Chuyên đề tốt nghiệp: Improving the credit card business of military commercial joint stock bank – hoang mai branch

Introduction of the research f0pÍC - - - SH re 1 2 Ratiomalles nh

Modern payment activities nowadays are growingly focused and enhanced to keep up with the robust growth of the global economy Thanks to the development of science and technology, especially the advances of information technology which are applied to banking systems, this industry has expanded significantly Moreover, along with the current context of expanding international economic integration, Vietnam’s socio-economic has changed remarkably The more developed economy also involves an increase in the average income and an improvement in living standards According to SBV (2022), with the population structure of 70% of the young population is of working age with stable income, this is just one of many potential conditions for the expansion of credit card business An article from baochinhphu.vn (2022) indicated that, with the advantages of payment services via bank cards, credit cards have made great strides in recent years in enhancing added value for customers They affirmed their important role in banking services as well, as they facilitate the process of cash flow in the economy by providing funds for individuals and organizations who are in need It suggests that developing credit card services is an inevitable development trend for commercial banks in the current financial liberalization context.

Following up, financial institutions have promoted the development of credit card services with diverse features to meet customers’ needs The Military Commercial Joint Stock Bank, in order to carry out its mission, is constantly innovative in providing customers with the greatest financial products and services To meet the goal of becoming the leading modern digital bank in Vietnam, MB are places resources on growing the credit card business in an effort to encourage non-cash payments The credit card business is therefore a crucial segment in its business operation.

The market for credit cards has not yet been fully exploited in Vietnam According to Mibrand’s Banking Product U&A Report (2021), although the level of credit card usage is still low with 46% in Hanoi and Ho Chi Minh City, this service has good growth potential Although the rapid arrival of the COVID-19 pandemic slowed down practically all economic activities, the impact of the pandemic seems to have faded away in 2022 As life has got back to normal, the economy starts to

Lê Minh Thuy Nga — 11193621 — Business English 61B interpret positive signs According to Insider Intelligence (2022), “with pandemic restrictions easing, customers are resuming more recreational purchases— especially in travel and entertainment (T&E), which is critical for credit card volume.”

Hoang Mai is a peri-urban district of Hanoi with a rapidly increasing population in recent years This is a very favorable factor for MB - Hoang Mai Branch to deploy credit card business However, due to the large population area, MB's transaction offices are still scattered and have not operated systematically. Therefore, the development of credit card business has not been carried out effectively, and the awareness of the local population about credit cards is still limited Realizing attractive potential has not been properly exploited, I decided to conduct a study titled “Improving the credit card business of Military Commercial Joint Stock Bank - Hoang Mai Branch’” as the graduation report.

This research aims to study the current situation of the credit card business in MB

— Hoang Mai Branch and propose some recommendations to improve. Accordingly, the following objectives are expected to be achieved: e Evaluate the performance of credit card business in MB — Hoang Mai Branch from 2019-2021 in the market. e Research and analyze factors affecting the credit card business of the branch in the current context. e Propose suggestions for the bank’s future improvements in operating credit card business.

To achieve the mentioned objectives, the paper is conducted to answer the following questions:

Question 1: From 2019 to 2021, how did MB — Hoang Mai perform credit card business in the market?

Question 2: What are the factors affecting the credit card business of the branch? Question 3: What can be done to improve the performance of credit card business of MB — Hoang Mai Branch?

Lê Minh Thuy Nga — 11193621 — Business English 61B

To carry out this paper, the author collects both primary and secondary data to serve the purpose of the research.

Secondary data is first collected from Profit and Loss Statement of MB - Hoang Mai Branch from 2020, 2021, 2022 Second, the author will collect information related to MB’s credit card from topics on forums and websites Thirdly, previous theses, essays, scientific research in specialized journals from the university library and information sources on Google Scholar will be selected as reference sources for this study And finally, a part of the information in this paper is taken from relevant reference textbooks.

Primary data is obtained from the opinions of the branch manager and 5 employees (including universal banker and relationship manager) at Individual Customer Department of MB — Hoang Mai Branch To collect the data, in-depth and open direct communication is conducted with each person by an interview.

For data analysis, the author uses both quantitative and qualitative data Using Excel software, quantitative data from statements can be measured and examined. Meanwhile, qualitative data is analyzed through key words in each appropriate context to find out facts, opinions, minds, and souls of people involved The author also employs deductive reasoning, also based on logical reasoning in this study Since the research is based on facts and conclusions only drawn from findings afterwards, the method is deductive in nature.

Introduction of the research includes rationales, explanation of the research objectives, methodology and research structure

Chapter 1 An overview of Military Commercial Joint Stock Bank — Hoang

The first chapter of the study provides general information about the branch and the business situation from 2019 to 2021.

The second chapter focuses on presenting prior literature of credit cards including the definitions of credit cards, types of MB credit card, roles of credit card, participants in the process of card issuance and payment used for later analysis.

The third chapter analyzes the information collected and discusses the current situation drawn from the figures to evaluate the overall business activities, and then to identify opportunities and existing problems in the credit card business of the branch.

The fourth chapter proposes some recommendations to improve the credit card business performance for the branch in the current context.

The final part summarizes the study and indicates the achievement of the research as a base for further study.

CHAPTER 1: AN OVERVIEW OF MILITARY COMMERCIAL JOINT

STOCK BANK - HOANG MAI BRANCH

The first part of the report will provide readers with general information about the bank, including the establishment process, business sectors, and an overview of business performance from 2019 to 2021.

1.1 Overview of MB - Hoang Mai Branch

The general information of MB is represented in the following table.

Registered name Ngân hàng Thương mại Cô phần Quân đội

Bank’s name in English Military Commercial Joint Stock Bank

Headquarter MB Grand Tower - No 18, Le Van Luong Street,

Trung Hoa Ward, Cau Giay District, Hanoi City, Vietnam

Email mb247@mbbank.com.vn

Website http://www.mbbank.com.vn/

Table 1.1 General information about MB

(Source: M4B š profile) Mission: For the development of the country, for the benefit of customers

Vision: To be the most convenient bank — Customer-centric e Leading digital bank: App MB Bank, M-Office, Smart RM/Chat Bot e Community bank: Engaging local community - SMECare by MB

Lê Minh Thuy Nga — 11193621 — Business English 61B e Professional bank: IB services, FDI, supply chain financing e Fast execution: 100% ITization, 50% automation, advanced SLA and KPIs e Outstanding risk management: 3 rounds of centralized appraisal and approval Core values: Unity, Discipline, Devotion, Efficiency, Trust, Enforcement

In the recent years, keeping up with the development trend of Vietnam's banking sector, MB Bank has expanded its network of branches and transaction offices to residential areas and economic regions all over Vietnam In turn, by making it simple and convenient for customers to use the bank's services, the bank can enhance its reputation, increase its competitiveness, and improve its business performance.

Military Commercial Joint Stock Bank - Hoang Mai Branch was established and put into effect on December 16, 2017, which is the second level branch directly under Military Bank.

The branch is developing steadily, consolidating its position in the Military Bank system as well as in Vietnamese financial and monetary market.

The branch operates as an independent entity which is run directly by a manager for operating the business, then each department has divided tasks.

Figure 1.1 Organizational structure of MB Hoang MaiBranch Manager takes overall responsibility for the whole activities of MB HoangMai She directly manages and is responsible for all activities of the branch

AN OVERVIEW OF MILITARY COMMERCIAL JOINT

THEORETICAL FRAMEWORK cc.ccece 14 2.1 Credit Card LH TH TH nọ HH HH ng 14 2.1.1 General concepts about credit CAPES -o- co sscccseieserseres 14 2.1.2 History of Credit CAVAS san ốố

The CONVENICNCE nan ốốốốốỐốỐẦ.Ầ

As a non-cash payment method, cards offer customers convenience that no other means of payment can This is especially convenient for those who must go abroad for travel or business No matter how much it is, cards can help them pay anywhere without having to bring cash or travelers checks along Card is considered as the most preeminent means of payment for consumption (Nguyen Thi Thu Thao,2009).

The SAfCtV cecccccccccccccessecssseesseeeeeseecssseessceseseeseseeseaeceseeeneeenseeneaeenses 18 2.1.5 Classification of credit CAPS HH key 18 2.1.5.1 SCOpe Of CAVA USC SG SH vn Hệ 18 QL.5.2 CAVA USCVS na e.e

With the card payment procedures that the bank provides to its customers, the cardholder can be assured of his/her money against the risk of being stolen In this circumstance, the bank can still protect the cardholder's money by the PIN number, photo, signature on card, card account code, etc This indicates that cards are much safer than other means of payment Moreover, most card transactions are done via an online connection from merchants or ATMs to the paying bank, issuing bank and international card organizations Debiting and crediting for the account participating in the payment process are done automatically, so the payment process is easy, convenient and fast (Nguyen Thi Thu Thao, 2009).

According to TheBank (2022), credit cards can be classified by different criteria.

In this part, three criteria which are mentioned are scope of card use, card users, and credit limits.

Domestic credit cards Credit cards are used within a country Issuing bank and merchant are in one country.

International credit cards Credit cards are issued by banks and financial institutions that are members of international card organizations This card can be accepted at merchants worldwide.

Personal credit card Cards are issued to individuals who have demand and meet the card issuance conditions The cardholder is responsible for paying expenses with his/her own funds Individuals can register to issue primary card and supplementary card with the bank.

Business credit card Cards are issued to organizations for payment in business activities The organization directly signs a contract with the issuing bank for card use It then authorizes the individual belonging to that organization to use the card All card-related transactions are paid by the organization to the issuing bank.

Standard class This is the most basic kind of credit card It is popular with the majority of customers with a low limit.

Gold class This is the premium kind of credit card which is suitable for customers with higher living standards, income, and financial needs They are given to people with a good reputation and healthy financial capacity.

Platinum class This is the ‘VIP’ kind of credit card that the bank offers privileges to a small number of customers who perform transactions of great value With a large spending demand, the credit limit granted to this card is also much higher. 2.1.6 Credit cards transaction

The credit card transaction includes the following steps: e Credit Purchases: The cardholder purchases goods / services and receives the credit card. e Processing of credit card: A commercial establishment delivers the merchandise after taking a notarized credit card and a null number and taking signatures on certain forms. e Raising of Bills: The commercial establishment raises the purchase invoice and sends it to the credit card issuing bank for payment.

Lê Minh Thuy Nga — 11193621 — Business English 61B e Marking Payment: The issuing bank pays the amount to the merchant's establishment. e Bill to Cardholder: The issuing bank sends the invoice to the credit card holder and sends it for payment. e Card Payment: The credit card holder makes the payments to the issuing bank. 2.1.6.2 Participants

International card organizations An organization of card issuing banks, such as Visa, Mastercard, Discover, and American Express, that sets transaction conditions for merchants, issuing banks, and acquiring banks.

Issuing banks The banking institution that issued the credit card is also responsible for charging the cardholders The bank issues a reimbursement bill to the customer and takes the risk of the card being used fraudulently The customer receives a line of credit from the issuing bank As a result, the issuing bank and the purchasing bank share liability for default.

Consumers The individual whose name appears on the card This can be a bank client who received the card or someone to whom the bank has issued a card that the bank customer has permitted to hold and use the card This individual is also responsible for any charges made to that card A consumer is the person who owns the credit card to make a transaction.

Acquirers The financial institution accepts payment for the products or services on behalf of the commercial establishments.

Merchants The person or business that accepts credit cards for the sale of products or services to cardholders.

2.2.1 Improving credit card business at commercial banks

The credit card business at commercial banks consists of two main activities: card issuance and payment (Nguyen Thi Tuyet Nhung, 2014).

Card issuance activity is the management of process including card issuance, card usage and customer debt collection Each part is closely related to customer service and risk management of the bank Therefore, they must make clear regulations on card use and debt collection, minimum payment amount, statement date, due date, types of expenses and interest, maximum and minimum credit limit, preferential

Lê Minh Thuy Nga — 11193621 — Business English 61B policies, etc Well managing card issuance activity brings the bank a stable source of revenues, not only from the cardholder's issuance fee, but also from the exchange fee shared by international card organizations This is the basic profit of financial institutions and card-issuing banks Based on this revenue, financial institutions and card-issuing banks offer interest-free and other incentives for customers to expand the customer file to increase card usage.

Card payment activity brings revenue to the bank through discount fees on the value of card payment transactions from merchants This amount of profit is not negligible, so payment banks need to set up reasonable marketing and customer care plans and provide merchants with free services to enhance its competitiveness.

Bui Tuan Anh (2015) pointed out that improving the credit card business of commercial banks is to increase the scale, quantity, and quality of the existing credit card services, and at the same time expand new services This comes from customer demand, competitor pressure and the need to increase profits for the bank An increase in the scale or quantity and the diversification of card products helps the bank increase competitiveness and market share, which not only retains old customers but also attracts new ones Meanwhile, improving the quality of credit cards creates favorable conditions for customers to get familiar with using cards frequently, which can increase the bank's profits.

Criteria for evaluating the credit card business of commercial banks ơ

Bui (2015) proposed some criterion to evaluate the performance of credit card business in commercial banks They are chosen to serve the purpose of this study. Growth rate of issued credit cards

This is a criterion that reflects the growth in the number of credit card products over the years If the growth is positively stable, the bank can be running its credit card business well On the contrary, abnormal growth indicates a problem in the business strategy that needs to be detected and adapted in a timely manner.

Growth rate of credit cards sales

“A credit card sale occurs when a customer pays for your small business products or services with a credit card instead of cash” (Chron, 2019) This is a criterion that reflects the customer's preference to the credit card products and services of the bank over time.

Credit cards bad debt ratio

This is a criterion that reflects whether the credit card business is running well or hiding any risks It is evaluated by comparing the bad debt ratio of credit cards over the years.

Growth rate of profit from credit cards business

This is a criterion that reflects profit from credit card issuance and payment activities of the bank over the years The higher this ratio, the more efficient business performance in the current context.

Contribution ratio of credit card business profit to the bank's business profit

This is a criterion that reflects the role of the credit card business in the entire business system of the branch It can answer whether the potential of credit cards can be exploited as effectively as other products or not.

ANALYSIS AND FINDINGS 0 occcececceceeeeeeceeeeseeteeteeeeaees 25 3.1 Current situation of credit card business in MB — Hoang Mai Branch

RECOMMENDATIONS - Q che 35 4.1 Growth prospects of Vietnam’s credit card market in the near future ơ— L"^

Orientation for credit card business of MB <<c<+ 36 4.3 Recommendations to improve the credit card business of MB — Hoang U82) e

The credit card business in MB is experiencing advantages from external environment while the world economy is recovering with positive signs after a long time of being frozen by the epidemic Vietnam's economy is also revealing steady growth, contributing to improve people's living standards.

Besides those advantages from the macroeconomic environment, MB's card business is also facing challenges from the micro-economic situation and issues from the bank's internal environment.

In the bank is strongly applying technology on digital transformation to manage, improve business quality, diversify products, and expand customer network, the plan for improving credit card business is also designed along with that trend In the short term, to 2025, MB's goal is to dominate the Vietnamese card market in both credit and debit cards The bank will continue to improve the quality of existing products and launch new products and services such as linked cards An international card payment system will be built and tested by the bank to combine with other banks to synchronize the interbank card network Expanding the network of merchants will be put into effort to increase credit card sales and usage,

Lê Minh Thuy Nga — 11193621 — Business English 61B especially in e-commerce Marketing is focused on introducing card products to a wider audience Promotions and customer care programs will be adapted accordingly In addition to service development, the bank also aims to promote research and upgrade the card service processing system, overcome technical shortcomings, and access new technologies in the world In particular, the bank also focuses on comprehensive human resource training to keep up with the rapid change of technology in the world.

To MB Hoang Mai, based on the orientations from MB's head office, the branch also set specific goals to develop credit card business Firstly, the bank aims to increase market share in the credit card market, especially in Hoang Mai district, which is still a potential area Various types of card products with attractive incentives such as promotions, links with service companies, and service enhancement will be deployed more strongly Investment in technology, equipment and human resources will be a key goal in effort to enhance the brand image of MB card products in the area.

4.3 Recommendations to improve the credit card business of MB — Hoang Mai Branch

The rapid development of information technology nowadays requires banks to continuously modernize their technologies to improve competitiveness The bank’s head office needs to invest in a stable transmission line system to ensure a stable card payment system According to UBs, after many complaints about interruptions, some customers have turned to using other banks’ cards Circumstances causing loss to customers that occur frequently will gradually lose customers' trust Therefore, the bank’s head office needs to ensure that the system is not interrupted for ATM and POS.

Specialized equipment, no matter how modern it is, needs periodic maintenance. Therefore, coordination and communication line between the technical and sales departments is necessary in dealing with incidents The technical staff should be equipped with knowledge of card business so that they can better assist in handling problems arising during operation.

4.3.2 Developing business strategies following market trends

If technology is the deciding factor for the existence of the card industry in general, business strategy is a crucial factor for MB Hoang Mai to survive in this industry.

Ms Nguyen Thi Lan, branch manager, agreed that, not only investing in technology, but business strategy should also be paid special attention on to achieve a breakthrough Therefore, the branch can gain market share, maintain the number of loyal customers, and attract new customers.

Business strategy is an extremely important factor in guiding the smaller steps of credit card business at MB — Hoang Mai Branch A perfect business strategy is the bridge between "effort" and "success" That business strategy needs to include the following parts: product strategy, pricing strategy, distribution strategy and communication strategy And regular meetings need to be held in order to build a credit card business system capable of adapting to changing and fierce business environment nowadays Card business system must be developed based on customers' needs and capital capacity of MB — Hoang Mai Branch It can be said that developing an effective business strategy has created half of the success, contributing to improving competitiveness as well as better meeting the increasing needs of customers.

To really approach the domestic market, it is necessary to develop a merchant network to supply services to the people Therefore, MB Hoang Mai needs to rapidly increase its network of merchants.

Currently, only networks of supermarkets and restaurants have a relatively high level of card acceptance, but other banks also heavily exploited this market So, this market is almost saturated It is wasteful when a supermarket has even three or four POS offered by different banks.

For cardholders to have a place to spend, it is necessary to promote the development of the network into different sectors that are not traditional in the market such as electronic stores, grocery stores, service centers, etc At the first place, the operational efficiency of these spots certainly cannot be as high as those that accept cards for foreign customers such as hotels and souvenir shops But it must be understood that investing in merchants to serve domestic credit cards

Lê Minh Thuy Nga — 11193621 — Business English 61B market, as well as Vietnamese This is a long-term, sustainable investment to develop the card market and increase the number of card users.

It is also important to focus on merchants with high sales first Banks need to have reasonable policies so that all these merchants prioritize paying through MB, minimizing additional investment while substantially increasing sales from payment fees For example, the branch should give them incentives in lending and payment activities, etc In addition, when signing contracts with merchants, the branch can offer discounts of a certain percentage for customers who use a card issued by MB The bank then can compensate the merchant and credit the merchant's account with the entire amount of goods and services at the original price Therefore, the merchant can increase the revenue from customers who are cardholders of MB Cheap prices of goods and services also attract more customers to MB After MB cards gain more popularity as people recognize the card widely and realize its benefits brought, the bank can gradually adjust the price compensation for merchants to zero and begin to collect payment service fees from merchants and other fees from cardholders for card issuance and payment.

With the whole network of merchants, the branch should implement reward programs for merchants who have high and stable sales, and record bonus points for effective merchants, etc.

In addition, the branch also needs to periodically send employees to the merchants to carry out machine maintenance, promptly repair the damage, and check if the merchant is using the equipment effectively There are also a need to guide and train the merchant's staff on how to use the machine, update new information about counterfeit cards, etc to improve the effectiveness of merchants.

In the credit card business market, customers play a leading role in developing services Therefore, marketing towards the goal of expanding the market is extremely important in the process of improving credit card business.

Like other products and services, bank cards also have to follow the product life cycle including 4 stages: introduction, growth, maturity, and decline Marketing activities must play a role in shortening the introduction time, prolonging the growth and maturity time of the product.