The Formation and Development Process of the Tdqt Card Market in Vietnam

The growth rate was steady and there was a small gap, but since 2009, after converting the business model from a State-owned Bank to a Joint Stock Commercial Bank, Vietinbank has changed more rapidly, showing that the capital mobilization each year increased by about 100 thousand billion instead of tens of thousands of billion as before. By the end of 2011, Vietinbank's mobilized capital was 420,212 billion VND, making Vietinbank the largest Joint Stock Commercial Bank and only after Agribank, the State-owned Bank that has not yet equitized according to the roadmap of the State Bank.

Vietinbank's total asset growth chart

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Total assets

Billion VND

500

400

367,712

460,604

300

200

166.112

193.59

243,785

100

2007 2008 2009 2010 2011

Year

(Figure 2.2)

Not only increasing capital mobilization from customers, Vietinbank also shows growth in scale of operation, increasingly expanding investment in fixed assets to develop business activities, shown through the value of total assets continuously increasing over the years with high growth rate. In 2007, total assets were

166,112 billion VND by the end of 2011, an increase of 460,604 billion VND, an absolute increase of 294,492 billion VND, affirming Vietinbank's growth in the market.

Vietinbank's net profit growth chart

Net profit

Billion VND

8,392

2 1,149

1,804

3.373

4,598

2007 2008 2009 2010 2011 Year

(Figure 2.3)

Looking at the chart, we can see the remarkable development of Vietinbank, the net profit from 1,140 billion VND in 2007 has increased more than 7 times after 5 years. This effort is not only from Vietinbank's Board of Directors and all staff but also from Vietinbank's partners and loyal customers throughout the past journey.

During the process of formation and development, Vietinbank has constantly improved new products to best meet customer needs. In the near future, customers can use the most advanced banking products such as 24/24h electronic payment system, Internet Banking service, home banking service, phone banking, retail...etc.

Over the years, Vietinbank has always achieved high and sustainable growth rates. With high prestige at home and abroad, more and more businesses, families and individuals are coming to Vietibank and moving towards a future where all economic activities are carried out through the banking system.

2.2 The process of formation and development of the international credit card market in Vietnam

Visa credit cards have been used in some locations in Vietnam since 1991. But the first Visa credit card was issued in Vietnam in 1996 by the Foreign Trade Bank. With practical benefits and business profits from card business activities, other banks have been attracted to participate. Therefore, sharing the market is inevitable. Banks all choose the same direction: piloting as payment agents for foreign banks, then directly issuing cards. This form has brought a certain level of commission, business and necessary business prudence.

In August 1996, the Association of Card Payment Banks in Vietnam was established and put into operation with 4 members: Vietcombank, ACB, Eximbank and First Vinabank to create unity in card business activities in Vietnam, maintaining a healthy competitive environment.

After more than 10 years of development, the international TTD market has nearly 15 participating banks (VTB, VCB, ACB, ANZ, Eximbank, DongA, HSBC, Techcombank...) with more than 2 million cards by the end of 2011, including 4 main brands: Visa, Mastercard and American Express, JCB; card usage turnover is 2.1 million USD. About 55% of the number of customers using TTD must have money to mortgage or guarantee for issuance. More than 35% of card usage turnover is domestic, the rest is foreign.

2.2.1 Characteristics of the credit card market in Vietnam

The international credit card market in Vietnam is a potential market, but there are also many barriers in terms of customs, habits and legal corridors. According to research by Visa in the markets of Vietnam, Cambodia and Laos, the number of 1.2 million consumers eligible for credit cards (TTD) out of a total population of nearly 7 million in the two cities of Hanoi and Ho Chi Minh City shows the great potential of the Vietnamese credit card market.

According to statistics from Visa Organization, out of 85 million Vietnamese people, only 88,000 people (equivalent to 1% of the total population) currently use Visa credit cards, with transaction turnover reaching about 115 million USD. Meanwhile, the number of people using Visa credit cards in countries in the region is much higher: Singapore accounts for 68.5%, Thailand accounts for 10.6%; Malaysia is 20.3%. Therefore, according to experts in the financial industry, Vietnam is a potential market for the development of credit cards.

With high-end financial products, this utility, although the number of people eligible for issuance is large, the habit of Vietnamese people not paying through banks is the first obstacle. This research group has conducted interviews with subjects who are considered to be fully qualified to be issued international credit cards due to their relatively stable financial potential, however, many people do not understand or know nothing about credit cards, debit cards... At the same time, the rate of opening bank accounts in Vietnam is also very low compared to international standards, only 6% of people have bank accounts. While neighboring countries such as Singapore are 95%, Malaysia 55% and Thailand reaches 46%...

The Governor of the Bank issued Regulation No. 20/2007/QD-NHNN dated May 15, 2007 "Regulations on issuance, payment, use and provision of support services for bank card activities", replacing Decision No. 371/19 ...

SBV dated October 19, 1999 of the Governor of the State Bank. This is the only legal framework regulating credit card business activities of banks. However, the new regulations only provide basic concepts, without specific mechanisms and regulations like those of developed countries, which greatly affect the card business activities of Vietnamese commercial banks.

The international credit card market in Vietnam is receiving special attention from foreign banks. Competition between domestic and foreign banks will create momentum for the international credit card market to develop in both quality and quantity. When the number of card users increases, it will create pressure on goods and service providers to accept cards as a popular means of payment, promoting the banking and finance industry to develop more and more in the direction of modernization, minimizing the use of cash according to the habits of Vietnamese people.

2.2.2 Card business model and international credit card issuance activities at Vietinbank

- Card center: is a unit directly under the headquarters of NHTMCPCTVN and

Card business organization model at Vietinbank Diagram 2.1. TTT organization model of Vietinbank

Card Center: Established by the decision of the General Director of Vietinbank, including departments and functional units responsible for organizing card issuance, payment and management throughout the Vietinbank system.

Main tasks of the Card Center:

+ Research, analyze the market and Vietinbank's resource capacity to develop policies, goals and business development plans in both card payment issuance areas.

+ Issue documents guiding the implementation of card issuance and payment throughout the Vietinbank system. Develop operating procedures for card operations at the card center.

+ Research the card market, develop marketing plans for Vietinbank's card services. Implement direct marketing activities and support services to attract customers and merchants. Research cooperation plans with merchants in providing utilities and promotional policies for cardholders.

+ Implement and control card issuance and payment operations. Organize management and supervision of card service providers' operations. Implement training programs on card operations for card officers at branches.

+ Synthesize reports on card payment issuance activities of branches, agents, and payment service providers.

+ Manage information related to issuance and payment risks according to Vietinbank's regulations, in accordance with the regulations of international card organizations.

+ Manage and operate the system of machinery and equipment related to card issuance and payment activities. Develop coordination regulations with partners and branches in handling problems, breakdowns... to ensure continuity.

of the system.

- Level 1 branch: performs business functions, coordinates the activities of Level 2 branches and transaction offices, sample transaction points... The branch is responsible for:

+ Actively develop card issuance and payment agents. Directly do marketing and customer marketing.

+ Focal point for receiving customer records, issuing and paying to customers

+ Manage and maintain ATMs and card payment devices at the branches under management.

+ Periodically propose the demand for the number of ATMs, card payment devices and materials serving the operation of the devices to the Card Center to have a plan for total card development across the entire Vietinbank system.

- Central and Southern card sales department

Diagram 2.2. Organizational model of Vietinbank's Central and Southern card business department

Mission:

- Fully and effectively perform the functions and tasks of the Sales Department.

- Promote card business activities in the area of 54 branches, contributing to the completion of the card business plan of the entire system.

- Through card business activities, contribute to promoting VietinBank brand.

- Create a close coordination mechanism between TTT and branches, promote the advantages of the facility to exploit and develop customers.

- Ensure that the implementation of card operations at the Branch complies with issued regulations and business processes and achieves high efficiency.

Principles of issuing international credit cards at Vietinbank

International credit cards are issued based on the principle of short-term lending. That is, when accepting to issue a credit card to a customer, the Bank provides them with a short-term credit with a certain limit that the cardholder is allowed to use during the credit cycle. The customer's card credit limit is part of the total general loan for the customer, this total general loan must not exceed the maximum loan limit of the bank for a customer as prescribed by law. When issuing a card, an important principle that customers must comply with is that the customer must have a guarantee with the Bank by mortgage or credit. If based on credit, the bank will consider the customer's ability to repay the debt. The mortgage must be an asset with a value equivalent to the credit limit granted to the card. The customer's collateral is usually a personal account at the bank or a term deposit. As for debit cards, the card is issued based on the deposit balance at the bank .

Types of international credit cards currently issued at Vietinbank

Currently, as of January 2012, Vietinbank has 2 lines of international credit cards: international credit card and international debit card associated with Vietinbank's Cremium brand.

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