CHAPTER 2: OVERVIEW OF CARD SERVICE BUSINESS
2.2. Basic content and system of evaluating criteria for card service business
2.2.1 Basic content of card service business development in commercial bank22
2.2.1.1 Issuance
The issuance of the bank includes the management and deployment of the entire process of card issuance and use, as well as debt collection from customers.
These three processes are equally important; they are closely related to customer service and risk management of the bank.
Basically, card issuance in a bank involves in:
-Organize marketing activities to launch products to market.
-Evaluate clients in card issuance process.
-Provide credit limitation for credit card.
-Design and purchase white card.
-Emboss, encode and create a PIN number for customers.
-Manage customer information.
-Manage card using activities of the customers.
-Manage the debt collection of customer.
-Provide customer service.
-Organize to make a payment with the international card organizations.
When deploying the card issuance, the bank and financial institutions can achieve a lot of benefit. Besides gaining card issuance fee collected from the cardholder, the issuing bank also get the exchange fee from the paying bank by sharing the paying fees via the international card organizations. Based on this revenue, the financial institution and the issuing bank offer free-interest program
and other incentives to cardholders to attract more customers and encourage spending by card.
2.2.1.2 Payment
Along with issuing card, payment activities play a crucial role in the development of card services. The implementation of card payment in a bank is profited not only from the discount fee which is based on the value of card payment transaction from the card-accepting unit, but also from the desire to provide customers a perfect service. To the international card organization and its members, to encourage payment activities by card via card-accepting unit is very important.
When the payment activities of a certain type of card are expanded in a market, it means that cardholders can use the card more easily and conveniently.
Currently, payment activities by card market have blossomed in the international market with over thousands of card-accepting units in over 200 countries. They accept cards with the famous brand such as Visa, MasterCard, American Express, Diners Club, JCB and other international cards. In Vietnam, although the bank card market still has a lot of potential, a number of banks supplying card by 2002 had reached about 13 banks with a network of over 5,000 card-accepting units nationwide.
Card payment of the bank includes the following major activities:
-Develop and manage information systems of card-accepting units -Manage activity network of card-accepting units
-Organize payment transactions using the card for card-accepting units -Provide customer service
-Provide knowledge training program about card payment for employees of card-accepting units
-Provide equipment serving the card payment.
2.2.1.3 Risk management
A bank deploying card business activity always has to face with many different kinds of risk such as counterfeit cards, customer information steal, fake transaction, etc. The risks directly affect the profit and reputation of the card- issuing bank and annoy the cardholder. Therefore, banks should pay special attention to risk management activities. Risk management department at the bank implementing card business is considered as the backbone in the card operation. It consists of the following key features:
-Prevent and investigate acts of using counterfeit cards.
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-Manage the list of accounts related to the stolen and misplaced cards which are reported.
-Develop plans for monitoring the security of embryonic card, printed, damaged or revoked cards.
-Update information about the stolen card list of international card organization.
-Cooperate with the competent authorities involved in investigating and handling violations of contract or fraud.
-Provide training course for staff, card-accepting units and cardholders about fraud prevention measures.
2.2.1.4 Marketing and customer service
Like other businesses, the bank card business requires considerable emphasis on the marketing and customer service. In theory, marketing and customer service in the card business is a fairly broad concept, including all of the ways to find customers (card-accepting unit and the cardholder); to help them access, make decisions and choices and become long term customers of the bank.
Marketing activities include the following basic operations:
-Contact with the potential supplying units for card operation, convince them to sign contracts to accept card payment.
-Provide services to the card-accepting units: adapter installation, business process guidance, maintenance.
-Conduct advertisement for the card-accepting units in general or other potential units.
-Develop reasonable promotion policy for card-accepting units by ranking, grading the service or value of transactions in units; and from that a bank can build to a reduce-cost policy, the discount rate for cardholder and card-accepting units.
-Contact with individual customers, businesses having the potential to use the card, convince them to sign contracts through the convenience of bank cards in general and the advantages of banking services provided.
-Maintain relationships with cardholders and encourage consumption through the construction of promotions, bonuses.
However, an important factor which plays a crucial role in marketing activities is the human resource. Marketing staff must be people who understand the card market and have good marketing profession.
2.2.2 System of evaluating criteria for card service business development in commercial bank
2.2.2.1 Card issuance criteria
Card issuance includes activities locally and internationally. Usually, every month and every quarter, the card center of the bank will have a general report on the number of cards issued in each area and with each types of customer. From that, the bank can evaluate card-issuing speed, compare the speed between the different regions across the country and also have the base to make strategies for card issuance, build the promotions stimulating people to use the card of the bank.
Typically, for banks, local debit card product is still a key type of products, accounting for more than 93% of a total number of cards issued in the market.
However, in recent years, the proportion of local debit card has tended to decrease.
International card is now focused to develop gradually, so the international card issuing index will evaluate card service development towards customer groups who have overseas trade, study and travel activities.
2.2.2.2 Card-using evaluation criteria
Every week, month, quarter and year, the card center will report about card transactions. Statistics will estimate a number of card making transactions on a number of cards issued. In fact, the aggressive promotions of banks contribute the most to increase the number of cards issued, however, after a time, many customers do not use the card, which led to the "dead" card or virtual card. The evaluation on this fact will contribute to making judgments about the market, features of the card, from that the bank will have a strategy to attract people to use bank card in payment.
It is a fact that sales by card payment transactions are concentrated in two major cities, Hanoi and Ho Chi Minh, where focus more than 80% of businesses, hospitals, universities, public authorities, etc. In other provinces, although trading activity is not high, they are still the potential market. The banks need to build card policy toward any regions which contain the demand for convenience of the transaction, payment of goods and services.
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According to the 2010 card operation report of the Vietnam card association, Vietcombank continued to affirm its leading position in sales using the card, with nearly 130,000 billion, accounting for 23.4% market share. Agribank followed with nearly 110,000 billion, increased three times compared with 2009, accounting for nearly 20% market share. Next is Vietinbank with more than 93,000 billion VND (17%), and DongABank with over 89,000 billion (more than 16%).
2.2.2.3 ATM and POS network development criteria
When using the card in transactions, the card issuing bank (card center) needs to install card-accepting place systems. When network is opened widespread, it will bring a lot of utilities to the users, help them pay or withdraw cash at many localities throughout the country. Therefore, when people have demand, they will themselves realize the benefits of using smart card.
The investment for the development of ATM and POS system is very large, so to the new bank joining in the card market, this will be a big matter. As a routine, a bank will have statistics report on the development of ATM and POS networks.
The place installed is usually near the shopping center, densely populated area or offices. The number of machines installed in each locality will be based on card issuing speed in that locality.
2.2.2.4 Card service quality evaluation criteria
Improving the quality of the cards is the focusing task of the bank to increase the competitiveness of the product in the varied card market conditions today.
Service quality can be assessed on the following features:
-Evaluate the quality of the ATM system: The bank equipped ATM remote observation management system, which helps notify account balance via phone and email to customers or other emergency situations. For the bank, tracking the cash balance remaining at the end of the day at ATMs will make other task proceed smoothly.
-Pay the attention to the investigation or complaint: In the transaction, sometimes there will have network failure leading to inconvenience for customers.
Thus, the banks have launched customer care system over the phone, to quickly investigate and fix error for customers in the shortest time.
-Increase benefits to cardholders.
Card service quality evaluation is one target setting up the competition, the advantages of one bank card products over other competitors.
2.3 Factors affecting the card service business development in commercial bank
Card services business development also means to develop both issuance activities (development of card number, cardholder) and payment activities (development of card sales, service quality) as well as reduce risks in both the card issuance and payment.
In fact, there are many factors affecting the development of card services such as habit of using card in the economy, the guidelines of the State, card technology, quality of client evaluation, marketing activities and human resource.