Marketing mix solutions to develop Agribank cards at Vietnam Bank for Agriculture and Rural Development – Thanh Xuan branch

Marketing mix solutions to develop Agribank cards at Vietnam Bank for Agriculture and Rural Development – Thanh Xuan branch

I owe a debt of gratitude to many people who helped me complete this thesis Iwould like to acknowledge the help of all First of all I would like to express mydeepest acknowledgement to my supervisor, Professor Ngo Thuy Lan fromNational Economics University of Foreign Languages Department, for hervaluable advice and recommendations.

I acknowledge Ms Ha Viet Hoa, Head of Department of Marketing, Ms.Nguyen Ngoc Anh, and Ms Dinh Thi Thu Trang, Mr Nguyen Huy Hoang, MrNguyen Hai Tuan, Mr Trinh Thanh Dong, staff from Thanh Xuan branch ofAgribank for their support with statistical techniques and data analysis

I am greatly indebted to Mrs Nguyen Thi Nhu Van, Chief accountant, whointroduced me to Marketing Department and continuously encouraged me duringinternship time at Thanh Xuan branch I would particularly like to thank all stafffrom Marketing Department and all members of Thanh Xuan branch of Agribankfor their help, support and providing related information, data

I would like to thank Foreign Languages Department of National EconomicsUniversity, Marketing Department of Thanh Xuan branch of Agribank whichsupported me in completing my thesis.

In the process of data collection for this research, many people contributed tothe task and I am particularly grateful for their contributions.

Finally, to my family and my friends, I wish to extend my loving thanks fortheir encouragement My greatest debt of gratitude is to my parents who weresupporting me during my study in University

In the globalization context, trade activities grow in both quantities and quality.It is required a new safe, fast and effective payment method In addition, thiscentury witnesses a lot of successes in scientific and technical progress, especiallysuccess in advanced information technology

Nowadays, bankcards are used more and more popularly in societies.Bankcards have features of a modern and perfect payment method:

To cardholders: Cardholders like the convenience of bankcards which can givethem the safety, fastness and effectiveness…in payment activities.

To banks: Bankcards’ operation is increasingly playing an important role inbanking business The operation also helps reduce paperwork in banksdramatically because transactions are carried out through computers and electronicsystems

To merchants: Merchants discovered that bankcard customers were most likelyto make a purchase and they bought more with the cards than with cash Handlingthe cards was also much safer than handling checks for which payment was notguaranteed.

To societies: Bankcards’ transactions help reduce the cash pressure and it is aprogress to a “non-cash society”.

Owing to these advantages, bankcards gradually become a popular paymentmethod in developed countries as well as all over the world.

Bankcards were used in Vietnam since 1990s and they have really developed inVietnam market in recent years Issuing and acquiring cards’ business madesignificant achievement and profit for Vietnam market and commercial banks ToVietnam Bank for Agriculture and Rural Development, the bank has just joinedbankcard’s market for about six years, however, it has gained huge successes.However, Thanh Xuan branch which was established for more than two years stillcopes with many difficulties and challenges.

After internship time at Services and Marketing Department of Thanh Xuan

branch, I decided to choose topic: “Marketing mix solutions to develop

Agribank cards at Vietnam Bank for Agriculture and Rural Development –Thanh Xuan branch” for my report.

My report is divided into three chapters:Chapter I: Overview of bankcard

Chapter II: The role of marketing activities to bankcard and actual state ofAgribank cards

Chapter III: Solutions to develop Agribank cards at Agribank Thanh Xuan

Glossary of Terms and Abbreviations

Agribank Vietnam Bank for Agriculture and Rural DevelopmentABIC Agriculture Bank Insurance Joint – Stock CorporationAMEX American Express

ATM Automatic Teller Machine

BIDV Bank for Investment and Development of Vietnam EDC Electronic Data Capture

HSBC The Hongkong and Shanghai Banking CorporationICO International Card Organization

JCB Japan Credit Bureau

PG Bank Petrolimex Group Joint-stock Commercial BankPIN Personal Identity Number

POS Point of Sale

SBV The State Bank of VietnamSMS Short Message Services

SWIFT Society for Worldwide Interbank Financial TelecommunicationVCA Vietnam Card Association

VIB Vietnam International Bank

WSBA Western States Bankcard Association

Table of Contents

ACKNOWLEDGEMENT i

GLOSSARY OF TERMS AND ABBREVIATIONS iv

TABLE OF CONTENTS v

LIST OF TABLES AND FIGURES vii

CHAPTER I OVERVIEW OF BANKCARD11.1 General introduction about bankcard1

1.1.1 History of bankcard 1

1.1.2 Concept and classification 2

1.2 Cards’ activities in commercial banks5

1.2.1 Entities join card activities 51.2.2 Transaction process 6

CHAPTER II THE ROLE OF MARKETING ACTIVITIES TO BANKCARDAND ACTUAL STATE OF AGRIBANK CARDS 9

2.1 Introduction of Vietnam Bank for Agriculture and Rural Development (Agribank) - Thanh Xuan branch9

2.1.1 Foundation and development of Agribank Thanh Xuan 92.1.2 Organization structure 10

2.1.3 Products and services 11

2.2 Marketing activities at Agribank Thanh Xuan 12

2.2.1 Organization of Services and Marketing Department 122.2.2 Current marketing activities 13

2.2.3 The role of marketing to Agribank cards 14

2.3 Bankcard activities in the branch 15

2.3.1 Introduction of Agibank cards 15

2.3.2 Actual state of Agribank card in the branch 17

2.3.2.1 Some results of development Agribank card 17

2.3.2.2 Existing problems and difficulties 21

CHAPTER III SOLUTIONS TO DEVELOP AGRIBANK CARDS AT

3.1 Advantages and disadvantages in developing bankcards23

3.1.1 Advantages 233.1.2 Disadvantages 23

3.2 Marketing mix solutions to develop Agribank card24

3.2.1 Study and set the target market24

3.2.2 Marketing mix solutions to develop Agribank cards 263.2.2.1 Product policies 26

3.2.2.2 Price policies 28

3.2.2.3 Promotion policies 283.2.2.4 Place policies 29

List of Tables and Figures

Figure 1 - Types of bankcards 3

Figure 2 - Participants in bankcard transactions 5

Figure 3 - Procedure of issuing bankcard 7

Figure 4 - Procedure of acquiring cards 8

Figure 5 – Education of staff 10

Figure 6 - Organization Chart 11

Figure 7 - Services and Marketing Department 12

Table 1 - Total profit of services (VND million) 14

Figure 8 - Types of Agribank Card 16

Table 2 - Result of issuing cards 18

Table 3 - Devices of acquiring card of Agribank 19

Diagram - Quantity of ATM, EDC 20

CHAPTER I: OVERVIEW OF BANKCARD 1.1 General introduction about bankcard

1.1.1 History of bankcard

Bankcard history began when individual retail merchants extended credit to theircustomers, allowing them to charge purchases to an account held by the merchant In 1730, Christopher Thompson, a furniture merchant, created the firstadvertisement for credit by offering furniture that could be paid off weekly.However, 1950 marked the real beginning of the credit card most of us are familiarwith today Diner’s Club, Inc introduced the first credit card that could be used at avariety of stores and businesses Advantages of this card immediately took notice ofmany people

In 1960, Bank of American introduced its own bankcard, the BankAmericard In1966, fourteen United States banks formed Interbank, a new association with theability to exchange information on credit card transactions The following year,1967, four California banks changed their named from the California BankcardAssociation to the Western States Bankcard Association (WSBA) The new WSBAlicensed Interbank to use the MasterCharge name and logo In the late 1960s,numerous financial institutions became MasterCharge (Interbank) members tocompete with BankAmericard Eventually, financial institutions interested inissuing cards in the U.S became members of either BankAmericard orMasterCharge In 1977, BankAmericard became Visa USA/ Visa International In1979, MasterCharge changed its name to MasterCard to reflect its expandedservices At the present time, the leaders in the bankcard systems are Visa, MasterCard, Amex and JCB.

Payment by bankcard quickly becomes popularity in other countries In 1960, thefirst plastic card was used in Japan marked the beginning of bankcard in Asia Thefirst plastic card of Barcaly Bank issued in 1966 also highlighted a new period ofdevelopment of bankcard in Europe.

In Vietnam, the first card was accepted in 1990 It was the starting point forcard’s products and services in Vietnam Nowadays, bankcard presents all over the

world in diversified forms to meet every demand of cardholders Banks and

financial institutions always try to improve bankcard to reach a friendly andconvenient payment method for customers.

1.1.2 Concept and classification

Everyday millions of people all around the globe are using bankcards for makingcredit card payments for their purchases However, the fact that not everycardholders know concept of a bankcard

* Concept:

In simple terms: A bankcard can be described as a plastic card issued by a bank or afinancial institution which the cardholder can gain access to the financial resourcesof the bank as a line of credit

* Classification:

There are many types of cards that can be used as alternative forms of payment.Financial institutions issue some and bank issues others Many allow the balance tobe paid in full each month Some take the payment directly from the cardholder’sbank account while others require that the cardholder send payment to the issuer.Herein, I list some popular ways to divide bankcards

Figure 1 - Types of bankcards

* Payment method:

- Debit card: A plastic card used to initiate a debit transaction In general, thesetransactions are used primarily to purchase goods and services and to obtain cash,for which the cardholder's asset account is debited by the issuer

Debit card consist of two basic types:

+ On-line debit card: An online-debit card deducts funds from the bank accountimmediately, as soon as the card is used There is no delay for processing thetransaction

+ Off-line debit card: An off-line debit card does not deduct funds from thechecking account immediately Transactions are processed like a regular credit cardand the funds are not deducted for 24-72 hours

Most issuers of debit cards are moving to this type of card rather than on-linedebit card

- Credit card: A plastic card bearing an account number assigned to a cardholderwith a credit limit that can be used to purchase goods and services and to obtaincash disbursements on credit, for which a cardholder is subsequently billed by anissuer for repayment of the credit extended at once or on an installmentbasis

- Cash card: Cash cards are similar to pre-paid phone cards The card is worth acertain amount of cash and the retailer must use a special cash card reader to debitthe card Each purchase is deducted from the value left on the card until the pre-paidamount is spent These cards are just like cash – if lost or stolen, there is no way toretrieve the money on the card.

* Issuer:

- Bankcards: Banks, financial institutions around the world distribute cards Acardholder borrows money against a credit line and repays those funds with interestif the balance is carried over from month to month

These cards are used all around the world, such as: Visa USA, MasterCard… - Travel and entertainment cards: travel and entertainment corporations distributetheir own cards so they are not considered bankcards since they are not issued by afinancial institution These cards are widely used by business for their travel andentertainment expenses, such as American Express (AMEX), Dinners Club…

* Area of using card:

- Domestic card: Card is used in domestic only with legal tender of that nation - International card: Card is used around the world, used strong currencies intransactions.

1.2 Cards’ activities in commercial banks

1.2.1 Entities join card activities

Figure 2 - Participants in bankcard transactions

The figure shows 5 entities joining a bankcard transaction * International card organizations: (ICO)

For example MasterCard or Visa International/Visa USA, they are worldwidepayment service organization composed of member institutions They set andenforce rules and regulations governing operational procedures, interchangeprocedures, and graphic design approval of their cards…

These organizations do not have a direct relationship with cardholders andmerchants.

Any bank has international card must be a member of an ICO

* The issuing members: The cardholder’s financial institution (usually called theissuing member or issuer) is a licensed member of an ICO The issuer directlyissues the card to the approved cardholder The issuer may also benefit fromservices of a third party processor and/or association in processing information andpayments.

The issuingmembers

The acquiring members

MerchantCardholders

* The acquiring members:

The acquiring members, or acquirer, solicits screens and accepts merchants intoits bankcard program The acquirer is also a member of an ICO, and holds a writtenagreement with the merchant to:

- accept the merchant sales drafts

- provide the merchant with credit card authorization terminals, instructions, andcontracted support services

- handle and process the credit card transactions

The acquirer usually charges the merchant a merchant discount for handling thetransactions The acquirer is licensed by an ICO agrees to follow the operating rulesand regulations of the two associations.

In fact, many banks and financial institutions are both issuers and acquirers Asissuers, they maintain the cardholder relationship As acquirers, they maintain themerchant relationship.

* Cardholders:

The customer to whom a card has been issued or the individual authorized to usethe card The cardholder uses the bankcard either to purchase goods and services from amerchant, or to obtain a cash advance from a member for which the cardholderreceives a monthly bill from the issuer.

1.2.2 Transaction process

* Issuing:

Figure 3 - Procedure of issuing bankcard

+ Customers

- Customers fulfill and sign on the application and credit card agreement

- Required documents: photograph 3x4 or 4x6, Copies of Identity card, copies ofpassport, visa or residence permit…

- Types of guarantee for card payment + Issuing banks

- Checking customer’s application, then decide to approve or not - Approving

- Sending their requests of opening a new card to the card centre

- Receiving new card and personal identity number (PIN) from the card centre - Handing new card and PIN over customers

- Guiding the customer to use card + The Card centre

- In responsibility of receiving information of customers from issuing banks - Produce a new card

Customer

and PIN over

Receiving new card and PIN from centre

Registration of issuing

- Deliver cards to issuing banks * Acquiring:

Figure 4 - Procedure of acquiring cards

The acquiring procedure begins with the cardholder:

(1) - The cardholder purchases goods or services from the merchant

(2), (3) - The merchant, in effect, sells the transaction to the acquire and isreimbursed the amount of the sales ticket by the acquirer

(4) - The acquirer then summits the ticket to the issuer for payment, via the ICOinterchange and settlement system.

(5) - The issuer bills the cardholder

(6) - Finally, the cardholder repays the issuer for the goods or services originallypurchased from the merchant.

ICO are at the centre of the transaction process, maintaining the flow of fundsand information between issuing and acquiring members.

The exchange of financial information is called clearing The exchange of theactual funds for the transaction and the fees associated with them is called

Issuing Member

MerchantAcquiring Member

(6)

settlement The term used to refer to the clearing and settlement system as a wholeis interchange.

CHAPTER II THE ROLE OF MARKETING ACTIVITIES TO BANKCARD AND ACTUAL STATE OF AGRIBANK CARDS 2.1 Introduction of Vietnam Bank for Agriculture and Rural Development(Agribank) - Thanh Xuan branch

2.1.1 Foundation and development of Agribank Thanh Xuan

In 2007, Vietnam Bank for Agriculture Development - Thanh Xuan branch wasfounded under Decision No 1292/QĐ/HĐQT/TCCB dated November 29th, 2007 bythe Board of Directors of Agribank with the primary staff of 36 people.

Located in 90 Lang Street, Thanh Xuan District, a vast residential area with manyconvenient economic conditions, Agribank Thanh Xuan has many advantages to dobusiness effectively Thanh Xuan branch operates its business mainly on ThanhXuan District and other Districts in Hanoi Being in the strategy of organizationnetwork development of Agribank, Agribank Thanh Xuan has played an importantpart in improvimg business performance of Agribank, as well as contributed to shifteconomic structure, promoted the further economic-social development of ThanhXuan District in a comprehensive and sustainable way.

Since its establishment, Agribank Thanh Xuan has continuously extended tradingnetworks, diversified items of business, currency, and credit, promoted capitalsources The branch is also focusing on improving the qualification of staff both inprofessional knowledge, skills and foreign languages Thanh Xuan branch concernsnot only stabilizing and expanding the network but also the living conditions ofemployees Facilities are modernized, especially information technology, to servethe business better From its establishment, the branch always makes profits, therevenue is higher year after year, contributing to the State budgets increasingly,creating credibility with customers.

Figure 5 – Education of staff

Source: Administration Department of Agribank Thanh Xuan

The pie chart shows the education degree of staff in the branch Staff andemployees in the branch have high education degree - 86% of bachelor, major ineconomics, banking or financial field With the workforce have high educationdegree; it is one of the most important advantages to build a strong and sustainablebranch Continuously developed and widened, the staff and employees in the branchhave raised to 72 people at the present time

2.1.2 Organization structure

Through years of operation, Agribank Thanh Xuan has developed widely, at thepresent time it has a business network of five dealing rooms They are: Thirty two(32), thirty three (33), thirty four (34), forty six (46) and Cat Linh dealing room Agribank Thanh Xuan is organized under the model of a supervisor Board ofManagement including a General Director and two Deputy Directors.

Organization structure of Agribank Thanh Xuan is divided into functional blocksas follows:

Figure 6 - Organization Chart

Source: Administration Department of Agribank Thanh Xuan

2.1.3 Products and services

Agribank has been made an effort in developing traditional services as well asother modern and valued added services This has enabled Agribank to diversify itsown products suitable to each segment of customers At the present time, Agribankbecomes the leading bank in developing products: Mobile banking, SMS banking,VNTop up, SMS remittance (A transfer service), etc

To Agribank Thanh Xuan, inherited reputation and successes of Agribank, thebranch has its decisions, policies to precede those successes Agribank Thanh Xuanposts in the account dependently, has its own seals, organizes and operates underRegulation on organization and operation of Agribank Agribank Thanh Xuanprovides products and services which serve:

Services & Marketing Department

Administration Department

Cát Linh

Deputy Director

General Director

Internal

SupervisionDirectorDeputy

Plan & BusinessDepartment

Accounting & Treasury Department

Dealing Rooms

- Personal customers: They are individual, households join transactions in thebranch The branch provide these customers: Individual account, loans, savings andinvestment, remittance, Agribank card, foreign exchange

- Corporate customers: They are target customers of the branch Money flowsoften in a great number They are organizations, corporate… Services and productsinclude: guarantee service, international payment, account, lending, check services,valuable notes, payment, border payment, saving deposit, leasing, foreign exchange,factoring

- Financial institutions: Agribank hope to “provide various services in order tosatisfy customers coming from financial institution sectors” These services are:retail banking, foreign exchange, treasuring, financial trading, project basedlending.

2.2 Marketing activities at Agribank Thanh Xuan

2.2.1 Organization of Services and Marketing Department

Figure 7 - Services and Marketing Department

Source: Administration Department

Services and Marketing Department has 6 staff with separate tasks and roles intheir own working field:

- Head of Department: is directly responsible for the work and plans ofdepartment to the Director, makes plans and assigns tasks to the staff to completeobjects of Department and the branch.

- Marketing staff: 4 employees are in charge of Card section and 1 staff isresponsible for International payment Section

Head of Department

International Payment

Card Section