Marketing mix solutions to develop Ngân hàng nông nghiệp và phát triển nông thôn (AgriBank) cards at Vietnam Bank for Agriculture and Rural Development - Thanh Xuan branch

en Hai Tuan, Mr Trinh Thanh Dong, staff from Thanh Xuan branch of Agribank for their support with statistical techniques and data analysis. I am greatly indebted to Mrs. Nguyen Thi Nhu Van, Chief accountant, who introduced me to Marketing Department and continuously encouraged me during internship time at Thanh Xuan branch. I would particularly like to thank all staff from Marketing Department and all members of Thanh Xuan branch of Agribank for their help, support and providing related information, data I would like to thank Foreign Languages Department of National Economics University, Marketing Department of Thanh Xuan branch of Agribank which supported me in completing my thesis. In the process of data collection for this research, many people contributed to the task and I am particularly grateful for their contributions. Finally, to my family and my friends, I wish to extend my loving thanks for their encouragement. My greatest debt of gratitude is to my parents who were supporting me during my study in University. Abstract In the globalization context, trade activities grow in both quantities and quality. It is required a new safe, fast and effective payment method. In addition, this century witnesses a lot of successes in scientific and technical progress, especially success in advanced information technology. Nowadays, bankcards are used more and more popularly in societies. Bankcards have features of a modern and perfect payment method: To cardholders: Cardholders like the convenience of bankcards which can give them the safety, fastness and effectiveness…in payment activities. To banks: Bankcards’ operation is increasingly playing an important role in banking business. The operation also helps reduce paperwork in banks dramatically because transactions are carried out through computers and electronic systems. To merchants: Merchants discovered that bankcard customers were most likely to make a purchase and they bought more with the cards than with cash. Handling the cards was also much safer than handling checks for which payment was not guaranteed. To societies: Bankcards’ transactions help reduce the cash pressure and it is a progress to a “non-cash society”. Owing to these advantages, bankcards gradually become a popular payment method in developed countries as well as all over the world. Bankcards were used in Vietnam since 1990s and they have really developed in Vietnam market in recent years. Issuing and acquiring cards’ business made significant achievement and profit for Vietnam market and commercial banks. To Vietnam Bank for Agriculture and Rural Development, the bank has just joined bankcard’s market for about six years, however, it has gained huge successes. However, Thanh Xuan branch which was established for more than two years still copes with many difficulties and challenges. After internship time at Services and Marketing Department of Thanh Xuan branch, I decided to choose topic: “Marketing mix solutions to develop Agribank cards at Vietnam Bank for Agriculture and Rural Development – Thanh Xuan branch” for my report. My report is divided into three chapters: Chapter I: Overview of bankcard Chapter II: The role of marketing activities to bankcard and actual state of Agribank cards Chapter III: Solutions to develop Agribank cards at Agribank Thanh Xuan Glossary of Terms and Abbreviations Agribank Vietnam Bank for Agriculture and Rural Development ABIC Agriculture Bank Insurance Joint – Stock Corporation AMEX American Express ATM Automatic Teller Machine BIDV Bank for Investment and Development of Vietnam EDC Electronic Data Capture HSBC The Hongkong and Shanghai Banking Corporation ICO International Card Organization JCB Japan Credit Bureau PG Bank Petrolimex Group Joint-stock Commercial Bank PIN Personal Identity Number POS Point of Sale SBV The State Bank of Vietnam SMS Short Message Services SWIFT Society for Worldwide Interbank Financial Telecommunication VCA Vietnam Card Association VIB Vietnam International Bank WSBA Western States Bankcard Association Table of Contents ACKNOWLEDGEMENT i ABSTRACT ii GLOSSARY OF TERMS AND ABBREVIATIONS iv TABLE OF CONTENTS v LIST OF TABLES AND FIGURES vii CONCLUSION 30 Bibliography List of Tables and Figures Figure 1 - Types of bankcards 2 Figure 2 - Participants in bankcard transactions 5 Figure 3 - Procedure of issuing bankcard 7 Figure 4 - Procedure of acquiring cards 8 Figure 5 – Education of staff 10 Figure 6 - Organization Chart 11 Figure 7 - Services and Marketing Department 12 Table 1 - Total profit of services (VND million) 14 Figure 8 - Types of Agribank Card 16 Table 2 - Result of issuing cards 18 Table 3 - Devices of acquiring card of Agribank 20 Diagram - Quantity of ATM, EDC 20 CHAPTER I: OVERVIEW OF BANKCARD 1.1. General introduction about bankcard 1.1.1. History of bankcard Bankcard history began when individual retail merchants extended credit to their customers, allowing them to charge purchases to an account held by the merchant. In 1730, Christopher Thompson, a furniture merchant, created the first advertisement for credit by offering furniture that could be paid off weekly. However, 1950 marked the real beginning of the credit card most of us are familiar with today. Diner’s Club, Inc. introduced the first credit card that could be used at a variety of stores and businesses. Advantages of this card immediately took notice of many people. In 1960, Bank of American introduced its own bankcard, the BankAmericard. In 1966, fourteen United States banks formed Interbank, a new association with the ability to exchange information on credit card transactions. The following year, 1967, four California banks changed their named from the California Bankcard Association to the Western States Bankcard Association (WSBA). The new WSBA licensed Interbank to use the MasterCharge name and logo. In the late 1960s, numerous financial institutions became MasterCharge (Interbank) members to compete with BankAmericard. Eventually, financial institutions interested in issuing cards in the U.S. became members of either BankAmericard or MasterCharge. In 1977, BankAmericard became Visa USA/ Visa International. In 1979, MasterCharge changed its name to MasterCard to reflect its expanded services. At the present time, the leaders in the bankcard systems are Visa, Master Card, Amex and JCB. Payment by bankcard quickly becomes popularity in other countries. In 1960, the first plastic card was used in Japan marked the beginning of bankcard in Asia. The first plastic card of Barcaly Bank issued in 1966 also highlighted a new period of development of bankcard in Europe. In Vietnam, the first card was accepted in 1990. It was the starting point for card’s products and services in Vietnam. Nowadays, bankcard presents all over the world in diversified forms to meet every demand of cardholders. Banks and financial institutions always try to improve bankcard to reach a friendly and convenient payment method for customers. 1.1.2. Concept and classification Everyday millions of people all around the globe are using bankcards for making credit card payments for their purchases. However, the fact that not every cardholders know concept of a bankcard * Concept: In simple terms: A bankcard can be described as a plastic card issued by a bank or a financial institution which the cardholder can gain access to the financial resources of the bank as a line of credit. * Classification: There are many types of cards that can be used as alternative forms of payment. Financial institutions issue some and bank issues others. Many allow the balance to be paid in full each month. Some take the payment directly from the cardholder’s bank account while others require that the cardholder send payment to the issuer. Herein, I list some popular ways to divide bankcards. Figure 1 - Types of bankcards Debit card Payment method Area of Using card International card Technical Feature Issuer Credit card Magnetic stripe card Smart card Bankcards Travel and Entertainment cards Domestic card Cash card Cards * Payment method: - Debit card: A plastic card used to initiate a debit transaction. In general, these transactions are used primarily to purchase goods and services and to obtain cash, for which the cardholder's asset account is debited by the issuer Debit card consist of two basic types: + On-line debit card: An online-debit card deducts funds from the bank account immediately, as soon as the card is used. There is no delay for processing the transaction + Off-line debit card: An off-line debit card does not deduct funds from the checking account immediately. Transactions are processed like a regular credit card and the funds are not deducted for 24-72 hours. Most issuers of debit cards are moving to this type of card rather than on-line debit card - Credit card: A plastic card bearing an account number assigned to a cardholder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a cardholder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis  - Cash card: Cash cards are similar to pre-paid phone cards. The card is worth a certain amount of cash and the retailer must use a special cash card reader to debit the card. Each purchase is deducted from the value left on the card until the pre-paid amount is spent. These cards are just like cash – if lost or stolen, there is no way to retrieve the money on the card. * Technical feature: - Magnetic stripe card: The magnetic stripe on the bankcard plastic was encoded; this stripe contains information pertinent to the cardholder account - Smart card: The smart card, also known as the chip card, contains a computer chip embedded in the plastic. When read by a special terminal designed to interact with the embedded chip, the card can perform a number of functions or access data stored in the chip. These cards can be used as cash cards or as credit cards with a preset credit limit. * Issuer: - Bankcards: Banks, financial institutions around the world distribute cards. A cardholder borrows money against a credit line and repays those funds with interest if the balance is carried over from month to month. These cards are used all around the world, such as: Visa USA, MasterCard… - Travel and entertainment cards: travel and entertainment corporations distribute their own cards so they are not considered bankcards since they are not issued by a financial institution. These cards are widely used by business for their travel and entertainment expenses, such as American Express (AMEX), Dinners Club… * Area of using card: - Domestic card: Card is used in domestic only with legal tender of that nation. - International card: Card is used around the world, used strong currencies in transactions. 1.2. Cards’ activities in commercial banks 1.2.1. Entities join card activities Figure 2 - Participants in bankcard transactions The issuing members International card organization The acquiring members Merchant Cardholders The figure shows 5 entities joining a bankcard transaction. * International card organizations: (ICO) For example MasterCard or Visa International/Visa USA, they are worldwide payment service organization composed of member institutions. They set and enforce rules and regulations governing operational procedures, interchange procedures, and graphic design approval of their cards… These organizations do not have a direct relationship with cardholders and merchants. Any bank has international card must be a member of an ICO * The issuing members: The cardholder’s financial institution (usually called the issuing member or issuer) is a licensed member of an ICO. The issuer directly issues the card to the approved cardholder. The issuer may also benefit from services of a third party processor and/or association in processing information and payments. * The acquiring members: The acquiring members, or acquirer, solicits screens and accepts merchants into its bankcard program. The acquirer is also a member of an ICO, and holds a written agreement with the merchant to: - accept the merchant sales drafts - provide the merchant with credit card authorization terminals, instructions, and contracted support services - handle and process the credit card transactions The acquirer usually charges the merchant a merchant discount for handling the transactions. The acquirer is licensed by an ICO agrees to follow the operating rules and regulations of the two associations. In fact, many banks and financial institutions are both issuers and acquirers. As issuers, they maintain the cardholder relationship. As acquirers, they maintain the merchant relationship. * Cardholders: The customer to whom a card has been issued or the individual authorized to use the card .  The cardholder uses the bankcard either to purchase goods and services from a merchant, or to obtain a cash advance from a member for which the cardholder receives a monthly bill from the issuer. * Merchants: The merchant can be virtually any company which meets the qualification standards of an ICO and an acquirer. The ICO usually requires that the merchant must be financially responsible and has a good repute. The merchant has a written agreement with the acquirer to accept the bankcards as a payment and to abide by the terms of the agreement. 1.2.2. Transaction process * Issuing: Figure 3 - Procedure of issuing bankcard Customer Application Approval Guide of using Handing card and PIN over Receiving new card and PIN from centre Registration of issuing + Customers - Customers fulfill and sign on the application and credit card agreement - Required documents: photograph 3x4 or 4x6, Copies of Identity card, copies of passport, visa or residence permit… - Types of guarantee for card payment. + Issuing banks - Checking customer’s application, then decide to approve or not - Approving - Sending their requests of opening a new card to the card centre - Receiving new card and personal identity number (PIN) from the card centre - Handing new card and PIN over customers - Guiding the customer to use card + The Card centre - In responsibility of receiving information of customers from issuing banks - Produce a new card - Deliver cards to issuing banks * Acquiring: Figure 4 - Procedure of acquiring cards (4) (3) (2) (1) Cardholder Issuing Member International Card Organization Merchant Acquiring Member (5) (6) The acquiring procedure begins with the cardholder: (1) - The cardholder purchases goods or services from the merchant (2), (3) - The merchant, in effect, sells the transaction to the acquire and is reimbursed the amount of the sales ticket by the acquirer (4) - The acquirer then summits the ticket to the issuer for payment, via the ICO interchange and settlement system. (5) - The issuer bills the cardholder (6) - Finally, the cardholder repays the issuer for the goods or services originally purchased from the merchant. ICO are at the centre of the transaction process, maintaining the flow of funds and information between issuing and acquiring members. The exchange of financial information is called clearing. The exchange of the actual funds for the transaction and the fees associated with them is called settlement. The term used to refer to the clearing and settlement system as a whole is interchange. CHAPTER II. THE ROLE OF MARKETING ACTIVITIES TO BANKCARD AND ACTUAL STATE OF AGRIBANK CARDS 2.1. Introduction of Vietnam Bank for Agriculture and Rural Development (Agribank) - Thanh Xuan branch 2.1.1. Foundation and development of Agribank Thanh Xuan In 2007, Vietnam Bank for Agriculture Development - Thanh Xuan branch was founded under Decision No 1292/QĐ/HĐQT/TCCB dated November 29th, 2007 by the Board of Directors of Agribank with the primary staff of 36 people. Located in 90 Lang Street, Thanh Xuan District, a vast residential area with many convenient economic conditions, Agribank Thanh Xuan has many advantages to do business effectively. Thanh Xuan branch operates its business mainly on Thanh Xuan District and other Districts in Hanoi. Being in the strategy of organization network development of Agribank, Agribank Thanh Xuan has played an important part in improvimg business performance of Agribank, as well as contributed to shift economic structure, promoted the further economic-social development of Thanh Xuan District in a comprehensive and sustainable way. Since its establishment, Agribank Thanh Xuan has continuously extended trading networks, diversified items of business, currency, and credit, promoted capital sources. The branch is also focusing on improving the qualification of staff both in professional knowledge, skills and foreign languages. Thanh Xuan branch concerns not only stabilizing and expanding the network but also the living conditions of employees. Facilities are modernized, especially information technology, to serve the business better. From its establishment, the branch always makes profits, the revenue is higher year after year, contributing to the State budgets increasingly, creating credibility with customers. Figure 5 – Education of staff Source: Administration Department of Agribank Thanh Xuan The pie chart shows the education degree of staff in the branch. Staff and employees in the branch have high education degree - 86% of bachelor, major in economics, banking or financial field. With the workforce have high education degree; it is one of the most important advantages to build a strong and sustainable branch. Continuously developed and widened, the staff and employees in the branch have raised to 72 people at the present time. 2.1.2. Organization structure Through years of operation, Agribank Thanh Xuan has developed widely, at the present time it has a business network of five dealing rooms. They are: Thirty two (32), thirty three (33), thirty four (34), forty six (46) and Cat Linh dealing room.. Agribank Thanh Xuan is organized under the model of a supervisor Board of Management including a General Director and two Deputy Directors. Organization structure of Agribank Thanh Xuan is divided into functional blocks as follows: Figure 6 - Organization Chart Services & Marketing Department Administration Department Cát Linh Deputy Director D 46 34 33 32 General Director Internal Supervision Deputy Director Plan & Business Department Accounting & Treasury Department Dealing Rooms Source: Administration Department of Agribank Thanh Xuan 2.1.3. Products and services Agribank has been made an effort in developing traditional services as well as other modern and valued added services. This has enabled Agribank to diversify its own products suitable to each segment of customers. At the present time, Agribank becomes the leading bank in developing products: Mobile banking, SMS banking, VNTop up, SMS remittance (A transfer service), etc. To Agribank Thanh Xuan, inherited reputation and successes of Agribank, the branch has its decisions, policies to precede those successes. Agribank Thanh Xuan posts in the account dependently, has its own seals, organizes and operates under Regulation on organization and operation of Agribank. Agribank Thanh Xuan provides products and services which serve: - Personal customers: They are individual, households join transactions in the branch. The branch provide these customers: Individual account, loans, savings and investment, remittance, Agribank card, foreign exchange - Corporate customers: They are target customers of the branch. Money flows often in a great number. They are organizations, corporate… Services and products include: guarantee service, international payment, account, lending, check services, valuable notes, payment, border payment, saving deposit, leasing, foreign exchange, factoring - Financial institutions: Agribank hope to “provide various services in order to satisfy customers coming from financial institution sectors”. These services are: retail banking, foreign exchange, treasuring, financial trading, project based lending. 2.2. Marketing activities at Agribank Thanh Xuan 2.2.1. Organization of Services and Marketing Department Figure 7 - Services and Marketing Department Head of Department International Payment Section Card Section Source: Administration Department Services and Marketing Department has 6 staff with separate tasks and roles in their own working field: - Head of Department: is directly responsible for the work and plans of department to the Director, makes plans and assigns tasks to the staff to complete objects of Department and the branch. - Marketing staff: 4 employees are in charge of Card section and 1 staff is responsible for International payment Section. Establishment of Marketing Department helps the branch to carry out marketing activities more professionally, exactly and effectively. It is not like many other branches which do not have a marketing department. Instead of that marketing activities are carried out under Business Department or hired expertise from outside. At Agribank Thanh Xuan, the Department is specialized in marketing operation. This establishment is also a success of the branch. 2.2.2. Current marketing activities The most important function of the department is to research and then bring banking services of the branch to more and more customers. Services and Marketing Department provides banking services to customers: remittance, opening new banking account, foreign exchange, mobile banking, factoring, international payment…. + Card Section: introduce and issue card, develop existing cards and research, create new types of cards + Marketing: Marketing role is to carry out strategies, advertise programmes… to promote the image of Agribank as well as the branch, new products and services, promotion activities…to public. + International payment Section: the section realizes operations related to international transactions: foreign exchange, factoring, international payment by SWIFT… The work-force of the department is all young, creative, skillful and enthusiastic. This is the advantage for the department to develop business. The department has not been established for a long time; however, it gains certain success: Table 1 - Total profit of services (VND million) Operation October November December Accumulation of 12 months 1 Guarantee 119.5 208 290.2 3,465 2 Payment services 192 213.4 280.4 2,376.9 Total 311.5 421.4 570.6 5,841.9 Source: Report on performance of Services and Marketing Department in the 4th quarter, 2009 The table shows the total profit from operation of services in Services and Marketing Department in three month and accumulation of 12 months. Figures are given in VND million. As can be seen in the table, the total profit of services had steadily increased in all period. In particular, the total profit of November and December went up sharply, at 35.3% and 35.4% respectively, contributed directly to big accumulation of 12 months. The growth of total profit showed that the Department has continuously made an effort to diversify the variety of services to meet and satisfy better customers’ needs and demands. 2.2.3. The role of marketing to Agribank cards. Tasks of Marketing Department were ruled in Decision No 107/QĐ/NHNo – HCNS dated August 25th, 2009 by the Director of the branch. The decision ruled some major tasks of Services and Marketing Department as follow: - Doing transactions with customers, marketing and introducing banking products and services; receiving feedback from customers about services, give ideas, guides to improve services in order to best serve customers. - Giving opinions plans to the Director of branch about: policies to develop new banking products and services, to improve procedure’s transactions, to build marketing plans, to enhance promotion, advertisements, etc. - Serving activities related to marketing, promotion, press, medium…, activities related to marketing, promotion of organization of Party, Union, or Youth Union at the branch. - Carrying out marketing activities at the branch, as well as local area - Directly handling international payments, foreign exchange, remittance, etc. - Managing, controlling issuing and acquiring card operation at the branch followed rules of Agribank - Directly organizing, developing card business of the branch in the working area followed the rules of Agribank Marketing plays an important role in developing modern banking activities in general and in card services in particular. In general, marketing activities, promotion new products and services have been increasingly concerned and invested. - Card products and services of Agribank have been advertised in media channels: television, radio, newspapers, banners in buses, left leaves, etc. - 24/24 supporting customer services on telephone from Card centre - Service of Finding ATM/EDC by website, SMS. (Service of finding ATM/EDC by SMS has applied by all most mobile network: Viettel, MobiFone, Vinaphone, EVN, VietnamMobile) - In addition, to be sponsor of some programmes on television, game shows, and charity activities...plays a significant role in advertising trademark of Agribank, helps the branch reach more and more customers. 2.3. Bankcard activities in the branch 2.3.1. Introduction of Agibank cards Agribank joined the bankcard market since 2003, after six years, its card service now has reached all 63 cities and provinces with about 4,000 ATM/POS nationwide in the 2nd quarter of 2009. In July, 2009, more than 26,200 institutions, corporate and organizations applied Agribank cards to pay salary for employees, with the people received salary were nearly 1.32 million people that was increased over twice compared with the first half of 2008. Joining card market later than many other commercial banks, however, Agibank has taken advantage of learning entrepreneur’s lessons. So card products and services of the bank have been improved disadvantages of other cards and also added value on its own. In order to better and better satisfy customers’ card payment demand, at the same time bring about ultimate convenience to customers, Agribank has continuously modernized its technology as well as diversified services and products supplied. Agribank is one of the biggest commercial banks in Vietnam which has been connected to Visa and Banknet. All the card products which labeled Visa and Banknet logo will be accepted for payment at any ATM/POS bearing logo of Agribank, Visa and Banknet in both domestic and overseas. Connecting to Visa, Banknet is the perforce development step of Agribank in the process of integration to enhance Agribank competitiveness and its position in Vietnam bankcard market At the present time, Agribank Thanh Xuan provides following types of cards: Figure 8 - Types of Agribank Card Types Local Card Classic Gold Platinum International Debit Card International Card International Credit Card Card Grade Source: Marketing Department of Agribank Thanh Xuan - Local Debit Card: - Success Debit card which is issued by Agribank, allows cardholders to use the card within demand deposit account balance and/or overdraft for payments of merchandises or services or for cash withdrawal/advance and other services at ATM/EDC and other cash disbursement points in domestic area. - International Card: + International Debit Card: means debit card bearing Visa/MasterCard trademarks issued by Agribank, allowing cardholders to use the card within demand deposit account balance and/or overdraft for payments of merchandises or services or for cash withdrawal/advance and other services at ATM/EDC and other cash disbursement points all over the world + International Credit Card: means credit card bearing Visa/MasterCard trademarks issued by Agribank, allowing cardholders to use the card within granted credit limit for payments of merchandises or services or cash advance and other services at ATM/EDC and other cash disbursement points all over the world 2.3.2. Actual state of Agribank card in the branch 2.3.2.1. Some results of development Agribank card The Board of Directors has made plans, decisions and increasingly invested into card operation. In addition, all staff have made an effort to develop card business so through the time card operation has gained breakthrough and outstanding achievement, such as success in connecting to international payments of Visa, MasterCard, connection to Smartlink card system, issuing international Visa, MasterCard, and related devices and application, etc. Its speed of card growth has always been higher than average speed of card growth in the card market of Vietnam. Especially, in 2009, the rate of Agribank card growth was 3 times higher than the common one of Vietnam card market. At the present time, Agribank issues over 4.2 million cards, ranks the 2nd in the card market. Besides developing quantity of cards, Agribank always concerns to enhance quality of products and services, ensure customers’ security. Except for HSBC, Agribank was the only commercial bank in Vietnam which invested and carried out measures to prevent copying cardholders’ information at 100% ATM. In the recent years, Agribank took special notice of investing modern devices, upgrading network system, and standardization procedure of operation to develop card business. Agribank has proceeded many plans and investment: buys two issuing systems which are the most modern in Vietnam, c._.