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VIETNAM NATIONAL UNIVERSITY, HANOI VNU INTERNATIONAL SCHOOL Nguyen Duy Quang RISK MANAGEMENT OF CARD SYSTEM OPERATION IN CARD CENTER MILITARY COMMERCIAL JOINT STOCK BANK MBBANK Major Financial Managam[.]
VIETNAM NATIONAL UNIVERSITY, HANOI VNU INTERNATIONAL SCHOOL Nguyen Duy Quang RISK MANAGEMENT OF CARD SYSTEM OPERATION IN CARD CENTER- MILITARY COMMERCIAL JOINT STOCK BANK -MBBANK Major: Financial Managament Code: 8340202.01QTD MASTER IN FINANCIAL MANAGAMENT HANOI, 2021 ABSTRACT In the context of deeper and deeper integration into the global economy, in order to successfully achieve the goal of maintaining business operations in the direction of stability, sustainability and competitiveness in the market, most banks must pay attention to the risk management activities of the bank Bank cards bring many benefits such as reducing the habit of using cash, shortening payment transaction time, minimizing management costs and other inconveniences brought by the cash economy Along with the benefits that a bank card brings, it is impossible not to mention the potential risks associated with this type of service The more the card service develops, the more modern the technology applied to the card, the higher the security and convenience of the card, is also the continuous development of card criminals, especially criminals international card, has created fake cards with new tricks that are extremely sophisticated and difficult to recognize Card risks can cause huge losses to the bank, affecting business performance Therefore, it is required that banks pay due attention to their card risk management activities This study focuses on a specific case study of MB's card business and risk management The research results show that the card risk management activities of MB bank have achieved good results in the period of 2018 - 2020 such as the low ratio of overdue debt/total credit card outstanding balance, the number of card issuance, However, card risk management activities still have some limitations Therefore, after carefully reviewing card risk management activities of MBBANK, the author proposes some solutions to improve the effectiveness of this activity with stakeholders ACKNOWLEDGEMENT I would like to thank the Board of Directors, the training department of the International Faculty, Hanoi National University for creating all conditions for me in the process of studying and completing this thesis I would like to express my gratitude to the teachers and ladies who have dedicatedly taught MFM1 master class I would like to express my deep gratitude to my teacher, Dr Tran Tat Thanh who wholeheartedly helped and guided me during the process of writing this thesis I would like to thank all my friends, colleagues and family who have always supported, encouraged and created the best conditions for me to complete this thesis Thank you! Author TABLE OF CONTENTS ABSTRACT TABLE OF CONTENTS INTRODUCTION Research motivation Statement of the problem Research objective and tasks Subjects and scope of the study Research questions Research method 10 6.1 Methodology 10 6.2 Methods of data collection and processing 10 Structure of the study 11 CHAPTER I: THEORETICAL BASIS ON CARD OPERATION AND CARD OPERATION RISK MANAGEMENT ACTIVITIES 12 1.1 Overview of card operation activities of commercial banks 12 1.1.1 The formation and development of the payment card 12 1.1.2 Concept, structural features and classification of bank cards 13 1.1.3 The role of card services in the economy 18 1.1.4 Participants in the process of card issuance and payment 19 1.1.5 Contents of card operation activities 22 1.1.6 Card management system 24 1.2 Risk in card operation 25 1.2.1 Risks in card operation 25 1.2.2 Risk management in card operation 27 1.3 Risk measurement in card operation 29 1.3.1 Risk of fraud 29 1.3.3 Card credit risk 30 1.3.3 Risk of card management system 30 CHAPTER II: REALITY OF RISK MANAGEMENT IN CARD OPERATION ACTIVITIES AT MILITARY COMMERCIAL JOINT 32 STOCK BANK 32 2.1 Overview of MB Bank and structure of MB card system operation 32 2.1.1 Overview of Military Commercial Joint Stock Bank 32 2.1.2 Organizational structure of card divisions at MB Bank 39 2.1.3 Results of MB's card operation in the period 2017 - 2020 43 2.2 Risk situation and risk management for card operation at MB 50 2.2.1 Card risk situation at MB 50 2.2.2 Situation of risk management in card operation at MB 53 2.2.3 Assessing the current status of card risk management at MB 56 CHAPTER III: SOLUTIONS TO COMPLETE RISK MANAGEMENT IN CARD OPERATION AT MB BANK 60 3.1 Orientation and development goals of card services at MB Bank 60 3.1.1 Forecasting the risks of the card market in the coming time 60 3.1.2 Orientation and development goals of MB card services 62 3.2 Solutions to improve risk management in card operation at MB 64 3.2.1 Solutions within the bank 64 3.2.2 Customer-related solution group 67 3.3 Recommendations to relevant authority 68 3.3.1 Proposal to the State 68 3.3.2 Recommendations to the State Bank of Vietnam 68 3.3.3 Recommendations to Vietnam Bank Card Association 71 CONCLUSION 72 REFERENCES 74 LIST OF TABLE AND FIGURES Table 1: Major shareholders of MBbank at 31/12/2020 33 Table 2: Income statement of MBbank in period 2017 - 2020 35 Table 3: Balance sheet of MBbank in period 2017 - 2020 37 Table 4: Growth rate in card issuance of MB in period 2017 - 2020 44 Table 5: MB’s number of card issuance as of 31/12/2020 45 Table 6: Payment activities of MB’s Card .48 Table 7: Operation status of ATM system at MB in period 2018 - 2020 49 Table 8: Fraudulent card situation issued by MB Bank 50 Table 9: Risk ratio of several banks in Viet Nam 51 Table 10: Ratio of card overdue loan of MB in period 2018 - 2020 52 Figure 1: Growth in bank payment instruments Figure 2: Physical features of a credit card 15 Figure 3: Structure of a bank card 16 Figure 4: Types of MB bank cards 17 Figure 5: Organizational structure of MBBank 34 Figure 6: Member companies of MBBANK .35 Figure 7: Percentage of MB’ Card .46 INTRODUCTION Research motivation Banking is one of the important parts of the economy, especially in the context of international economic integration and the development of science and technology 4.0 Together with other sectors of the economy, the bank is responsible for participating in stabilizing the money market, controlling and repelling inflation, helping to develop production, creating jobs for workers, helping people employment development help investors, develop capital market, foreign exchange market, participate in payment and support payment Bank card is a modern means of payment widely used in daily transactions Its ubiquitous presence in advanced economies has proven it to be the mainstream cashless means of transaction Credit card officially appeared in Vietnam in 2002 and is still quite young compared to the history of card payment and development in the world We not have much experience in card business development, especially in dealing with risks in the field of card business and card services The issue of limiting risks in card payments becomes even more important as we participate more and more strongly in the world economy with more open reforms Currently, card business is recognized by joint stock commercial banks as a very important advantage in the race for technological advancement, contributing to bringing a new position and new look to commercial banks share Along with the development of card services, in the past few years, card fraud in Vietnam has tended to increase at an alarming rate Card criminals have begun to organize, collude with outsiders to carry out fraudulent acts to earn profits with increasingly sophisticated tricks, difficult to control This has pushed Vietnamese banks in general and military joint stock commercial banks in particular to face more risks in the entire card business process Forgery in card issuance and payment not only causes financial loss but also directly affects the reputation and efficiency of the bank's card business Therefore, the research to find synchronous, effective and feasible solutions to prevent and limit risks in card business has become a hot issue in both theory and practice In parallel with the development of the credit card service business along with the development of the economy, the issue of risk management in the card service business becomes more urgent than ever for business credit cards in commercial banks of Vietnam In recent times, there have been a number of articles, studies, research topics on the card market in Vietnam, of which are typically by the authors Nguyen Vu Cuong (2019) "Card activities and some solutions to promote card payment at Joint Stock Commercial Bank for Foreign Trade of Vietnam", Master thesis in economics; Huynh Thi Minh Duyen (2018) “Developing card payment services at Agribank”, Master thesis in economics; … Previously researched topics mainly researched on the payment card market, on international business operations of Vietnamese commercial banks or on solutions to develop card payment forms… As the names of these banks suggest The above-mentioned dissertations and dissertations have shown that these studies have not fully analyzed and generalized about the risks arising in the process of using the card as well as the management of these risks to increase the risk of loss further strengthen the efficiency of card business activities at commercial banks Joining the card business since 2004, MB Bank always focuses on product development, research and application of new technologies, improve service quality and card usage convenience for customers Mb's card issuance, payment and usage has always achieved high growth rates However, MB also faces risks in the process of card business, the attack of international card crime organizations when they move to the Vietnamese market, bad debt status, card overdue debt credit causing losses to the bank, affecting the business performance and reputation of the Bank Therefore, MB Bank should pay due attention to risk management activities in its card business To meet the above urgent requirement, the author has chosen the topic: "RISK MANAGEMENT OF CARD SYSTEM OPERATION IN CARD CENTER- MILITARY COMMERCIAL JOINT STOCK BANK " Statement of the problem In Vietnam, cash transactions still account for the majority of transactions; However, card transactions and the number of newly opened cards are constantly increasing According to the Payment Department - SBV (2021); the total number of domestic cards in circulation as of mid-2021 is 98 million cards while the total number of international cards in circulation is 20 million cards That is, on average, each Vietnamese person owns at least one transaction card at a bank This ratio is still relatively low when Vietnam has many commercial banks operating; Therefore, the potential for growth in the number of cards and the value of card transactions is still enormous Figure 1: Growth in bank payment instruments (Source: SBV) The rapid development of infrastructure and technology has promoted ebanking services to become more complete The main problem in card system operation is card system risk management and developing useful innovation policies to improve the efficiency of the bank card system The card system brings great benefits to both banks and consumers; However, this activity also contains risks and financial institutions need to balance risks and benefits Therefore, this study was developed and evaluated the effectiveness of the MB Card Center in the process of managing, monitoring, evaluating and controlling the risks related to the card system Research objective and tasks Research objective The results of this study aim to evaluate and develop the card system risk management process of MB Card Center Then, based on the analysis results, some recommendations will be made to help Military Bank and MB Card Center improve the effectiveness of card system risk management; thereby can attract and improve the efficiency of use and reputation for customers in the future Tasks First, Systematize the theoretical basis of risk and risk management for card operations at commercial banks; Second, Clarifying the current status of card operations at Military Commercial Joint Stock Bank in the period 2017-2020, finding out the achieved results, limitations and causes of those limitations; Third, Proposing some solutions to improve risk management for card activities at Military Commercial Joint Stock Bank Subjects and scope of the study 4.1 Research subjects Card risk management activities at Military Commercial Joint Stock Bank 4.2 Research scope Content: Research on card risk management activities Scope of space: Military Joint Stock Commercial Bank Time range: period 2017-2020 Research questions The main issues studied in this study are presented in an overview through research questions Research questions are formulated and developed according to a ... 1.2.2 Risk management in card operation 27 1.3 Risk measurement in card operation 29 1.3.1 Risk of fraud 29 1.3.3 Card credit risk 30 1.3.3 Risk of card management system 30 CHAPTER II: REALITY OF. .. OF RISK MANAGEMENT IN CARD OPERATION ACTIVITIES AT MILITARY COMMERCIAL JOINT 32 STOCK BANK 32 2.1 Overview of MB Bank and structure of MB card system operation 32 2.1.1 Overview of Military Commercial. .. Participants in the process of card issuance and payment 19 1.1.5 Contents of card operation activities 22 1.1.6 Card management system 24 1.2 Risk in card operation 25 1.2.1 Risks in card operation