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.
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- 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.
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