Solutions to non cash payment improvement at agribank lang ha branch,graduation thesis

INTRODUCTION

Rationale

In the era of regional and international economic integration, Vietnamese banks are encountering intense competition from both local and foreign institutions To ensure sustainable growth, these banks must continuously innovate and enhance their products and services, particularly by integrating technological advancements into their operations to align with global trends in the digital age.

Commercial banks play a crucial role in economic development, particularly as payment intermediaries While cash payments have been essential since their inception, they are increasingly inadequate for modern commodity production and circulation due to issues related to time, cost, and delivery Additionally, the rise in money circulation to facilitate goods exchange contributes to high inflation rates Non-cash payment methods offer a solution to some of the limitations associated with cash transactions.

The rise of non-cash payments within the banking system has revolutionized commercial transactions, offering significant advantages for customers, banks, and the government As non-cash payment methods evolve, they enhance modern banking services and promote integration into the global finance and banking landscape Additionally, these payment processes are faster, more accurate, and cost-effective For governments, non-cash payments facilitate better control over the macro-economy and improve the effectiveness of monetary policy.

The whole banking system in Vietnam in general and Agribank in particular has continuously carried out development strategy of tailored services and products via

Agribank's strategies emphasize the provision of diverse, professional, and convenient products to meet customer demands, aiming to establish a high-quality, safe, and efficient non-cash payment system However, both Agribank and Vietnamese commercial banks face limitations and challenges in their non-cash payment services that require resolution.

To enhance the quality of non-cash payment services at Agribank, it is essential to evaluate the current state and effectiveness of these services This graduation thesis will propose targeted solutions aimed at improving service quality and ensuring customer satisfaction.

TO NON-CASH PAYMNET IMPROVEMENT AT AGIRBANK LANG HA BRANCH”.

Research Objectives

The main objectives of the study are

 To provide the theoretical framework of the non-cash payment in terms of definition, significance, main types and their operations, which create the essential foundation for the reality analysis

 To illustrate the current background of the non-cash payment at Agribank and evaluate its typical achievements and drawbacks

 To provide some solutions to the improvement and development of non-cash payment at Agribank

Scope and Subject of the study

 Subject of the study: theoretical framework and practice related to developing non-cash payment at Agribank

This study investigates non-cash payment methods at Agribank from 2011 to 2015, highlighting the limitations of time and conditions It also offers solutions and recommendations to enhance these payment systems.

Le Phuong Anh-K15ATCB Page 3

Research Methodology

The study was conducted using secondary data sourced from Agribank Lang Ha's annual reports and consolidated business activity statements from 2011 to 2015 The graduation thesis was developed through a systematic process.

Step 1: Collect information from internal documents of Agribank Lang Ha branch related to the field of study

Step 2: Study theoretical literature from published textbook to build up basis for evaluation

In addition, the following methods and techniques are used to suggest solutions: analysis, comparison and synthesis.

Research Question

To achieve above objectives, three questions will be addressed in this study as follows:

 What are characteristics, roles, classification and regulation on non-cash payment?

 What is the current background of non-cash payment at Agribank?

 What are solutions to the improvement of non-cash payment at Agribank?

Research Structure

In addition to lists of abbreviations, references, tables, figures, the main content of the thesis consists of 5 chapters as follows:

Chapter 2: Theoretical framework of non-cash payment

Chapter 3: Current background of non-cash payment at Agribank

Chapter 4: Solutions to develop non-cash payment at Agribank

THEORETICAL FRAMEWORK OF NON-CASH PAYMENT

Definition

Non-cash payment, as defined in "Bank Accounting" by Master Nguyen Minh Phuong from the Banking Academy, refers to the method of settling transactions for goods and services without using physical cash This process involves transferring funds electronically from the payer's account to the payee's account or through intermediaries like payment service providers.

According to http://www.investorwords.com/, non-cash payment is a method of paying for goods and services that does not involve the exchange of cash.

Characteristics of non-cash payment

The launch of non-cash payment method associated with the launch of the recording cash and the development of banking system Non-cash payment, therefore, has some following characteristics:

The movement of money and commodities operates independently in both time and space, allowing for payments to be made through the transfer of funds from the buyer's account to the seller's account, either before or after the delivery of goods, rather than requiring a direct exchange of money for goods.

In non-cash payment systems, transactions are recorded through accounting books, where funds are transferred from the buyer's account to the seller's account, either within the same bank or across different banks The payment amount is specified in the documentation used by banks to facilitate these transactions for the involved parties.

In non-cash transactions, three key parties are involved: payment providing institutions such as commercial banks and other credit institutions authorized by the State Bank of Vietnam (SBV), the payer (buyer), and the beneficiary (seller).

Roles of non-cash payment

Non-cash payments enhance money circulation and increase capital velocity within the economy Additionally, they enable the central bank to monitor and manage the volume of transactions among residents, thereby facilitating the effective implementation of monetary policy.

 Reducing circulation costs and increasing mobilizing funds

Customers open accounts to ensure timely and quick payments However, account-holders must maintain a specified balance for certified cheques and debit cards, resulting in temporarily idle funds at low cost for banks By effectively utilizing these resources, banks can enhance profitability, gain a competitive edge, and contribute positively to the national economy.

Demand deposits enable banks to enhance profitability by supplying funds to the economy at a low cost This allows banks to offer competitive lending interest rates, which encourages businesses and individuals to borrow money for manufacturing expansion and investment, ultimately stimulating economic growth.

 Expanding payment subjects and increasing total sales of payment

Non-cash payments offer an effective, safe, reliable, accurate, and quick method for settling transactions for goods and services This approach enhances public trust in the banking system, encouraging both individuals and businesses to utilize banking services for their payment needs.

Non-cash payments offer a secure alternative to cash transactions, helping clients avoid potential losses from theft, disasters, or fires With the convenience of ATM cards, customers can swiftly and easily pay for goods and services without the need to carry cash.

The banking system is actively working to transform non-cash payments into a universally accepted payment method across society Customers who open accounts with any bank will benefit from a range of enticing promotional programs.

Non-cash payment methods allow customers to simply present the required documents to their bank, which then processes the payment to the beneficiary on their behalf This convenient approach saves customers both time and travel expenses.

 Declining proportion of money in circulation

Implementing non-cash payment systems not only reduces expenses like issuance and circulation costs but also enhances the speed of money circulation This advancement lays a solid foundation for effective planning and execution of monetary policies.

Non-cash transactions are kept in books thereby banks can control operation of different economic units in easy way

Types of Non-cash payment

The government and the State Bank of Vietnam are actively enhancing non-cash payment systems by studying and implementing legal documents that establish a robust legal framework for these payment methods This comprehensive system of regulations supports the effective operation of non-cash payment solutions.

 Law on the State Bank of Vietnam, and Law on Credit Institutions published in

2010, which referred to bank payment

 Law on negotiable instruments of the Socialist Republic of Vietnam-published in 29 November 2005

 Decision 30/2006/QD – NHNN published by the Governor of State Bank of Vietnam in 11 July 2006, issuing regulations on supply and use of cheques

 Decree 101/2012/ ND-CP (22 November 2012) by Government on non-cash payment

 Circular 46/2014/ TT-NHNN published by the Governor of State Bank of Vietnam in 31 December 2014, issuing regulations on Non-cash payment services

According to all legal documents above currently, there are 5 means of non-cash payment used to make payment among individuals and organizations in the economy, namely:

Cheque is an order in writing to your bank to pay money from your account to another account or someone else

Parties involve in the operation process of cheque payment including:

 Drawer is a person who writes cheque

 Drawee is a bank or a payment providing institution who is obliged to pay for cheque under drawer’s order

A beneficiary is an individual who possesses a cheque that either has their name inscribed on it or states "Pay to the holder." Additionally, the cheque may be transferred to the beneficiary through a series of endorsements, marked by a sequence of signatures.

A clearing house, designated by the State Bank of Vietnam (SBV) or authorized institutions, is responsible for organizing and managing the exchange and clearance of cheques It also determines the financial obligations arising from cheque clearing for banks and other payment service providers authorized by the SBV.

There are many different types of cheque, however, cheques are commonly used in non-cash payment including certified cheque and cheque for transfer

A certified cheque is a secure payment method where the drawee guarantees that sufficient funds are available in the account holder's account, ensuring the cheque will not bounce This type of cheque also verifies the authenticity of the account holder's signature Certified cheques are commonly used in transactions where the recipient needs assurance regarding the account holder's creditworthiness.

 Crossed cheque: a cheque with 2 crossing lines down the middle of the cheque and the word 'ACCOUNT PAYEE only ' written between these lines, is called

Le Phuong Anh-K15ATCB Page 9 crossed cheque It can be cashed by passing through payee’s account (or can be cashed by putting into payee’s account)

A payment order is a directive from an account holder to their bank, instructing the transfer of a specified sum of money to a beneficiary's account, whether at the same bank or a different one This process is commonly used for settling payments for goods and services or for remitting funds on behalf of customers across various banks.

Parties involve in the process of payment order including:

 Payer: an individual who sends a payment order instructing his bank to make payment

 Beneficiary: final addressee of the transfer of the amount of the payer's payment order

 Payer’s Bank: means the bank to which the payer’s payment order is issued

The term "beneficiary's bank" refers to the financial institution specified in a payment order where the beneficiary's account will be credited, or which is responsible for disbursing the payment amount to the beneficiary as directed by the payer's payment order.

Payment orders are favored for their convenience and speed, but they come with inherent risks Buyers who pay in advance and sellers who deliver before receiving payment both assume significant risks in this payment method.

A collection order is a directive issued by the seller (exporter) to their bank, allowing it to present documents to the importer’s bank after the delivery obligation is fulfilled This process aims to secure payment, accept bills of exchange, or meet other specified terms and conditions.

Parties involve in process of payment by collection order including:

 Importer/Buyer: a person who pay money to the beneficiary through this bank account

 Exporter/ Beneficiary: is normally a stand for the seller of goods, who writes collection order to the remitting bank (exporter’s bank) to obtain payment from importer/buyer

 Seller’s bank is the bank to which the payer’s collection order is issued

A buyer's bank refers to the financial institution specified in a payment order where a beneficiary's account will be credited according to the payer's instructions, or the bank responsible for disbursing the payment to the beneficiary as directed by the payer.

The collection order process can be complex, often leading to discrepancies between the seller's stated amount and the actual value of goods received by the buyer As a result, collection orders are typically utilized for precisely measured services, such as electricity, water, and mobile phone bills.

2.4.4 Letter of credit/ Documentary credit

A letter of credit is a financial agreement in which a bank, upon the request of a customer (the L/C applicant), issues a document guaranteeing payment or acceptance of a bill of exchange (B/E) when presented with the required documents that meet the stipulated terms and conditions of the letter of credit.

Parties involve in the process of payment by L/C including:

 Applicant of L/C is the buyer or the party who requests the letter of credit to be issued

 Beneficiary is the seller or the party to whom the letter of credit is addressed

 Issuing bank is the bank which opens a letter of credit on behalf of the applicant and forwards it to the advising bank for delivery to the beneficiary

An advising bank is a local branch or correspondent bank near the beneficiary's location, where the issuing bank sends the letter of credit or a notification about its issuance This bank's role is to inform the beneficiary about the letter of credit, doing so without any obligation or engagement.

Letters of Credit (L/C) offer significant protection and security for both buyers and sellers in international trade Sellers can trust that payment will be processed by an independent party, provided they meet the specified terms and conditions of the L/C Conversely, buyers are guaranteed that payment will only be made to the seller once the bank has received the required title documents outlined in the L/C.

While letters of credit (L/C) are essential for secure transactions, they can be time-consuming due to the numerous steps involved and the need for precise documentation The process requires high accuracy, as multiple parties test the documents Additionally, L/Cs do not guarantee that the shipped goods match the order, nor do they protect buyers and sellers from potential disputes in their relationship Consequently, the overall transaction costs associated with L/Cs tend to be relatively high.

A payment card is a cashless payment tool issued by financial institutions, enabling cardholders to purchase goods and services or withdraw cash from ATMs and merchant locations.

Parties involve in the process of payment by cards including:

Overview of Agribank

3.1.1 Foundation and development of Agribank

Agribank was established under Decree No 53 / HĐBT dated 26 th March, 1988 of the Council of Ministers (now the Government) on the establishment of specialized banks

On 15 th November, 1996, the Prime Minister authorized the Governor of the State Bank of Vietnam to sign Decision No 280 / QD – NHNN on renaming bank as Bank for Agriculture and Rural Development of Vietnam So far, Agribank is a State-owned enterprises operating in the field of currency trading, always eager to grow and develop activities aiming at promoting economy with the motto "business performance of the enterprise is Bank’s profits"

Along with the implementation of the above target, on 17 th March1997, Agribank-Lang

Ha Branch was founded and officially put into operation This branch is level I, grade

As a prominent branch of Agribank, we are recognized as one of the largest banking institutions in Hanoi Since our establishment, we have successfully implemented a comprehensive range of modern banking services, earning a strong reputation both domestically and internationally.

With over 18 years of construction and development, Lang Ha branch has grown from just 13 staff members to more than 250 The branch prides itself on innovation and aligns with the rapid advancement of modern, safe, and reliable electronic systems that meet international standards.

Lang Ha branch boasts a comprehensive network throughout the city, featuring seven locations that provide modern banking products and services These offerings are delivered swiftly and at competitive interest rates and fees, ensuring a range of multi-utilities The branch is committed to enhancing and maintaining its prestige and brand reputation in both domestic and international markets.

Agribank-Lang Ha Branch, a dependent accounting units, in which the director is the person directly managing and taking responsibility to the General Director Agribank

The Board of Directors, responsible for daily operations, includes a Director and several Deputy Directors The Lang Ha Branch comprises eight key departments at its head office: the Department of Foreign Currency Trade and International Payment (FC&IP), the Department of Marketing Service (MS), the Plans and Businesses Department (P&B), the Credit Department (CR), the Accounting Department (AC), the Computing Department (CP), the Administration and Human Resources Department (A&HR), and the Internal Inspection Department (ININ).

Agribank Lang Ha has 7 Transaction Offices as follows:

+ Trading Room No 1-01 Dao Duy Anh

+ Trading Room No 2-179 Phung Hung

+ Trading Room No 3-159 Doan Ke Thien

+ Trading Room No 5 – C2 Trung Kinh

+ Trading Room No 6-180 Tran Duy Hung

+ Trading Room No 7-106 Dao Tan

+ Trading Room No 8-102 Khuat Duy Tien

Main functions and duties of Agribank, Lang Ha Branch are direct currency trade, credit and banking services in the area of Hanoi city Businesses include:

- Accept deposits in different terms such as demand deposits and time deposits, payment deposit in domestic or foreign currency from individuals and economic entities

- Issue certificate of deposits, bonds and others forms of mobilization in accordance with Agribank’s regulations

- Receive financing funds, entrusted funds from the Government and economic entities

- Borrow money from domestic credit institutions under Agribank’s regulations

- Agribank lend customers in need of capital for developing manufacture, service and investment in short-term, medium-term and long-term

- Appraise and Reappraise credit project, directly finance projects authorized by the General Director of Agribank

Besides, Agribank implements other businesses such as:

Agribank actively participates in foreign currency trading by buying and selling various foreign currencies, facilitating international payments, and offering additional services in accordance with the foreign currency policies set by the Government and the State Bank of Vietnam (SBV).

- Staff training: the branch carries out training staff according to authorization and implements other duties divided by General Director of Agribank

3.1.3 Business outcomes of Agribank in the period from 2013 to 2015 i Fund Mobilization

Fund mobilization is essential for the growth and development of banking operations Understanding its significance, Agribank Lang Ha branch has implemented various strategies to improve both the quality and quantity of its fund mobilization efforts.

Table 1: Fund mobilization at Agribank Lang Ha

(Source: Consolidated statement in the period 2011 – 6/2015)

The table 3.1 shows situation of the growth in mobilizing fund at Agribank between

Between 2011 and 2015, Agribank successfully stabilized its fund mobilization through the diversification of products and services, alongside effective promotional programs aimed at attracting idle funds This growth in fund resources significantly enhanced Agribank's capacity to meet the rising capital demands of businesses while ensuring adequate liquidity.

In a highly competitive landscape dominated by international and domestic banks, Agribank, particularly the Lang Ha branch, is committed to providing customized products and services to various customer segments This dedication has led to positive results in fund mobilization from different economic sectors, achieving 3,930 billion VND in 2015 and 7,432 billion VND in 2016 However, the growth in fund mobilization poses risks due to an unbalanced structure, with economic institutions constituting 61% of the total funds in 2015 Notably, Viettel Corporation contributed over 3 trillion VND, while the Petroleum Corporation added 350 billion VND This reliance on a limited number of sources may expose Agribank to liquidity challenges and hinder the stability of its funding.

A notable trend in sustainable fund mobilization is observed, with over 12-month sources comprising 54% of the total, ensuring a stable capital base for the bank However, if interest risks are not effectively managed, the bank may face significant costs and interest rate challenges.

From 2011 to 2015, Vietnam's economy experienced stagnation and slow growth, largely influenced by global economic fluctuations During this period, Hanoi faced a range of complex challenges, impacting nearly all businesses in the region.

Le Phuong Anh-K15ATCB Page 20 highlights the challenges faced in manufacturing and business operations, leading to increased caution in investment decisions regarding manufacturing expansion Consequently, the bank's credit growth has encountered obstacles, making it less appealing to potential investors.

Table 2: Lending at Agribank, Lang Ha Branch

(Source: Consolidated statement on credit operation between 2011 and 2015 at Agribank Lang Ha)

As can be seen from the table 2, the outstanding loans have fluctuated downward over the years In 2012, the volume of loans went down by 416 billion compared with 2011

In 2013, the amount of loans decreased to 3,073 billion (a decrease of 788 billion, equivalent to 20.4%) in comparison with the year 2012 Outstanding loans of branch in

2014 reached only 1,944 billion (a decrease of 1,129 billion, equivalent to 36.7%) compared to 2013 The downturn in loan portfolio of the branch between 2011 and

In 2014, the Vietnamese macro-economy faced significant uncertainties, marked by rising market interest rates and restrictive credit policies Additionally, the independent operation of the Bach Khoa branch, which was spun off during the year, had a considerable impact on its outstanding balance.

Figure 1: Credit structure at Agribank Lang Ha from 2011 to 2015

Over the past five years, the credit structure has undergone significant changes, with a decline in the proportion of outstanding medium and long-term loans, which still remained higher than short-term loans Large organizations and corporations emerged as the primary borrowers, aligning with the fund mobilization structure However, the concentration of outstanding loans among a limited group of customers poses a risk, as it may reduce management costs for the branch but simultaneously increase credit risk Meanwhile, the foreign currency loan balance has remained relatively stable, particularly noted in 2015.

Le Phuong Anh-K15ATCB Page 22 converted was 341 billion VND, accounting for 20% of total loans This is consistent with SBV’s policy of foreign exchange market stability

Table 3: Bad debt ratio at Agribank Lang Ha Branch

(Source: Consolidated statement over years from 2011 to June 2015)

Table 3 illustrates the bad debt ratio at Agribank Lang Ha over the specified period, highlighting effective control of bad debts and an overall improvement in credit quality during the last five years.

2015, the bad debt ratio declined to 4.42% which was 0.06% less than 2014

Table 4: Main business outcomes at Agribank Lang Ha branch

(Source: Consolidated statement of businesses from 2011 to2015 at Agribank Lang Ha)

Non-cash payment at Agribank in the period 2011-2015

3.2.1 Payment services at Agribank, Lang Ha

The Lang Ha branch is experiencing significant growth in its banking system, particularly in payment activities and non-cash payments According to Agribank's annual report, this progress reflects the branch's commitment to advancing modern banking solutions.

In 2015, Lang Ha branch opened over 46,804 individual accounts, establishing a crucial connection between the bank and its customers This growth allows the bank to effectively cross-sell various services and products, including savings, lending, overdrafts, and ATM cards, thereby enhancing its product diversification To address the rising customer demand, the branch prioritizes payment services and leverages information technology to streamline payment processes These initiatives not only improve payment efficiency and save time but also bolster the bank's reputation.

Table 6: Sales of payments at Agribank, Lang Ha between 2011 and 2015

(Source: Consolidated statement on business outcomes from 2011 to 2015)

Between 2011 and 2015, non-cash payments constituted the majority of total transactions at Agribank Lang Ha, reflecting significant progress following the government's five-year non-cash payment development initiative Specifically, the volume of non-cash payments increased from 49,892,737 million VND in 2011 to 67,099,746 million VND in 2015 Over this period, non-cash payment sales consistently surpassed cash sales, consistently representing over 75% of total payments each year This achievement can be attributed to the effective integration of information technology in banking, along with precise guidance and innovative strategies aimed at promoting non-cash payment methods.

Le Phuong Anh-K15ATCB Page 25 types of non-cash payments Agribank Lang Ha has significantly contributed to the development of Vietnam’s banking system in general Agribank in particular and

Table 7: Total sales of non-cash payments in the period from 2011 to 2015 at Agribank

Between 2011 and 2015, the Lang Ha branch experienced a significant upward trend in total sales of non-cash payments, starting from 49,892,737 million VND in 2011 By 2015, total sales reached 67,099,746 million VND, reflecting a consistent growth in non-cash transaction volumes The sales distribution over the years showed that 49.70% of the total sales were recorded in 2011, with subsequent years contributing to the overall increase This data underscores the growing preference for non-cash payment methods in the region.

In 2015, Le Phuong Anh-K15ATCB reported a significant increase in total sales, reaching 65,025,054 million VND During this period, payment methods such as payment orders, bank cards, and cheques exhibited a positive growth trend, while two other payment types experienced a steady decline.

Payment orders are the most popular non-cash payment method due to their convenience and straightforward process, accounting for over 55% of total non-cash payment sales In 2013, payment order sales peaked at 30,576,327 million VND, marking a significant rise from 12,357,598 million VND in 2011 Similarly, card payments grew from 12,357,598 million VND in 2011 to 28,390,738 million VND by 2015 Cheque payments also showed an upward trend, increasing from 11,250 million VND in 2011 to 31,056 million VND in 2015, although their overall share remained low, fluctuating between 0.02% and 0.05%.

During the analyzed period, L/C payment significantly declined, with 2015 figures at only 5,377,880 million dongs, approximately one-third of the 2011 amount In contrast, sales from collection orders experienced fluctuations, starting at 11 billion dongs in 2011, rising to 111,222 million dongs in 2012, and ultimately dropping to 25,308 million dongs in 2015, which represented a mere 0.04% of the total.

In Vietnam, cheques remain the least popular non-cash payment method, particularly at Agribank The bank offers two types of cheques: certified and crossed Crossed cheques are often inconvenient, as beneficiaries without an account at the branch face long wait times for payment Certified cheques, on the other hand, require the bank to freeze an amount equal to or greater than the cheque's value to prevent bounced payments.

This leads to the fact that customers probably hesitate to choose this type of payment

Table 8: Payments by cheque at Agribank Lang Ha from 2011 to 2015

Year Criteria Account payee cheque

When it comes to crossed cheque, it is used more than certified cheque because of convenience, simple procedure and wide using sphere

In 2012, Agribank Lang Ha reported crossed cheque payments totaling 17,050 million dongs, marking an increase of 9,691 million dongs from the previous year However, total sales of crossed cheque payments experienced a decline over the past five years, with a notable decrease of 1,775 million dongs, or 10.4%, in 2013 By the end of 2015, payments made via crossed cheque reached 21,491 million dongs, accounting for 69.2% of all cheque payments.

Meanwhile, certified cheque accounted for around a third of total cheque payments In

In 2012, the volume of certified cheques reached 8,097 million dongs, representing 32.2% of total cheque payments, an increase of 4,306 million dongs from 2011 Despite this growth, its proportion decreased due to a notable rise in crossed cheque volumes By 2013, certified cheques accounted for 39.5% of total payments, up from 32.2% in 2012 The highest sales of certified cheques occurred in 2014, peaking at 11,204 million dongs, an increase of 1,069 million dongs from 2013, followed by a decline to 9,569 million dongs in 2015.

Figure 2: Structure of payments by cheque at Agribank Lang Ha from 2011 to 2015

Figure 2 illustrates the total cheque payment sales made by both domestic and foreign customers It is evident that domestic enterprises and individuals significantly outpaced foreign customers in cheque usage Specifically, domestic customers contributed 10,662 million VND in cheque payments in 2011, which surged to 20,557 million VND in 2012, maintaining an upward trajectory through 2015 In stark contrast, foreign customers' cheque payments totaled only 588 million VND in 2011.

Payments by cheque at Agribank, Lang Ha branch

Domestic enterprises and individual International enterprises and individual

Le Phuong Anh-K15ATCB Page 29 ii Standing order/ payment order

Payment orders are the most advantageous payment method, widely utilized for purchasing goods, services, and remittances, both within the same bank and across different banks Data indicates a consistent increase in payment order transactions, with 25,258,245 million dongs recorded in 2011, rising by 1,997,990 million dongs in 2012 The transaction volumes continued to grow, reaching 30,576,327 million dongs in 2013, 32,257,050 million dongs in 2014, and 33,350,072 million dongs in 2015.

In 2011, payment orders represented the largest share of total non-cash payment volume at 50.63% This figure peaked at 55.57% in 2013, followed by a decline in 2014.

2015 at the expense of the increasing popularity of payment cards

The payment order is favored for its extensive payment options, straightforward process, and ease of use Buyers can easily set up a standing order to direct their bank to make payments to sellers This method allows for quick and convenient money transfers, enabling beneficiaries to receive funds within minutes.

Historically, payment orders were utilized primarily between buyers and sellers with established trust, allowing payment for goods and services post-delivery, which posed a commercial risk for sellers due to potential fund misappropriation by buyers However, in modern transactions, payment orders can be employed even without mutual trust, as buyers now pay in advance, ensuring that sellers ship goods only after receiving payment This shift has significantly enhanced the appeal of payment orders for customers.

Le Phuong Anh-K15ATCB Page 30 iii Collection order

Table 9: Proportion of collection order

Year Sales of collection order (million USD)

Proportion of total international payment (%)

Evaluation about operation of developing non-cash payment at Agribank 36 1 Achievements

In the context of fierce competition of others organizations in local and abroad, Lang

Ha branch has been confirming its position in the economy in general and banking system in particular thanks to director’s insight directions and all officers’ effort

 The remarkable improvement in non-cash payments infrastructure

The bank has made significant investments in modern technology to enhance its payment activities, collaborating with RIAS experts to implement the IPCAS centralized management system, which has greatly improved transaction processes Additionally, the bank's interbank payment system via Banknet streamlines payments, while the installation of monitoring cameras and copy-proof devices bolsters cardholder security during transactions.

 A steady increase in the number of credit card and ATM

Agribank Lang Ha branch offers enticing promotions, including the complimentary issuance of Agribank Visa and Master Cards with free 3D-secure features Additionally, the bank collaborates with resorts and ticket agents to provide exclusive benefits for customers who open new cards.

 An increase in the number of customers joining in e-payment

E-payment is one of services that the bank has been continuously upgraded and diversified in recent years amid the rapid growth and highly practical application of information technology The bank has carried out numerous promotions to encourage customers to involve in electronic payment system Calculating to 2015, there were 17,896 customers registering mobile banking at the bank, an increase of 1,214 registers over 2014

 Unexpected quality of non-cash payment

Despite having modern facilities and qualified staff, the bank experienced system failures and line malfunctions in the final months of the year due to an overwhelming volume of transactions This resulted in setbacks in the payment process, adversely affecting customers' businesses.

Debit cards offer essential functions such as cash withdrawals, balance inquiries, and account transfers; however, ATM machines may occasionally be unavailable due to cash shortages or technical issues Additionally, customers must visit their original account-opening location to register for interbank and mobile banking services, as online registration is not permitted This process creates limitations and inconveniences for users.

 Complicated procedure of issuing ATM

At Agribank, customers face the inconvenience of completing multiple forms to register for ATM services over the counter In contrast, Vietcombank (VCB) and ACB streamline the process by enabling customers to register online by simply filling out a comprehensive form After a brief processing period, these banks promptly deliver the ATM cards directly to the customers.

The absence of an independent marketing department at the bank places the responsibility of marketing on bank clerks and customer relation officers While this allows them to acquire knowledge about various services and products, it often leads to a lack of deep understanding of their benefits, making it challenging for them to present the full range of services to customers Additionally, effective marketing requires specialized skills and professional training to effectively attract customer attention.

- A rooted habit of paying in cash

Customer payment behavior is significantly influenced by their habits and awareness Cash payments have become ingrained in people's routines, transcending various income levels Many individuals prefer cash transactions due to the immediate exchange they offer, eliminating the wait associated with processing non-cash payments Changing these established habits and perceptions regarding non-cash payment methods requires considerable time and effort.

The lack of a comprehensive legal framework for payment systems and instruments has been a significant barrier to the advancement of e-payment innovations Despite the introduction of laws like the Law on Electronic Transactions (2005) and the Decree on Banking Electronic Transactions (2007), these regulations remain inadequate to address the rapidly evolving e-payment landscape Emerging sectors such as e-money, mobile banking, internet banking, and payment gateways are often subject to minimal regulation Furthermore, existing regulations concerning payment systems and the standardization of e-payment instruments, particularly e-money and prepaid cards, are incomplete.

Many companies pay salaries through bank accounts, but employees often find that their earnings only cover basic daily expenses like rent and food As a result, account holders tend to withdraw their salaries immediately to fulfill their immediate financial needs Additionally, both buyers and sellers favor cash transactions for essential purchases due to the convenience it offers.

The bank lacks a dedicated department for market analysis and exploitation, resulting in officers handling both marketing and product execution without professional training in marketing skills This deficiency leads to a poor understanding of the bank's products and services, causing officers to provide inadequate information to customers Consequently, customers have limited knowledge or misunderstand the offerings, which diminishes the appeal of non-cash payment options.

- Lack of preferential policies for card acceptance points

Many business units are reluctant to accept card payments due to the associated bank fees that impact their revenue Although some merchants have contracts with banks to accept cards, they often impose limitations such as offering discounts for cash payments or charging customers who pay with cards Additionally, Agribank Lang Ha has yet to implement effective policies to incentivize card acceptance and promote non-cash transactions.

Agribank Lang Ha branch is enhancing its business operations through advanced technology, notably with the launch of IPCAS, which significantly upgrades its information technology system This improvement facilitates the development of modern services, including automated collection orders and international payments However, there remains a gap in the software needed to meet diverse customer demands, highlighting a shortage of application software for managing and delivering products and services based on modern technology.

SUGGESTED SOLUTIONS TO IMPROVING NON-CASH

General solutions

4.1.1 Enhancing the quality of human resources to ensure profession in business

Human resources are crucial for the success and growth of a bank, as they directly influence the development of products and services and the execution of strategies A notable weakness within the branch is the inconsistency in staff professionalism, with some leaders lacking essential managerial skills and experience To address these issues, the bank should implement comprehensive solutions aimed at enhancing the quality of its human resources.

 Improving the quality of recruitment

Currently, Agribank lacks a formal recruitment mechanism, leading to employment decisions that rely on policies, relationships, or allocations rather than official examinations This absence of a structured selection process hinders the bank's ability to identify qualified candidates In contrast, joint-stock commercial banks prioritize recruitment, focusing on attracting young, skilled, and innovative individuals To remain competitive in a challenging market, Agribank should establish a rigorous recruitment process with standardized systems and defined phases.

- Public recruitment on mass media to attract more potential candidates

- Organize recruitment process strictly in accordance with process instead of pass-over implementation and formalism

Banks should prioritize hiring young employees who excel in soft skills, including computer and language proficiency, as well as those who are highly qualified, experienced, and enthusiastic Additionally, implementing preferential mechanisms for officers in remote areas can effectively attract local talent and enhance workforce diversity.

To enhance staff performance and foster a positive work environment, the bank should implement professional training that aligns with real-world business applications Additionally, establishing a system of rewards and penalties will motivate employees to contribute creatively and actively to the organization.

 Change awareness and perception of modern bank

Regular training sessions for officers and staff are essential to communicate new policies, modern products, and services, ensuring comprehensive awareness of offerings in a competitive landscape By fully understanding the products and services, as well as the bank's strengths and weaknesses compared to competitors, staff can proactively enhance and develop offerings that meet customer needs.

 Enhance staff’s qualification and profession

The branch must actively collaborate with Agribank's training center to promptly introduce new products and services to staff while addressing any questions or challenges that arise This approach ensures that employees are well-equipped to provide effective support to customers and offer guidance on modern banking services, including Internet banking and card services like Visa and MasterCard.

Effective communication and negotiation skills are crucial for business growth When staff members excel in communication, customers are more likely to feel valued and engaged with the bank’s offerings However, certain departments within the branch are currently struggling with these skills, leading to customer dissatisfaction To address this issue, the bank should consider bringing in psychological experts to enhance the communication and interpersonal abilities of its employees.

To enhance employee strengths, banks must assign officers to appropriate positions while continuously monitoring their progress Implementing online professional assessments will help evaluate individual capabilities, foster creativity, and encourage the sharing of ideas and initiatives among staff.

 Change award regime for staff

The bank should have a good award regime to encourage staff’s creativity and effort

The Lang Ha branch, as a state-owned commercial bank, currently implements an egalitarian pay structure rather than compensating based on individual capability and performance Establishing an appropriate salary system is crucial for attracting top talent and enhancing productivity, which is vital for maintaining competitiveness with other banks.

4.1.2 Improving Effectiveness in Marketing and Advertisement of products and services

 Promote propaganda and advertisement of services and products

In today's rapidly growing global market, advertising plays a crucial role in attracting potential customers by effectively showcasing products and services Successful advertising campaigns not only draw in more customers but also enhance their frequency of engagement Therefore, it is recommended that banks leverage mass media and social networks to broaden their reach and appeal to a larger audience.

- Carrying out direct marketing strategies such as sending email and leaflets to customers, directly consulting or organizing customer seminars,…, or social activities to propaganda AGRIBANK’s services

- Public promotion programs on mass media to draw customers’ attention to modern products and services of the bank

- Upgrade and modernize website of Agribank on the basis of modern technology advancement in order that customer can be easy to find out and update new products and services

 Develop the brand of bank

To enhance professionalism in service delivery, the branch should simultaneously implement key components such as brand identification systems, a corporate culture handbook, dress regulations, bank teller etiquette, and customer care processes for all officers and transactions.

The branch must continuously supervise its transaction offices to ensure that equipment, facilities, and decor align with Agribank's brand identity, promptly addressing any substandard offices Additionally, the ATM system should be strategically located in high-traffic areas with convenient transportation access to facilitate card transactions It is essential for ATMs to operate 24/7 and be regularly checked to prevent issues like running out of cash or paper To improve service quality, ATM locations should feature clear and detailed signage to attract customer attention.

Transaction offices should be designed with a formal and spacious layout, featuring a dedicated reception and advisory department to warmly welcome customers It is essential for bank tellers and all staff to maintain a polite and friendly demeanor to foster and strengthen the relationship between the bank and its customers.

Implementing various sponsorship and social security initiatives in hospitals and schools is an effective strategy for enhancing the bank's image and promoting its services These programs not only strengthen brand awareness but also expand the range of services offered to customers.

4.1.3 Modernizing banking technologies and renovating payment techniques and technology

 Promoting application of information and technology

In today's digital era, banks are increasingly adopting innovative technologies to enhance their modern banking services Agribank Lang Ha branch should prioritize investments in advanced technology, particularly in card facilities and the card acceptance network, while ensuring the system operates smoothly and securely Additionally, the branch must focus on researching and developing new card types and service features to meet evolving customer needs.

Solutions to main payment types

Payment orders are currently the most beneficial payment method for banks, significantly contributing to their revenue To enhance this payment option, a comprehensive and synchronized legal framework is essential Additionally, banks should actively promote the features and advantages of payment orders to increase customer awareness and encourage their adoption.

The current limitations of collection orders pose significant risks for sellers, particularly if buyers present counterfeit documents Additionally, buyers are required to ship goods before submitting the collection order to the bank, which can deplete their working capital for other investments This method is primarily utilized when there is a strong relationship and mutual trust between buyers and sellers, resulting in limited customer attraction due to the associated risks To enhance this service, banks must establish clear regulations outlining the obligations and responsibilities of all parties involved to mitigate risks Furthermore, investing in modern technology is essential for banks to ensure a quick, timely, and accurate payment process.

Letters of Credit (L/C) are complex payment methods commonly used in international trade, yet many buyers and sellers in Vietnam lack a clear understanding of their obligations and responsibilities Furthermore, banks have not prioritized the development of L/C services, resulting in lower competitiveness compared to major commercial banks like Vietcombank To enhance the appeal of L/C payments in import-export transactions, banks must focus on improving service quality and implementing effective advertising strategies to educate and encourage customers to utilize this payment option more frequently.

To enhance cheque usage, banks should actively promote cheques alongside other payment methods to increase community awareness While cheques offer convenience, customers often hesitate to use crossed cheques due to potential fines for exceeding their account balance To address this issue, banks could offer short-term loans to customers who inadvertently write cheques that exceed their balance Initially, this policy could be implemented for high-reputation customers, with ongoing research to refine eligibility criteria and limits This approach would benefit both the customers and the bank, ultimately boosting the bank's prestige and brand image.

To enhance customer satisfaction and boost usage, the bank should focus on diversifying its card offerings and enhancing their features Additionally, expanding card payment options through partnerships with intermediaries like supermarkets, shopping centers, and recreational facilities will further promote the adoption of card payments.

The bank should enhance customer convenience by increasing the number of ATMs and POS terminals in strategic locations, ensuring timely repairs to minimize downtime and prevent financial losses, thereby maintaining customer trust.

The bank must maintain collaboration with the telecommunications sector to enhance card payment technology and integrate new features that benefit customers A key priority is to ensure the seamless operation of the ATM system, particularly during peak hours.

Recommendations

The government must prioritize the development of a comprehensive legal framework that clearly outlines the powers and responsibilities of non-cash payment stakeholders, effectively managing legal risks This framework should align with international standards recommended by financial institutions, fostering a fair competitive environment and ensuring equal market access for similar entities By establishing a standardized legal structure, we can enhance customer protection mechanisms, implement fair dispute resolution processes, and limit cash transactions involving state budget funds, thereby improving the oversight of budget utilization.

Enterprise sectors represent a promising market for the growth of non-cash payment solutions, driven by their high transaction volumes and educated workforce To foster greater participation in digital payment systems, it is essential to implement supportive policies for businesses Additionally, the government should enforce strict regulations on the permissible cash holdings for enterprises, tailored to their size and industry.

The government is actively promoting the equitization of enterprises and enhancing the operations of the stock market Most stock market transactions are significant in value and primarily conducted through account transfers, highlighting the importance of stock market development.

The Le Phuong Anh-K15ATCB Page 49 market plays a significant role in advancing non-cash payment methods Additionally, the stock market presents a promising opportunity for raising substantial funds.

To remain competitive, SBV must prioritize the modernization and enhancement of its payment technology Adapting to global trends in modern payment methods is essential, necessitating the development of policies and strategies that leverage advanced technology This approach will ensure the delivery of seamless, synchronized, and rapid payment services.

Advertisement and propaganda significantly influence people's psychology, making it essential for SBV to collaborate with communication agents to promote the benefits and features of non-cash payments through mass media channels like the internet and television By effectively spreading knowledge and providing comprehensive information about the advantages, costs, and risks of various payment methods, this initiative aims to shift customer focus from cash transactions to non-cash payment options.

The State Bank of Vietnam (SBV) must enhance the integration of advanced technology to create a more synchronized ATM network across various banks Presently, the ATM systems are only connected through limited groups like Smartlink or Banknet, lacking a centralized approach from a competent authority This improvement would not only reduce installation and maintenance costs for both commercial banks and the SBV but also ensure cohesive operation throughout the banking system, addressing the issue of poorly placed ATMs.

The IBPS system is currently utilized for settling high-value transactions, while low-value transactions are primarily processed through interbank bilateral payment systems, with some conducted via IBPS In the realm of international payments, banks directly connect with the payment systems of international financial institutions.

Vietnam's payment system currently operates with overlapping connections among banks and financial institutions, requiring each entity to maintain separate links to global financial networks like SWIFT, MoneyGram, and Western Union To streamline this process, the State Bank of Vietnam (SBV) must collaborate closely with commercial banks to establish an Automated Clearing House (ACH) This new payment system aims to enhance automated and periodic services while effectively managing large volumes of low-value transactions and improving non-cash payment infrastructure.

Conclusions

Payment processing is a critical function in banking that significantly impacts economic growth and development To align with national modernization, industrialization, and international integration goals, banks must focus on enhancing and upgrading non-cash payment systems The advancement of non-cash payment methods is now regarded as a primary responsibility of the banking sector.

During 5-year period from 2011 to 2015, Agribank Lang Ha branch has taken various steps to develop and improve the quality of non-cash payments and gained optimistic achievements The branch has experienced a gradual growth in non-cash payments when total sales of non-cash payments consecutively increased to reach 67,099,746 million dongs in 2015, a rise of 4,935,419 million dongs compared with the previous year The branch has been offering full of non-cash payment types in which payment order is by far the most popular thanks to its convenience and simple procedure Besides, the branch is offering a wide range of products and services basing on advanced technology such as electronic banking Via actively coordinate with

Le Phuong Anh-K15ATCB Page 51 international card institutions, the branch has provided customers with numerous features of VISA or MASTER card

Despite the promising market potential and the demands of the financial economy, the bank's development remains lacking The branch faces challenges due to an incomplete technological infrastructure, ineffective marketing strategies, and limited product and service features To address the current state of non-cash payments at the branch, several solutions and recommendations for improvement are proposed in the final chapter.

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1 Agribank, Lang Ha branch, Consolidated Statements on products and services over 5 years from 2011 to 2015

2 Agribank, Lang Ha Branch, Consolidated Statements on credit operation from 2011 to 2015

3 Agribank, Lang Ha Branch, Financial Analyzing Statements from 2011 to

4 Agribank, Lang Ha Branch, Consolidated Statements on Businesses from

5 Dinh Duc Thinh, M.A.; Nguyen Hong Yen, M.A (2012) Kế toán ngân hàng

6 Edward G Hinkelman (2013) Short course in International Payments (2 nd ed)

7 Bergman, M., Guibourg, G., and Segendorf, B (2007) The Costs of Paying –

Private and Social Costs of Cash and Card Payments, Sveriges Riksbank Working Paper Series 212

8 Eastwood, G (2008) The Future of Payments Prepaid cards, contactless and mobile payments, Business Insights, Datamonitor, April 01

9 Decision 30/2006/QD – NHNN published by the Governor of State Bank of

Vietnam in 11 July 2006, issuing regulations on supply and use of cheques

10 Decree 101/2012/ ND-CP (22 November 2012) by Government on non-cash payment

11 Doan Thi Thu Huyen, Develop banking services at Agribank, Lang Ha branch

Le Phuong Anh-K15ATCB Page liii

Le Phuong Anh-K15ATCB Page liv

This graduation thesis could not have been completed without the invaluable support and motivation received throughout the research process The author expresses heartfelt gratitude to all who contributed to this journey, which is essential for fulfilling the requirements of a Degree in English for Finance and Banking.

I would like to extend my heartfelt gratitude to my supervisor, Ms Can Thuy Lien, for her invaluable support and guidance throughout the completion of my thesis Her encouragement and insightful feedback greatly enhanced my work, and without her motivation and direction, this thesis would not have been achievable.

I would like to express my heartfelt gratitude to my parents for their unwavering love, care, and constant support throughout my life Additionally, I extend my thanks to my siblings for their continuous encouragement and assistance.

I would like to express my gratitude to the staff at Agribank's Lang Ha branch for their invaluable support during my internship, particularly in providing me with essential insights into non-cash payment systems.

Le Phuong Anh-K15ATCB Page lv

I affirm that this thesis is my original work and has not been presented for any other degree or diploma at any university All information sourced from both published and unpublished works of others has been duly acknowledged within the text, and a comprehensive list of references is provided.

Le Phuong Anh-K15ATCB Page lvi

Non-cash payment systems are crucial for economic development globally, including in Vietnam While numerous studies have explored non-cash payment advancements in Vietnamese commercial banks, there is a lack of focused research on Agribank Lang Ha branch This thesis aims to analyze non-cash payment methods at the branch using techniques such as comparison and internal report analysis Findings indicate that payment orders are more favored than other non-cash payment types due to their straightforward procedures and time efficiency Additionally, the thesis offers solutions to enhance non-cash payment services at Agribank Lang Ha branch.

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ACKNOWLEDGEMENTS I DECLARATION LV ABSTRACT LVI TABLE OF CONTENTSLIST OF REFERENCES LVII LIST OF REFERENCES LIX LIST OF ABBREVIATIONS LIX LIST OF FIGURES AND TABLES LX CHAPTER 1: INTRODUCTION 1

1.1 Rationale 1 1.2 Research Objectives 2 1.3 Scope and Subject of the study 2 1.4 Research Methodology 3 1.5 Research Question 3 1.6 Research Structure 3 CHAPTER 2: THEORETICAL FRAMEWORK OF NON-CASH PAYMENT 4

2.1 Definition 4 2.2 Characteristics of non-cash payment 4 2.3 Roles of non-cash payment 5 2.3.1 To the central bank 5 2.3.2 To commercial banks 5 2.3.3 To clients 6 2.3.4 To economy 6 2.4 Types of Non-cash payment 7 2.4.1 Cheque 8 2.4.2 Payment order 9 2.4.3 Collection Order 9 2.4.4 Letter of credit/ Documentary credit 10 2.4.5 Payment Card 11 2.4.6 Electronic banking 13

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CHAPTER 3: CURRENT BACKGROUND OF NON-CASH PAYMENT AT AGRIBANK LANG HA BRANCH 14

3.1 Overview of Agribank 14 3.1.1 Foundation and development of Agribank 14 3.1.2 Organizational Structure of Agribank 15 3.1.3 Business outcomes of Agribank in the period from 2013 to 2015 17 3.2 Non-cash payment at Agribank in the period 2011-2015 23 3.2.1 Payment services at Agribank, Lang Ha 23 3.2.2 Non-cash payment services 25 3.3 Evaluation about operation of developing non-cash payment at Agribank 36 3.3.1 Achievements 36 3.3.2 Limitations 37 3.3.3 Causes 37

CHAPTER 4: SUGGESTED SOLUTIONS TO IMPROVING NON-CASH

PAYMENTS AT AGRIBANK LANG HA BRANCH 40

4.1 General solutions 40 4.1.1 Enhancing the quality of human resources to ensure profession in business

This article discusses strategies for enhancing marketing effectiveness and modernizing banking technologies, focusing on improving payment techniques and competitiveness of products and services It outlines solutions for various payment types, including payment orders, collection orders, letters of credit (L/C), cheques, and payment cards Additionally, it presents recommendations for government and the State Bank of Vietnam (SBV) to further support these initiatives, concluding with a summary of the key findings and implications for the banking sector.

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Agribank Vietnam Bank for Agriculture and Rural Development

SBV State Bank of Vietnam

IPCAS Intra Payment and Customer Accounting System

SMS banking Short Message Service Banking

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LIST OF FIGURES AND TABLES

Figure 1:Credit structure at Agribank Lang Ha from 2011 to 2015 21

Figure 2: Structure of payments by cheque at Agribank Lang Ha between 2011 and

The article presents a comprehensive analysis of Agribank Lang Ha's financial performance, highlighting key metrics such as fund mobilization, lending activities, and bad debt ratios It includes detailed tables that showcase the branch's main business outcomes and the lending-to-mobilizing fund rate, alongside a review of payment sales from 2011 to 2015 These insights are crucial for understanding the branch's operational efficiency and financial health.

Table 7: Sales of non-cash payments in the period from 2011 to 2015 at Agribank Lang

Between 2011 and 2015, Agribank Lang Ha experienced notable trends in various payment methods, including cheque payments, collection orders, and L/C payments The data showcases the proportion of collection orders and highlights the growth of card services during this period Additionally, the rise of mobile and internet banking services at Agribank Lang Ha reflects the evolving landscape of digital finance.

In the era of regional and global economic integration, Vietnamese banks are encountering intense competition from both local and international institutions To ensure sustainable growth, these banks must continuously innovate and enhance their products and services, particularly by leveraging technological advancements to stay aligned with global developments in the digital age.

Tiêu đề	Solutions To Non-Cash Payment Improvement At Agribank Lang Ha Branch
Tác giả	Le Phuong Anh
Người hướng dẫn	Ms. Can Thuy Lien (M.A)
Trường học	The State Bank of Vietnam Banking Academy
Chuyên ngành	English for Finance and Banking
Thể loại	graduation thesis
Năm xuất bản	2016
Thành phố	Hanoi

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Số trang	123
Dung lượng	1,14 MB