Improving quality of the bank card service at bank for investment and development of vietnam,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty - - GRADUATION THESIS IMPROVING QUALITY OF THE BANK CARD SERVICE AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM Lecturer : Nguyen Thi Hong Mai (M.A) Student : Nguyen Quang Dung Class : K15-ATCA Student Code : 15A7510035 May 2016 i STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty - - GRADUATION THESIS IMPROVING QUALITY OF THE BANK CARD SERVICE AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM Lecturer : Nguyen Thi Hong Mai (M.A) Student : Nguyen Quang Dung Class : K15-ATCA Student Code : 15A7510035 May 2016 i DECLARATION I hereby declare that this submission is my own work in design and execution, and that all material contained herein has been duly acknowledged Signature Nguyen Quang Dung i ACKNOWLEDGEMENT I would like to extend my deepest appreciation and gratitude to my thesis advisor, M.A Nguyen Thi Hong Mai, for her tremendous interest and assistance in the preparation of this thesis I am greatly indebted to all lecturers in Faculty of Foreign Languages for having expertly instructed me through my graduate education at Banking Academy of Vietnam With boundless love and appreciation, I would like to express my profound gratitude to my friends for supporting and encouraging me to this study Finally, I would like to acknowledge with a deep sense of reverence towards my parents and brother This thesis would not have been possible without them ii ABSTRACT Despite the considerable amount of critical work that has been initiated on improving quality of the bank card service, misconceptions still remain Based on actual information and knowledge in relation to banking, the author conducts a study of improving quality of bank card service, aiming at examining fundamental theoretical issues about the bank card service at Vietnam commercial banks Particularly, the author concentrates on the current situation of the bank card sector at Bank for Investment and Development of Vietnam, and proposes several solutions and recommendations which hopefully might be beneficial and practical for the bank card service development in Vietnam There are four chapters in the research: Chapter 1: Introduction Chapter 2: Literature review Chapter 3: Research methodology and data analysis Chapter 4: Recommendations and conclusions iii TABLE OF CONTENTS DECLARATION .2 ACKNOWLEDGEMENT ii ABSTRACT iii LIST OF TABLES AND FIGURES vi LIST OF ABBREVIATIONS vii CHAPTER 1: INTRODUCTION 1.1 Current problem statement 1.2 Objective and research questions 1.2.1 Objective 1.2.2 Research questions 1.3 Scope and limitations 1.4 Research methodology CHAPTER 2: LITERATURE REVIEW .3 2.1 Fundamental theoretical issues about the bank card service .3 2.1.1 Definition, features and roles of the bank card service .3 2.1.2 Classification of the bank card 2.1.2 Main activities of the bank card service 10 2.2 Quality of the bank card service of the commercial bank .12 2.2.1 The definition of quality of the bank card service 12 2.2.2 The dimension to assess quality of the bank card service .13 2.2.3 The importance of improving quality of the bank card service 14 iv 2.3 Factors affecting quality of the bank card service 15 2.3.1 Subjective factors .15 2.3.2 Objective factors 16 CHAPTER 3: RESEARCH METHODOLODY AND DATA ANALYSIS 18 3.1 Overview of Bank for Investment and Development of Vietnam 18 3.2 The current situation of the bank card service at Bank for .23 3.3 Quality of the bank card service at Bank for Investment and Development 39 3.4 Evaluation of quality of the bank card service at Bank for Investment and 41 CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS .47 4.1 Elaborate the bank card product 47 4.2 Develop the bank card network .48 4.3 Upgrade quality of market and customer research 50 4.4 Improve staff’s proficiency .51 4.5 Enhance the security and risk management activity of the bank card service 51 4.6 Other solutions 52 CONCLUSION 54 REFERENCES 55 v LIST OF TABLES AND FIGURES List of tables Table 3.1: Number of domestic debit cards issued by BIDV (2013 – 2015) 25 Table 3.2: BIDV’s market share in the domestic debit card market 26 (by 12/2015) Table 3.3: BIDV’s market share in the international credit card market (by 31 12/2015) Table 3.4: Number of international credit cards issued by BIDV (2013 – 2015) 32 Table 3.5: BIDV’s market share in the international debit card market (2013 – 25 2015) Table 3.6: Number of international debit cards issued by BIDV (2013 – 2015) 36 Table 3.7: ATM network development (2013 – 2015) 37 Table 3.8: POS network development (2013 – 2015) 38 List of figures Figure 2.1: Bank card operation 10 Figure 3.1: BIDV’s market share in the domestic bank card market (by 27 12/2015) vi LIST OF ABBREVIATIONS BIDV Bank for Investment and Development of Vietnam ATM Automatic Teller System POS Point of Sale UNDP United Nations Development Programme Vietcombank/VCB Joint Stock Commercial Bank for Foreign Trade of Vietnam Vietinbank Vietnam Joint Stock Commercial Bank for Industry and Trade vii Agribank Vietnam Bank for Agriculture and Rural Development DongA Bank DongA Joint Stock Commercial Bank Techcombank Vietnam Technological and Commercial Joint Stock Bank VND Vietnamese Dong ACB Asia Commercial Bank Eximbank Vietnam Export Import Bank Sacombank Sai Gon Thuong Tin Commercial Joint Stock Bank VIB Vietnam International Commercial Joint Stock Bank CHAPTER 1: 1.1 INTRODUCTION Current problem statement The past few years have witnessed an exponential growth in science and technology In association with this tendency, the banking system has introduced a number of modern methods of payment Among them, the non-cash payment method, especially the bank card has been considered an influential mean of payment and has rapidly changed the people’s purchasing habit in all over the world, including Vietnam Apparently, the bank card service is one of the unique and modern banking services that satisfy the client’s demand due to its safety and convenience At present, the bank card service has gradually asserted its position in payment operations in Vietnam Vietnam banks in general, and Bank for Investment and Development of Vietnam (BIDV) in particular, have their own strategies to compete and expand the market share in this sector, hence the tremendous boost in income of the bank Owing to the fierce competition in bank card service sector, the needs of Vietnam clients is better met As a result, the number of clients using bank card have also surged and the bank card market has become more and more active and competitive Therefore, improving quality of the bank card service is of importance and necessity Under the guidance and supervision of thesis advisor, MA Nguyen Thi Hong Mai, I chose the thesis topic: “Improve quality of the bank card service at Bank for Investment and Development of Vietnam (BIDV)” in order to comprehend the current situation and propose several possible solutions to enhance quality of bank card service, contributing to the development of BIDV 1.2 Objective and research questions 1.2.1 Objective The objective of this study is to: i ranked 4th, 7th and 7th in the numbers of domestic debit, international credit and international debit card, respectively - The revenue of bank card business: The revenue of bank card service went up gradually year on year However, in comparison of other banks such as VCB and Vietinbank, the revenue of BIDV was not considerable Particularly, the revenue of BIDV ranked 5th, 6th, 7th in the domestic debit, international credit and international debit card, correspondently 3.4 Evaluation of quality of the bank card service at Bank for Investment and Development of Vietnam 3.4.1 Achievements a Numerous benefits offered to the client First, the card product of BIDV supplies various utilities to diversified types of clients, with high transaction limit and reasonable, competitive fee compared to the rival Second, BIDV has constantly expanded the client segment and the number of clients of BIDV, clearly, has increased with a fast pace This has been shown by the figure for the client during several recent years The number of client increased from 1,046,158 in 2005 to 6,254,624 at the end of 2011 and surged to 11,535,635 until 2015 This reveals that BIDV has continuously reformed and launched additional features and benefits to the client, asserting the position in the Vietnam bank card market b Contribution in reducing the risk and strengthening bank card security BIDV invested a huge fund in technological innovation for banking service In order to enhance the bank card service, BIDV applied and practiced ‘Core banking’ technology With this advanced technology, the data of the client is updated and stored concentratively, leading to the ease in the client and bank card management and the reduction in time and cost Besides, ‘core banking’ technology helps speed 41 up the processing time, shorten transition time, which saves time and cost for the client and the bank c Boost in revenue, profit and market share of BIDV Revenue, profit and market share of BIDV have steadily climbed over recent years It can be easily seen that improving quality of the bank card service brings about the increase in the number of clients and bank cards issued This attracts a huge amount of deposit, leading to the boost in revenue, profit as well as market share 3.4.2 Limitations and causes a Limitations Despite considerable achievements of BIDV’s bank card service and the well-earned reputation of BIDV in the Vietnam market, quality of the bank card service has shown deficiency as follows: - Lack of diversity in products and services: BIDV has already launched only two products, including debit and credit card, which are not as diverse as those of such banks as Vietcombank, Techcombank, Sacombank Although several utilities at the ATM services, including bill payment, electronic wallet, etc has been provided, they have been likely unknown to a significant number of customers Bill payment at POS, which is one of the most crucial functions of debit card, has also left unnoticed - Uncertainty of information security: BIDV’s infrastructure and information technology security has certain limitations BIDV has currently utilized magnetic stripe card instead of chip card enabling better security Besides, cases of counterfeit bank cards at POS were reported in the early 2013, issuing a warning against the increasing risk of cloned and forged bank cards These frauds were punished timely, avoiding tremendous financial losses 42 - Dissatisfaction at bank card services of the customers: notwithstanding the significantly increasing number of registered debit cards, credit cards and POS, quality of the bank card service is not been enhanced equally and compatibly Comments and complaints on poor quality service, limited ATM functions, slow POS systematical errors, etc., have been issued on mass media - Customer’s limited awareness of card service Bank cards are preferably used to withdraw money rather than paying bills - POS network is not nationwide and interbank POS is not closely associated Clients are charged extra when using card payments, resulting in limitations in the development of card payments - ATM system is not evenly distributed and unstably functioned ATM’s network outages and contemporary deactivation still exists b Causes  Objectives causes Deficient infrastructure and technical equipment In spite of the fact that BIDV is one of commercial banks possessing widespread ATM system, a considerable number of ATMs are obsolete Additionally, machine maintenance, decoration as well as safety at ATM has not been adequate Lines are leased from telecommunication units, resulting in instability of the speed and objectivity of the lines Inconvenience has been caused due to the network outages and ATM deactivation A number out-of-date POS and dial-up connection has been utilized, leading to extra time of transactions Difficulties in POS network development In comparison with such banks as VCB, ACB, etc., BIDV is a newcomer, encountering a number of obstacles in dealing with POS network expansion On the one hand, the marketing strategies in order to associate with POS is initiatively launched and promoted, the efficiency is not achieved when a majority of 43 supermarkets, restaurants, and hotels have already signed the contracts with banks mentioned above Limited speed of bank card modernization In order to diversify the credit card, BIDV started launching MasterCard in 2008 However, the development speed of MasterCard project considerably fell behind schedule, expectedly accomplished in 2013 This stagnancy is an obstacle to the diversification of products, services, market segment expansion and also the enhancement of the POS network Incompetent staff qualifications Sales representatives of a number of BIDV branches are primarily seniors, who are not particularily equipped for professional sales of card products and services Banking officers are not thoroughly trained They accumulate and self-learn through documents; therefore, lose pace with the fast-moving environment of the card services sector Besides, problem solutions and manners of customer service are likely to be unprofessional occasionally, leading to the low level of customer satisfaction Limitations in bank card advertisment and promotions Although BIDV management boards have taken great efforts in framing brand identity However, these strategies have not worked effectively Uniformity in staff’s manners of customer services, trading counters, has not been achieved across the whole system Counter officers are not likely to actively introduce new utilities and benefits of the bank cards to the client The image of the product has not been promoted regularly and systematically, leaving not much favorable impression on clients Customer care and promoting programmes and events have not been conducted continously, consistently and diversitively Other causes 44 A number of BIDV branches have not stricly followed the regulations of bank card services, including ATM locations, ATM 24/7 availability, surveillance cameras, billboards, and air conditioning ATM maintenance work has not been carried out properly Furthermore, several banking officers passing the general and professional training courses are assigned to work for other departments Particularly, some of the ATMs run out of money, out of printed receipts frequently on peak time and in holidays, leading to the ATM suspension and deactivation in a specfic period of time  Objective causes Socio-ecomonic factors The primary reasonale of the inadequate provision of the bank card service in BIDV as well as the whole Vietnamese banking system is the unsustainable development of the finacial and monetary market in Vietnam, resulting from the global finacial crisis and recession National import and export were negatively influenced by the instability of the economy and politics as well as the devastation of natural catastrophies, leading to the difficulty in the transaction of the whole banking system Psychological habits, financial incomes and awareness of the people Operations and transactions of the bank card service in Vietnam has not been remarkably advanced The habits of money storage and cash payment actually exist among the Vietnamese society Hence, a number of banking services are new to the majority Domestic businesses are not likely to enthusiastically support bank card payment For instance, they are not actively involved in salary payment via personal bank accounts of employees, and invoice payment channels Besides, the habit of cash usage troubles the cash users and bank card accepted merchants as well A number of stores qualified to be bank card accepted merchants still prefer cash payment to bank card Competitive environment 45 Owning to fiercing competition among banks and the penetration of financial organizations, market shares of commecial banks are significantly declined, leading to the obstacles to the bank card services advancement Legal environment Legal frameworks under the control of hierachical authority are not consistent and integrated The circulations are belated Management information systems are incomplete, negatively affecting the growth of the bank card service 46 CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE QUALITY OF THE BANK CARD SERVICE AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM 4.1 Elaborate the bank card product Nowadays, one of the most considerable obstacles of the bank is the transaction time which is about hours a day Using ATM system is one the great innovation to overcome this difficulty and attract more clients Therefore, in order to make the best use of ATM system and leverage the technological advancement, the bank needs to diversify the bank card product as well as initiate much more new services for client Product diversification is the goal not only of BIDV, but also of every commercial bank in Vietnam Especially, when using cash for purchase is still prevalent in the market, the bank needs to put much greater effort to change this habit The customer of the bank card service today are only students, civil servant, office-holder, businessman and high income person Thus, product diversification helps BIDV meet the client’s need fully and extendedly This leads to increased market share, credibility of BIDV 4.1.1 Improve the existing feature and utility of the bank card product Nowadays, BIDV offers categories of the bank card: debit and credit card Enhancement of existing product is of importance as it helps maintain the former clients and also attract new clients - The debit card: This product is considered the widely-spread product of BIDV Thus, the utility such as bill, mobile card and plane ticket payment needs to be more widely popularized to the client Besides, these benefits should be researched comprehensively to exceed the client’s expectation Moreover, BIDV’s bank card should be redesigned physically and functionally to match 47 the client’s needs The withdrawal limit and overdraft limit should be diverse to attract greater client’s interest - The credit card: Nowadays, the process to launch an international credit card of BIDV is exceedingly complicated Hence, BIDV needs to put huge attempt to simplify the procedure and offer the flexible and reasonable credit limit to the client 4.1.2 Research and initiate the new product Apart from enhancement of existing features and utility, it is necessary to develop and create new features and benefits for the bank card product to cater effectively the client and to compete with other rivals: - Launch the new bank card product for upper class people with smart and luxurious design The cardholder of this product needs to be offered special benefits such as the highest amount of money withdrawn within a day, preferential treatment when using to make payment in hotels, restaurants, resorts, etc - Launch more Co-branded cards with other businesses: So as to diversify the product and offer a mixed variety of choices to the client, BIDV should invest in cooperating with other partners and businesses to develop the Co-branded card To effectively develop the Co-branded card, BIDV needs:  First, BIDV should integrate with a number of partners and businesses providing goods and services domestically and globally The business that BIDV should consider is the one that is familiar with the customer such as supermarket or company specializing in airline, insurance, petroleum, etc  Second, BIDV should create the bank card with parties offering the service, such as recreation, travel, television, medical, etc These services are indispensable parts of every person and household 4.2 Develop the bank card network 4.2.1 Develop the network of the bank card accepted merchant (POS) 48 To expand the network of the bank card accepted merchant, BIDV should enhance the effectiveness of POS, encourage and introduce the marketing campaign to raise the awareness of merchant about the role and benefits of POS Specifically: - Strengthen marketing activities to the merchant: supermarket, restaurant, hair salon, etc., which generate high revenue - Introduce and popularize POS to small and medium-sized department stores - Set up POS at airport, train station, etc., where the huge number of people gather every day - Encourage and launch promotion policies and gifts for the merchant that produces high revenue generated by bank card payment 4.2.2 Develop the card payment system (ATM) - Investigate the area before setting the ATM: BIDV should prioritize to set up the ATM in industrial zones, colleges, universities where a substantial amount of people and students gather Also, set up the ATM at shopping malls, travelling sites where people have high demand on goods and service purchase BIDV can set up a cluster of ATMs in one area to prevent the obstruction during peak time - Improve quality of ATM’s operation: BIDV should upgrade the machine’s configuration as well as transaction software to speed up the client’s transaction, and reduce the manual operation The machine should be maintained monthly to ensure effective operation of the ATM - Deal with ATM’s problems: The client sometimes faces the problems: network obstruction, out-of-money status, etc In order to deal with these problems, BIDV’s staff should monitor the machine regularly, check and classify money cautiously prior to putting into the machine 49 4.3 Upgrade quality of market and customer research Classification and identification of the customer segment play an instrumental role in any business BIDV needs to get clear about the client to launch the suitable product and service For the bank card service, BIDV needs to identify and comprehend market segments: 4.3.1 The corporate customer The business is the crucial client for any bank The majority of revenue of the bank card service is generated by the corporate customer (state owned business, private business, foreign business, etc.) However, the number of businesses is considerable while the number of bank cards used by the staff in the business is limited Thus, BIDV need to put much interest in advertising and popularizing the bank’s image to these customers, thereby boost in the number of businesses cooperated with BIDV and the number of personal accounts from these businesses 4.3.2 The high income and upper class client This group includes governmental officials, businessmen, and officers of foreign companies and of companies specializing in petrol, airline, telecommunication These clients are high and stable income earners Therefore, they have great demand on goods and service purchase, aboard travelling, etc., leading to high needs to use the bank card BIDV should introduce incentive policies to attract these clients to earn the considerable income for the bank 4.3.3 The student and teenager This group is potential and easily approachable BIDV should be much interested in these clients Although not obtaining high income, they are majority in nation’s population Focusing on these clients, the bank is possible to benefit from the deposit of student’s parents Furthermore, by issuing the bank card for student, BIDV can 50 integrate with universities to initiate new services such as loan making for school tuition 4.4 Improve staff’s proficiency - Organize regular training courses for the officer in the bank card center and the branch officer It would be better if BIDV is able to send the staff abroad to acquire and update the knowledge in successful bank card market in the world - Organize the event to introduce comprehensively new products, new features and utilities of the bank card product - Strengthen the training to the bank card marketing officer to ensure the effective market research activities and flawless communication to the client - Improve the knowledge of technology information to the bank card officer - Launch the incentive policy of salary, benefit and bonus to encourage the staff - For the bank card accepted merchant, BIDV should organize the training session for the merchant’s staff, especially on-job training in the branch office - Raise awareness and sense of responsibility of the counter officer about the importance of direct interaction with the client Regulate the attitude, working style of the counter officer in service marketing, consulting and instruction activity 4.5 Enhance the security and risk management activity of the bank card service - Risk is unavoidable for any business and the bank needs to put effort to reduce the risk To lessen the risks, BIDV needs to reduce the risk in bank card issuance and payment activity: the officer in charge of bank card issuance needs to check and verify the client’s information carefully before accepting the application The staff needs to ensure the safety principles: the card and PIN code must be delivered to the cardholder 51 - Security is of importance to reduce the risk Therefore, the officer working in this sector needs to have professional ethics and must be commit not to unveil any information related to the card Set up the camera inside the ATM to monitor and supervise the client’s activity - and to avoid the illegal activity at the ATM - Set up various channels to update information about the bank card account whenever one transaction is conducted The channel can be mobile, email, website Use the communication (television, internet, radio …) to instruct the client to - secure the PIN code and signature 4.6 Other solutions 4.6.1 Enhance the marketing, advertising activity At present, the bank card service is well-known mainly in big cities with high density of population Therefore, in order to widely spread the bank card service to society, banks in general, and BIDV in particular need to advertise the bank card product to all groups of population in all nationwide regions Specifically: - Strengthen the advertising campaign in the media (newspaper, radio, television, YouTube, Facebook, etc.), and attach banners and posters in the street BIDV should follow and learn from the successful advertising campaign of banks in the world - Set up an event or a television, radio program for the client to learn more about the bank card service of BIDV The program can be designed in the form of game show, short movie and talk show - Apply the model of direct issuance of the bank card for the client in shopping malls, commercial centers - Launch promotion and incentive policies for any business which introduces the bank card service of BIDV to the staff 52 4.6.2 Strengthen the relationship with the domestic bank card network Tendency of cooperating with the bank card network is increasingly common-spread BIDV should be proactive in integration and construction of bank card payment network (Smart link, banknetvn, etc.) to offer better service to the client 53 CONCLUSION The bank card service is regarded as the most commonplace banking service in the world Evidently, non-cash payment in general and bank card payment in particular offers a number of preferential benefits compared to cash payment Bank card payment not only benefits the user, but also generates considerable income for the bank In order to integrate with regional and international economy, the commercial bank including BIDV should put constant efforts to enhance quality of the bank card service, aiming at reducing the amount of cash in the economy Besides, piercing competition between banks and higher expectation of the client require BIDV to launch superior measures and solutions to upgrade quality of this sector The past few years have witnessed a marked growth in BIDV’s investment for this sector The bank card product of BIDV has enabled credibility and liability among the client, leading to increased position of BIDV in Vietnam market Nevertheless, BIDV is not able to meet fully client’s expectation Features and utilities of the bank card product are still restricted Equipment and facilities catered for bank card service are not diverse Marketing and advertising campaigns are not implemented carefully and comprehensively Therefore, enhancing quality of the bank card service is of necessity for BIDV to assert its position in this market With the hope of contributing to the development of the bank card service at BIDV, the author presented and proposed several solutions to enhance quality of the bank card service at BIDV The author desires to get feedbacks from teachers to better the thesis 54 REFERENCES Bank for Investment and Development of Vietnam (2013, 2014, 2015) The annual report Bank for Investment and Development of Vietnam, T b (2013, 2014, 2015) The business report Crosby, L A (1990) Relationship Quality in Service Journal of Marketing, 71-84 Karim newrian, A C (1996) Service Quality Banking: The Experience 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