The bank card market previously maintained a double-digit growth rate in an entire decade. While the main product at that time was debit card, it is now credit card with many outperforming policies.
In fact, credit cards have now become a much more popular form of payment than before thanks to the widespread card acceptance system with many new technologies (contact, contactless, etc.). Particularly, card acceptance units which are shops and hotels are more aware of the role of payment cards in increasing revenue. That is not to mention that the hesitance of getting bank loans has declined, especially among young people; or the verification of income to issue cards has become much easier than before.
These factors are creating a very hot bank credit card market, and the profit figures will be higher for banks if they hold a relatively large market share. So, it is understandable when banks’ sales staff are subject to much higher card issuance targets compared to the previous year.
The profit earned by banks through card payment is the sharing of revenue by the card acceptance units to banks, which is usually up to 2.5 percent of the revenue depending on the business characteristics of specific unit. The units accepting bank card payments are very diverse, such as commercial centers, electronic stores, insurance companies, airline ticket agents, small shops, etc. Banks even use a part of the paid fee to refund customers in order to encourage spending, because the nature is commodity discounts. The term “cash back” is being used by many banks to attract customers to open cards.
At HSBC, Visa Cash Back card allows cardholders to get up to eight percent of the total spending at grocery stores and supermarkets with a maximum value of 200,000 dong per months. In addition, cardholders are entitled to unlimited refunds at the rate of one percent for insurance and education expenses, or 0.5 percent for other spending. Cardholders will be automatically refunded to the monthly card account, right on the next credit card statement.
Notably, some banks have launched credit cards with interest-free for up to five years, instead of just 45 days as at present, at the same time offered free lifetime management fee. For example, Vietnam International Commercial Joint Stock Bank (VIB) has launched VIB Zero Interest rate card which offers lifetime free policy for all spending transactions on the cards. This is the first time in Vietnam, the interest-free policy is applied for a long period of five years of the credit cards, instead of 45 to 60 days as commonly seen in the market, with free transaction fee in the first three months from the activation date of the card.
Previously, in December 2018, VIB simultaneously launched five completely new credit card products to meet the diverse needs of cardholders. VIB has made considerable investment in the development of MyVIB application, Internet Banking, digital banking website www.vib.com.vn, automatic sales tools through digital technology; because credit card segment contributes a significant amount of revenue to VIB’s retail business. From the beginning of 2019 until now, the credit of VIB’s retail section has risen by up to eight percent. According to VIB’s leader, the Retail Banking is bringing hug revenue and profit to the bank.
A fierce competition among banks is seen on the credit card market. In order to increase market share, banks all have promotional policies to attract customers.
According to the SBV’s statistics, by the end of the third quarter (Q3) last year, the total number of bank cards issued nationwide reached 147.3 million cards, up by 20 million cards after only one year. In particular, credit cards had a very fast growth rate. By the end of Q3 2018, there were 4.6 million credit cards issued in the country with a total trading value reaching approximately 50 trillion dong, up by 50 percent over the same period of 2017. With more than 70 million adults and the fastest growth of income and spending in the region, Vietnam is showing itself as a potential credit card market.
Experts in the financial industry said that the development of tourism and online shopping activities has been encouraging Vietnamese consumers to spend more through credit cards. Recognising this trend, in the past 10 years, the banking sector has continuously stimulated spending on credit cards. Moreover, the investment in cards, especially credit cards, is bringing a huge profit source to banks because the interest rates are higher than normal loans. At the same time, the fees collected from cards, such as annual fee, cash withdrawal fee, overdue debt penalty, etc. also bring about a large and stable income.
Certainly, the recent hot growth of the credit cards is also making card security to be a major concern for each bank. The card market of Vietnam is currently still considered safe compared to many other card markets. Banks themselves have mainly issued chip cards to increase the security level.
However, sometimes cardholders were still charged too many types of fees or suffered unjust loss of money because personal information was stolen during transaction process, because all data such as name, age, card number and authentication code are embossed on the credit card surface as well as prepaid payment card.
In fact, the information security for credit card holders is still fairly loose. The payments by credit cards at sales points and commercial centers currently do not require password. Cardholders who wish to pay by card only need to provide the card to the salesperson for him to swipe the card through Point of Sale machine (POS).
Not only cardholders but also banks have to bear the risks of credit cards. The high level of credit limit granted (up to a billion dong) without secured assets poses a high risk of bad debts and in fact, the bad debts from credit card segment is not small. deputy general director of a bank admitted that the profit from credit cards is currently high (popular at 30-35 percent per annum) but it goes along with the risks of bad debt rise.
