Professional Documents
Culture Documents
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.
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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.
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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 Schedule
Tasks 1. Preparing a Research Proposal 2. Completion of Literature review 3. Developing interview guideline and Negotiation with the cardholders and merchant 4. Data collection 5. Data transcription 6. Data Analysis 7. Completions report writing, preparing recommendation and submission. Total 12 Weeks 2 Weeks 2 Weeks 2 Weeks 2 Weeks Time 1 Weeks 1 Week 2 Weeks
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Project Budget
Subjects 1. Collection of literature 2. Salary of the field investigators 3. Tape Recorder, Telephone Charge and stationary 4. Data Collection 5. Data Transcription 6. Printing and other costs Costs Tk. 2,000.00 Tk. 10.000.00 Tk. 1,000.00 Tk. 2,000.00 Tk. 2,000.00 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:
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SUBSTITUTES (Threats of substitute products of services) Fig: Driving Forces Industry Competition
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
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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 Low Cost Position
DIFFERENCIATIO N
FOCUS
Industry Wide
Strategic Target
Particular Segment only Fig: Three Strategic Strategies 8
Future Goal
At all levels of management and in multiple decisions.
Current strategy
How the business is currently competing?
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Assumption
Held about itself and the industry?
Capabilities
Both Strengths and weaknesses. .
Skills in market research and new product development Training and skills if the sales force
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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
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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 Outbound Logistics Marketing & Sales Service
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Promotion
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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;
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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. 13
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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.
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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"
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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.
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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.
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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.
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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.
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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'.
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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.
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(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.
(vi) Security:
It gives more security rather than carrying cash.
(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.
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.
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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.
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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.
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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.
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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.
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.
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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.
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Benefits
To customer -Convenience -Cash advance -Grace period To the Bank -Customer satisfaction -Profit Mechanism -Network acceptance
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). 3. 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. 6. 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.
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7. 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. 8. 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.
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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.
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card Market Proportion (%) 6.72 76.12 7.83 6.35 2.98 100
Standard Chartered March, 199 (Grindlays)Bank Prime Bank Limited Vanik Bangladesh Ltd. Dhaka Bank Ltd. Total November, 1999 March, 1998 August, 2001
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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.
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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
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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.
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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)
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Acquirer Host
M I P
M I P
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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
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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
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Acquire income
Merchant discount rate Cash disbursement accommodation fee Rental / sale or equipment and supplies Cost of fund
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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 3. MasterCard Business Card: This card offers members incremental revenue and relationship with corporate clients with members. 4. Co-Branded and Affinity Programs: This programs help issuer to segment to market and gain additional customers to incremental volume. 5. 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. 6. 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.
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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. 5) 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.
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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)
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CREDIT LIMIT
Card Type Visa Classic (426376) Visa Gold (426378) Minimum Limit US $ 500 US $ 5,000 Maximum Limit US $ 4,500 US $ 20,000
LIEN AMOUNT
Card Type Visa (426376) Credit Limit Classic US $ 500 Lien Amount US $ 556 LTV 90%
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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.
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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 Fees Annual Fee (US $) Annual fee for Supplementary card (US $) Card replacement fee (US$) 120.00 60.00 15.00 36
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%
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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.
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Chapter 4
ANALYSIS OF INDUSTRY COMPETITOR
National Bank Limited Standard Chartered Bank Prime Bank Limited
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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: (Tk. million) 2005 1000.01 430.29 3285.01 2268.4: 400.6 48732.1 in
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Year Authorized Capital Paid up Capital Income Expenditure Net Profit before Tax Assets/ Liabilities
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Card Division:
i. Establishment: March 1997 ii. Human Resources: a. Executive b. Non Executive c. Technical Total iii. Card Base: a. Gold Card b. Silver Card Total Card iv. Trend Analysis: Year Issued Card Surrendered Card Income from Card (in million Tk.) Marketing Expenditure (%of income) POS Machine (no) Merchant 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: 2002 2000 43 45.00 10 20 125 2003 2700 58 95.00 5 210 425 2004 1400 63 85.00 2 325 700
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Acceptance: An international MasterCard from National Bank Limited is accepted at million of establishments across the world and home including 5-star 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.
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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.
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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.
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Total
iv. Trend Analysis: Year Issued Card Surrendered Card Income from Card (in million Tk.)
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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.
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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.
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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.
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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.
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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.
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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.
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.
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.
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.
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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.
Safety Net is designed to cover the cardholders 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 Banks 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.
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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)
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.
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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.
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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.
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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 : Adamjee Court Annex Building-2 1 19-120, Motijheel C/A Dhaka-1000, Bangladesh Cable : PRIMEBANK Phone : 9567265,9570747-8 PABX Telex : 642459 PRIME BJ Fax : 88-02-9567230, 9560977, and 9566215 E-mail : Primebnk@bangla.net Web site : www.prime-bank.com Swift : PRBLBDDH Chairman : Qazi Saleemul Huq Managing Director : M Shahjahan Bhuiyan Secretary : Manash Kumar Ghosh Auditors : Hoda Vasi Chowdhury & Co. Hawlader Yunus & Co Chartered Accounts Chartered Accounts
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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%.
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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 Authorized Capital Paid up Capital Reserve Fund Equity Fund Deposits Loans & Advances Investment Income Expenditure Net Profit before Tax Fixed Assets Assets/ Liabilities Number of Employees Return on Asset (%) 2001 1000.00 500.00 362.92 1258.26 13259.87 9074.94 1730.74 1100.14 448.36 705.09 174.27 15736.94 613 3.38% 2002 1000 600 448.93 1526.41 16902.29 12686.85 1996.23 1196.20 592.28 696.84 218.50 19358.93 730 2.38% 2003 1000 700 602.89 1781.86 20483.23 16492.22 2749.71 1593.69 592.28 769.91 265.17 24249.13 777 1.72% 2004 1000 1000 815.89 2239.80 28069.24 23219.67 3083.81 1970.37 824.23 1064.24 321.68 32361.62 894 2.16% 2005 4000 1400 1055.98 2808.00 36022.46 31916.11 3939.50 2406.43 886.09 1200.83 372.12 41506.29 1024 1.54%
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Cash in hand Balance with Bangladesh Bank Balance with other Banks Money at Call Investment in Liquid Assets Other asstes Non-Banking Assets Total
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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%.
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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. 2. 3. 4. 5. 6. 7. 8. 9. Sector Agriculture Large and medium Scale Industry Working Capital Export Finance Commercial Lending House Building Loan Small and Medium Enterprise Consumer Credit Scheme Others Total 2,832.55 1,604.13 1,675.55 4,244.05 392.12 114.70 473.57 1,291.19 12,686.85 22.33 12.64% 13.32% 33.45% 3.09% 0.90% 3.73% 10.18% 100% Tk. in million % of total loans
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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.
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I. Prime Bank Card Service: Establishment : 18th November, 1999 Home Base : Adamjee Court Annexe Building-2 119-120, Motijheel C/A, Dhaka-1000 Main 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
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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 Gold VIP Gold Normal Silver Padma Silver Meghna Silver Jamuna [Tk. 25,000- 5,00,000] [Tk. 1,00,000- 5,00,000] [Tk. 50,000- 5,00,000] [Tk. 30,000- 50,000] [Tk. 20,000- 29,000] [Tk. 10,000-19,000]
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2003 4131
2005 3058 1424 379.70 50.70 2.50 27.40 121.30 173 350
Advance in credit card (Tk. in million) 250.60 Income from Card (Tk. in million.) 10.30
Marketing Expenditure (% of income) 1.00 Profit (Tk. in million.) Outstanding amount (Tk. in million.) POS Machine (no) Merchant (no) 2.70 60.10 0 10 56
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.
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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. I had to work in these sections turn by turn. I started my learning experience from Operation Department from 6th July and ended in Marketing on 6 th octoberJanuary. And in the mean time, I had traveled all the sections in due time.
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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 prospectivecardholders 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.
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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 Issuing Bank Shop Acquiring Bank Master Card Int'l
Cardholder Billing
Cardholder payment
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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.
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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.
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.
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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 60
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.
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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.
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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.
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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.
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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 outstanding balances 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.
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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.
Payment applied for Any over limit amount Any over due amount Cash Advances Service Charges Fees Purchase
Marketing:
a. Number of DSAs b. Advertising Exp. c. Merchant Marketing : 30 Person : 2.50 % of Income : 2 Person
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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)
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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) 1
Fixed salaried person Tk 6,000-Tk 10,000-40 Tk 10,001-Tk 15,000-41 1 . Ownership of house in Municipal area (in own name- 10 parents / Joint name- 5) 2. Ownership of car
5 5 2 2 2 5 5 2 2 2 2 2
Tk l5,001-Tk 20,000-42
Tk 20,00 1-Tk 25,000- 3. Ownership of T & T telephone 43 4. Customer for our Bank having Tk 25,001-Tk 30,000-44 other credit card facilities, which are regulr or considerable deposit Tk 30,001-Tk 40,000-45 5. Having credit card of other Tk 40,00 1-Tk 50,000- Bank. 46 6. Ave. bank Balance of last 6 Tk 50,001-Tk 60,000-47 months. Tk 60,001-Tk 70,000-48 Tk 60,001-Tk 70,000-48 Tk 70,001-Tk 80,000-49 Tk 80,001 and above-50 7. Personal Suitability 8. Income Tax Assessment up to date 9. Holding Passport 10. Spouse earns 11. Club Members 12. Married 13. Age: 45-60 years : 4 35-45 years: 3 25-35 years: 2 20-25 years:1
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4 40
10
50
Points for profession 10 Points for Income level 50 Points for other consideration____ 40 Total points 100
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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.
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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.
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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, 71
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.
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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.
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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) Annual Fees (Primary Card) Gold Card $80 Tk.2,000 Classic Card $40 Gold Card $120 Silver Gold Card Card $70 $90 Tk.1750 Tk.2000 Silver Card $90 Tk.1500 Standard Chartered National Bank Ltd. Bank (SCB) (NBL)
International Local Replacement Card International Local Supplementary Card Annual Fee
Tk.1,000 Tk.3500
$20 Tk.500
$20 Tk300
$15 Tk500
$15 Tk.200
$50 Tk.1000
$35 Tk500
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$35
$90
$50
First Free Card(Local) Second Card Tk.1,000 and Onward(Local) Card Replacement International Local PIN Replacement International Local Late Fee Payment $10 $10 Tk.500 $20 Tk.500
Tk.500
Tk.1000
$800
$20 Tk.300
$15 Tk.500
$15 Tk.200
$50 Tk.1000
$35 Tk.500
$10 Tk.500
$15 Tk.500
$15 Tk.200
$10 Tk.500
$10 Tk.500
International
$10
$15
$15
$15
$15
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Tk.300
Tk.200
Tk.500
$300
Tk.500
Tk.350
$20 Tk.500
$15 Tk.300
$15 Tk.500
$15 Tk.300
$15 Tk350
Emergency Tk.150, or 3%, of 2.5% of the Iterest @ 2.5% per Cash Advance Advance amount Withdrawal amount month Facility whichever is higher. Interest Rate (per Month) International Local Cash Limit International Local 20% 50% 15% 50% 50% of Credit limit 50% of Credit limit 5% of the Credit limit plus amount excess of Credit limit. 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2% on 2% Daily Basis 2% 2%
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Return Cheque Fee International $10 Local Statement Retrival Fee International Local Cheque Collection International Local Tk350
$10 Tk250
$15 T500
$15 Tk500
$10 Tk100
$10 Tk100
$5 Tk50
$5 Tk50
$5 Tk50
$5 Tk50
$5 Tk50
$5 Tk50
$20 Tk250
$15 Tk250
$10 Tk100
$10 Tk100
$15 Tk100
$15 Tk100
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Strength and Weakness Analysis: Ranking 1-5, 5=Strong Position, .1=Weak Position
PBL 1. SCB NBL
Card
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 5 5 4 5 3 5 5 5 4 5 5 5 4 4 5 5 5 3 5 5 5 4 5 5 5 3 5 5 4 4 3 4 1 4 3 4 1 4 4 4 4 3 4 3 1 4 1 1 3 2 3 2 2 3 4 3 4 3
2.
Service
a. Cash Advance Facilities b. ATM Service c. Customer Service 4 2 3 3 5 5 4 3 3 5 3 3 3 2 3 3 3 5 4 3 3
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3.
Merchant Marketing
a. Good Merchant Relation b. Faster Payment c. Faster Approval
4.
Marketing
a. Promotional Activities b. Direct Sales Effort c. Public Relation d. New Marketing Targeting e. Aggressive Marketing Strategy
5. 6.
7.
Corporate Profile
a. Financial Resources b. Reinforce Business Capability c. Non-classified Loan d. Corporate image e. Product Assortment
8.
Customer Positioning
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CHAPTER-6
Market Survey (Gathering Primary Data)
Card Market Analysis Merchant Market Analysis
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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. 76
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
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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
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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
Qualitative Research
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Research Questions
Hypotheses
Survey Research
Telephone Interviewing
Personal Interviewing
Data Collection
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Data Analysis Frequency Distribution Cross Tabulation Parametric Test N-way ANOVA Multiple Regressions
Recommendation
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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 Model Building: Verbal Model: Analysis the competitors 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 and
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Mathematical Model: Y= a + bx Where, Y= Preference of PEL card a = Competitive performance b = Weight of independent variables x = Independent variables
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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
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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
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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
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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
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Frequency Analysis:
Transaction form; Rank cash; Rank cheque; Rank credit card; Rank debit card.
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Frequency Analysis:
Transaction form; Rank cash; Rank cheque; Rank credit card; Rank credit.
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Merchant Analysis:
Dependent variables: Metric in nature Independent variable: Metric in nature Measurement is done by using 5 point Likert Scale
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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 competitors 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
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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 Banks credit card). Respondents 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.
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Hypotheses:
CR 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. ED I ( Level of significance ) =.05 T
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.
CA RD
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+ 0.756X 2 + (-0.109)X3 + (-0.0089)X4+ (-0.541)X5 + (0.0040)X6 + (-0.0737) X7
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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:
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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.
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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.
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Y = 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.
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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.
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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 Gold Silver Debit and credit 2 0 48 45 4 1
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Rank 3 3 46 1
Total 50 50 50
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.
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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. 93
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 Cash Cheque Credit Card Credit 19 0 0 0 Rank 2 0 1 17 2 Rank 3 1 18 2 1 Rank 4 0 1 1 17
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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. 96
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.
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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.
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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, 99
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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 (PBLs other products) Co-offer with other organization
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PBL should focus the target group who will use card frequently. It may be Age limit 20 to 40 years Well family background Middle-middle class to upper higher-class income group Upper class supplementary cardholders like-wife, children etc. Who frequently tours foreign countries
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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.): 1.00 to 25 000 Rate of commission 3.00 % 2.75 % 2.50 % 2.25 % 2.00 %
25 000 to 50 000 50000 to 100000 100 000 to 200 000 More than 200 000
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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 SCBs 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 101
believes that SCBs 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.
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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.
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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:
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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 co-relation 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.
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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 banks 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 and 9280756.82 214541.34 9495298.16 1,331,730.64 18,733.30 1350463.94 Fixed assets after depreciation 7,949,026.18 195,808.04 8,144,834.22
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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
506.69
573.95
Some Important Ratio Analysis: SI. No 1 2 3 4 Particulars Return on Assets (ROA) Return on Expenses Yield on advances Cost of Fund Up to June-05 23.01% 106.03% 20.73% 10.50%
Growth of Income and Profit of credit cards (Figure in lac) Particulars Income Fees (local) Fees (Intl)) Merchant Commission Other Income Total Income Profit 16.95 76.45 39.59 39.61 0.00 5.31 351% 0% 531% 341% 217% 784% 92.71 63.31 22.41 328.26 506.69 373.95 21% 60% 322% 60% 55% 48% 111.25 75.97 26.89 393.91 608.03 448.74 2000 2001 Growth Over 2000 2002 Growth Over -2001 Estimated year-2003
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(Estimated growth is 20% in the year 2003 over the year 2002)
2003 922.43
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Fig: Explanation of income and expenditure through graph.
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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.
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 banks 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 HSBCs 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.
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Notes to the Financial Statements for the year ended 31 December, 2005, 2004, 2003 of Prime Bank Ltd.
Assets:
Particular Credit Card 2005 38,364,537 2004 18,100,845 2003 15,032,503
Liabilities:
Particular Credit Card 2005 30,891,896 2004 1,989,484 2003 -
Operating Income:
Particulars Credit Card Income (Note-23.2) 2005 44,478,662 2004 33,660,981 2003 31,109,491
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Expenses:
Particulars Credit Card Expenses Particulars Credit Card Income
Increase of assets:
Particulars Credit Card Particulars Credit Card
Increase of Liabilities:
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CONCLUSION
The popularity of credit cards in Bangladesh looks set to grow by leaps and bounds as domestic and foreign banks capitalize on the nations 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.
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