(LUẬN VĂN THẠC SĨ) Some solution to develop the card payment activity in Viet Nam Joint Stock Comercial Bank for Industry and Trade VietinBank for the period of 2012 2017

THE BASIC ISSUES ON THE CARD PAYMENT ACTIVITY

OVERVIEW OF THE BANK CARD AND REAL SITUATION OF THE

1.1.1 Definition of the bank card and card payment

The evolution of payment cards began with purchase cards, which allowed customers to buy goods without cash In 1949, Frank McNamara invented the first payment card, "Diner's Club," enabling users to pay restaurant bills without cash This was followed by the introduction of the first charge card by American Express in 1958, alongside the launch of the VISA card by Bank of America In 1966, MasterCard emerged as a competitor to VISA Today, card payment methods enable cardholders to purchase goods and services or withdraw cash from ATMs without the need for physical cash.

The first payment cards were made of paper, which were prone to damage, leading to the adoption of more durable plastic cards As the need for information security and data storage grew, innovations like magnetic stripe cards and EMV smart cards emerged, facilitating banking operations such as authorization and clearing Payment cards have since diversified, evolving into various classifications and integrating with non-financial functions to create connection or co-branded cards Additionally, payment methods have become increasingly flexible, allowing for contactless transactions that do not require the physical presence of the card.

1.1.2 Classification of bank card and form of card payment

1.1.2.1 According to the payment characteristic of the card

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

A credit card is a financial tool that allows cardholders to make purchases and withdraw cash within a predetermined credit limit established by the issuing bank Widely used for transactions at various merchants, hotels, and airports, credit cards enable users to buy goods and services without immediate payment, deferring the cost to a later date This feature gives credit cards their name, as they allow consumers to advance their spending without upfront cash, effectively functioning as a delayed or deferred debit card.

A debit card is a financial tool that enables cardholders to make payments and withdraw cash directly from their bank account, utilizing only the funds available in their deposit account When used for purchases, the transaction amount is instantly deducted from the owner's account and transferred to the merchant's account through electronic devices at retail locations, hotels, and other establishments Additionally, debit cards allow for cash withdrawals at automated teller machines (ATMs) Unlike credit cards, debit cards do not offer a credit line; they are strictly linked to the cardholder's existing balance.

In addition to the previously mentioned cards, the Cash Card is specifically designed for cash withdrawals at automated teller machines (ATMs) or banks This card serves a singular purpose: to facilitate cash withdrawals To utilize the Cash Card, users must either deposit funds into their bank account or have a credit balance available on the card.

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

A domestic card is a financial instrument that operates within the boundaries of a specific nation, requiring transactions to be conducted in the local currency This category includes both home debit cards and home credit cards, which are designed for use exclusively within the country of issuance.

An international card is widely accepted across the globe and facilitates payments using robust foreign exchange Both international debit cards and international credit cards serve as effective payment methods for transactions in foreign countries.

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

Non-bank cards are specialized tourism and entertainment cards issued by major business groups, large retail companies, and prominent petrol corporations, including brands like Diners Club and American Express These cards offer unique benefits and rewards tailored for consumers seeking enhanced experiences in travel and leisure.

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

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

Despite being in use for 20 years, the card has notable weaknesses It lacks the ability to encode information independently, relying solely on fixed data storage Additionally, its limited storage capacity hinders its effectiveness, and it does not utilize advanced coding techniques for enhanced information security.

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

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

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

In 1990, VietcomBank initiated the introduction of payment cards in Vietnam by signing a Visa card disbursement agency contract with a French bank, primarily aimed at serving international tourists Following this, Sai Gon Thuong Tin Bank also partnered with Visa, enhancing the country's payment infrastructure This open policy has significantly transformed Vietnam's socio-economic landscape, attracting an increase in foreign investment projects and drawing the attention of large financial institutions, which now offer a range of services, including payment cards.

In 1995, the Governor of the State Bank of Vietnam granted official membership to Ho Chi Minh City Foreign Bank, A Chau Commercial Joint Stock Bank, First-Vina-Bank, and Eximbank in the Mastercard international card organization.

In 1996, the Foreign Bank became a member of Visa International, followed by A Chau Bank and VietinBank, which began direct payment services with the organization That same year, Vietnam Foreign Bank (VCB) launched the first pilot bank card, leading to the establishment of the Vietnam Card Payment Banks Association, founded by VietcomBank, A Chau Commercial Joint Stock Bank, Eximbank, and First Vinabank At the time, the legal framework for card activities was limited to Decision No 74 issued by the State Bank on April 10, 1993, which regulated the temporary issuance and use of payment cards The adoption of cards in Vietnam faced challenges due to legal, economic, and technical constraints Commercial banks were required to establish their own rules and contracts for card issuance, creating a system that operated primarily through internal agreements between banks and cardholders VietinBank entered this market significantly later than VietcomBank, which had a substantial advantage in knowledge and experience regarding card services.

In 2006 and 2007, Vietnam's card market experienced significant growth as the country joined the WTO, intensifying competition in the financial sector with increased foreign bank investments Credit and ATM cards became essential tools for banks to penetrate the market, leading to a surge in payment card products and sparking a competitive landscape for card issuance among domestic banks.

1.1.3.2 The development of payment card in Vietnam and some achievements

PROCESS OF THE CARD PAYMENT

Figure 1.1 : General payment-via-card process

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

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

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

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

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

1.2.2 The participation entities of the card payment

The card owner is the individual whose name appears on the card and has the exclusive right to use it for purchasing goods and services Only the card owner is authorized to utilize the card, and when making payments to merchants or settling debts, they must present the card to verify the transaction and finalize the payment receipt.

Merchants are businesses, such as restaurants, hotels, and shops, that partner with payment banks to accept card payments for goods and services To facilitate these transactions, merchants must equip themselves with the necessary technology and machines to process card payments, replacing traditional cash transactions This partnership enables merchants to issue cards and manage accounts effectively.

An issuance bank is the financial institution that provides a card to the cardholder, typically as a member of international card organizations It is responsible for processing card issuance requests, managing the cardholder's account, and facilitating transactions Additionally, the issuance bank plays a crucial role in establishing and maintaining relationships with merchants.

A payment bank is a financial institution that installs card payment machines and directly contracts with merchants to facilitate transactions It manages the payment process by handling exchange documents submitted by these merchants Additionally, a payment bank can serve both as a provider of card payment services and as an issuer of payment cards.

International card organizations and switching card organizations serve as vital connections between payment banks and issuing banks, facilitating payment processing and clearing They establish standards for payment and card issuance In Vietnam, prominent financial switching organizations include Smartlink and Banknet, while globally recognized entities include Visa, MasterCard, JCB, and American Express.

1.2.3 Charges and charges sharing rate in the card payment activity

Card payment charges are fees that merchants incur for using payment processing services provided by banks that own card payment machines These charges typically amount to an average of 2% of the card payment turnover, though the exact rate can vary based on the type of payment card and the issuing bank This fee structure encompasses various after-sale services, including the provision of paper for monthly invoices, rental of card payment machines, documentation support, advertising tools for merchant card acceptance, and assistance with payment-related issues Generally, about 50% of these charges are allocated to financial switching organizations For instance, in a Visa or MasterCard transaction with a 2% charge, the payment bank would pay approximately 1.1% to the respective international organization.

THE ROLES AND THE MEANINGS OF CARD PAYMENT ACTIVITY

1.3.1 For the society- national economy

Figure 1.2: The roles of the card payment activity

 Reduce the social charges to organize the payment activity

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

The management of $100 billion in cash can lead to significant inefficiencies, including time wasted on transportation, storage, and banking processes Storing money in bank accounts also increases the risk of errors and losses during transactions and account management, complicating the circulation of funds.

Roles and meanings of card payment activity

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

Reduce the social charges to organize the payment activity

To combat fraud, tax evasion, and delayed debt payments, it's essential to implement measures that prevent the circulation of counterfeit currency and money laundering The limitations of paper money, which is prone to tearing, burning, and deterioration during circulation, highlight the need for more secure financial practices.

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

Merchants and business households often prefer cash payments to avoid declaring income that would be traced through bank accounts, leading to tax evasion During discussions on the anti-money laundering law, a member of the Assembly Standing Committee highlighted that reliance on cash complicates cash flow management and positions Vietnam as a potential hub for money laundering activities To combat this issue, recommendations for limiting cash circulation will be proposed to address the problem at its source.

In 2001, the State Bank reported statistics highlighting a six-year review of the Government's Decree No 74 aimed at combating money laundering, revealing a concerning rise in tax evasion, smuggling, corruption, counterfeit production and sales, as well as speculation in the securities, real estate, and gold markets.

Beneficiaries engage in legal activities like bank consignments, investments in securities, real estate, gold, or transfers to foreign banks with strict banking secrecy laws The demand for "money laundering" services is increasing, particularly due to regulations requiring officials to disclose their assets and personal income under anti-corruption laws.

The United Nations Office on Drugs and Crime (UNODC) has identified Vietnam as a prime target for money laundering due to its rapidly growing economy and increasing commercial and investment activities UNODC warns that without swift and effective measures to combat money laundering, there will be a rise in crime and corruption, negatively impacting legal financial operations Currently, significant cash flows are evident in both the stock and real estate markets, yet the origin of these funds is not being adequately scrutinized.

The lax legal framework, combined with credit organizations' fear of losing customers, often leads to a superficial approach to verifying the source of exchanged funds Additionally, the prevalent use of cash for transactions complicates the monitoring of cash flow within the economy, thereby facilitating conditions conducive to money laundering activities.

The primary sources of illegal money in Vietnam include fraud, gambling, weapon trafficking, prostitution, smuggling, and drug-related activities The challenge in regulating this illicit cash flow arises from the preference for cash transactions among these entities, making it difficult to monitor and control the movement of illegal funds.

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

At 12:00 AM, users can purchase a scratched card to instantly fund their prepaid mobile phones via a text message, with the amount automatically deducted from the card account This convenient payment method allows busy professionals to effortlessly book and pay for international flight tickets anytime, anywhere.

Traditionally, cash transactions required both buyers and sellers to be physically present for the exchange However, the rise of e-commerce has revolutionized this process, allowing for remote transactions through methods such as telephone, email, and internet orders This shift has been favored by customers due to its convenience and efficiency, enabling payment solutions like credit transfers and card payments Now, buyers can make payments from anywhere with a payment card, while sellers can receive funds directly into their bank accounts, eliminating geographical barriers and time constraints.

In Vietnam, several reputable online payment portals, including Nganluong.vn, VNmart.vn, Payoo.vn, Onepay, and Baokim.vn, offer secure options for customers to collect payments and make purchases with confidence.

1.3.2 For the bank joining in the payment

The increasing card activity of banks is transforming their status and image, enhancing their competitiveness in the retail banking market By fostering a friendly relationship with individual customers, banks demonstrate their technological advancements through effective card services, making these services a key competitive advantage in the commercial banking sector.

To utilize a bank's card payment service, a business owner must open an individual or ATM account to receive customer payments In return, the bank benefits from payment charges agreed upon by the merchant, which represents a significant financial advantage However, many banks are willing to lower these charges to balance their benefits with other advantages, such as sourcing mobilization and foreign currency For instance, if a business has a payment turnover of 100A, an average of 40A will typically remain in the merchant's account Melia Hotel, for example, processes 8 billion VND in card payments monthly, resulting in an average account balance of 3.2 billion VND This balance earns a non-term interest of 3%, compared to the 14% mobilization interest from residents, allowing the bank to benefit from an 11% price gap Consequently, the fees incurred by the hotel for the payment service are strategically offset by these financial dynamics.

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

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

Figure 1.3: Benefits for payment bank

While most consumers in Vietnam primarily use debit cards, credit cards account for 90% of card payments in the country When a foreign bank-issued credit card is used for purchases in Vietnam, the payment is processed in foreign currency, which is then deposited into the merchant's foreign currency account or a designated payment account This process allows banks to effectively mobilize foreign currency without incurring fees Currently, the Vietnamese government mandates that merchants accept payments in VND, which enhances the banks' advantages by providing a cost-effective means of mobilizing foreign currency.

Payment banks do not fully absorb all payment charges; they typically deduct around 1% from card payment turnover to cover input costs Essentially, payment banks assist merchants by managing the expenses associated with transaction processing, including fees for transmission lines, card payment machines, currency exchange, and cash advances.

GENERAL INTRODUCTION ON VIETINBANK

2.1.1 The general introduction on VietinBank

Established in 1988 after its separation from the State Bank of Vietnam, VietinBank is one of the country's four largest State-owned commercial banks It holds over 20 percent of the total market share within the Vietnamese banking system VietinBank's capital resources have consistently grown, with an average annual increase of 20 percent since 1996, and a remarkable 35 percent growth compared to the previous year.

VietinBank boasts an extensive operations network that includes one Transaction Center, 149 branches, 527 transaction offices, 166 savings offices, two Representative offices, four subsidiaries, three administrative merchants, and 1,200 ATMs Additionally, the bank has established correspondent relationships with 850 banks and financial institutions across 90 countries and territories worldwide.

As the founder of several prominent financial institutions, including Saigon Bank for Commerce and Industry and Indovina Bank, Vietnam's first joint-venture bank, I have significantly contributed to the banking sector Additionally, I established the Vietnam International Leasing Company (VILC), the country's first financial leasing company, and Vietinbank Insurance Company Ltd VietinBank is also a proud member of key financial organizations such as Vietnam’s Banker Association, the Asian Banker’s Association, SWIFT, and Visa International Services Association.

VietinBank boasts a diversified portfolio with four independent subsidiaries: VietinBank Leasing Company, VietinBank Securities Company, VietinBank Asset Management Company, and VietinBank Insurance Company Additionally, it operates three non-profit entities, including the VietinBank Information Technology Center, VietinBank Card Center, and VietinBank Training Center Notably, VietinBank is the only bank with a branch located in Europe, specifically in Germany.

The Card Center, a division of the Vietnam Commercial Joint Stock Bank of Industry and Commerce, operates under a centralized management principle that ensures consistency and alignment with the bank's activities It follows a dependent-accounting regime, possesses its own seal, and manages advance transactions as prescribed by the Central Bank The center oversees all card-related business functions, including managing trading accounts at branches, while ensuring efficient cash advance processes Additionally, it focuses on researching and developing policies, procedures, and regulations for card operations, as well as innovating new card features and services to enhance performance and support branch distribution, aligning with the bank's strategic development plans.

2.1.2 The general introduction on VietinBank Card business Center

Established in 2001, the VietinBank Card Business Center evolved from the initial Card Team, which comprised only 10 staff members handling multiple responsibilities, leading to limited growth in card services To enhance operations and specialization, VietinBank created the Division of Card Service in 2003 The Card Business Center was officially formed on July 20, 2009, under Decision No QD26/NHCT32 by the President of VietinBank, with key functions including the development, management, execution, organization, inspection, and supervision of card business activities at VietinBank, as well as conducting direct card transactions.

The establishment of the Card Business Center marks a significant milestone in the evolution of VietinBank's card services, enhancing the bank's capability to manage card operations effectively This development enables VietinBank to accelerate the growth of its card services and products, maximizing market opportunities The Center currently employs 160 specialized staff members, predominantly young and dynamic, who are adept at identifying market trends and opportunities for card services Additionally, the Center is equipped with modern infrastructure and technology, ensuring it meets the competitive demands of the card service sector.

The establishment of the Card Business Centre has positioned VietinBank as a leading card issuer in the market In addition to its traditional offerings, VietinBank consistently introduces innovative card products Compared to its competitors, VietinBank stands out for its commitment to technological modernization and enhancing customer convenience.

In August 2006, VietinBank launched its E-Partner Debit Card, marking a significant addition to its card offerings The bank actively promotes various expansion programs to enhance the convenience of card usage and attract more clients As a result, VietinBank's card issuance and market share have consistently grown each year.

In 2010, the number of domestic debit cards in circulation approached 5 million, while credit cards totaled approximately 122,000, with debit cards holding a market share of 20% and credit cards at 25.7% VietinBank led the market with an impressive operational card rate of nearly 90%, outperforming other banks.

VietinBank currently operates an extensive ATM network with 1,300 machines strategically located at branch headquarters, transaction departments, and various public areas such as schools across the country Additionally, over 8,000 points accept VietinBank cards The bank continues to expand its product offerings, including Visa debit cards, Platinum international credit cards, and co-branded international credit cards, featuring enhanced services like remittance reception, e-wallets, ATM savings deposits, invoice payments, online transactions, and prepaid card purchases Notably, in 2010, VietinBank pioneered non-stop road charge services and petroleum payments via card in collaboration with the Military Petroleum Company.

The Card Business Centre strategy aims to establish VietinBank's card services as the leading product in both quality and quantity within the Vietnamese market By 2013, the centre plans to evolve into an independent card business company, generating significant revenue for VietinBank.

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

Since its entry into the card service market in 2001, VietinBank has achieved significant milestones over the past decade, solidifying its brand and competitive edge in the financial sector The bank's card services have not only contributed to its growth but also enhanced its position in the retail banking landscape amidst increasing competition and national integration.

In its early days in the card market, VietinBank faced significant challenges, including an underdeveloped technology system, a limited number of ATMs, and a general unfamiliarity among citizens with cashless payment methods Despite these obstacles, VietinBank made substantial efforts to innovate and expand its services By 2006, the bank introduced the E-Partner Card, a debit card tailored to meet the diverse needs of clients across various markets Additionally, VietinBank collaborated with universities, policy banks, social insurance agencies, and businesses nationwide to enhance card functionality and promote multi-functional cards As a result of these initiatives, VietinBank has issued over 7 million debit cards, solidifying its competitive position and establishing itself as the leading bank in Vietnam's debit card market.

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

Mastercard is a global card organization, and VietinBank offers the Cremium international card service, providing diverse terms and various growth values As Vietnam's leading bank, VietinBank implements card technology that adheres to EMV standards, which are mandatory for Visa member banks.

THE POSITION OF VIETINBANK CARD SERIVES

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

The use of domestic debit cards has surged in recent years, driven by the growing trend of cashless transactions and the implementation of directive 20/2007/CP-TTg by the Prime Minister By December 2010, the number of domestic debit cards exceeded 27 million, reflecting an increase of over 7.3 million cardholders compared to the end of 2009 VietinBank has emerged as the second-largest issuer of domestic debit cards, capturing approximately 19% of the market share, while Agribank leads with about 21%, followed closely by VietcomBank at 18% and East Asia Bank at 17% To achieve this rapid growth, Agribank and VietinBank have focused on expanding their client base and offering promotional programs, including fee waivers for card issuance.

As of November 2011, VietinBank has issued over 7 million credit cards, surpassing its closest competitor, which has issued nearly 6.5 million cards According to the Card Association's official results, VietinBank is set to become the market leader in debit card issuance.

The operation of international credit cards in Vietnam has evolved significantly, with a sharp increase in domestic debit card issuance leading to market saturation In response, domestic commercial banks are focusing on expanding their international credit card offerings, which yield higher profits due to lower investment costs compared to debit cards However, the entry of leading foreign banks like HSBC and ANZ in 2010 intensified competition by introducing diverse retail products, including card services To counter this fierce competition, domestic banks have implemented new incentive programs, resulting in a notable rise in international credit card issuance By 2009, Vietnam’s banking system (excluding foreign banks) recorded 371,718 international credit cards, reflecting substantial growth in the market.

As of December 2010, the total number of international credit cards in Vietnam reached 537,499, with an increase of over 165,000 cards In 2011, VietinBank contributed more than 100,000 additional credit cards, narrowing the gap with the leading bank in the country The following chart illustrates the distribution of international credit cards among the top banks in Vietnam.

Figure 2.2 : Credit card segmentation in 2010

VietcomBank maintains its leadership in the banking sector with a commanding 37% market share, while VietinBank follows closely in second place, boasting a robust 30% market share ACB Bank ranks third, holding a 12% share of the market.

Banks are not only focused on issuing debit and international credit cards but are also investing in the development of card payment systems and expanding the network of merchants that accept card payments This strategic expansion is seen as an effective payment channel that promises significant income and growth potential for banks in the future.

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

As of December 2009, Vietnam's market had a total of 36,620 POS machines, with Vietcombank leading the market by holding 9,700 POS, which represents 26.49% of the total market share PGbank follows in second place with 3,748 POS, accounting for 10.23%, while VietinBank ranks third with 3,161 POS, or 8.23% Agribank and ACB occupy the fourth and fifth positions, with 2,715 POS (7.41%) and 2,658 POS (7.26%), respectively Other notable banks include VIBank with 2,391 POS (6.53%), Eximbank with 1,833 POS (5.01%), and MP with 1,550 POS (4.23%) Vietcombank's dominance is evident, as its POS count is three times that of VietinBank, attributed to its long-established reputation in payment services, leading many merchants to directly approach the bank for contracts PGbank's second-place ranking is largely due to its strategic installation of POS at petroleum stations, although its business lines remain less diversified Additionally, competitors like Techcombank, VIBank, and Agribank pose significant challenges to VietinBank's market position.

As of June 2010, Vietnam experienced a notable increase in POS machinery, with an additional 4,722 units added in the first half of the year, bringing the total to 41,342 Vietcombank maintained its leading position with 10,915 POS machines, capturing 26.4% of the market VietinBank surpassed PGbank to secure second place with 4,975 machines, representing 11.96% of the market share PGbank followed in third with 3,776 POS units, accounting for 9.13% Agribank ranked fourth with 3,025 machines (7.32%), while VIB Bank, ACB, and Military Bank had 2,666 (6.45%), 2,514 (6.08%), and 1,719 (4.16%) POS machines, respectively This growth underscores VietinBank's emergence as one of Vietnam's leading banks in the POS sector.

The development of card-accepting merchants is crucial for banks aiming to expand their market share through enhanced debit and international credit card services By investing in payment systems and increasing the number of merchants accepting cards, banks are tapping into a profitable and promising payment channel As of December 2010, the total number of POS machines in the country reached 47,824, following the addition of 11,204 machines Vietcombank led the market with 14,762 machines, holding a 30.87% market share, while VietinBank secured the second position with 9,907 POS, representing 20.72% of the market PGbank followed in third place with 3,992 machines (8.35% market share), and Agribank ranked fourth with 3,450 machines, accounting for 7.21% of the market.

The chart: POS market shares as of December, 2010

VietinBank has emerged as the market leader in POS machines, boasting a total of 12,000 devices, according to a recent market research report This achievement positions VietinBank ahead of its closest competitor in the payment card machine sector across the entire market.

VietinBank currently holds the top position in the market for the number of issued debit cards and payment machine coverage, showcasing impressive growth Although it ranks second in issued credit cards, trailing behind VietcomBank, VietinBank has rapidly advanced from the fourth and fifth positions in 2009 to its current standing as the second-largest issuer.

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

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

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

VietcomBank leads the domestic debit card market with total sales reaching 115.5 trillion VND, while Agribank and VietinBank follow closely, each holding approximately 19% market share with sales of 91.6 trillion and 92 trillion VND, respectively The Bank of East Asia ranks next, with sales of 88.83 trillion VND, accounting for 18% of the market share.

A detailed analysis of used debit card sales reveals that cash withdrawals dominate bank transactions, followed by account transfers, while merchant payments remain minimal Specifically, the Bank of Agriculture and Rural Development reported total sales of 91.6 trillion VND, with cash withdrawals constituting 81.2 trillion VND, account transfers at 9.57 trillion VND, and merchant payments generating only a negligible amount.

824 billion VND With the same trend, at VietinBank, of 92 billion VND of total sales, the sales of drawing the cash also accounted for 97,53% with 89,78 thousand billion VND

In the competitive landscape of payment services at merchants, VietinBank reported sales of only 12.4 billion VND, significantly trailing behind Agribank's 824 billion VND While exact figures for VietcomBank's merchant payment services are unavailable, market analysis indicates that it leads in both quantity and quality, particularly noted for its convenient taxi payment options Thus, VietcomBank emerges as VietinBank's primary competitor in the debit card sector, followed by East Asia Bank and the Investment and Agriculture Bank in various provinces and cities.

However, considering the sales of used international credit card, the market shares of banks has the huge difference Considering the market shares of international credit cards of June, 2010

Figure 2.4 : Card payment revenue in 2010

VietcomBank remains the leading competitor in the Vietnamese banking sector, commanding a substantial 34% market share in international credit cards In contrast, VietinBank holds 30% of the market, while Sacombank's share is significantly lower at 6% based on issued cards, though it achieves 12% when considering card usage sales This highlights a notable performance gap between Sacombank and VietinBank Techcombank, with only 4% of the card issuance market share, has effectively leveraged strategic partnerships with HSBC to capture 11% of the sales market, positioning it as the fourth-largest player in Vietnam's international credit card market.

THE FACTUAL SITUATION OF IMPLEMENTATION AND

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

2.3.1.1 The steps of card business and payment of VietinBank

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

(Source: VietinBank card business Center)

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

3 Set up and training 4.service after sales

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

No Merchants Contracts EDC machines Times of training

Table 2.1 : The results of Card payment implementation and development

(Source: VietinBank card business Center)

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

The initial and most challenging step in establishing a card business involves the seller, including VietinBank's implementation channels such as branch staff, co-operators, and third-party partners, executing a series of essential small steps to achieve success.

To effectively gain access to business units, it is crucial to identify key subjects: first, the business unit's name and the merchants with significant sales who may need to showcase or conceal their payment capabilities without cash Additionally, understanding the prevalence of payment card usage among clients and the merchants' awareness of these dynamics is essential Second, it is important to identify the decision-maker within the business unit, typically the owner or the individual with the most influence over selection decisions Once these factors are recognized, sellers can prepare both hard and soft selling tools to facilitate access.

To effectively engage potential clients, sellers utilize various communication channels, including phone, email, and letters, to schedule appointments with business owners Successful presentations and persuasive strategies should align with the client's needs while integrating VietinBank's card payment solutions to fulfill those requirements Key objectives include boosting sales and profits, enhancing brand recognition, diversifying payment channels, attracting clients, managing turnover, minimizing cash risks, and strengthening competitive advantages.

To effectively address client objections, sellers must recognize and prepare for various client reactions, collaborating with business merchants to find solutions An objection does not indicate a lack of interest in purchasing; rather, it signifies the client's desire for more information and reassurance about their decision Inexperienced sellers often fear objections due to uncertainty in responding, leading them to defensively cling to their viewpoints By anticipating common objections and understanding the merchants' perspectives, sellers can easily navigate these challenges by following a structured approach.

 Repeating the objection by answering

 The leading sentence + Expressing the sympathy with the client

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

The followings are some popular objections:

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

1 Used the machine of other bank

The benefit of getting many machines of payment

The competitive advantage of VietinBank machines

The promotion program and the care quality of VietinBank

2 Not wanting to bear the charges

The turnover increases by diversifying the channel of creating the profit to make up for the charges The solution of receiving the outside charge when necessary

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

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

5 Being afraid that the information of business is revealed

Bringing other merchants as the evidence to explain

The solution of creating many receiving accounts

6 Comparing the quality with other banks

Bringing the big merchants as the evidence

Confirming the market shares, achievements

Table 2.2 : Popupar Objetion on POS sales

(Source: VietinBank card business Center)

Clients often struggle to sign contracts due to a lack of trust and experience, leading to uncertainty about service charges and benefits They may have specific selection criteria and comparisons that make them question the necessity of the service, and they might also seek to negotiate If the seller and client do not reach an agreement to sign the contract, efforts to address objections will be futile.

Once the client agrees to install the VietinBank card payment machine, the process of signing the contract begins, which includes essential documents such as the service recommendation letter, business registration certificate, identification of the unit owner, account opening recommendation letter, card payment service contract, and the agreed-upon merchant charges The contract signing is finalized with a minutes document that details the parameters of the merchants and the machinery installation handover This thorough contract establishes a solid foundation for better client care In the next step, VietinBank provides training and guidance to new merchants, equipping them with relevant signage, including symbols for card payment acceptance and logos for VietinBank, Visa, MasterCard, Banknet, and Smartlink, as well as branding materials like name cards and menus.

Workers responsible for market access and installation must train cashiers to use card payment machines professionally The training will cover debit and international card payment methods, identifying successful transactions, handling printed invoices, processing payment cancellations, and understanding acceptable card types Additionally, it will include a summary of transactions and support hotline information for various merchants Since many cashiers may be hesitant to engage with technology, instilling confidence and enthusiasm for VietinBank's card payment services is crucial for driving the success of card transactions.

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

When a unit installs a machine, it is mandatory to provide an on-site training course for cashiers who handle transactions for merchants The training costs are itemized as part of the installation process, making on-site training the most common approach for effective implementation.

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

1 The first training when installing the machine

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

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

4 The skill of addressing the basic payment obstacle

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

Table 2.3 : Parameters of the training conduct

(Source: VietinBank card business Center)

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

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

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

 Reporting the summary of periodical transaction

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

 Solving the obstacles related to the payment

 Enhancing the position, abolishing the current and potential competitors

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

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

The implementation of card payment systems and the development of merchant support heavily rely on branch networks and staff responsible for executing card transactions This dependency creates both advantages and limitations in today's fiercely competitive landscape.

The branch serves as the primary and most significant distribution channel due to its capacity, quantity, and advantageous location Given the heavy reliance on the branch, it is essential to implement effective regulation, management, and support for this channel.

Chart 11: The POS sales channel: October, 2010

Figure 2.7: The POS sales channel in 2010

(Source: VietinBank Card Business Centre)

The branch serves as the primary distribution channel, demonstrating its critical role in reaching merchants nationwide Its extensive network allows for a deeper understanding of client needs and local market conditions However, the branch faces challenges, including high care costs and the need for specialized staff, which can hinder the overall quality of customer service.

Most branches lack a dedicated card division or team, with staff from the client, computing, or combined divisions handling card-related tasks These employees receive salaries based on their primary roles, with additional card-related work contributing only about 10% to their evaluations, salaries, and bonuses This lack of specialized personnel and low evaluation metrics hinders the effectiveness of new hires and merchant care teams Conversely, branches with established card teams show significantly higher card payment sales compared to similarly positioned branches, even those in better locations Additionally, there has been insufficient promotion of the current channels for implementing and developing card payment sales criteria.

The channel 1- The branch: Regulating by the criteria, the instrument, Account managers Sales staffs

At the start of the year, the leadership board of Vietnam Joint Stock Commercial Bank for Industry and Trade will issue a document outlining the criteria for card assignments The card criteria for the branch consist of seven distinct types, as detailed in the instrument for assigning card business criteria for 2011.

- The criteria 1: Issuing the ATM card (the quantity)

- The criteria 2: Issuing the international credit card (The quantity)

- The criteria 3: Exploiting and opening Merchant (the quantity)

- The criteria 4: The sales of card payment (the quality)

- The criteria 5: The charge received from the operation of card business (the quality)

- The criteria 6: The mobilizing resources of card (the quality)

- The criteria 7: Others (OBU, Autobank, etc)

The seven types of criteria, known as card criteria, assess 5% to 10% of the work completion of branch staff, focusing primarily on quantity metrics While three of these criteria allow for straightforward evaluation of individual performance, the sales criteria applicable to merchants are challenging to update and identify clearly Consequently, branches typically distribute the overall criteria evenly among divisions, which then allocate them to staff This method emphasizes the quantity of issued cards and new card recipients, often neglecting the quality of service and operational efficiency For instance, a Quarter I-2011 review revealed that only 40% of POS machines were operational, indicating that 60% were merely fulfilling criteria without generating sales due to issues like hidden or damaged machines This focus on quantity over quality creates pressure on branches, leading to a detrimental oversight of service standards and operational effectiveness.

SWOT ANALYSIS ON VIETINBANK CARD PAYMENT BUSINESS

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

This article examines the health of VietinBank's card business by analyzing external factors and objective conditions that influence its operations, identifying both opportunities and challenges Additionally, it evaluates the internal environment to determine the strengths and weaknesses of VietinBank's card payment activities The findings will be summarized in a SWOT matrix, which will inform strategic solutions for the development of card payment services in Chapter III.

To enhance service quality at Vietinbank, the author examined the impact of promotional programs and other factors related to the 7Ps of marketing (product, price, place, promotion, people, process, physical evidence) A comprehensive analysis was conducted through three types of surveys: the Merchant Survey, which focused on merchants rather than cardholders since customers typically do not differentiate between bank POS systems unless promotions are involved; the Card Owner Survey, which included 250 customers; and the Staff Survey, which gathered insights from 70 employees across various branches (25 from the North, 25 from the South, and 20 from the Central region) The Merchant Survey categorized participants into three groups: top-benefit merchants generating the most profit, mixed merchants utilizing multiple POS systems, and potential merchants with inconsistent profitability or those not using Vietinbank services.

2.4.1 External environment analysis- challenges and opportunities of VietinBank

Figure 2.8 : Micro-environment analysis of business

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

The external business environment encompasses objective factors that significantly influence the operations of enterprises, including VietinBank and other business merchants Four key macro factors that impact these activities are Politics, Economics, Society, and Technology.

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

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

The scheme serves as a crucial legal framework for payment activities that support economic development in Vietnam, particularly amid ongoing global and regional economic integration By the end of 2010, the country had issued 15 million cards, with 70% of commercial centers, supermarkets, and restaurants equipped to accept card payments This is projected to rise to 30 million cards and 95% acceptance by 2020 Additionally, the cash payment rate was limited to 18% of total payment devices in 2010, with a target reduction to 15% by 2020 The number of personal accounts is expected to grow significantly by the end of 2020.

As of now, 20 million individuals, with 70% of budgeted staff and 50% of laborers in private businesses, receive their payments through bank accounts, a figure projected to rise to 45 million personal accounts, with an average account holding of 0.5% By 2020, 95% of budgeted staff and 80% of laborers are expected to be paid via accounts, while bank payments among businesses have increased from 80% in 2010 to 95% in 2020 The Vietnamese government is committed to promoting non-cash payment methods through its "Non-Cash Payment" scheme, which includes six synchronized solutions aimed at establishing a robust legal framework for non-cash transactions in the country On September 27, 2010, the State Bank of Vietnam issued Dispatch No 7305/NHNN-TT to facilitate the opening of POS connections in Hanoi, involving eight banks—VIETCOMBANK, Agribank, VietinBank, BIDV, Techcombank, VIB, Seabank, and Oceanbank—alongside two switching companies, Banknetvn and Smartlink Additional banks like Maritime Bank, Eximbank, and Sacombank are also participating in this expanding national system.

Recently, during a conference organized by the Ministry of Labor, Invalids, and Social Affairs, a mandate was issued requiring business merchants to make payments to their staff and officers via card transactions Additionally, discussions among delegates and members of the National Assembly highlighted that cashless payments are a key measure in combating money laundering Legal documentation supporting card payments serves as evidence of the State's backing for this initiative Consequently, the government is creating optimal conditions for card payments, presenting a significant opportunity for VietinBank.

The entrenched cash payment habits of Vietnamese consumers present both challenges and opportunities for VietinBank's card payment services Currently, 83% of ATM card usage is limited to cash withdrawals, with only 14% of total payments made electronically, significantly lower than the global average of 5-7% Despite the introduction of various non-cash payment solutions like Internet banking and POS systems, changing consumer behavior requires broader societal participation Many merchants prefer cash transactions and only install POS systems upon customer request, leading to limited card usage even in supermarkets Additionally, high card transaction fees deter merchants from fully embracing card payments, as they fear reduced profits Although Visa has implemented measures to curb additional charges, competition among banks allows merchants to choose service providers based on their terms, further complicating the shift toward cashless transactions.

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

According to the 2009 general housing and population investigation, Vietnam ranks as the third largest population in ASEAN and thirteenth globally The country boasts a favorable demographic profile, with a labor force comprising 65% of the total population from 2015 to 2025 This youthful demographic is poised to embrace new trends, transform consumer habits, and adopt banking technologies, leading to an increase in payment card ownership Consequently, Vietnam stands to benefit from a significant workforce that is inclined towards consumption.

Over the years, the development of merchants in tourist-heavy areas, such as the old quarter and upscale hotels, has proven advantageous, particularly for foreign visitors who frequently use their cards In recent years, high-income workers have increasingly adopted card payments at major shopping centers like Vincom and Trang Tien Plaza However, the majority of average-income individuals still prefer cash transactions Despite owning cards, many are unaware of their usability for payments at merchants, making it challenging to shift this payment habit This transition is especially difficult in underdeveloped areas, where the concept of card payments remains unfamiliar.

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

Mr Nguyen Van Nam, former Head of the Commercial Research Institute, predicts significant changes in the consumption habits of Vietnamese consumers In recent years, Vietnam has consistently ranked third globally for consumption growth, according to international organizations This trend indicates a shift towards consumers increasingly prioritizing both the quantity and quality of products Additionally, the emergence of a middle-class demographic is becoming evident in society.

Technology: technological development is a basic chance for VietinBank in some aspects, but its incompleteness also brings difficulties

Thanks to advancements in financial switching and interconnection technology, cardholders from various banks can now make payments at different payment machines without being restricted to their issuing bank's terminals This capability is facilitated by the Vietnam National Financial Switching Company and Smartlink Card Service JSC.

VietinBank is currently importing payment machine from oversea market, machine buying mechanism is lack of being flexible and active That payment is greatly affected by network provider’s telecommunication link

At the moment, telecommunication network quality in Vietnam is in mediate

The lack of transparency in card payments through mobile SIM or telephone lines is evident, particularly during network issues While fierce competition in the mobile phone market compels network providers to improve service quality to attract customers, it remains a critical factor for new entrants aiming to capture market share Despite the generally reliable POS networks, payment processes can become opaque when network disruptions occur, highlighting the dependency on network providers for seamless transactions.

Micro-environment: using model Five-Force to search for micro environment of payment activity at VietinBank

Figure 2.9: Michael Porter’s five forces model

(Source: Michael E Porter, (2008), The Five Competitive Forces That Shape

Client negotiation power in the card service market is relatively low due to the abundance of providers offering various options Banks are in fierce competition to attract clients, often leading to internal competition within their own branches Merchants frequently install multiple card payment machines from different banks, receiving ongoing invitations to adopt new services This results in clients having numerous alternatives if they choose to switch banks for better fees, quality, or additional services VietinBank, while facing competition from VietcomBank, boasts superior payment quality through its machines, gradually establishing itself as a reputable brand with strong competitive advantages Additionally, banks typically invest around 10 million in payment machines when merchants agree to accept their cards, which means they often overlook smaller merchants.

VietinBank's negotiation power with payment machine providers is relatively low, as it relies on key suppliers for essential services such as payment processing and connection transfers The bank utilizes several payment machines, including the corded and cordless VX510 from Verifone, as well as the P70 and P80 machines from Pax, which are from Hong Kong Among these, the cordless S90 from Verifone employs GPRS technology, which can lead to transaction failures due to poor network conditions The P70, being the smallest model, has been in operation at VietinBank for an extended period.

The Verifone VX510, known for its affordability, is commonly utilized by merchants; however, it often encounters hardware issues such as transfer link errors (#51, #52), full memory, and system errors, leading to time-consuming challenges for caretakers.

SOME SOLUTIONS TO DEVELOP CARD PAYMENT

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

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

Analyzing card payment sales by business lines and regional distribution reveals that certain sectors outperform others To enhance machine installation performance and maximize service charges, it is essential to target high-performing businesses for card acceptance The most profitable sectors include hotels, tax-exempt restaurants, refrigerated supermarkets, jewelry stores, and golf facilities.

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

VietinBank revenue Allocation Revenue % North Midle South

Vàng bạc, đồ trang sức

1,819,499.52 28% 26.47% 9.54% 64.00% Table 3.1 : VietinBank revenue by region and category

(Sources: VietinBank Card business center)

The analysis reveals promising business opportunities across three regions, particularly in the hotel, restaurant, gold, silver, jewelry, tourism, supermarket, and fashion sectors Each area exhibits unique strengths, highlighting the individual potential of various lines of business that can drive significant sales growth.

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

To boost debit card payment transactions, it is essential to encourage debit card owners to utilize their cards beyond cash withdrawals Currently, the majority of card payment activity is dominated by credit card users, with many debit card holders overlooking the payment features of their cards By enhancing awareness and promoting the benefits of using debit cards for payments, we can significantly increase card payment turnover among debit card owners.

To boost the revenue from "On-us" card transactions at VietinBank, it is essential to enhance the volume of these payments, which involve transactions made by VietinBank cardholders on the bank's own machines Unlike "Not-on-us" transactions, which involve cards from other banks, "On-us" transactions do not incur interchange fees, allowing for increased net charges and income By offering comprehensive services, including card issuance and management, VietinBank can attract more customers and drive higher service utilization, ultimately contributing to the growth of both transaction volume and revenue.

To enhance cash withdrawal rates at POS, it is essential to return significant service fees of 4% on both on-us and not-on-us card transactions Additionally, leveraging fees from International Card Organizations for cash withdrawal transactions can further boost revenue Moreover, the interest accrued from cash withdrawal transactions, which begins from the transaction execution date, offers a substantial advantage over payment transactions, where interest is calculated after the billing cycle.

VietinBank's credit card payment turnover primarily involves Visa, MasterCard, and JCB, with no acceptance for other cards like Diners Club, international debit, or Amex This limitation in card issuance stems from unsuccessful negotiations with card organizations, highlighting a key weakness for VietinBank Additionally, the exclusivity of the Amex card contract held by VietcomBank restricts VietinBank's competitiveness in that segment To enhance its market position, VietinBank should focus on negotiating partnerships to accept a wider variety of cards, including Diners Club, Visa Debit, and Master Debit, beyond the dominant Visa, MasterCard, and JCB.

Table 3.2: Revenue by credit card type

On us Not on us On us Not on us

3 2 Cover and scoop the whole open and potential market

A recent survey revealed that nearly 40% of respondents believe increasing the number of merchants is crucial for enhancing card payment sales Additionally, factors such as purchasing cycles during Tet holiday, summer vacation, and special occasions in Vietnam play a significant role, accounting for 19% of the influence Therefore, expanding merchant partnerships and addressing service quality are essential strategies for VietinBank to improve its card payment services and capture a larger share of the market.

Figure 3.1: The reason for changing card payment sales

The retail sector, especially card trading, is increasingly vital to banks' business strategies According to Timewell newspaper, banks that successfully tap into the demand for retail banking services among underserved populations in emerging economies are poised to become global leaders in the future.

Vietnam's commercial banks recognize the crucial role of retail banking in their development strategies, focusing on enhancing card services as a key distribution channel This shift not only repositions banks in the market but also promises future revenue potential Currently, 45 banks are active in the card market, leading to intense competition that has reshaped the hierarchy of leading banks since 2010, with several former top players losing their positions.

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

Leading the market in card payment networks offers significant advantages, as the current landscape demonstrates immense potential for growth With card payments projected to become the primary payment method of the future, establishing a strong position in this sector is crucial for businesses aiming to thrive in an evolving financial ecosystem.

Currently, banks are interconnected, allowing cards from one bank to be used for payments at POS machines of other banks However, if a specific bank's unit accepts payments from a restaurant, other branches of that bank cannot set parameters for that restaurant The government has implemented policies to prevent multiple banks from installing common machines at business locations, aiming to reduce waste and unhealthy competition The swift installation of machines in shops serves as a barrier for other banks, reinforcing their sovereignty in the market.

To enhance its competitive edge, VietinBank should establish exclusive contracts with merchants to minimize competitor involvement While VietcomBank leverages its superior quality in the hospitality sector, it faces intense price competition from other banks that have significantly lowered market prices to attract merchants Currently, VietinBank occupies a middle position in the card payment market, offering lower quality than its top competitor and higher prices than the third The competition is fierce, employing tactics ranging from aggressive pricing to technological disruptions VietinBank should initiate a campaign encouraging merchants to exclusively support its services, leveraging the business relationships of its staff and fostering pride in the VietinBank brand Additionally, a skilled sales team is essential for driving this initiative forward.

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

The quality of card payment services, although often unnoticed, directly influences the overall product quality This article will explore two key aspects: first, the significance of enhancing service quality as a means to improve the product, and second, the specific types of card payment services that warrant our attention for optimal development.

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

VietinBank, we should refer the following numbers

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

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

5-7 time as much as keeping 01 former customer

A significant 98% of dissatisfied customers choose not to voice their complaints and instead turn to competitors, highlighting the importance of addressing customer concerns Additionally, even among those who express satisfaction, 15-40% are likely to leave for rival companies, underscoring the need for businesses to actively engage and retain their clientele.

The quality of after-sales service in banking encompasses activities aimed at caring for, maintaining, and enhancing customer satisfaction This service includes addressing payment-related issues and implementing loyalty programs to foster customer retention.

Cashiers play a crucial role in customer interactions, significantly influencing the choice of card payment methods Their friendliness and professionalism can greatly affect customer satisfaction Unlike banks, cashiers have the unique advantage of directly engaging with customers, allowing them to sway payment preferences However, many cashiers may lack advanced education and experience high turnover rates, making effective training essential By equipping cashiers with skills in operating card payment machines and educating them on the benefits of card transactions, businesses can encourage a more active promotion of modern payment services Cashiers often prefer card payments for their simplicity and the elimination of cash handling, but concerns about machine malfunctions can deter them from fully embracing this method Addressing these issues is vital for fostering a positive attitude towards card payments.

While the issues faced by cashiers are significant, they are primarily reflections of the directives set by merchants, rather than standalone problems Research conducted in stores that have not experienced increased turnover reveals several key underlying causes.

VietinBank's merchant services face challenges as merchants are reluctant to absorb transaction fees, typically around 2%, opting instead to pass these costs onto customers Engaging this customer group requires patience and tailored incentives, such as consultations on e-banking services, savings plans, loan guarantees, and complimentary card usage Additionally, the bank's complex management structure allows for a percentage of receivable charges to be allocated to key decision-makers A compelling strategy to attract merchants involves promoting the extensive reach of VietinBank, which boasts over 7 million cardholders and opportunities for visibility in the bank's prestigious gold handbook, connecting merchants with high-value customers and enhancing their payment solutions.

Merchants often choose to use machines from various banks due to several key factors Primarily, lower fees and a range of service packages offered by these banks attract them Additionally, many merchants exhibit strong loyalty to their current bank, predominantly VietcomBank Effective penetration strategies, high-quality customer care, and appealing promotional programs play crucial roles in influencing merchants' decisions To evaluate the quality of care provided, important criteria include the quality of invoice printing paper, the reliability of transmission lines, the efficiency of cashiers during transactions, the visibility of card permission signage, the resolution of payment issues, the effectiveness of promotional initiatives, and the establishment of strong relationships through thoughtful gestures like presenting gifts to merchants.

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

The Vietnamese card market is likened to a "delicious cake," becoming increasingly segmented In the coming years, competition will shift from limits and fees to a focus on service quality and utility, particularly through i-banking, SMS banking, and phone banking VietinBank should leverage its unique MOTO payment service and online payment options, continuously enhancing its service features alongside other financial products Additionally, the card payment landscape is evolving to include virtual and contactless options, allowing users to transact without physically presenting their cards.

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

In Thailand, the usage of cards for online payments rose significantly from 43% in 2008 to 67% in 2010, while Malaysia saw an increase from 33% in 2009 to 55% in 2010 Vietnam also experienced a 35% growth in online payment card usage in 2010 compared to the previous year The MOTO (Mail Order Telephone Order) card payment turnover accounted for 1.41% of total payment turnover in 2010, increasing to 2.39% in 2011, highlighting its growing acceptance among merchants MOTO services are becoming increasingly familiar to cardholders and merchants, serving as a competitive advantage for banks like VietinBank in Vietnam This card-not-present payment method allows customers to provide their information via email or phone to complete transactions, making it ideal for remote purchases Merchants often utilize this method when they cannot swipe the card, entering card details manually on EDC devices MOTO transactions include Key-enter transactions, where merchants process payments themselves, and MOTO Collection transactions, where merchants call the bank to authorize transactions.

Compare between the MOTO transaction and the normal transaction

Present of the card owner at the payment period

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

Card gets in touch with EDC

Advantages Not limited by payment time and payment space

Safer due to identification of the card owners

Diversify the payment methods for the Merchants

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

Table 3.3: MOTO transaction and the normal transaction comparison

To effectively develop MOTO services, it is essential to target the right market segment by focusing on merchants with a strong demand for MOTO transactions Prioritizing online businesses over offline ones is crucial, while also considering the appropriate scale, brand reputation, and customer trust of the selected units.

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

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

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

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

VietinBank has enhanced its card payment services, allowing customers to access credit reports for both their bank payment accounts and ATM card accounts Additionally, merchants can now receive a summary of their payment activities via email, and the automatic credit reporting system eliminates the need for intermediaries, adding significant value to VietinBank's card services However, the payment quality has faced challenges, including frequent faults such as network errors preventing transactions, double reporting of credit reports for card-accepting merchants, slow transaction processing, and input errors.

The card payment service for the integrated card form:

VietinBank currently partners with nearly 100 schools across the country to provide an integrated student card system, excluding pedagogy schools With an average of 3,000 students per school and term tuition fees totaling approximately 5 billion dong, this service streamlines the collection process, saving time for both schools and students The tuition fee collection is facilitated through POS machines at the school finance department, allowing payments to be made easily via the school's website or through messaging services for selected subjects.

Many businesses recognize the importance of issuing loyalty cards to reward their dedicated customers These cards enable customers to enjoy free purchases or discounts at the store Cashiers utilize the information on these cards to apply reductions or deductions for loyal patrons, enhancing customer satisfaction and encouraging repeat business.

Residents are required to pay their monthly electricity and water bills either at the respective departments or through on-site collection by utility staff By equipping these staff members with POS machines, issues such as insufficient cash or lack of funds can be avoided, allowing for seamless transactions, including payments via credit cards for those who may be short on cash.

SOME RECOMMENDATION

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

Implementing policies that promote card payments is essential for reducing cash transactions and fostering a legal framework that supports this shift By enhancing regulations that enable state sectors to accept card payments, we can encourage a more efficient and transparent spending culture.

With advancements in science, technology, and media, numerous new payment services have emerged; however, a robust legal framework is still lacking Current mechanisms and policies aimed at promoting cashless payments are inconsistent and fail to attract significant investment in infrastructure The integration of administrative measures with economic stimulus methods is insufficient to effectively implement these guidelines in practice.

Despite the growing demand for card payment services, key governing bodies, including the government, central bank, and ministry of finance, have yet to implement policies that could significantly enhance this sector Proposed measures include mandating card payments for certain business transactions, offering tax reductions or refunds for card payment transactions, and providing exemptions or reductions on import taxes for EDC card payment equipment.

3.4.2 The recommendation to some relevant merchants, boards, sections

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

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

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

The Ministry of Labor, Invalids, War, and Social Affairs should officially implement regulations that promote the mandatory payment of salaries through bank accounts for certain business units.

The Department of Planning and Investment should develop incentive policies that prioritize businesses investing in card brushing machines, including tax benefits and related programs to encourage their adoption.

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

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

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

4 Bank card technology Jounal in 2009-2010

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

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

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

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

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

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

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

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

13 Vietnamese Communist Party, " Strategy to develop socio- economic 2000 – 2010”, Document of the 10 th Party , 2000

QUESTIONAIRE FORM 1 – (Merchant) I.General information

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

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

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

 “ Quốc khánh trọn niềm vui”: ………

 “ Kỳ nghỉ vàng mừng Quốc Khánh”: ……

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

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

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

Bonus per 500.000 vnd card payment sales

Bonus per card payment transation

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

QUESTIONAIRE FORM 2 – (Customer) I.General information

You are : Age: … Card using ……

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

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

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

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

 My receiving - salary card of company ………

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

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