LV Thạc sỹ_Credit card bussiness at ANZ bank Vietnam

1 NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM ***************************** BACHELOR’S THESIS DEVELOPING THE CREDIT CARD BUSINESS AT ANZ BANK (VIETNAM) LIMITED ACKNOWLEDGEMENT I would like to thank everyone who has offered kind help to me in my thesis writing process Without their help and guidance, I could not have completed this research First, I would like to sincerely thank PhD…, instructors from National Economics University for his advice, valuable suggestion and sincerity help through obstacles in the completion of this research work Second, I would like to show my gratitude to my supervisors – Ms… for her precious time, her helpful guidance; and all the staff in Merchant Department at ANZ bank for enthusiasm and kindness while I have been for internship and completing my thesis It has been an enjoyable and rewarding experience to work together with them ABSTRACT This thesis represents my research about the credit card market in general and credit card business operations in commercial banks in particular The initial idea comes from how to expand credit card market share and generate profit for ANZ Bank The card payment market in general and credit card market in particular is known to be one of the most complex and competitive market Moreover, there are many things that the new born credit card market in Vietnam has to face with, especially in the case of the instability of the world economy which has the large impacts to local economy in recent years from the laws, implementations, inspection to reality of applying Even though, many experts and articles refer about this topic, I still want to dig deeply in this problem and try to figure out a future for the credit card market in Vietnam The thesis contained four main parts including introduction, theoretical framework of credit card business, analysis of ANZ credit card business, and proposed solutions to improve its business in the future In this thesis I will focus on the operations of credit card business which the commercial banks are using From the theories and the facts that the banks are applying we will have the overview of how the effectiveness of operation From the view of all a financial student, I will recommend some solutions for the banks to make the market more efficiently and avoid the foreseen risk Due to the limit of time and available sources, I just provide the overview of situation of the market and the problem in particular in ANZ bank for reference Therefore, in this thesis I will use the primary data from the internal information in ANZ bank, and the secondary data from the public information on the ANZ’s website and all the available information on the Internet ABBREVIATION ACB: Asia Commercial Bank ANZ Bank: Australia and New Zealand Bank HSBC Bank: Hong Kong and Shanghai Banking Corporation Bank Sacombank: Saigon Commercial Bank Vietcombank: Bank for Foreign Trade of Vietnam TABLE OF CONTENTS NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM ACKNOWLEDGEMENT ABSTRACT ABBREVIATION LIST OF TABLE .6 LIST OF FIGURE INTRODUCTION CHAPTER I: THEORETICAL FRAMEWORK OF CREDIT CARD BUSINESS IN COMMERCIAL BANKING ACTIVITIES CHAPTER II: CURRENT SITUATION OF CREDIT CARD BUSINESS AT ANZ BANK (VIETNAM) LIMITED 39 CHAPTER III: PROPOSED SOLUTIONS TO DEVELOPING CREDIT CARD BUSINESS OF ANZ BANK (VIETNAM) LIMITED 64 CONCLUSION 70 REFERENCES .71 LIST OF TABLE Table 2.1: ANZ Credit Cards Features 44 Table 2.2: Comparison Annual Fee among HSBC, ANZ Bank, and ACB .47 Table 2.3: Comparison difference fees offered by different banks .48 Table 2.4: Comparison credit limit offered by different banks 49 LIST OF FIGURE Figure 2.1: ANZ Vietnam Organization 41 Figure 2.2 ANZ Vietnam Operation 42 Figure 2.3: ANZ Credit Card operation 43 Figure 2.4: Number of ANZ Credit Card Issued 49 Figure 2.5: ANZ Payment Volume 2009 – 2011 51 Figure 2.6: Credit Card Revenue Distribution 2011 53 Figure 2.7: Interest Income and Interest Expense of ANZ 2009- 2011 53 Figure 2.8: Profitability of ANZ Credit Card .55 Figure 2.9: ANZ Credit Card Expense Distribution 2011 .56 INTRODUCTION Rationale: Credit card is an invention of modern commerce It is used instead of paper money and is a contemporary tool for paying bills Electronic payments improve economic inefficiency; make payments more secure and convenient As a result, credit card is now the most popular and convenient payment tools in the world Credit card payment has become familiar with Vietnamese people for the past few years Consequently, electronic banking also became the key of gaining competitive edge in Vietnam banking sector Especially, the entry of Vietnam into the World Trade Organization undoubtedly would bring unprecedented chances for international payment transaction Because of that reasons, more intense competition will be placed between local commercial banks with foreign funded banks in this market Local banks with its largely existing market shares and customer base seem to have advantages But international banks who have reliable prestige and experience in the worldwide credit card market also own their unique strength to effectively compete on the market Vietnam is on its path of integration into the world economy; understanding the operation of foreign entities in our country as well as the growing competition in the market economy is necessary Therefore, the writer decided to this topic on credit card business at ANZ bank, where she has completed the internship from March 1st to May 1stto get a real insight into the operations of credit card in general and credit card business at ANZ bank Vietnam in particular From what has been observed, the writer gives out some recommendations and practical solutions to improve the bank’s credit card business in the future Scope of research: This research primarily discusses current credit card situation of ANZ Bank (Vietnam) Limited in the period from 2009 to 2011 In the first place, the author presents the theoretical background of credit card, the credit card framework, and the credit card market both internationally and domestically In the second place, the paper analyzes ANZ Bank credit card business with the SWOT model Finally, the research proposes several solutions for the bank based on the results of the study Research purpose: The purpose of this thesis is to investigate the current situation of credit card business in ANZ Bank (Vietnam) Limited and identify competitive position of ANZ credit card business Meanwhile, the thesis will propose suggestions for the bank’s future improvements.- Research methodology: This thesis uses the following methodology: data collection, statistics, deductive reasoning to interpret the business situation The author has collected both primary and secondary data in order to fulfill the purpose of this paper SWOT framework is applied to locate competitive position of credit card business of ANZ Bank The secondary data is assessed via the internet and article For the real implementation at ANZ bank, the author used the primary sources of information in ANZ bank through internal reports which was luckily achieved at the time of internship However, due to the nature of confidential material, some information cannot be revealed so that the thesis cannot avoid some unspecific, unclear or vague points CHAPTER I: THEORETICAL FRAMEWORK OF CREDIT CARD BUSINESS IN COMMERCIAL BANKING ACTIVITIES 1.1 General Information about Credit Card 1.1.1 Credit Card Definition A credit card is a small plastic card issued to users as an instrument of payment, which contains identifying information about a credit account that the owner of the card has established with a bank or other institution It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services within credit limit The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user Cardholders normally must pay for credit card purchases within 30 days of purchase to avoid interest and/or penalties 1.1.2 Credit Card History a The beginning: The idea of using card instead of cash for purchase was first used in buying and selling fuel among automobile owners in America since 1920s But the concept of customers paying different merchants using the same card was invented in 1950 by Frank McNamara, founders of Diners Club, and his partner Ralph Schneider The story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill restaurant Unfortunately, Frank realized he'd forgotten his wallet when the bill arrived That accidental incident had led him to the idea of establishing something as alternative to cash while spending at restaurants McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card In 1950, Diners Club issued its first card 10 heavily spending on their appealing supportive program such as VND million instant rewards when opening a credit card account Today, card issuers also closely monitor payment and charge volumes and adjust credit limits accordingly both to allow increased borrowing capacity as warranted and to limit credit risk Many issuers have attempted to gain or maintain market share by offering very low, temporary rates on balances rolled over from competing firms and by offering a wide variety of enhancements But another limitation that ANZ credit card has encountered is the low credit limit offered while interest and fee which are a little bit higher in comparison with local banks or could not outweigh other international banks in Vietnam like HSBC or Citibank Besides, the modest number of ATM machines in big cities in particular and nationwide in general is another disadvantage of ANZ credit card operation These limitations would be explained by the fact that ANZ Bank has actually entered the market for credit card in Vietnam for only three years and the bank is still on its way to improve the business operation It is understandable that the risk and fraud management for a new market entrant is one of the hardest problems at the beginning, especially when the bank has its operation in a foreign country Along with the great increase in credit card transactions, credit card fraud has become increasingly rampant in recent years Fraud is a serious problem faced by credit card issuers As a new player, the bank now has to deal with both risk management and market share extension As a matter of fact, those limitations is unavoidable along the developing way of ANZ credit card and the bank is trying to find its solutions to enhance those problems such as lowering fee and charges in the past few years, and day by day improving its supportive program quality Other improvement will be shortly answer in near future 59 2.3.2 Business Assessment with SWOT analysis 2.3.2.1 Strength Being Australia’s leading bank in Asia and one of the most famous foreign banks in Vietnam, ANZ credit card has the advantage of international transaction with its widely and completed international payment systems Thus, it has built the trust in businesses, and individual customers to make purchase in international market What is more, ANZ Bank is obviously a good international brand name In Vietnam, with a reputation as the best retail bank in many years, ANZ has a position and reputation with individual customers for its banking service quality As a result, it will be much easier for ANZ Credit Card to find its own position in customer preference Lately entry to the market with great support from parent bank, ANZ Bank Vietnam also has the advantage in modern information and technology system which could be more up-to-date and faster ANZ credit card is accepted in more than 30 million merchants all over the world Besides, it also receives strong support from the active ANZ Spot Program, other marketing programs and 24/7 call service center Credit card has the image of high secured payment products with encryption security system Its conveniences are created and closely associated with the achievement of information technology development As a new comer on Vietnam credit card market, ANZ Bank has the advantage to consolidate all previous technology with up-to-date information technology Last but not least, the accumulated experience in credit card market worldwide of the parent bank will definitely be a solid foundation for ANZ Vietnam to operate and expand in Vietnam credit card market 60 2.3.2.2 Weakness Clearly credit cards are an important part of today modern life, which is why consumers are now pay more attention to fully understand the effect of credit card interest and fee charged on them Thus, interest and fee which are a little bit higher in comparison with local banks and could not outweigh other international banks in Vietnam might be a weakness that ANZ Bank should fix in the near future Another weakness of ANZ credit card that prevents its faster development may arise from its narrow target customers Possessing the strong international payment system but at this time, the bank now only focus on retail market with the majority of individual cardholders that put less attention to another profitable field which is business credit card ANZ credit card only corporates with one credit card network, which is VISA This will not enrich products types and offers that the bank issued Besides, it also not create competition among different credit card associations, thus the bank might skip some special offers and privilege that other banks receive as a result of competitive environment among credit card association The bank’s negative profit in the past beginning years also puts a huddle for ANZ credit card business to overcome in the next few years 2.3.2.3 Opportunities According to some experts’ assessment to the economic outlook in coming years, the economy is setting back to its positive increasing trend In addition, credit card market in Vietnam is still a fertile source for players with 61 population more than 80 million people The credit card market in Vietnam is growing more and more attractive to issuers because of the new height in living standard of citizens in big cities and the catch up with new payment trend in the world Therefore, there is a promising future for ANZ credit card to develop in the future At this time, majority ANZ cardholders are customers living in big cities like Hanoi, Hochiminh, Danang Besides taking good care of existing customers, ANZ Bank also meets the opportunity to assess potential customers from other provinces besides Hanoi and Ho Chi Minh City as card payment are more and more popular and preferred nationwide What is more, the bank also has the opportunity to diversify and enrich its card products while the credit card market is still new and not fully exploited by others banks in the market Besides the business credit card which is very profitable, the student credit card is profitable markets which nearly still left untouched need to be invested more and more to generate great potential profit 2.3.2.4 Threats Being a new player in Vietnam credit card market, ANZ Bank has to face with harsh competition from other banks both local and international banks like HSBC, Citibank, etc., Threats come from local state-owned banks and other big local banks that are in possession of a large amount of resources and customer base Despite its senior experience operating in Vietnam banking field for years, an international bank like ANZ Bank still meet some difficulties in occupying big market share with big local banks which have the support from the Government The culture 62 gap among different countries also puts more barrier for the bank to overcome in order to achieve success In addition, because of the fast development of technology, there are more and more sophisticated tricks used by thief in deceiving credit card money The higher volumes of cards in the market also a reason provide more opportunities for credit card fraudsters to carry out scams As a result, besides finding ways to improve its business profit, it has become more and more challenge for banks to increase its customers’ account security, prevent their products from fraudulence 63 CHAPTER III: PROPOSED SOLUTIONS TO DEVELOPING CREDIT CARD BUSINESS OF ANZ BANK (VIETNAM) LIMITED 3.1 The recent trend in credit card market 3.1.1 Trends in credit card market worldwide According to the Global Industry Analysts Association prediction at the beginning of 2012, the global outlook on the Credit Cards Issuing Industry gets brighter as the recession was pushed back behind Global market for Credit Card Issuing gains immensely from the renewed confidence of consumers on the payment mode, post-recession Credit card issuing globally is back on its growth path Credit card issuers are currently sharpening their focus on innovation in service offerings to attract customers while at the same time exercising efforts to prevent fraudulence Over the next few years, accelerated growth is expected in the credit card markets of the emerging nations On its ways to getting out of the financial crisis, the market place has become more competitive than ever with players competing ever so fiercely for customers Innovation continues to be the key for success in the credit card market place Innovation in terms of offers, technological advancements and an attitude of always being alert and technically ready for leveraging new opportunities coming along go a long way in assuring continued success for credit card issuers Some of the technological advancements that could shape the future of the industry, and which players in 64 the market place are aggressively pursuing, are multifunction cards, and mobile payments Especially, payment through phones is forecast to rise as a major trend over the coming years with rising popularity of smart phones 3.1.2 Trends in credit card market in Vietnam Vietnam consumer trend in supermarkets, major shopping centers is rapidly growing in recent years Accordingly, the modern method of payment such as cards, online payment flourished The rising middle class population and their household incomes, the constantly expand of young population size with modern payment habit, along with the development of technology and the increasing trend of e-commerce are basic elements that make the credit card market grew rapidly in the next few years Catching with new payment trend in the world, online payment and mobile payment are growing fond of by Vietnam credit card users Commercial banks in Vietnam, the credit card networks are trying their best to compete to increase benefits to the cardholder, stimulating demand Banks leading in this race only offer attractive promotion programs but also find ways to develop their merchant both domestically and internationally 3.2 Solutions to improve Credit Card Business at ANZ Bank (Vietnam) Limited 3.2.1 Technology The bank should utilize its strength as an international bank with the experiences accumulated in global market to inherit and bring modern technology to Vietnam, making it a competitive advantage of ANZ Credit Card 65 The bank should update the most recent technology in processing and authorizing credit card system; it should frequently pay attention and catch up with new trend and technology in the world to become one of the leading service providers in credit card market More ATM machine should be built nationwide to better serve customers Besides offering customer good service quality based on modern technology, the bank should pay good attention to technology that could highly protect customers’ account and information safety As a matter of fact, the biggest threat to the Vietnam credit card industry is fraud and scams, particularly card cloning Online cheats are also reported from the Vietnam territory Therefore, ANZ Bank should also equip itself a good fraudulence prevention technology to enhance both the bank and cardholders’ from being deceived 3.2.2 Human resources ANZ Bank should rearrange personnel function and cut off number of staff to utilize the productivities as personnel now are spending a remarkable proportion in operating expense of credit card operation The bank should regularly train sales people to be professional, objective and not too pushy for customers to build better image of the bank and to achieve highest business results Besides, it should also set clearly weekly, monthly, and quarterly goals and target as well as reasonable reward and punishment system to encourage staff and sales personnel Especially, the salary system for credit card seller should also be adjusted to make it more attractive to motivate sale person in searching for new customers and effectively pursuit their customers’ contracts Because as a matter 66 of fact, the salary floor for sale person at ANZ Bank is lower than other rivals in the market Thus, this is also a strategy to build trust and loyalty in staff to achieve highest business results 3.2.3 Target market First of all, the bank must continue to focus on exploiting its existing potential market target by establishing more close relationship to big entities and organization, through that promoting the brand to woo their employees to ANZ Credit Card products After that, the bank should segment the market further according to demographic, psychographic and behavioral dimensions With the result from careful segmentation, ANZ should expand its target customers to a broader range nationwide ANZ Bank enjoys high brand reputation but lower market shares in Vietnam credit card market In order to enlarge market occupation and promote the competitiveness, the bank should develop its credit card business in rural areas Some relatively rich rural areas are the main potential market for ANZ Bank At this time, ANZ credit card business only concentrates on potential cardholders which are residents of two big cities in Vietnam which are Hanoi and Ho Chi Minh cities In other words, customers from other province find it very hard to possess ANZ credit card due to the difficulties in acquiring, authorizing process and related supportive services Thus it is missing a great number of potential customers along the country 3.2.4 Service quality Obviously, the service offered to customers plays a very important role in determining the business success In order to be more effective operation as well 67 as to achieve positive profit in the next few years, there are many things for the bank to to improve customer service quality by: - Regularly updating information on official websites Fast assistance and problem resolution react to customers’ complain at both branch offices and through the customers support line Effectively communicate new products and promotion programs for cardholders by sending them an attached file with monthly statement, updating brief information about those programs Design a reasonable fees and charges system to attract more applicants as in comparison with other issuer banks, ANZ fees are still a little bit higher, thus reduces its competitiveness Carefully profiling customers and building customer base also helps the bank to improve its service quality By doing that, the company can decide the right channel to approach the group, the kind of sales personal to use when communicating with the people in each group, and the features of products appreciated by different group Approaching the customers with what they want and need instead of what they not need, this will result in cost efficient for both companies and customers 3.2.5 Product Innovation ANZ Bank Vietnam should pay more attention to create new and innovative products with competitive offers and fees to compete with other rivals in the market and to expand market share Because it is quite hard to see the difference in products provided among banks, ANZ Bank Vietnam should try to innovate new products to distinguish the ANZ brand from other competitors One suggestion is to create co-brand card with merchants with renowned and established brand name so that ANZ Bank can share the 68 reputation at the same time, for example co-branding card with Vietnam airline or famous shopping malls like Vincom center, etc., It is also advisable to exploit student credit card, the profitable sectors to in the world credit card market, but quite new and still nearly unexploited in Vietnam In consistence with its characteristic as an international bank, it might open a new business opportunity for the bank if develop this potential products for oversea students Additionally, the bank should also establish more relationship with other network association such as MasterCard or AMEX, etc., to enrich the bank products branding and offers to customers 3.2.6 Marketing Supportive Program Continuing its success in ANZ Spot Program, the bank should keep on recruiting new potential merchants in corporation with ANZ to broaden the network This will popularize the image of ANZ Bank to consumers as well as help to boost credit card usage Due to the target market that the bank aimed at, it must put more effort on establishing corporation program with classy and high-end merchant to build consistence image for its cardholders, to distinguish ANZ credit cardholder among others Service quality becomes increasingly decisive at present when many banks are offering products that are very similar to each other It is reasonable to say it is service that distinguishes one bank from another From that point of view, besides solutions to improve service quality as stated above, more interesting promotion programs should be created with attractive discount and presents for customers purchased by ANZ card, for example the accumulated 69 rewarding point for cardholders, or travel rewarding program for cardholders with remarkable usages CONCLUSION Owning it all convenient characteristics offered to both customer and society in addition with the significant profit contribution, credit card has sufficient advantages to become one of the main businesses of banking sector Technological changes and changes in shopping habits increased consumer demand for credit cards; as global economies set into a state of recovery, more optimism is being witnessed in the approach of credit card expansion Through issues that have discussed in the thesis above, it can be recognized that the credit card business of Vietnam market in general and in ANZ Bank in particular is promising a lot of profit and convenience for the economy in the near future Participating in the issuing business for years, ANZ Bank is in the very early stage of the business Although it experienced negative profit in the past, it does not mean that the business is not profitable The expenses that the bank had invested in the starting years are estimated to break even in 2012 in the bank business plan The thesis is expected to contribute some solutions and suggestions for the development of credit card business in ANZ Bank (Vietnam) Limited in near future Hopefully, this research will successfully represent my internship result at the bank 70 REFERENCES Peter S Rose & Sylvia C Hugins, (2010), Bank Management and Financial Services, Douglas Reiner Timothy W.Kock Bank management Harcourt Brace College Publisher Ass Prof Nguyen ThiMui (2003) Quan tri ngan hang thuongmai NXB Tai Chinh Financial Statement of ANZ Bank Vietnam Limited in 2011 Monthly Credit Card Internal Report, December 2011 Comptroller’s Handbook (March 1998), Credit Card Lending Todd J Zywicki, (1999), The economics of credit card ANZ Bank Official Website Url:http://www.anz.com/vietnam/vn/ HSBC Official Website: Url: http://www.hsbc.com.vn/ 10 ACB Official Website: Url: http://www.acb.com.vn/ 11 http://www.wikipedia.org 12 http://www.creditcards.com/ 13 http://www.sbv.gov.vn 14 http://www.investopedia.com COMMENTS 71 INTERSHIP REPORT ASSESSMENT Signature of Advisor 72 73 ... CURRENT SITUATION OF CREDIT CARD BUSINESS AT ANZ BANK (VIETNAM) LIMITED 2.1 General introduction about ANZ Bank (Vietnam) Limited 2.1.1 History and development of ANZ Bank (Vietnam) Limited ANZ is... Card Sales Attrition Direct Sales Retention Telesales Card Features Brand sales Data (Source: ANZ Bank Vietnam Limited) 2.2 Current situation of Credit Card Business at ANZ Bank (Vietnam) Limited. .. Corporate card: its cardholders are companies, organizations • Card Issuer Basis: - Credit cards issued by Banks (Visa Card, Master Card) - Credit cards issued by non -bank institutions (cards