Current background and suggested solutions to enhance non cash payments a case of agribank chuong my branch,graduation thesis

INTRODUCTION

Rationale

A developed banking system is essential for economic growth, as emphasized by Nguyen Van Binh, the Governor of the State Bank of Vietnam, during a meeting with commercial bank representatives in June 2012 Over nearly two decades of renovation, Vietnam has made significant strides in its economy, shifting towards industrialization and modernization Concurrently, commercial banks have played a crucial role in supporting and promoting this economic development.

Commercial banks play a crucial role in the economy by serving as payment intermediaries, particularly through the use of non-cash payment methods These methods are increasingly dominating the market due to their numerous advantages, contributing significantly to economic development Compared to cash payments, non-cash methods offer benefits for banks, customers, and the government alike The growth of non-cash payments enhances banking operations and supports effective macroeconomic management, especially in the context of international economic integration.

Commercial banks are the primary providers of non-cash payment services, underscoring their vital role in the economy Dr Nguyen Duc Thanh from the Center for Economic Research and Policy at Hanoi National University emphasized in a December 2012 discussion that the banking industry serves as the backbone of the economy, significantly contributing to national economic growth Consequently, the banking sector is increasingly focused on improving institutional mechanisms and business activities, particularly in the realm of non-cash payment operations.

Nguyen Thi Khanh Huyen ATCA - K12

In recent years, Vietnam's commercial banks, particularly the Agribank system, have made significant strides in payment technology to attract customers and enhance regional and global integration The rise of non-cash payments has positively impacted social life, yet these services remain inadequate in meeting the demands of a rapidly developing economy There is a pressing need for modernization of payment technologies and greater promotion of non-cash payment options in residential areas To address these challenges, it is essential for the banking industry, especially Agribank, and economists to collaborate on effective solutions that will enhance these services and facilitate integration into the international payment network.

Research Purposes

This study aims to address key theoretical issues surrounding non-cash payment operations, specifically focusing on the development of non-cash payment services at Agribank-Chuong My branch It will analyze the current business operations related to non-cash payments and offer recommendations to improve these services within the branch.

Scope and Subject of the Study

Subject of the study: theoretical issues and practice related to developing non- cash payment services in Agribank- Chuong My branch

Scope of the study: mainly focusing on research on development of non- cash payment services in Agribank- Chuong My branch.

Research Methods

After collecting data from Annual Report of Agribank- Chuong My branch (2010-

2012), the thesis has just applied some research methods such as: Synthesis, Comprehensive Analysis Moreover, the thesis uses reliable secondary data sources like

Nguyen Thi Khanh Huyen ATCA - K12 reports, researches which are done by trustworthy articles, websites to figure out the conclusions on this research topic.

Research Questions

To achieve the above purposes, three research questions are addressed in the present paper as follows:

Questions 1: What are the main forms of Non- cash Payments?

Question 2: What is current background of Non-cash Payments in Chuong My branch? Question 3: What are possible solutions to improve Non- cash Payments in Chuong My branch?

Research Structure

The thesis comprises five main chapters, along with acknowledgements, abbreviations, tables, figures, and references The Introduction chapter details the rationale, purposes, scope, methodology, research questions, and structure of the study The second chapter presents an overview of non-cash payments both globally and in Vietnam Chapter three focuses on the current status of non-cash payments at the Agribank-Chuong My branch In chapter four, several solutions are proposed to enhance non-cash payment systems at this branch The final chapter concludes the study with key findings.

OVERVIEW OF NON- CASH PAYMENTS IN VIETNAM

Overview of Non- Cash Payments

2.1.1 Definitions and Characteristics of Non- Cash Payments

Definitions of non- cash payments:

According to thefreedictionary.com, non- cash payments are the methods of paying for goods and services that do not involve the exchange of cash Moreover, under “Giao

In the article "Trinh Ke Toan Ngan Hang" by Dr Nguyen Thi Thanh Huong and Teacher of Merit Vu Thien Thap, it is defined that non-cash payments refer to transactions conducted without physical cash These payments involve transferring a specific amount from the payer's account to the beneficiary's account at a bank or savings institution, or through the offsetting of mutual claims.

Characteristics of non- cash payments:

The introduction of non-cash payment methods is closely linked to advancements in cash recording and the evolution of the banking system Consequently, non-cash payment methods exhibit several key characteristics.

 The most important and outstanding characteristic of non- cash payments is the movement of currency independent of the movement of goods in both time and space

In non-cash payment methods, exchange vectors differ from the traditional Goods-Money-Goods cycle seen in cash transactions Instead, they manifest as recorded cash entries in accounting documents This unique characteristic necessitates that payment parties, primarily buyers, maintain a bank account with a sufficient balance, as payments cannot be processed without it.

In non-cash payment methods, banks serve as both organizers and implementers of payments, managing customer deposit accounts with adherence to professional standards This role positions banks as the central facilitators of payment transactions for their customers.

2.1.2 Roles of Non- Cash Payments in the Market Economy

According to the State Bank of Vietnam, non- cash payments have three main roles such as: for customers, for commercial banks and for economy

Non-cash payment methods offer customers a simple, safe, and convenient way to transact, enhancing the speed of consumption and capital flow With bank accounts, customers can easily submit requests and withdraw funds whenever they need.

Non-cash payment methods serve as a vital clearing instrument for commercial banks, facilitating convenient transactions without the need for physical cash These methods enhance cash flow management and allow banks to efficiently mobilize idle customer funds to support their operations Additionally, non-cash payments enable banks to leverage customer data, optimizing capital usage and mitigating liquidity risks.

In our economy, non-cash payment methods are integrated into a unified system where commercial banks are central players In a market economy, the exchange of goods and services culminates in payment activities, linking the payment system to all societal and economic activities Consequently, both payment activities in general and non-cash payment methods specifically play a crucial role in driving economic growth.

Non-cash payment methods, particularly bank transfers, significantly reduce opportunity costs such as issuance, transaction, and storage costs, thereby enhancing the speed of capital flows.

 Non- cash payment method creates a favorable condition for State Bank to control inflation and execute monetary policies, contributing to ensure the stability of economy

Commercial banks play a crucial role in mobilizing funds from residents to support economic growth, driven by the rising trend of non-cash payments This shift towards digital transactions accelerates the capital cycle and enhances the overall demand for capital within society.

2.1.3 Main Forms of Non- Cash Payments

Under the SBV Law and the Credit Institutions Law of 1997, the State Bank Governor has established specific documents for payment procedures via payment service providers In the economy, five non-cash payment methods are commonly utilized for transactions between economic organizations and individuals: cheques, payment orders, collection orders, letters of credit, and cards.

A cheque is a written, unconditional order from an account holder to a bank or cheque-issuing institution, instructing them to pay a specified amount of money to a designated individual or to the bearer of the cheque.

 Payer/ Drawer: a person who writes a check instructing the drawee to make payment

 Beneficiary: is normally a stand for the seller or the exporter of goods, who has to receive payment from the drawer

 Issuing bank/ Drawee: the bank which issue check on behalf of the drawer and forwards it to the advising bank for delivery to the beneficiary

An advising bank is a branch or correspondent bank located near the beneficiary's residence, where the issuing bank sends either the check or a notification of the check issuance, along with instructions to inform the beneficiary.

(Source: “Giao trinh ke toan ngan hang” – Banking Academy, 2011)

1) The seller (the beneficiary) delivers goods for the buyer under the signed contract

2) The buyer (the drawer) issues the cheque to the seller

3) The beneficiary submits cheque + cheque list to the advising bank in valid time

 In the case Cheque payment via the same bank:

4) The bank checks the apparent authenticity of cheque, and then deducts certain mount from drawer’s account to beneficiary, debits to the drawer (buyer) and credits to beneficiary Ending the payment process

 In the case Cheque payment via two different banks:

4) The advising bank checks the apparent authenticity of cheque and sends cheque + cheque list to the issuing bank

5) The issuing bank checks the apparent authenticity of cheque then deducts certain amount from drawer’s account to beneficiary and debits to the drawer

6) The issuing bank sends credit order to the advising bank

7) The advising bank credits to the beneficiary

Definition: an instruction to a bank to pay a particular amount of money at regular times from a person’s bank account (the importer’s account) to another bank account (the payee’s account)

 Importer/ Buyer: a person who writes a standing order instructing the drawee bank to make payment

 Exporter/ Beneficiary: is normally a stand for the seller of goods, who has to receive payment from the buyer

 Collecting bank: the bank which collects a payment order from a buyer (importer) and forwards it to the remitting bank for eventual remittance to the seller (the beneficiary)

 Remitting bank: the bank which collects money from account of the buyer through collecting bank and makes payment for the beneficiary

Figure 2 Standing order operation process

1) The seller (the beneficiary) delivers goods for the buyer under the signed contract

2) The buyer writes a standing order instructing the collecting bank to make payment for the beneficiary

 In the case Standing order payment via the same bank:

3) The bank deducts certain amount from buyer’s account to beneficiary, debits to the buyer and credits to the beneficiary Ending the payment process

 In the case Standing order payment via two different banks:

3) The collecting bank checks the apparent authenticity of standing order, and then deducts certain amount from the buyer’s account to beneficiary, debits to the buyer/ importer

4) The collecting bank sends credit order to the remitting bank

5) The remitting bank credits to the beneficiary

A collection order is a financial instruction from the seller (exporter) to their bank, authorizing the bank to present shipping documents to the collecting bank (importer's bank) after the seller has fulfilled their delivery obligations This process is essential for obtaining payment, accepting bills of exchange (B/E), or meeting other specified terms and conditions.

 Importer/ Buyer: a person who pay money for the beneficiary through his bank account

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

 Collecting bank: the bank which collects money from a buyer (importer) and forwards it to the remitting bank for eventual remittance to the seller (the beneficiary)

 Remitting bank: the bank which collects money from account of the importer through collecting bank and makes payment for the beneficiary

Figure 3 Collection order operation process

1) The seller delivers goods for the buyer under the signed contract

2) The seller (the beneficiary) writes a collection order instructing the remitting bank to collect money from the buyer

 In the case Collection order payment via the same bank:

3) The bank checks the apparent authenticity of collection order, then debits to the buyer and credits to the seller/ beneficiary Ending the payment process

 In the case Collection order payment via two different banks:

3) The remitting bank checks the apparent authenticity of collection order, and then sends that collection order to the collecting bank

4) The collecting bank checks the apparent authenticity of collection order, and then deducts certain amount from buyer’s account to the seller, debits to the buyer

5) The collecting bank sends credit order to the remitting bank

6) The remitting bank credits to the seller

2.1.3.4 Letter of Credit/ Documentary Credit

A letter of credit is a formal commitment from a bank, known as the issuing bank, initiated by an importer or buyer, referred to as the applicant, to provide payment to an exporter or seller, the beneficiary This financial instrument ensures that the bank will pay upon presentation of specified documents, such as bills of exchange or drafts.

Nguyen Thi Khanh Huyen ATCA - K12 commercial documents that comply with the terms and conditions of the documentary credit

Parties to letter of credit (L/C)

Background of Non- Cash Payments in Vietnam and in the World

2.2.1 Background of Non- Cash Payments in the World

The World Payments Report reveals that, according to the European Financial Management and Marketing Association, global non-cash payment volumes increased by 7.1% annually, reaching 283 billion transactions, significantly outpacing the 4.1% growth of GDP Emerging markets experienced a remarkable annual growth rate of 16.9%, while developed nations saw a more modest increase of 4.9%.

Russia ranks as the tenth largest non-cash payments market globally, showcasing impressive annual growth of 33.9% in emerging markets This surge is attributed to rising card penetration, with card usage in transactions jumping from 3% in 2001 to 27% by 2011 Additionally, government initiatives, including the establishment of a new legal entity called the “payment agent” in 2011, have further expanded payment options for rural customers, contributing to the overall growth of the sector.

China experienced a significant 30.3% increase in non-cash payment volumes, largely due to the gradual acceptance of cards by retailers and supportive e-payments directives guiding banks In contrast, Brazil, the third-largest market for non-cash transactions globally, recorded $20 billion in volumes for 2010, reflecting an 8.9% growth from the previous year.

Brazil's robust GDP growth and the expansion of banking networks via non-bank 'banking agents' are crucial factors driving the country's non-cash payments Since 2005, the Brazilian regulator has actively promoted the advancement of retail payment systems by issuing reports and directives aimed at addressing identified inefficiencies in the payments market.

The significance of international electronic and mobile payments is on the rise, with industry estimates predicting that online payments for e-commerce will soar to $31.4 billion by 2013, reflecting a consistent annual growth rate of 20.0% since 2009.

2013 Analysts believe the number of payments using mobile devices could grow even faster, by 52.7 per cent a year to reach 17 billion in 2013

Frederic S Mishkin emphasizes that the growth of non-cash payment volumes will persist, driven by factors such as market size, population growth, and the swift adoption of non-cash innovations, even if economic growth slows compared to recent years.

2.2.2 Background of Non- Cash Payments in Vietnam

The State Bank of Vietnam reports that Project No 291/2006/QD-TT, initiated on December 29, 2006, has led to notable advancements in non-cash payments over four years However, the global financial crisis and economic downturn have resulted in significant challenges, indicating that further efforts are necessary to enhance the non-cash payment system in the future.

In the past five years, the State Bank of Vietnam (SBV) has developed an advanced inter-bank electronic payment system that connects 63 provinces and cities, adhering to international processing standards Most banks have implemented core banking systems and sophisticated internal payment solutions, enabling them to efficiently handle the growing transaction volumes of the economy.

By May 2010, the country had installed 11,000 ATMs and approximately 40,000 POS terminals, with 24 million cards issued under 190 different trademarks by 48 card issuers.

Several enterprises, including Banknet.vn and Smartlink, have commenced operations focused on connecting bank members within card alliances Notably, the telecommunications and IT sectors have established a foundational system that facilitates the development of innovative payment services and tools nationwide.

The proportion of cash payment transactions in the economy has significantly decreased, dropping from 31.6% in 1991 to 15% in 2009 This shift towards non-cash payment transactions in the public and business sectors, as well as among individuals, has shown positive trends Notably, there has been a concerted effort to enhance non-cash payment processes related to budget revenues and expenditures, particularly through the modernization of tax payment procedures among tax authorities, state treasuries, customs, finance authorities, and banks.

The growing awareness and adoption of non-cash payment methods among individuals and businesses have led to the emergence of various payment services, including mobile banking, internet banking, and electronic wallets This trend aligns with global payment practices As reported by the State Bank of Vietnam, by the end of 2009, approximately 70,000 electronic wallets were in use, with VietUnion Company holding the largest share at 32,000 wallets Payment service providers are increasingly collaborating with commercial banks and e-commerce businesses to enhance their offerings.

Despite promising outcomes, the progress of the non-cash payment project remains sluggish due to several challenges The technical infrastructure is incomplete, with ATMs primarily serving cash withdrawal needs Additionally, other forms of money transfers predominantly rely on the banking system, while the development of POS systems has lagged behind.

Despite the availability of non-cash payment options in urban areas, such as supermarkets and commercial centers, cash transactions remain prevalent in the public sector due to ingrained consumer habits and psychological factors.

Experts identify several factors contributing to the current situation, including a weak legal system and insufficient budget allocation for the development of non-cash payment systems The high costs associated with purchasing equipment, securing suitable locations, and ensuring security are significant barriers Consequently, many banks are hesitant to establish auto-banks themselves, opting instead to rely on their card centers to handle these operations.

CURRENT BACKGROUND OF NON- CASH PAYMENTS

History and Development of Agribank- Chuong My Branch

3.1.1 Foundations and Developments of Agribank- Chuong My Branch

Agricultural Development Bank – Chuong My branch was established by Decree

Established under No 340/QD-NHNo-02 on June 19, 1998, Agribank's Chuong My branch has solidified its reputation as a leading commercial bank in Chuong My District over the past decade As of December 2012, the branch reported total fund mobilization of 554.852 million VND and outstanding loans of 600.286 million VND, reflecting a significant growth rate of 45.1% This impressive performance highlights Agribank's successful journey and its vital role in the region's financial landscape over 15 years.

In the early 2000s, Agribank - Chuong My Branch emerged as the leading commercial bank in Chuong My district, thanks to strategic restructuring and market expansion campaigns Celebrating a decade of establishment in 2008, the branch focused on key goals such as maintaining its dominance in the rural and agricultural financial market, accelerating restructuring efforts, resolving non-performing loans, enhancing IT infrastructure, diversifying product offerings, and improving service quality.

At present, the branch is serving millions of households and enterprises at Chuong

Agribank's Chuong My branch has actively demonstrated its commitment to corporate social responsibility by contributing to the nation's social welfare programs In alignment with the Government's resolution 30a/2008/NQ-CP aimed at rapid and sustainable poverty alleviation, the branch has funded the establishment of 20 water supply systems and 31 community kitchens as of August 2010.

Nguyen Thi Khanh Huyen ATCA has provided essential equipment for 38 schools in the district and contributed to the construction of hospitals and the enhancement of historical monuments Each year, the branch's employees donate their salaries for four working days to various welfare funds, including the Fund for the Poor and the Fund for Children Saving In 2011, Agribank generously sponsored over VND 500 million for charitable initiatives.

Since 2013, Agribank's Chuong My branch has been a key player in national economic development and a leader in the agricultural and rural financial market The branch is committed to mobilizing funds from local and international sources while ensuring sustainable credit growth.

To maintain its position as a leading bank offering high-quality products and services while meeting customer demands, Agribank - Chuong My branch is focusing on modernizing its banking technology and increasing non-credit income The branch aims to achieve several goals for 2013, including a 10%-12% increase in fund resources compared to 2012, an 8%-10% rise in outstanding loans, and ensuring that 70% of loans are directed toward agricultural and rural areas Additionally, the branch targets keeping non-performing loans below 3% and boosting non-credit income by 30%-35%.

As the premier commercial bank in Vietnam, Agribank, especially its Chuong My branch, has made significant strides in contributing to the nation's industrialization, modernization, and overall economic development.

3.1.2 Organizational Structure of Agribank- Chuong My Branch

Figure 6 Organizational structure of Agribank- Chuong My branch (Source: Annual report of Agribank- Chuong My branch- 2012)

Administrative and human resources department

- Accounting, reporting and settlement funds

- Planning and implementing financial plans for short and long term

- Analyzing the financial situation, and balance the budget, debts…

- Building credit customers strategy, classifying customer and proposing incentives for each customer

- Classifying outstanding loans, analyzing overdue debts, then giving causes and proposing solutions…

- Implementing marketing plans, answering customer questions, handling any disputes and complaints arising…

- Participating in physical living conditions, cultural - spiritual care of employees…

- Synthesizing and timely reporting test results, editing the existing shortcomings of the branch…

The board of directors is structured with one director and two deputy directors, overseeing various professional departments, including accounting, planning and business, administration and human resources, and internal inspection Additionally, the branch features a Party union with 25 members and a youth union, fostering organizational unity and engagement.

The organization consists of 24 members and operates under a trade union with a total of 53 members It features three key transaction points: Quang Bi, Mieu Mon, and Dong Phuong Yen Currently, the branch is equipped with three ATMs and three POS systems to facilitate transactions.

The organizational model renovation from 2004 to 2008 has enabled Agribank-Chuong My branch to align its structure with the new development phase of 2008-2012 This restructuring emphasizes modern, vertical management and growth, ensuring a balance among income, risk, growth, and control Currently, the branch prioritizes its core business areas, effective risk management, and maintains a consistent centralized management approach from the head office to all transaction points.

In summary, the true core values of an organization are found not only in its tangible assets but also in the intangible qualities cherished by its dedicated team of professional, trustworthy, and creative staff.

Current Background of Non- Cash Payments in Agribank-Chuong My Branch

3.2.1 Contribution of Payment Activities to Total Service Income in Chuong My Branch

The Chuong My Branch of Agribank has seen significant growth in non-cash payment activities, reflecting the overall development of the banking system According to the branch's Annual Report, by the end of 2012, there were over 10,000 accounts, comprising around 4,000 institutional and 6,000 personal accounts The establishment of bank accounts is essential for facilitating payments through banking services, addressing the rising demand for efficient payment solutions.

Nguyen Thi Khanh Huyen from ATCA - K12 customers at the Chuong My branch emphasizes the importance of payment processes and actively promotes information technology to streamline these transactions This commitment not only enhances payment efficiency but also saves time and boosts the bank's reputation.

In today's competitive landscape, the enhancement of banking services is crucial for commercial banks The Chuong My branch has focused on improving payment quality by refining its payment processes and systems As a result, the advancement of payment services has significantly contributed to increased revenue for the branch.

Figure 7: Contributions of Payment Activities to Total Service Income

(Source: Annual Report of Agribank- Chuong My Branch 2010- 2012)

Payment activities play a crucial role in the overall income of the branch, as illustrated by the charts In 2010, fees from payment activities and other services were equal, each amounting to 1,800 million VND However, this trend underwent a significant transformation in subsequent years.

In 2012, fees from other services peaked at over 5 billion VND, doubling the amount generated from payment activities This marked a significant shift, as in 2011, fees from payment activities had previously outnumbered those from other services.

Contributions of Payment Activities to Total Service Income

Fees from payment services Fees from other services

In 2011, fees from payment services surged by 929 million VND, while in 2012, this growth stabilized with a modest increase of 150 million VND Conversely, fees from other services in 2012 reached a record low of under 3 billion VND.

The analysis reveals that other services received greater attention and a higher proportion of focus compared to payment activities Furthermore, the lack of a strategic emphasis on marketing efforts hindered the branch's ability to fully develop its payment activities, limiting their potential benefits.

3.2.2 Sales of Non- Cash Payments in Chuong My Branch from 2010 to 2012

Table 1: Sales of Non- Cash Payments in Chuong My Branch (2010-2012)

(Source: Annual Report of Agribank- Chuong My Branch 2010- 2012)

From 2010 to 2012, the Chuong My branch experienced a significant increase in total sales of non-cash payments In 2011, total sales rose by 10,143,145 million VND compared to the previous year, followed by a further increase of 11,613,405 million VND in 2012.

Over the past three years, payment orders have emerged as the leading payment method, representing 63.7%, 62.3%, and 63.9% of transactions, respectively In contrast, bank card payments accounted for 21.3% of transactions in 2010.

In 2012, Nguyen Thi Khanh Huyen ATCA - K12 experienced a significant growth of 25 percent However, the number of Letters of Credit (L/C) showed modest figures, starting at 14.8 percent in 2010 and declining by 3 percent to reach 10.8 percent in the following year Other financing forms accounted for insignificant percentages during this period.

The rise in non-cash payment sales aligns with the economy's growth and technological advancements, highlighting banks' emerging role as trusted payment centers at both local and regional levels To support this trend, the branch must closely monitor capital fluctuations and ensure the effective utilization of funds by organizations with credit relationships, thereby reinforcing its banking functions Additionally, the branch has played a crucial role in decreasing cash circulation and stabilizing local prices, effectively preventing capital shortages in the economy.

To evaluate the benefits and drawbacks of non-cash payments and identify strategies for their improvement, we analyze the sales data for various non-cash payment methods at the Chuong My branch This study focuses particularly on three primary payment forms utilized at the branch: payment orders, bank cards, and letters of credit (L/C).

3.2.2.1 Sales of Payments by Payment Order in Chuong My Branch from 2010 to 2012

Table 2: Sales of Payments by Payment Order in Chuong My Branch (2010-2012)

(Source: Annual Report of Agribank- Chuong My Branch 2010- 2011-2012)

Between 2010 and 2012, payments via payment orders experienced significant growth, increasing from under 15 billion VND to nearly 30 billion VND, making it the preferred option for domestic enterprises and local residents By 2012, sales of payment orders among domestic enterprises stabilized at 77.5% after a slight rise in 2011 Notably, in 2012, the sales of payment orders for local individuals surged by nearly 21%, attributed to the effectiveness of retail banking policies.

Payment orders are a popular and user-friendly method for domestic transactions, particularly at the Chuong My branch Customers favor this payment method due to its numerous advantages, including a broad range of payment options, the ability to transfer funds between the same or different banks, and streamlined procedures that save time Additionally, payment orders often allow for goods to be delivered in advance, reflecting sellers' trust in buyers' payment capabilities This approach safeguards the interests of both parties, enabling them to verify the quantity and quality of goods before finalizing payments.

3.2.2.2 Sales of Payments by Bank Cards in Chuong My Branch from 2010 to 2012

Figure 8: Sales of Payments by Bank Cards in Chuong My Branch (2010-2012)

(Source: Annual Report of Agribank- Chuong My Branch 2010-2012)

Sales of Payments by Bank Cards in Chuong My Branch (2010-2012)

Sales of payments by Banks cards

From 2010 to 2012, the Chuong My branch experienced significant growth in bank card payments, starting at over 4 billion VND in 2010 This figure rose to 8 billion VND in 2011 and peaked at over 11 billion VND in 2012, indicating a strong upward trend in card payment usage during this period.

Achievements and Limitations of Non- Cash Payments in Chuong My Branch

In recent years, the Chuong My branch has steadily established its position in the local economy, despite a dynamic market and intense competition Through the determination of its director and staff, the branch has successfully navigated initial challenges, actively integrating into the market economy and fulfilling its developmental tasks.

Agribank – Chuong My branch recognizes the significance of non-cash payments in the evolving economic landscape and has proactively invested in modernizing its equipment and information technology This modernization has significantly enhanced payment facilities, making non-cash transactions quicker and more convenient for customers.

The branch's payment activities are effectively drawing in customers to open accounts and conduct transactions Timely and accurate accounting of these transactions enhances customer trust Additionally, the branch's adherence to strict payment procedures and documentation further solidifies this trust among its clientele.

The payment methods offered by the Agribank-Chuong My branch are limited, with payment orders accounting for over 60% of transactions Other payment types remain underutilized, reflecting a common constraint among commercial banks.

The non-cash payment landscape primarily includes state-owned enterprises and government agencies, while large traders and high-income individuals are largely excluded Despite representing a significant opportunity, the private sector remains largely untapped, contributing to 70% of the national income Additionally, a substantial portion of the population lacks awareness of the essential needs and advantages associated with non-cash payments.

The Chuong My branch is required to process indirect payments and set-offs with other banks through Agribank-Hanoi due to its status as a dependent accounting unit However, the branch faces several professional challenges, including system failures, ATM issues, data loss, card retention, and ineffective marketing strategies.

The branch's marketing strategies are a significant subjective factor affecting its growth Currently, marketing activities are not utilized effectively to attract customers or conduct market research Additionally, the absence of a dedicated marketing department and client classification system hampers the branch's ability to expand its network.

The incomplete infrastructure and outdated technology significantly hinder the payment process at Agribank's Chuong My branch, reflecting a broader issue within the entire Agribank system due to challenges in attracting investors Additionally, the uneven professional knowledge and skills among bank staff, coupled with the rapid business expansion in the local area, has led to a shortage of experienced personnel, further complicating the payment process in the short term.

Payment behaviors are significantly influenced by customer habits and awareness, with cash transactions deeply ingrained in the routines of both low and high-income individuals Many people, particularly small businesses and civil servants, hesitate to engage with banks due to fears of complex procedures Large corporations often rely on just one or two payment methods, overlooking more suitable options for their economic needs Additionally, commercial banks' failure to implement cohesive payment systems complicates the process for clients who need to manage multiple accounts across different banks The lack of uniformity in POS systems further hampers the growth of non-cash payment transactions, particularly in the Chuong My branch Furthermore, an inadequate legal framework surrounding payment systems contributes to the challenges faced, as existing regulations do not align with the demands of economic development.

CHAPTER IV SUGGESTED SOLUTIONS TO ENHANCE NON- CASH PAYMENTS

IN AGRIBANK- CHUONG MY BRANCH

Despite achieving initial successes in non-cash payments, Agribank's Chuong My branch faces challenges regarding the effectiveness of these transactions To address the identified shortcomings, several solutions are proposed to enhance the quality of non-cash payment services at the branch.

Perfecting the System of Non-Cash Payments

Reducing payment costs is essential as it directly impacts both cash expenses and the opportunity costs associated with non-cash payment methods By lowering these costs, businesses, organizations, and individuals are more likely to increase their demand for banking payment solutions.

A reliable and secure payment process is essential for fostering customer trust in non-cash bank transactions This accuracy and stability are not only fundamental for customer confidence but also mandatory for commercial transactions and services within the economy Furthermore, ensuring a safe payment system enables both banks and customers to effectively manage their funds, minimizing potential risks associated with payments.

Timely payments are crucial for businesses as they directly influence operational efficiency, management capabilities, and capital utilization Delays in payments can lead to significant financial losses due to fluctuating exchange rates and market prices To mitigate these risks, it is essential for non-cash payment systems to be both quick and reliable, enabling all parties to manage and optimize their capital effectively.

An open payment system, leveraging modern information technology, is essential for enabling banks, payment service providers, businesses, organizations, and individuals to execute direct payments seamlessly within both national and international networks.

Improving Effectiveness in Marketing and Advertisement of Products

In today's market economy, advertising is crucial for product dominance, especially for banks promoting their offerings through diverse channels like newspapers, television, radio, and online platforms These advertisements emphasize the convenience and benefits of non-cash payment products, highlighting competitive payment conditions Furthermore, effective advertising campaigns and promotional programs, including bonuses, provide tangible advantages to clients, significantly enhancing the adoption of non-cash payment methods.

Despite the significant advantages of bank payment services, many customers have yet to fully utilize them due to limited access to information Enhanced marketing efforts, such as providing detailed consultations and informative brochures to new account holders, can encourage clients to explore these services By increasing awareness of the benefits and associated facilities, banks can stimulate greater usage of supplementary services, ultimately boosting branch revenue.

To enhance market presence, the branch should implement strategies for network expansion and customer acquisition Establishing a dedicated marketing department will facilitate comprehensive market analysis and customer classification, enabling a deeper understanding of customer needs This approach will support the development of new products and services tailored to meet those demands effectively.

The branch can enhance its brand image and connect with customers by sponsoring events and engaging in community activities, such as charity initiatives and gratitude movements, viewing these efforts as part of its corporate responsibility.

Investing in the expansion of product and service distribution channels is essential for promoting the bank's image and working style, while also showcasing its growth This strategy plays a crucial role in enhancing brand communication and promotion.

Improving the Quality of Customer Care

Effective customer care involves serving customers according to their preferences and engaging in activities that retain existing clients A crucial aspect of a successful customer care strategy is understanding the psychology and desires of customers through research and direct communication To enhance this approach, businesses must focus on several key issues.

The branch must develop a customer care strategy that aligns with non-cash payment methods and business growth objectives tailored to the unique psychology and culture of clients in each geographical area.

 The branch needs to have suitable customer care policies to each object such as VIP customers, standard clients, common customers, traditional customers, etc

To enhance customer satisfaction and meet rising expectations, banks should prioritize both direct and indirect customer care strategies Utilizing media to engage customers is essential, alongside personalized gestures such as offering appropriate gifts during holidays, New Year, and birthdays to make clients feel valued and thoughtfully cared for.

Regular communication with customers is essential for banks, utilizing methods such as client conferences, promotional programs, product launches, and customer surveys By implementing a mixed approach that includes setting up hotlines, banks can effectively gather insights into customer needs while providing timely information about their products and services This proactive engagement helps address customer requests and enhances overall satisfaction.

Nguyen Thi Khanh Huyen ATCA - K12 emphasizes the importance of effective communication in banking activities To enhance customer interaction, banks must maintain comprehensive and accurate customer information.

Promptly addressing customer complaints is essential for enhancing service delivery and fostering customer trust in the bank By viewing complaints as opportunities for improvement, banks can refine their processes and ensure customer satisfaction Additionally, effective resolution of issues helps mitigate the risk of negative information spreading due to unresolved grievances.

 Customer -care staffs are not only necessarily knowledgeable, qualified but also communicative, friendly and well listening in direct or indirect transactions with clients

 Customer -care staffs are not permitted to neglect or omit any procedure and regulations in the process of communication and care to traditional clients

4.4 Improving the Quality of Human Resources

To enhance the branch's business activities, it is essential to implement effective human resource development strategies This includes focusing on recruitment, work arrangement, task assignment, and ongoing training and re-training of bank staff.

The branch must establish effective training policies to enhance human resources, fostering internal capabilities to drive overall development and specifically improve payment processes It is essential for qualified payment staff to possess a comprehensive understanding of banking skills, payment regulations, and the procedures associated with each payment method To ensure the smooth functioning of non-cash payments, the branch should implement targeted solutions for its credit officers.

Enhancing recruitment quality is crucial for Agribank, focusing on candidates with the right professional qualifications, personality traits, ethics, and relevant work experience An active recruitment strategy, driven by a well-defined action plan, should be implemented alongside appealing benefit policies to attract skilled and experienced talent.

 Promotion of training and re-training

- 100% newly recruited employees are provided with consistent training programs

It is advised to avoid the form of “passing” training It is necessary to supplement

Nguyen Thi Khanh Huyen ATCA - K12 practical contents, experience, skills in the works into theoretical contents to facilitate the trainees to promptly catch up with the work after the trainings

Regular training sessions for officers and staff are essential to communicate new bank policies and updates from relevant external agencies These sessions ensure that every employee is well-informed and capable of consistently applying the latest information in their roles.

- Organizing professional tests, contests on excellent profession to stimulate sense of acquisition, then improving and evaluating officers’ qualifications in order to design suitable training and re-training programs

- Enhancing education on qualification, professional ethics and raising sense of responsibility of bank officers and staffs

To prevent brain drain, it is essential for the branch to implement effective benefit policies that attract and retain employees Additionally, fostering a healthy working environment will enable staff to fully develop their skills and contribute to the bank's long-term success.

Accelerating Modernization of Banking Technologies, Renovation of

Banking services are largely similar across the industry; therefore, banks that differentiate themselves by offering highly convenient services can gain a competitive edge To achieve this, it is essential to integrate modern technologies into service offerings.

In today's rapidly evolving payment technology landscape, banks must adapt or risk obsolescence Even minor errors in payment processing can erode customer trust over time To maintain reliability, it is crucial for banks to enhance information transmission speeds, invest in IT infrastructure, and promote services like SMS banking, phone banking, and internet banking, ensuring seamless payment operations.

The advancement of information technology should align with customer needs, as their interests drive innovation A robust and comprehensive inter-bank payment system is essential, as it efficiently manages electronic payments and facilitates seamless transactions among banks nationwide, ensuring a safe, fast, and timely payment process.

Suggested Solutions to Main Payment Forms

Payment by payment order at the branch is the most widely used method for generating revenue, particularly for high-value transactions and those conducted over long distances To enhance convenience for clients, creditors, and payment recipients, branches should utilize payment orders for consistent and regular payments, including taxes, insurance, and utility bills.

To improve cardholder convenience, the branch should enhance its ATMs and POS systems while also fostering stronger partnerships with other banks to promote the overall card market in Vietnam.

To enhance payment security and modernize its offerings, the branch should prioritize the transition from magnetic technology cards to electronic cards While magnetic cards are cost-effective and easy to produce, they are susceptible to security breaches By adopting electronic card technologies, the branch can ensure safer transactions for cardholders and the issuing bank, ultimately improving customer trust and satisfaction.

The Letter of Credit (L/C) is a complex payment method that not all businesses or clients fully understand To enhance bank payments in the import and export sector, it is essential for the branch to establish a clear and specific roadmap.

Nguyen Thi Khanh Huyen ATCA - K12 specializes in communicating with large-scale import and export clients, offering detailed guidance and exclusive preferential services tailored to their needs.

Despite the simplicity of cheque procedures, buyers remain cautious about using transferable cheques due to the potential fines for issuers who exceed their account balance To address this issue, branches should permit customers to maintain a debit balance or issue cheques with larger debit limits at a short-term interest rate This approach allows the branch to cover any excess amounts paid to beneficiaries, enabling clients to avoid hefty fines associated with late payments, even though they may incur higher interest rates.

Payment through collection orders is advantageous for service providers when all customers have bank accounts Consequently, the processes involved in using collection orders should be streamlined, clear, and user-friendly for clients.

CONCLUSIONS

Conclusions

Mr Vu Viet Ngoan, Head of the National Finance Supervision Committee, emphasized that enhancing non-cash payment methods would decrease the amount of money in circulation and improve the implementation of the State Bank of Vietnam's monetary policies Payment services are crucial for banks, positively influencing the economy's cash flow and significantly contributing to economic development and integration Consequently, it is the banking sector's primary responsibility to continually expand and enhance the range and quality of payment options, particularly non-cash payments, to support economic growth and integration.

The study highlights key findings regarding non-cash payments, revealing that payment orders are the preferred method among customers due to their simplicity, time efficiency, and compatibility across banking systems Despite Agribank-Chuong My branch's initial successes in enhancing capital flows and reducing idle enterprise capital, challenges such as inadequate facilities, a lack of skilled marketing personnel, and ineffective business strategies hinder the adoption of non-cash payment methods To address these issues, the study proposes solutions that include improving marketing effectiveness, enhancing customer care, investing in human resources, and modernizing banking technology and payment systems.

Limitations and Suggestions for Further Study

This study has revealed some significant findings related to non- cash payments of Agribank-Chuong My branch that were mentioned above However, there are still some limitations as follows:

The study primarily analyzes limited data from the Annual Reports of Agribank-Chuong My branch for the years 2010 to 2012 It does not incorporate or interpret statistics from earlier or more recent reports, which restricts the depth and significance of the analysis.

This study focuses on non-cash payment methods at the Agribank-Chuong My branch, highlighting key forms such as payment orders, bank cards, letters of credit (L/C), cheques, and collection orders However, it is important to note that the research is limited in scope and timeframe, providing insights only into this specific branch rather than the entire non-cash payment system of Agribank Consequently, caution is advised when applying these findings to the broader context of Agribank's non-cash payment systems.

Further research is essential to explore various non-cash payment methods utilized in both local and global banking systems This deeper investigation will provide a comprehensive understanding and identify effective strategies for promoting these payment options across different sectors.

Agribank- Chuong My Branch (2010) Annual Report

Agribank- Chuong My branch (2012) Organizational structure

Dinh, D.T and Nguyen, H.T (2011) “Giáo trình kế toán ngân hàng” Statistic

Frederic S.Mishkin (2001) “Banking Monetary and Financial Market”

Luật về các công cụ chuyển nhượng của nước CHXHCN Việt Nam đã được sửa đổi vào năm 2005 Bộ Tài chính đã nhấn mạnh tầm quan trọng của việc củng cố môi trường pháp lý và cơ chế chính sách cho việc trả lương qua tài khoản Thông tin chi tiết có thể được tìm thấy trên trang web của Bộ Tài chính tại địa chỉ: http://www.mof.gov.vn, truy cập ngày 10 tháng 4 năm 2013.

“Non-cash Payments” Accessed on 6 April, 2013 www.businessdictionary.com

“Non-cash Payments”.Accessed on 6 April,2013

URL: http://encyclopedia2.thefreedictionary.com/Noncash+Payments

Nguyen,T.T.H and Vu, T.T.(2005) “Giáo trình kế toán ngân hàng” Statistic Publication Nguyen,V.T.(2010) “Giáo trình thanh toán quốc tế” Statistic Pucblication

The Gorvernment Nghị định 64/2001/NĐ- CP về thanh toán qua tổ chức cung ứng dịch vụ thanh toán Amended (1999)

The State Bank of Vietnam regulates credit institutions through the Credit Institutions Law and the Law on Banking Transactions, with key amendments made in 1997 and 1999 Notably, Decision 371/QĐ-NHNN outlines the rules for the issuance and payment of bank cards, ensuring compliance with updated financial regulations.

Tiêu đề	Current Background And Suggested Solutions To Enhance Non-Cash Payments A Case Of Agribank- Chuong My Branch
Tác giả	Nguyen Thi Khanh Huyen
Người hướng dẫn	Le Thi Minh Que (M.A)
Trường học	State Bank of Vietnam Banking Academy
Chuyên ngành	Foreign Languages
Thể loại	graduation thesis
Năm xuất bản	2013
Thành phố	Hanoi

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