Chuyên đề tốt nghiệp: Improving the credit card business of military commercial joint stock bank – hoang mai branch

<span class="text_page_counter">Trang 1</span><div class="page_container" data-page="1">

NATIONAL ECONOMICS UNIVERSITY

FACULTY OF FOREIGN LANGUAGESDEPARTMENT OF BUSINESS ENGLISH

LE MINH THUY NGA

IMPROVING THE CREDIT CARD BUSINESS OFMILITARY COMMERCIAL JOINT STOCK BANK —

HOANG MAI BRANCH

</div><span class="text_page_counter">Trang 2</span><div class="page_container" data-page="2">

NATIONAL ECONOMICS UNIVERSITY

FACULTY OF FOREIGN LANGUAGESDEPARTMENT OF BUSINESS ENGLISH

LE MINH THUY NGA

IMPROVING THE CREDIT CARD BUSINESS OFMILITARY COMMERCIAL JOINT STOCK BANK —

HOANG MAI BRANCH

Hanoi, November 2022

</div><span class="text_page_counter">Trang 3</span><div class="page_container" data-page="3">

I would like to express my gratitude to everyone who has offered kind help to mein my research writing process from August to November 2022. Without their

support, I could not have completed this report.

Firstly, I would like to thank the National Economics University and the Facultyof Foreign Languages for providing me with the invaluable opportunity to conductthis research. I owe my most sincere gratitude to my supervisor Ph.D. Nguyen Thi

Hong Hanh for the precious time she dedicated to helping me and her heartily

advice. Her encouragement and guidance from the initial to the final stage made itpossible for me to deepen my research.

Secondly, I would also like to send my deep appreciation to all managers andbankers at MB — Hoang Mai Branch, especially those in Individual CustomersDepartments for their assistance during my internship. Although three-month is

not a long time, they did their best to create a favorable condition for me to obtainbasic knowledge and hone my practical skills in the banking environment.

Lastly, I would like to thank my colleagues who are doing graduation internshipsthis semester. They have been accompanying me, reviewing my research, andoffering constructive criticisms. It has been an enjoyable and rewarding experienceto work together with them.

</div><span class="text_page_counter">Trang 4</span><div class="page_container" data-page="4">

EXECUTIVE SUMMARY

The study on the credit card business of Military Commercial Joint Stock Bank —Hoang Mai Branch has shown that the branch is under good orientation. Within 5years of establishment and development, the branch experiences a constantincrease in annual revenue and creates trust from customers. However, there aredrawbacks in this field of business that remain unsolved, preventing the branchfrom reaching further achievements in the banking environment.

This study is an overall evaluation of credit card business MB Hoang Mai in the

period of 2019-2021 and recommendations for the branch in the future. The

findings of this research were obtained based on data shown in the Statement ofIncome of the branch and Individual Customer Department. The author alsoacquired useful opinions from the branch manager and 6 employees at IndividualCustomer Department. Besides, information from the Internet was a plentifulsource of data.

Analysis of the data revealed achievements and shortcomings of the branch’scredit card business between 2019 and 2021. In the period of 3 years, MB HoangMai achieved remarkable achievements such as maintaining an upward trend innumber of credit cards issues, credit cards sale, expanding merchant networks and

increasing profit. However, the branch also faces some drawbacks: new cardsopened but not yet used and merchants are reluctant to use POS. In that context,

the research also finds the causes of these inadequacies, including both objectiveand subjective reasons.

On the basis of these findings, it is recommended that the development of updatedbusiness strategy be encouraged to raise residential’s awareness and stimulate non-

cash payment habits. The branch would expand its merchant networkssignificantly by applying the trend of distribution channels. Marketing activitiesshould be specialized in the branch to expand the market while still maintaining

existing piece.

<small>1</small>

</div><span class="text_page_counter">Trang 5</span><div class="page_container" data-page="5">

EDC (machine)

LIST OF ABBREVIATIONSMeaning

Automated Teller Machine

Electronic Data Capture (machine)Foreign Direct Investment

Relationship ManagerState Bank of Vietnam

Service Level Agreement

Small and Medium Enterprises

Universal Banker

Vietnam dong

<small>11</small>

</div><span class="text_page_counter">Trang 6</span><div class="page_container" data-page="6">

LIST OF TABLES

Table 1.1. General information about MB...c cà5

Table 1.2. Operating profit of MB — Hoang Mai Branch from 2019 —2021...10

Table 1.3. The business result of MB Hoang Mai on fund mobilization... 11

Table 1.4. The business result of MB Hoang Mai on credit allocation... 12

Table 3.1. Number of credit cards issued by MB Hoang Mai 2019 —2021... 25

Table 3.2. Credit card sales of MB Hoang Mai 2019 — 2021... 26

Table 3.3. Number of new merchants of MB Hoang Mai 2019 — 2021... 28

Table 3.4. Number of newly installed POS of MB Hoang Mai 2019 — 2021... 29

Table 3.5. Bed debt credit cards of MB Hoang Mai from 2019 to 2021... 29

Table 3.6. Operating profit from credit cards of MB Hoang Mai 2019 — 2021...30

<small>IV</small>

</div><span class="text_page_counter">Trang 7</span><div class="page_container" data-page="7">

LIST OF FIGURES

Figure 1.1. Organizational structure of MB Hoang Mai... 6

Figure 3.1. Number of credit cards issued by MB Hoang Mai 2019 — 2021...25

Figure 3.2. Credit card sales of MB Hoang Mai 2019 — 2021... 27

Figure 3.3. Total credit cards sales of MB Hoang Mai 2019 — 2021... 27

</div><span class="text_page_counter">Trang 8</span><div class="page_container" data-page="8">

TABLE OF CONTENTS

ACKNOWLEDGEMENTS... ccc ceceeccssecssessecsseesseecececssecaeeeesseesaeeaeseeesaeeseees iEXECUTIVE SUMMARY .W00. oie eccsccenecseeteeeeseesaeceeeeseceseceesseeeaeesaeeeaeeseenas ilLIST OF ABBREVIATIONS... HH giết 1HI9). 9.)02.111n1nẺẺ8e... 1V

IiS09)0):60.42. 1...4... V

INTRODUCTION 012157... 1

1. Introduction of the research f0pÍC... - - - -- SH re. 1

2. Ratiomalles nh... ... 13. Research aims and obj€CfÏVS...- - - -- - SH HH kiệt 2

4. Research questions ...-- --- 5 Ác 1n nh TH ng TH ng nh 2

6. Outline of the r€pDOFÍ...-- - .- -< 11H HH HH, 3CHAPTER 1: AN OVERVIEW OF MILITARY COMMERCIAL JOINT

STOCK BANK - HOANG MAI BRANCH ...oo cc ceccececcesceeeeeeseeeseteeeeaeeeaes 5

1.1. Overview of MB - Hoang Mai Branch...- eee se. 5

1.1.1. General information about ÌMÍ... - các se 51.1.2. MB — Hoang Mai Branchh... c5 1x hiện 6

1.1.3. Organizational SHFICÍHLF... - óc tk ngư 6

1.1.4. Business Ch@FQCÉGTISÉÍCS... 5 HH HH ru 9

1.2. Business results of MB — Hoang Mai Branch from 2019 to 2021... 10

JJN\.. 1... na... 111.2.2. Credit QÏÏOCŒfÍOIH... 5 HH nh HH 11

CHAPTER 2: THEORETICAL FRAMEWORK...cc.ccece 142.1. Credit Card ...-- LH TH TH nọ HH HH ng 14

2.1.1. General concepts about credit CAPES ... -o- co sscccseieserseres 142.1.2. History of Credit CAVAS san ốố... 15

1.2.1. History of credit cards in the WOrITd wicicicccseseseesesteetesseeseeseeneeees 15

1.2.2. History of credit Card in Victim ..cccccccccsccccccessceseesseesseetsesssesseetesenes 15

</div><span class="text_page_counter">Trang 9</span><div class="page_container" data-page="9">

2.1.3. The importance of credit CŒFS... .. che, 16

2. ].3. ]. ECOHOTNJ...Ă. SG HH HH re 162.1.3.2. (CHSÍOHHICS... Ăn kh 16

2.1.3.3. Commercial PQHIKS... «cv kg HH HH 17

2.1.4. Characteristics of credit CdFdÌS... -- St skssikesrseerssrrseres 17

PC nh The flexibility n6 ... 182.1.4.2. The CONVENICNCE nan ốốốốốỐốỐẦ.Ầ... 1821.4.3. The SAfCtV cecccccccccccccessecssseesseeeeeseecssseessceseseeseseeseaeceseeeneeenseeneaeenses 182.1.5. Classification of credit CAPS ... ... HH key 182.1.5.1. SCOpe Of CAVA USC ... SG SH vn Hệ 18QL.5.2. CAVA USCVS na e.e... 192.1.5.3. Credit [init ..ccccccccccesccecccecesececeeeceesceeseceseceeesseceseceseseeeeeeeaeeeseeseees 192.1.6. Credit Cards ÍFGHSŒCÍÏOHH... HH HH nh ky 192.1.6.1. Credit card operation CVCẽâ...c- ô + SE ESkEEeseEseeekseeeereere 19

2.1.6.2. PFIÍCD(IHIÍS... HH HH 202.2. Credit card business... - .-- - sọ HgHHnHhnHnHnHrưn 20

2.2.1. Improving credit card business at commercial banks... 202.2.2. Criteria for evaluating the credit card business of commercial banks

¬... 21

2.2.3. Factors affecting the credit card business of commercial banks... 22

2.2.3.1. External environment fACtOLS ...ccccccccccccescceseesseeteeeecsseesseeseesseeseees 222.2.3.2. Internal Environment fACtOMS ...cccccccccccsccescceseesseetseeeseseessenteesseteees 23

CHAPTER 3: ANALYSIS AND FINDINGS ...0..occcececceceeeeeeceeeeseeteeteeeeaees 25

3.1. Current situation of credit card business in MB — Hoang Mai Branchfrom 2019 tO 2020 pƯiđẳaẢ... 25

3.1.1. Card iSSUANCE ... sàn HH nh HT nh 25

K70) ....nố...ố...Ặằ.ằ...Ắ.... 263.1.2.1. RECOrACA SALCS nh. ... 263.1.2.2. Payment Network nn..e...- 28Khu. r.nốốeố... 29

3.1.4. Operating profit from credit card DUSỈI@§S...- S55 c S55 29

</div><span class="text_page_counter">Trang 10</span><div class="page_container" data-page="10">

3.2. Factors affecting MB — Hoang Mai Branch’s performance in the

Credit card DUSIMESS ... -. .-- ó5 HH HH TH TH HH tr 303.2.1. External environment Í((CÍO§... nhe 30

3.2.1.1. Cash preference Of the MAJOTItY ....cccccccecceseeseeseeeseetseeteeeteesseessenss 30

3.2.1.2. Income level of the residents ...cccccccesccescceseesseeseeeseesseeseenseesseeseenes 31

3.2.1.3. LOG] iSSUCS ae e... 31

3.2.1.4. COMpetitive €HVỈTOTIHCHIÍ... Sky 313.2.2. Internal environment Í(CÍOTS... SG. SH HH ghe 32

3.2.2.1. Technological infrastructure ... . sinh ni, 32

KT... ae. nan. ... 32

3.2.2.3. Credit card risk Ié.HQĐIHCHHÍ... So cv key 33S2 N6... nanố.e... 33

CHAPTER 4: RECOMMENDATIONS...- Q che 354.1. Growth prospects of Vietnam’s credit card market in the near future

¬— ...L"^...,.,. 35

4.2. Orientation for credit card business of MB...--..<<c<+ 364.3. Recommendations to improve the credit card business of MB — HoangU82). e... 37

4.3.1. Synchronizing technology infrastructure ...à.àẶ So 374.3.2. Developing business strategies following market trends... 38

4.3.3. Expanding merchant network ...ccccccccescccescceeceeeneeeeseceeseeeseeeneeees 38

4.3.4. Advancing marketing Activities ...ccccccccccccscccessceseteseeeesseeseseeeeees 394.3.4.1. Marketing research, analysis and forecasting ... 40

4.3.4.2. Targeted market SCQMENE ... SG khe ree 404.3.4.3. Pricing strategy ANA DFOIHOfÏOHH... se ĂS«SSeskseekseessesrke 41

CONCLUSION... HH HH HT TH HH Hà HH HT TH 42

3001340010 0111.344... vi

APPENDIX 021... ... Vili

</div><span class="text_page_counter">Trang 11</span><div class="page_container" data-page="11">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>INTRODUCTION

1. Introduction of the research topic

Modern payment activities nowadays are growingly focused and enhanced to keepup with the robust growth of the global economy. Thanks to the development of

science and technology, especially the advances of information technology whichare applied to banking systems, this industry has expanded significantly. Moreover,

along with the current context of expanding international economic integration,Vietnam’s socio-economic has changed remarkably. The more developed economy

also involves an increase in the average income and an improvement in livingstandards. According to SBV (2022), with the population structure of 70% of theyoung population is of working age with stable income, this is just one of manypotential conditions for the expansion of credit card business. An article frombaochinhphu.vn (2022) indicated that, with the advantages of payment services via

bank cards, credit cards have made great strides in recent years in enhancing addedvalue for customers. They affirmed their important role in banking services as well,

as they facilitate the process of cash flow in the economy by providing funds forindividuals and organizations who are in need. It suggests that developing creditcard services is an inevitable development trend for commercial banks in thecurrent financial liberalization context.

Following up, financial institutions have promoted the development of credit cardservices with diverse features to meet customers’ needs. The Military CommercialJoint Stock Bank, in order to carry out its mission, is constantly innovative inproviding customers with the greatest financial products and services. To meet thegoal of becoming the leading modern digital bank in Vietnam, MB are placesresources on growing the credit card business in an effort to encourage non-cashpayments. The credit card business is therefore a crucial segment in its business

2. Rationales

The market for credit cards has not yet been fully exploited in Vietnam. Accordingto Mibrand’s Banking Product U&A Report (2021), although the level of creditcard usage is still low with 46% in Hanoi and Ho Chi Minh City, this service hasgood growth potential. Although the rapid arrival of the COVID-19 pandemic

slowed down practically all economic activities, the impact of the pandemic seemsto have faded away in 2022. As life has got back to normal, the economy starts to

</div><span class="text_page_counter">Trang 12</span><div class="page_container" data-page="12">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

interpret positive signs. According to Insider Intelligence (2022), “with pandemicrestrictions easing, customers are resuming more recreational purchases—

especially in travel and entertainment (T&E), which is critical for credit cardvolume.”

Hoang Mai is a peri-urban district of Hanoi with a rapidly increasing populationin recent years. This is a very favorable factor for MB - Hoang Mai Branch todeploy credit card business. However, due to the large population area, MB'stransaction offices are still scattered and have not operated systematically.Therefore, the development of credit card business has not been carried outeffectively, and the awareness of the local population about credit cards is stilllimited. Realizing attractive potential has not been properly exploited, I decided toconduct a study titled “Improving the credit card business of Military CommercialJoint Stock Bank - Hoang Mai Branch’” as the graduation report.

3. Research aims and objectives

This research aims to study the current situation of the credit card business in MB— Hoang Mai Branch and propose some recommendations to improve.Accordingly, the following objectives are expected to be achieved:

e Evaluate the performance of credit card business in MB — Hoang Mai Branchfrom 2019-2021 in the market.

e Research and analyze factors affecting the credit card business of the branchin the current context.

e Propose suggestions for the bank’s future improvements in operating creditcard business.

5. Methodology

</div><span class="text_page_counter">Trang 13</span><div class="page_container" data-page="13">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

To carry out this paper, the author collects both primary and secondary data toserve the purpose of the research.

Secondary data is first collected from Profit and Loss Statement of MB - Hoang

Mai Branch from 2020, 2021, 2022. Second, the author will collect informationrelated to MB’s credit card from topics on forums and websites. Thirdly, previoustheses, essays, scientific research in specialized journals from the university libraryand information sources on Google Scholar will be selected as reference sourcesfor this study. And finally, a part of the information in this paper is taken fromrelevant reference textbooks.

Primary data is obtained from the opinions of the branch manager and 5 employees(including universal banker and relationship manager) at Individual CustomerDepartment of MB — Hoang Mai Branch. To collect the data, in-depth and open

direct communication is conducted with each person by an interview.

For data analysis, the author uses both quantitative and qualitative data. UsingExcel software, quantitative data from statements can be measured and examined.

Meanwhile, qualitative data is analyzed through key words in each appropriatecontext to find out facts, opinions, minds, and souls of people involved. The authoralso employs deductive reasoning, also based on logical reasoning in this study.Since the research is based on facts and conclusions only drawn from findingsafterwards, the method is deductive in nature.

6. Outline of the report

Introduction

Introduction of the research includes rationales, explanation of the researchobjectives, methodology and research structure

Chapter 1. An overview of Military Commercial Joint Stock Bank — HoangMai Branch

The first chapter of the study provides general information about the branch andthe business situation from 2019 to 2021.

Chapter 2. Theoretical framework

The second chapter focuses on presenting prior literature of credit cards includingthe definitions of credit cards, types of MB credit card, roles of credit card,participants in the process of card issuance and payment used for later analysis.

Chapter 3. Analysis and Findings

</div><span class="text_page_counter">Trang 14</span><div class="page_container" data-page="14">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>The third chapter analyzes the information collected and discusses the current

situation drawn from the figures to evaluate the overall business activities, and

then to identify opportunities and existing problems in the credit card business of

</div><span class="text_page_counter">Trang 15</span><div class="page_container" data-page="15">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>CHAPTER 1: AN OVERVIEW OF MILITARY COMMERCIAL JOINT

STOCK BANK - HOANG MAI BRANCH

The first part of the report will provide readers with general information about the

bank, including the establishment process, business sectors, and an overview ofbusiness performance from 2019 to 2021.

1.1. Overview of MB - Hoang Mai Branch

1.1.1. General information about MB

The general information of MB is represented in the following table.

Registered name

Ngân hàng Thương mại Cô phần Quân đội

Bank’s name in English Military Commercial Joint Stock BankName abbreviation MB

Tax code 0100283873

Headquarter MB Grand Tower - No. 18, Le Van Luong Street,

Trung Hoa Ward, Cau Giay District, Hanoi City,Vietnam

Vision: To be the most convenient bank — Customer-centric

e Leading digital bank: App MB Bank, M-Office, Smart RM/Chat Bote Community bank: Engaging local community - SMECare by MB

</div><span class="text_page_counter">Trang 16</span><div class="page_container" data-page="16">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

e Professional bank: IB services, FDI, supply chain financing

e Fast execution: 100% ITization, 50% automation, advanced SLA and KPIs

e Outstanding risk management: 3 rounds of centralized appraisal and approval

Core values: Unity, Discipline, Devotion, Efficiency, Trust, Enforcement

1.1.2. MB — Hoang Mai Branch

In the recent years, keeping up with the development trend of Vietnam's bankingsector, MB Bank has expanded its network of branches and transaction offices toresidential areas and economic regions all over Vietnam. In turn, by making itsimple and convenient for customers to use the bank's services, the bank can

enhance its reputation, increase its competitiveness, and improve its businessperformance.

Military Commercial Joint Stock Bank - Hoang Mai Branch was established andput into effect on December 16, 2017, which is the second level branch directlyunder Military Bank.

The branch is developing steadily, consolidating its position in the Military Bank

system as well as in Vietnamese financial and monetary market.

Figure 1.1. Organizational structure of MB Hoang Mai

Branch Manager takes overall responsibility for the whole activities of MB HoangMai. She directly manages and is responsible for all activities of the branch

</div><span class="text_page_counter">Trang 17</span><div class="page_container" data-page="17">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

following the head office's targets. Operating expenses and important documentsof the branch must be approved by her before implementation, such as credit

payment, financial accounting, treasury, capital and assets management.

The Administrative department advises the Branch Manager on the development

and implementation of human resources plans; coordinates with two customer

departments to set up plans to develop the local network in the branch’s operating

area; manages, monitors and keeps confidential the employee's profiles; managesthe salary and bonus regime, insurance of employees; ensures working conditionsand safety for employees; directly purchases, manages and preserves assetswhereas ensuring their economical and effective use.

The Individual Customers department directly works with individuals to raise

funds (in VND and foreign currencies) and handles lending-related operations,

manages loan products following current regulations of the State Bank and the

Military Bank. Besides, it is also in charge of advertising, marketing, introducing

and selling banking products and services to individual customers. Below areadditional details:

e Raising funds in VND and foreign currencies from individual customers.e Mobilizing capital from residents.

e Marketing to and supporting customers.

e Checking and evaluating credit limits for customers within authorized scope.e Managing the credit limits set for each customer.

e Managing loans and transactions including from receiving and processing loan

<small>requests to guarantees.</small>

e Appraising customers’ profile, projects, lending plans and guarantees.

e Making decisions on accepting and rejecting loan requests.

e Checking and monitoring loans.

e Coordinating with related departments to collect debts, interest, and fees.e Monitoring, managing and planning to recall mandatory loans.

e Monitoring and managing and handling collaterals of risky debts.

e Keeping up to date with comprehensive analysis of customer information.

e Analyzing economic activities, financial capacity of borrowers, applying forguarantees to effectively serve the lending and guarantee process.

e Operating and managing labor, assets, mobilized capital at savings funds andtransaction spots.

</div><span class="text_page_counter">Trang 18</span><div class="page_container" data-page="18">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

Inspecting and supervising the activities of savings funds and transaction

<small>spots.</small>

Performing business on life insurance and other types of insurance.

Promptly realizing and reflecting problems, proposing solutions to Branch

Managers.

Making reports according to its functions and duties.Restoring documents and data.

Organizing training programs to improve staff’s qualifications.

Do other assigned tasks given by the Branch Manager.

SMEs department directly works with customers who are small- and medium-sized

enterprises to raise funds (in VND and foreign currencies) and handles credit-related operations, manages credit products following current regulations of theState Bank and the Military Bank. Besides, it is also in charge of advertising,marketing, introducing and selling banking products and services to SMEs. Below

are additional details:

Raising funds in VND and foreign currencies from SMEs customers.

Marketing, consulting customers about the Bank's services, including credit,

investment, money transfer, foreign currency trading, import and export

payment, cards, e-banking services, etc.

Doing research on improving available products and services while providing

new ones to serve customers’ needs.

Appraising customers’ profile to evaluate and determine their credit limitswhen they have demand for credit transactions and commercial finance, thenreporting the result to competent authorities for decision in accordance with

MB Bank's regulations.

Performing credit activities and processing transactions through receiving andprocessing loan requests, guarantees and other forms of credit extension.

Appraising customers’ profile, projects, loan plans, guarantees and other formsof credit extension based on the regulations of MB Bank.

Proposing plans to approve/refuse loan requests and rescheduling repaymentterms for customers after appraisal.

Supervising constantly during and after granting credits while coordinatingwith functional departments to collect fully loan principal, interest, and fees in

accordance with the signed contract.

</div><span class="text_page_counter">Trang 19</span><div class="page_container" data-page="19">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

e Monitoring, managing and planning to recall mandatory loans.

e Managing the granted credits and attached collateral in accordance with theMB's regulations.

e Performing duties as a member of the credit council, interest reduction council,and risk handling committee.

e Providing information of customers in form of written documents for

independent appraisal and re-appraisal.

e Regularly updating and analyzing customers’ business and financial

capabilities to meet credit management requirements.

e Rating credit score for customers who are in need of a transaction or have acredit transaction relationship with the branch.

e Reflecting raised problems about mechanisms, policies or processes and

proposing measures to solve problems with the branch manager.

e Performing debt classification for each customer according to currentregulations, then transferring this result to the debt management division to

calculate the risk provisioning and debt management,

e Restoring documents and data.

e Organizing training programs to improve staff’s qualifications.

e Do other assigned tasks given by the Branch Manager.

Customer Service department is responsible for the reception, clerical andlogistical work, including: take charge of marketing programs to promote the

bank's brand; manage administrative work such as distribution, publishing andarchiving of documents; be responsible for branch’s shopping, maintenance; openand manage deposits, loans, and capital mobilization; perform short- and medium-term credit operations, disbursement, loan collection and guarantee operations;

perform payment transactions, domestic money transfer in VND and ATM card

issuance service for legal individuals and businesses in Vietnam; receive, manageand use effectively assigned assets and tools; directly perform and account for

transactions with customers.

1.1.4. Business characteristics

Fund mobilization. The bank receives customers’ savings deposits in differentforms, such as demand deposit, term deposit, savings in VND and foreign

currencies, insurance savings, etc. and often offers super interest rate savings

programs to encourage this activity.

</div><span class="text_page_counter">Trang 20</span><div class="page_container" data-page="20">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

Credit allocation. The bank offers short-, medium- and long-term loans in VNDand foreign currencies. Thereby, the branch can perform the function of allocatingcapital flow to the economy to serve the needs of borrowers for production,business and consumption.

Guarantee. The bank provides domestic and international guarantees and

guarantee for bids, performance contract, payment, etc.

re-Foreign exchange. The bank offers services to transfer money from people whoare residing or working abroad to their relatives in their homeland.

E-banking services. MBBank App was launched in 2018 with a series of modernfeatures. With many outstanding and free utilities such as: 24/7 quick money

transfer, money transfer by phone number, ATM withdrawal by App, etc. it has

attracted a large number of customers.

Others. The branch also offers other financial instruments for customers who are

in need, such as: bancassurance,

1.2. Business results of MB — Hoang Mai Branch from 2019 to 2021

In recent years, Vietnam's economy has seen numerous challenges anddisadvantages due to the severe impact of the Covid-19 epidemic. The negative

impact of the world economy as well as internal problems of the domestic economyhave directly affected the business activities of all economic sectors as well as

commercial banks. A series of enterprises filed for bankruptcy while the ones thatsurvived had to narrow their production. Although there have been noticeable signsof economic recovery in Vietnam since 2021, the process is still moderate.

Commercial banks have faced a lot of difficulties as a result of high bad debt levels

and constrained capacity to absorb capital in the economy. In that context, MB -

Hoang Mai Branch has made great efforts to achieve the planned targets, thus, ithas attained commendable results.

(Unit: billion VND)

Year 2018 2019 2020 2021

Profit 57 65 70 82

Growth rate - 14.03% 7.69% 17.14%

Table 1.2. Operating profit of MB — Hoang Mai Branch from 2019 — 2021

(Source: MB Hoang Mai š Statement of Income)

<small>10</small>

</div><span class="text_page_counter">Trang 21</span><div class="page_container" data-page="21">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

Despite difficulties from the economy, MB - Hoang Mai Branch 's operating profit

still grew over the years. In 2019, it reaches 65 billion VND, up 14.03% comparedto 2018. Profit in 2020 of the branch reached 70 billion VND, up 7.69% comparedto 2019. And most recently, by 2021 the branch gain net profit of 82 billion VND,

increased 17.14% to 2020.1.2.1. Fund mobilization

Since the early days, fund mobilization has always been placed as a top priority bythe branch. Therefore, the growth rate of fund mobilization has always been stableat a high level. These encouraging results have created a stable source of capitalfor the branch's capital-using activities.

(Unit: billion VND/ million USD)Year 2019 2020 2021

Table 1.3. The business result of MB Hoang Mai on fund mobilization

(Source: MB Hoang Mai š Statement of Income)

The total fund mobilized in 2019 was 4286.86 billion VND, an increase of 19.76%

compared to 2018. In the next year, 2020, this number reached 4741.10, up 10.6%compared to 2019. In 2021, the branch recorded the total fund mobilization of4959.70 billion VND, 4.61% higher than 2020.

1.2.2. Credit allocation

In encouraging the development of the private economic sector, the branch focusesmainly on non-state enterprises, foreign-invested joint-stock companies, and typesof small- and medium-sized enterprises. The management of the branch's funds is

<small>11</small>

</div><span class="text_page_counter">Trang 22</span><div class="page_container" data-page="22">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

carried out to achieve both efficiency and safety, ensuring the balance between

profitability and liquidity.

(Unit: billion VND/ million USD)

Year 2019 2020 2021

Total 2379.54 2598.11 2731.00

By currency

VND 2154.40 2516.13 2621.30

Foreign currency 20.41 71.92 49.99By customer

Organization 1783.38 1522.50 1855.40

Individual 596.16 1075.61 875.3

By term

Short-term 1595.85 1819.33 1784.7Medium- and long-term 783.71 7718.77 946.3

Table 1.4. The business result of MB Hoang Mai on credit allocation

(Source: MB Hoang Mai š Statement of Income)

In 2019, the branch the branch lent an amount of about VND 2379.54 billion VND,an increase of 10.54% compared to the previous year. By 2020, total loans reached2598.11 billion, up 15.84% compared to 2019. In 2021, this number went to 2731

billion VND, which is 8.32% higher than 2020.

1.3. The situation of credit card business in MB — Hoang Mai Branch

The credit cards issued by MB are international credit cards (Visa, JCB,Mastercard, Unionpay) which are accepted globally. They are issued by VietnamDong to pay for goods and services, withdraw money at ATMs or correspondentbanks. When cards are paid at merchants pricing goods and services in the foreign

currency, the bank converts that kind of money into VND according to exchangerate announced by MB on the day of debiting the customer accounts.

Credit cards issued by MB include three types. With the above five brands,depending on the credit limit that MB grants to cardholders in a credit cycle, cards

are classified into: classic cards, gold cards and platinum cards. Besides, MB alsooffers special kinds of credit cards to honor VIP customers, such as MB Priority or

MB Visa Infinite, MB Private/MB VIP.

<small>12</small>

</div><span class="text_page_counter">Trang 23</span><div class="page_container" data-page="23">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

In general, the bank is quite mobile in developing a variety of product lines in an

effort to meet all the needs of customers.

The branch also tries to keep up with the diversification of the whole MB system

by maintaining the number of each brand increasing over the years. However, due

to the needs of the residents, the main product line developed by the branch is still

Visa cards with high recognition.

<small>13</small>

</div><span class="text_page_counter">Trang 24</span><div class="page_container" data-page="24">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>CHAPTER 2: THEORETICAL FRAMEWORK

In this chapter, the concept of credit card and credit card business in commercialbanks will be given based on the works of authors, which is the theoretical basisfor all scientific research.

2.1. Credit card

2.1.1. General concepts about credit cards

Reviewing international research about credit cards, various definitions have beenused by different researchers in their research projects. O'Sullivan, Arthur and

Steven M. Sheffrin (2019) book defined the following:

<small>“A credit card is a payment card issued to users (cardholders) to enable the cardholderto pay a merchant for goods and services based on the cardholder's promise to thecard issuer to pay them for the amounts plus the other agreed charges”. (p. 261)</small>

In Professor Gary Schneider’s point (2010), “Credit cards are different from

charge cards, requiring the balance to be fully paid in each month’. (p. 497)

In Vietnam, the definition of credit card is also stated in official documents. Whenregulating banking card activities, the State Bank of Vietnam (2016) noted that“Credit card: A card that allows the cardholder to conduct card transactions withinthe granted credit limit as agreed with the card issuer”. (p. 4)

Credit cards are a product of technology that serves two basic functions: paymentand credit (Foscht et al., 2010). The bank and credit cardholder agree on a

commitment that allows users to buy first and pay later (Amin, 2007). Issuing bankwill pay for billers on behalf of cardholder, who are responsible for repaying backfully and timely (Foscht et al., 2010). In modern commerce, credit cards arebecoming increasingly important and popular (Turban et al., 2018).

At the point of sales, customers can make credit card payments on online payment

portals or through mobile payment applications. The availability of consumerloans is the key distinction between credit cards and other e-payment instruments.Whenever a cardholder uses a credit card to pay a bill, the bank disburses him theexact amount of money shown on the bill. He is then required to repay the bankpromptly and fully for this money. Other e-payment options, however, require

clients to first deposit money into their account before any billing within the

account balance (Seetharaman, Patwa, Niranjan, & Kavuri, 2016).

<small>14</small>

</div><span class="text_page_counter">Trang 25</span><div class="page_container" data-page="25">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

2.1.2. History of credit cards

1.2.1. History of credit cards in the world

Beginning in the early 1900s, a variety of fueling companies (gas stations) and

department stores in the United States started offering their consumers a newspecial form of shopping card. However, as this card was issued by the company,its function was limited to being a member card. A banker named John Biggins

from Flatbush National Bank of Brooklyn named this system — ‘Charge-It’, whichaimed to make it simpler for consumers (also bank customers) to conduct anytransactions with shops or merchants who were also customers at the bank.(Mandell, Lewis, 1990)

The Diners Club Card is the next development of early credit cards. In 1949, after

having a dinner at a well-known restaurant, a businessman named FrankMcNamara found out that he left his wallet in another suit. This problemaccidentally led him to think about another way of payment to avoid similarembarrassment. He then started looking for a replacement option for cash or a

wallet that would frequently be experienced by restaurant consumers. A year later,

in 1950, Frank McNamara and his colleague, Ralph Schneider revisited therestaurant, but using a unique payment card this time. This kind of card is the

forerunner of credit cards as we know today. (Levine, Jonathan, 2008)

It all started with Diners Club, which at that time was a type of "charge card".Charge Card refers to a delay card. It was not until 1951 that plastic was first used

as a raw material in the current form of card as many Americans began to acceptcredit cards more widely. The first credit card of the modern era was issued byBank of America in 1958. That card eventually evolved into Visa, and MasterCardappeared in the 1960s (Ma, 2005). At the same time, a credit card called AMEX

was also issued by American Express. Then followed by Bank of America issued

a credit card, namely VISA. Furthermore, American policy regulations governing

credit card usage and rules were released in the 1970s. Since then, credit card

businesses have rapidly increased their global footprint (The points guy, 2021).

1.2.2. History of credit card in Vietnam

According to MOF (2007), it was not until 1990 when credit cards appeared forthe first time in Vietnam, as Vietcombank signed a contract with foreign banks toact as their credit card payment agent. With the advantage of international

<small>15</small>

</div><span class="text_page_counter">Trang 26</span><div class="page_container" data-page="26">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

reputation and experience in export-import payments, Vietcombank was the onlyone providing card services. However, the monopoly position did not last longeras other Vietnamese commercial banks could see the benefits from credit card

business. They quickly participated in this new promising business. They all chosethe same path to carry out this business, which was becoming payment agents forforeign banks before direct issuance. This allowed them to test their businessmodels while still obtaining an obvious payment commission.

In April 1995, Vietcombank, ACB, Eximbank, and First Vinabank became officialmembers of international card organizations MasterCard. By August 1996,Vietcombank, ACB, Vietinbank, and Saigon Bank became official members of

international card organizations VISA. Following, Master cards and Visa cardswere Officially issued (Truong Thi Hong, 2019). At the end of 1996, the

Association of Card Payment Banks in Vietnam was established and put intooperation (MOF, 2007). This event marked a new step in developing card activitiesas well as credit card business in Vietnam.

Hai Van stated on Tri thức trẻ (2019) that the credit card market in Vietnamnowadays is a quite competitive market with the participation of many domesticbanks, joint venture banks and experienced foreign bank branches. Credit card

market share is therefore inevitable.

2.1.3. The importance of credit cards

2.1.3.1. Economy

With the benefits that credit card payments bring, banks can enhance their abilityin credit expansion. Thereby, capital is circulated effectively in the economy toensure the smooth process of production - business and speed up the turnover ofgoods and services.

Credit cards help the government in stimulating domestic consumption throughlending for personal consumption. Besides, cards reduce the proportion of cash incirculation, which contributes to reducing the cost of using cash. By controllingsignificantly economic transactions, the government can prevent counterfeitmoney, money laundering, tax evasion, etc. to minimize the negative impact of

underground economic activities on the whole economy (Bui Tuan Anh, 2015).

2.1.3.2. Customers

<small>16</small>

</div><span class="text_page_counter">Trang 27</span><div class="page_container" data-page="27">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

The primary advantage of credit cards is that it enables customers to make

purchases first and pay for that pre-purchase later. Secondly, with the development

of science and technology, paying with credit card makes it easy to avoid lossesdue to fraud. Thirdly, most credit cards automatically come with a number ofconsumer protections that people don't even realize they have, such as rental carinsurance, travel insurance, and product warranties, etc.

Due to tight rivalry in the credit card industry, credit card companies frequentlyoffer incentives such as frequent flyer miles, gift cards, or cash back rewards(usually 1-5 percent based on total spending) to entice users to join theirprogrammers. There are credit cards with low interest rates or even zero percent

interest rate. (Dhruv Sheth & Dinesh Purswani, 2022).

2.1.3.3. Commercial banks

Credit cards are an important product that brings different sources of revenue forbanks. Firstly, the annual fee that cardholders pay to the bank is a significantsource. Second, withdrawal fees and payment fees for goods and services also go

into the bank's revenue. Third, the bank can still earn interest from the late

payments on transactions that have occurred. Besides, other fees can be a kind ofrevenue such as: credit limit increase fee, trace fee, card re-issuance fee, or fee for

putting a stolen or lost card on the global ban list, etc.

Credit cards are relatively safe compared to other forms of credit. Credit cards are

often issued on a collateral basis or on a customer's recurring income trackingbasis, so losses can be minimized. The great advantage of credit cards with banking

activities is that they can create long-term business relationships with customersin a volatile business environment (Bui Tuan Anh, 2015).

2.1.4. Characteristics of credit cards

The fundamental size and design of cards are quite similar. Customers are givencredit cards to use for purchases of goods and services or cash withdrawals atATMs within a credit limit agreed by bank and cardholder. Issuing cards andpaying by cards often go with setting up systems such as ATM automatic

depositing and withdrawing machines, card payment machines at points of sale(POS).

Payment by Card has many features and advantages over other conventionalpayment methods

<small>17</small>

</div><span class="text_page_counter">Trang 28</span><div class="page_container" data-page="28">

<small>Lê Minh Thuy Nga — 11193621 — Business English 61B</small>

2.1.4.1. The flexibility

With a wide variety of products, cards are suitable for a wide range of customers

which are from low-income to high-income customers, from demand for

withdrawing cash to paying for travel, entertainment, etc. Cards can providecustomers with ‘utility maximization’ and satisfy all their needs (Nguyen Thi Thu

Thao, 2009).

2.1.4.2. The convenience

As a non-cash payment method, cards offer customers convenience that no othermeans of payment can. This is especially convenient for those who must go abroadfor travel or business. No matter how much it is, cards can help them pay anywhere

without having to bring cash or travelers checks along. Card is considered as themost preeminent means of payment for consumption (Nguyen Thi Thu Thao,

2.1.4.3. The safety

With the card payment procedures that the bank provides to its customers, thecardholder can be assured of his/her money against the risk of being stolen. In this

circumstance, the bank can still protect the cardholder's money by the PIN number,

photo, signature on card, card account code, etc. This indicates that cards are much

safer than other means of payment. Moreover, most card transactions are done viaan online connection from merchants or ATMs to the paying bank, issuing bankand international card organizations. Debiting and crediting for the accountparticipating in the payment process are done automatically, so the paymentprocess is easy, convenient and fast (Nguyen Thi Thu Thao, 2009).

2.1.5. Classification of credit cards

According to TheBank (2022), credit cards can be classified by different criteria.In this part, three criteria which are mentioned are scope of card use, card users,

and credit limits.

2.1.5.1. Scope of card use

Domestic credit cards. Credit cards are used within a country. Issuing bank and

merchant are in one country.

<small>18</small>

</div>