Rationale
The card is a versatile personal financial tool that leverages modern technology to provide numerous benefits to customers By enhancing payment civilization and increasing bank competitiveness, card services have transformed spending and transaction methods within communities As bank cards continue to assert their significance in commercial banking, it is essential to strengthen their issuance and boost income from card activities This aligns with global integration trends and supports the diversification of services and modernization of banking technology in both regional and international contexts.
Vietcombank, a leading commercial bank in Vietnam, has significantly expanded its card services across its extensive branch network Recognizing the advantages of card operations, the bank has actively promoted card issuance and attracted users, resulting in a steady increase in customers In 2018, Vietcombank reported 33,213 card users, marking a 21% rise from the previous year Additionally, the bank's income from card services reached VND 1,598 billion in 2018, reflecting a remarkable 57.75% growth compared to 2017 and surpassing its assigned plan by 112%.
Despite notable achievements, Vietcombank's card issuance and business activities face significant challenges that require attention According to the Card department's evaluation report, customers predominantly utilize their cards for cash withdrawals at branches and ATMs, while sales from goods and services at smaller merchants fall short of the market's potential.
International card users, primarily business travelers and tourists, highlight the need for Vietcombank to enhance its non-cash payment solutions, aligning with the bank's vision to reduce cash circulation and improve customer convenience To address this, Vietcombank must intensify its marketing and promotional efforts to raise awareness of its card services, ultimately leading to the development of effective business strategies for these products This approach will facilitate increased card issuance and drive revenue growth from card-related activities, prompting the author to focus on the topic “Strengthening card issuance and boosting income from card activities at Vietcombank” for their master’s thesis.
Research objectives
General objectives
The primary goal of this research is to identify strategies for improving card issuance and boosting revenue from card-related activities at Vietcombank, ultimately contributing to the enhancement of the bank's overall business efficiency.
Specific objectives
- Systemize the theoretical basis for card issuance and business activities at the commercial banks
- Analyze the status of card issuance and business at Vietcombank
- Propose solutions to enhance card issuance and increase revenue from card activities at Vietcombank
Research questions
- What is the content of card issuance and business services at commercial banks?
- What is the actual status of card issuance and business activities at Vietcombank?
- What are the measures for Vietcombank to enhance issuing activities and increase revenue from card services?
Objects and scope of the research
- Objects of the research: Card issuance and business activities at commercial banks
+ About destination: Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
+ About time: Data for the study was gathered during the period of 2016-2018.
Research methodology
Data collection methods
Summary, select and analyze information from textbooks, specialized books, previous researches related to card issuance and business activities at commercial banks; select information relating to bank card business activities
This article summarizes and analyzes data from Vietcombank to evaluate the current state of card issuance and business operations It aims to identify effective strategies to enhance card issuance and boost revenue from card-related activities.
Data analysis methods
The statistical method utilized involves gathering data from Vietcombank's annual reports, financial statements, and information disclosures, as well as from statistical offices, the annual reports of the State Bank, and various commercial banks and economic magazines This comprehensive approach allows for an in-depth analysis of the card issuance and business operations at Vietcombank.
To assess the bank's card service business, we will analyze actual data from bank reports and documents This involves comparing and synthesizing fluctuations in figures over the years to summarize the current state of the card service sector, while also identifying trends and future development directions.
Synthesis method: Screening and summarizing from facts and theory to propose solutions and steps to carry out research objectives.
Research structure
Chapter 1: Theoretical basis for card issuance and business at commercial banks Chapter 2: Actual situation of card issuance and business activities at Vietcombank
Chapter 3: Solutions to strengthen card issuance and boost income from card activities at Vietcombank
THEORETICAL BASIS FOR CARD ISSUANCE AND BUSINESS
Card service of the commercial banks
In Vietnam, the definition of a bank card is outlined in Article 2 of the Regulation on the issuance, payment, use, and support services for bank cards, established by Decision No 20/2007/QD-NHNN on May 15, 2007 A bank card is described as an instrument issued by a card-issuing organization, designed for executing card transactions in accordance with the agreed terms and conditions between the involved parties.
Bank card services encompass a range of banking functionalities associated with payment cards, designed to meet customers' needs for payments, cash withdrawals, and bank transfers These services enhance the utility of payment cards, ensuring customer satisfaction Additionally, banks typically impose fees for these services (Frederic S Mishkin, 1995).
Bank card services encompass various transactions between banks and customers, whether individuals or organizations, involving the processing and transfer of digital data to deliver banking products and services Essentially, card services can be broadly defined within this framework.
- Bank card services require high-tech service development, deployment and management system and inter-network coordination of an entire multinational network
- The payment card service provides customers with a safe and convenient cashless payment method
- Card service provides customers with a safe but flexible method to store money and perform financial transactions such as withdrawals, transfers, etc at ATMs and other transactions on the internet
- In order to provide this type of service to customers, banks have to spend huge investment costs in building a card issuance and payment system
Bank card services exhibit minimal differentiation, prompting banks to prioritize marketing and after-sales services over product innovation To remain competitive, financial institutions focus on enhancing customer experiences rather than developing unique product features.
Card issued by a bank: a card issued by a bank to a customer so that the customer can use his account or a bank-issued account for payment or use of banking services
Cards issued by non-bank organizations: Cards issued by non-bank organizations with the same process and scope of payment as cards issued by banks such as Amex, JCB
A Gold Card is a specialized payment card designed for customers who frequently make large transactions, typically with merchants Its features can vary by region and country, establishing specific limits for withdrawals and deposits tailored to local regulations and practices.
The standard card is the most prevalent type of card in use today, with approximately 160 million people worldwide utilizing it daily The spending limit on these cards varies by bank.
* According to the technology of card making:
Braille cards are created using braille engraving techniques, where essential information is embossed onto the card However, due to the limited amount of information and the ease of counterfeiting, these cards are now rarely utilized.
A magnetic stripe card is a type of card that holds unencrypted information, making it less secure and vulnerable to counterfeiting Additionally, these cards store only a limited amount of data.
A smart card is equipped with an electronic chip that securely stores information, including up to 200 recent transactions Its advanced encryption technology makes it highly secure and challenging to counterfeit, ensuring the protection of sensitive data.
An international card is a payment card issued by a domestic bank that can be utilized for transactions both within and outside of the cardholder's home country Examples include cards like ANZ and HSBC In Vietnam, these cards allow for seamless payments domestically and internationally, facilitating global access for users.
A domestic card is issued by a local bank in Vietnam, enabling users to make payments in the local currency within the Socialist Republic of Vietnam This type of card facilitates transactions exclusively within the country, ensuring convenient access to local banking services.
* According to the payment characteristics:
A credit card, often referred to as a deferred or late payment debit card, enables the cardholder to make purchases for goods and services and withdraw cash, all within a credit limit set by the issuing bank.
A debit card is linked directly to the cardholder's deposit account, allowing for immediate deductions when purchasing goods and services This means that the money is instantly transferred from the cardholder's account to the merchant's account Debit cards come in two varieties: online and offline.
A Cash Card is a versatile financial tool that allows users to withdraw cash from ATMs, transfer funds within the same banking system, and pay for value-added services such as airline tickets, utility bills, and phone card top-ups directly at ATMs Each transaction, whether it involves withdrawing or transferring money, results in an immediate deduction from the cardholder's account.
* According to the object responsible for payment:
A personal card is issued to individuals who fulfill the necessary criteria set by banks for card issuance The cardholder is accountable for making payments using their own funds and has the option to request additional cards if needed.
Issuing and trading card services at commercial banks
The issuance of bank cards is governed by state laws and must adhere to international card organization regulations, alongside the rules set by bank management There are primarily two types of card issuance: issuing new cards and reissuing existing ones, both of which follow specific procedures.
To obtain a credit card, customers must visit the issuing bank to complete essential procedures, which include filling out an application form and submitting required documents like an ID card or passport The information provided by customers should encompass their name, address, company details, and legal capacity.
(1) (2) (4) (3) etc Customers can request card issuance in the form of mortgage, credit mortgage or deposit, depending on the financial capacity and the bank's regulations
The evaluation department will verify customer applications and make a decision to accept or reject them The bank reviews the submitted applications along with the financial situation of business customers or the regular income of individual customers to assess their solvency Once the documents are accepted, the bank will move forward with signing a contract with the customer.
Step 3: Customer classification for card isssuance:
If the application is considered to be completely appropriate, the bank may conduct customer classification and have a separate credit policy for each customer group
Step 4: The bank issues the card to the cardholder:
To obtain a bank card, the cardholder must sign and register their sample signature at the bank The issuing bank will then print essential details on the card, including the cardholder's name, card number, validity period, bank code, and any associated company name Additionally, this information will be encrypted, and a personal identification number (PIN) will be assigned to the cardholder, allowing their data to be securely entered into the bank's management system.
Upon receiving their card, customers will also be issued a PIN, which must be kept confidential Cardholders are fully responsible for any losses incurred due to a compromised PIN.
1.2.2 Card service business activities at commercial banks
Bank card issuance involves the management and execution of card distribution, usage, and customer debt collection, all of which are interconnected with customer service and risk management Financial institutions must establish clear regulations governing the issuance, usage, and collection processes to ensure efficient operations and mitigate risks.
Once the card issuance and delivery process is finalized, the bank takes charge of managing customer information and overseeing card usage This includes addressing all customer inquiries related to card usage and updating transaction records in the system For credit card holders, the bank periodically sends statements detailing all transactions and subsequently collects the owed amounts as indicated on those statements Additionally, the bank offers various services to customers and collaborates with international card organizations for seamless operations.
When banks engage in card issuance, they not only collect fees from cardholders and interest on late payments but also earn exchange fees from card payment banks through international card organizations This fundamental revenue stream allows financial institutions and card issuers to provide interest exemptions and other incentives to customers, ultimately boosting card usage and increasing revenue from card transactions.
The bank's card payment activities encompass several key functions, including the establishment and management of a comprehensive customer information system for merchants, which involves the approval and signing of card acceptance contracts that outline discount levels for card transactions Additionally, the bank oversees the operations of the card acceptance network and facilitates payment processing for merchants utilizing card payment transactions.
The process of card payment at the bank when a transaction arises is carried out through the following steps:
Step 1: Cardholders use the card to pay for goods, services or withdraw cash at the merchants When receiving the card from the customer, the merchant is responsible for checking the validity of the card If the card is valid, the merchant will provide goods, services or cash to the customer
Step 2: The merchant conducts transactions with the customs clearance bank and sends the card payment invoice to the paying bank Card payment invoices are kept at the card payment bank This invoice will be used as the original document for checking and resolving the complaint (if any)
Step 3: The payment bank credits the account of the merchant
Step 4: Conduct payment with international card organization and other members Every day, the bank synthesizes all data of card-related transactions issued by other banks and transmits data to international card organizations
Step 5: The international card organization will notify the payment bank After receiving the data from the payment bank, the International Card Organization will credit the bank Data transmitted by the International Card Organization includes paid payment banks, fees payable to the International Card Organization, and transactions being searched
1- good and service purchase or cash advances
3 -ad v am ce p ay m en t
Step 6: The international card organization will transmit data to the issuing bank Step 7: The international card organization will issue a debit note to the issuing bank
Step 8: On that basis, the issuing bank will send the statement to the cardholder c : Cardholder pays debt to issuing bank: After receiving the statement, the cardholder will pay for the goods and services consumed
Merchants may need to reach out to the issuing bank or an international card organization to obtain a credit card payment license Payment authorization involves the bank issuing the card directly or informing the international card organization to facilitate a card transaction by supplying a license number or adhering to the necessary requirements for the license application.
Factors influencing card issuance and business activities
Subjective factors influencing the issuance and trading of commercial cards by banks encompass several key elements, including the bank's brand reputation, its financial strength, the effectiveness of its distribution channel system, and the policies aimed at customers.
The brand plays a crucial role in the issuance and trading of card services by commercial banks, serving as the essential element that shapes customers' perceptions It is the distinctive characteristic that each bank cultivates, creating a lasting impression in the minds of its clients.
A bank's strong brand and reputation significantly enhance customer appreciation for its products, leading to an increase in its customer base and facilitating business expansion This is particularly true for card services, which are relatively new and often misunderstood by consumers Due to the inherent risks associated with these services, customers are more likely to choose reputable banks to ensure transaction safety Consequently, a bank's elevated reputation directly correlates with its ability to grow, boost revenue from card services, and maintain a competitive edge in the market.
1.3.1.2 Financial capability of the bank
To boost revenue from card services, banks must possess robust financial resources, which are crucial for developing competitive new card products Financially strong banks can effectively scale their investments in essential infrastructure, including ATM networks and POS machines, thereby enhancing their card business capabilities.
The financial strength of a bank significantly influences customer trust, as clients are more likely to rely on large, reputable institutions with robust financial capabilities This perception leads customers to expect superior services, particularly in areas such as card offerings.
Customers tend to prefer banks with well-established brands over lesser-known institutions, making strong branding and enhanced financial capacity essential for banks aiming to improve their business operations and boost revenue from card services.
The distribution channel serves as the primary pathway for delivering card products to customers It actively identifies customer needs, enabling banks to enhance and refine their offerings while facilitating easier access to these products for consumers.
The bank's distribution channels are categorized into traditional and modern types Traditional channels involve distributing card products through branches, transaction offices, and correspondent banks Despite advancements in technology that reduce the need for new branches, expanding the network remains essential in our country due to the general public's familiarity and habits Therefore, enhancing the presence of branches and transaction offices is crucial for attracting customers, promoting the brand, and increasing revenue from card products.
Modern distribution channels, driven by advanced technology, are essential for the development of card products in banking Innovations like automatic teller machines (ATMs) enhance customer access to services, effectively overcoming the constraints of time and space in transactions This efficiency not only reduces costs for banks on each transaction but also boosts their income, ultimately enabling banks to expand their card service offerings.
People are central to all economic activities, influencing success or failure The card service management team plays a crucial role in directly addressing card business operations and combating fraud Their experience, vigilance, and strict adherence to banking regulations are essential for detecting and mitigating risks, ultimately protecting the bank from potential losses This proactive approach enhances the overall effectiveness of card service management.
Bank officers play a crucial role in card management, as they are responsible for issuing and overseeing cards However, this responsibility also makes them potential sources of sophisticated fraud that can be challenging to detect, leading to significant financial losses for banks Consequently, the ethics, experience, and qualifications of card service management staff are vital, as they directly influence the performance and risk levels associated with a bank's card services.
1.3.2.1 Legal basis of the bank
The legal environment plays a crucial role in the commercial card business of banks, as a well-structured and effective legal framework safeguards the rights of all parties involved in card issuance and payment processes This foundation enables new banks to confidently invest in and expand their card services, fostering growth and development in the industry.
In every country, the issuance and payment activities of bank cards operate within a defined legal framework, which is governed by specific regulations These rules can promote card usage and business when they are reasonable and aligned with real-world conditions Conversely, overly strict or lenient regulations can hinder the effectiveness of the card business, negatively impacting both banks and consumers.
1.3.2.2 Competition among the commercial banks
The banking market is experiencing significant growth, driven by a global trend towards increased service provision Numerous business organizations are entering the financial services sector, with a particular focus on card services The involvement of foreign banks and financial institutions is intensifying competition within the industry, making the landscape more dynamic and competitive than ever before.
To thrive in a competitive landscape, banks must optimize their financial capabilities and continuously innovate their product offerings, such as card translation services, to fulfill customer needs while maintaining low costs.
1.3.2.3 Factors related to customers using card services themselves a Consumption habits of the population
About Joint Stock Commercial Bank for Foreign Trade of Vietnam
The Joint Stock Commercial Bank for Foreign Trade of Vietnam, previously known as the Bank for Foreign Trade of Vietnam, was established on April 1, 1963, originating from the Foreign Exchange Bureau of the State Bank of Vietnam As the first state commercial bank selected for pilot privatization by the Government, Vietcombank commenced operations on June 2, 2008, following a successful IPO equitization plan The bank, identified by the stock code VCB, was officially listed on the Ho Chi Minh Stock Exchange (HOSE) on June 30, 2009.
For over 56 years, Vietcombank has played a crucial role in stabilizing and advancing the national economy, establishing itself as a leading foreign trade bank Its contributions have not only supported efficient domestic economic growth but have also significantly impacted the regional and global financial landscape.
Vietcombank, originally established as a specialized foreign trade bank, has evolved into a comprehensive multi-sector bank offering a diverse array of financial services These include traditional services like capital trading, credit, and project financing, as well as modern banking solutions such as forex trading, derivatives, and extensive e-banking options Leveraging advanced technology, Vietcombank excels in its automated banking system and product development, providing innovative services like Digital Lab, VCB Internet Banking, VCB Money, SMS Banking, and Phone Banking These offerings are designed for convenience, safety, and efficiency, significantly promoting non-cash payment habits among customers.
With over 50 years in the banking sector, Vietcombank stands as one of Vietnam's largest commercial banks, employing more than 16,800 staff members The bank operates a comprehensive network of over 560 branches, transaction offices, and representative offices both domestically and internationally Its headquarters is located in Hanoi, complemented by 111 branches and more than 441 transaction offices across the country Additionally, Vietcombank has established four subsidiaries within Vietnam and three international subsidiaries, including Vinafico in Hong Kong, Vietcombank Money Transfer Company in the United States, and a subsidiary bank in Laos.
Vietcombank has established a robust presence with representative offices in Singapore, Ho Chi Minh City, and an upcoming office in the US, alongside three administrative units, including a Training and Human Resources College and two Cash Processing Centres in Hanoi and Ho Chi Minh City, which launched in 2019 The bank boasts an extensive Autobank system featuring over 2,536 ATMs and more than 60,000 merchants nationwide Supported by a network of 1,856 correspondent banks across 176 countries and territories, Vietcombank's team of skilled professionals excels in banking and finance, adapting effectively to the modern business landscape This expertise positions Vietcombank as the preferred choice for large corporations, both domestic and international enterprises, as well as millions of individual customers.
Joint Stock Commercial Bank for Foreign Trade of Vietnam has the following functions and mission:
To effectively mobilize capital across all economic sectors, it is essential to attract short-term, medium-term, and long-term investments from individuals and businesses through demand and term deposits Additionally, obtaining approval from the State Bank allows for the issuance of promissory notes, enhancing liquidity and financial flexibility.
- Receive investment trust and development capital from domestic and foreign organizations and individuals when permitted by the State Bank; Borrowing capital from the State Bank and other credit institutions
We offer a range of financing options, including short-term, medium-term, and long-term loans, tailored for organizations and individuals involved in agricultural, forestry, and fishery production, as well as in the processing of agricultural products Our loan offerings are designed to meet the specific needs and capabilities of borrowers in these sectors.
Our services include discounting commercial bills, bonds, and valuable papers, as well as facilitating capital contributions and joint ventures in compliance with relevant laws We also offer various services to our clients and provide foreign exchange services in accordance with Decision No 194/QD-NHNN issued by the Governor of the State Bank of Vietnam on October 9, 2006.
Between 2016 and 2018, Vietcombank underwent a significant transformation, achieving remarkable growth in total assets, capital mobilization, and credit By 2018, it emerged as the leading bank in profit and budget contributions within the industry, becoming the first commercial bank in Vietnam to reduce its non-performing loan (NPL) ratio to below 1%, in line with Basel II capital safety standards Throughout this period, Vietcombank invested heavily in modernizing its IT infrastructure and implemented comprehensive transformation projects to align with best practices and standards.
Table 2.1: Business results of Vietcombank
In 2018, Vietcombank's total assets reached VND 1,074,027 billion, marking a robust growth of 3.74% from the previous year The bank's mobilized capital rose significantly, from VND 601,994 billion in 2016 to VND 726,734 billion in 2017, reflecting a 20.72% increase Continuing this upward trend, Vietcombank's mobilized capital grew by 13.3% in 2018, reaching VND 823,390 billion This growth can be attributed to the bank's strategic approach to capital mobilization, which aligns with market conditions, ensuring adequate funding for credit growth while maintaining competitive interest rates and expanding payment and collection services for the State Treasury and social insurance.
Vietcombank has effectively managed its growing credit balance by maintaining strict control over loan quality The bank conducts thorough checks and supervision of credit activities across all branches, adhering to its regulations on credit extension Key members of the Board of Directors are assigned to oversee branches facing significant debt issues, such as those in Quang Nam, Hue, and Bac Kan Each year, Vietcombank inspects all branches and relevant departments, auditing various topics to identify and mitigate potential risks This diligent approach has led to a decrease in the non-performing loan (NPL) ratio, from 1.48% in 2016 to 0.97% in 2018, positioning Vietcombank as the first bank in Vietnam to achieve an NPL ratio of 1% in line with Basel II capital safety standards.
In recent years, Vietcombank has proactively implemented flexible operating solutions to adapt to the evolving business environment, aiming to become Vietnam's leading bank and one of the top 100 banks in the region, as well as among the 300 largest financial banking groups globally, all while adhering to best international practices by 2020 This strategic approach has led to consistent growth in the bank's business results, providing a strong foundation for the effective implementation of social security policies that contribute to the economic development of the country.
Vietcombank's card issuance and payment activities represent a professional operation within the bank, yet the profits derived from card services remain inaccurately assessed This is primarily due to the lack of separate accounting for certain business service expenses, which are currently included in the broader category of international payment activities Consequently, an accurate evaluation of the card business's performance can only be achieved by analyzing the revenue generated from payment and issuance services.
Revenue generated from Vietcombank's card payment activities primarily comes from fees charged to merchants and ATMs Specifically, this revenue is calculated based on the transactions related to goods and services.
Revenue from card payment activities
Total card payment turnover at the merchants
Revenues from transactions at ATMs
Revenues are allocated by international card organizations and card associations to payment banks
Vietcombank receives revenue from international card organizations and card associations, which includes payments for repayment, reimbursement, cash withdrawals, and cash advance transactions made at its counters using cards issued by other banks.
Analysis of the actual situation of card issuance and business at Vietcombank30
2.2.1 Card issuance activities at Vietcombank
Since its inception, Vietcombank has established a streamlined card issuance process that connects the central office with its branches The central government provides overarching regulations that set maximum and minimum limits for each card category, along with guidelines on fees, charges, and required customer information Between 2016 and 2018, Vietcombank's card issuance activities yielded significant results.
Table 2.4: Card issuance results at Vietcombank
With domestic debit cards: Connect24 is a domestic debit card issued by
Vietcombank offers individual customers the convenience of withdrawing funds from their personal accounts through its advanced ATM transaction system, which is built on its online payment technology The Connect24 card has gained popularity among users, enabling automatic transactions at ATMs across the country, including cash withdrawals, bank transfers, statement printing, and balance inquiries, as well as facilitating payments at Vietcombank-affiliated merchants The card's utility, combined with rising consumer knowledge and income levels, has led to significant growth in its usage, with the number of Connect24 domestic debit cards increasing from 798,573 in 2017 to 984,563 in 2018, representing a growth rate of 23.29% Most of these cards are issued in major cities like Hanoi, Ho Chi Minh City, and Hai Phong, which boast robust economic conditions.
Vietcombank offers a range of international debit cards, including MasterCard, Connect 24 Visa, UnionPay, Cashback Plus, American Express, and Visa Platinum The issuance of these cards has seen significant growth, rising from 166,832 cards over the years.
Between 2016 and 2018, the number of international debit cards issued surged from 201,000 to 248,463, driven by concerted efforts in marketing and the growing suitability of these products for the Vietnamese market The simple issuance process, which requires no collateral, allows cardholders to use their cards for both domestic and international spending Notably, MasterCard and Connect 24 Visa dominate the market, being the two most issued cards annually, thanks to their strong brand reputation and effective customer transaction management.
Vietcombank has established a streamlined credit card issuance process from its headquarters to branches, setting clear rules and limits for credit classes, fees, and customer information requirements Most customers are required to provide a mortgage or deposit to obtain a card Due to its diverse features, convenience, and consistent service quality, Vietcombank's international credit card offerings are rapidly increasing, making it a leading and reputable choice in the market The bank partners with major global card organizations, including Visa, MasterCard, JCB, UnionPay, and American Express, to provide a wide range of popular card products.
2016, the number of credit cards issued at banks was 42,748 cards, increasing to 67,349 cards in 2018, contributing to improving the efficiency of card service business activities at banks
In recent years, the card market has become increasingly competitive, with many new banks offering attractive incentives such as fee waivers and discounts to attract card users Despite this challenging environment, Vietcombank has successfully increased its card issuance through the dedicated efforts of its staff at all levels The bank's strategy has focused not merely on expanding its cardholder base but on enhancing the quality of its card services and increasing customer benefits This approach has led to higher card usage and, consequently, a steady rise in the number of cards issued each year.
2.2.2 Card payment activities at Vietcombank
Vietcombank has consistently excelled in card payment activities since launching its card services in Vietnam, which remain a crucial component of the bank's strategic plans for card business growth in recent years.
In the 2016-2018 period, revenue from card payment activities at Vietcombank is as follows:
Table 2.5: Revenue from card payment at Vietcombank
Vietcombank has witnessed a significant increase in card payment sales, with turnover rising from VND 101,985 billion in 2016 to VND 123,265 billion in 2017, marking a 20.87% growth The upward trend continued in 2018, reaching VND 156,923 billion, a 27.31% increase from the previous year Domestic debit card sales, particularly from the popular Connect24 product, accounted for VND 79,856 billion, appealing to the working class and enhancing the bank's capital mobilization through low-cost deposit accounts Additionally, the bank's collaboration with the PULSE international card organization has enabled it to accept six types of international cards, including Visa and MasterCard, while maintaining exclusivity in issuing and processing Amex cards in Vietnam, further boosting its reputation and payment sales.
Despite the increasing availability of card payment options, cardholders predominantly use their cards for cash withdrawals at ATMs, with a staggering VND 98,493 billion transacted in 2018, representing nearly 63% of total card transactions This persistent cash withdrawal habit highlights a significant challenge for commercial banks, particularly Vietcombank, to devise more effective strategies for expanding their merchant networks Such efforts are essential to support the Government's initiative aimed at promoting a cashless payment platform.
In a highly competitive banking environment, many banks have reduced merchant fees to zero to sustain significant growth, particularly in international debit cards This success is attributed to the strategic direction of the Board of Directors, which focuses on enhancing card usage among existing cardholders rather than merely increasing the number of cardholders Key factors contributing to this achievement include effective card marketing initiatives, the successful launch of online payment services, and the expansion of Vietcombank's ATM and POS networks Additionally, continuous improvements in card product features have maximized convenience for customers, fostering satisfaction and paving the way for an expanded customer base and increased card payment transactions at Vietcombank.
2.2.3 Risks and risk management activities
2.2.3.1 Risks in card business of Vietcombank
At Vietcombank, the risks in card business often lie in card counterfeiting and technical risks
As the year-end approaches, the risk of card counterfeiting intensifies, particularly for Vietcombank cardholders who increase their spending during this period Criminals often exploit cardholders' actions in Southeast Asian markets like Thailand, Malaysia, and Singapore, capturing their information to create counterfeit cards This stolen data is primarily obtained from Vietnamese workers traveling or working abroad, making them vulnerable to information theft Consequently, the trend of card counterfeiting at Vietcombank has shown significant fluctuations in recent years.
Table 2.6: Risks on card counterfeiting Vietcombank
In 2018, fake Visa and MasterCard incidents increased significantly, with values reaching VND 8.36 billion and 4.53 billion, respectively, as Vietcombank led in the issuance and usage of these cards In contrast, the risk of counterfeiting American Express (Amex) cards remained low, with only one fraudulent transaction reported in 2018 valued at VND 0.49 billion Amex cards, designed for successful individuals, are associated with reputable merchants, minimizing the risk of skimming The sole instance of Amex fraud in 2018 stemmed from a payment system error that mistakenly processed a non-existent card Although rare, Amex fraud can result in substantial losses, prompting Vietcombank to prioritize robust risk management for these cards.
Between 2016 and 2018, Vietcombank experienced a significant rise in card counterfeiting transactions, leading to increasing financial losses In response, the Card Management Department established a dedicated risk management team to combat this issue The team conducts daily transaction monitoring to identify and prevent fraudulent activities, promptly locking compromised cards and issuing free replacements for affected cardholders in Malaysia Additionally, they provide safety advice to customers on secure card usage, enhancing overall security for cardholders These efforts not only bolster the bank's reputation but also contribute to increased revenue from card services.
In the third quarter of 2018, Vietcombank faced significant technical risks when a payment system error allowed transactions on invalid American Express cards, resulting in a loss of VND 0.49 billion Additionally, various payment program errors have led to inaccurate statements for card-accepting units, impacting the bank's reputation and incurring financial losses and recovery time despite prompt corrections.
In recent years, the rapid increase in Connect24 card usage and the expansion of Vietcombank's ATM network reflect the bank's effective strategy in the debit card market However, this growth has led to system overloads, particularly during the Tet holidays when transmission line errors resulted in transaction failures The inability to process transactions during the 2017 Tet holiday severely disrupted the ATM system, causing significant losses and damaging Vietcombank's reputation, as well as hindering potential revenue growth from bank card services.
First , issuing risk management tools
Analysis of factors affecting card issuance and trading at Joint Stock
Vietcombank has established itself as a key player in the banking sector, particularly in card services, by prioritizing brand development It is widely recognized as one of the most prestigious and largest banking brands in Vietnam, a reputation underscored by its ranking in Forbes Vietnam's 2018 list of the top 40 most valuable and reputable brands, valued collectively at over $8.1 billion This recognition highlights Vietcombank's appeal among economic organizations, businesses, and individuals, solidifying its position among the market leaders in Vietnam.
Table 2.12: Brand value of Vietcombank
Vietcombank is focused on enhancing its brand identity and customer perception in the banking sector, particularly in card services By prioritizing service quality, transaction efficiency, competitive pricing, and a diverse range of card products, Vietcombank aims to attract and retain customers, thereby strengthening its market position As a testament to its efforts, the bank ranks 9th on Forbes Vietnam's list of the 40 most valuable brands, boasting a brand value of $177.9 million This recognition not only elevates Vietcombank's brand status but also creates opportunities for business growth and increased revenue from its card offerings.
2.3.1.2 Financial capability of the bank
Vietcombank's financial performance from 2016 to 2018 is demonstrated through key metrics such as return on assets (ROA), return on equity (ROE), net interest margin (NIM), and capital adequacy ratio (CAR), which exhibit notable fluctuations during this period.
Vietcombank demonstrates robust and consistently rising financial indicators, reflecting its strong financial capacity This solid foundation enables the bank to enhance its card products and services, boost revenue from its card business, and improve overall operational efficiency.
Vietcombank prioritizes the enhancement of its distribution channel network and technical infrastructure to ensure convenient payment and card usage for customers The bank's ATM system not only serves Vietcombank Connect24 Debit cardholders but also accommodates international card users, including Visa, MasterCard, Amex, and JCB With 2,409 ATMs strategically located primarily in commercial centers, Vietcombank provides easy access to essential banking services.
In 2016, 2017, and 2018, Vietcombank established a significant presence in major cities and provinces throughout Vietnam With 24/7 customer service and a wide range of services, Vietcombank offers an advanced automated trading system that surpasses those of other banks in the Vietnamese market.
Diagram 2.2: ATM, POS system at Vietcombank
By the end of 2018, Vietcombank operated 2,409 ATMs and 49,418 POS terminals, securing third place in the ATM market with a 15.67% share while leading the POS market with a 27.5% share As the first bank in Vietnam to connect with the three major card switching organizations—Smartlink, Banknetvn, and VNBC—Vietcombank has expanded its merchant acceptance network across various sectors, including hospitality, retail, and travel, enhancing its card services and revenue However, challenges remain, as the technology and infrastructure at Vietcombank ATMs lack synchronous investment, leading to degraded machines and frequent incidents Additionally, the placement of ATMs is often inadequate, with many residential areas lacking access, which hinders customer service and impacts the bank's revenue growth from card services.
Currently, the human resources at Vietcombank are of quite good quality, meeting the requirements and tasks set in each stage of development of the bank
Accordingly, the number of human resources in the bank in the period of 2016-2018 is as follows:
University degree 12,432 13,343 13,731 911 7.33 388 2.91 College and intermediate level 1,776 1,535 1,854 -241 -13.57 319 20.78
Source: Vietcombank The total number of officers and employees at Vietcombank until the end of
In 2018, Vietcombank employed 17,216 staff, reflecting a 6.09% increase from 2017, with 1,318 postgraduate employees and 13,731 holding university degrees, while college and intermediate staff numbered 1,854 This growth demonstrates Vietcombank's commitment to recruiting qualified personnel to meet job demands The bank prioritizes standardized training for new hires based on their roles, enabling them to quickly adapt and enhance their skills By maintaining rigorous recruitment standards, Vietcombank ensures that its staff possesses the necessary qualifications and can efficiently manage card services, thereby minimizing transaction risks and boosting revenue from its card business.
Vietcombank is committed to enhancing professional and management skills through continuous investments in training programs across all departments involved in the card business This includes initiatives such as Grouping and Career Development Projects, as well as the Leadership Development Program, TechcomLead, ensuring a well-rounded approach to employee growth and expertise in the industry.
TechcomFuture projects are implemented and achieved high efficiency The specific training content is summarized as follows:
Table 2.14: Some training activities for staffs involving in card operation at
Training customer management and exploitation skills Train skills to maintain relationships with partners who are companies, corporations, large enterprises
Training skills to maintain relationships with partners who are companies, corporations, large enterprises
Training skills in selling and deploying new card products and services
Training exploitation skills, maintaining relationships with merchants / partners with high payment turnover (Key Account)
Training exploitation skills, maintaining relationships with merchants / partners with high payment turnover (Key Account)
Develop skills to build promotions in combination with media
Improve the skills to handle alerts related to cardholders' spending activities
Improve the ability to detect suspected fraudulent card cases, collect, analyze and propose remedies
Train and develop risk management capabilities in card business
Develop the ability to operate and monitor the operation of ATM, POS and intermediary devices
Training skills in handling technical errors in card operations
Develop the ability to operate and monitor the operation of ATM, POS and intermediary devices Training expense 4,283 million dongs 6,235 million dongs 7,256 million dongs
Vietcombank has implemented targeted training activities to enhance the skills of its staff involved in managing and trading card services The bank's approach focuses on developing and improving the quality of card service personnel by addressing the specific needs of different groups of officials.
Vietcombank's strategic investment in staff development training has proven effective in enhancing professional skills and improving card management, with training budgets of 4.283 billion VND in 2016, 6.235 billion VND in 2017, and 7.256 billion VND in 2018 This commitment to organized training activities has significantly boosted the efficiency of their card service business and increased service revenue.
Vietnam's card market is currently characterized by spontaneous operations and a lack of long-term strategy, resulting in unfair competition among banks To address these challenges, it is essential for authorities to provide timely guidance and direction However, there are currently no official regulations from the State Bank of Vietnam regarding cards, credit cards, or foreign exchange controls for international cards.
The implementation of VND for payments at POS systems, as outlined in Government Decree No 160/2006/ND-CP and State Bank Decision No 20/2007/QD-NHNN, presents significant challenges for Vietcombank and other domestic banks While transactions between merchants and payment banks must occur in Vietnamese Dong, foreign banks can still process payments in US dollars, putting local banks at a competitive disadvantage Additionally, the presence of foreign bank branches, such as Hong Kong and ANZ, which allow USD withdrawals at ATMs, further limits the competitiveness and appeal of Vietnamese banks in the financial landscape.
Currently, there is a lack of legal documentation addressing disputes and violations related to card issuance and payment in Vietnam, resulting in inconsistencies between existing regulations and governance on foreign exchange and credit This gap complicates banks' efforts to grow their international card business Furthermore, the State Bank's policy to control credit growth has a significant impact on Vietcombank's ability to develop and increase revenue from its card services.
The card market presents significant growth opportunities, as card issuance and trading can utilize idle capital from card account balances, thereby enhancing business capital and generating profits for banks Recently, numerous banks have entered the card issuance arena, intensifying competition with Vietcombank, which faces challenges in boosting revenue from card services Nevertheless, leveraging its existing advantages—such as advanced facilities, technology, capital, and a loyal customer base—Vietcombank continues to hold a leading position in the card business and is committed to maintaining its dominance.
Evaluation of card issuance and trading activities at Joint Stock Commercial
The bank's income from card services is steadily rising, driven by significant growth in both card issuance and payment revenues With an increasing annual number of issued cards, the bank effectively sustains its competitive market share in card issuance services.
Vietcombank stands out as the sole bank in the market that issues and processes payments for all six major international card brands: Visa, MasterCard, American Express (Amex), JCB, Diners Club, and UnionPay Notably, Vietcombank is the exclusive issuer of Amex cards in Vietnam.
Vietcombank offers a streamlined card issuance and payment process, ensuring fast processing speeds that meet international standards This efficiency has led to a significant increase in the number of payment cards and annual card issuances, effectively addressing the growing demands of customers.
Vietcombank has implemented a comprehensive risk management system for its card business, establishing uniform security regulations across its operations The bank also allocates a risk provision fund, setting aside 10% of its card business revenue, ensuring it is well-prepared to address potential losses from risks that may occur.
Vietcombank has actively engaged in marketing by launching various promotional programs and showcasing appealing products The bank has developed tailored incentive policies for different customer segments based on card classifications, including Special cards, Gold cards, and Classic cards.
Vietcombank is widely recognized and respected by customers, establishing a strong reputation within the community As one of the top high-value brands, its significant brand value facilitates business growth and boosts revenue from card services.
The bank's expanding distribution network is crucial for the future growth of its large-scale card service business To enhance customer comfort during transactions, the bank's ATMs and transaction offices are equipped with modern amenities such as cameras and air conditioning Additionally, select ATMs feature mirrors, allowing customers to monitor their surroundings and ensure the safety of their personal belongings while conducting transactions.
In addition to the above results, Vietcombank's card business still has many limitations that need to be overcome, specifically as follows::
Vietcombank's card offerings are limited compared to regional competitors, with only six card brands available, significantly fewer than foreign banks like ANZ and HSBC, which offer nearly 30 card products These banks provide a range of international credit cards, including Visa, MasterCard, Amex, JCB, and Dinner, while also introducing innovative domestic credit card options in collaboration with various sectors such as travel, retail, transportation, insurance, and healthcare Customers benefit from discounts ranging from 1% to 20% on purchases made with these affiliated cards Additionally, international prepaid cards, such as Prepaid Visa and Prepaid Master, are also available, enhancing the variety of payment options for consumers.
Vietcombank's credit card issuance process is characterized by strict requirements and extensive paperwork Customers seeking credit cards must provide collateral amounting to 125% of their spending or mortgage limits The documentation process for verification is complex and time-consuming, creating challenges for applicants Furthermore, insufficient customer assessment standards lead to branch hesitance in extending credit, ultimately hindering the growth of credit card offerings.
Vietcombank's card payment structure reveals an imbalance, with a significant portion of transactions occurring through ATMs This indicates a lack of familiarity among the population with non-cash purchases at merchants, posing ongoing challenges for the bank's card business.
Each year, the card business faces significant risks that lead to substantial losses for banks The lack of diversification in the bank's risk prevention strategies means that they primarily rely on provisioning for risk financing, which can negatively impact overall business performance and profitability across the system.
Vietcombank's investment budget for its card business and information technology systems remains insufficient, leading to a lack of uniformity in investment across software, hardware, and human resources This disparity limits the effective utilization of technological features and results in some inefficient technology investments that adversely affect the bank's profitability.
- Marketing programs are not diverse, incentives and promotions are mainly applied to Vip customers and special card customers, so the bank has not attracted the small customer group
Fierce competitive environment: When starting to participate in the card market,
Vietcombank, a leading bank in Vietnam's card issuance and payment sector, is currently facing intense competition from other commercial banks such as ACB, Tecombank, and Dong A The increasing involvement of various banks in this market has introduced advanced techniques and improved customer relations, leading to a fragmented market share As a result, Vietcombank is encountering significant challenges in boosting revenue from its bank card services.
Vietnam's card market currently lacks a comprehensive and stable legal framework, resulting in spontaneous operations and a lack of long-term strategic direction This situation fosters unfair competition among banks Additionally, existing legal documents do not adequately address critical aspects such as card security, dispute resolution, and risk management in card payments, creating significant challenges for banks in their business operations.
Despite the growing availability of card payment options, cash remains a prevalent payment method among the population Many individuals still primarily use cards for ATM withdrawals rather than for purchasing goods, which presents challenges for increasing card payment revenue at Vietcombank's merchant locations.