Prime Bank limited is a fast growing private sector bank and the bank has focused for providing high quality.
Introduction: Prime Bank limited is a fast growing private sector bank and the bank has focused for providing high quality customer service at a very competitive price. PBL efforts are directed at diversification of products and services. Offering customers a wide variety of choices and options have remained cornerstone of their business strategy. In this backdrop, PBL has launched credit card business in collaboration with a global player like Mastercard. MasterCard is one of the top 20 brands in the world. An alliance with these as its principal member is definitely a big advantage from marketing point of view. The policy planners have found a showing growth of card market with the increasing acceptability of plastic money in many outlets; the business has become intensely competitive. More players had entered into the market and some others were preparing for entry into the same. As increasing number of customers were turning to the convenient features of credit card usage, PBL had steeped up marketing efforts to retain and enhance their market. This report is basically deals with “A Competitive Analysis of Prime Bank Credit Card with the Credit Cards offered by Standard Chartered Bank and National Bank Limited and its contribution towards the company growth�. Overview of the problem: This paper emphasize that all tasks assigned to a marketing research manager, none is more critical that analysis competitors activities, performance and potentially in credit card market in Banking area that effect the projection in the future periods are fundamentals to architectonic a long term strategic plan and designing appropriate marketing strategies. In a research project is has been identified that the sales growth become negative for the last few months. Through this research proposal like to identify the factors, which affect large in consumer preference at the time of selecting a particular companies credit card and find out prospective solution to overcome those shortcomings. At the same time in this exercise, it is tried best to identify the variables that are significantly collateral in competitive advantage and by distinguished cardholders and merchant effect in performance.
Objective of the study: The main objective of the study is it explore and examine the underlying issues critical to developing and maintaining long term exchange relationship with the customers of the PBL. More specifically through this study like to find out the lacking of PBL in terms of its competitive competitors. 1. To identify the competitors of the PBL. 2. Identify the customer (cardholders) preference that differentiates the services of PBL Card with the competitor in the market. 3. Identify the merchant preference in credit card transaction. 4. Identify the share of heart of cardholders in charging credit card. 5. To identify the share of dollars in credit and changing in total expenses. 6. Identify the different changes, interest and service fees that give the competitive advantage in credit card market. 7. The preference of merchant in credit card transaction. 8. Potentiality of credit card. 9. Find the variables that act as competitive advantage in credit card market. Research Questions: To achieve the objectives the following major research questions are identified: 1. What are the factors affect customers at the time of evaluation of the offerings of credit card of different competitors? 2. Who are the competitors of PBL Credit Card and their performance comparing with Prime Bank Credit Card? 3. What type of benefits do consumers expect from credit card and what type of difficulties they face at the time of using it? 4. What type of differentiations exists in the competitive of credit card according to its interest, service charge and fees?
Methodology: Once the research objectives are finalized the next logical step to achieve the objectives is to decide the methodology to be followed. In order to achieve the primary objective, quantitative method, in particular case study approach, appear more appropriate in collecting necessary data. Survey method can be use for research purpose through using a structured questionnaire that will be prepared both for cardholders and merchants. Data Collection: Both the primary and secondary form of information and also requires a depth observation of the phenomenon to be investigated is used to achieve a report which is more meaningful and presentable. But most of the data are primary. The details of these sources are given below: Primary Sources: • Major source of collecting information is questionnaire, which will be prepared both for cardholders as well as for merchant.
• •
Another source of information may be discussions with the officers of credit card division through in depth interview of the competitive companies. Practical work exposure in the credit card division may consider another source of information.
Secondary Sources: • Brochures of different banks, their annual report, research publications, annual report of BIBM on Bank Management can be the secondary sources for collecting information. • Dhaka Commercial bank Management. • Dhaka Security and Exchange Commission who store information of all the banks operating in our country. Layout: All necessary parts of conventional formal report have been followed. The readers are expected to get a different taste from this report. Time and Budget Schedule: For the proposed research we need to set a time set and required budget schedule, which may help to determine for further research step: Time Schedule Tasks
Time
1. Preparing a Research Proposal
1 Weeks
2. Completion of Literature review
1 Week
3. Developing interview guideline and Negotiation with
2 Weeks
the cardholders and merchant 4. Data collection
2 Weeks
5. Data transcription
2 Weeks
6. Data Analysis
2 Weeks
7. Completions report writing, preparing recommendation
2 Weeks
and submission. Total
12
Weeks Project Budget Subjects
Costs
1. Collection of literature
Tk. 2,000.00
2. Salary of the field investigators
Tk. 10.000.00
3. Tape Recorder, Telephone Charge and stationary
Tk. 1,000.00
4. Data Collection
Tk. 2,000.00
5. Data Transcription
Tk. 2,000.00
6. Printing and other costs
Tk. 3,000.00
Total
Tk.
20,000.00 CHAPTER-1 THEORITICAL BACKGROUND Every firm competing in an industry has a competitive strategy, whether explicit or implicit. This strategy may have been developed explicitly through appalling process or it may have evolved implicitly through the activities of the various functional departments of the firm. Left to its own devices, each functional department will inevitably pursue approaches dictated by its professional orientation and the incentives of those in charge. However, the sum of these departmental approaches really equals the best strategy. Competition Competition includes al the actual and potential rival offerings and substitutes that a buyer might consider. We can broaden the picture further by distinguishing four levels of competition, based on degree of product substitutability: 1. Industry competition: A company sees its competitors as all companies making the same product or class of products. Volkswagen would see itself as competing against all other automobile manufacturers. 2. Form competition: A company sees its competitors as all companies manufacturing products that supply the same service. Volkswagen would see itself competing against not only other automobile manufacturers but also against manufacturers of motorcycles, bicycles, and trucks. 3. Generic competition: A company sees its competitors as all companies that compete for the same consumer dollars. Volkswagen would see itself competing with companies that sell major consumer durables, foreign vacations, and new homes. Essentially developing a competitive strategy is developing a broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals.
Process for Formulating a Competitive Strategy A. What is the Business Doing Now? 1. Identification What is the implicit or explicit current strategy? 2. Implied Assumptions What assumptions about the companies' relative position, strengths and weaknesses, competitors and industry trends must be made for the current strategy to make sense? B. What is happening in the Environment?
1. Industry Analysis The key factors for competitive success and the important industry opportunities and threats? 2. Competitors Analysis What are the capabilities and limitations of existing and potential competitors, and their probable future moves? 1. Societal Analysis What important governmental, social, and opportunities or threats?
political
factors
will
present
2. Strengths and Weaknesses Given an-analysis of industry and competitors what are the company strengths and weaknesses relative to present and future competitors? C. What should the business be doing? 1. Tests of Assumptions -an strategy How do- the assumptions embodied in the current strategy compare with the analysis in B above? 2. Strategy Alternatives What are the feasible strategy alternatives given the analysis above? Is the current strategy one of these? 3. Strategy Choice Which alternative best relates the company's situation to external opportunities and threats? STRUCTURAL ANALYSIS AND COMPETITIVE STRATEGY:
An effective competitive strategy takes offensive or defensive action in order to create a defendable position against the five competitive forces. Broadly, this involves a number of possible approaches. • Positioning the firm so that its capabilities provide the best defense against the existing array of competitive forces. • Influencing the balance offered through strategic, thereby improving the firm's relative position; or • Anticipating shifts in the factors underlying the forces and responding to them, thereby exploiting change by choosing a strategy appropriate to the new competitive balance before rivals recognize it
The Structural Analysis of Industry: The intensity of competition in an industry is neither a matter of confidence nor bad luck. Rather, competition in an industry is rooted in its underlying economic structure and goes beyond the behavior of current competitors. The state of competition in an industry depends on five basic competitive forces, which are show in Figure: POTENTIAL ENTRANTS (Threats of new entrants)
SUPPLIERS (Bargaining power of suppliers)
INDUSTRY COMPETITOR Rivalry among existing firms
BUYERS (Bargaining power of buyers)
SUBSTITUTES (Threats of substitute products of services) Fig: Driving Forces Industry Competition Generic Competitive Strategies: Three Generic Strategies: In coping with five competitive forces, there are there potentially successful generic strategic approaches to outperforming other firms in an industry. 1. Overall cost leadership 2. Differentiation 3. Focus OVERALL COST LEADERSHIP The first strategy an increasingly common one in the 1970s because of popularization of the experience curve concept, is to achieve overall cost leadership in an industry through a set of functional policies aimed at this basic objective. Cost leadership requires aggressive construction of efficient -scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on.
DIFFERENTIATION The second generic strategy is one of differentiating the product or service offering of the firm. Creating something that is perceived industry wide as being unique. Approaches to differentiating can take many forms: design or brand image (Fieldcrest in top of the line towels and linens: Mercedes in automobiles) technology) Hysteria in lift trucks Macintosh in stereo companions Coleman in camping equipment) features (Jennie air in electric ranges); customer service Crown cork and seal in metal cans) dealer network (Caterpillar Tractor in construction equipment,) or other dimensions. Product Form Feature Performance Conformance Durability Reliability Repair Ability Style Design
Services Ordering Ease De4livery Installation Customer Training Customer Consulting Maintenance & Repair Miscellaneous
Personnel Competence Courtesy Credibility Reliability Responsiveness Communication
Channel Coverage Expertise Performance
Image Symbols Media Atmosphere Events
Table: Differentiation variables FOCUS The final generic strategy is focusing on a particular buyer group, segment of product line, or geographic market; as with differentiation focus may take many forms, Although the cost and differentiation strategies are aimed at achieving their objectives industry wide, the entire focus strategy is built around serving a particular target very well and each functional policy is developed with this in mind. Strategic Advantage Uniqueness Perceived By the Customer DIFFERENCIATION
FOCUS Industry Wide Strategic Target Particular Segment only
Low Cost Position OVERALL COST LEADERSHIP
Fig: Three Strategic Strategies A FRAMEWORK OF COMPETITOR ANALYSIS: Competitive strategy involves positioning abusiveness to maximize the value of the capabilities that distinguish it from its competitors. It follows that accentual aspect of strategy formulation is perceptive competitor analysis. The objective of competitor analysis is to develop a profile of the n attune and success of the likely strategy changes each competitor might make, each competitors probable response to the range of feasible strategic moves other firms could initiate, and each competitors probable reaction to the array of industry changes and broader environmental shafts that might occur. Fig: Components of a Competitor Analysis What drive the competitor?
Future Goal At all levels of management and in multiple decisions.
What the competitor is doing and can do?
Current strategy How the business is currently competing?
Competitor’s Response Profile Is the competitor satisfied with its current position? What likely moves or strategy shifts will competitors make? Where is competitor vulnerable? What will provoke the greatest and most effective realization by the competitor?
Assumption
Capabilities
Held about itself and the industry?
Both Strengths and weaknesses. .
Areas Competitor Strengths and Weakness Products • Standing of products, from the user's point of view, in each market segment • Breadth and depth of the production Dealer/Distribution • Channel coverage and quality • Strength of channel relationships • Ability to service the channel
Marketing and Selling • Skills in each aspect of the marketing mix • Skills in market research and new product development • Training and skills if the sales force
Operations • Manufacturing cost position-economies of scale, learning equipment etc. • Technological sophistication of facilities and equipment • Flexibility of facilities and equipment • Proprietary know-how and unique patent or cost advantages • Skills in capacity addition, quality control, tooling, etc. • Location, including labor and transportation cost • Labor force climate, unionization situation. • Access to and cost of raw materials • Degree of vertical integration
curve
of
Research and Engineering • Patents and copyrights • In house capability in the research and development process (product research, process, research, development, imitation, etc) • R&D staff skills in terms of creatively, simplicity, quality reliability etc. • Access to loused sources of research and engineering. Overall Costs • Overall relative costs • Shared costs or activities with other business units • Where the competitors is generating the scale or other factors that are key to its cost position. Financial strength • Cash flow • Short and long term borrowing capacity (relative debt equity aeration) • New equity capacity over the foreseeable future • Financial management ability, including negotiation raising capital, credit in venturous and accounts receivable Organization • Unity of values and clarity of purpose in the organization • Organizational fatigue based on recent requirements placed on it • Consistency of organizational arrangements with strategy General Managerial Ability • Leadership qualities of CEO; ability of CEO to motivate • Ability to coordinate particular functions or groups of functions (e g manufacturing with resource coordination) • Age training and functional orientation of management Depth of management • Flexibility and adaptability of management Corporate portfolio • Ability of corporation to support planned changes in all business units in terms of financial and other resources
• Ability of corporation to supplement or reinforce business unit strengths Others • Special treatment by or access to government bodies • Personnel turnover Value chain: To diagnose competitive advantage it is necessary to define a firm's value chain for competition in a particular industry. Starting with the generic chain, individual value activities are identified in the particular firm. Each generic category can be divided into discrete activities, as illustrate for one generic category in the following figure Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics
Operations
Advertising Marketing Management
Outbound Logistics
Marketing & Sales
Sales Force Technical Administration Literacy
Service
Promotion
Fig: The generic Value chain. STRUCTURAL ANALYSIS WITHIN INDUSTRIES Dimensions of Competitive Strategy Companies' strategies for competing in an industry can differ in as wide variety of ways. However the following strategic dimension usually capture the possible differences among a company s strategic options in a given industry: • Specialization: the degree to which to which it focuses its efforts in terms of the width of its line the target customer segments an the geographic markets served; • Brand identification: the degree to which it seeks brand identification rather than competitors based mainly price or other variables. Brand identification can be as sieved inverting sales force or variety of other means.
• Push versus pull: the degree to which it seeks to develop brand identification with the ultimate consumer directly versus the support of distribution channels in selling its product. • Channel selection: the choice of distribution channel ranging from company owned channels to specialty outlets to broad line outlets. • Product quality: its level of product quality in terms of raw materials specifications, adherence to tolerances, features, and so on; • Technological leadership: the degree to which it seeks important to note that a firm could be a technological leader but deliberately not produce the highest quality product in the market quality and technological leadership do not necessarily go together; • Vertical integration: the extent of value added as reflected in th level of forward and backward interruption adopted in clouding whether th firm has captive distribution exclusive or owned retail outlets an in house service network and so on; • Cost position: the extent to which it seeks the low cost position in manufacturing and distribution through investment in cost minimizing facilities and equipment; • Service: the degree to which it provides ancillary services with its predict line such as engineering assistance and in house service network credit and so forth. This aspect of strategy could be viewed as part of vertical integration but of vertical integration be is usefully separated for analytical purposes; • Price policy: its relative price position in the market. Price position will usually be related to the relationship between a unit and its parent such other variables as cost position and product quality but price is a distinct strategic variable that must be treated separately; •
Leverage: the amount of financial leverage and operating leverage it bears;
• Relationship with parent company: requirements on the behavior of the unit based on the relationship between a unit and its parent company. The firm could be a highly diversified conglomerate, one of a vertical chain of businesses part of a cluster of related businesses in general sector a subsidiary o foreign company an dos no. The gnarr of the relationship with the parent will influence the objectives with which the firm is managed the resources available to it and perhaps determine some operations or functions that it shares with other units; • Relationship to home an host government: in international industries the relationship the firm has developed or is subject to with its home government as well as host governments in foreign countries where it is operating.
Competitive Advantage Marketing Mix Marketers use numerous tools to elicit desired responses from their target markets. These tools constitute a marketing mix. Marketing Mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion. Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs. Four Ps Four Cs Product Customer solution Price Customer cost Place Convenience for customer Promotion Communication with customer Winning companies will be those who can meet customer needs economically and conveniently and with effective communication will get advantage against competitor. Marketer Responses and Adjustments Marketers also are rethinking their philosophies, concepts, and tools. Here are the major marketing themes as the millennium approaches: • Relationship marketing: from focusing on transactions to building long-term, profitable customer relationships. Companies focus on their most profitable customers, products, and channels. • Customer lifetime value: From making a profit on each sale to making profits by managing customer lifetime value some companies offer to deliver a constantly needed product on a regular basis at lower price per unit because they will enjoy the customer's business for a longer period. • Customer share: from a focus on gaining market share to a focus on building customer share. Companies build customer share by offering a larger variety of goods to their existing customers. They train their employees in cross selling and up selling. • Target marketing: from selling to everyone to trying to be the best firm serving well defined target markets. Target marketing is being facilitated by the proliferation of special-interest magazines, TV channels, and Internet newsgroups. • Individualization: From selling the same offer in he same way to everyone in the target market to individualizing and customizing messages and offerings. Customers will be able to design their own product features on the company's Web page. • Customer database: from collecting sales data to building a rich data warehouse of information about individual customers' purchases, preferences, demographics, and profitability. Companies can "Data mine" their proprietary
databases to detect different customer need clusters and make differentiated offerings to each cluster. • Integrated marketing communications: from heavy reliance on one communication tool such as advertising or sales force to blending several tools to deliver a consistent brand image to customers at every brand contact. • Channels as Partners: From thinking of intermediaries as customers to treating them as partners in delivering value to final customers. • Every employee a marketer: From thinking that marketing is done only by marketing, sales, and customer support personnel to recognizing that every employee must be customer-focused. • Model-based decision-making: from making decisions on intuition or slim data to basing decisions on models and facts on how the marketplace works. These major themes will be examined throughout this book to help marketers and companies sail safely through the rough but promising waters ahead. Successful companies will be those who can keep their marketing changing as fast as their market place and market space. Tools for Tracing and Measuring Customer Satisfaction: • Complaint and suggestion systems: A customer-centered organization makes it easy for its customers to deliver suggestions and complaints. These information flows provide companies with many good ideas and enable them to act quickly to resolve problems. • Customer satisfaction surveys: Studies show that although customers are dissatisfied customers will complain. Most customers will buy less or switch suppliers. Complaint levels are thus not a good measure of customer satisfaction. Responsive companies measure customer satisfaction directly by conducting periodic surveys. • Ghost shopping: Companies can hire persons to pose as potential buyers to report on strong and weak points experienced in buying the company's and competitors' products. These mystery shoppers can even test whether the company's sales personnel handle various situations well. •
Lost customer analysis: companies should contact customers who have stopped buying or who have switched to another supplier to learn why this happened. Not only is it important to conduct exit interviews when customers first stop buying, but it is also necessary to monitor the customer loss rate. If it is increasing, this clearly indicates that the company is failing to satisfy customers.
Today, more and more companies are recognizing the importance of satisfying and retaining current customers. Here are some interesting facts bearing on customer retention:
Acquiring new customers can cost five times more than the costs involved in satisfying and retaining current customers. It requires a great deal of effort to induce satisfied customers to switch away from their current suppliers. The average company loses 10 percent of its customers each year. A 5 percent reduction in the customer defection rate can increase profits by 25 percent to 85 percent, depending on the industry. The customer profit rate tends to increase over the life of the retained customer. A satisfied customer tells about the company or product to 5/6 people, but on the other hand a dissatisfied customer tells to 15 to 18 people from his experience.
Adding Financial Benefits: Two financial benefits that companies can offer are frequency marketing programs and club marketing programs. Frequency marketing programs (FMPs) are designed to provide rewards to customers who buy frequently and / or in substantial amounts. Frequency marketing is an acknowledgment of the fact that 20 percent of a company's customers might account for 80 percent of its business. Adding social Benefits: Here company personnel work on increasing their social bonds with customers by individualizing and personalizing customer relationships. Following table contrasts a socially sensitive approach with a socially insensitive approach to customers. Good Things Initiate positive phone calls Make recommendations Candor in language Use phone Show appreciation Make service suggestions Use "we" problem-solving language Get to problems Use jargon or shorthand Personality problems aired Talk of "our nature together"
Bad things Make only callbacks Make justifications Accommodative language Use correspondence Wait for misunderstandings Wait for service requests Use "owe-us" legal language Only respond to problems Use long-winded communications Personality problems hidden Talk about making good on the past
Adding Structural Ties: The company may supply customers with special equipment or computer linkages that help customers manage their orders, payroll, inventory, and so on.
CHAPTER -2 ANALYSIS OF GENERIC COMPETITION • Cash • Cheque • Different Types of card • Credit Card CASH The present day in convertible paper money and other credit instruments, which serve, as close substitutes for money called near money are only a recent development. The paper money (Cash) was not used circulation before the French Revolution; paper money (Cash) is a competitor of modern invention plastic money (credit card). People today are not habituated in plastic money. The main reason is to use Cash in transactions are easy acceptability, Government circulation, easily accessible, store value, social preference and reluctant of change new medium (credit card) rather than cash. CHEQUE A cheque is an unconditional written order, advanced by a customer to his bank, to pay on demand a specified sum of money to or to he order of the person named therein or the bearer of the instrument. A cheque is defined by Negotiable Instrument Act as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise that on demand. Cheques came into use in 1875. Crossed Cheque, Bearer and Order cheque are the different form of cheque, hi selling of goods; cheque is used in large transaction like industrial market. DIFFERENT TYPES OF CARD Bank Card: Transactions card giving a bank's customers' ability to pay for goods and services at retail merchant, and get cash at bank teller window or at ATMs. A bankcard may be a credit cad, tied to a pre-approved line of credit or a Debit Card, drawing funds from the holder's checking or saving accounts. A bankcard is also used as identification when cashing a check. Debit Card/Assert Card: A plastic card used to initiate a debit transaction. In general, these transactions are used primary to purchase goods and services and to obtain cash, for which the cardholder's asset account is debit by the issuer. There are two types of Debit cards currently is use in USA: national Debit Cards, such as -the Visa Debit difference is that the national debit cards were designed specifically as retail payment cards; bank debit card were issued first as ATM access cards and later as general purpose transaction cards.
Travel and entertainment (T & E) Cards: Charge cards used to pay for hotel, airlines and others business related expense. Diners Club, followed by American Express in 1958, issued the first travel card in 1950. Travel Card differs from bank credit cards in several ways. They typically are 30-day charge accounts, with payment due in full before the next billing cycle, the accountholder receives copies of the original sales drafts (called Country Club billing) with the monthly billing statement, and some T & e card plans, usually corporate cards, gibe the C/H a quarterly summary of charges to the card. Smart Card: Bank card containing a computer chip for identification, special purposes processing and data storage. The computer ship has the ability top perform various computations, such as validating the C/H's PIN, authorizing retail purchases, verifying account balances and storing personal records. A smart card's internal memory may also store pertinent information on a consumer's relationship with a bank, brokers, insurance company or medical history time the card is used. Also called chip card or memory card. ATM card: An unattended self-service terminal activated by a card and cardholder validation method (CVM) that providing cash withdrawal. It also may perform other functions including basic banking functions such as accepting deposits, ordering transfers among accounts, accepting, loan payments and answering account balance inquiries. CREDIT CARD: Physically, credit card is a layered piece of hard plastic with holograms and security features. It also carries a strip of magnetic tape on the back, which is loaded with electronic data including the cardholder details. The strip in read electronically by specialized machines called Point of Sale (POS) Terminals at merchants or Automatic Teller Machines (ATM) in bank premises or elsewhere. It is developed on the technology of microchips and cryptography, which have bred a new generation of payment system. It is only today that the revolution in information technology has folly hit the area of retail payments. The Card is rectangular, looking rather like the familiar phone card. Its distinguishing feature is that it acts as cash, may be large account being only a small piece of documented plastic. This is why it is popularly called 'Plastic Money'. HISTORY OF CREDIT CARD: Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange - the forerunner of banknotes - was established in the 14th century. Debts were settled by one-third cash and two-thirds bill of exchange. Paper money followed only in the 17th century. Christopher Thornton, who offered furniture that could be paid off weekly, placed the first advertisement for credit in 1730.
From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called "tallymen" because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shopper's plate - a "buy now, pay later" system - was introduced in the USA. It could only be used in the shops that issued it. In 1950, Diners Club and American Express launched their charge cards in the USA, the first "plastic money". In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. In the late 1940s, a number of U.S. banks started issuing their customers scrip that could be used like cash in local shops. The Franklin National Bank (New York)- now EAB (European American Bank) - formalized the practice by introducing the first modern credit card in 1951. California-based Bank of America extended the idea throughout the United States by introducing the Bank Americard (now Visa) in 1960 and franchising a single bank in each major city as its local affiliate. These affiliates were responsible for signing contracts with merchants to accept cards as payment, as well as enrolling cardholders in their respective areas. At this time, a group of enterprising U.S. bankers who were not "franchises" of Bank Americard created their own network by accepting one another's local credit cards. On August 16, 1966, the group formed the Interbank Card Association(ICA) which later became MasterCard International.
The word credit comes from Latin, meaning, "trust". The first use of magnetic stripes on cards was in the early 1960's, when the London. Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper-based ticket the same size as the credit cards in the late 1960's.
Functions: (i) Single Money Credit card can be used in world wide as a Single money in transaction with safety. A MasterCard can easily be accessible in sub-Sahara or in Siberia. (ii) Emergency situation: In emergency situation (2am) when there is no money at home credit card can be charge for transaction or cash withdrawal from ATM booth. (iii) E-commerce: E-commerce is a new business arena in modern world. Buyer and seller can transact in online and sell goods in terms of credit card. (iv) Late Payment in Transaction: if there is no money at hand now, one can charge credit card. But the amount such transactions have to pay to the bank within a future time context. (v) Cash advance facilities: Credit card can be used to withdraw ATM booth or cash advance facilities from the bank within the credit limit. (vi) Security: It gives more security rather than carrying cash. (vii) 24 hours transaction: Credit card is accessible in transaction within any time of the day (viii) Social status: Anybody can pay bill by credit card and it relief him from money counting hassle. (ix) Traveling: In traveling credit card is the best friend. In some constrains it is not possible to endorse sufficient amount foreign currency. In such situation credit card is the best option. (x) Money is the second God: It is said that money is the second God. In crisis situation whenever anybody lost his all things in a new place, credit card can relief his hassle because others cannot use it. So it cannot be robbed.
Parties related to Credit Card: There are four parties related to credit Card. 1. Card Holder 2. Issuer. 3. Acquirer. 4. Merchant. Cardholder: The Cardholder is solicited, screened and approved by the issuer, which establishes a line of credit for the customer and issues the credit card. The Cardholder uses Credit Card either to purchase goods and services from a merchant or to obtain a cash advance from a member for which the cardholder receives a monthly bill from the issuer. Issuer: The Cardholder's financial institution (usually called the issuing member or issuer) is a licensed member of Master Card and/or Visa. The Issuer: • Issues the card to the approved cardholder • Receives and pays for transactions from Master Card and/or Visa • Bills and collects from the cardholder The issuer may also benefit from the services of a third party and/or association in processing information and payments. Agent Banks Managing a credit program is expensive and some small financial institutions prefer to offer credit cards to their customers without taking on the complications and responsibilities of becoming an issuing member. These small financial institutions can contract to become an issuing agent of an issuing member. The issuing agent solicits cardholder applicants for the issuer generally through take-ones made available at its branches. The issuer, in turn, issues the card its name, has the cardholder relationship makes all of the Credit Decisions, completely manages the card program. It the agent banks name appears on the card, then the agent bank must be in foliate/associate member of Master Card/Visa Int' 1. The issuer usually keeps most the income from the cardholder account the agent member may or may receive a small compensation for providing the application.
While the issuing agents income this from arrangement is small, it does, retain customers who might take their business else-where if a Credit Card Program were not available at their local financial institution. When the issuing agents name appears on the card it tends to preserve the financial institution-Cardholder relationship. Acquiring The acquiring member or acquirer solicits, screens, and accepts merchants into its Credit Card Program. The acquirer is a member of Master Card and/or Visa, and holds a written agreement with the merchant to. • Accept the merchant's sales slips • Provide the merchant with credit card authorization terminals, instructions, and contracted support services • Handle and process the credit The acquirer usually charges the merchant a merchant discount for handling the transactions. The acquirer is licensed by Master Card and/or Visa and agrees to follow the operating rules and regulations of the two associations. MasterCard and Visa provide various services to the acquirer including authorization and settlement processing, interchange and resolution of member disputes. Many financial institutions are both issuers and acquirer. As issuer they maintain the cardholder relationship. As acquirers they maintain the merchant relationship. Merchant The Merchant can be virtually any company, which meets the qualification standards of MasterCard and/or Visa and an acquirer. Typical merchant business includes retail stores, restaurant, airlines, mail order companies, and health plans to name a few. MasterCard and Visa both require that the merchant be financially responsible and of good repute. The merchant has a written agreement with the acquirer to accept the Credit Cards as payment and to abide by the terms of the agreement. Definition of Various Credit Card and Terms: Gold Card Visa or MasterCard Credit Card with a maximum credit limit of USD 5000/-, and frequently higher. These cards have a higher annual fee than standard bank credit card, and are marketed to consumers with above average incomes. Sometimes called prestige card or premium cards.
Also, American Gold Card, which differs from bank, issued cards. American Express issues the card, but the credit line is arranged separately, by a bank acting as an agent for the card issuer, and varies among banks. American Express travel Related Services Co. issued the first gold cards in 1966 and has claimed a proprietary right to the name, a claim the court have not upheld. Secured Credit Card A Credit card backed by a deposit account is issued to marginally qualified borrowers. Affinity Card Credit Card promoted under a sponsoring agreement between an organization and a card-issuing bank. In exchange for making available its membership list, the sponsor receives some compensation from the issuing bank, usually part of issuer's net interest income. The issuer may waive annual fees for affinity cardholders, or even offer the card at a lower rate than ordinary bankcards. Co-branded Card Visa or MasterCard Credit card jointly sponsored by a bank and a retail merchant, such as departmental store. Co-branded cards may be issued at less cost than conventional retail private label cards, and give issuing bank access to new customers. Cardholders may be given incentives, such as discount on merchandise, rebates, or discounts off purchases. A co-branded card has a tie-in with a specific merchant rather than an association or professional group. It also can be used at other merchant. Contrast with Affinity cards. Islamic credit card Shariah laws of contract Three fundamental principles 1. Principles of Justice 2. Principles of transparency 3. Principles of Maslah Why Islamic credit card? • An alternative mode of payment for Muslims to make retail purchases. • To broaden the product offering of Islamic banks • To capture customer and niche market segment. • To compete with conventional banking products Definitions: • Debit card: A card issued to a customer with available balance in his account. • Charge card: A card that provides a credit facility up to a ceiling but not revolving. • Credit card: Revolving credit.
Benefits To customer -Convenience -Cash advance -Grace period
To the Bank -Customer satisfaction -Profit Mechanism -Network acceptance
[Source: Seminar-Dhaka Sheraton, August 20, 2001] DEFINITIONS 1. Affinity and Co-Branded Card Program A program created to offer the issuers the opportunity to issue affinity or co-branded cards as well as life-style or specialized custom-feature cards targeted at potential cardholders having common interests or membership in an organization. 2. Affiliate Member A type of MasterCard member that participates indirectly through an association of member or a Principal member in the activities of this corporation (for example: by issuing MasterCard cards or by accepting transaction records from merchants). 4. Bank Identification Number A unique number, of which the first position is 5, assigned by MasterCard international to identify member transactions and accounts. The BIN is the first six digits of a cardholder account number, and it is the second through seventh position of the 23-digit acquirer's reference number. Also known as the prefix. 4. Banknet Telecommunication Network The MasterCard worldwide telecommunication network. The primary "data transport" communications facility that links all MasterCard customers and MasterCard data processing centers into a single online financial network. 5. Card Validation Code A two-part security feature. CVC 1 is a 3-digit value encoded on tracks 1 and 2 in three contiguous positions in the "discretionary data" field of a magnetic stripe on a MasterCard. CVC2 differs from CVC1 and is indent-printed into the tamper-evident signature panel on the card. The CVC is intended to inhibit the alteration or misuse of card data and enhance the authentication of card. 5. Check Digit Routine An algorithm that is performed on the primary account number (PAN) to ensure that the numbers were not transposed or miss keyed. The result is the last position of the account number, or check digit.
6. Counterfeit Card An instrument or device embossed, printed, or otherwise bearing MasterCard marks, so as to purport to be a MasterCard card issued by a member or affiliate. But that is not a MasterCard card because the embossing or printing thereon was not authorized, or because the MasterCard card has been altered or re-fabricated, even though it was validly issued initially. 7. Chip A piece of silicon etched with electronic circuits. The microprocessor chip has an operating, a programming, and a data memory that allows internal processing to take place and provides additional storage capacity. 9. Chip Card (Smart Card) A Card with logic capabilities and data storage capabilities to enhance card functionality and security (for example pay telephone cards) 10. EMV A joint project started in 1993. To define global specification for chip-based credit and debit cards. The EMV specifications are divided into three parts- card specification, terminal specification, and application specification. The latest version of EMV is known as EMV2000, Integrated Circuit Card Specification for Payment System, Version 4.0 December 2000. Business Card In America: Below are credit cards tailored especially for businesses? •
Fleet Platinum Visa Business Credit Card
Save with a 0% introductory APR on purchases and balance transfers for up to six months, and a low variable rate, currently 10.99%, on purchases and balance transfers thereafter. Generous credit line up to $50,000, online account access, discounts on business products and services, free additional cards for employees, and more. •
Advanta Platinum Business MasterCard
No annual fee credit card especially for small businesses. Offers credit lines up $100,000. Get a 0% APR on purchases and balance transfers for the first 9 months you have the card. •
Blue for Business from American Express(r)
Blue for Business from American Express works much like a traditional credit card with revolving credit line. It offers a 2.9% introductory APR for 6 months, then a fixed 11.99% fixed rate afterwards. Unlike most Amex cards, there is no annual fee, and you can extend payments over time. Also offers business discounts at FedEx, Hertz, Hilton Hotels, Mobil and more. Of course, it also extends the perks American
Express is known for, such as travel accident insurance, car rental insurance, baggage loss insurance and more. •
American Express(r) Business Gold Card
This card offers basically the same features as the Blue for Business card above, although it has a little different payment arrangement. Like most American Express cards, you pay off your balance monthly, unless you use the Business Flex program, which lets you draw out payments over time, but at a higher APR than the card above. FEATURES OF AN IDEAL CREDIT CARDHOLDER From the point of view of the bank an ideal credit cardholder is the one having following features: • Uses the card extensively for purchasing merchandise and services, thus generating service charge revenue. • Makes use of the credit aspect of the card ideally by perpetually keeping his or her credit limit near maximum, thus generating interest. • Makes large infrequent purchase, thus reducing processing costs per transaction. Is not delinquent in making the minimum monthly payments and did not default and thus reducing bad debt losses. CREDIT CARD IN BANGLADESH In Bangladesh three banks have already introduced credit cards. These are Prime Bank, National Bank, Standard Chartered Grindlays Bank, American Express Bank issues charges cards only. Very recently Janata Bank a nationalized commercial bank in Bangladesh has also came up with its own smart card called "Ready Cash". A good completions swiftly growing up and it is expected that more banks national or international Government or private will enter the new place of business. Standard Chartered Grindlays Bank took a pioneering role in introducing credit cards in Bangladesh. It started acquiring Visa and MasterCard nearly 10 years back. In the first few years its operational area was very limited and concentrated only at the large hotels and restaurant. In 1997 the bank decided to launch full-scale card operation and very realistically brought a wide range of people under is service systems. It is now giving a wide range of card services thorough multifarious quality facilities. Standard Chartered Grindlays Bank issues only local credit card. It has Visa Silver, MasterCard Silver and MasterCard Gold. Prime Bank Limited obtained Principal Membership of Master Card International in the month of May 1999. Within a period of six months, the bank successfully launched MasterCard-Credit Card, which created a new dimension on its customer service and consumer financing. Prime Bank Limited is planning to expand their card facilities even further so that more and more people can be benefited from both the emotional and functional needs.
Name of the Institutions Establishment Period
Brand
Credit base
National Bank Ltd.
MasterCard
9000
6.72
MasterCard VISA
102000
76.12
March, 1997
Standard Chartered March, 199 (Grindlays)Bank
card Market Proportion (%)
Prime Bank Limited
November, 1999 MasterCard
10500
7.83
Vanik Bangladesh Ltd.
March, 1998
Vanik
8500
6.35
Dhaka Bank Ltd.
August, 2001
Vanik
4000
2.98
134000
100
Total
National Bank burst into the world of credit card in October 1997. It has Gold international and Gold local and Silver international and Silver local. National Bank Limited first issues International Card in our country. They started to issue local cards in the year of October 1999. Vanik a Sri Lanka - Bangladesh joint enterprise has also come forward with its won credit card service in recent time. It has started its operation in the year 1998. They have their own card called Vanik Card; one is known as Gold another is Classic. More and more people are getting interested in credit card facilities. To observe the success of the credit card operations of other banks, Premier Bank Ltd, Jamuna Bank Ltd., The City Bank Ltd. and Southeast Bank Ltd have taken measures introduce their own cards.
CHAPTER -3 ANALYSIS OF FORM COPPETITOR • • •
MasterCard VISA Vanik
MasterCard Membership: MasterCard is an association nearly 22,000-member financial institution worldwide. As part of its role in partnership with its members, MasterCard performs such central functions as: • Creating global and regional marketing programs and promotions to support the MasterCard brand • Providing expert systems including secure, reliable, state-of the art transaction processing • Developing new products, services and technologies • Setting and enforcing politics and standards for card use acceptance Benefits of MasterCard Membership: Payment cards are a proven means of generating profit and strengthening customer relationships. Additional benefits of MasterCard membership are access to: -• The known and globally accepted MasterCard brand • An integrated product and service offering that can customize to appeal to different types of customers • Reliable and cost-effective transaction processing Operation Banknet Telecommunication Network : Banknet, a global MasterCard telecommunications network, lets you communicate with other members and with MasterCard. It is used primarily send and receive ' authorization, clearing and settlement transactions.
The MasterCard Banknet provides the following benefits: ~ • • • protocol • • •
Flexibility, through an adaptive and reactive renting network Reliability, through rerouting capabilities and back up facility Efficiency, through a peer-to-peer architecture and pack let-switching Expandability with redesign Intelligence of a distributed network. Speed (average 2.1- second response time)
Standard Authorization Process: Here is the standard step-by-step procedure for authorizing the use of a MasterCard card. • Step 1: The cardholder gives the card to the card to the merchant • Step 2: The merchant starts the authorization process by either placing a call to acquirer or its agent entering the transaction into POS terminal • Step 3: The acquirer host computer system sends an authorization request message to the Banknet network through the acquirer MIP • Step 4: The Banknet network sends the authorization request message through to the issuer MIP. The issuer host computer (MasterCard Interface processor) • Step 5: The issuer host computer processes the authorization request and sends an authorization request response • Step 6: Banknet routes the response to the acquire agent or its agent, • Step 7: The acquirer or agent delivers the response to the merchant Standard Authorization Flow Card Holders
Merchant
Acquirer Host
M I P
Mastercar d Banknet Switch
M I P
Issue r Host
In its authorization request response, the issuers can advice the merchant to take one of the following actions: • Approve • Decline • Capture Card • Refer to Card Issue Card Program Business There are two categories of payment card business: issuing and acquiring. Many MasterCard members participate in both categories. An issuing member (issuer) handles all aspects of the cardholder relationship, including solicitation of cardholders and maintenance of cardholder's account. An acquiring member (acquirer) assumes the responsibilities of the merchant relationship, including merchant acquisitions and transactions settlement. Issuer information need: • Estimated number of cardholders. • Projected transaction volume and monetary amount. • Estimated proportion of cardholders who will revolve their account balance. • Appropriate interest rate and annual fees. • Products needs within your market. • Approximate number of people who will apply for quality for, and use their products. • Current market competition. • Cost of conduct card business. • Projected interchange and others sources of revenue. • Projected profit. Acquirer information needs: • Number of visitors of the to the geographic area and their country of origin • Estimated demographic spending • Estimated number of merchants • Average value of individual goods and services • Average customer purchase • Competitors' merchant discount rate possibilities of renting selling pointof-sale (POS) equipment • Legal issues • Market potentials • Average interchange and other cost • Available technology
Issuer income: •
Fee income Annual fee Supplemental card fee Cash advance fee Late payment fee Access limit fee Insufficient fund fee Enhancement fee Merchandising income
•
Interest income: Billing date calculation Average daily balance calculation Posting date calculation
•
Interchange Income: International Domestic On us transaction
•
Foreign exchange income
Card Issuance Expenditure: • • • •
Cost of funds Losses Fraud Credit Operation and services Transactional fees Cash disbursement accommodation fee Banknet access fee Authorization service charge
Acquire income • • • •
Merchant discount rate Cash disbursement accommodation fee Rental / sale or equipment and supplies Cost of fund
Acquirer business expenditure • Interchange fee • Cost of fund • Operation and processing expense • Merchant marketing and services • Losses
• •
Fraud Credit
Cardholder decision factors: (i) Price (ii) Geographical convenience (iii) International acceptances (iv) Bank affiliation / loyalty (v) Enhancement / card product differentiation (vi) Credit policy Merchant decision factors: (i) Geographical convenience (ii) Loyalty (iii) Pricing (iv) Payment scheduling and timing (v) Credit arrangement (vi) Service and support (vii) Additional service. Product 1. MasterCard Card: This general-purpose payment card offers unsurpassed global acceptance, letting customers purchase goods and services at participating merchants. 2. Gold MasterCard Card: This product targets an upscale market and delivers increased profitability as a result of greater frequency of use, higher spending, and larger average outstanding balance 4. MasterCard Business Card: This card offers members incremental revenue and relationship with corporate clients with members. 5. Co-Branded and Affinity Programs: This programs help issuer to segment to market and gain additional customers to incremental volume. 6. MasterCard Travelers Cheques: Sold by members and through Thomas Cook network locations around the world, travelers' cheques give consumers a secure, convenient alternative to carrying cash.
7. Maestro POS Debit Program: The only global, online point-of sales (POS) debit service with a single, unifying acceptance mark and brand; Maestro provides cardholders a payment alternative to cash or cheque that is quick, convenient and secure. Services: 1) MasterCard/Cirrus ATM Network A single network distinguished by the MasterCard and Cirrus marks, it offers worldwide cash access 24 hours a day, 365 a year, at Automatic Teller Machine (ATM) that permit cash withdrawals and other bank services. 2) Priority Cardholder Service: These are the Lost and Stolen Card Reporting (LSR), Emergency Card Replacement (ECR), and Emergency Cash Advance (EGA) service, which protect all MasterCard cardholders against improper use of their cards if their cards are lost or stolen, and provided critical assistance. 3) Master card global service: This will be a cost-effective telecommunications based service that makes emergency assistances for cardholders traveling outside their country more accessible. 4) The MasterCard/ Thomas Cook Alliance: Provides cardholders with access to routine and emergency travel-related service at Thomas Cook travel and bureaux de charge locating worldwide. 4) Card Enhancement service: Card enhancement provides valuable advantage and convenience for cardholder, offer members tools to maximize a portfolio's and build brand preference. These services include • Master Assist Travel Assistance Service • Master Phone Telephone Service • Product and Service Positioning.
VISA CARD STANDARD CHARTERED INTERNATIONAL VISA CREDIT CARD LAUNCH VISA Card: August 2002 PRODUCT Visa Classic Visa Gold NUMBER OF CARD 30,000 (Both classic and gold) PER MONTH CARD ISSUED Average 1,000 cards; in the year 2000 SCB issued about 12,000 cards. ISSUANCE / ELIGIBILITY CRITERIA • Cardholder between the age of 21 and 70 • Cardholder is a Bangladeshi national • Against RFCD Account* Balance (to be kept under lien) • Against Exporter's Retention Quota FCY Account* Balance (to be kept under lien) Maintained in any Bank. Card cannot be issued to more than top 3 executives of any exporting firm. All cards issued to the top executives of an exporting firm must be taken from only one issuing bank. CREDIT LIMIT Card Type
Minimum Limit
Maximum Limit
Visa Classic (426376)
US $ 500
US $ 4,500
Visa Gold
US $ 5,000
US $ 20,000
(426378)
LIEN AMOUNT Card Type Visa (426376)
Credit Limit Classic US $ 500 US $ 2,500
Lien Amount
LTV
US $ 556
90%
US $ 2,778
90%
Visa (426378)
US $ 4,500
US $ 5,000
90%
Gold US $ 5,000
US $ 5,556
90%
US$ 10,000
US$ 11,112
90%
US $ 20,000
US $ 22,223
90%
FEATURES / BENEFITS • Worldwide recognition and acceptance • Accepted in more than 150 countries around he world including Bangladesh. • Accepted at over 18m establishments worldwide including 3,000 merchant in BD • Accepted at over 556k ATMs worldwide displaying the Visa log • Accepted at over 398k visa member offices worldwide. • Easy and flexible credit and repayment options • Maximum 45 days interest free period • Monthly minimum repayment of 5% or US $10, whichever is greater • Instant cash advance up to 50% of the credit limit. Service & Price Guide International International Visa Gold Visa Classic General • Payment due date 15 days 15 days from statement date • Minimum amount due 5% or $10 whichever is higher • Cash advance 50% of credit Limit • Maximum interest free 45 days 45 days days available (incase of 100% payment of current balance on or before due date)
International Visa Gold
International Visa Classic
Fees • • •
Annual Fee (US $) Annual fee for Supplementary card (US $) Card replacement fee (US$)
120.00
70.00
60.00 15.00
35.00 15.00 (per card)
Other fees & charges (all cards) •
Finance charge on all transaction types, calculated from statement date till repayment date (calculated on average daily balance method) 2.5% per month (30 days) • Over limit charge (US $) 15.00 15.00 • Late payment charge (US $) 15.00 15.00 (If minimum due is not paid within Due Date) • Duplicate statement (US$) 5.00 5.00 • Returned cheque (US$) 15.00 15.00 • Outstation cheque processing (US $) 10.00 10.00 • Copy of sales voucher (US$) 15.00 15.00 (up to a maximum of 3 months) • Certificate charge (US$) 15.00 15.00 • Cash Advance fee 2.5% 2.5% •
Safe and secure • Photo-sign feature • Cardholder protection in case of loss/stolen report • 24-hour customer service • Supplementary cards • Four supplementary cards on one account • Separate spending limits for supplementary card(s) • Replacement of only supplementary card(s) in case of lost / stolen /damage.
VANIK Vanik a Sri Lanka - Bangladesh joint enterprise has also come forward with its won credit card service in recent time. It has started its operation in the year 1998. They have their own card called Vanik Card; one is known as Gold another is Classic. It has now 9000 (Apx.) cardholders in credit card market. Vanik- Dhaka Bank Dhaka Bank has introduced new products like Credit Card, ATM Card and Automatic Phone Banking service in selected branches in recent years. Dhaka Bank Credit Card has earned wide acceptability and reputation within a very short time. The bank has developed the process such mat it can deliver the Credit Card within only seven days against security: for unsecured card it takes only ten days. It has also networked at all
branches in Dhaka, Chittagong, Sylhet, Narayangonj and Savar. To offer any branch banking facility for the convenience of the customer. Dhaka Bank at a Glance: Opening of the Card Business August 2001 Human resource Executive -3, Non-executive -8 Card Base: 4000 (40% Gold Card and 60% Classic) Per month Issued Card: 230 (Average) Credit Limit: Tk. 10,000 to 49,000 = Classic Card Tk. 50,000 to 1,00,000 = Gold Card Customer Positioning: Bill payment in Petrol Pump, and Auto Debit facility (Grameen Phone, Citycell). They are also going to deal with North South University where the students will pay their fees in Vanik Credit Card. Marketing Activities: 20% of their income from Card goes to marketing expense. They have 15 DSAs and card selling through branch is one of their main Cards selling effort. They expand a large share for advertising of Cards.
Chapter 4 ANALYSIS OF INDUSTRY COMPETITOR • National Bank Limited • Standard Chartered Bank • Prime Bank Limited NATIONAL BANK LIMITED Establishment and Operation: National Bank Ltd. has been established in 1983. It is working as a well-established reputed commercial bank in Bangladesh. A long termed vision governing body and skilled human resources is the main reason to get this position. Chairman: Abu Taher Mia Managing Director
: Rafiqual Islam Khan
Company Secretary : Md. Abdur Rahman Sarker Objective: • To maximize the facilities to the client and shareholders in systematic way • Expand the multinational service in economic sector to reach the mass people • To ensure the maximum utilization of manpower by increasing efficiency and growth of productivity • To encourage saving attitude in different classes in the society • To gain confidence by easing the international transaction in internal trade • Analyzing the realistic demand by consumers' needs and provide short and long-term finance. • To activate the capital market by facilitating the banking system • Utilizing the latest technology for the best service to the customer. • To bring and strengthen banking discipline and thus creating the long-term compatibility with the customer by giving the best service • To improve the corporate image in home and abroad. Present Company Financial Position at a Glance:
Year
2002
2003
2004
(Tk. million) 2005
Authorized Capital
1000.00
1000.00
1000.00
1000.01
in
Paid up Capital
396.16
430.27
430.27
430.29
Income
1808.66
1871.54
2988.90
3285.01
Expenditure
1407.69
1667.95
2064.75
2268.4:
Net Profit before Tax
400.97
203.59
333.75
400.6
Assets/ Liabilities
33617.50
36545.28
47148.08
48732.1
Branches: 75 all over the country Card Division: i. Establishment: March 1997 ii. Human Resources: a. Executive : 3 b. Non Executive : 37 c. Technical : 3 Total : 43 iii. Card Base: a. Gold Card : 2000 b. Silver Card : 7000 Total Card : 9000 iv. Trend Analysis: Year
2002
2003
2004
Issued Card
2000
2700
1400
Surrendered Card
43
58
63
Income from Card (in million Tk.)
45.00
95.00
85.00
Marketing Expenditure (%of income)
10
5
2
POS Machine (no)
20
210
325
Merchant
125
425
700
iii. Target People to be served: Mainly salaried person Income Tk. 10000 or more selected for silver card, if other thing remain same. More than Tk. 55000 or more selected for gold card.
For international card the prospect cardholder have to open a RFCD account Card is issued in security basis. iv. Customer Positioning: • Price and Competitive offering is the key focal point of offering. NBL card has the following options: •
Acceptance: An international MasterCard from National Bank Limited is accepted at million of establishments across the world and home including 5star hotels, restaurant, departmental store and establishments offering diverse services.
• Security: When a NBL MasterCard holder automatically covered under Personal Accident Insurance against loss of life for as high as tk. 5 lakh in case of air travel free of cost. • Credit Cushion: It has revolving loan facility. You can avail a free credit facility from 15 days if you settle your full dues within payment due date. • In Case of Lost Card: If a Card holder lost his card he have to report to the Credit Card Division and they will provide a replacement card on payment of prescribed fees. Card Division is open 24 hours a day, 365 days a year. • Supplementary Card Facility: A Cardholder can get supplementary card for his relatives. The expense of supplementary card will charged to the account of principal cardholder. • Cash Advance: Cash drawing facility through approved channels is available in some cases to meet your emergency requirement at a prescribed fee. • Need not Pay Fluffy at a Time: NBL gives the opportunity of being flexible in repayment schedule suiting to convenience of cardholders. • No Interest or Charges: Payment in full within the payment due date and enjoy a free credit facility from 15 days to 45 days. vii. Merchant Commission: 2% to 3% (average 2.8%) on agreement basis. viii. Marketing Activities: a. Number of DSE : Nil b. Advertising Exp. : 5% c. Merchant Marketing: 3 people NBL maintain strong personal relation with its cardholders and merchant by giving prompt and customize service. They believe relationship marketing is key success to gain customer loyalty.
STANDARD CHARTERED BANK Establishment and Operation: The early years: Standard Chartered is named after two banks when merged in 1969. They were originally known as the Standard Bank of British South Africa and the Chartered Bank of India. Australia and China of the two banks, the Chartered Bank is the older having been founded in 1853 following the grant of a Royal Charter from Queen Victoria. Standard Chartered today: Today Standard Chartered is an international bank focused on the merging markets in which it has worked for over 100 years in Asia, Africa, the Middle East and Latin America. It has a network of over 500 offices in more than 50 countries, and its headquarter is in London. In Bangladesh: The Chattered Bank opened in Chittagong in 1948, which was, at the time, the eastern region of newly created Pakistan. The branch was opened mainly to facilitate the postwar re-establishment and expansion of South and South East Asia. The Bank opened its first branch in Dhaka in 1966 and shifted its headquarter from Chittagong to Dhaka after the birth of Republic of Bangladesh in 1971. At present, the bank has 28 branches over the country by acquiring ANZ Grindleys Bank (2000). Objective: Vision: “ To be renown as the top performing banking group serving Australia, New Zealand and in the international market.� Mission: Standard Chattered bank credit card division mission statement states, " Touch the power" SCB is a banking and financial services group that aims to be an outstanding financial institution providing a broad range of services in the banking and non-banking financial sectors. Values: The Bank holds the following values:
• To have a strong customer focus and to build a relationship based on integrity superior services and mutual benefit. • To strive for profit and sound growth. • To work as a team to serve the best interest of the group. • To work for continuous business innovations and improvements. • To value and respect people and make decisions based on merits. • To provide recognition and rewards on performance. Branches: 18 all over the country. Card Division: i. Establishment: March 1995 [ANZ Grindlays Bank] ii. Human Resources: a. Executive : 26 b. Non Executive : 300 c. Technical : 2 Total : 328 iii. Card Base: a. Gold b. Silver Total
: 10000 : 60000 : 700000
iv. Trend Analysis: Year
2003
2004
2005
Issued Card
6000
10000
38000
Surrendered Card
120
208
320
Income from Card (in million Tk.)
120.00
170.00
300.00
Marketing Expenditure (%of income)
20%
10%
15%
POS Machine (no)
220
350
500
Merchant
1400
2100
3500
Table: Annual Report of Standard Chartered Bank v. Target People to be Served: Segmentation profile: Geographic: Primarily located in major urban areas/ centers of the country i.e. Dhaka, Chittagong, Khulna, and Sylhet.
Demographic: Age: Income: Education:
18 to 70 years Monthly minimum 10,000.00 and/or above Graduates
Profession: Executives, govt. officials, defense personnel, housewives, entrepreneurs/ businessman. Psycho graphic: Life style: Mobile, sociable high achievers, motivated by status, style conscious, exposed of international media /lifestyle, English is first language after Bangla. Attitude-aspiration attracted to international offers, progressive, independent. v. Operational Structure of Card Service Division: The Cards Services Division (CSD) has six units namely, Risk Assessment, Collections, Merchant Services, Operation Services, Issuing Services continuously corking on improvement and wide acceptance of Standard Chartered cards. A manager who reports directly to the Head of Cards heads each of these units. The Head of Cards is responsible for overall operation of CSD. A sales team known as Direct Sales Agents, work alongside these units to build up the customer base. a. Risk Assessment: It is the section where the applications for new cards are received or limit enhancements are approved. This department determines eligibility of the applicants on the basis of the information provided by the applicant with the relevant documents. For example, if the applicant is a service holder then he/she has to submit his/her salary certificates, on the other hand, if he/she is a businessperson then he/she has to submit income tax return certificate. On the Basis of these documents, the risk assessment department screens out those applicants who are not eligible. This department uses the services of a consultancy firm (third Party) to assist in the verification process. Once the applicant is selected to be eligible for a credit card, an initial credit limit is set. This limit is extended on the basis of customer instruction after six months of use and is supported by the customer's financial capability. b. Collection: This department deals with the collection process. The collection process of credit card starts when the cardholder has failed to meet on or more contractual payments (i.e. minimum 10% payments) or exceeds the allocated credit limit or both in which case the cardholder becomes a delinquent. It therefore becomes the duty of the collections department to minimize the outstanding delinquent receivable and credit losses. The collection process involves the following: • Services (updating status). • Issues bills to customers and remind them the due date of payments. • Locates and reminds defaulters of their obligations. • Legal enforcement in case of grosses default.
c. Merchant Services: A merchant is a shop, outlet, hotel or restaurant that accepts credit card. This department, also known as Acquiring Department, brings in new merchants to expand the business of the credit cards. The basic job of this department is to encourage the sellers to accept the credit cards and if they agree they become merchants of Stan chat. This department also takes up promotional activities to boost up the transactions at the merchant stores and sets up POS terminals to make credit card transactions easier and quicker. d. Operational Services: Basically this department deals with the payments and data submission related to the credit cards. For each transaction the Operations Department processes the customer sales, prepares the bills for the customers, gives authorization to the merchants about the acceptability of the cards, deals with excess usage beyond credit limit and arranges to settle payments to the merchants. Among other tasks this department also prepares warning bulletin for merchant to prevent fraudulent transactions and take actions against any such case. e. Customer Services: Customer Services department deals with customers in the following manners: • Issuance of approval letters, decline letters, renewed letters, replacement letters and enhancement letters. • Issuance of credit cards and personal identification numbers (PIN). • Issuance of renewed and replacement cards and PINs. • Answering customer queries. • Mitigating discrepancies regarding bills/payments. • Handling customer instructions such as reporting lost card. f. Issuing Services: The Issuing Department of CSD has the responsibility and accountability of issuing debit cards for account holders while providing services through Nigh & Day Banking. Debit card is a plastic card by a bank to enable its customers with checks accounts to pay for goods and services at certain retail outlets by using the telephone network to debit their check accounts directly. Presently the Cards Service Division (CSD) of Stan-Chat bank is issuing debit card known as ACCESS Card. The Bank has installed Automated Teller Machines (ATM) almost two years ago for the benefit of its debit cardholders. From the ATM debit cardholders can withdraw cash withdraw cash against their account at any time of the day or night. At present (June 2000), Stan-Chat has issued around 55000 debit cards for its account holders. vi.
Customer Positioning:
According to the management the core features involves 3 C's C - clean leading C - convenient C - cash advantage Standard chartered credit Card comes with a winning combination of value- packed features and benefits.
• Wide acceptance: Standard chartered Credit Card is accepted at more than 3,500 outlets around the country.. You can use your Card for everyday purchases as well as for high value purchases. Our wide range of merchants include hotels, restaurants, airlines & travel agents, departmental stores, hospitals and diagnostic centers, jewelry shops, electronics and computer shops, leather goods, mobiles and internet service providers and many more. This number is increasing everyday to cater to your growing needs. • Easy Credit With Standard Chartered Credit Card you have the convenience to pay as little as 5% of your outstanding on the Card account every month, thus having the power and flexibility to plan your payments. • Instant Cash Advances Standard Chartered Credit Card gives you access to cash up to 50% of the credit limit. You can withdraw cash advances from all Standard Chartered ATM's around the country, thus having access to cash 24 hours a day. Besides, cash advance can also be taken from any of our branches across the country. • Safe and Secure You do not need to carry cash anymore if you are carrying Standard Chartered Credit Card. If you loose your card, you are protected against financial charges from the moment you report the loss to us. • Air Accident Insurance The Standard Chartered Credit Card gives you free air accident insurance coverage upto Tk. 100,000 (for Silver Card) or Tk. 500,000 (for Gold card). This coverage is also applicable for supplementary Cardholders. • Supplementary Card You may apply for Supplementary Card(s) for your spouse, parents, sisters, brothers, friends or children over 18 years of age. All charges incurred on the Supplementary Card(s) are reported on he monthly statement. Besides, for your peace of mind you can assign monthly spending limit on each supplementary Card. • Financial security in times of need Safety Net is designed to cover the cardholder’s credit card outstanding balance when he is unable to meet financial liabilities due to permanent total disability or death. Under these circumstances, the outstanding balance on credit card account will be waived. vii. Merchant Marketing Commission: A merchant is a shop, outlet, hotel or restaurant that accepts credit card. This department, also known as Acquiring Department, bringing in new merchant to expand the business of the credit cards. The basic job of this department is to encourage the sellers to accept the credit cards and if they agree they become merchants of SCB. This department also takes up promotional activities to boost up the transactions at the merchant stores and sets up POS terminals to make credit card
transactions easier and quicker. Initially, the Bank’s cards market was very small with only 29 merchants. Currently, the total number of merchants is around 3500. Commission is set up on agreement with merchant in bargaining system. It varies merchant in reputation and volume of sales. The rate falls from 1.55 to 4%. viii.
Marketing Activities: a) Number of DSE : 150 b) Advertising Exp. : 10% c) Merchant Marketing:5 People.
• Advertising: Awareness and intention development through advertising in print media, sign and billboard. • Public relation: SCB maintains a good public relation with valued Cardholders and merchants (Hotel Pan Pacific Sonargaon) • Special promotion Offer: The bank offer special to the cardholders time to time. Such as• Discount 5% to 20% in various renown restaurant and first food steres, i.e. Chillis Chineses &Thai Restaurant, La Villa, Royal Orchid, Hot Hut, Sajna, Santoor, Hotel Agraba etc.
• Discount in payment in Five Star Hotel i.e. Hotel Pan Pacific Sonargaon (20%) • Discount in payment in air ticket i.e. Malaysia Airlines • Special offer package tour at discount • Special gift for the bonus point cardholders. • Air insurance • Discount in different promotional period. ix. Innovation: Standard Chartered is going to market a special card, which have three facilities in a single card (Debit, Credit, ATM Facility). They found that there is a demand of the proposed card in Bangladesh and the cost of production will vary significantly. PRIME BANK LIMITED •
Background of the Company:
The present day banking structure has evolved over several decades. The far-reaching program of economic reform is being carried out at present towards efficient utilization of scarce resources and the development of private entrepreneurship. hi a fast changing business environment, financial intermediaries are gradually being left to be guided by market forces rather than regulation. Competition is strengthened by the entry of new and innovative providers of financial services through the development of Money Market and Capital Market. Under the ongoing financial liberalization program, Prime Bank Limited emerges as a bank in private sector to operate in the commercial arena of Bangladesh. Prime Bank Limited was established on 17th April 1995. It is a fall licensed scheduled Commercial Bank set up in the private sector in pursuance of the policy of the Government to liberalize Banking and Financial services. The Bank has made significant progress within a very short period owing to its competent Board of Directors, dynamic Management and introduction of various customer friendly deposit and loan schemes. PBL achieved to be one of the A- grade banks in the year 1997 as per CAMEL (Capital, Asset, Management, Earnings and Liquidity) rating according to Bangladesh Bank. •
Objective of PBL:
• Vision To be the most effective bank in terms of customer service, profitability and technology application • Mission PBL mission statement states, “Bank with a different" Prime Bank is a banking and financial services group that aims to be an outstanding financial institution providing a broad range of services in the banking and nonbanking financial sectors.
• •
Continue improvement in our business policies and procedures Cost reduction throw integration of technology at all levels
• Efforts and Focused On delivery of quality service in all are of banking activities with the aim to add increased value to shareholders investment and offer highest possible benefits to the customers. • Strategic Priorities To have sustained growth, broaden and improve range of products and services. •
Values The Bank holds the following values: • To have a strong customer focus and to build a relationship based on integrity Superior services and mutual benefit. • To work as a team to serve the best interest of the group. • To work for continuous business innovations and improvements. • To value and respect people and make decisions based on merits. • To provide recognition and rewards on performance. •
Corporate Profile Registered office
Cable Phone Telex Fax E-mail Web site Swift Chairman Managing Director Secretary Auditors & Co Chartered Accounts •
: Adamjee Court Annex Building-2 1 19-120, Motijheel C/A Dhaka-1000, Bangladesh : PRIMEBANK : 9567265,9570747-8 PABX : 642459 PRIME BJ : 88-02-9567230, 9560977, and 9566215 : Primebnk@bangla.net : www.prime-bank.com : PRBLBDDH : Qazi Saleemul Huq : M Shahjahan Bhuiyan : Manash Kumar Ghosh : Hoda Vasi Chowdhury & Co. Hawlader Yunus
Current Position
Prime bank Limited is a fast growing private sector Bank and the Bank is already at the top slot in terms of quality service to the customers and value addition for the shareholders. The Bank made satisfactory progress in all areas of business operation in 2002. Despite difficult circumstances, the Bank closed the year with a number of achievements. The Bank further expanded and consolidated its customer base in both of its core businesses and retail banking. The Bank retained its lead positing with the capital adequacy ratio of 12.43% as on December end 2002, which is well above the stipulated requirement of 8%.
The return on assets (ROA) was 3.73% well above the industry average, during the year under review, the network of branches increased to 27 with a branch at Madhabdi to focus on rural development and deepen our stake in agricultural sector. We are very selective in locating branches so that customers can be better served. This year we have already planned to add a few branches to our network, which will give the Bank strategic advantage in terms of operation and business potential. In 2002, the Bank consolidated its position and retained its product line and financial services aimed at various target groups. In a challenging market conditions, the Bank Continued to provide more innovative products and better service to retain the market share. (in million Tk.) YEAR
2001
Authorized Capital
1000.00
1000
1000
1000
4000
Paid up Capital
500.00
600
700
1000
1400
Reserve Fund
362.92
448.93
602.89
815.89
1055.98
Equity Fund
1258.26
1526.41
1781.86
2239.80
2808.00
13259.87
16902.29
20483.23
28069.24
36022.46
Loans & Advances
9074.94
12686.85
16492.22
23219.67
31916.11
Investment
1730.74
1996.23
2749.71
3083.81
3939.50
Income
1100.14
1196.20
1593.69
1970.37
2406.43
Expenditure
448.36
592.28
592.28
824.23
886.09
Net Profit before Tax
705.09
696.84
769.91
1064.24
1200.83
Fixed Assets
174.27
218.50
265.17
321.68
372.12
15736.94
19358.93
24249.13
32361.62
41506.29
613
730
777
894
1024
3.38%
2.38%
1.72%
2.16%
1.54%
Deposits
Assets/ Liabilities Number of Employees Return on Asset (%)
2002
2003
2004
Fig: Current financial position at a glance (Source: Annual report, 2005)
2005
Asset and Liability committee (ALCO) The management of Bank's asset and liability is managed by ALCO at Head Office. The committee generally maps the strategy for liquidity management, reduction of interest rate risk, market risk and maturity gap. In addition, ALCO provides the Bank continued access to different funds including inter bank fund so that liquidity risk is low. The pricing policy for different kinds of liability and asset is also determined in this committee. The Bank ensures its available funds to meet obligation of maintaining Statutory Liquidity Ratio (SLR) and investment of liquid assets in a profitable manner. As on 31st December 2005, PBL had property and assets of Tk. 41,506.29 million as detailed below: 2005 Taka 273,115,879
2006 Taka 203,753,581
3,077,524,975
2,043,945,640
403,023,839
1,653,795,077
3,939,495,059
3,083,812,400
31,916,112,508
23,219,673,305
Other asstes
372,118,317
321,681,640
Non-Banking Assets
344,898,190
654,955,145
41,506,288,767
32,361,616,788
Cash in hand Balance with Bangladesh Bank Balance with other Banks Money at Call Investment in Liquid Assets
Total
Prime Bank Limited always gives emphasis on maintaining sufficient liquidity and cash flows to ensure uninterrupted customer services. As on 31 December 2005 our ratio of liquid assets to total asset was 21.89%. Loans and Advances With a view to improving the quality and soundness of loan portfolio, credit risk management methods were undated in 2005. The Bank is now applying a new system o credit risk assessment and lending procedures by stricter separation of responsibilities between risk assessments and lending decisions and monitoring functions. The Bank monitors its exposure to particular sectors of economy on an ongoing basis.
As at the end of 2002, total loans and advances amounted to Tk. 12,686.85 million up by 40% compared to Tk. 9,074.94 million in 2001. As before, the Bank continued to extend credit facilities to trade Finance, Project Loans, Working Capital and consumer credit etc. the Bank has all along encouraged small business group and supported Small and Medium Enterprises (SME). Agriculture and It sectors both got priority from the Bank in line with national interest, the Bank had also extended long term loan to a number of projects under syndicated financing arrangement with banks and financial institutions. Portfolios of Loans and advances as on December 31, 2005 is given below: SI. No 1.
Agriculture
Sector
Tk. in million
% of total loans
2.
Large and medium Scale Industry
2,832.55
22.33
3.
Working Capital
1,604.13
12.64%
4.
Export Finance
1,675.55
13.32%
5.
Commercial Lending
4,244.05
33.45%
6.
House Building Loan
392.12
3.09%
7.
Small and Medium Enterprise
114.70
0.90%
8.
Consumer Credit Scheme
473.57
3.73%
9.
Others
1,291.19
10.18%
Total
12,686.85
100%
Automation in Banking Operation Technology integration for automation of business process and procedures is an integral part of our customer service. Since the very beginning, we have made conscious efforts for induction and up gradation of information technology at various levels to gain competitive edge over the others. Process of selecting top quality banking software was in an advanced stage and the Bank had already short listed three solutions from internationally reputed firms. We needed high performance, scalable online banking software so that customer service was rendered more efficiently and new products were deployed with little loss of time. In that exercise, we were looking into a total solution to our needs. Putting multiple delivery channels had also been considered for extra capacity building in customer service by doing away with limitations of time and space.
All our branches are now in an automated environment as far as customer transactions are concerned and excepting a few branches in locations not accessible by lease line all other branches are under a wide area network. For remittance and fund transfer purpose, our customers could take the advantage of online facility. We had already undertaken initiatives to look into the possibility of connectivity outside BTTB to keep our online service at a desired level and without interruptions. We are pleased to inform you that our website (www.primebank.com) was frequently visited from home and abroad. The site was always updated with current information about our services and products. Rate of interest on various deposit products sere also available in ten website. The bank was incorporated in Bangladesh as a banking company under companies Act 1994. It has 44 branches and a booth located at Dhaka Club, Dhaka, all over Bangladesh. It carries out all the banking activities through its branches in Bangladesh. Out of the above, two branches of the bank are run under Islamic Shariah, the modus operandi of which is substantially different from other branches run on commercial conventional basis. The bank is listed with the Dhaka and Chittagong Stock Exchanges as a Publicly Quoted company for its general class of shares. Branches: 44 all over the country. Card Division:
I. Prime Bank Card Service: • • • • • •
Establishment : 18th November, 1999 Home Base : Adamjee Court Annexe Building-2 119-120, Motijheel C/A, Dhaka-1000 ain Business : Issuance of credit cards and acquisition of merchants. Issued Brand of Credit Card: MasterCard Initial Investment : Taka 15 million
II. Human Resources: a. Executive b. Non Executive c. Technical Total
:2 : 37 : 1 : 39
III. Product Assortment: International Card: • Gold Travel Quota [credit limit $ 1,500- $3,000] • Gold RFCD [on deposit balance $3,000- $5,000] • Gold Retain Quota [$6,000- $20,000] • Silver Travel Quota [credit limit $ 1,000] • Silver RFCD Local Card: • Gold Board/ Employee [Tk. 25,000- 5,00,000] • Gold VIP [Tk. 1,00,000- 5,00,000] • Gold Normal [Tk. 50,000- 5,00,000] • Silver Padma [Tk. 30,000- 50,000] • Silver Meghna [Tk. 20,000- 29,000] • Silver Jamuna [Tk. 10,000-19,000] iv. Card Base: Card Type:
International
Local
Total
a. Gold
841
4067
4908
b. Silver
468
5049
5517
Total
1309
9116
10425
v.
Per month average Card issued
: 350
vi. Trend Analysis:
Issued Card
2003 4131
Surrendered Card
2004 4114
2005 3058
528
1424
Advance in credit card (Tk. in million)
250.60
313.90
379.70
Income from Card (Tk. in million.)
10.30
32.70
50.70
Marketing Expenditure (% of income)
1.00
1.80
2.50
Profit (Tk. in million.)
2.70
25.10
27.40
Outstanding amount (Tk. in million.)
60.10
93.00
121.30
POS Machine (no)
0
10
173
Merchant (no)
10
120
350
vii. Target People to be Served: Prime Bank Focuses the following group of people for our Card Marketing: • • • • • • • • • • • •
Employee, Executives, and the Directors of Banks, Insurance and other type of Financial Institutions Companies. Directors and Executives of export oriented Garments Industries Members of renowned Clubs and Societies Doctors and Engineers Employees of Foreign and Multinational companies Directors of 100% Export Oriented Leather and other Industries University and College Teachers Employees of Mobile Telephone Service Provider i.e. Grameen phones, SHEBA Telecom, Aktel etc. Govt. high officials (DS and above) Renowned businessmen in the society Members of Chamber of Commerce and Industries Defense officers High officials of renowned NGOs, International Voluntary Organization.
Priority: • Our first priority is our existing valued account holders of our Branches. • Employees of the reputed organizations who are getting at least Tk.10,000/per month. Employees of Bank or financial institutions. • Corporate Clients of Prime Bank. viii. Operational Structure of Card Service Division: The Card Division of Prime Bank Limited is divided into eight departments are as follows: i. Marketing Dept. ii. Credit Analysis Dept. iii. Operating Dept. iv. Accounting Dept. v. Recovery Dept. vi. Acquiring Dept. vii. International Card Monitoring viii. Customer Services Dept. The work in these sections turn by turn. The started learning experience from Operation Department from 6th July and ended in Marketing on 6th october January. And in the mean time, I had traveled all the sections in due time.
1. Marketing Card Marketing is one of the important departments in Card Business. PBL has a marketing team who works as agent on commission basis called them DSA (Direct Sales Agent). The DSA's bring card applications from potential and prospective cardholders and submit the application form to the credit analysis department. The job of DSA's is limited to this function only. Usually they contact the prospective customers over phone to make appointment and then they visit the customers. At the end of month they get the commission according to the number of approved applications from the Card management. Verification: The first job of the Credit Analysis Department is verification of card application and authentication of customer's financial base and status. To verify the application and customer we have set rules, which need to be strictly followed. 2. Credit Analysis: After proper verification of full documentation the verification officers submit the application to the credit analysis officer to cross check the information. The officer sets the credit limit according to the set rules and cardholder choice. The officer hands over the application for making business proposal. The proposals get approved / rejected by the management. The approved applications are handed over to the operation department for next processing. 3. Operation Section: Operation department deals with the cardholder very closely. In fact, Operation Dept. is the heart of card Business. The job of the operation dept is described in detail bellow: a. Data Capture: b. End of Day Processing c. Embossing File: d. Card Delivery: e. Card Activation f. Purchase through Cards: MasterCard cards issued from any issuer of the world. The shop can accept card in three ways: • Manual Authorization: • Electronic Authorization: • Floor Limit Authorization: g. Settlement: i. On-Us-Card: Cardholder
Shop
Bank
Cardholder Billing
ii. Not-On-Us-Card: Cardholder
Shop
Acquiring Bank
Master Card
Int'l Issuing Bank
Cardholder Billing
Cardholder payment
4. Accounts Dept: • Receiving Cheque/ IBCA / ETCA, from various branches, collect and posting them in the various card accounts. • Check EDP report if found any discrepancy take necessary action immediately. • As per EDP report prepare all kinds of voucher and posting them in the proper ledger. • RFCD a/c maintains properly and collects adequate fund from RFCD a/c for various card a/c from various branches. • Reconciliation with ID / FAD. • Settlement of Local card transaction bill with NBL / SCB. • Settlement of International card bill and reconciliation with ID and MasterCard Int'l. • Daily Merchant payment procedure through IBAC or Pay order issue. • Maintenance all kinds of late payment, Excess limit charge and other dispute charges etc. • Monthly and quarterly MIS report submit to the MC and our Management. 5. Recovery Section: Collection of outstanding amount from the delinquent cardholders is sometimes very much crucial and difficult. However, the total collection process in the card division is detailed bellow: • Telephonic contact with each of defaulter • Preparing MIS on overdue accounts of the Card. • Preparing reminders letter for all defaulters. • Corresponding with other branches of our Bank to follow up their defaulters. • Legal Procedure. • Serving legal notice to the defaulters. • Physical visits to the delinquent cardholders. • Appear at the court for legal procedures. • MIS for dishonored cheques. • Preparing CL for overdue card accounts. 6. Acquiring and Merchant Marketing: • Making new Merchants • Merchant Services • Preparation of proposal for Merchant set-up • Installation of POS / Manual machines at the merchant end. • Settlement of Disputed transactions at merchant end. • Delivery to merchant payment. • MATCH (Member Alert to Control High-Risk Merchants) report to MasterCard Int'l. 7. International Card Monitoring: A. Endorsement of Passport on issuance of Travel Quota Cards, Reporting on spending amount to branches for realization and on word reporting to
Bangladesh Bank. B. Travel Quota Card Transaction monitoring. C. Reporting to Bangladesh Bank on issuance each retention Quota Card. D. Monthly Summary report of all International card Accounts. E. Monthly of Int'l cards issued against balance of RFCD A/C. 8. Customer Service: A. Answer all types of customer quires relating to application to cards, filling up application form, transactions, payments, A/C balance, service charges, dispute, and problems faced at merchant end, etc. B. Receive cardholder's documents such as: Application forms, request for enhancement of card limit, change of card type, lost & found report, replacement of cards, request for PIN, acknowledgement slips, change of address/designation and auto debit instructions, waiver of service charges, cancellation of card account, transaction disputes, IBCA from branches, etc. All papers are forward to the relevant sections at the end of the day. C. Receive of cheques and forward to the Account Dept. at the end of the day after proper record keeping. D. Prepare proposals for waiver of various charges i.e late payment penalty, interest and excess limit charges upon cardholder's written request and proper justification. Prepare proposal for exemption of annual fees. E. Persuade cardholders to continue card who apply for closure of card account. F. Prepare proposals for cancellation of card account. G. Follow up customer queries relating to various disputes. H. Reply to cardholder's queries in written or over phone. I. Help cardholders in understanding the rules of interest calculation. J. Follow up cardholder payment pattern and remind them over phone to make the payment with in due date. K. Maintain individual register for all customer letters and application forms received. viii.
Customer Positioning:
Three unique reasons to own Prime bank's MasterCard Credit Card • Reduction on annual MasterCard fee and other charges • Flexible payment term
•
Enhanced cash advance facilities
Other Features and Benefits of Prime Bank's credit cards: A. B. C. D. E. F. G. H. I. J. K. L. M. N. O.
Revolving credit limit. No account. Convenient-easy purchase /repayment. Security - robbery/if list. Prestigious. First photo card. Minimum payment and also easy payment. No lean or no charge. Additional card issuing facility. World-class brand. Minimum interest. Service centers are in most important places. Minimum 20 days and maximum 50 days interest free period. Plastic money. Convenient way of bill payment.
PROCESS NEEDED TO BE FULFILLED TO HAVE A CARD The Master Card of Prime Bank Limited can be obtained through direct sales agent or through the bank branch network. The prime criterion for getting the card is the regular income of the clients. It is not mandatory to have an account of the client to get a Master Card. After receiving the application, generally it takes three days for issuing the card. But sometimes more time is required for further verifications. Two types of cards issued by Prime Bank Limited based on the security: • Unsecured Card • Secured Card. Unsecured Card: In case of unsecured card Prime Bank Limited don't take any security (as collateral) against the issuance of the cards. Secured Card: But in case of secured card the bank requires security against the card. These may include share certificate, Sonchoipotro, FDR, Business solvency, Telephone number, Third party guarantee etc. The customer can use the Card at all the merchant locations that display the Master Card sticker. The card will be valid usually for two years and then it can be renewed. SPECIAL FEATURES OF MASTER CARD: •
Prime Bank Ensures High Level of Security by inserting the Photograph of the cardholder on the Card.
20 to 50 days credit form the date of transaction. When cardholder receives monthly statement, he can either choose to pay in mil or just minimum due amount
shown on the statement. No interest is charged if he pays in full within payment due date. •
It provides services 24 hours a day, 365 days a year and the service is provided all over the world.
•
It does not require any joining or administrative fees.
•
There is a bonus provision for annual fees in the case of local card. If card user accumulates 10,000 Prime Bank Bonus Point for his Gold Card or 8,000 Bonus Point his Silver Card in a year then he can enjoy Card without fees (Tk. 507- purchase: 1 Bonus point).
•
There is another provision for International card as well. If he accumulates 20,000 Prime Bank Bonus Point for his Gold Card or, 10,000 Bonus Point for his Silver Card in a year then he enjoy our Card without fees ($ 1 purchase: 1 Bonus).
•
Dhaka-Bangkok-Dhaka (Business Class) Air ticket: if the cardholder can accumulate 100000 Bonus point.
•
Dhaka-Katmandu-Dhaka (Economy Class) Air ticket: if the cardholder can accumulate 50000 Bonus point.
•
Dhaka-Cox's Bazaar-Dhaka (Business Class) Air ticket: if the cardholder can accumulate 25000 Bonus point. ft Cash advance facilities.
•
MasterCard accepts 1,39,00,000 locations in all over the world.
•
The cardholders have access to cash from more than 200000 Master Card ATM locations and have 20 million POS (point of sale) terminals all over the world. TERMS & CONDITIONS OF MASTER CARD CREDIT CARD:
There are some terms and conditions of the Prime Bank Limited Master Card. The following terms and conditions are included in the agreement: 1. "PBL" means Prime Bank Limited 2. "ATM" mans any Automated Teller Machine or Terminal.
3. "Card" Means any Card issued by PBL bearing the name MasterCard or the service mark of MasterCard (whether or not it also bears the name or mark of any other person or entitles) to the principal Cardholder/Supplementary Cardholder for use on their Card Account and includes any such Card issued in replacement or renewal thereof. All Cards issued for use on Card Account remain the property of PBL at all times. The issue of a Card is conditional upon the comprehensive and truthful completion of PBL's Credit card Application Form and PBL's utmost satisfaction on the information furnished in Credit Card Application Form. 4. "Cardholder" where used in relation to any Card means the person being eligible for entering into a contract who has been issued a card to operate a Card Account and where used in any other case means Principal Cardholder or any Supplementary Cardholder. 5."Card Account" in relation to any Card means the account designated and maintained by PBL in relation to that Card provided that where only one account is designated and maintained by PBL for all the Cards issued to the Principal Cardholder and every Supplementary Cardholder, any reference to Card Account shall mean that Account accessed by Cardholder's Card. 6. "Card Account Statement" means a statement or statements by PBL of the amount charged debited and/or paid to Card account(s) stated therein. Card Account Statement shall detail all transactions processed to the Card Account during the statement period. 7. "Card Transaction" means an advance or payment made in any currency or by Travelers Cheques or other forms representing an amount of any currency but shall not include any withdrawals from any account with PBL. 8. "Cash Advance" means an advance or payment made in any currency or by Travelers Cheques or other forms representing an amount of any currency but shall not include any withdrawals from any account with PBL. 9. "MasterCard" means MasterCard International Incorporated. 10. "Merchant" means any person or entity with whom PBL or any member of MasterCard has a subsisting agreement relating to the use and or acceptance of the Card in payment to such person of entity whether for goods, services or changes incurred and or to obtain Cash Advances for such person or entity. 11. "Outstanding Balance " in relation to any Card Account Statement means the outstanding balance in favor of PBL as stated therein or where more than one outstanding balances is stated therein the total of all the outstanding balance stated herein. 12. "PIN" in relation to any Card means the Personal Identification Number assigned by PBL to that Card which will be used for accessing Cardholder's nominated Card Account through an ATM.
13."Principal Cardholder" means the person to whom a Card is issued on his application alone.
Fig: Gold Card
Fig: Silver Card
14."Supplementary Cardholder" means the person (other then the Principal Cardholder) to whom a Card is issued on the application or request of the Principal Cardholder whether alone or joining with such person. 15."Payment Due Date" means the last date of payment and is usually 15 days from the date of statement, if not otherwise mentioned, and specified on the Card Account Statement. At least, the Minimum Payment Due (excluding the overdue amount) must be paid by the Cardholder within the due date at Card Division of PBL's Head Office. Any overdue/over limit amount must be paid immediately. 16."Company" means when used in relation to a Cardholder shall include (I) Company of which such Cardholder is Director or Employee, (ii) Business Enterprise of which such Cardholder is the sole proprietor and (iii) Firm of which such Cardholder is a Partner. FACILITIES OF THE CARD The card provides the following facilities: • • •
The Cardholder can use the card to make payments to the merchants against purchase of all goods and services. The card can be used for availing cash advances from any branches of Prime Bank Limited or any member of MasterCard of any Merchant authorized to make cash advances; as may be agreed upon by Prime Bank Limited. The card can be used for availing cash advances by the use of the Card on any ATM of Prime Bank Limited or of MasterCard. 20% cash can be withdrawn from the ATM terminals.
CREDIT LIMIT •
Prime Bank Limited may sanction any credit limit, i.e., the maximum of credit available to the card holder which can be accessed at any time and can terminate or modify or vary such facilities or credit limit without prior notice.
•
Unless the credit limit is imposed in relation to in relation to each Card Account, the imposed credit limit is the limit applicable to the aggregate of the balances due to PBL on all Card Accounts of the Principal cardholder and all supplementary cardholders.
•
Notwithstanding, any credit limit that may be sanctioned by PBL in its absolute discretion authorize and allow any Card Transaction even though the Credit Limit would be or has been exceeded or refuse to make or approve any cash advance or authorize or approve any Card transaction Notwithstanding that the credit limit is not exceeded.
LOSS OF CARD OR DISCLOSURE OF PIN: •
The Cardholder shall not disclose any person the PIN assigned to the Card immediately upon learning that the Card is stolen or the PIN is disclosed. The Cardholder shall report it to PBL followed by written confirmation containing Cardholder's signature on the said loss. The Cardholder shall at the request of the PBL furnish PBL with a statutory declaration in such a form as PBL may require and F.I.R7 Police report and /or any other information as PBL may require. But if the lost card is found or recovered, the cardholder shall not make use of the card but shall immediately cut it into halves and return the same to PBL.
•
Notwithstanding the loss on the theft of any card or disclosure of the PIN in respect of any Card, PBL charge and debit the Card Account the amount of each and every Card Transaction made of effective before written confirmation by the Cardholder of such loss, theft or disclosure is received by PBL. Replacement of Card may be made to the Cardholder on payment of required charges in this regard.
CHARGES TO CARD ACCOUNT: PBL may charge and debit the Card Account the amount of each and every Card Transaction made or effected, whether by the Cardholder or any other person with or without the Cardholder's knowledge or authority notwithstanding that the balance due to PBL on the Card Account may as a consequence of any such charge or debit exceeding any credit limit that may be sanctioned. For existing Fees and Service Charges, one may contact Card Division at PBL's Head office or any Branch of PBL. CASH ADVANCE FEE In respect of each Cash Advance made through the use of any Card and or the PIN, PBL charge and debit the Card Account a fee as decided from time to time.
PAYMENT: • The following stated there in shall be paid to the Card Division at PBL's Head office within the payment due date in respect of each Card Account Statement: a. At least the aggregate of the minimum payments specified as such in the Card Account Statement. b. The amount, if any, by which the outstanding balances stated therein exceeds the credit limit of the Card Account Statement. •
If an outstanding balance stated in Card Account statement is not paid in full within the Payment Due Date stated therein, PBL may charge and debit the Card Account calculated on a daily basis, subject to minimum monthly finance charge of 2.50% or such other sum as may be determined from time to time by s PBL without notice.
•
On the amount of each and every charges stated in that Card Account Statement as from the date when such charge was incurred or was posted to the Card Account, as PBL may elect, to the billing date stated in that Card Account Statement and on the entire outstanding balance from the billing date stated in that Card Account Statement until the full payment of the outstanding is made. Priority 1st 2nd 3rd 4th 5th 6th
Payment applied for Any over limit amount Any over due amount Cash Advances Service Charges Fees Purchase
Marketing: a. Number of DSAs : 30 Person b. Advertising Exp. : 2.50 % of Income c. Merchant Marketing : 2 Person Advertising: Awareness and intention development through advertisement in print media, sign and billboard. Public Relation: SCB Maintain a good public relation with valued Cardholders and Merchants (Hotel Pan Pacific Sonargaon) Special Promotional Offer: The bank offer special to its Cardholders time to time. Such as-
• Proposal Analysis Matrix Presently Credit card limits are fixed in a way not based on any Matrix. The task may be made easy, scientific, uniform and systematic if a Matrix is developed and approved for assessing the Credit card limit taking into consideration of the important criteria comprising credit worthiness of the Cardholders. Prompt delivery of service is also a prerequisite to make a break through in the highly competitive market. As such, the approving authority should also be well defined and precise so that decision is taken very promptly within the defined and approved Matrix. With this end in view the following Matrix has been developed for scoring the Credit Card limit proposals: Points For Points for Income Points For Other considerations Profession Level (Monthly Income) Fixed Tk 6,000-Tk 10,000- 1 . Ownership of house in 1 salaried 40 Municipal area (in own name- 5 person 10 Tk 10,001-Tk parents / Joint name- 5) 5 5 15,000-41 2. Ownership of car Tk l5,001-Tk 2 20,000-42 3. Ownership of T & T telephone Tk 20,00 1-Tk 2 2 Professional 25,000-43 4. Customer for our Bank i.e having other credit card Doctors, 5 Tk 25,001-Tk facilities, which are regulr or 2 Engineers, 30,000-44 considerable deposit Bankers, 5 Chartered Tk 30,001-Tk 5. Having credit card of other Accounts 40,000-45 Bank. 5 Tk 40,00 50,000-46
1-Tk 6. Ave. bank Balance of last 6 2 months. 2 Tk 50,001-Tk 7. Personal Suitability 60,000-47 2 8. Income Tax Assessment up Tk 60,001-Tk to date 2 70,000-48 9. Holding Passport 2 Tk 60,001-Tk 70,000-48 10. Spouse earns Tk 70,001-Tk 11. Club Members 80,000-49 12. Married Tk 80,001 and above-50 13. Age:
4
45-60 years : 4 35-45 years: 3 25-35 years: 2 20-25 years:1
10
50
40
Points for profession 10 Points for Income level 50 Points for other consideration____ 40 Total points 100 B.
Assessment
of
Credit
1. 2. 3. 4. 5. 6.
Total Points Scored 50 51 52 53 54 55
Card
limits
based
Credit Limit -
Tk. 10,000 Tk. 12,000 Tk. 14,000 Tk. 16,000 Tk. 17,000 Tk. 18,000
on
the
points
scored:
7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33.
56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81-85 86-100 •
-
Tk. 20,000 Tk. 21,000 Tk. 22,000 Tk. 24,000 Tk. 25,000 Tk. 27,000 Tk. 30,000 Tk. 32,000 Tk. 34,000 Tk. 35,000 Tk. 37,000 Tk. 38,000 Tk. 40,000 Tk. 42,000 Tk. 44,000 Tk. 46,000 Tk. 48,000 Tk. 50,000 Tk. 52,000 Tk. 54,00 Tk. 55,000 Tk. 56,000 Tk. 57,000 Tk. 59,000 Tk. 60,000 Tk. 61, 000-Tk 75,000 Tk. 76,000 -Tk 100,000
Before sanctioning credit limit necessary due diligence shall have to be done. • Residence / office of the applicant may be visited by the concerned Bank's representative, if required. • Effort should be m86ade to collect credit information on he applicant informally as fare as possible. • In special cases personal interview of he applicant may be arranged with high ups of credit Card Division to collect more information and to know him more intensely. • Credit Card limit for more than Tk. 1,00,000 shall be given in very special and deserving cases having scored more than 90. Limit above Tk 1 lac have be approved by head office credit committee. • For enhancement of credit card limit, utilization o the existing limit and repayment behavior of the Card Holder is evaluated. • The customer who frequently utilizes the full limit and repayment is also as per schedule; his limit may be enhanced up to 25% without approach of the customer and which may be advised to the customer.
Problems of' PBL Card Division: • • • • • • • • • • • • • • •
Vision and mission is not well specified. The market is not well defined. Inter-section relation is not well correlated Lack of proper marketing knowledge Always in a pressure from the higher authority. Lack of proper management Lack of aggressive marketing activities Lack of motivation Switching tendency of the employees Improper logistic support Lack of technical person Lack o training facilities Decisions taken by higher authority do not match with the implementer's view. Slow return on investment Lack of technical support (software, hardware, tele-communication etc.)
CHAPTER-5 Analysis of Secondary Data • In issuing NBL takes defensive strategy. They issue card on security and strong recommendation than any other bank. They take special facility and services to their existing cardholders. They do not feel to issue as much as possible rather best service to the customer. NBL cards are sold on pull marketing activities like, corporate bonding, -branch offering, signboard and advertisement at print media. In the year 2003, 2004 and 2005 NBL issued approximately 2000, 2700 and 1400 cards and now have no DSE. • Standard Chartered takes aggressive marketing activities to capture the market. Already it proves itself as a market leader. It already has DSA. In the year 2003,2004 and 2005 SCB issued approximately 6000, 10000, 38000 MasterCard, which proves their growth (40% and 73.7%). • Prime Bank issues card in other defensive way, but they do not follow as NBL. PBL basically offer salaried persons. The DSEs are newly introduced in marketing activities. In 2003, 2004 and 2005 PBL issued 4131,4114 and 3058 cards.
Fig: Number of Credit Card ogf Prime bank in the year 2003, 2004and 2005 • In case of surrendered NBL says that every year they loose 3% of the total cardholders. On the bother hand SCB reduces it in 2% by giving better and competitive services. But the rate of PBL surrendered is higher than the others. In the year 2004 and 2005 numbers of surrendered cards are 5287 and 1424. • NBL proves efficiency in cards by increasing its income with less number of cards comparisons with competitors. On the other hand SCB shows a pioneer market leader advantage with efficiency and strong marketing knowledge on cards. PBL income from card shows the potentiality to improve in this field. On the other hand, PBL expenditure is now a headache of higher authority. The fixed cost is (35 X 12)= Tk.42 million and variable cost is Tk. 6 million now. In each contrary, income has to increase.
• Marketing expenditure of NBL and SCB is a competitive approach to hit PBL. PBL on other hand expense very little on marketing expenditure and promotional campaign.
Fig: Number of POS Machine and Merchant of each Bank. • As a market leader SCB explore merchant and POS terminal. It has already 500 POS machine and 3500 merchants over the country. On the other hand NBL has 325 POS machine and 600 merchants. But PBL is growing as their competitor. Already it has 173 POS machine and 350 merchants in Dhaka city within two years. Comparative Evaluation of Fees and Charges of Credit Card of PBL with the fees charged by other different Companies on Credit Card Market: Prime Bank Ltd. (PBL)
Standard Chartered National Bank Ltd. Bank (SCB) (NBL)
Classic Card $40
Gold Card
International
Gold Card $80
Local
Tk.2,000
Tk.1,000
Annual Fees (Primary Card)
$120
Silver Gold Card Card $70 $90
Silver Card $90
Tk.3500
Tk.1750
Tk.1500
Tk.2000
Replacement Card International
$20
$20
$15
$15
$50
$35
Local
Tk.500
Tk300
Tk500
Tk.200
Tk.1000
Tk500
$60
$35
$90
$50
Tk.600
Tk.1000
Tk.500
Tk.1000
$800
Supplementary Card Annual Fee First Free Card(Local) Second Card and Tk.1,000 Onward(Local)
Free
Card Replacement International
$20
$20
$15
$15
$50
$35
Local
Tk.500
Tk.300
Tk.500
Tk.200
Tk.1000
Tk.500
International
$10
$10
$15
$15
$10
$10
Local
Tk.500
Tk.500
Tk.500
Tk.200
Tk.500
Tk.500
PIN Replacement
Late Fee
Payment
International
$10
$10
$15
$15
$15
$15
Local
Tk.300
Tk.200
Tk.500
$300
Tk.500
Tk.350
International
$20
$15
$15
$15
$15
$15
Local
Tk.500
Tk.300
Tk.500
Tk.300
Tk. 500
Tk350
Over Limit fee
Emergency Cash Tk.150, or 3%, of 2.5% of the Iterest @ Advance Facility Advance amount Withdrawal amount month whichever is higher. Interest Rate (per Month) International
2.5%
2.5%
2.5%
2.5%
2.5%
2% on Daily 2% Basis
per
Local
2.5%
2.5%
2.5%
2.5%
2%
2%
International
20%
15%
50% of Credit limit
Local
50%
50%
50% of Credit limit
5% of the Credit limit plus amount excess of Credit limit.
Return Cheque Fee International $10
$10
$15
$15
$10
$10
Local
Tk350
Tk250
T500
Tk500
Tk100
Tk100
Statement Retrival Fee International
$5
$5
$5
$5
$5
$5
Local
Tk50
Tk50
Tk50
Tk50
Tk50
Tk50
Cheque Collection International
$20
$15
$10
$10
$15
$15
Local
Tk250
Tk250
Tk100
Tk100
Tk100
Tk100
Cash Limit
Strength and Weakness Analysis: Ranking 1-5, 5=Strong Position, ………….1=Weak Position PBL
SCB
NBL
1.
Card 5 5 4
4 3 4
5 3 5 5 5
1 4 3 4 1
2.
a. Developed Technology 3 b. Credit Card 3 c. Charges and Interest 3 Reasonable d. Photo 5 e. Credit Processing Time 5 f. Card Base 3 g. Faster Approval 3 h. Innovation 4 Service
4 5 5
4 4 4
3.
a. Cash Advance Facilities b. ATM Service c. Customer Service Merchant Marketing
4 2 3
3 5 5
5 4 4
4 3 4
4.
a. Good Merchant Relation b. Faster Payment c. Faster Approval Marketing
5.
a. Promotional Activities b. Direct Sales Effort c. Public Relation d. New Marketing Targeting e. Aggressive Marketing Strategy Financial Strength
4 3 3 5 3 3
5 5 5 3 5 5
3 1 4 1 1 3
6.
Managerial Ability 3 2 3
5 4 5
2 3 2
7.
a. Risk Analysis b. Managerial Capability c. Number of Employees Corporate Profile
8.
a. Financial Resources b. Reinforce Business Capability c. Non-classified Loan d. Corporate image e. Product Assortment Customer Positioning
3 3 5 4 3 3
5 5 3 5 5 4
2 3 4 3 4 3
CHAPTER-6 Market Survey (Gathering Primary Data) • • •
Card Market Analysis Merchant Market Analysis
Factors Considered by the Cardholders: 1. Dependent variables: Percentage of average expenditure in credit card transaction; 2. Independent variables: •
Preference in buying goods
•
Ranking of transaction medium in preference 3. In credit card preference • •
Insufficient retail stores number Problem in operation in transaction
• • • •
Retailers are reluctant in credit card transaction Problem in credit card payment Easy transaction in cash rather than credit card Fraud transaction may occur
4. More credit card other than PBL 5. Preference in MasterCard categories 6. Comparison MasterCard Vs VISA / Vanik MasterCard: • Has more retail access. • More ATM access. • Charges are lower. • Transaction is easier than VISA / Vanik. 7. Comparison PBL credit cards with NBL card facilitate. Prime Bank Credit card: • • • • • • • • •
Has more retail access (than NBL). Ease operation. Has more cash advance facilities. Have different types of cards and its limit. Charges and interests are reasonable. Ease in bill payment system. Customer service is better. Is welcomed by the retailers. Gives more satisfaction (than NBL).
8. Comparison PBL credit card with Standard Chattered credit card facilities. Prime Bank credit card • • • • • • • • •
Has more retail access (then SCB) Ease operation. Has more cash advance facilities. Have different types of cards and its limit. Charges and interests are reasonable. Ease in bill payment system. Customer service is better. Is welcomed by the retailers. Gives more satisfaction (than SCB).
For Merchant: •
Dependent variables: Percentage of selling goods in terms of credit card. • Independent variables: • Preference in selling goods • Ranking of transaction medium preference in selling
1. Problems of credit card: • • • • •
Late bill Payment Rate of commission Slow approval Lack of logistic support Less profitability
2. Percentage of selling goods in terms of credit card 3. Compare MasterCard with VISA/ Vanik MasterCard: • • •
Technology is better than VISA/ Vanik Faster approval Profitability is more Cardholders are more in numbers than VISA/ Vanik
4. Compare Prime Bank Credit facilities with National Bank Credit Card facilities PBL Credit Card:
• • • •
• Machine online is better than NBL • Better payment system • Service is better • Upgraded technology Machine types (of line) are convenient Less time taking for authorization Rate of commission is less Mode of payment is satisfactory than NBL
5. Compare Prime Bank Card facilities with Standard Chartered facilities PBL Credit Card: • Machine online is better than SCB • Better payment system • Service is better • Upgraded technology • Machine types (of line) are convenient • Less time taking for authorization • Rate of commission is less • Mode of payment is satisfactory than SCB METHODOLOGY Literature Review of Credit Card
Discussion with DM
Interviewing Industry Expert
Secondary data analysis
Qualitative Research
Environmental Context of The Problem
Management Decision Problem
Marketing Research Problem
Approach to the Problem Objective/ theoretical Foundation
Analytical Model: Descriptive, Mathematical
Research Questions
Hypotheses
Single Cross-Sectional Research Design Survey Research
Characteristics/ Factors influencing Research Design
Telephone Interviewing
Personal Interviewing
Non-comperative Scaling Techinique: Structure Questionnaire
Stratified Sampling with SRS
Data Collection
Data Coding & Conversion (Metric To Categorical)
Data Analysis Frequency Distribution Cross Tabulation Parametric Test N-way ANOVA Multiple Regressions Findings and Result
Recommendation Research Design: (i) Kind of information to be obtain: Information relevant to the problem derived from competitor of the PBL card, merchant, and cardholders. (ii) Method of administrating the questionnaire: Forward and backward linkage types of questionnaire are designed to collect the data. Personal interview is the main technique of collection date from merchant, cardholder and competitors (NBL and SCB). (iii) Scaling technique: • Likert scaling. Source of Data: Data collection is based on primary and secondary data and also requires in depth observation of the phenomenon to be investigated in order to achieve the objectives test of hypothesis.
(iv) Types of questionnaire: Open-ended questionnaire and close-ended questionnaire (Multiple Dichotomous) Time - 5 minutes Length - 2 page [each for cardholder and Merchant] Approaches to the problem
and
Model Building: Verbal Model: Analysis the competitor’s performance in the credit card market that effect the customer client satisfaction comparing with PBL card Geographical Model PBL NBL SCB
Offerings > Product > Price > Place > Promotion
Competitive Advantage
Mathematical Model: Y= a + bx Where, Y= Preference of PEL card a = Competitive performance b = Weight of independent variables x = Independent variable
Performance of PBL card
Rate of credit card charge
Statistical tools and Models: Cardholder Analysis Multiples Regression: Y=B0+B1X1+B2X2+B3X3.....................+BkXk+ e Estimated equation--A Y=a+blxl+b2x2+b3x3+b4x4+b5x5 + b6x6 Where, Dependent variables: y = Percentage expenditure in credit card a = is the estimator of he Bo b = coefficient of weight Independent variables: Credit Card hasx1 = Insufficient retail stores number x2 = Problem in operation in transaction x3 = Retailers are reluctant in credit card transaction x4 = Problem in credit card payment x5 = High interest and charges x6 = Easy transaction in cash rather than credit card x7 = Fraud transaction may occur Factor analysis Xi = Ai1F1+ Ai2F2+ Ai3F3+ ......................... + Ai9F9 + ViUi Where, Xj AIJ F Vj
= i th standardized variables = Standardized multiple regression co-efficient of variables on common Factor j = Common factor = Standardized regression co-efficient of variables i on Unique factor Ui = Unique factor for variables
Variables: Comparison MasterCard with VISA / Vanik V1: Master card has mean retail access than VISA / Vanik V2: MasterCard has more ATM access than VISA / Vanik V3: MasterCard charges are lower than VISA / Vanik V4: MasterCard Transaction is easier than VISA / Vanik. Comparison Prime Bank credit card with National Bank credit card facilitiesV1: PBL card has more retail access then NBL V2: PBL machine online is better than NBL V3: PBL payment system is better than NBL V4: PBL service is better than NBL V5: PBL has upgraded technology than NBL V6: PBL machine types (of line) are convenient than NBL V7: PBL takes less time for authorization than NBL V8: PBL rate of commission is less than NBL V9: PBL mode of payment is satisfactory than NBL Comparison Prime Bank credit card with Standard Chartered credit card facilities: V1: PBL card has more retail access then SCB V2: PBL machine online is better than SCB V3: PBL payment system is better than SCB V4: PBL service is better than SCB V5: PBL has upgraded technology than SCB V6: PBL machine types (of line) are convenient than SCB V7: PBL takes less time for authorization than SCB V8: PBL rate of commission is less than SCB V9: PBL mode of payment is satisfactory than SCB
Frequency Analysis: Transaction form; Rank cash; Rank cheque; Rank credit card; Rank debit card. Factors affects in credit card expenditure: Insufficient retail store numbers; Problems in operation in transaction; Retailers are reluctant in credit card; Problem in credit card payment; High interest and charges; Easy transaction in cash rather than credit card; Fraud transaction may occur; More credit can other than PBL; Rank gold card; Rank silver card; Rank debit and credit facilities in a single. MasterCard Vs VISA / Vanik: More retail access; More ATM access; Low charges; Easy operation in transaction. PBL Vs NBL / SCB: More retail access; Easy operation in transaction; More cash advance facilities; Different types of cards and limit; Charges and interest are reasonable; Easy bill payment; Better customer service; Retailers welcome the card; Gives more satisfaction. Personal Identification of the Respondent: Expense in credit card; Age limit; Educational background; Occupation; Income limit.
Merchant Analysis Multiple Regression Analysis: Multiples Regression Model: Y=Bo+B1X1+B2X2+B3X3.....................+BkXk +e Estimated equation— Y = a+b1x1+b2x2+b3x3+b4x4+b5x5 Where, Dependent variables: y = Percentage of sales in credit card a = is the estimator of he Bo b = coefficient of weight Independent variable: Problems of credit card: X1 = Bill payment is late X2 = Rate of commission have to surrendered X3 = Approval is slow X4 = Logistic support is not adequate X5 = Shrunk Profitability. Factor Analysis Comparison master card will VISA / Vanik V1: MasterCard technology is better than VISA/ Vanik V2: MasterCard approval is faster than VISA/ Vanik V3: MasterCard is more profitable than VISA/ Vanik V4: MasterCard has more cardholders than VISA/ Vani Companion Prime Bank facilities with National Bank: V1: PBL machine online is better than NBL V2: PBL payment system is better than NBL V3: PBL service is better than NBL V4: PBL technology is unguarded than NBL V5: PBL machine types (of line) are convenient than NE V6.� PBL takes less time for authorization than NBL V7: PBL rate of commission is less than NBL V8: PBL mode of payment is satisfactory than NBL Comparison Prime Bank facilities with Standard Chartered Bank
V1: PBL machine online is better than SCB V2: PBL payment system is better than SCB V3: PBL service is better than SCB V4: PBL technology is unguarded than SCB V5: PBL machine types (of line) are convenient than SCI V6: PBL takes less time for authorization than SCB V7: PBL rate of commission is less than SCB V8: PBL mode of payment is satisfactory than SCB Frequency Analysis: Transaction form; Rank cash; Rank cheque; Rank credit card; Rank credit. Factors affect in credit card selling: Late bill payment; Rate of commission surrendered; Slow approval; Lack of logistic support; Less profitability; Sales in credit card. MasterCard Vs VISA / Vanik: Better technology; Faster approval; More profitability; More cardholders; Machine online is better. PBL Vs NBL/ SCB Better payment system; Services are better; Upgraded technology; Machine types (of line) are better; Less time taking for authorization; Rate of commission is less; Mode of payment is satisfactory. Operationalization and Measurement of variable Cardholder Analysis: Multiple Regression Analysis: Dependent variables: Metric in nature Independent variable: Metric in nature Measurement is done by using 5 point Likert scale) Strongly disagree = 1, Disagree =2, Indifferent = 3, Agree = 4,Strongly agree = 5 Factor analysis: Variable (measurement is done by using by 5 point Likert scale) Merchant Analysis: Dependent variables: Metric in nature Independent variable: Metric in nature Measurement is done by using 5 point Likert Scale
SOURCE OF DATA Secondary data: Secondary data has been collected from the Annual report, brochure, and in-depth interview with the employer working in the card division of different organization. Primary Data: Primary data has been collected from the respondents (cardholders merchant) by questionnaire. Sample Design (1) Population: • All credit cardholders in Bangladesh • All merchant engage in credit card transaction. (2) Sample frame: • •
Cardholders of PBL with having one or more than one competitor’s card PBL merchant having transaction relation with competitor.
(3) Sample technique: • •
Individual credit cardholder Individual merchant
Extend- Dhaka city Time-July 5 to October 5, 2006 (3) Sampling technique: • •
Non-probability and convenience sampling (for cardholders) Bayesian technique (selecting sample depending or prior information of merchants)
(4) Sample size:
50 cardholder 20 Merchant
(5) Executing the sampling process: • •
Collection of data knocking in the working place and personal relation (for cardholders) Collection address and information of the merchant and collect responses.
QUESTIONNAIRE AND INSTRUMENT •
Open-ended and close-ended questionnaire (both for cardholders and merchants)
•
Data analysis has done by using SPSS-10.0 and
•
Microsoft Excel
LIMITATION: • • • • • • • • • • • • •
Sufficient data is not available to measure the problem. Competitors are reluctant to provide adequate data when they knew I am doing internee in Prime Bank. Respondents got it difficult to response the scaling techniques. Lack of lab facilities made troubles to work smoothly. The working time from 9 am to 5 pm made trouble to me to get information, analysis and report writing, Respondents are tremendously busy. So they gave me a little time to work with them. As per my desire we do not get sufficient respondents (Prime Bank cardholders who have least one other Bank’s credit card). Respondent’s responses biased for some response of the questionnaire and social views. In fact I tried only for SPSS software but other software might be used for its betterment. To get 50 responses of cardholders and 20 responses of merchants makes a heavy load for a single person like me. Credit card is a new product in Bangladesh, so respondents do not know much of it. Comparison analysis sometime made the respondents biased influences of corporate image. Prime Bank card operation is a newly (3 years) launched phenomenon. So it is tough to compare with other competitors that are well established in the market.
Findings And Discussion: Analysis of Primary Data Cardholders Cross-Tabulation Statistics: Chi-square test of user status and level of customer satisfaction. Hypothesis Testing: Customers with high user status of Credit Card hold low level of satisfaction and vice-versa. Hypotheses: H0: No association between user status of Credit Card and level of customer satisfaction. H1: Association between user status of Credit Card and level of customer satisfaction. α ( Level of significance ) =.05 Explanation: Since the value of significance level ( at .05 level ) is greater than the probability of the Chi-square test & other cross tabulation statistics (.ooo), we can conclude that the H0 can be rejected and H1 can be accepted. So there is association between user status and the level of satisfaction of customer. The approximate Chi-Square is 16.881 with 6 degrees of freedom, which is significant at 0.05 level. The value of KMO Statistics (0.346) is denotes lower calculation of factor analysis. Multiple Regressions: A statistical technique that simultaneously develops a mathematical relationship between two or more independent variables and an internal scaled dependent variables. Ho: there is no relation existing between the dependent variable and independent variable(s). From the SPSS output our significance is 0.045 is less than the significance of 0.05, the null hypothesis of equal population means is rejected. Moreover, Multiple Regression equation— ^ Y = a+b1x1+b2x2+……………….+bk xk = 1.492 + 0.237X1+ 0.756X2 + (-0.109)X3 + (-0.0089)X4+ (-0.541)X5 + (0.0040)X6 + (-0.0737) X7 Here, a = 1 .492 which indicates that regression line will cross the y-axis at point 1 .492. bi = 0.237 which indicates that if Xi (insufficient retail store number) change by one unit then y (percentage in credit card expense) will change by 0.237 unit.
This condition will be same for all other variables as per output. From the co-efficient co-relation matrix we found, Fraud transaction may occur has a positive co-relation with Problem in operation in transaction (0.053), Easy transaction in cash rather than credit card (0.075), High interest and charges (0.3 10) is one of the main reason for credit card expense. In other hand, Easy transaction in cash other them credit card has positive co-relation with Problem in credit card payment (0.019), High interest and charges (0.206), Retailers are reluctant in credit card transaction (0.090) and Insufficient retail store number (0.371) denotes that the cash is in a better competitive position them credit card. Factor Analysis: MasterCard Vs Visa / Vanik: • Based on Initial Eigenvalue we have chosen two factors and from the communalities matrix we can see that Vi and V2 are highly co-related. On the other hand Vs and ¥4 are highly co-related which we can see in both factors. Though our null hypothesis is ‘The variables are not co-related in the population’ so the null hypothesis is rejected. •
From the co-relation we found two factors:
1. More access (Vi and V2) 2. Charges and transaction (V3 and V4) •
There are 4 (66.0%) non-redundant residuals with absolute value >0.05.
PBL Vs NBL •
Based on initial Eigenvalue we have chosen four factors (Greater than 1.00) Factor 1: Vi ,V7 and V9 Factor 2: V2and V4 Factor 3 : V5 and V6 So the hypothesis is rejected.
• The appropriate Chi-Square is 114.160 with 36 degrees of freedom, which is significant (0.000) at the 0.05 level. The values of KMO statistics (0.586) •
There are 18 (50%) non-redundant residuals with absolute values.
PBL Vs SCB Based on initial Eigenvalue we have chosen four factors: Factor 1: V, ,V2 Factor 2 :V5 and V9 Factor 3 : Vs, Ve and Vg Factor 4 : V4 and V7
So the hypothesis is rejected • The approximate Chi-Square is 74.688 with 36 degrees of freedom. Which is significant (0.000) at 0.05 level. The value of KMO statistics 0.485 may denote Factor analysis may not be perfect. •
There are 19 (52%) non-redundant residuals with absolute value. Merchant Analysis
Multiple Regressions: Ho = there is no relation exist between the dependent variables and independent variable(s). From SPSS output our significance is 0.961 is more then the significance of 0.05, the null hypothesis of equal population means is not rejected. More over, multiple regression equationY = a + b1x1+ b2 x2.........................bkxk = 3.549 + 0.357 x1+ (-0.200) x2 + (-0.115) x3 + (-0.081) X4+ (-0.203) x5 Here, a = 3.549 which indicates that regression line will cross the Y axis at point 3.549. bi = 0.357xi which indicates that if Xi (Late bill payment) change by one unit than Y (percentage in credit card selling) will change by 0.357 unit. This condition will be same for all other variables as per output. Factor Analysis MasterCard vs. VISA/Vanik: Based on initial Eigenvalue we have chosen only one factor from the communalities matrix, we can see all the variable are correlated. The approximate Chi-Square is 10.545 with 6 degrees of freedom, which is not significant at 0.05 level. The value of KMO statistics (0.568) denotes lower calculation of factor analysis. There are 6 (100.00%) non redundant residuals with absolute values > 0.05 PBL Vs NBL Based on initial Eigenvalue we have chosen 3 factor from the communalities matrix we can see thatFactor 1: Vi Factor 2 : V2 , V7 and V8 Factor 3 : V3 ,V4 V5 and V6 The approximate chi-square is 56.544 with 28 degrees of freedom, which is significant at 0.05 level. The value of KMO statistics (0.606) denotes significance the analysis. These are 18 (64.0%) non-redundant with absolute value.
PBL Vs SCB Based on initial Eigenvalue we have chosen 3 factor from the communalities matrix we can see thatFactor 1: V4 Factor 2: V? Factor 3: Vi V2 V3 V5 and V6 The approximate chi-square is 75.757 with 28 degrees of freedom, which is significant (0.000) at 0.05 level. The value of KMO statistics (0.696) denotes significance the analysis. These are 16 (57.0%) non-redundant residuals with absolute value. FINDING (Primary Data) Analysis of cardholder: • 74 % people prefer cash as a form of transaction and only 26% in credit. •
78.7% of respondent believe that insufficient number of retail outlets is a problem of credit card and another 21.3% strongly agree in this matter.
•
80.9% of valid respondent remarked that credit card has a problem in transaction and another 10.6% strongly agreed such statement.
•
In reluctance of credit card by retailers 40% of the respondent agreed on the statement, in other case 36% are indifferent.
•
42% of respondent face problem in bill payment. In the other side 14% tick strongly disagrees and 38% are in indifferent.
•
In ‘high rate of interest and charges’ of credit card 63.8% of the respondent strongly agreed on the statement and 63.8% moderately agreed on the statement.
•
70.2% of total valid percentage agrees upon that cash is easier transaction form that credit card. But in other side 14.9% disagreed on such statement.
•
100% of valid respondent believe that fraud transaction is a problem of credit card, where 72.3% agreed on the statement and 27.7% strongly agreed on such statement.
• Preference of card in ranking: Preference Rank l
Rank 2
Rank 3
Total
Gold
2
45
3
50
Silver
0
4
46
50
Debit and credit
48
1
1
50
Analysis of form competitor •
72% of respondent agreed that master card has more retail access than VISA or Vanik. On the other hand 12% disagreed on such matter.
•
58% of total respondent agreed that MasterCard has more ATM access than VISA or Vanik. But 40% of respondent are indifferent such comment.
•
54% respondent mentioned than MasterCard’s charges are lower than VISA or Vanik In the other contrary 42% respondent indifferent and 4% remerged disagree in such statement.
•
In case of ‘easy operation in transaction’ 28% disagreed that MasterCard is not easier than Visa or Vanik in transaction. Again 20% agreed on such statement. On the other hand 42% are indifferent in such statement.
Analysis of Industry Competitor: PBL Vs NBL •
14% of respondents agreed upon that PBL have more retail access than NBL. On the other hand 26% of total respondent disagreed on such statement. The largest number 30(60%) remarked indifferent.
•
94% of respondent do not find any different in operation of transaction.
•
In cash advance facilities, 32% agreed upon that PBL is better. OB the other had 22% disagreed on such statement. 40% are indifferent.
•
20% respondent agreed that PBL offers different types of card and limits than NBL 4% disagreed on such statement. On the other hand 74% are in different.
•
PBL ‘charges and interest are reasonable’ in such statement 50% respondent disagreed on such statement and another 50% were indifferent.
•
10% of respondent agree upon that PBL bill payment is easier. But 90% of respondent are indifferent is such factor.
•
PBL provides better customer service has been agreed by 44% of respondent. But 52% are indifferent between PBL and NBL in this factor.
•
8% respondent remarked that PBL and is well accepted by the retailers, But 90% of total respondent are indifferent.
•
20% of respondent replied PBL card give more satisfaction than NBL. 78% do not feel any difference between PBL and NBL in satisfaction.
PBL Vs SCB •
88% respondents disagreed that PBL has more retail access than SCB in which 12% strongly disagree on such statement.
•
62% respondent agreed that SCB card is easier in transaction than PBL. On the other hand 38% are indifferent.
•
40% respondent agreed on SCB has more cash advance facilities. In other contrary 52% are indifferent.
•
PBL offers different types of cards and limits -in such reply 14% agreed on such statement, 60% disagreed and 26% are in neutral.
•
50% of the respondent does not agree that PBL offers reasonable charges and interest than SCB. On the other hand 44% are indifferent..
•
72% of the respondent reply that there is no significant difference between PBL and SCB in bill payment system. But 22% says that SCB is better than PBL.
•
78% of total respondent remarked that PBL customer service is not better than SCB, which 14% strongly disagreed on PBL service quality.
•
24% retailer welcome SCB card rather PBL card other (76%) are indifferent.
•
Only 2% respondent reply that PBL card give more satisfaction that SCB. On the other hand 56% says that SCB card give more satisfaction than PBL.
•
Merchant:
•
In preference of the transaction from 100% of the respondents (merchant) like cash rather than credit.
•
Preference of ranking of transaction form. Rank 1
Rank 2
Rank 3
Rank 4
Cash
19
0
1
0
Cheque
0
1
18
1
Credit Card
0
17
2
1
Credit
0
2
1
17
Factor affect in credit card selling: •
90% of the respondent reply that late bill payment is one of the major cause not to prefer in credit card selling, in which 30% of he respondent strongly agree on such statement. Only 10% disagree on such statement.
•
Rate of commission is other problem of selling in credit card transaction. 70% of the respondents agree upon such statement, where in 30% strongly agreed on such remark. On the other kind 20% replied disagree.
•
60% of total responses show that slow approval is a problem of credit (card) selling in which 25% strongly agree on such problem. 10% remarks disagree from their belief.
•
Lack of logistic support is a complicated head. 50% of the respondents are indifferent in such comment. On the other head 25% agree and 25% respondents disagree on such statement.
•
Selling in credit card shrunk profitability. 85% respondents agree upon such statement in which 30% strongly agree on such opinion. Only 10% disagreed on such statement.
•
Sales in credit card: Below 5%
15%(of Total respondent)
5% to 10%
20%
10% to 20%
45%
20% to More
20%
Analysis of Form Competitor •
40% respondents believe that MasterCard technology is better than VISA or Vanik. In the other hand 40% respondent disagree upon such statement, where in 5% strongly disagree.
•
MasterCard provide faster approval than VISA / Vanik, in such statement only 35% merchant agreed upon such issue. But 45% respondents do not agree upon such statement in which 10% remark strongly disagrees.
•
11.30% of respondent agreed that MasterCard provide more profit than VISA / Vanik. On the other hand 15% disagree upon such comment.
•
70% of total respondent believe that MasterCard cardholder are more in numbers than the VISA / Vanik.
Analysis of Industry Competitor: PBL Vs NBL •
65% respondent (merchant) agrees upon than PBL payment system is better, where in 10% strongly recommend on PBL.
•
PBL service is better than NBL, 55% respondent agreed on such remark, in which 10% strongly agree upon such remark. Only 25% are not satisfied with this opinion.
•
Only 20% respondents believe that PBL uses upgraded technology. On the other hand 10% believe cast for opposition.
•
30% respondents believe that PBL machine (of line) are better than NBL. Only 5% disagreed on such remark, and 65% are indifferent.
•
25% respondent found that PBL give less time in authorization than NBL. But 10% disagree on such remark. On the other hand 65% are indifferent.
•
In case of commission 75% respondent reply that there is no difference between PBL and NBL. But 10% agree upon and 15% disagree upon such statement.
•
40% are satisfactory on mode of payment of PBL rather than NBL. But 15% believe in negative.
PBL Vs SCB: •
65% respondents believe that SCB machine online is better than PBL. Only 10% believe that PBL is better.
•
35% of total respondent remark that PBL payment system is better than SCB. Where in 5% strongly agree upon such statement, On the other hand 45% disagreed on such statement. 70% respondent reply PBL service is not upto the mark of SCB, where in 20% strongly neglected. Only 10% remarked on better PBL service.
• •
PBL technology is upgraded than SCB, in such statement 75% do not agree upon such statement. Only 15% reply positive on such remark.
•
50% of total respondent do not find any difference between PBL and SCB machine of line. 20% favor PBL and 30% favor SCB.
•
In taking authorization 30% believe PBL takes less time then SCB. On the other hand 25% favor SCB rather PBL. But the largest portion 45% does not find any difference.
•
‘Rate of commission’ is a competitive scenario in card merchant market. 25% of respondent agree upon that PBL commission is less than SCB where in 10% strongly agreed on such statement. On the other hand 30% remark on SCB. But 45% do not find any difference.
•
In mode of payment 35% remark favorably to PBL rather than SCB, in which 5% strongly favor to PBL. On the other hand 20% disagree in such statement. The largest portion (45%) does not find any difference in PBL and SCB payment system.
CHAPTER-7 Managerial Implication • • •
PBL card division should set a specific mission which is clear and achievable. Then they should analysis their resources and potentiality to set specific mission towards that mission. They need to define their market first. In cardholders analysis they should identify the potential cardholders who will easily use card in their purpose. In such case income, social status and family background should need to take account.
•
Inter-section co-ordinate is very poor. Most of the division taken does not know by others. Sometimes problem arise in one end do not want to solve by others. Each section feels that they do the best and complicated work and others do not. In such contrary rotation or changes of table or end will helpful to know others works. They should need to motivate in a single team towards the corporate objective and finally they must need to have transparency between the sections.
•
To avoid extra pressure it is needed to have transparency between division and higher authority by which they can know the real scenario and take strategic decision.
•
There is a tendency of employees to switch for better options. In some cases they switch to the competitors organization. In such cases it is really harmful for the organization. To reduce switching of employees PBL should motivate its employees to feel PBL as their organization. In this case special financial, social and personal benefits need to increase and job security and environment needs to be improved.
•
To increase efficiency of the executives PBL needs to provide training facilities by which they can run the division efficiently.
•
To increase efficiency and better customer service PBL need to increase better logistic support like providing better software, improve better telecommunication network and other technical support.
•
Credit card is a new habit in our country. So its current rate of return is very low. Some of us compare credit banking with other retail banking and get frustrated. Though its present is not well, but in future it has a tremendous opportunity. So PBL should focus on future need to get prepare itself for the next time context.
For Cardholders •
• •
• • • • • •
• •
• •
• •
• •
•
In preference of transaction form Cash is most preferred by the cardholders. There might be some advantages in cash rather than credit card. So the demand of credit card might have to be increased by developing awareness campaigns and focuses the importance, facilities that may not get from the cash transaction. Among the different cards (debit, ATM. credit) there is a great demand of debit card. Social factors are one of the main causes of such effect. In our society very few people like to financial on credit card. Facilities provided by debit card may include in credit card. Makes those group conveniences in auto-debit formula from his personal account. In other option, PBL can introduce debit card facilities in a single card, which, SCB is already going to launch few months later. Insufficient retail number is a great problem for cardholders who wish to pay cards. In such case PBL should increase merchant number. This will habituate more cardholders and the volume of transaction will increase. Line down, illiterate merchant, electricity, etc. sometimes makes problem in credit transaction. PBL should use better technology, give merchant education and provide substitute electricity device in EDC machine. To improve retailer reluctance PBL should campaign the merchant and make them the facilities if transaction. PBL may organize a seminar where prospect merchant and merchant who are in this group should be invited. In such seminar experienced merchants (like Agora, Electra, Apon) will share their experience, and cost analysts will show the social and economical benefits. A great portion of cardholders feel that there might be fraud transaction and it is an important cause in volume of transaction in credit card. In such contrary PBL should understand the security policy of cardholders and make them free and fear in credit card transaction. There is a great demand of gold card rather then silver card to the cardholders. In such case PBL should make ease the matrix by which more cardholders can get gold card. It will give them mental satisfaction that will enhance more volume of transaction in credit card. VISA and Vanik is a strong competitor of MasterCard (in form competition). More retail access, more ATM access and low charges are the competitive advantage of MasterCard holders than VISA/Vanik holders. In other case some people believe that VISA operation is faster than MasterCard. PBL should introduce VISA as soon as possible because there is a huge demand of VISA card. As late as it will loose its market share cumulatively. In some cases there are very limited difference between NBL and PBL. Operation in transaction, cash advance facilities, bill payment system, retailers’ well acceptance of card etc. To get competitive advantage PBL should increase more facilities.
•
• •
• • • • • • • • • • • • • • • • • • •
A large portion of respondent remarked that NBL offers low charges and interest rate. But we found that only interest rate (PEL - 2.5%, NBL - 2%) is a great factor in pricing where as the others charges are reasonable. In such contrary interest rate should be cut off in a competitive offering. Standard Chattered Card got some competitive advantage against Prime Card like ‘more retail access; easy operation in transaction; charges and interest are reasonable; better customer service; retailers’ acceptance and more satisfaction’. In this situation, PBL should concentrate the above factors sincerely. PBL should increase the merchant number by aggressive marketing activities, increase promotional tools and increase expenditure in marketing. Better technology should provide that makes the transaction easy within the least possible time. At the same time corporate image and service developed that creates a competitive brand image in the market. Only 10% respondents transact 5% to 10% of total expenditure in credit card. To increase the volume and frequency of transaction, PBL should increase awareness campaign to the target income group of the society. It is found that age 25 to 40 years group expends the largest volume in credit card. So marketing activities should special focus on such group and give more supplementary card to increase the volume of transaction. PBL should collect more information about its client to send gifts and for other promotional program. By this the rate of recovery will be higher when the cardholders feel a social tie with PBL. PBL can send: Birthday gift, marriage anniversary gift Special offer Corporate offer (PBL’s other products) Co-offer with other organization PBL should focus the target group who will use card frequently. It may beAge limit 20 to 40 years Well family background Middle-middle class to upper higher-class income group Upper class supplementary cardholder’s like-wife, children etc. Who frequently tours foreign countries
For Merchant •
Most of the merchants prefer cash as a form of transaction. There are some special benefits in cash rather than credit. PBL has to identify those demerits like-late bill payment; rate of commission surrendered; slow approval; lack of logistic support; less profitability in credit card transaction. To get a competitive advantage PBL should send merchants’ bill as early as possible.
•
Rate of commission is a major factor in charging card. In such case PBL should set a dynamic commission policy that might reduce merchant obligation. They can set spell commission system in terms of volume of sales. Such as
Monthly sale (Tk.):
Rate of commission
1.00
to 25 000
3.00 %
25 000 to 50 000
2.75 %
50000 to 100000
2.50 %
100 000 to 200 000
2.25 %
More than 200 000
2.00 %
•
Special concentrate on the high volume present and prospect merchant who transact 10% or more sales in credit card. From a survey we found tat 65% respondents sell more than 10% in credit sales (card), and among them more than 20% sales on credit card is one-fifth of the total respondent (merchants).
•
Most merchants do not find any discrimination among VISA, Vanik and MasterCard. But a group of them believe that VISA can get faster approval. So PBL has to improve its communication network to compete with SCB’s VISA.
• •
• •
• • • •
•
PBL get competitive advantage over NBL by providing better payment system; upgraded technology; better machine of line service and satisfactory mode of payment. To hold this advantage PBL should improve the facility with fastness and efficiency. To improve better payment system PBL can open merchant account in convenient branch by which merchant can get payment within the shortest time. An on line system can improve the best payment service. Standard Chattered Bank is the market leader of credit card market. To hold that position it takes some competitive positioning strategy that strongly differentiates from NBL and PBL. A good portion of merchants believes that SCB’s machine on line is better than PBL. So PBL should improve its BTTB line or have to find other alternatives that give better than the present. To get better relation with merchants PBL should improve services, less time to take authorization; competitive commission offer and use better technology that can provide competitively better service. SCB is a multi-national bank with good corporate reputation in Bangladesh. So merchants feel prestigious to open an account in SCB. In such situation they can get their payment in on line where PBL is in traditional way. So PBL should improve its faster payment system. There are complains that PBL service is not up to the mark of SCB. In such contrary PBL service should improve in a competitive mark.
•
But some other extent machine (of line) service; time taking authorization; commission policy should be improved and upgraded to get competitive advantage against SCB and NBL.
Card Division: •
Credit card culture is a new phenomenon in our society. Most of the people do not know much about it. To expand its total market Prime Bank should take steps to build awareness and interest in the general mass. PBL can take the following strategies:
•
Collect the different business, government, NGO and other social concern (from Yellow Page or other sources) and write later to the CEO or in charge about credit card (what is credit card, function of credit card, uses, facilities, ATM uses, present world view and user rate in different countries and as well as PBL credit card offer)
•
Formulate business or group offer to the particular offer to the particular business or non-business organization with a bundle of benefits addressing the CEO. Female DSAs should be appointed to deal special prospect
• •
Approach to the present A/C holders in different branches in a rebate as a promotional tool so that the prospect cardholder being a deposit on the bank as security.
•
A relationship with merchant will be strong when the merchant will be a cardholder of PBL. In two types of relationship PBL can get more transaction from merchant and can be good valued cardholders. In such case-giving merchant in least cost would be a promotional tool.
•
Some cardholders get problem when they use the card for the first time. In this case PBL can provide information of full function of a card, uses of a card, ATM operation, cash withdrawals, fraud transaction in the time of dispatch of the card from the Card Division.
•
In response of credit limit increase claimed by the cardholders, PBL should assure that when the cardholder would follow the ideal rules of the credit card transaction limit will be provided according to his desire.
•
Marketing people are less motivated in their job. DSAs says that their remuneration is only on the commission basis, like as follows—
Card issued 1 to 19 = Tk.300 per card Card issued 20 to 24 = Tk.375 per card + Tk.1000 mobile bill Card issued 25 or more = Tk.400 per card + Tk.1000 mobile bill In such situation they feel job insecurity. To increase Motivation they need to fix monthly amount and other financial incentives with the commission.
On the other hand who deals with merchant marketing sometimes become frustrated. They feel that they do not get enough as their effort, labor and output. They want a commission on the total merchant income. • • •
In Account section, officers feel a load of work in the traditional manner. They deserve better software that will reduce paper and other unnecessary works. In Operation section officers want better software and better communication system mat can provide better and faster service to the cardholders. It is also needed to train of the service providers.
•
In the Recovery side, it is very difficult to collect the due amount or bad debts sometimes. In such case, efficient recovery agent is needed to recruit as commission basis.
•
In case card process time, Card proposal and analysis and verification department should faster their activities with least time that may bring competitive advantage over the competitors.
•
There are complains of Cardholders and Merchants on Customer Service Department. As customers’ problem is linked with other ends, when the Customer Service Department is unable to solve it, they should divert the call to the perfect end.
•
Marketing people (card, merchant) need a proper training of how to handle a prospect customer to develop awareness, interest, desire and action to make him a final customer. It can be done through hiring experts in sales and marketing in different organization and university teachers.
•
Today customers are harder to please. They are smart, more price conscious. More demanding, less forgiving and approach by more competitors with equal or better offers. The challenge according to Jeffrey Gitomer is not to produce satisfied customer; several competitors can do this. The challenge is to produce loyal customer. We can invest the following customer relationship building to increase loyalty:
•
Reactive Marketing: The sales person sales the product and encourages the customer (cardholders, merchants) to call if he/she has questions, comments or complains.
•
Accountable Marketing: The sales person phones the customer a short term after the sales to check whether the product is meeting expectation.
• •
Proactive Marketing: The company sales person contract the customer from time to time with suggestions about improved product uses or helpful new products.
•
Partnership Marketing: The Company works continuously with the customers to discover ways to perform better. PBL should need to follow above steps.
•
Slow inter-branch transaction often create problem in ‘payment due date’ of the cardholders. Some cardholders complained that they paid before the payment due date, but they faced penalties and got a bad impression on card division. In such situation, online inter-branch transaction or better transaction process need to develop to minimize complains.
•
Merchant Marketing is a new competitive arena of retail banking. Standard Chartered Bank has a strong relation with retailers. As a result most of the good merchant has an account in SCB. As a result SCB got a competitive advantage on faster payment on credit card to their merchant. PBL need to establish corelation with Merchant Marketing Section of Card Division with Merchant Marketing Section of Marketing Division in a contingency approach to take a strategic marketing strategic to capture new merchant (deposit collection and credit transaction through POS machine) and provide better services.
CHAPTER-8 Contribution of Prime Bank Card to the Company (PBL) Growth Prime Bank has already completed three years of operation in card business. Because the card market was showing growth with the increasing acceptability of plastic money in many outlets, the business had become intensely competitive. More players had entered into the market and some others were preparing for entry into the same. As increasing number of customers were turning to the convenient features of credit card usage, we had stepped up marketing efforts to retain and enlarge our market share. We have already hired a group of marketing executives purely on commission basis to solicit prospective customers to be our cardholders. That has resulted in increasing the customer base and similarly we had enlarged merchant network for acquiring business as well. Since then the journey was for steady and sustainable growth. Here are some of our growth indicators, which will justify the expectations of the Board with card business. The bank’s earning capacity grew and the customers got a new product of plastic money, which gave them convenience. Brief overview of cost for Card Division A. Fixed Assets schedule for the year-2005 Particulars
Fixed assets Depreciation before charged depreciation
Fixed assets after depreciation
Equipment and machinery 9280756.82
1,331,730.64
7,949,026.18
Furniture Total
18,733.30 1350463.94
195,808.04 8,144,834.22
214541.34 9495298.16
B. Operating Expenses Depreciation Interest on prime general Salary and allowances Other expenses
13.50 80.44 49.26 89.54
232.74
C. Income from Card business: Fee local Fee International Merchant commission Other income
92.71 63.31 22.41 328.26
D. Profit generated from card business Profit Some Important Ratio Analysis:
506.69
573.95
SI. No
Particulars
Up to June-05
1
Return on Assets (ROA)
23.01%
2 3 4
Return on Expenses Yield on advances Cost of Fund
106.03% 20.73% 10.50%
Growth of Income and Profit of credit cards (Figure in lac) Particulars
2000
2001
Growth Over 2002 2000
Growth Over Estimated year-2001 2003
Income Fees (local) Fees (Int’l))
16.95 76.45 39.59 39.61
351% 0%
92.71 63.31
21% 60%
111.25 75.97
Merchant Commission Other Income Total Income
0.00
531%
22.41
322%
26.89
46.65 205.68 103.19 327.05
341% 217%
328.26 506.69
60% 55%
393.91 608.03
Profit
28.62 253.08
784%
373.95
48%
448.74
5.31
(Estimated growth is 20% in the year 2003 over the year 2002)
Fig: Sharing Profit & Income in the Year 2005 Contribution of Card Division to the mother concern is as follows: Income (Tk. in million.) Prime Bank Card PBL
2003 10.30 1515.63
2004 32.70 1987.58
2005 50.70 2250.96
2004 1231.49 7.40
2005 1503.12 23.27
Expenditure (Tk. in million.)
Prime Bank Ltd. PBL Card Division Profit (Tk. in million.)
2003 922.43
Prime Bank Ltd. PBL Card Division
2003 526.20 2.70
2004 705.09 25.10
2005 696.84 27.40
Fig: Explanation of income and expenditure through graph.
Fig: Profit Structure of the credit Card of Prime Bank Separate Identity: Though Card Division is under Head Office, Prime Bank Limited, but it has separate identity. Its transaction code is 130 and it has to calculate income, expenditure and profit as the other brunches of PBL. Credit Card business is quite different from other banking business. It cannot collect deposit from people. The classified loan (30%), interest rate (30%) and slow rate of return make it specialized banking services. Issues and Challenges: The credit card business has many issues and challenges as well. Unlike any other country, we issue two separate cards- one for local taka currency and one for dollar for international usage. One global card for local and international usage will simplify the process and customers will be much benefited. This may even lead to growth in card usage. In line with liberalized economy and open market concept, more reforms are required to encourage people to use credit card outside Bangladesh. One other issue, which leads the growth of card business, is connectivity. The success of this business is dependent upon availability of communication line round the clock. Since we rely on BTTB for our connectivity, it has become increasingly difficult to keep the line up at a desired level. Poor infrastructure and inadequate maintenance often cause disruption. However in order to provide quality service to the customers, Prime Bank Limited is looking into state of the art solution outside BTTB. Defaults on credit cards are both an issue and challenge for the card operations. To keep defaults at a minimum level has become an uphill task. Once our society consisted of
conservative people with relatively low spending and minimum borrowing habits. But the scenario has undergone changes. Delinquency rate in card business has registered upward trend making the issue uneasy. Though in Bangladesh market we are yet to hit the global benchmark of 20% defaults, the issuers have become more selective. In order to offset the loss from default, the interest rate has been kept as high as 30% per annum. Since the credit is allowed to cardholder without any security, the bank can hardly recover from organized group of defaulters. Existing recovery laws are inadequate and the loan courts take unusually long time. Prime Bank has engaged recovery agent on commission basis on recovered amount. There is a need for constructive reform to recover bank’s money and the sooner it is done it is better for the country. Alliances and partnership with other business houses has become the order of the day so that core strength can be fully exploited. Prime Bank has been looking forward for such alliances and partnership to address new segments of the card market, which has not yet been reached by them. Their strategy is to reduce the cost of doing business and utilize the full capacity of our infrastructure. The upshot is to make or create new avenues for business growth. It has already made alliance with HSBC for issuing credit cards on their behalf. This alliance will help it to access up market in the society. PBL expect quick surge in the card issue area from HSBC’s customer base. The Bank is also talking to Scholastica, a leading English medium school for issuing exclusive cards for the parents of the school children. PBL has also signed an agreement with another local bank EXIM Bank to issue cards on their behalf and provide all support services. All these are likely to contribute in our growth and overall profitability in the days to come. New Market Opportunity: HSBC HSBC is interested in issuance of local credit card for their customers. According to their estimate, they have a base of 20,000 customers who are likely to be cardholders. This base is likely to expand progressively with addition of new customers every month. The relationship will be: 1) Prime Bank will be fully responsible for credit risk, collection activities, funding, and interest income. Bad debts would be for Prime Bank Limited 2) Prime Bank Limited would do card issue and embossing. 3) Annual membership fee would be split at a certain ratio. 4) Merchant acquiring would be Prime Bank’s responsibility. 5) Merchant commission would be split at a certain ratio. To add to the above, HSBC has put forward a draft business model containing approximate cost benefit analysis of co-branding credit card with Prime Bank Limited. The net income from this segment would be Tk. 57,910,000.00 Notes to the Financial Statements for the year ended 31 December, 2005, 2004, 2003 of Prime Bank Ltd. Assets: Particular
2005
2004
2003
Credit Card
38,364,537
18,100,845
15,032,503
Liabilities: Particular
2005
2004
2003
Credit Card
30,891,896
1,989,484
Operating Income: Particulars
2005
2004
2003
44,478,662
33,660,981
31,109,491
Credit Card Income: Particulars
2005
2004
2003
Annual Fees
16,762,978
11,984,599
14,624,380
Late Payment fees
5,808,884
4,415,793
3,851,114
Inter-change, Mark-up, excess limit, cash advance fees etc.
10,995,655
7,991,503
8,612,099
Others
10,911,145
9,269,085
4,021,898
Expenses: Particulars Credit Card Expenses
2005 14,262,626
2004 10,867,651
2003 12,413,348
Receipt from operating activities: Particulars 2005
2004
2003
Credit Card Income
44,478,662
33,660,981
31,109,491
Increase of assets: Particulars Credit Card
2005 38,364,537
2004 18,100,845
2003 15,032,503
Increase of Liabilities: Particulars Credit Card
2005 30,891,896
2004 1,989,484
2003 -
Credit Card Income (Note-23.2)
CONCLUSION
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The popularity of credit cards in Bangladesh looks set to grow by leaps and bounds as domestic and foreign banks capitalize on the nation’s infant credit card market and growing affluence. Card segment will undergo skyrocketing growth in future, sparked by fierce competition from several other banks. An increased use of credit card and foreign exchange cards coinciding with the expansion of personal banking services, cross-border business and travels is helping the explosion. Prime Bank is fully aware of this explosion. Prime Bank has already renewed our marketing efforts to increase our market share. PBL is trying to improve its quality in the competitive card market with its limited resources and always try to monitor the competitors’ trail. In the conclusion we can that Credit Card is a relatively new concept for the general public of Bangladesh so they need to rake more marketing promotional activities to make it popular to the public.