VPBank''s ATMcard services Current situations and solutions

VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D Introduction The years 2006 and 2007 marked new steps in the process of world and regional integration with great opportunities and challenges in place for Vietnam’s reform and development. In this trend, the financial and banking also obtained impressive results, banks have been expanding continuously. Vietnam’s ATM market has begun booming with 15 commercial banks moving aggressively to identify promising services providers, provide perfect services and diversify their ATM cardholders. Therefore, in coming time, this market will certainly become more competitive and active all cardholders will enjoy unprecedented services. Vietnam Joint-Stock Commercial Bank for Private Enterprises (VPBank) is in that race, and its abilities has unexplored, its market share is not strong enough. So after learning and researching about this issue, I have decided to choose the following topic as the subject of my report “VPBank’s ATM card services: Current situations and solutions”. Apart from introduction and conclusion sector, the report is divided into three chapters as following: Chapter 1: General understanding of ATM card service Chapter 2: Situation of Vietnam Joint-Stock Commercial Bank for Private Enterprise’s ATM card services Chapter 3: External environment evaluations and solutions to improve VPBank’s ATM card services. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D Chapter 1: General understanding of ATM card service 1.1 Introduction to the ATM card service Card definition: The ATM card is a non-cash based means of payment issued to customers by commercial banks or other financial institutions. It is also known as cash card or plastic money. At certain points where cards are accepted, cardholders can withdraw cash or pay for bills, goods, services. The first real ATM card with a magnetic strip and a personal ID number was developed by Wetzet, Barnes and Chastain in 1973. It is issued in form of a debit card, and it can be used only when the cardholder has money in his account. Convenience is the key property of an ATM card because ATMs are self-service machines and available 24 hours a day, 7 day a week. Essentially, an ATM card allows the customer to “go banking” anytime. An ATM card made by plastic ABS or PC with the following uniform contents:  Rectangle shaped with two slides and round corners.  Card name, symbol, and the logo of the card issuer.  Card number: 16 digits,  Issuing date  Class,  Magnetic stripe: it stores uniform codes of card number, PIN (personal identification number), some information of a cardholder and other security factors. 1.2 Card functions An ATM card is issued based on the cardholder’s own money. Whenever the cardholder makes any card transaction, it will be completed by debiting directly from his account and transferred to the seller’s account. This means VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D the card can be accepted as long as its cardholder’s account balance is positive or the cardholder spends only what remain in his pocket. As for a customer, obtaining an ATM card is easy. A key condition that he has to meet is to open an account with sufficient money. After having an ATM card, the cardholder can go banking anytime at his convenience, conduct many transactions such as checking their account balance, transferring money, withdrawing cash, paying bills, etc and also enjoy some interest on his savings, account at the same time. As for the bank, issuing an ATM card is safe because it doesn’t worry about bad credit and unpaid transactions. Besides, it can acquire more capital to invest and reinvest. Furthermore, the issuing bank can expand its business scope without the cost of opening new branches, but only by installing more ATM’s nationwide. 1.3 The role of an ATM card in the economy. As a matter of fact, cash, either in the form of note or coin, is not always the best means of payment, especially in business because using cash poses some risks for customers such as money losses, fake note, and physical damage. Thus, the application of non-cash payment is essential. Up to now, ATM cards has still been considered an effective tool that deals with the inconvenience of cash payment and allows more transactions with the higher value to be made in the economy. They take an important role because of some reasons:  Reducing cash in circulation: ATM cards have been developed in the form of a non-cash instrument of payment and clearly, it is used to replace cash. In an economy using huge volume of cards, the circulation of cash is certainly limited. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D  More transactions, less time: Conducting a card transaction is much more quickly than making cash transaction. The reduced time allows more transactions with higher value to be made.  Higher transparency: Every ATM card transaction is recorded by the bank data centre for later reference.  Improving business environment, drawing international investment and international interests. A mature and modern environment will also attract more foreigners, both businessmen and tourists. 1.4 Card-related factors. 1.4.1 Card transactions equipment: Automatic teller machines (ATMs) Card transactions are safe, simple and quick. Thus modern and hi-tech equipment are required. The ATM is an inseparable equipment of an ATM card. By this combination, services are provided. The ATM allows a bank customer to conduct their banking card transactions. It is first introduced in the 1960s and was considered a breakthrough in the banking business. Don Wetzel was the co-patentee and chief conceptualist of the ATM an idea he thought of while waiting a line at a Dallas bank. Thanks to its many advantages, the ATM has been quickly adopted by many banks around the world. Nowadays, the ATM can be seen not only in front of banks but in numerous public locations for the convenience of its customers. In general, instead of being constrained by the limited working hours of banks, the cardholders could “go banking” outside by using the 24- hour services of an ATM at their convenience. 1.4.2 Card transaction participants There are three main participants involved in a card transaction: cardholder, Card issuer and Merchants. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D  The cardholder: a cardholder is an individual who want to have an ATM card to go banking anytime at his convenience. When using ATM card services, he will enjoy some advantages such as convenience, safety, time-saving, responsiveness and accuracy, etc.  The card Issuer: A card issuer is a commercial bank, or a financial institution who wants to offer ATM card services to customers. While providing these services to a card user, it will gain the fooling benefits: income from card issuance fees, capital from savings accounts, business expansion, etc.  The merchants (ATMs): they are located outside the bank, help card transactions occur promptly, easily and accurately. The introduction of these machines brings benefits for the economy because they reduce risk and lower costs. Having an ATM on the premises can reduce the number of bad cash and cut costs of setting up more banks’ branches. 1.4.3 Card transactions process. Figure card transactions: Card transactions process Cardholders ATMs Issuing Banks 1 4 5 2+3 This card transactions process involves five steps: Step1: the cardholder finds an ATM to conduct card transactions. Step 2+3: After the card and Pin code are presented, the ATM automatically checks its validity by asking the bank’s server installed at VPBank’s head Office. If all information is correct, the cardholders are permitted to select his transaction. Step 4: After the transactions is selected, the ATM will automatically complete it, and provide what he asks for. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D Step 5: Data of the completed transaction will be transferred from the ATM to the issuing bank. After checking the data, the issuing bank will balance the payment (e.g: debiting the cardholder’s account and crediting the bank’s account when the transaction is to withdraw cash). 1.5 The development of ATM system in Vietnam 1.5.1 ATM card market According to the Vietnam Bank card Association, Vietnam’s ATM market became blooming two years ago. Currently, the ATM card market is growing very quickly both in terms of quantity and quality. The leader is Vietcombank (VCB) with 1,200,000 cards, accounting for 55% of the ATM card market. Next to VCB is Vietnam Bank for Agricultural and Rural Development (VBARD) or Agribank (12%), BIDV (7%), it has been offering the ATM card service nationwide and has obtained good results. The industrial and Commercial Bank of Vietnam (ICB or Vietinbank) make up for 6%, Eastern Asia Bank (EAB) becomes a runner with 5%. Vietnam Joint- Stock Commercial Bank for Private Enterprises only accounts for nearly 4% and other banks 11%. (See the figure 2.2)However, some analysts state that Vietnam’s ATM potential market of ATM cards has not been fully exploited; it is a “big cake”. How to “eat” the rest of this “cake” in the most effective way is the matter for all bankers, it requires them to have specific strategy, offer more services, bring more benefits for customers, so forth. 1.5.2 ATM network In recent years, Vietnam banks have promoted their investment in information technology (IT) applications to offer modern banking services. The ATM system is one of these services. It has operated effectively, making a major contribution to modernizing the local banking industry. Besides, the ATM has been considered a leap in banking payment and has become a popular product of Vietnamese commercial banks. In particular, 15 banks have issued ATM VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D cards so far and have installed to total of 1,107 ATMs nationwide (2005). Up to now, there are 5625 ATMs nationwide (2008). Back to the year 2000, “ATM” was still a strange word to the majority of customers in Vietnam. There were only six ATMs throughout Vietnam-three from Australia and New Zealand banking group (ANZ), the rest from Hongkong and Shanghai Banking Corporation (HSBC). Alongside with the increase in the number of ATMs, the building of a switch centre for ATM connection and end equipment of banks is ongoing. Thus, no one can deny that the ATM service market is beginning to take flight, as ATMs become increasingly prevalent and widespread throughout the country. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D Chapter 2: Situation of Vietnam Joint-Stock Commercial Bank for Private Enterprise’s ATM card services 2.1 Overview of Vietnam Joint-Stock Commercial Bank for Private Enterprises. VPBank stands for Vietnam Joint-Stock Commercial Bank for Private Enterprises. Website: www.vpbank.com.vn Founded in 1993, VPBank is present the seventh largest joint-stock commercial bank in Vietnam by assets. Its Headquarter is in Hanoi and has a network of 130 branches and sub-branches across Vietnam. Its business is focused on SMEs and private consumers. Its initial chatter capital when first established was 20 billion VND. Subsequently, due to the growth demands, VPBank has increased its chatter capital multiple times. At present, the charter capital of VPBank has grown to 750 billion VND. The year 2006 witnessed many breakthroughs, with a series of activities building a foundation for the renovation and growth of VPBank in the future. In February 2006, VPBank officially moved to a new headquarters at No 8 Le Thai To, Hoankiem District – one of the most beautiful locations in Hanoi. In March, VPBank signed a strategic cooperation agreement with OCBC Bank, one of Singapore’s leading banks. 2.1.1 VPBank’s Capital Its assets reached VND 12 trillion (USD 750 million) in June 2006. In the first quarter of the year, VPBank was listed by the Navigos Group and AC Nielsen of the US as one of the two Vietnamese banks among the top 50 businesses in the country in term of working environment and personnel management. It was regarded by the State Bank of Vietnam to be one of the banks among all commercial joint stock banks in the northern Vietnam. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D At the beginning of quarter 3 in 2007 the charter capital of VPBank will increases to 1,500 billion VND. VPBank is privately held by Vietnamese individuals and companies. Approximately 30% of VPBank’s staff is shareholders of the bank. It currently has one foreign shareholder, Dragon Capital Holdings- a British fund management company with focus on the Vietnam market, with a 10% stake. Table 1: Balance sheet summary (31 st Dec 2007) Unit: billion VND Balance sheet summary 2005 2006 2007 Total assets 6,090 10,159 18,137 Mobilized Funds 5,638 9,065 15,204 Loans 3,014 5,031 13,324 Shareholders’ equity 309 756 2,000 Source: VPBank Annual Report 2007, p6 According to the Balance sheet summary, it’s easily to see that VPBank’s finance is rather good. There is an increasing tendency in all factors of the balance sheet. In 2006, its total assets were 10,159 billion VND, increased 166.8% compared to that period time of year 2005. Moreover, the mobilized Funds of VPBank also had increase much and had some bright signs. In 2006, its mobilized were funds were 9,065 billion VND, with the high mobilized funds like that, there would have many advantages for VPBank to push its level of outstanding loans. The more outstanding loans VPBank has, the more profit it can obtain. In fact, it raised the level of loans in 2006 about twice as many as that in the time of 2005. It increased sharply and reached 13,324 billion VND in 2007. With a good Balance sheet, it’s no doubt that VPBank business result is rather high in next year. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D 2.1.2 Network In the entire process of formation and growth, VPBank has always focused on boarding its scale and strengthening its operating network in large cities. In its first two years of operation, VPBank’s network had only 53 branches and transaction points, with 28 branches and 27 transaction offices. In 2006 alone, VPBank brought 20 new transaction points in top operation. VPBank is operating in many provinces and large cities throughout the country. Up to now, VPBank has 128 branches and transaction points. 2.1.3 Business performance Table 2: Business results Unit: billion VND Business results 2005 2006 2007 Total operating income 470 995 1,460 Total operating expenses 394 838 1,146 Pre-tax profit 76 157 314 Source: VPBank Annual Report Mr. Le Dac Son, VPBank General Director, revealed that his bank reached the goals that are set in early 2008. By the end of September, VPBank’s total raised capital had risen by 60%, expected to be 90% by the year’s end. The bank’s overdue debt is also controlled at 0.86%. At the end of fiscal year 2006, VPbank achieved result in pre-tax profit of 157 billion VND, an increase of 81 billion VND compared to it of 2005. After setting aside risk reserves of 11.36 billion VND, pre-tax profit after risk reserves was 157 billion VND, surpassing the plan by 36%. In 2007, the pre-tax profit rose twice compared to that of 2006, which is impressive result. [...]... services and more importantly, tries to find some feasible solutions for VPBank to improve and expand its services in the future Based on the above analysis and these suggested solutions, the writer hopes that VPBank will have a deeper look into its current situations of ATM card services and promptly find comprehensive solutions to tackle its difficulties Bui Thi Van – Class 4D VPBank’s ATM card services: ... services Before providing suggested solutions; however, the writer would like to point out some opportunities and challenges for VPBank in its ATM service improvement process 3.2 Some future solutions to improve ATM card services 3.2.1 Improve and expand card services VPBank should improve and expand card services so as to facilitate best the diverse demand of customers because currently, VPBank’s ATM cards... buying minutes from MobiFone Company Thus, currently, VPBank’cards mostly offers basic deposit and withdrawal services via ATM are still poor, new and strange to all VPBank’s cardholders Bui Thi Van – Class 4D VPBank’s ATM card services: Current situations and solutions Chapter 3: external environment evaluations and solutions to improve VPBank’s ATM card services 3.1 External environment evaluations... multi-purpose and more convenient to customers Additionally, it should establish and manage efficiently the network of providing banking services The writer thinks that there are three ways to solve this problem Bui Thi Van – Class 4D VPBank’s ATM card services: Current situations and solutions 3.2.1.1 Expanding payment services visa ATM In addition to basic deposit, withdrawal, bill payment services, ... VPBank’s ATM card services are fruitful Thus, VPBank should continue expanding and improving its network nationwide Currently, the best Bui Thi Van – Class 4D VPBank’s ATM card services: Current situations and solutions way for VPBank is to co-operate with other commercial banks’ ATM networks to make VPBank’s ATM cards accept everywhere when necessary  Deficient ATM card services Its ATM services are not... ATM card services 19 Chapter 3: external environment evaluations and solutions to improve VPBank’s ATM card services 23 3.1 External environment evaluations 23 3.2 Some future solutions to improve ATM card services 23 3.2.1 Improve and expand card services 23 3.2.2 Ensure a smooth and efficient VPBank’s ATM operation 25 3.2.3 Guarantee the availability of ATM card services. .. Class 4D VPBank’s ATM card services: Current situations and solutions Source: www.vpbank.com.vn 2.3 The benefits and limitations of VPBank’s ATM card services 2.3.1 The benefits of VPBank’s ATM card services As the IT sector continues to develop and spread throughout various sectors of a modern-day society, many industries are adopting it as a new strategy in conducting business and this includes the banking... whole ATM and POS system of the bank,  Card marketing Department: The marketing staff will provide the best customer services and also develop marketing and sales promotion programs  24-hour support team: Since card transactions can be made everywhere at anytime, a 24-hour support team will provide both the ATMs and Bui Thi Van – Class 4D VPBank’s ATM card services: Current situations and solutions. .. – Class 4D VPBank’s ATM card services: Current situations and solutions fraudulent cards and report to VPBank to stop the use of this card Therefore, all VPBank clients can be confident going out with their cards in pocket, because VPBank always takes care of them and protects their interest 2.3.2 The limitations of VPBank’s ATM card services Although VPBank’s ATM card services are improved day by... industrial parks and expert processing zones in HoChiMinh City have many thousands of workers but a total of only 19 ATMs, so workers Bui Thi Van – Class 4D VPBank’s ATM card services: Current situations and solutions must queue up to take their pay from the machine Because of the long wait, a group of workers sometimes asks one representative to withdraw their money, so their passwords are known and they . Enterprise’s ATM card services Chapter 3: External environment evaluations and solutions to improve VPBank’s ATM card services. VPBank’s ATM card services: Current situations and solutions Bui Thi. ATM card services: Current situations and solutions . Apart from introduction and conclusion sector, the report is divided into three chapters as following: Chapter 1: General understanding of. VPBank’s ATM card services: Current situations and solutions Bui Thi Van – Class 4D Introduction The years 2006 and 2007 marked new steps in the process of world and regional integration