LUẬN văn THẠC sĩ some solution to develop the card payment activity in viet nam joint stock comercial bank for industry and trade vietinbank for the period of 2012 2017

THE BASIC ISSUES ON THE CARD PAYMENT ACTIVITY

OVERVIEW OF THE BANK CARD AND REAL SITUATION OF THE

1.1.1 Definition of the bank card and card payment

The ancestor of the payment card is the purchase card when the shops sale the purchase cards for the customers to buy the goods instead of cash In 1949, Frank Mc Namara, an American businessman, invented the first payment card named “Dinner’s Club” This card was useful to pay the restaurant invoices, the card owners could eat in the restaurant without paying in cash This was the paper card, used in the system of Dinners Club Then in 1958, American Express Organization issued the first charge card, Bank of American also issued the bank card which was called VISA card at the same year In 1966, MasterCard was appeared, it was considered as the competitor of VISA card

Therefore, it can be defined that the card payment is the payment method in which the card owner can use the card to pay for the goods and services purchase money or withdraw automatically cash through the card readers or the automated taller machines, or in other words, the card payment is payment method without using the cash but the card

The material of the first payment card was paper, but its disadvantage was easy to corrupt and tear, so it was gradually replace by the plastic card with the better endurance When the demands of information security and large storage became the considered issue, the card with the magnetic tape and the intelligent card using the EMV standard as a very small computer was appeared and helped to perform the banking operations such as license permission and bank clearing The payment card is developed diversified such as card classification, the payment card linking with many non-financial function cards become the connection cards or co-trademark cards The forms of using card are very flexible, sometimes; the payment does need the direct appearance of the card but can be un-touch payment by the payment machine

1.1.2 Classification of bank card and form of card payment

1.1.2.1 According to the payment characteristic of the card

According to the payment characteristic of the card, there are two main forms:

Credit card and Debit card

Credit card: is the card allowing the card owners to implement payment, withdrawing within the issued credit line according to the agreement with the card issuance bank This is the most popular used bank, the card owners are entitled to use the credit line without being paid the interest to purchase the goods and the services in the business merchants, hotels, airport, etc which accept this card It was called the credit card because the card owners can advance the consumption line without being paid money immediately, only paid after the certain period From this characteristic, the credit card can be called the delayed debit card or deferred debit card

Debit card: is the card allowing the card owners to implement payment, withdrawing within the amount of money in the payment deposit account of the card owners opened in a bank This is the card which has the direct relation and connects with the deposit account When this card is used to buy the goods or the services, the transaction values will be immediately deducted into the owner’s account by the electronic devices located at the shops, the hotels, etc; at the same time, immediately transfer to the account of the shops, the hotels The debit card is also used to withdraw cash in the automated taller machine The debit card does not have the credit line because it is based on the available balance in the account of the card owners

Besides the above two cards, there is Cash card: this is the cash drawing card in the automated taller machine or the bank With the specific function only using for cash drawing, to use this card is that the card owners have to deposit into the bank account or the card owners have to be issued the credit in account

According to the payment scope, the card can be used in Vietnam and can be used worldwide

Domestic card: is the card which is limited in the scope of a nation, so that the exchange currency must be the local currency of this country The home debit card and the home credit card are the domestic cards

International card: is the card which is accepted all over the world, uses the strong foreign exchange for payment The international debit card and the international credit card are the international cards and can be used for payment both in the foreign countries

1.1.2.3 According to issuance entity Bank Card: is the card issued by the bank in order to help the clients use amount of money financed by the Bank This card is mainly used in Vietnam

Non-bank Card: is the tourism and entertainment cards issued by the large business groups or the big petrol companies, the large shops, etc such as Dinner’s Club, Amex, etc

1.1.2.4 According to production technology Embossing card: Based on the embossing technology; the first card was produced by this technology At the present, this card is not been used no longer because its technology is too simple, easy for counterfeit

Magnetic stripe: Based on the letter technique with two magnetic tapes storing information in the card’s back This card was used popular in the last

20 years, but there are some weaknesses: because the information in the card can not be coded by itself, the card only stores the fixed information, the data storage space is litter; it can not apply the coding technique, information security, etc

Smart Card: this is the newest generation of the payment card; the structure of the card is the same as a computer

1.1.3 The of formation and development history of the payment card in Vietnam

1.1.3.1 History of formation and appearance of the payment card in Vietnam

In 1990, VietcomBank signed the contract of Visa card disbursement agency with French bank, this activity started the adoption of the payment card into Vietnam The main purpose of this connection was to serve for the international tourists coming to Vietnam Following the Foreign Trade Bank, Sai Gon Thuong Tin Bank also connected with the center of Visa card payment for becoming the payment agency May be the clear open policy brought for Vietnam a socio-economic face with many potentials The foreign investment projects have increased from the quantity to the scope, the large financial institutions have paid attention to Vietnam and following these groups, there are the concurrent services of which the payment card is integral

In 1995, Ho Chi Minh City Foreign Bank, A Chau Commercial Joint Stock Bank, First-Vina-Bank and Eximbank were allowed to officially join in the Mastercard international card organization by Governor of the State Bank of Vietnam

In 1996, the Foreign Bank officially became the member of Visa International Organization Then, A Chau Bank, VietinBank Vietnam also became the and A Chau Bank implemented the direct payment with this organization At this year, Vietnam Foreign Bank (VCB) issued pilot the first bank card, as well as the association of Vietnam card payment banks was also established with the four founders including VietcomBank, A Chau Commercial Joint Stock Bank, Joint Stock Commercial Bank for Import and Export (Eximbank) and First Vinabank The legal corridor for the card activity at that time was only the Decision No 74 issued by Governor of the State Bank on 10/4/1993 regulating the “temporary regulations on issuing and using the payment card”

PROCESS OF THE CARD PAYMENT

Figure 1.1 : General payment-via-card process

Step 1: The card owner submits the request of card issuance and receives the card printed by the issuance bank, owns the account with his/her name, deposits into the card if this is the debit card

Step 2-3: Sell the goods in the business merchants which accepts the card payment Implement the payment for the amounts in the purchase invoices by swiping the card performed by cashier or the owner

Step 4: If the money is enough to pay, and the card swiping exchange is successful, the payment amounts paid by the bank will be reported credit in the account of the shop’s owner

Step 5: The payment bank will charge the card payment by reporting the card payment debt into the account of the shop’s owner

Step 6: The payment band and the issuance bank through the card union organization will make the offset accounting, reporting the debt for the advanced amounts of the shop’s owner to the issuance bank so that the issuance bank can report and account to deduct in the account of the card owner, each party will retrieve the receivable charges

1.2.2 The participation entities of the card payment

The card owner: is the person whose name is written in the card and is entitled to use the card to pay the amounts of goods and service purchase

Only the card owner can use his/her card When paying for the Merchants of the goods, services or paying the debts, the card owner has to show the card in order to check under the process and set up the payment receipt

Merchants: are the goods and services business sectors which sign with the payment bank on accepting the card payment such as the restaurants, the hotels, the shops, etc These merchants have to equip the machines, technology to receive the payment card for the goods and services amounts, the debt payment replacing for cash This entity plays the roles of issuing the cards and remaining the account

Issuance bank: is the bank which issues the card for the owner This bank is usually the official member of the international card organizations The issuance bank takes responsibility to receive the document of the card issuance request, solve and issue the card, open and control the card’s account, as well as implement the last payment with the owner This entity plays the role of developing and maintaining the relations with the Merchants

Payment bank: is the bank which installs the card payment machines The bank directly signs the contract with the receipt unit and pays the exchange documents presented by the Merchants A bank can play the role of card payment and the role of issuance

International card organization and switching card organization: are the organizations which connect the payment bank and the issuance bank This entity takes responsibility to switch and solve the clearing payment, set up the payment and issuance standards For example, in Vietnam, the financial switching card union organizations are Smartlink and Banknet, and on the world these are Visa Card organization and Master, JCB, American Express, etc

1.2.3 Charges and charges sharing rate in the card payment activity

The card payment charges are the charges which the Merchants have to pay for the payment bank, means the bank owning this card payment machine

These charges are directly proportional to the card payment turnover if the unit and calculated by % of card payment The average charges which the Merchants have to pay for the bank are 2% However, this charge rate is based on the payment card forms and the issuance bank These charges are included the after-sale service charges including supplying paper to print the monthly invoices, hiring the card payment machine, providing the documents and the advertisement instruments to realize the card acceptance merchants and the fees of caring and solving the problems related to the payment process

These returned charges will be distributed, normally 50% of which will be paid for the financial switching organization For example, with 2% of charges from the Visa/Master card swiping transaction for the goods payment, the payment bank has to pay for the above international organization 1.1% of the received charge rate.

THE ROLES AND THE MEANINGS OF CARD PAYMENT ACTIVITY

1.3.1 For the society- national economy

Figure 1.2: The roles of the card payment activity

 Reduce the social charges to organize the payment activity

Annually Vietnam Government has to pay a significant finance to print cash for the payment activity of the economy with 80 populations and GDP of over

100 billion USD In additions, using the cash will waste a lot of time and unnecessary time for the transportation, storage, reservation, checking in the bank systems if the money is in the account form It is very easy to make mistake and loss when checking, make conditions for the circulation of the

Roles and meanings of card payment activity

The commercial exchange to occur without being limited by time and space

Reduce the social charges to organize the payment activity

Limit the fraudulent, tax evasion, debt delayed payment, create conditions to anti- circulate the false money, money laundering paper money expresses the large limits because it is easy to tear, burnt, corrupt in the circulation process

 Limit the fraudulent, tax evasion, debt delayed payment, create conditions to anti-circulate the false money, money laundering

The tax evasion of the merchants, the business households who do not obviously want to receive the money by the card payment, because these income sources in the bank account will be declared, will be reduced due to the payment card utilization When discussing the Law on anti-money laundering, the member of the Assembly Standing Committee confirmed that the cash utilization made the cash flow management more difficult, brings Vietnam to become a “destination” of the money-laundering crime” and then the solutions of the cash circulation limit will be recommended to “prevent from the origin”

In 2001, the State Bank quoted the statistic data when summarizing the six years of executing the Decree No 74 of the Government on preventing and fighting the money laundering, showing that the tax evasion, smuggling, corruption, counterfeit production and purchase, speculation in the securities market, the real estate and the gold market were gradually increased

Therefore, the benefited subjects are implemented through the legal activities such as consigning on to the bank, investing on the securities, real estate, gold or remitting to the foreign banks which have the secret bank law The “money laundering” demand is larger more and more when there is the regulation that the officials have to list their properties, the individual income in the Law on anti- corruption

United Nations Office on Drug and Crime (UNODC) considered that Vietnam is the destination which is easy for the money laundering crime to come because its economy uses lots of money and the commercial and investment activities are more and more increased UNODC warned that if there were not the fast and effective methods to cope with money laundering, the crime and corruption would be increased, the legal financial operation will be effected

Actually, a very big cash flow was felt in the stock market and the real estate market, the development speed of capital is difficult to estimate, however, checking the money’s origin are not properly concerned

Besides the loose legal law, due to the psychology of losing the customers of the credit organizations, checking the information, the origin of the exchanged money of the customers is usually formalism The habit of using the cash in payment makes difficult for controlling the circulated cash flow in the economy and makes conditions for the money laundering crime to perform easier

Whereas, the main origin of the illegal money in Vietnam is from defrauding, gambling, weapon trafficking, prostitution, smuggling, drugs, etc; but because the entities use the cash in payment, it is difficult to control this illegal cash flow

 The card payment facilitates the commercial exchange to occur without being limited by time and space

At 12h00 A.M, an entity can buy the scratched card to fund money for his/her prepaid mobile phone by a message, the money will be automatically deducted from the card account corresponding with the value of the scratched card Whenever and wherever in a day, a busy businessman can book and pay for the overbroad airplane ticket thanks to using the payment card

Normally, formally with the goods payment in cash, the buyer and the seller had to appear to implement “sell and buy” activities When the form of delivery in advance- then payment appeared, telephone-order-selling, email- order-selling, internet-order-selling or called e-commerce were gradually appeared and favored by the customers because of its great benefits in required the solution for payment without the physical appearance of the buyer and the seller And this solution is the credit transfer or card payment

The buyer only has the payment card and the seller has the bank account, the payment can be implemented in any geological distance between the seller and the buyers as well as the payment time

In Vietnam, there are some popular and prestigious online payment portals such as Nganluong.vn, VNmart.vn, Payoo.vn, Onepay and Baokim.vn In here, the customer owning the payment card can feel secure collection and goods purchase

1.3.2 For the bank joining in the payment

The card activity of the banks is developed more and more, puts the banks into the new status, new appearance Besides building the friendly image with each individual customer, the successful card service performance can confirm the technology advance of the bank; so that the card service has been considering as the important competitive advantages in the race of toward the retail bank market of the commercial banks

Normally, when using the card payment service of a bank, this unit’s owner has to open an account in this bank either individual account or ATM account in order to receive the sales money when the customers strike the card for payment At that time, the payment bank will be benefited the payment charges which the unit’s owner agrees to pay This is also the most realizable financial benefits for the payment bank However, many banks accept to maximum reduce the charges for the Merchants when balancing this benefit with two the residual benefits- “Mobilization source” and “Foreign currency mobilization” The number of 40% shows that of the payment turnover is 100A, 40A will be the average amounts which the account owner places in the card or the account receiving the card payment money of the goods The card payment turnover of Melia Hotel is 8 billions/month; it means that 3.2 billions is the average balance in the account of this unit The non-term interest for this unit will be 3% in comparison with the 14% of mobilization interest from the residents; so that the bank will also be enjoyed a price gap rate of 11% Therefore, the charges paid by the Hotel for the payment bank is

160 million (2% of 8 billions VND) The interest gap rate (11%) from the average of non-term money source in the account (40% of 8 billions) is 11% x

8 billion = 352 million So that the real total revenue per month of the payment bank will be 352 million + 160 million = 512 million equivalent to 6% of the card payment charges not 2%

Figure 1.3: Benefits for payment bank

GENERAL INTRODUCTION ON VIETINBANK

2.1.1 The general introduction on VietinBank

VietinBank was established in 1988 after being separated from State Bank of Vietnam Being one of the four largest State-owned commercial banks of Vietnam, VietinBank’s total assets account for over 20 percent of the market share of the whole Vietnamese banking system VietinBank’s capital resources keep on increasing over the years and have been substantially rising since 1996 with the annual average growth of 20 percent, especially up 35 percent a year against that of last year

VietinBank has developed an operations network comprising of 01 Transaction Centers, 149 branches, 527 transaction offices, 166 savings offices, 02 Representative offices, 04 Subsidiaries, 03 administrative merchants and 1200 automatic Telling Machines (ATMs) Has established correspondent relationship with 850 banks, financial institutions of 90 countries and territories all over the world

Being the founder of the following Financial Credit Institutions: Saigon Bank for Commerce and Industry, Indovina Bank (the first joint-venture bank in Vietnam), Vietnam International Leasing Company – VILC (the first financial leasing company in Vietnam), Vietinbank Insurance Company Ltd In addition, VietinBank also is the official member of Vietnam’s Banker Association, Asian Banker’s Association, Society for Worldwide Interbank Financial Telecommunications (SWIFT), Visa International Services Association

Being diversified with 04 independent accounting subsidiaries: VietinBank Leasing Company, VietinBank Securities Company, Ltd., VietinBank Asset Management Company, VietinBank Insurance Company and 03 non-profit making merchants: VietinBank Information Technology Center, VietinBank Card Center and VietinBank Training Center VietinBank also is the only bank which has Branch in Europe – Germany now

Card Center, a unit of Vietnam Commercial Joint Stock Bank of Industry and Commerce, all operations are managed by the management principle of centralized control, consistency and conformity with the scope and activities of the Bank; done dependent-accounting regime, its own seal, opened advance of the date prescribed by the Bank Central card management functions, administration and organization of all business activities of the bank card and directly involved trading accounts at the branch, no money for overnight cash advance & that will be completed in in operational activities and business cards In addition to research, develop policies, procedures, regulations & documents guiding the implementation of business cards, card center also carries out research and product development services & other cards add new card features; performance management, support & distribution branch to ensure organizational business card in accordance with the plan & strategy development

2.1.2 The general introduction on VietinBank Card business Center

VietinBank Card Business Center was established in 2001 on the base of development and restructuring the model of personnel organization of the Card Team At the first time, the total number of staff who was in charge of card works of VietinBank only included 10 persons; therefore they had to implement many different works at the same time and as the result, the development of card works is not too strong In 2003, VietinBank established the Division of Card Service in order to push up the operation of card business, enhance the professional capacity and the specialization in the card operation Card Business Center was officially established according to the Decision No QD26/NHCT32 dated on July 20 th , 2009 by the President of Vietnam VietinBank Directorate including the functions, namely:

Researching for the development, managing, executing, organizing for implementation, inspecting and supervising the card business in VietinBank and conducting the direct card business

The birth of Card Business Center has created the turning point in the development of VietinBank’s card service, contributing to raise the self- motivation, the authority of addressing the card works; by this way it makes the favorable condition for VietinBank to push up the development of card service and products, meeting and take highest advantage of opportunities of market development Currently, the number of staff of the Center reaches 160 persons; all are assigned the separate tasks and have high specialization capacity; Most of the cadres of the Center are at young age with good capacity and they are very dynamic and flexible in exploring the information and opportunities for the card service in the market The infrastructure and the machinery system, equipment serving for the development of card service are adequate and modern to meet the best the demand of development of VietinBank card service in the context of current competition

The appearance of Card business Centre contributes to bring VietinBank to be one of the biggest organizations of card issue in the market Besides the traditional products, VietinBank continues to launch the types of new cards in the market Comparing to other banks, VietinBank is always the leading bank with many breakthroughs in making the efforts to modernize the technology and minimize the usefulness for the client

On August, 2006, VietinBank officially launched the trademark of debit card E-Partner Card The card product of VietinBank included the debit card

Furthermore, VietinBank regularly implements many huge programs of expansion and promotion aiming at creating many conveniences in the using the card to pay costs and attracting the attention of the client The quantity of card and card market share of VietinBank continues increasing yearly As of

2010, the quantity of domestic debit card reached nearly 5 million of card; the number of credit card also reaches to 122.000 cards with the market shares of debit card gaining 20% and the market share of the credit card is 25.7% The operative card of VietinBank reaches nearly 90%- the highest rate among other banks

Currently, VietinBank possesses the ATM network including 1,300 machineries which are placed in the headquarters of the branches, the bank’s transaction Department, the Area of Citizen, bodies, schools, etc throughout the country There are over 8.000 points which accept the card The new products continue to be expanded widely such as: Visa debit card, Platinum international credit Card, Co-branding international credit Card, etc and they have the new and improved utilities such as: Receiving the remittance, e- pocket, sending the savings with the term at ATM, invoice payment at ATM, the online payment, prepaid card purchase, etc Especially, in 2010, VietinBank was the first bank which successfully implemented the non-stop service of the road charges and the service of petroleum payment by the card on the base of co-operation with Military Petroleum Company, etc

The orientation of Card Business Centre strategy is bringing the product of card service of VietinBank to be leading product in terms of quality and quantity in Vietnam Market Up to 2013, Card Business Centre will develop to become Card business company- one unit of independent business with

2.1.3 The process of formation and development of payment operation by card at VietinBank

VietinBank conducted researching and has officially entered into the market of card service since 2001 After more than 10 years of implementation, together with the development and integration of the nation and the strong growth of the bank, the card service of VietinBank has gained the significant achievements, which confirms the position and trademark in the market and gradually becomes the advantage in the competition of VietinBank in the field of finance-bank in general and the retail service of banking in particular in the context of integration competition

At the very first days when participating in the market of card, VietinBank had to face a lot of difficulties, challenges of one new market, namely: The technology system has not yet invested satisfactorily, the number of ATM is few; the function of the card is so simple and especially, the citizen are too strange in using the card as one means of payment without using the cash As other banks, in this period, VietinBank made the biggest efforts to overcome these obstacles If at the first time, there are only cards which are too simple with the basic function of drawing money, in 2006, VietinBank started to launch the type of debit card E-Partner Card with the trademarks of card suitable for each client of different markets In addition to providing the normal debit card, VietinBank promoted co-operating with universities, banks of policy, social insurance and the enterprises nationwide to develop the card in the connection with the merchants aiming at launching the multi-functional cards Thanks to this creativity, as of this time, the total number of issued debit card of VietinBank reaches more than 7 million cards The product of card service of VietinBank confirms the competition position in the market of debit card in Vietnam As the result, VietinBank becomes the leading bank in terms of issued debit cards

Regarding the product of credit card, in 2005, VietinBank officially became 1 among 04 Vietnam’s banks which are the first official member of the Visa

&Mastercard international organization of card The product of the Cremium international card service of VietinBank provided the diversified term with the various values of growth Furthermore, VietinBank is also known as Vietnam’s leading bank which applies the card technology according to EMV standard (The compulsory technology standard for the member bank of Visa

THE POSITION OF VIETINBANK CARD SERIVES

2.2.1 The prominent speed of growth, leading in the quantity of market share

The operation of domestic debit issue (ATM card): In the context that using without the cash is more popular together the directive 20/2007/CP-TTg by the Prime Minister, most of the companies implements paying the salary by ATM; therefore, the quantity of the ATM cards has increased sharply over the past years As of December, 2010, the quantity of domestic debit card gained more than 27 million cards, increasing more than 7,3 million holders comparing to the ending time of 2009 VietinBank- VietinBank passes the VietcomBank, the Bank of East Asia and become the second bank in the market in terms of the quantity of issued domestic debit cards with about 19% the market share, of which the leading bank is The Agriculture Bank with about 21% market share, VietcomBank gains the third position with about 18% market share and East-Asia keeps the fourth position with 17% market share In order to gain the above-mentioned rapidly increasing quantity, Agribank and VietinBank continued exploiting, extending the subject of clients in the combination with the programs of promotion, issuing cost exemption

According to the statistic from the market research department, as of November, 2011, VietinBank issued from 5, 7 million cards to more than 7 million credit cards while the second competitor just issued nearly 6,5 million cards and with the official result from the Card Association, VietinBank will officially become the bank leading the market in issuing the debit card

The operation of international credit card: According to the tendency of issuing the card over the past years, the number of domestic debit card has grown sharply and this makes the market of debit card become saturated

Mastering this tendency, the domestic commercial banks gradually moves toward the new orientation, namely: increasing the human resources to push up developing the quantity of the international credit cards- the type of card brings the much higher profit than the type of debit card due to low investment cost (due to not investing in ATM system) However, in 2010, more and more foreign banks leading in the world in the field of retailing such as HSBC, ANZ gathered to extend a variety of retailing products in the market, of which there is the service of card, which made Vietnam’s card market compete fiercely and strongly Facing the bloody competition of the foreign banks, the domestic banks continued taking the measures, new incentive programs in order to increase the issued cards and the results showed that the quantity of international credit cards in the whole system of Vietnam banks gained the significant growth As of 2009, Vietnam’s whole market (excluding the foreign banks), had 371,718 international credit cards

As of the end of December, 2010, the number of cards increased over 165,000 cards; which brought the number of international credit cards in the whole country up to 537,499 cards In 2011, VietinBank issued an addition of over 100,000 credit cards; as the result, the distance between VietinBank and the first bank is shortened The following is the chart of the density of the number of international credit cards of the leading banks in Vietnam:

Figure 2.2 : Credit card segmentation in 2010

Such as, VietcomBank still continues to lead in the market with 37% market shares, VietinBank develops strongly and gains the second position with 30% market shares; ACB bank ranks the third with 12% market share

In addition to making effort to issue the debit cards, international credit cards, the banks have invested to develop the system of payment by card, extend the network for the merchants to accept the card in order to continue increasing the market share This network is assessed to be the effective channel of payment, bringing the huge income and potential for the banks in the future

The network of machinery paying by card: According to the statistic of

Vietnam Card Association, as of the end of December, 2009, the whole market had 36,620 POS machines Of which, Vietcombank ranks the first with 9,700 POS, accounting for 26.49 % market shares; PGbank ranks the second with 3,748 POS, accounting for 10.23 % the market; VietinBank ranks the third with 3,161 POS, accounting for 8.23 % the market The fourth and fifth positions are Agribank (2, 715 POS, accounting for 7, 41 %) and ACB (2,658 POS, accounting for 7.26%) The market shares of other banks:

VIBank had 2391 POS, accounting for 6.53%; Eximbank had 1833 POS, accounting for 5.01 %; MP had 1550 POS, accounting for 4.23% It can be seen that the quantity of POS and VietcomBank is three times as huge as the quantity exploited by VietinBank The reason is that VietcomBank is the prestigious bank in the area of payment; this trademark has been confirmed for a long time Many merchants themselves come to sign the contract with VietcomBank without the introduction of the staff of the bank For the part of PGbank, the reason why this Bank ranks the second in the market is that it gathered to instal POS at the stations of petroleum Although PGbank gained the huge quantity of POS, the business lines of PGbank are not diversified

Besides VietcomBank, the banks such as Techcombank, VIbank, Agribank

However, after 6 first months of 2010, the whole country gained the addition of 4,722 POS machinery, bringing the total number of machinery in the whole market up to 41,342 machineries As of June, 2010, the positions of ranking changed Vietcombank still ranked the first with 10,915 machines, accounting for 26.4 % the market However, VietinBank passed PGbank to gain the second with 4,975 POS, accounting 11,96the market PGbank ranks the third with 3,776 POS, accounting for 9.13 % market The next id Agribank with 3.025 POS, accounting for 7.32% the market The next banks are VIB bank (2.666 POS, accounting for 6.45%), ACB (2514 POS, accounting for 6,08 %) and Military Bank (1,719 POS, accounting for 4.16%) Such as, After 6 months in 2010, VietinBank gained the significant growth, confirming the position of one of Vietnam’s strongest banks in the area of POS

The work of development of card receiving merchants (Merchants): In addition to enhancing the issue of debit cards, international credit cards, the banks have invested to develop the system of payment by card, extend the network of the card accepting merchants in order to continue increasing the market shares This is evaluated to be the effective channel of payment, bringing the huge profit and potential for the banks in the future As of the end of December, 2010, the whole country had an addition of 11,204 POS machines, bringing the total number of machines in the whole market uo to 47,824 machines The ranking positions of the banks in terms of the market share of card accepting merchants at the end of 2010 had the changes

Vietcombank still ranks the first with 14,762 machines, accounting for 30

87% the market VietinBank passed PGbank to gain the second position with 9,907 POS, accounting for 20.72 % the market PGbank ranks the third with 3,992 POS, accounting for 8.35 the market The next position is Agribank with 3,450 POS, accounting for 7.21 % the market

The chart: POS market shares as of December, 2010

According to the report of market research of VietinBank, currently, the number of POS machines of VietinBank gained 12,000 machines and ranks the first in the market of POS machine, passing the first competitive bank in the quantity of payment machines by card in the whole market

Note: In term of the market share of quantity, VietinBank currently ranks the first in the market in the number of issued debit cards and coverage of the payment machines (The issued credit card still ranks the second, behind the VietcomBank), VietinBank passed other banks with the admirable speed; from the fourth and fifth position in 2009, this bank ranked the second in

2010 and at the current time, it gained the first I can be seen that VietinBank left many competitors behind and shortened the distance with the first competitor

2.2.2 The quality and profit have not yet been proportional to the potential

In term of the sales of sold cards, as of June, 2010, VietcomBank ranked the first in the domestic market of debit cards with 23% the market shares and the

VietcomBank’s total sales of sold domestic debit cards gained 115,5 thousand billion VND Agribank and VietinBank ranks the second with about 19% the market share, respectively with 91,6 and 92 thousand billion VND

The next position in the market of debit cards in the term of the sold sales is the Bank of East-Asia with 88,83 thousand billion VND, accounting for 18% market shares

THE FACTUAL SITUATION OF IMPLEMENTATION AND

2.3.1 The factual situation of implementation and development of card business and payment

2.3.1.1 The steps of card business and payment of VietinBank

Figure 2.6 : The model of implementation and development of card business and payment

(Source: VietinBank card business Center)

The works related to conducting the step 1, 2, 3:

3 Set up and training 4.service after sales

The real results related to conducting to the accessing, signing the contract, installing the machine and training the service of card payment:

No Merchants Contracts EDC machines Times of training

Table 2.1 : The results of Card payment implementation and development

(Source: VietinBank card business Center)

Step 1: Getting access to the unit to persuade it to become the unit which accepts VietinBank’s card

This is considered as the first step and also the most difficult step in the process of conducting the card business To get the success in this step, the seller (namely the VietinBank’s implementation channels including staff of the branch, co-operators, the third partner, staff of TTT, etc) has to implement the small steps as follows:

Identifying the subjects which it is necessary to get access and prepare: The first subject in need of getting access is the name of business unit, the business merchants which have huge sales and demand of expressing or hiding the potential of payment capacity without using the cash, the high rate of client having the payment card and the capacity of awareness and understanding of business merchants as well as the client is relative The second subject to get access is the person who has the right of decision of business unit, namely the owner of the unit who has the right of decision or has the biggest influence on the person who has the right of selection decision

After identifying 2 above factors, the seller will prepare the hard and soft tools of selling to implement getting access

Getting access and representing: The seller uses the contact channels such as phone, email, letter in order to arrange the appointment with the owner of business unit The presentation and persuasion just meet the demand when it shows and opens the demand of the client and in combination with the VietinBank’s solutions of card payment service to meet all those demands

Need to: Increase the sales, profit, create the trademark, diversify the channel of payment, attract the client, control the turnover, reduce the risks of cash, and increase the advantage of competition

Address the objection: The seller needs to identify the reaction situations of the clients and gets ready to combine with the business merchants to address the problem The client objects; however, it doesn’t mean that the client don’t want to buy; it means that they want to get further information, utility and want to confirm that their decision is correct by the explanation of the seller

The seller who lacks the experience is often afraid of the client’s objections because they don’t know how to answer and they often fail because when they hear the objection, they usually have the psychology to protect their opinion If the Seller predicts the situations of popular objection and well understands the merchants of getting access, implements according to the following steps, it is very easy to address the objection

 Repeating the objection by answering

 The leading sentence + Expressing the sympathy with the client

 Education: Representing the ideas to help the client understand the issue

The followings are some popular objections:

No The popular objection The way of addressing- “raising the awareness of the client”

1 Used the machine of other bank

The benefit of getting many machines of payment

The competitive advantage of VietinBank machines

The promotion program and the care quality of VietinBank

2 Not wanting to bear the charges

The turnover increases by diversifying the channel of creating the profit to make up for the charges

The solution of receiving the outside charge when necessary

3 Not get used to use Providing the evidences that other merchants are using the market share of card, etc

4 The charge is expensive Comparing to the charges of other banks The attached added values

5 Being afraid that the information of business is revealed

Bringing other merchants as the evidence to explain

The solution of creating many receiving accounts

6 Comparing the quality with other banks

Bringing the big merchants as the evidence

Confirming the market shares, achievements

Table 2.2 : Popupar Objetion on POS sales

(Source: VietinBank card business Center)

Coming to sign the contract: The client will feel difficult in taking the decision when they have not yet got the trust; in addition, they have not got the experience and they wonder when they have to pay the charge for the service which they have not known in detail about its benefits

Furthermore, they also have the criteria of selection and their own comparison and they feel that it is not really necessary or they have a lot of criteria to decide or they want to bargain The efforts to address the objection will gain nothing in case the Seller and the client don’t come to sign the contract o Step 2: Singing the contract

After the client agree to install the VietinBank machine of payment by card, the works related to signing the contract (including the appendixes of the forms serving for the contract of payment by card): The letter of recommendation for using the service of card payment, the certificate of business registration, the identification card of unit owner, the letter of recommendation of opening the account at VietinBank, the contract of using the service of payment by card and the specific charge applying for merchants with the agreement of two parties Signing the contract is completed by the minutes which handovers the parameters of Merchants, the handover minutes of machinery installation The contract is established adequately and specifically, which contributes to give the information of Merchants to become the base for caring the client better o Step 3: Training and instructing the usage VietinBank will equip new Merchants with several relevant signals as follows:

The signals of card payment: the symbol of accepting the payment by card, logo VietinBank, Visa, master, Banknet, Smartlink, etc Other marks are boxes of namecard, menu

The workers are in charge of installing or getting access to the market will have to instruct training the cashier to work professionally when using the machine of card payment The contents of training include: the method of payment of debit card, international card, identifying successful payment, treating the invoices being printed from the machine, the transaction of abolishing the payment, the type of card which it is possible to pay, summary of transaction, support hotline, etc at many merchants; the cashiers are the persons who don’t like to move or address the problems of technology Instructing them to use professionally, confidently and bringing them the passion on the VietinBank’s service of payment by card, which will become the factor to push up the success of payment by card

At first time, the training is related to the work of conducting; however, later training and money receiving improvement are the work related to the development and care

Currently, when one unit is allowed to install the machine, it is compulsory to accompany with one on-site training course for the cashiers, the persons who implement the transaction of those merchants The charges of training is usually counted in detail because it is one part of the works of the workers who are in charge of installing the machines and the way of on-site training is considered to be the most popular

The followings are some parameters expressing the real situation related to conducting the training:

1 The first training when installing the machine

≈90% The unit used the payment machine of other bank before does not need to train

2 The later training for ≈40% The normal cashiers train one the new cashiers another, however the knowledge is lost partly

4 The skill of addressing the basic payment obstacle

30% The majority of cashiers who have the average capacity of understanding are the hired subject and they are afraid of taking the responsibility

Table 2.3 : Parameters of the training conduct

(Source: VietinBank card business Center)

The works related to the service after selling: - Step 4:

Step 4: The development and care Although it is called the step 4, it has no ending point; it is a prolonging continuous process The detailed contents of the step 4 include:

 Receiving the print paper, signals which identify the card payment

 Reporting the summary of periodical transaction

 Training the knowledge for the old cashiers and training the new cashiers: Updating the new applications, promotion programs for the cashiers, merchants, holders of card, etc

 Solving the obstacles related to the payment

 Enhancing the position, abolishing the current and potential competitors

As of the current time, VietinBank conducted over 12,000 Merchants nationwide, leading the market shares in the new opened quantity of Merchants

2.3.1.2 The real situation in the process of implementation and development of card payment business a The real situation 1: Much depending on the network of the branches, as a result, this leads to the difficulty in controlling

The channel of deploying the implementation of payment by card or the channel of development and care Merchants currently much depends on the networks of the branches, specifically the staff who partly implement the card work of the branch also depends on these network; as the result, this leads to first convenience as well as the certain limits in the stages of bloody competition as today

With the capacity, quantity and favorable position, currently the Branch is the distribution channel which plays the most important and first role Due to the huge dependence on the branch, it requires one channel of regulating, managing and supporting the branch effectively

Chart 11: The POS sales channel: October, 2010

Figure 2.7: The POS sales channel in 2010

(Source: VietinBank Card Business Centre)

Seeing the above table, we can realize that this is the most specific evidence to confirm that the branch currently is the distribution channel which plays the most important first role The first reason is that the Branch has the biggest force with the favorable position to exploit Merchants throughout the nation and this is the force that has the best condition to understand the client, location, area to get access and care the client The biggest limitation of this channel is that the care cost and the specialization requirement of the circulating staff of the branch is high; as the result, the quality of the care can not meet well

SWOT ANALYSIS ON VIETINBANK CARD PAYMENT BUSINESS

In order to clearly mention how the “health” of VietinBank card payment activity is and it simultaneously gives the prediction about the reason of that

“health” situation Now, writer will analyze the external environment and objective factors affecting to card business activity of Vietinbank aiming at finding the opportunities and challenges and internal environment affecting to card business of VietinBank aiming at finding strong and weak points of card payment activity Then, four grafts of SWOT matrix from analyzing the external and internal environment will be used to give some solutions for card payment service development for VietinBank in chappter III

To have the answer for the way to improve service quality, the affection of promotion program, others factor for 7P – marketing ( price, place ….), also to find out the weakness and strength of Vietinbank The author conducted 3 kinds of survey, and the first kind of survey’s name: Merchant survey In this survey, I focus mostly on the merchant not the card owner, cause the customer who own bank card do not care which POS they swipe, all bank’s POS are the same, the difference can occur when promotion of the bank POS available An due to the limited time and resource I carried out sample collection of 100 merchant which was divided in to 3 groups, group 1 – Top benefit merchants that bring most profit Group 2 – mixture merchants that use not only VietinBank POS And Group 3 – The potential merchant but bring un – equal profit or just leave out VietinBank The second kind of survey is Card owner survey (on 250 customer as sample collection) and the last is Staff survey (Sample collection 70 persons: 25 persons in the North branches, 25 in the south branches and 20 in the Middle branches)

2.4.1 External environment analysis- challenges and opportunities of VietinBank

Figure 2.8 : Micro-environment analysis of business

Source: J David Hunger & Thomas L Wheelen, (2008), Essentials of strategic management)

External business environment of enterprises is externally objective factors of the business affecting to the entire activities of not only VietinBank but also business merchants in operation progress, 4 macro factors include: Politics, Economics, Society and Technology

Politics: recently, Prime Minister of the Government had signed Decision No

291/2006/QD-TTg (on 29/12/2006) to approve the Scheme of none–cash Payment in the period of 2006-2010 and in orientation to 2020 in Vietnam

The scheme is an important legal basis for payment activities meeting the demand of economic development In particular, in the context of the currently global and regional economic integration of Vietnam, under this scheme, to the end of 2010, the number of card release is 15 million of card;

70% commercial centers, supermarket, restaurants… install devices which accept card payment This number will increase to 30 million of card and 95% to 2020 The cash rate of the total payment devices to 2010 is not over 18%;

15% is in 2020 The Number of personal accounts to the end of 2020 achieves

20 million; 70% budgeted staffs and 50% labors who work in the private businesses perform to pay through account This number will increase to 45 million of personal accounts (the average account of each person is 0.5 %);

95% of the budgeted staffs and 80% of the labors will be paid through account Payment among businesses performed through the bank achieves 80% in 2010 and 95% in 2020 One of the important orientations of the Government about none- cash payment method development is to deploy the scheme “None-Cash Payment”, of which 6 solutions are synchronized to create a legally important basis for the None-cash Payment activities in Vietnam in the next time On 27/9/2010, Vietnam State Bank released the Dispatch No 7305/NHNN-TT about opening the POS connection in Hanoi

Accordingly, 8 banks and 2 Switching companies interconnect locations that accept the first phase POS 8 banks include VIETCOMBANK, Agribank, VietinBank, BIDV, Techcombank, VIB, Seabank, Oceanbank 2 Switch Companies include Vietnam National Financial Switching Jsc ( Banknetvn) and card service JSC (Smartlink) Some other banks such as Maritime bank, Eximbank and Sacombank… also take part in the system Currently, the system had been multiplied nationwide by the banks

Lately, in a conference held by Ministry of Labor, invalid and social affairs, staff and officers Simultaneously, in analysis of delegates and member of the National Assembly also indicated that that none-cash payment is the origin to prevent the money laundering Legal documents about card payment are evidence to show the support of the State Hence; it is seen that card payment is made a maximum favorable condition by the State and it is an opportunity for VietinBank

Society: permanent habit of people is that payment in cash and the thought of doing things that bring tangible benefits are both challenge and blank market opportunity of card payment service of VietinBank Vietnamese is used to paying in cash for a long time, hence; when card appears, people only use it for the purpose of receiving money from the remote transfer Ms Duong Thu Huong, general secretary of the Bank Association, said that: currently, 83%

ATM card is used only for the purpose of retrieving money nationwide The fact shown that using ATM card to pay in shop installed card acceptance machine is still limited Furthermore; rate of payment in cash of the total payment is 14%, of which it is only 5-7% worldwide Although joint-stock commercial banks nationwide have launched many service products aiming at none-cash payment such as Internet banking, mobile banking, POS( card acceptance station)… however; the only participation of the bank is not enough to change the habit “ see on sight, touch in hand” of consumer Many bank experts said that to change this habit need a participation of the entire society It is known that ATM card can pay in many shops, but consumer still takes money from ATM machine to pay for their goods Although many supermarkets have been equipped POS, the number of people pay in card is still limited in comparison with paying in cash MERCHANTS do not actually focus on customer service and payment civilization In terms of business merchants, merchants always want to be paid in cash and only install POS when their customers require paying in card Places where card payment become familiar with people such as hotels, tourism company, free -of -tax shops in airport… service charge is easily acceptable, problem is that whether the charge is high or low However, merchants that service is never used, card transaction charge is a big hindrance leading to their refusing of using card because merchants’ benefit will be reduced in comparison with pay- in- cash Therefore; to avoid reducing benefit, many merchants had collected the additional charges of the card owner This affects to owner’s card consumption, then, they will not want to use it further Although Visa organization has been applying the program of preventing the additional charges collection and punishing in cash with the unit do not follow However; because supply exceeds the demand and the harsh competition among banks, merchants have full rights to select a bank where their demand are provided with good service (No prohibiting for collecting additional charges or reducing card transaction charge…)

Economics: Vietnam is a developing economy and young populations who love civilized technology together with typical consumption market of the world are a big opportunity for VietinBank and other banks

The result of the general housing and population investigation in 2009 showed that Vietnam is the third largest population of the Asean and the thirteen worldwide Additionally, Vietnamese population is belonging to the golden population structure in the period of 2009-2039 with the scale of labor age accounting for 65% of the general population in the period of 2015-2025

The youth under this structure are both objectives who will attract the new things, change the cash use culture and who will possess bank card, discover and access technology easily As a result; our country is being benefited a great number of labor who can possess payment card Furthermore; this force is highly having tendency to consuming

From the past to now, that develop Merchants is very advantageous in some areas numerous of tourists such as old quarter, and 4 or 5- star hotels…, Where many foreigners using their card usually come to stay In 2 or 3 recent years, that high- income workers use their card to pay for their goods in some great trade centers such as Vincom, Trang Tien, Plaza… had become popular

However; majority of people having the average income is still used to paying in cash Although people have their own card, they also do not use them to pay at Merchants or even do not know whether the card can be used to pay

That change this habit is very difficult and it requires a long time, especially in some undeveloped areas where people still feel strange for the “card” and

“card payment” concept Even in some suburb areas where access and exploit Merchants are also difficult

SOME SOLUTIONS TO DEVELOP CARD PAYMENT

Focusing on the market segment, groups of lines and types of card which bring

3.1.1 Exploiting the group of lines bringing the sales of payment and high profit

Through analyzing the sales of card payment according to the lines of business and the regional allocation, there are some lines of business accounting for the better sales than others Therefore, in exploiting and opening the card accepting merchants, focusing on the groups which bring the good sales of card payment will be the method to increase the performance of machine installation and it is possible to receive the service charges from this time Lines of business which brings the sales and good profit are: Hotel, restaurants in exemption of tax, refrigerator supermarket, stores of gold, silver and jewelry and golf area

The average sales of card payment in the quarter of 2011 and the level according to the region, area:

VietinBank revenue Allocation Revenue % North Midle South

Vàng bạc, đồ trang sức

Table 3.1 : VietinBank revenue by region and category

(Sources: VietinBank Card business center)

It can be seen that there are some potential lines of business, the strength for three regions throughout 3 areas with huge sales: Hotel, restaurant, gold, silver, jewelry, tourism, supermarket and fashion Some lines of business are the individual potential of each area

3.1.2 Increase the transaction according to the card forms and the transaction forms

Increase the card payment transaction of the debit card owner: At the present, most of the card payment turnover from the credit card owners group is mainly occupied among the card payment turnover; the inhabitants only use the debit card for drawing cash and not use other functions of the debit card such as payment Strengthening the medial work so that the debit card owners can use this card for payment is also the way to increase the turnover of card payment

Increase the card payment transaction of the On-us card owner: The “On- us” transaction is defined as the payment transaction or drawing cash of the VIETINBANKcopany card owners on the VietinBank’s machines The “Not on us” is the transaction not on the VietinBank’s machines or the transaction of the customers of other banks on the VietinBank’s machine bank The charges from the “On-us” card transaction will not be shared with other banks but only paid for the card union organization, the financial switching organization Therefore, in order to increase the revenue, increase the charges:

Increase rate of the on us card transaction: No interchange charges for the card transactions, contributing to the increase of real receivable charges and income; Providing the all-in service for the customers (card and the service of card permission) will lead to increase the number of customers and turnover of service utilization;

Increase rate of cash drawing in POS: Return the large service fees (4%/ number of drawn amounts for both the on us card transaction and not on us card transaction); Gain the fees of the International Card Organizations paid for the cash drawing transactions; Gain the large interest per used turnover (the interest from cash drawing transaction is calculated from the day of the transaction execution while the interest from payment transaction is calculated after the copy circle)

In additions, the card payment turnover of VietinBank distributed under the form of the credit card can show that there are the payment of three credit card forms Visa, Master Card and JCB, but there are not the payment of other cards such as Dinner Club, international debit card, Amex card and etc The capacity of card issuance is limited because VietinBank does not successfully negotiate with the card organizations out of the current organization This is one of the weaknesses of VietinBank With Amex card, because VietcomBank signed the exclusive contract in Vietnam, the competitiveness opportunity in this card can not be performed; however, the competition can be occurred with other forms of card such as Dinner Club, Visa Debit, Master Debit, and etc Therefore, VietinBank should promote the working work to successful negotiate for releasing and paying with the various cards besides the popular card Visa Master, JCB

Table 3.2: Revenue by credit card type

On us Not on us On us Not on us

3 2 Cover and scoop the whole open and potential market

Let look at the result of survey 2 and 4 ( last question) , almost consider that increase the merchant quantity ( nearly 40%) will be the main reason for changing card paymetn sales, then they think the Purchasr cyle such as Tet holiday, Summer holiday and some special days in Viet Nam, next account for 19% of the affective facter is Take - care quality So that, cover and scoop the whole open and potential market to have the no 1 merchant quantity will be the solution to imprve the card paymetn service bussines in VietinBank

Figure 3.1: The reason for changing card payment sales

At the present, the retail sector in general and the card trading sector in particular gradually show their important role in the business strategy of the banks The Timewell newspaper confirmed that “With the current tendency, a bank which can hold the opportunity to open the retail bank service supply for a huge number of the inhabitants who are hungry for the financial services in the emerging economies will become a global giant in the future”

The Vietnam commercial banks are aware of the importance of the retail bank, therefore, the development strategy of the Vietnam commercial bank towards to become the retail bank, of which concentrates to investment on the card service development- one of the most important distribution channels turning the bank into the new position, new appearance as well as bringing the potential of charges return in the future At the present, there are 45 banks joining in the card market The race of the card service development of the commercial bank leaded to the fierce competition and changed the leading position of the banks in 2010, of which there were the banks which have been the top banks in the previous years

An VietinBank can completely do it due to its financial potential and nationwide network in all country at the moment

What are the benefits of leading the market in term of the card payment network? It should be confirmed again that the current market is very potential and the card payment will be the main payment form of the future

At the present, there is the connection among the banks, so that the card of this bank can implement the payment in POS machine of other banks; inside of the bank, if this unit can accept a restaurant, another, means other branch can not issue parameter for this restaurant At the present, the Government is releasing the policy that does not allow many banks to install the common machine in a business unit to avoid waste and unhealthy competition Quickly installing the machine in a shop is the barrier so that another bank can not install the machine and this is way to affirm its sovereignty

However, this is only a part of the covering work; VietinBank should sign the exclusive contract of assembling with the merchants to reduce the participation of the competitors Objectively, with the superior sectors, the large hotel, restaurants, VietcomBank usually use its quality for wining but its price At the same time, we also meet the fierce competition on price of the other banks; many banks has devaluated the market price or the price floor which the card association regulates the card payment charges marketed to the Merchants to sign the contract The price can be reduced a half or even a whole in each period to attract the customers In the card payment market, VietinBank is in the middle position in which its quality is less than the No 1 competitor and its price is less than the No 3 competitor It can be said that the competition is very fierce and drastic, from the trick of underselling to the small trick of technology such as closing the transmission line, powering off payment card machines, even destruction of phone wave from the switchboard It should launch the campaign that the VietinBank’s people only expend in the Merchants of VietinBank; make use of all the business relations of the cadres; increase the pride spirit of the VietinBank trademark And above all, it should use the skillful sales group.

Improve the card payment business effectiveness through marketing mix 7Ps 85 1 P1 - Product

“Card payment service” is invisible product, so that the improvement of the service quality is the improvement of the product quality In this “product” part, we will mention to 2 directions, the first is the “service quality” or the “product quality” and the second is type of card payment service we should focus on

3.3.1.1 The product solution 1: Improve the service’s quality thought focusing on service after-sale After-sales service’s quality: Relating to the synchronous solutions on increasing the after-sales service to develop the card payment activity of VietinBank, we should refer the following numbers

 An unsatisfactory customer can tell 8-12 persons and each person can talk with at least 5 others

 Only reduce 5% of the customers, who leave the company, the profit can be increased 30-85% The costs of having 01 new customer can be 5-7 time as much as keeping 01 former customer

 98% of the customers, who are not pleasant, will never complain but will use the product of the competition And 15-40% of the customers who said “satisfaction” still leave the company to come to the competition

For the bank, the after-sales service’s quality includes the activities to care, maintain, and increase the satisfaction of the customers about the service It includes two fields: solving the troubles relating to the payment, and the caring programs in order to increase loyalty of the customers

The cashiers are the persons who directly communicate with the customers, who are the important decisive persons to the card payment selection of the customers The friendliness and professional in guiding the customer to strike the card will directly impact on the customers They have the very strong power that the bank can not have which is the right of directly contract with the customers They can have influence on the customers Most of the cashiers are the persons with a not high academic standard, and the high rotation; therefore, the cashiers should be trained skillful with the card payment machines and this group should be educated and persuaded so that they can realize the benefits of the card payment, then they will actively contact with the modern card payment service Actually, the cashiers like using this payment method because it is simple and they do not have to check and keep the cash Their concerned issue is the troubles with the card payment machine; the trouble is only occurred one time but is not be solved thoroughly, they will not eager to use the machine and they can request the customers to pay in cash for familiar

However, the cashiers issue is not the most important problem, because they are only the staffs and completely bear the instruction of the merchants; the research in the stores without having the arisen turnover shows some main causes as follows:

There are only the machines of VietinBank: the merchants do not want to lose the charges and they only pay if they receive the additional charges of their customers; it means that the charges of about 2% will be pushed into the customers It is not simple to care this subject because they are the owners so that they are relatively fastidious Normally, with this customer group, it should be patient to persuade them using the service and give out some individual preferential treatments for them to bind One of the successful applied biding is consultancy for using the e-banking service, saving under the week, loan guarantee, free using the card or service of salary payment

With the complicated management structure, it can deduct % of receivable charges for the decisive person Another way to persuade the merchants is making them believe that if they become the merchants of VietinBank, they will be advertised with over 7 million of the card owner of VietinBank and even they can be advertised in the gold handbook of Vietinbank so that the credit card owner and the VIP customers of VietinBank can know them and find them for payment; this is also the very persuasive factor

They had the machines of other banks: Normally, there are many opposite reasons The first reason is the lower fees and these merchants have used many service packages of this bank The second reason is that these merchants are very loyal with the payment of the current bank (mostly VietcomBank) At that time, the penetration policy and the care quality and the promotional programs are the motive powers to persuade the merchants

The following is the checklist of evaluating the mark of care quality: invoice cashiers, hanging and sticking prints to realize the card permission unit, solving the payment troubles, the promotional programs and caring the merchants, the work of presenting the grateful present to create the sentiment relation with the merchants

3.3.1.2 The product solution 2: Improve the service’s quality thought focusing on profitable product line

The Vietnam card market is being compared as the “delicious cake” and will be divided smaller and smaller In some next years, the competitive trend on limit and charges will be gradually replaced by the competition on service, utility, especially the services, the utilities via i-banking, sms banking, phone banking and the additional enclosed value VietinBank should make advantage use of the different service product which is the MOTO payment service, online payment, payment on the integrated card products; and continuously increase the useful features for its service products enclosed with other financial service products

The card payment service for the virtual and un-touch card: The card payment is not only that the card owner directly strikes card in the payment machine but also paying without submitting the card

In 2010, the Card-not-present transaction accounts for total of 26% card payment transaction; this is considered as the indispensable tendency of the age

In Thailand, in 2008, 43% of the card owners used the card to pay for online payment In 2010, this number increased 67%; and in Malaysia this number is 33% in 2009 and 55% in 2010; in Vietnam, in 2010 the number of person using the online payment card increased 35% in comparison with 2009 In 2010, the MOTO card payment turnover accounted for 1,41% of the payment turnover with 63/82 merchants arising the turnover, in 2011, the MOTO card payment turnover accounted for 2.39% with 131/195 merchants arising the turnover

The MOTO service is not strange with the card owners and the Merchants and this is the channel to increase the competitiveness with other banks in the market that the MOTO service has many potential as Vietnam In many cases, the MOTO service is the increase service but the decisive service to persuade the Merchants of VietinBank The card-not-present payment service, or called the MOTO transaction (Key Order Telephone Order) does not the present of the card owners and the cards; but the card owner only supply his/her information via email and telephone to implement the payment This transaction form is used when the customers are distance but have to pay for advance; the Merchants have the card but do not succeed in striking the card so that they use enter the numbers by hand on EDC This method is very popular with the Merchants selling via Website, the customers pay by entering their information on Website There are two forms of the MOTO transaction which are Key-enter transaction and Collection service The Key-enter transaction is the transaction in which the Merchants will implement the transaction by themselves on the device, send the transaction documents so that the VietinBank can compare before reporting credit; then check the credit value with the value in the invoice statement The MOTO Collection transaction is the transaction in which the Merchants make the phone call for the bank to request for license of the transaction, and then send the collection request for the MOTO payment transactions

Compare between the MOTO transaction and the normal transaction

Present of the card owner at the payment period

Signature in the invoice Yes or No Required or some time not required

Card gets in touch with EDC

Advantages Not limited by payment time and payment space

Safer due to identification of the card owners

Diversify the payment methods for the Merchants

Do not invest the EDC devices for TID MOTO Disadvantage Time for personnel to check the documents

Table 3.3: MOTO transaction and the normal transaction comparison

Therefore, the orientation to develop the MOTO service development should have the suitable market’s segment by: selecting the business line of the Merchants, who have the demand relating to the MOTO transaction, giving priority to the online business group besides the offline group, based on the selection of the unit with suitable scale, trademark and belief

In details, the market segment for the MOTO transaction as follows:

The first group: The hotel from 3 stars and over For example: booking room The second group: Tourism agency For example: selling and buying international tour, booking tour, airplane ticket

The third group: The prestigious and potential merchants on online-selling in

Vietnam For example: superior cinema such as Megastar, Ebay Vietnam, Bao Kim, Ngan Luong, Vinaphone, Viettel, Mobifone, Vietnam airline

SOME RECOMMENDATION

3.4.1 The recommendation to the government on the policy and legal lobby

It is very necessary to issue the policies of encouraging the operation of payment by card- building up the spending way of not using the cash and creating the legal lobby- improving the document allowing the areas of the State to pay by card

Together with the development of the science, technology and media, a lot of new service of payment; however, the legal lobby has not been established

The mechanisms, policies to push up the payment without using the cash are not consistent, not encouraging the strong investment for the infrastructure; the combination between the administrative measures and the methods of stimulating the economy is not strong enough to take the guidelines into the reality

For the service of card, until now, the bodies managing in the macro scale such as the government, state bank, ministry of finance has not issued the policy to create the breakthrough for the service of payment by card such as:

Regulating the forms of business which is compulsory to pay by card, reducing/repaying tax for the transaction of payment by card, exempting/reducing import tax for the equipment of payment by EDC card, etc

3.4.2 The recommendation to some relevant merchants, boards, sections

 The State Bank: needs to manage the floor level and ceiling level of payment cost closely to avoid the situation of devaluation

 The sector of telecommunication: increases the quality of internal transmission line to avoid the situation that the machine can not pay due to the weak internet

 The sector of electricity and fresh water provision: Gives the guideline of agreeing to conduct receiving money of electricity-water by card

 For the Ministry of Labor, Invalid War and Social Affair: needs to officially issue the encouragement regulation in general and it is compulsory to pay the salary through the account of card for some unit of business

 For the Department of Planning and Investment: needs to build up the regime of encourage policy and priority for the enterprises installing the machine of brushing card by giving the tax incentive and some relevant programs

1 Association of Vietnamese Bank Card, Operation report Card 2008, operation orientation in 2009, 2009, Hà Nội

2 Association of Vietnamese Bank Card, Operation report Card 2009, operation orientation in 2010, 2010, Hà Nội

3 Association of Vietnamese Bank Card, Operation report Card 2010, operation orientation in 2011, 2011, Hà Nội

4 Bank card technology Jounal in 2009-2010

5 Goverment (2006), "Projects non-cash payment in period 2006 – 2010 and orientation to 2020”, Hanoi

6 Porter, M.E (1990,1998) “ The competitive Advantage of Nation”, Free Press, New York, 1990

7 Porter, M.E (1990,1998) “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, Free Press, New York, 1980

8 Philip Kotler, Kevin Keller, Mairead Brady, Malcolm Goodman, Torben Hansen “ Marketing Management” , Pearson Prentice Hall Press, New York, 2009

9 State bank of Vietnam, Technological achievements and mordern banking service - Science Conference material , 2006, Ha noi

10 State bank of Vietnam , Card operation report 2009, operation orientation in 2010, 2010, Hanoi

11 Trương Đoàn Quốc Dũng " Development of card service require synchronous solutions to create new turnpoints”, Finance and monetary market Journal, No 15/ 2008

12 Trần Văn Hiệu, “Discussion on the development card payment customers of commercial banks”, Finance and monetary market Journal, No 12, 2010

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QUESTIONAIRE FORM 1 – (Merchant) I.General information

II Content Please tick “۷” at the propriate answer:

Question 1: Do you know the current promotion program of VietinBank

Question 2 : If yes, please give the name of the current Programge

 “ Quốc khánh trọn niềm vui”: ………

 “ Kỳ nghỉ vàng mừng Quốc Khánh”: ……

 “ Thanh toán nhanh tay, quà lớn trao ngay”: ………

Question 3: If yes, please give the time of the programe

Question 3 : Fill in some detail of the Programe ( If yes )

Bonus per 500.000 vnd card payment sales

Bonus per card payment transation

Question 1 Selection Question 2 Selection Question 3 Selection Don't know 59 24% Answer 1 22 9% Answer 1 25 10%

QUESTIONAIRE FORM 2 – (Customer) I.General information

You are : Age: … Card using ……

II Content Please tick “۷” at the propriate answer:

Question 1 : Have you ever use card payment method instead of cash payment

 I don’t know this function of my card ………

Question 2 : Why you choose this bank card for paying ( if yes at question 1)

 My receiving - salary card of company ………

Question 3: When you choose a certain bank POS to pay ( card payment method)

Question 1 Selection Question 2 Selection Don't know 110 44% Answer 1 121 48%