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Big banks lose with card services?   2010-09-10 - Viet Nam News

While some commercial banks have been highly enthusiastic in the race for the number of issued cards, other banks say they do not intend to join the race, because card services bring losses.



The Bank for Foreign Trade of Vietnam (Vietcombank) has been “dethroned” from its top position as the number one cards issuer, after many years of enjoying the highest numbers.


The market has a new leader in bank cards: by the end of August 2010, the Bank for Agriculture and Rural Development (Agribank) had issued more than five million, while the figure had been 4.2 million for Vietcombank.


By the end of August 2010, the number of cards issued by the Vietnam Industrial and Commercial Bank (Vietinbank) had nearly reached five million, and will become the second bank to exceed this threshold.


Though Vietcombank is still leading the market in terms of transaction value, the bank has fallen to fourth position in bank cards. They rank behind Dong A Bank, in third with 4.5 million cards.


Vietcombank leaders don’t regard this as bad news. “Our period of “hot development” in bank cards is over. Now we want to promote card transactions and to consider the efficiency of the cards,” a senior executive explained.


The source added that, in 2010, Vietcombank deliberately reduced the number of promotions, so development slowed. To date, the bank remains in the top spot in terms of international cards issued.


“The number of cards will not be our top priority any longer. Our main goals are transaction value, the number of people who really use the cards, and especially, business efficiency,” revealed Nguyen Thanh Hang, Director of Vietcombank’s Card Centre.


After a period of hot development, the bank realized that rapid development will not bring benefits to the bank if it cannot develop non-cash payments. The percentage of “rubbish” cards (un-activated cards) has increased, perhaps creating losses in business operations.


Asia Commercial Bank (ACB), a “big guy” in retail banking, shares this view. A senior executive confirmed that ACB will not join the card race. “This is a type of business that brings heavy losses. People only use cards to withdraw money, while they do not use them to make payments. Meanwhile, banks still are not allowed to collect fees from cash withdrawal transactions,” he explained.


Bui Tan Tai, Deputy General Director of ACB, stressed that the bank is still paying attention to developing card services, but aims to push up payment transactions, not use cards for cash. ACB has been developing credit cards, especially international credit cards, and has will not make heavy investments in ATM cards.


When asked about its 4.5 million cards, Ly Thi Ngoc, Director of the Card Centre of Dong A Bank, corrected that 4.5 million was the total number issued so far. In fact, the real number of Dong A Bank’s cardholders is only four million.


Ngoc also does not agree that ATM cards bring only losses. Other banks also report that they are not taking losses with ATM cards. An executive of Vietinbank said that the difference of the revenue and expenses would be a negative number. However, when estimating profits, banks also need to consider other factors, especially the prestige bank can obtain with card development programs.


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