I. RIGHTS OF PAYMENT USING CREDIT CARD

A.   In international market

In general, competitiveness between card-issuing organizations in the world is

very drastic because this kind of business makes many benefits. Now, Visa is a

leading card organization in the world market, of 50% issuing market share and

more than 45% payment market share. After that is MasterCard, account for 30%

issuing market share and 25% payment market share. Three big card

organizations are Diners Club, Amex, and JCB, around 20% issuing market share

and 30% payment market share.

According to Nilsson Report’s prediction, card services in the world market will

develop strongly in the coming years. American market is still largest market of

six bankcard markets. Card transactions in America will be increased by 80%

from 2000 to 2005; meanwhile, this figure in Europe is around 96%. However,

card turnover of the region that have the most dynamic economy in the world-

Asia Pacific area- with growth of 152% in five years, is expected to achieve

1,500 billion dollars in 2005 and will rise up the second in the world.

In order to deal with competitive situation in the market and catch up with the

increasing development of science and technique, international card

organizations implemented continuously innovation of technology, services and

organizational structure. Apart from two kinds of traditional cards: credit cards

and normal debit cards, these organizations also diversified their products,

launching connected cards, smart- cards, ... Visa and MasterCard now try their

best to promote replacement of normal cards by smart- cards which linked to

e–chip. At the same time, they intend to connect with companies that provide

technology solution, in order to supply services for electric-commerce

(e-commerce), mobile-commerce (m-commerce). Visa works out a plan on

replacing all normal cards by smart cards in 2008 and MasterCard also have

similar plan.

After regional and world crisis in 1997, international card organizations and

companies in the world have had big changes on global policy. Visa is still an

international card organization that has biggest market share in the global. It

attracts special importance to new and potential markets. Meanwhile,

MasterCard’s turnover and market share is reduced by changes of policy. It

attracted special importance to traditional markets and reduced investment in

retail and small markets. Not long ago, MasterCard international organization

merged with Euro pay in an effort to strengthen synchronous on management

strategy, customer policy, and provide market with new services. Diners Club

also carried out market research to apply new policies. Amex established global

network services (GNS).  In order to expand the network and increase market

share of Amexcards in some markets, especially, Asia and Eastern Europe

markets, GNS chose a leading bank to resell the rights of issuing and payment

Amexcard in that market through signing sole contracts.

In Asia Pacific, card market is very effervescent. After the crisis in 1997, some

regional economies was in recession, population’s income was reduced. At the

same time, some governments tightened the regulation of credit cards, bringing

about the negative growth of turnover of card issuing and payment in 1998.

However, with the recover of regional economy, card services increased

constantly.

In fact, the crisis changed business strategy of regional banks. Before the crisis,

regional economy developed significantly through investment in infrastructure

and commercial projects.  In addition, governments also encouraged banks to

lend companies, large projects and ignore retail services. Consequently, banks

concentrated their resources on commercial lending; not paying attention to

consumer market while retail banking only concentrated on attracting savings

from residents.

After crisis, commercial lending market was collapsed, governments eliminated

protection step by step, in order to clear banking sector. These forced regional

banks tend their strategy to retail services and consumer market. The result is

that card developing field has new importance at the look of regional banks. 

B.    In Vietnam

1. Competition environment

Before 2001, there was only 10 Banks joining supply- credit card service. But up

to now, almost commercial state-managed banks, stock banks and branches of

foreign banks have joined this field as follows: VCB, ACB, VIDB, UOB, AGRI-

BANK, CHOHUNG BANK, EXIMBANK, INCOMBANK, SAIGONBANK,

INDOVINABANK, ANZ, HSBC and the most recently is EAST ASIAN BANK.

Among those banks, there are 4 commercial state- managed banks, 6 stock and

join venture banks, 4 branches of foreign banks. The diversity of organizing

structure and holding form of these banks makes the credit card market become

competitive and effervescent in both issuing and payment fields. However, credit

card market of Vietnam is still large and full of potentials for banks to invest and

develop in, according to the report of international credit card organizations and

domestic economists.

2. Issuing field

In Vietnam at present, only 3 banks are permitted to issue international credit

card officially: Vietcombank, ACB and EXIMBANK .  The 2 formers have issued

2 kinds of credit card: VISA and MasterCard. And the latter has issued only

MasterCard since 2001. Up to now, on the total amount of issued cards in

nationwide (27,000), Vietcombank has more than11,000 cards taking account of

41%, ACB has about 15,000 cards, means 55% of issuing international credit

card share. For the part of turnover, on 400 billion VND of 2001, Vietcombank

has 125 billion making up 30% and ACB get the rest.

The reason why ACB can pass Vietcombank in issuing credit card is that they

have the more flexible financial management and marketing policy. ACB

launches new products continuously. They lead in issuing domestic credit card in

the form of co-operation with big service and relax partners. At the moment,

ACB has 4 co-operative products: ACB- Saigon tourist (co-operate with Saigon

tourist company), ACB- Phuocloctho( with Co-opmart, Citymart and Western),

ACB- Saigon( with chain of Co-opmart), ACB- Mailinh(  with Mailinh Taxi

Company). The owners of these cards get discount of 1% to 20% if buy

commodities and services at co-operative partners, which have their trade, mark

on the card.  Although the quantity is not large and only mass up HCM city area,

they make a good reputation in the credit card market of Vietnam.  

In 2001, the Vietnam-based branch of ANZ bank launched international debt

cards Access Card. All customers who own the account in AZN were issued

Access Card. This card can be used at all supplying commodity places, which

have the trademark MasterCard Meastro and withdraw cash from ATM, which

have the trade mark Cirrus. At present, ANZ has issued about 10,000 card of this

kind.

Besides, UOB is issuing card in Vietnam but they’re not issuing directly and

publicly. They issue credit card through its head bank in foreign country. This

activity is not many but it makes up a part of high- salary customers.

3. International payment using credit card

There is totally 10 banks join in international payment for credit card in Vietnam.

With this number, the competition is relatively severe. The 2 leading banks in

this field are still VCB and UOB. Presently, only 2 banks (Bank for foreign trade

and UOB) accept payment for 4 kinds of credit card, the rest only pay Visa and 

MasterCard. Especially, INDOVINABANK accepts payment for Diners Club. In

comparison with VCB, foreign Banks and stock merchant bank have much more

advantages in payment because they have favorable conditions for developing

flexible policy that is ready for giving bonus and commissions for accepted-card

places and promoting discount programme for customers. Moreover, they have

marketing staffs who have active relationships with customers and can solve

system problems rapidly.

However, in payment field, The Bank for foreign trade takes the largest account

in Vietnam at present.

4. ATM system and debt Card

Before the year 2000, in Vietnam, only 2 branches of foreign Bank expanded into

ATM system at small scale. They are ANZ (3 machines) and HSBC( 3 machines).

In 2001, State-owned banks began to join self-service market. Currently, 7 Banks

(BIDV, ICB, VCB, SACOMBANK, ANZ, HSBC and AGRIBANK) had ATM

throughout Vietnam; with the total number are 90 machines.

                                       ATM system in Vietnam

BIDV     ICB     VCB      Sacom      ANZ      HSBC        Agri     Total

                                        Bank                                        Bank             

12          32        30          5               4            3               4           90

In issuing debt Cards in Vietnam, there are 6 banks issuing ATM card including:

VCB (11,000 Cards - 25%), ANZ (8,000 Cards- 20%), BIVD (7,000 Cards-

17%), ICB (6,000 Cards - 15%), ACB (6,000 Cards- 15%), Agri-bank (30,000

Cards). Although ATM Card is a new product, it has received positive respond of

market initially.

5. Customer

Together with the fluctuation of international market and domestic competition

environment, customer of credit card service in Vietnam tends to change

dramatically both in quality and quantity.

6. Cardholders

In the recent years, with the development of economics, income of most public

increase highly so that the demand for payment services through banks in general

and credit card payment services in particular is larger. If in the year 1996, there

are about 400 cards issued by the bank for foreign trade of Vietnam, up to now

the number has increased to 30,000 with its turnover is over 400 billions each

year.

Besides the Vietnamese cardholders, there are a large number of foreign

cardholders. As the increase in annual traveler and foreign businessman, it brings

about the increase in demand for card service.

The more banks join in issuing credit card, the more chances the customer may

have. So that, banks have to improve the quality and diversify the products and

services combines with promoting customers to keep their standing in the market

and strengthen the customer confidence.

7. Accepted-credit card places

At present, there are 5.500 Accepted- credit card places in Vietnam. The bank for

foreign trade of Vietnam has 3500, ACB has 3000, and ANZ and UOB have 1000

but are high turnover. Most accepted-credit card places are in big cities or tourist

place gathering many foreigners. Among 4 banks having high turnover (VCB,

UOB, ANZ, ACB), only ACB concentrates on expanding accepted- credit card

places for Vietnamese. The others are for foreigners. The professional level of

staffs of these places is not enough. They still discriminate between the

customers who pay in cash and by credit card.     

II. PROPOSALS FOR PAYMENT USING CREDIT CARD IN VIETNAM

In this small essay we, Victorious Stars group, would like to express our initial

ideas in which we think it might need to be done in order to push up the use of

credit card in Vietnam. They may be unsuitable and may be unrealistic. We,

therefore, welcome any criticisms and comments from our readers to make it

better.

A. Governments

No one can deny the role of the government in directing the economy.

Government, of course, takes an important part in promoting a new method of

payment - credit card.

1. Building a frame of legislation on credit card.

Up to now, we have no law on payment by credit card. We have no regulations on

paying and settle disputes over payment without cash and credit card too. Some

foreigners recently have taken those holes by using false credit card in some

payments. So we need to have this kind of guilt to be found in the criminal laws

in order to prevent frauds.

2. Salary policy.

Governments ought to have scheme for promoting companies pay wages to their

employees through banks. For many years, we have received our salary in cash

though it is unsafe and inconvenient. In some big cities or areas where banking

system have developed, we have the opportunity to make it come true. Personal

accounts at banks are critical point to issue credit card. But ups to now, deposits

at personal accounts only make up 1% of total deposits in commercial banking

system. We can make it, step by step, from foreign companies to state ones and

then spread in the economy

3. Establish a switching center among banks and banks with customers.

Each bank must have a center for processing information in the transaction by

credit card, which they issued. However, a national center for all that centers of

various banks is needed to unify all the information in the system. This is

particularly good in building a network of preventing criminal like false credit

card or bound cards. A national switching center can help domestic banks issuing

credit card by reducing the cost paid to international card companies.

4. Explore market for payment using credit card

Government should have plan to cooperate with Vietnam commercial banks and

international card organizations in setting strategies to explore market, boost the

issuing and paying by credit card, utilizing the achievement of credit card

technology in the world.

5. Should has a particular regulation for credit card

In the current foreign exchange regulations, there are no rules for the limit of

payment and credit of cards that issued by Vietnamese banks. It is necessary to

have a particular regulation for credit card, especially international cards for

tighter control on sending foreign exchange abroad. But this should not restrict

cardholders on their legal activities.

B. Banks

The proposals above are in general that the banks just wait to see or wait to hope

when it comes. But in the real world, all other things are unchanged what should

be done?

1. Marketing activities

Issuing agent should have a specific strategy for credit card and merchant

account in which advertising activities are considered the main factor to make

credit card known to every one.

Why credit cards have not developed widely in Vietnam?

By carrying out a survey we understand that people do not have any concept of

credit card even those who work in companies that are quite new and active let

alone the average citizens. So we cannot offer a thing that the buyers do not know

anything about it. It is essential to make an advertising campaign to targeted

customers and points of sale. But the campaign should not be tremendous in size

and splendid in style as the Aquafina of IBC because it is not the consumer

goods. Our targeted customers are people with high income and living in big

cities. We hereby will deal with that in details in the business plan.

2. Offer favorable discount and requirements for cardholders.

Banks can introduce a policy that is simple and easy to credit card owners to

borrow money from banks. This may require less collateral and instead, make

guarantee by prestige. Card owners also are promoted to broaden their spending

by which we can successfully broaden demand.

3. Installing more EDCs.

Banks need to sign contracts with points of sale to establish a system of paying

by credit card. Only few EDCs set up in a small area make cardholders feel

inconvenient in paying by credit card. We should concentrate on the area where

foreigners often live or travel first. Then we can make it more available when the

demand growing. But we should avoid any severe competition in attracting

customers such as many banks install the same kind of machine EDC for one

point of sale. This leads to the waste in social resources.

4. Developing staff that can cope with the requirements of the task.

Credit card and merchant account are quite new in Vietnam. We need to go

abroad to get experience from big international finance companies. If not we can

get help from expert come from other countries, coming to Vietnam to make

on-the-spot training.

5. Issuer's association

The Association of Vietnam Card Bank  ought to innovate its performance and

procedures. It has cooperated with SBV and maintained a good relation with

international card orgs in order to push up card business in Vietnam. Its members

are almost card-service banks in Vietnam. Banks in the association have agreed

on a unique fee applied to points of sale that is mutual benefit for both issuers

and card acceptors. It also introduced some solutions for difficulties and

obstacles that the members encounter. However, the associate need to have more

activities and effectiveness, contribute to the development of credit card in

Vietnam. The members should collaborate more often, in terms of exchanging

experience and training, risk prevention and investment.

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                                               [ TABLE OF CONTENTS ]

 [ INTRODUCTION ]    [ PART I ] [ PART II ] [ PART III ] [ CONCLUSION ]