Message will be sent back to merchant. Transaction is approved or declined. 2.3. Member taking part in payment card on POS There are following some parties who take part in a transaction on POS.
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