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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.
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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 ........................................
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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 ...............................................................................
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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 .................................
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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……………………………………………………………….........
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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
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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
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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
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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
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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.
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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
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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:
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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.
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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.
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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
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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
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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.
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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
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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.
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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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