Perfecting the mechanism for managing payment activities through payment service providers in Vietnam

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

~~~~~~***~~~~~~

Nguyen Thi Thuy

“PERFECTING THE MANAGEMENT MECHANISM OF PAYMENT ACTIVITIES THROUGH PAYMENT SERVICE PROVIDERS IN VIETNAM”

DOCTORAL THESIS IN ECONOMICS

Hanoi, 2012

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

~~~~~~***~~~~~~

Nguyen Thi Thuy

“PERFECTING THE MANAGEMENT MECHANISM OF PAYMENT ACTIVITIES THROUGH PAYMENT SERVICE PROVIDERS IN VIETNAM”

Major: Economics, Finance and Banking Code: 63.31.12.01

DOCTORAL THESIS IN ECONOMICS

SCIENTIFIC INSTRUCTOR:

1. Associate Professor, Dr. Do Tat Ngoc

2. Dr. Hoang Viet Trung

Hanoi, 2012

COMMITMENT

I certify that this is my own independent research work.

The data in the thesis are honest and have clear origins, collected by me during the research process and discussions with responsible officials of the State Bank, Commercial Banks and related places.

Thesis author

Nguyen Thi Thuy

Commitment Table of Contents

List of abbreviations List of tables List of diagrams, charts

INDEX

Page

INTRODUCTION 1

CHAPTER 1: THEORETICAL BASIS OF THE MANAGEMENT MECHANISM OF PAYMENT ACTIVITIES THROUGH ORGANIZATIONS PROVIDING PAYMENT SERVICES IN THE ECONOMY 9

1.1 The concept of payment and its role 9

1.1.1 Concept of payment 9

1.1.2 The functional role of payment activities in the economy 15

1.1.3 Functions of payment activities 16

1.2 Payment activity management 18

1.2.1. Concept of management 18

1.2.2. Concept of payment activity management 21

1.2.3 Concept of payment management mechanism 22

1.3 Content of payment activity management 26

1.4. Factors affecting the payment management mechanism 32

1.4.1. Socio-economic environment 32

1.4.2. Legal environment 33

1.4.3. Scientific and technological advances and applications in commercial banking activities 33

1.4.4. System of payment means in providing payment services 34

1.4.5. Payment organization model 35

1.4.6. Management and human resources capacity for payment operations

of the banking system 37

1.5 World experience in payment organization and operation management

Payment Dynamics - Lessons Learned for Vietnam 38

1.5.1 Some highlights of payment activities in some countries 38

1.5.2. Comments and lessons learned 54

Chapter 1 57 Summary

CHAPTER 2: CURRENT STATE OF MANAGEMENT MECHANISM AND ORGANIZATION

PAYMENT ACTIVITIES THROUGH PROVIDING ORGANIZATIONS

PAYMENT SERVICES IN VIETNAM 58

2.1. Overview of payment activities of service providers

payment 58

2.1.1. Vietnam Banking System 58

2.1.2. Development of payment service providers and organizations

payment activity 69

2.2. Performance of payment systems over the past 90 years

2.2.1. Electronic Clearing and Payment System (ECPS) 91

2.2.2. Electronic Fund Transfer System (ETS) 92

2.2.3. Interbank electronic payment system (IPPS) 93

2.2.4. Bilateral payments between TCCƯDVTT 97

2.3. Summary of payment performance results in the 99 economy

2.4. Current status of payment management through supply organizations

payment service over time 103

2.4.1. Building and promulgating laws and legal documents 104

2.4.2. Instructions and implementation 107

2.4.2.1. Developing cashless payments in the public sector 110

2.4.2.2. Cashless payments in the business sector 114

2.4.2.3. Developing cashless payments in residential areas 115

2.4.3. Licensing and monitoring of implementation 126

2.4.4. Organization of the State Bank's payment management apparatus

2.4.5 Innovations in commercial banking operations to facilitate payment development

2.4.6 Bringing cashless payment management into practice in socio-economic activities and life

2.5. General assessment of the mechanism and organization of payment management activities through payment service providers in Vietnam since 2006

128

139

142

by 2010 143

2.5.1. Achievements 143

2.5.2. Limitations, problems and causes 145

Chapter 2 Summary 150

CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE THE MECHANISM AND ORGANIZATION OF MANAGEMENT OF PAYMENT ACTIVITIES THROUGH

PAYMENT SERVICE PROVIDERS IN VIETNAM 152

3.1. Goals and directions for developing cashless payments

in Vietnam by 2020 152

3.1.1. Overall Objective 152

3.1.2. Some indicators on payment activities up to 2015 152

3.1.3. Development orientation of cashless payment in Vietnam

by 2020 153

3.1.4. Perspectives on perfecting service organization and management

payment 155

3.2. Some solutions to improve the mechanism and organization of management activities

Payment activities through payment service providers in Vietnam 158

3.2.1. Developing modern, synchronous and reasonable information technology (solution)

total) 158

3.2.2. Solutions on the mechanism for organizing and managing payment activities 164

3.2.3. Solutions for organizing payment activities through organizations

payment service provider 176

3.2.4. General solutions 188

3.3. Some recommendations and proposals 193

3.3.1. The State Bank, the Ministry of Information and Communications, and the press promote the work

Disseminate knowledge about e-commerce 193

3.3.2. Recommendations to the State Bank 193

3.3.3. Recommendations to the Government 194

Chapter 3 Summary 195

CONCLUSION 196

REFERENCES APPENDIX

LIST OF ABBREVIATIONS

ATM : Automatic Teller Machine

APACS : Association for Payment and Clearing Services BTA : Vietnam - US Trade Agreement SRVN : Socialist Republic of Vietnam IT : Information Technology

CSTT: Monetary policy

Mekong Delta: Mekong Delta

Unit accepting card

DVTT: Payment services

FTA : Framework Agreement on Trade

Economic Contract: Economic Contract

HSBC : Hongkong and Shanghai Banking Corporation

HTTT: Payment method

State Treasury: State Treasury

MB: Military Bank

MICS : Multi-Integrated Cash Services

NHĐD: Bank of Indochina

SBV: State Bank

NHNo&PTNT: Bank for Agriculture and Rural Development NHQG: National Bank

Commercial Bank: Commercial Bank

State budget: State budget

State Commercial Bank: State Commercial Bank Joint Stock Commercial Bank: Joint Stock Commercial Bank Central Bank: Central Bank

NOSTRO: Bank A's account opened at bank B

to serve the business activities of bank A, as called by bank A.

SGD: Stock Exchange

SWIFT :

Society for Global Interbank Financial Telecommunication world
TCTD: TCCUDVTT	Credit institutions Payment service provider
Account: City: TKTG:	City Account Deposit account
E-commerce: TPTTT:	E-commerce Total means of payment
TTBT: TTBTĐT:	Clearing Electronic Clearing
TTĐTLNH: TTBĐTLNH: TTBTQG:	Interbank electronic payment Interbank Electronic Clearing National Clearing
Stock market: TTKDTM:	Payment by transfer Cashless payment
TTLNH:	Interbank payment
Information:	Payment Center
TTV:	Billing Officer
UNC : UNT :	Payment authorization Collection authorization
UK : VAT : VND : :	United Kingdom Value Added Tax Vietnamese Dong
VOSTRO :	Account opened by bank B for bank	A

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at the request of bank A, to serve the business activities of bank A, but in the name of bank B.

WB : World Bank

WTO : World Trade Organization