Playing a new deck of cards

Van Viet Duc is the director of a transport company in Ho Chi Minh City and has 34 bank cards altogether, including five credit cards issued by five different banks for payment online or urgent payments.
“Having a job with high salary, banks have been targeting me and offering me loans through credit cards,” said Duc. “I can borrow a maximum of VND50 million ($2,700) a month, interest-free for 45 days.”

On a recent visit to Vietnam, Visa’s South East Asia general manager Peter Maher said the bank card market in Vietnam had the highest growth rate in the region. After 15 years in operation, there are now more than one million Visa cards in circulation. However, Maher said the market had only started to grow rapidly about two years ago, with 400,000 new customers signing up.

The number of Visa cards issued in Vietnam increased from 100,000 in 2005 with 15 member banks, to more than one million by the end of 2009 with 28 member banks, a 900 per cent increase in card volume in five years.

Dong A Bank is one of the largest card-issuers in Vietnam and it has just begun offering two VIP cards, the Ruby and Sapphire cards, for high-income earners. To qualify, a customer must have either more than VND2 billion ($108,000) in the bank, an average of VND500 million ($27,000) in their account over a six-month period or have a monthly income of more than VND70 million ($3,700).

The first VIP banking chamber was opened earlier this year in Ho Chi Minh City and one will open in Hanoi next month. A further 10 VIP chambers will open around the country this year. Dong A Bank general director Tran Phuong Binh said the bank had selected about 2,000 VIP customers who would be eligible to receive special “one-stop shop” services, including card services.

Binh said the bank also planned to double the number of its ATMs this year with an additional 1,000 machines. “We have invested in developing ATMs since 2004 and our strategy is to continue expanding our network in the future. “We can earn an annual fee of VND50,000 on each of our three million cards and now we are thinking about what other card services we can provide so we can increase the revenue from this part of our business,” said Binh.

Newcomer Lien Viet Bank, meanwhile, is dealing with ATM contractors to expand its network as the bank is to acquire Vietnam Post’s Postal Savings Company. The process for this acquisition will be completed this year and Lien Viet then plans to increase the number of its ATM-capable transaction points to 13,000 nationwide. Its network will reach all corners of Vietnam, including rural and remote areas.

“This acquisition will increase competition between banks in the non-cash payment sector of the market,” said State Bank governor Nguyen Van Giau. The deal with Vietnam Post is in its final stages. Lien Viet Bank is waiting for approval from the prime minister and it also needs to have a plan to provide social insurance services, as well as e-customer services through its internet banking network.

A recent report from Smartlink, one of three card alliances in Vietnam, found 20.2 million people in Vietnam used internet banking and 22 million used a bank card. An increasing number of enterprises also participated in e-commerce last year. Three card alliances in Vietnam also connected with each other last December. This means 16 million cards — or 95 per cent of the total cards in Vietnam — can now access 8,000 ATMs. Vietnam Bank Card alliance (VNBC) has also connected with Smartlink and the alliance will also officially connect with Banknet in March.

Despite this positive growth, the expansion of points of sale (POS) is still difficult as service providers such as operators of supermarkets are not willing or ready to allow card payment services to avoid paying a fee to banks. To make matters worse, there are no clear regulations on the rights or obligations of cardholders, card issuers or POS when it comes to a card transaction.

“We suggest that the government, especially the Ministry of Finance, develops additional policies such as a discount on corporate income tax for non-cash payments,” Smartlink CEO Nguyen Tu Anh said.
A rise in non-cash payments will allow the development of other electronic payment services, such as via SMS and the internet. It will also ensure the POS network continues to expand. “As the economy bounces back from a tough period, banks will be more able to compete in the card sector – in the areas of payment and retail,” Tu Anh said.

A report from the Vietnam Bank Card Association found that by the end of 2009, 21.6 million bank cards had been issued in Vietnam, an increase of 147 per cent on 2008. There are 10,000 ATMs and 37,000 POSs throughout the country. The amount of money spent on cards was about VND330 trillion ($17.8 billion) in 2009, a rise of 140 per cent on the year before, and the revenue generated by card payments was about $1 billion. Some 10 per cent of ATM transactions were made through banks.