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

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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 i 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 ii 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 iii 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 iv 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 v 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. 1 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 3. Research questions - What is the content of card issuance and business services at commercial banks? - What is the actual status of card issuance and business activities at Vietcombank? - What are the measures for Vietcombank to enhance issuing activities and increase revenue from card services? 4. Objects and scope of the research - Objects of the research: Card issuance and business activities at commercial banks 2 - 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 3 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 cardissuing 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. 4 - 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. 5 * 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 valueadded 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 6 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 7 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. 8 * 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: Card holder (1) (2) Bank account (3) (4) Issuing bank 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, 9 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. 10 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: 11 MERCHANTS 1- good and service purchase or cash advances CARD HOLDER 4 data sending INTERNATIONAL ISSUING CARD BANK 7-debit 3-advamce payment 2-payment invoice 8-Statement 9-Payment 6-data sending PAYMENT BANK ORGANIZATION 5- credit 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. 12
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