Testing the factors affecting the development of credit cards in the viet nam banking industry

Global Journal of Business and Social Science Review
Journal homepage: www.gatrenterprise.com/GATRJournals/index.html

Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)

Testing the Factors Affecting the Development of Credit Cards in the
Global
J. Bus. Soc. Sci.
Review 2 (1)Industry
510 – 523 (2014)
Vietnam
Banking
Khanh, C.H.1, Tri, D.N.2*, Anh, T.T.N.3 and Dang,T.K.C.4
1,2,3,4

FPT University, 70000, Ho Chi Minh City, Vietnam

ABSTRACT
Objective – In recent years, banks have been very interested in encouraging non-cash payment activities in Vietnam.
Especially, payment by credit card has recently become a popular consumer behavior in the rural area. This paper aims
to evaluate the development of credit cards in the Vietnam banking industry, particularly in Ho Chi Minh City and identify
the significant factors affecting the credit card market.
Methodology/ Technique – The authors conduct questionnaire survey with Likert-style rating scale to get the primary
data. Exploratory Factor Analysis (EFA), Kaiser-Meyer-Olkin (KMO) and Bartlett’ test are also employed to test
correlation between independent variable (the development of credit cards in Vietnam) and five dependent variables
(technology innovation, customer behavior, product creation, promotion policies and critical framework).
Findings – The findings underline that the development of credit cards in the Vietnam banking industry is significantly
influenced by customer behavior, promotion policies, critical framework, product creation, and technology innovation.
Although there are some problems that need to be improved, Vietnam’s credit card market has still been assessed as an
outstanding potential market.
Novelty – In this paper, recommendations are made to discover ways to improve these problems and continue developing

the credit card market in Vietnam.
Type of Paper: Empirical
Keywords: Credit card, Vietnam banking industry; Vietnam.
JEL Classification: E5, G2.

_______________________________________________________________________________________
1. Introduction
Here follows the further instructions for authors. The credit card is a current non-cash payment tool and
indispensable source of credit. Furthermore, the credit card is a convenient method in short term with free
credit by buying first and paying later. It helps users to get the products and services even when they do not
have enough cash to afford with the payment at the end of the period. Therefore, the credit card is not only
popular in developed countries, but also in developing countries. In particular, there was around 800 million
credit cards serving a population of 313 million (Vietnamese E-Commerce Report 2012) in the USA. At the
end of June 2013, Australia had 15.4 million cards, reaching 2.2% compared to the same period last year (ABS
* Paper Info: Received: December 10, 2013
*

Accepted: January 26, 2014
Corresponding author:
E-mail:
Affiliation: FPT University, Vietnam

ISSN 2289-8506 © 2014 Global Academy of Training & Research (GATR) Enterprise. All rights reserved.


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

2013). According to National Institutes for Finance, the rate of credit card users in Singapore, Malaysia and
Thailand accounted for 95%, 55% and 46% respectively.
With the trend of the credit card in the world, Vietnam has recently accessed and developed this modern

tool. Following to the report of the State Bank of Vietnam, the proportion of cash payment has been decreasing
year by year, falling from 31.6% in 1991 to 11.8% in 2012. It creates an important motivation to enhance other
non-cash payment instruments like a bank card which has become more popular payment method with a rapid
growth; specifically, total credit cards remarkably increased by 198% from 2009 to 2011 (World Card
Intelligence: Vietnam 2012). According to the latest figures of the Payment Department of the State Bank of
Vietnam, at the end of quarter 01/2014, there were 68.55 million bank cards, rising by 3.5% compared to 2013
while credit accounted for 2.52 million.
With the population of nearly 88 million, Vietnam has 58.2 % of age-15 and older workers in the total
population (General statistic office, 2012). Vietnam has been perceived as an extremely potential market to
develop financial products and services, but cash is still the major form of payment. Generalization of the
credit card made up a low number in Vietnam. One Vietnamese owned around average 0.017 credit cards
(Vietnamese E-Commerce Report 2012), which was lower compared to some other countries. Therefore, to
improve non-cash payment instrument, Vietnam’s Government passed Decision No.291/2006/Q Đ-TTG dated
29th December 2006 with content “The project of non-cash payment during 2006-2010 and direction to 2020”.
The Government hopes that the credit card market will achieve a strong growth in the next years.
In this research, we would like to explore major factors affecting the development of credit card to have an
overview of the credit card in Vietnam and its position in the global credit card market. Then, basing on
analysis and findings, we suggest some recommendations and solutions to develop credit card for the banking
industry in Vietnam.
To reach the research objectives, the paper will test below hypotheses:
H1: The greater customer behavior awareness is raised, the more credit card market is enhanced.
H2: Technological innovation brings new potential for credit card market in Vietnam.
H3: The more successful product is created, the more credit card market will be built up.
H4: Promotion policies contribute importantly increasing the competitiveness of Vietnam's card
market.
H5: The greater critical framework has improved, the more the card market in Vietnam grows.
2. Literature review
2.1 Characteristic of the Vietnamese credit card market
Cash is a traditional payment instrument and it seems difficult to change habits of consumers and
enterprises. According to calculations by the Vietnam Bank Association, the amount of withdrawing cash

through ATM was around 550,000 billion VND each year (Bank Magazine, 2011). Clearly, cash is the
principal payment method in the country.
Following the BDRC’s research implemented in the two biggest cities, Hanoi and Ho Chi Minh, about the
forms of payment, cash is still the most preferred instrument. There was up to 99% of small and medium-sized
enterprises (SMEs) who still used the cash instrument, while only less than 10% of companies accepted credit
or debit cards for business. However, according to statistics of the Vietnamese State Bank, the ratio of cash
instrument to total payment methods tended to decrease from 20.3% in 2004 to 14% in 2010.
Mr. Darin Williams, Managing Director of Nielsen Viet Nam, said that there were just 42% consumers
who were interested in credit card services, and just one percent of Vietnamese consumers used it. In addition,
more than 50% of the market did not comprehend the concept of credit card and they felt difficult to use a
credit card as well. More than one-third (36%) said that they did not need it, 19% did not know how they work,
meanwhile another 18% said that this kind of payment instrument looked complicated to use (Nielsen, 2011).

41
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

Therefore, with the evolution of new payment method and the government’s fiscal supports, there are many
things to do to gradually approach the variety of non-cash payments.
2.2 Market shares in Vietnamese credit card market
It is apparent from information supplied by the World Cards Intelligence: Vietnam, 2012 that the credit
card made up a small proportion of total card payment with nearly 2.4% in 2011 and it was still a nascent
market of development in Vietnam. The secured credit cards were issued a significant percentage of the total
credit cards in the form of a mortgage loan, a time deposit account or a savings account. One thing which
happened remarkably between 2009 and 2011 was that total credit card rocketed by 198%. Although there was
a rapid development, the awareness of credit cards had far much been limited. As the result, Vietnam was one
of the least profitable markets for credit cards in the whole world with $6 average profit per card in 2011.
Meanwhile, it was expected that the urban middle class brought a brighter view for the profit of the credit card

market.
According to World Cards Intelligence: Vietnam, 2012, total payment card transactions accounted for
around 30% in payment of entertainment services, 28.5 % in leisure and 17.8 % in travel in 2010. It was
expected that there were about 1 million credit cards by the end of 2011. Then, the bank cards issued rose to
47.22 million with 3% of the credit cards (Vietnamese E-Commerce Report 2012). In 2011, the market for
credit cards was focused on four issuers: Vietcombank, Vietinbank, Asia Commercial Bank (ACB) and
Sacombank with around 80% of credit cards issued. Vietcombank has become the greatest issuer of credit
cards and the second-greatest payment card issuer in Vietnam. In 2012, as Vietnamese E-Commerce Report
2012, the leader card market changed for Vietinbank, Vietcombank, Sacombank and Techcombank with
around 300, 277, 61, 54 thousand credit cards respectively.
It is the fact that the early stage of market development was underlined by foreign issued credit cards with
more than a half of an acquired credit card transaction (World Cards Intelligence: Vietnam, 2012). The largest
network in both card number and billed volumes was Visa. Besides, there were some other cards such as
MasterCard, China UnionPay (CUP), JCB, Diners Club, Discover. On January 2008, Smartlink was officially
a third-party processor for MasterCard in Vietnam. That means all MasterCard card transactions in Vietnam
have to through Smartlink before being conveyed to the processing center of MasterCard. Therefore, it was
easy for 20 bank members of Smartlink to issue MasterCard cards.
Table 1: Credit Cards Metrics 2010-2013F
Vietnam: Credit Cards Metrics 2010-2013F
Billed Volume on Credit Cards
($millions)
POS
ATM
Total
Transactions on Credit Cards (000s)
POS
ATM
Total
Average transaction value on Credit Cards
($)

POS
ATM
Total average transaction value
Average other transaction/month
Source: Issuers, Networks, Lafferty estimates

2010

Chg.

2011E

Chg.

2012F

Chg.

2013F

Chg.

507
49
556
2010
9,492
770
10,262

17.2%
32.0%
18.4%
Chg.
14.8%
30.1%
15.8%

633
64
697
2011E
11,675
970
12,645

25.0%
29.0%
25.4%
Chg.
23.0%
26.0%
23.2%

811
81
891
2012F
14,594
1,164

15,758

28.0%
27.0%
27.9%
Chg.
25.0%
20.0%
24.6%

1,054
103
1,157
2013F
18,097
1,397
19,494

30.0%
28.0%
29.8%
Chg.
24.0%
20.0%
23.7%

2010

Chg.

2011E

Chg.

2012F

Chg.

2013F

Chg.

53
64
54
1.6

2.1%
1.5%
2.2%

54
66
55
1.2

1.6%
2.4%
1.7%

56
69
57
1.2

2.4%
5.8%
2.6%

58
74
59
1.1

4.8%
6.7%
4.9%

42
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

In addition, the shortage of payment card acceptance was a key obstacle for growth of credit cards (World
Cards Intelligence: Vietnam, 2012). There were around 58,000 POS in Vietnam in 2011, yet the majority of
which were concentrated in the big cities of Hanoi, Ho Chi Minh City, Da Nang. Higher surcharges of
merchants also have prevented cardholders from using POS card. However, this was expected to have the same
approximate double rise with the number of credit card. It was regarded as a key to achieving the farther
development of credit card market in Vietnam.

2.3 Opportunities and challenges for the Vietnamese credit card market
First and foremost, Vietnam is a new market. In recent years, although the number of cards has increased,
but credit cards’ proportion has been still low. By the end of 2013, the number of credit cards had accounted
for only 3.67% of the total 66.2 million cards issued in general (Bank Card Association of Vietnam, 2014).
Secondly, credit card was an equivocal concept with Vietnamese people. Nevertheless, nowadays, people have
understood what is a credit card and know its advantages by lots of reports and articles on the Internet. Thus,
they tend to access and use this financial instrument more and more. Thirdly, in the age of technology,
electronic commerce is really popular with Vietnamese people and electronic payment is encouraged to be
used more because it is convenient (easier and faster payment process) for customers. Therefore, the
development of credit card is an inevitable trend to meet customers’ demand. Last but not least, at the present,
there are a lot of banks in Vietnam that has created a fierce competition. Therefore, they have to offer more
product and exclusive promotion to attract customers, and credit card product must be planned as well.
Unintentionally, this has brought more benefits to customers. As a consequence, all elements of the credit card
marketplace such as the amount of customers using credit card, the quantity of cards, revenue from credit card,
will increase. It is clearly that banks’ competition is also an opportunity for credit card industry’s development.
On the other hand, the development of credit card market has also been facing many challenges coming
from fraud risk. To minimize risk, international card organizations such as Visa, Master Card recommend the
card issuers investing in technology EMV standard to protect the cardholder. The standards apply to all credit
cards and since 2006 in Vietnam also began the transition to this. Currently, many banks are also converting
to protect consumers, protect the security of payment (Mr. Nguyen Trong Khang, 2012). According to Mr.
Duong Quang Khanh, Head of Card Services and Commercial Bank of Vietnam (ICB), said: “When the card
is issued, bank staff also guide customers using cards and security (usually oral). However, when the market
formed the new card also emphasized the risk that customers may not dare to use the card.” Nowadays,
although banks’ technology has developed rapidly, but the customers have not been supported promptly. This
leads to not only the reputation of banks declined seriously, but also some damages not allowed happening.
Besides that, banks have not proposed specific criteria to follow and prevent risks (A professional development
of ICB Card Services, 2013). Banks in Vietnam should have a campaign guide for our customers (Mr. Peter
Maher-Director of Risk Management Asia - Pacific International Group Visa Card, 2012), which is similar to
the regular campaign of UK banks to guide people how to card security.
2.4 The significant factors affecting the development of credit card

2.4.1 Technology innovation
Technology innovation is an important component in the growth of credit cards in Vietnam. To spread the
credit card networks, banks must give customers a convenient and comfortable service (Retail Payments Risk
Forum Working Paper, 2012). Besides, the acceptance of card payments is limited today, most have only been
implemented in shopping malls or supermarket. The growth of the credit card system requires equipment and
advanced engineering in conformity with international criteria. Therefore, the investment in equipment is an
upgrade of the banking difficulties. (Vietinbank, 2012)

43
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

The State Bank of Vietnam (2013) announced that although the number of the ATM, POS increased steadily
over the years, but the proportion compared with the population is still low, not evenly distributed (mainly
created the large urban and industrial zones). Vietnam’s card technology system requires to be upgraded to
raise up the credit card industry. Most significantly, the situation of credit card fraud should be taken into
account.
According to an article published in ICTnews online (2013) mentioned about the situation of credit card
fraud in the past few years, international card organizations have recommended that the banks should make
the replacement of EMV Chip card (by Europay, MasterCard and Visa offer) to safety, risk mitigation. A
product could be visualized as a card application with the highest security on the securities industry today. In
Vietnam, the gradual transition to EMV “chip + PIN” chip card was underway, and VPBank is the first bank
to launch EMV chip card apply for credit cards with VP Bank Platinum EMV MasterCard (State Bank of
Vietnam, 2007).
At present, although some local banks such as Vietcombank, Sacombank, Eximbank, VIB, VP Bank,
Maritime Bank was converted to EMV chip but still large unrealized. Phil Christiansen (2011) found that cost
was a very significant issue in the transition of EMV chip. Although the technology became cheaper to
construct, many business cases would not be able to accommodate the higher costs of such card (estimated to

be at least $10 per unit, compared to less than $1 for a typical card) (Phil Christiansen, 2011). The amount of
cards in Vietnam was more than 50 million cards; switching costs required no less than 50 million dollars, not
admitting the other expenses (ICTnews online, 2013). In short, technology is a decisive factor of the credit
card business. Thus, banks should have extended networks to attract more clients to use credit cards. Modern
technology brings new potential for credit card market in Vietnam.
2.4.2 Customer behavior
Credit cardholder behaviors become a determinant of the development of credit card. Provided that the
issuer is aware of the behavior of their customers, they could prepare carefully strategies to meet the demand
of the market. In the credit market, credit-card-holders are usually divided into two types: convenience users
and revolvers. The former receives credit card statements at the end of the month and they pay the full balance.
The latter receives credit card statements at the end of the month, but they only pay a part of the balance so
the remaining balance is accrued interest expense. According to the theory of planned behavior, consumer
behavior which based on the intentions was defined by behavioral attitudes, subjective norms, and behavioral
control (Ajzen, 1991).
The greater convenience the credit card gets, the more customers use it. According to the studies of Canner,
Cyrnak (1986) and Maysami, Koh (2008), convenience was regarded as an important reason of credit card
usage. The customer is more likely to use credit cards which bring them the most comfortable means (Lee and
Hogarthe, 2000). As the result, when customer behavior is understated, it is less difficult to achieve the credit
card market.
2.4.3 Product creation
Product creation, consisting of improving product’s quality and developing new product, is one of
important factors deciding the existence of credit card. However, new product development is not easy, it is a
costly and risky process (Zeinab Rezvani, 2009). But “product development is a creative and interdisciplinary
activity” which changes the market opportunities and technological innovation into successful products (Bing
Liu, 2003). Bing Liu simultaneously said that a successful product not only demands the customers’ needs and
requirements, but also creates value to its stakeholders comprising of customers, organization, suppliers
outside of the organization and shareholders. No matter how great the new product may seem, it's a failure
when the market rejects it (David Kirkpatrick, 2010).

44

Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

When products make profit for all parts of the market, then obviously it is considered as an important factor
towards the market development, credit card industry is not the exception. And in the competitive credit card
market of Vietnam, banks have to issue more successful products. As a result, factor of product partly decides
whether the market will develop or not.
2.4.4 Promotion policies
The credit card market in Vietnam in the past year was assessed growth quickly. This is a good signal for
the important contribution of an accelerating trend of non-payment of money. However, to develop card
payment services efficiently, the state should apply appropriate solutions towards promoting consumption of
non-cash payments. When the competition among credit card issuers has gone up dramatically in the market,
they tend to find new promotions to encourage new customers. In other words, there are more reward programs
providing added incentives such as discounts and free gifts for cardholders (Walker et al, 2007).
To promote the usage of credit cards, customers use a credit card to obtain rewards, such as accumulate
points to receive gift certificates. The reward is often associated with the purchase of products or services on
the card. The value depends on the type of rewards card, rewards will generally cost the issuer between 0.25
and 2.0 percent of the spread. For example, Visa and MasterCard have increased their fees to permit issuers
to fund their rewards scheme (Subramanian, 2012).
2.4.5 Critical framework
To sustain and encourage the card market in Vietnam, in 2006 the Government issued Decision No.
291/2006 / TTg which was the execution of the scheme cashless payment period 2006-2011. Moreover, the
governor of the Vietnamese State Bank issued Decision No. 20/2007/NHNN which adjusted regulations on
the issuance, payment, and providing the user the support of bank card service activity. After that, Decision
No. 20 / 2007 / QĐ-NHNN - regulation on the issuing, billing, providing user services and operational bank
card support - was issued by the Governor of the State Bank of Vietnam in 2007. With new indications which
stipulate paying salaries through the bank system (15/05/2007/CT-NHNN); regulations and orders of
electronic transactions in banking activities (35/2007/ND-CPP), the government has encouraged the non-cash

payment.
Under the direction of the Prime Minister in Document No. 01 627/VPCP-KTTH on January 23, 2009, the
State Bank of Vietnam issued Circular No. 01/2009/TT-NHNN guiding the agreed interest rate among the
credit institutions. It is apparent that the State Bank has tried to produce a sound framework for card activities.
As the result, activities of card payment, card issuance and providing card services is now increasing with
various modern card products meeting customer requirements.
In addition, on 27/12/2011 the Prime Minister signed Decision No. 2453/QD-TTg to approve non-cash
payment in Vietnam from 2011 to 2015. In summation of the revised Criminal Code (2009) and the additional
provisions which relate to high technology criminal, the government strengthened activities to fight against
crime in payment as well as improve the trust of people. In 2013, the State Bank directed to complete the
connection of the POS network across the nation. The credit institution has established core banking system
(core banking), an internal payment system with advanced technology. Nevertheless, legal framework needed
to be improved more. The regulations and resolutions have been required to change and replace to suit the new
age, such as growth policies, national switches processing, the standard card system, risk provisioning of
payment card operations. Therefore, government has enhanced and supplemented the Payment law into the
State Bank law and the Credit Institutions law (2010) in order to complete a legal framework step-by-step.

45
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

3. Methodology
3.1 Exploratory Factor Analysis
The aim of the Exploratory Factor Analysis (EFA) is to identify a model of the factors by deciding the
amount of presenting factors for a dataset (Stevens, 2002). With the support of EFA, the variables can be
loaded on each factor. The target of the Exploratory Factor Analysis (EFA) is to summarize the sets of
correlation between variable numbers and observable variables into small (Field, 2005; Tabachnick & Fidell,
2007). According to Tabachnick & Fidell (2007), EFA is mostly done in the initial period of study so the

variables may not be preferred in the researcher’s mind process. In addition, sample adequacy and correlations
among the variables should be measured with Kaiser-Meyer-Olkin (KMO) and Bartlett’ test of sphericity
scores. In order to have factor analysis appropriately, it should be more than 0.5 in KMO score as well as it
must be smaller than .05 in p value in Bartlett’s test of sphericity score to be meaningful (Pallant, 2001). After
applying EFA, Factor Loadings are tested. Field (2005) demonstrates that during the EFA application items,
whether factor loadings are less than 0.6, they should be left out the data set.
3.2 Research model
In this research, the quantitative model is used to test hypotheses and comprises the independent variable
(the development of credit cards in Vietnam) and five dependent variables (technology innovation, customer
behavior, product creation, promotion policies and critical framework). Meanwhile, Likerk is considered to be
the scale used in the model. The scale measures the variables which are assessed by respondents from point 1
(strongly disagree) to point 5 (strongly agree). The hypotheses H1 to H5 are expected to give that independent
variables and the dependent variable have a linear relationship and positive correlation. In other words, the
researchers assume that an increase in independent variables (variables are assessed on the Likert scale) such
as technology innovation will grow the development of credit cards in Vietnam.
The model which was originally proposed for the study has variables and hypotheses:
De= s0+ s1TN+ s2CB+ s3PC+ s4PP+ s5CF
Where
De: development of credit cards, TN: technology innovation, CB: customer behavior
PC: product creation, PP: promotion policies, CF: critical framework.
The survey containing personal information questions and 23 questions related to the main research
problem was generated. The Likert-type scale was used for assessing each item in the survey. Answers were
between “1” and “5” with the convention that “1” is “Strongly Disagree” and “5” is “Strongly Agree”. The
language of the survey was Vietnamese because all of the respondents are Vietnamese. Our survey contains 7
parts; the first is Personal information (gender, age, occupation, education level, income, card issuer) except
respondents’ identity to ensure their confidentiality. The next 6 parts contain 23 questions which belong to the
element of “The development of credit card market in Vietnam” and 5 factors affecting to it. The first factor
is the Technology innovation, respondents will be asked about how technology is applied to credit card
industry in Vietnam. The second factor will evaluate the customer behaviors about credit card usage. The third
one will give users the chance to comment about the production creation of banks in Vietnam. Next,

respondents will answer some questions relevant to Promotion policies factor. The last one will ask credit card
users about critical framework, it means how Vietnamese government supports the credit card usage. The
questions will be designed following rating questions because rating questions are often used to gather opinion
data.

46
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

3.3 Data analysis and findings
3.3.1 Reliability analysis
We see that each group factor has a Cronbach's alpha higher than minimum of 0.7. The factors TN, CB,
PC, PP, CF were 0.726, 0.710, 0.719, 0.733, 0.717, 0.702 respectively. As the result, the Cronbach's alpha
total is 0.839, which reveals a high level of internal consistency of our scale with this specific sample.
Table 2. Item-Total Statistics
Corrected
Item-Total
Correlation

Cronbach’s
Alpha if
Item
Deleted

(PP1) Connection with
the favorite shopping
lables

.339

.835

.836

(PP2) Installment,
discounts, accumulated
points support

.424

.832

.451

.830

(PP3) Media promotion

.417

.832

(TN4) Bank's
supporting

.434

.831

.425

.832

(CB1) Convinience
compared to cash

.466

.830

.237

.840

(CB2) Purchasing
first, paying later
habit

.556

.826

.429

.831

(CB3) Credit card
debt

.423

.832

.157

.842

.466

.830

.533

.827

.547

.826

.534

.828

Corrected
Item-Total
Correlation

Cronbach’s

Alpha if Item
Deleted

(TN1) Easily
finding POS

.344

.835

(TN2) Long time
waiting for paying

.312

(TN3) Secured
information of user

(CB4) Previous
.401
carefull reference
(PC1) Service
.314
quality
(PC2) Variety of
.300
credit card product
(PC3) Additiontial
.306
fees charge

(PC4) Expectation
of new credit card
.297
products
Source: The authors’ calculation

.833
.836
.836
.837

(PP4) More credit card
promotions
(CF1) Approaches of
using encouragement
texts of the Government
(CF2) Encouragement
effort of the Government
(CF3) User benefit
protection by the State
law
(De1) Purchase demand
by credit cards
(De2) Credit card users
(De3) Knowledge of
credit cards
(De4) Issuing credit
cards by banks

.837

Cronbach's Alpha if Item deleted from the scale is a value that should be reconsidered. As we can see that
if any questions are removed, except CF1 and CF3, the Cronbach's Alpha result would be lower. Thus, we

47
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

would not remove these questions. It is obvious that the "Corrected Item-Total Correlation" values were
low (0.237, 0.157 in order) for CF1 and CF3 item. Removal of them would result in a small improvement in
Cronbach's alpha. However, they are regarded to be not removed out of the scale because it belongs to an
important value- CF (Critical framework). We decide that it is not necessary to sacrifice an important value to
increase Cronbach's alpha actually because Cronbach's alpha is also quite high and far much standard number
0.7.
3.3.2 Factor analysis
To check the sample size adequacy, this research uses Kaiser-Meyer-Olkin and Bartlett's Test of Sphericity.
It is evident from the table that KMO measure is 0.759 which is greater than the required value (0.5). Moreover,
Bartlett’s test of sphericity is smaller than 0.05 and p (Sig.) value is .000. According to these results, data are
appropriate for EFA.
Table 3: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Approx. Chi-Square
Bartlett's Test of Sphericity
df
Sig.
Source: The authors’ calculation

.759

1403.904
253
.000

Since the Initial are always 1.00, the Principal Component communalities follow the Extraction which
ranges from 0.451 to 0.735. These values demonstrate the ratio of each variable variance which can be
illustrated by the retained factors. The more high values variables have, the better represented they are in the
common factor space. Therefore, most of these variable variance have made up by this six dimensional factor
solution.
Table 4: Communalities
(TN1) Easily finding POS
(TN2) Long time waiting for paying
(TN3) Secured information of user
(TN4) Bank's supporting
(CB1) Convinience compared to cash
(CB2) Purchasing first, paying later habit
(CB3) Credit card debt
(CB4) Previous carefull reference
(PC1) Service quality
(PC2) Variety of credit card product
(PC3) Additiontial fees charge
(PC4) Expectation of new credit card products
(PP1) Connection with the favorite shopping lables
(PP2) Installment, discounts, accumulated points support
(PP3) Media promotion
(PP4) More credit card promotions
(CF1) Approaches of using encouragement texts of the Government
(CF2) Encouragement effort of the Government
(CF3) User benefit protection by the State law
(De1) Purchase demand by credit cards

(De2) Credit card users

Initial Extraction
1.000
.729
1.000
.455
1.000
.716
1.000
.714
1.000
.451
1.000
.697
1.000
.566
1.000
.518
1.000
.504
1.000
.603
1.000
.498
1.000
.735
1.000
.656
1.000

.626
1.000
.462
1.000
.645
1.000
.727
1.000
.650
1.000
.650
1.000
.534
1.000
.455
48

Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

(De3) Knowledge of credit cards
(De4) Issuing credit cards by banks
Source: The authors’ calculation

1.000
1.000

.473

.531

Thompson and Daniel22 said that the “simultaneous use of multiple decision rules is appropriate and often
desirable”. This research also uses multiple approaches in factor extraction. There are many extraction rules
and approaches consisting of Kaiser’s criteria (eigenvalue > 1 rule), the Screen test, the cumulative percent of
variance extracted, and parallel analysis. It is obvious from the table that the cumulative percentage of variance
is 59.1% and a total of 6 components (factors) have an eigenvalue > 1. Thus, they can explain and represent
for 17 the remaining factors. The EFA results demonstrate that these factors all belong to components supposed
and this scale is appropriate according to component term.
Table 5: Rotated Component Matrixa

(TN1) Easily finding POS
(TN2) Long time waiting for paying
(TN3) Secured information of user
(TN4) Bank's supporting
(CB1) Convinience compared to cash
(CB2) Purchasing first, paying later habit
(CB3) Credit card debt
(CB4) Previous carefull reference
(PC1) Service quality
(PC2) Variety of credit card product
(PC3) Additiontial fees charge
(PC4) Expectation of new credit card products
(PP1) Connection with the favorite shopping lables
(PP2) Installment, discounts, accumulated points support
(PP3) Media promotion
(PP4) More credit card promotions
(CF1) Approaches of using encouragement texts of the Government
(CF2) Encouragement effort of the Government
(CF3) User benefit protection by the State law

(De1) Purchase demand by credit cards
(De2) Credit card users
(De3) Knowledge of credit cards
(De4) Issuing credit cards by banks
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.a
a. Rotation converged in 7 iterations.
Source: The authors’ calculation

Component
1
2
3
.666
.545
.755
.817

4

5

6

.519
.765
.710
.515
.689
.736

.675
.755
.778
.761
.591
.723
.846
.707
.739
.683
.510
.503
.564

According to Principal Components Output, the Rotated Component Matrix demonstrates the correlation
of each variable with each factor. Explanation concerns with variables which are assignable to a factor. The
classification of factors is a subjective, theoretical, and inductive process. Henson and Roberts (2006) said that
“the meaningfulness of latent factors is ultimately dependent on researcher definition”. That means this
research wants to find the factors taken together, which interpret the majority of the responses. Consequently,
six factors have been produced.

49
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

3.3.3 Linear regression
A summary of the regression analysis shows a list of predictor variables and the outcome variable. As we
can see, it illustrates that only one model is tested and that all predictor variables were entered in for that

model.
The R-Square illustrates that 51% of the variance in De can be predicted from the variables TN, CB, PC,
PP, CF. This method just measures the overall of the strength of association, and it does not express the extent
to which any particular independent variable is associated with the dependent variable.

1

Table 6: ANOVA
Model
Sum of Squares
Regression
41.140
Residual
39.473
Total
80.613

Sig.
.000

Source: The authors’ calculation
In this case, the total variance is divided into the variance which can be interpreted (41.140) by the
independent variables (Regression) and the variance which is not interpreted (39.473) by the independent
variables (Residual). It is noted that the sums of squares for the regression and residual add to the Total
Variance. The p value or Sig. is so small (0.000) that comparing to particularly 0.05. Thus, the independent
variables reliably predict the dependent variable.
Table 7: Coefficients
Model

1

(Constant)
CF
PP
PC
CB
TN

Unstandardized Coefficients
B
Std. Error
.100
.310
.168
.048
.196
.066
.141
.052
.465
.057
.096
.047

Standardized Coefficients
Beta
.188
.166
.148
.464

.111

t

Sig.

.323
3.515
2.957
2.722
8.118
2.023

.747
.001
.004
.007
.000
.044

Source: The authors’ calculation
The table indicates the values for the regression equation to predict the dependent variable from the
independent variable. The t value and 2 tailed p values are used to test the null hypothesis where the coefficient
is 0. Most coefficients are significant as they have p values less than alpha (0.05) except for p value of constant
(0.747). However, this number belongs to constant, not variables so it does not affect to the model. Therefore,
we can reject the null hypothesis since the coefficient is significantly different from 0.
The standardized regression of the model can be written as follows:
De = 0.1 + 0.096TN+ 0.465CB+ 0.141PC+0.196PP+0.168CF
The model dedicates the current text of credit card development in Vietnam. It is explained through five
independent variables which has positive relationship. According to the model, Customer behavior is the most

powerful factor affecting the development of credit cards in Vietnam (B= 0.465), followed by Promotion
policy factor (B= 0.196), Critical framework (B= 0.168), Production creation (B= 0.141) and finally the
technology (B= 0.096). Therefore, H1, H2, H3, H4 and H5 are accepted.
From the model, we have some explanations. In order to develop Vietnam's card market, it is important to
enhance the customer behavior toward credit card. This interprets exactly the traditional cash usage habit in
50
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

Vietnam. On the one hand, almost the middle age and the older are afraid of changing because of some reasons
such as lack of credit card knowledge, skill using. On the other hand, the young people from 20 to 29 years
age group are more adaptable to new technologies and what they dare to change are gradually changing this
habit.
Promotion policy becomes the second factor affecting the development of the credit card in Vietnam.
Consumers are more cautious and careful when shopping not only in the world, but also in Vietnam nowadays.
Particularly, after world economic crisis, people have to tighten their budgets. Appropriate product promotion
strategies stimulate the purchasing demand. Card users tend to choose which credit card products give them
many extra profits. Thus, the more attracted the promotion policy, the more cardholders increase.
Associating with promoting policy, product quality is one of main factors which help to maintain customer
relationships with credit card issuers as well. Quality of service and after-sales service play an essential role
to make a product become successful. Cardholders always desire to stick to the products which bring them
convenience and various benefits. Therefore, product creation factor also impacts on the development of credit
card market in Vietnam.
The government plays an important role in the development of credit card market in a country. The
Vietnamese government has supported the non-cash payment activities through many legal tools. For instance,
state employees must be paid a salary through bank accounts; issuance, use, paying and providing support
services for bank card activities must be followed strictly the state regulations. These things also contribute
one vital part of credit card development.

Technology innovation factor is the least essential factor affecting the development of Vietnam's card
market in this survey. In fact, infrastructure supporting to the credit card network has more developed than
before in Vietnam. However, it is still limited and does not meet customers’ demands. To enhance it, it takes
a lot time and efforts of the total society. In short-term, it seems to affect the least to the development of credit
card market.
4. Conclusion and recommendations
4.1 Conclusion
This study recognizes the significant factors, which affect the credit card market in Vietnam, are
Technology innovation, Customer behavior, Product creation, Promotion policy and Critical framework. In
details, Customer behavior is the most powerful factor affecting the development of credit cards in Vietnam,
followed by Promotion policy, Critical framework, Product creation and the Technology innovation is the least
influencing factor.
4.2 Recommendations
4.2.1 Technology innovation
In Vietnam, most of the credit cards used for credit card payment are chip cards (old technology) so it is
easy to result in credit card fraud so they need to change via EMV standards (standards for smart card system)
that are more popular in many countries. Technology systems need to be invested and upgraded to broaden the
POS system as well as increase credit card transaction activities
4.2.2 Promotion policies
Discounts and point accumulation are known as popular promotions to boost sales in Vietnam. In regard to
the former, merchants should collaborate with banks to give more discounts campaigns to attract their
customers. When they make purchasing by credit cards, they can get discounts compared to by cash. Cash
back is not a new promotion over the world, but it is still a gap in Vietnamese market. With this kind of credit
51
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

cards, cardholders can earn cash rewards when making purchases. The more cards are used, the more cash

they receive. Recently, Visa-Metro credit card of Viettin Bank has attracted many cardholders.
4.2.3 Product creation
Currently, many banks too focused on the patrons so they seem to forget a segment, students, which foreign
banks are going to exploit. This is a potential, but risky segment since it is difficult to get approved for students
that have little credit history. Banks should consider reducing the fees and interest rates associated with credit
cards in order to encourage more customers’ usage.
References
Afshan Ahmed, Ayesha Amanullah and Madiha Hamid. (2009). Consumer Perception and Attitude towards credit card
usage: A study of Pakistani Consumers. Journal of Comparative International Management. Vol. 12, No.1, pp. 4757.
Bing Liu. (2003). Product Development Process and Their Importance Organizational Capabilities, Master’s Thesis of
Commerce Department of Electronics and Information Technology- Ministry of Trade, Vietnamese E-Commerce Report.
(2012). Publisher Workers- Social.PP.14
Douglas Akers, Jay Golter, Brian Lamm, and Martha Solt. (2005). Overview of Recent Developments in the Credit Card
Industry.
Douglas King. 2012. Retail Payments Risk Forum Working Paper.
Foscht et al. (2010). Debit and credit card usage and satisfaction-Which uses which and why–evidence from Austria.
International Journal of Bank Marketing, 28 (2), pp.150.
General Statistics Office. (2012). Total retail sales of goods and services consumed in real terms by local.
Ghauri, P. & Grønhaug, K. (2005). Research Methods in Business Studies: A Practical Guide. Essex, England: Prentice
Hall. pp.15, 81, 91-92, 102, 108, 115.
Kenneth E. Scott. (1999). Electronic Commerce Revisited. 51 STAN. L. REV.
KPMG’s report. (2008). Card payments in Asia Pacific: The state of the nations. Available at
[Accessed 02 June. 2014].
Lafferty.
(2012).
World
cards
intelligence:
Vietnam.
Available

at
/>nam00111234.pdf. [Accessed 18 May. 2014].
Mena Report. (2014). Belgium: New Report on Card Fraud Shows Online Fraud Increased in 2012. HighBeam research.
Available at [Accessed 2 June. 2014].
Naim, Fayez. (1995). Credit Cards, Modern Arab Press, Cairo, Egypt.
National Instituted For Finance. (2013). Card Market: Growth potential is even great. Available at
/>p_details=1 . [Accessed 1 June 2014]. (In Vietnamese).
Nielsen.
(2013).
Report
number
1023.
Available
at
[Accessed 07 June. 2014].
Phil Christiansen. (2011). Four Important Trends Shaping the Future of Credit Cards.
S. Subramanian. (2012). Credit card-a theoretical framework. Related articles Dec 18, 2012 .Oxford Dictionary and
Thesaurus.
The Government. (2011). 2453/QD-TTg Decision, dated 27/12/2011 approving the scheme promotes non-cash payment
in
Vietnam
2011-2015.
Available
at
[Accessed 1
June 2014]. (In Vietnamese).
The
UK
cards
Association.

2014.
Types
of
credit
card.
Available
at
[Accessed 10 June. 2014].
Todd J. Zywicki. 2000. Economics of Credit Cards. Available at />[Accessed 01 June. 2014].

52
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)


Khanh, C.H., Tri, D.N., Anh, T.T.N. and Dang,T.K.C.

Vietnam banks association. (2013). Risk of credit card and prevention approach. Available
at />[Accessed 2 June. 2014]. (In Vietnamese).
Walker et al. (2007). Instant credit card marketing system. United States Patent. Patent No.: US 8,732,045 B2
Worthington, S. (2001). Affinity credit cards: a critical review. International Journal of Retail & Distribution
Management, 29 (11), pp.485
Zeinab Rezvani. (2009). New Product Development Based on Customer Knowledge Management, Master’s Thesis, Lulea
University.

53
Global J. Bus. Soc. Sci. Review 2 (1) 40 – 53 (2014)