CHAPTER 2: PAYMENT TRANSACTION VIA POS IN VIETNAM AND
2. The status of POS payment at National Payment Corporation in Vietnam (NAPAS)
2.1. Introduction about National Payment Corporation in Vietnam
National Payment Corporation of Vietnam was established in 2004. They changed their name from Banknetvnn since 04/02/2016 based on the merger with Smartlink Card Services JSC in order to build a unified card switching centre under the direction of the Prime Minister and the State Bank of Vietnam. As a unit to build and complete national retail payment infrastructure, NAPAS is licensed by the State Bank of Vietnam to provide financial switching services and electronic clearing services in Vietnam. NAPAS's largest shareholder is the State Bank which accounts for 49% of the charter capital of the Company.
NAPAS currently manages and operates the interconnection switching system with more than 17,000 ATMs, 270,000 POS machines, 300 electronic payment
businesses in the fields of aviation, telecommunication, hotel and tourism. They serve more than 100 million cardholders of 46 domestic and international commercial banks which operating in Vietnam.
NAPAS mission:
- Set up a switching payment infrastructure and automated clearing for retail transactions (ACH), complete the national payment infrastructure.
- Provide customers with modern and convenient electronic payment services with international quality services; serve all economic sectors and bring the services towards every user.
- Pioneer to issue the trend and promote the habit of using domestic cards and payment accounts instead of cash in Vietnam.
b. Organizational structure
NAPAS is a joint stock company established and operating under the Law on Enterprises in Vietnam. Besides the General Assembly of Shareholders, Board of Directors, Board of Supervisors and Board of Management, the structure of the Company is shown in the model below which including blocks, functional departments and representative offices.
.
Figure 2.5: Napas structure organization, source: the author c. Napas service
- Domestic card switching service:
The domestic ATM/POS switching service provides technical infrastructure supporting to connect the NAPAS system to its member banks and organizations, enabling customers of those member organizations to perform transactions on their mutual ATM/ POS networks.
- Payment Gateway Service
The online payment service (Ecommerce) allows holders of domestic and international cards issued by service participating NAPAS members to pay bill online on muliple channels (website, mobile applications, other) of various goods & service providers connected to NAPAS.
- International Card Switching Service
The International Card Switching Service provides technical infrastructure to support the connection, transmission and processing of electronic data among
NAPAS membership organizations and other international card, switching organizations and foreign banks. Customers of service participating NAPAS members can make transactions on networks (ATM, POS, other) of other organizations that connected to NAPAS, and vice versa
- Topup/Billing service
The electronic topup service allows customers having cards or accounts opened at service participating NAPAS members (banks/merchants) to topup into the prepaid accounts (such as mobile phone account, game, digital content service, e-wallet, prepaid card, etc) of service providers connected to NAPAS everytime and everywhere via multiple channels of NAPAS members including but not limited to Internet Banking, Mobile Banking, SMS Banking, Kiosk Banking, ATM, POS, and counter.
The Billing service allows customers having cards or accounts opened at service participating NAPAS members to make payment for goods/services/public utility and bills (such as telecommunication, Internet, cable television, insurance, consumer loan, and other services) at everytime and from everywhere through different payment methods and multi-channels of member bank.
- 24/7 instant interbank fund transfer service:
The 24/7 Instant Interbank Funds Transfer Service allows customers to use bank cards or accounts to transfer and receive funds in real time through Bank channel ATM, internet banking, mobile banking, counter…
d. The role of Napas in the development of POS transactions
With the operation of the national payment system, the connection and provision of payment solutions with 46 member banks, Napas's role is very important in promoting POS transactions:
- Build up a common payment identification (via the Napas’ logo on the front-side of the card and on the ATM/POS of the banks), make it easier
for customers to identify the merchants which allow domestic debit card payment in Vietnam.
- Napas is the only single unit which is licensed by the State Bank of Vietnam to allow financial switching and electronic clearing.
- Napas focuses on developing technology that ensures safety and security in payments through modern payment solutions.
- Acting as a bridge between banks to build and develop non-cash payment in particular, as well as formulate policies and mechanisms for the development of POS payment in general, Napas brings more conveniences and benefits to customers, targets on a non-cash payment market under the policies of the government until 2020.
2.2. Status of POS payments at Napas
Currently, Napas only connects the domestic cards payment transactions through POS, not international card switching on POS yet. The operation is carried out regarding contracts with organization members which are card issuers or card acquirers such as Vietnamese banks and the branches of foreign banks in Vietnam.
a. Banks in POS payment system
Table 2.3. Numer of card and POS of Napas member banks
No Banks Number of
cards
Number of POS
The proportion of number of POS
1 Vietcombank 14,698,366 85437 31.60%
2 Agribank 18,966,555 15750 5.80%
3 BIDV 9,576,906 34792 12.90%
4 Vietinbank 20,034,274 80912 29.90%
5 Sacombank 2,873,162 6965 2.60%
6 ACB 1,162,603 2984 1.10%
7 MBBank 1,441,259 2012 0.70%
8 VIBank 1,144,464 683 0.30%
9 Saigonbank 340,731 104 0.00%
10 Eximbank 990,114 7436 2.70%
11 SCB 279,503 825 0.30%
12 VietABank 144,618 90 0.00%
13 MSB 466,011 65 0.00%
14 SHB 558,048 747 0.30%
15 Techcombank 1,598,809 1587 0.60%
16 DongABank 9,371,228 796 0.30%
17 ABBank 478,624 1248 0.50%
18 OCB 226,466 0 0.00%
19 VPBank 949,094 512 0.20%
20 PGBank 184,484 4481 1.70%
21 SeABank 481,913 435 0.20%
22 IVB 103,199 150 0.10%
23 UOB - 1410 0.50%
24 GPBank 105,297 111 0.00%
25 VRB 50,144 581 0.20%
26 Oceanbank 725,438 8170 3.00%
27 CBBank 55,128 0 0.00%
28 BaovietBank 85,160 36 0.00%
29 HDBank 947,002 86 0.00%
30 TPBank 299,478 10671 3.90%
31 NamABank 85,296 200 0.10%
32 NCB 125,876 39 0.00%
33 VCCB 86,674 0 0.00%
34 BacABank 68,649 168 0.10%
35 Lienvietpostba
nk 308,666 954 0.40%
36 Kienlongbank 233,289 17 0.00%
37 ShinhanVN 562,974 0 0.00%
38 PVComBank 144,815 0 0.00%
39 IBK 10,000 0 0.00%
40 Wooribank 9,600 0 0.00%
(Source VBCA )
b. Apply the new technologies
Besides the traditional POS connection, Napas has researched and built up the tokenization service provider (TSP) technology infrastructure in order to connect with the supplying units and companies which provide payment solutions for deployment of banks. Currently, Napas cooperated with Samsung Vina to deploy Samsungpay mobile payment solution for customers who are domestic cardholders of banks in Vietnam.
Figure 2.6: Samsungpay event in Ho chi Minh, source: internet
i. The payment support service on the Samsung Pay application is a support service for cardholders of member organizations which using the Samsung Pay application to create Token and perform the Token Payment transactions instead of card information at Merchants. Token is the information that consist the serial number assigned to the card information to be used in the payment transactions.
ii. Scope of deployment
- Support card type: Domestic cards - Transaction channel:
o Digital Tagging Channels: Samsung mobile phones include S8 / S8 Plus; S7 / S7 Edge; S6 Edge Plus; Note5; A9 Pro (2016); A7 (2016/2017); A5 (2016).
o Digital Tagging Channels: Samsung mobile phones include S8 / S8 Plus; S7 / S7 Edge; S6 Edge Plus; Note5; A9 Pro (2016); A7 (2016/2017); A5 (2016).
o Payment channels: POS - Type of transactions:
o Token creation transaction: A transaction that generates some Tokens that represent a card information.
o Payment transaction by Token: is a payment transaction using Token information instead of card information on the card accepting devices at the Merchants.
iii. Service model
Figure2.7: The payment service model of Samsung Pay, source: Napas - The NAPAS Tokenization Platform connects to Samsung Pay Mobile
Application Provider and Banks (as the issuing bank) to deploy the service.
- NAPAS Tokenization platform creates and manages Token, converts Token to card number and connects to Switch system to process Token payment transactions on POS.
- Token Payment transactions through the Samsung Pay are made through the NAPAS Switching System.
iv. Implementation processes and participating banks
- Napas collaborated with commercial banks to launch the service.
Currently, the service has been piloted implementation with 6 banks:
Vietcombank, Vietinbank, BIDV, Sacombank, ABBank, Shinhan Bank.
- In late 2017 and 2018, Napas targets to expand the deployment to all 46 member banks.
v. The advantages of service
Providing a new, modern and convenient payment method for customers.
This service enhances the customer experience as customers can digitize different domestic cards on the same Samsung mobile device to make payments instead of carrying cards.
High security due to card information has been replaced by token information in payment transactions helps reduce the risk of reveal transaction information. In addition, customers have an added layer of security because they need to log in into Samsung Pay account and enter password/fingerprint authentication/biometric authentication before performing payments.
With Samsung's proprietary MST technology, the Samsung Pay application has capable of performing contactless payments on traditional POS machines without the requirement for a reader upgrade, so the service is quickly accepted on the network of payment banks that connected with NAPAS.
This technology has a simple service deployment process and the reduction of time-consuming because the payments have been implemented on the available switch connection between NAPAS and member organizations.
This also open up the direction of developing new, safe and convenient payment services through the connection between the system of member organizations and digital infrastructure of NAPAS. There are some services can be expanded such as fast payment services (without entering PIN code), online
payment via Samsung Pay, payment support service via other mobile applications such as Apple Pay, Android Pay.
With the increase in the use of smartphones in the market, the continuously increase of Samsung's market share in Vietnam over the years (Samsung's market share is 28%-the top in Vietnam) and the significant development issue of digital services in Vietnam and all over the world, the services implemented on the digital infrastructure of NAPAS in general and Samsung Pay service in particular will have great potential of development and will bring many benefits to the economy as well as the image of the market participants.
c. POS transaction volume and value
Napas POS payment system operate the interconnection payments of 42 banks due to the off-us transaction model as above. According to the current situation in Vietnam, the main proportion of the number of transactions is still concentrated on the on-us transactions. However, there is a harmonious balance in the value of transactions between on-us model and off-us model. This shows that the trend of customers using POS payment through different banks is much higher than the on- us transactions. Accordingly, the proportion of total transaction number and transaction value through Napas can be described as follows:
- The number of payment transactions via POS
Table 2.4. POS transactions volume between Napas and whole market -
Year 2013 2014 2015 2016
The number of POS transactions in the whole
market 24,302,271 32,947,995 55,963,319 96,916,694
Napas 1,686,631 3,100,550 5,525,610 10,619,200
The proportion of Napas
and the whole market 7% 9% 10% 11%
(source by VBCA & Napas data
- POS transaction value (million dong)
Table 2.5. POS transaction value between Napas and whole market
Year 2013 2014 2015 2016
POS payment amount in
the whole market 12,373,354 16,514,110 23,426,132 42,488,331
Napas 3,035,936 6,300,990 11,638,658 22,130,151
The proportion of Napas
and the whole market 25% 38% 50% 52%
(Source by VBCA & Napas data)
According to tables 4 and 5 above, the proportion of off-us transactions (transactions through Napas) tends to increase. It shows the tendency of customers that they have a habit of making interbank payments. The number and value of POS increased is a good sign for the change in consumption habits and cash payment of people. However, in comparison with the number and value of ATM transactions, there is a huge difference. According to statistics, ATM transactions in the Napas system in 2015 increased 26 times in the transaction number and 17 times in transaction value. In 2016, this figure was 17.5 times in transaction number and 12.2 times in transaction value.
- The transaction number and transaction value by member banks
Table 2.6: The POS payment transaction number and transaction value by member banks
No BANK = ISS Transaction
number Transaction value
The
proportion of transaction number
The proportion of
transaction value 1 Vietcombank 2,657,602 5,108,775,477,152 25.00% 27.00%
2 Agribank 1,234,768 2,683,120,223,793 11.60% 14.20%
3 BIDV 952,544 2,018,706,619,456 9.00% 10.70%
4 Vietinbank 976,373 1,680,621,248,416 9.20% 8.90%
5 DongABank 906,242 1,603,543,712,400 8.50% 8.50%
6 Techcombank 671,208 882,139,101,574 6.30% 4.70%
7 Sacombank 364,016 811,383,047,488 3.40% 4.30%
8 MBBank 466,497 740,448,352,559 4.40% 3.90%
9 ACB 408,311 663,567,308,060 3.80% 3.50%
10 VPBank 389,959 399,593,896,356 3.70% 2.10%
11 Eximbank 236,378 388,341,556,386 2.20% 2.10%
12 TPBank 217,623 250,943,042,674 2.00% 1.30%
13 ShinhanVN 135,845 217,098,728,107 1.30% 1.10%
14 VIBank 155,902 196,084,034,407 1.50% 1.00%
15 Maritimebank 113,292 177,442,149,448 1.10% 0.90%
16 SHB 106,722 153,112,348,240 1.00% 0.80%
17 HDBank 87,669 128,934,079,734 0.80% 0.70%
18 SCB 95,927 88,961,478,895 0.90% 0.50%
19 ABBank 44,886 84,379,918,679 0.40% 0.40%
20 PVCombank 42,260 80,364,150,190 0.40% 0.40%
21 SeABank 60,578 77,755,130,991 0.60% 0.40%
22 OCB 44,424 61,096,458,492 0.40% 0.30%
23 Lienvietpostbank 40,983 60,147,070,518 0.40% 0.30%
24 BaoVietBank 24,823 44,154,417,050 0.20% 0.20%
25 Navibank 19,409 41,122,454,186 0.20% 0.20%
26 Oceanbank 27,175 36,095,844,418 0.30% 0.20%
27 Indovina 14,603 33,295,132,219 0.10% 0.20%
28 PGBank 18,488 28,106,925,309 0.20% 0.10%
29 Saigonbank 16,099 25,815,345,785 0.20% 0.10%
30 NamABank 16,047 21,804,517,092 0.20% 0.10%
31 BacABank 13,840 17,878,151,473 0.10% 0.10%
32 GPBank 10,951 15,953,460,052 0.10% 0.10%
33 VietABank 8,396 15,324,428,133 0.10% 0.10%
34 Kienlongbank 8,922 15,033,788,223 0.10% 0.10%
35 VCCB 13,625 14,358,119,709 0.10% 0.10%
36 VRB 7,595 11,459,035,512 0.10% 0.10%
37 CCBank 3,889 5,631,279,541 0.00% 0.00%
38 Coopbank 1,547 2,689,084,684 0.00% 0.00%
39 IBK HN 1,536 2,368,413,130 0.00% 0.00%
40 HongleongBank 825 973,342,177 0.00% 0.00%
41 IBK HCM 460 654,499,885 0.00% 0.00%
42 PBVN 955 625,181,696 0.00% 0.00%
(source: Napas data)
Based on the statistics until December 31, 2016, Napas has 42 member banks participated in card transactions through POS. The total transaction number and transaction value which had been processed through Napas system in 2016 was 10,619,200 transactions and 22,130,151 million of VND. The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) takes the top with 2,657,602 transactions, equivalent to 5,108.775 million of VND, accounts for 25%
of total transactions number and 27% of transaction value. Following on the list are Agribank, BIDV and Vietinbank, Dong A Bank. These are the banks that have the largest proportion of card issuance in the market.
d. Fee revenue of POS transactions
With the result of the connection transaction payment through POS as above, the revenue from the service fees of Napas also increased significantly over the years. From 2013 to 2016, revenue from fees increased from 2.5 billion to 19.3 billion, over 5 billion each year.
Table 2.7. Fee revenue of POS transaction from 2013 to 2016 Year Net revenue from
fees (VND)
Increase compared to previous year (VND)
% increase in the revenue 2013 2,528,933,609
2014 7,664,626,218 5,135,692,609 203%
2015 13,202,294,863 5,537,668,645 72%
2016 19,315,934,868 6,113,640,005 46%
(Source: Napas)
e. Fee polices and PR, marketing Fee policies
As the fee policy mentioned in 2.1.1,e, the fee policy for domestic cards is allocated as follows:
- The payment bank (the unit that manages the merchants and provides the POS, terminal management) collects the MDR from 0.1% to 1%.
- For off-us transactions, Napas applies the following fee policy:
Table 2.8: Fee for POS payment service of NAPAS
Type of fee Payment banks Issuance banks
Interchange fee -0.05% +0.05%
Service fee -0.05% -0.0.5%
(source: Napas)
In reality, the acquiring banks apply a very low fee collection policy for merchants while the cost for implementation, management and purchase of POS equipment is quite high. It leads to the result that the revenue is not enough to cover expenses. For that reason, in the domestic card payment activities, most of the banks are not profitable while fee collection policy for international cards is very high. This is due to:
- Interchange fees for international card are quite high, which means the payment banks have to collect the MDR at a certain level to cover the interchange fee, while the interchange fee for domestic card is very low.
This is because the lack of a reasonable MDR floor level of fee for domestic card transactions in order to push up the market.
- As the role of the only unit to manage, operate and switch card payment and switching system, electronic offset, Napas needs to coordinate with the State Bank, ministries, branches and banks in order to establish a uniform pricing policy across the whole market.
PR, marketing
Although the payment turnover through POS accounted for just 6% of net revenue in total Napas services that provided in 2017 which equivalent to 26.5 billion, in 2017, Napas has focused on promoting card payments by:
- The significant deployment of payment identification (Napas’ logo) at Merchants and the coordination with member banks to strongly communicate the features and utility of domestic card payment.
- Coordinate with banks and merchants, implement the marketing programs (Highland coffee, CGV, restaurant chains) to deploy the programs that push up the payments.
- The total budget for Napas domestic card in 2017 for POS payments is 5.6 billion (equivalent to 21% of net revenue from this service).
CHAPTER 3: EVALUATION OF THE IMPLEMENTATION OF DEVELOPING POS TRANSACTIONS IN VIETNAM AND NAPAS 1. Achievements