People For Payment Methods

Published Date: 02 Nov 2017

The development of economy, society and living standard led to higher demand of people for payment methods. That is why card market or especially credit card market was born. In 1993, the official card payment including credit card had presence in Vietnam. Over 15 years of development, credit card has played a certain role in serving the essential needs of the community. Moreover, credit card service is being one of potential market for commercial banks, when it brings reputation as well as a lot of other benefits from customers using this service. Therefore, many Vietnamese commercial banks especially concern how to change perception and habit of customer with credit card service in order to develop the number of customers in this potential market. Naturally, in this market, it seems that Hanoi market is a quite potential area in Vietnam. Hanoi is the centre of economy and trade in the Northern of Vietnam. Alongside with Ho Chi Minh City, Hanoi is an area with the highest levels income, demand and consumption. A large number of consumers provides an opportunity and favorable condition for card payment (in general) and credit card payment (in particular) to development. However, in reality, the percentage of traditional cash transactions is still dominant in the total transactions of people in Vietnam even though the number of credit card payment users has increased over the years. Besides, most of the people use credit card service on the purpose of withdrawing money rather than the main purpose of purchasing/ payment of credit card service. Realizing this problem, our research will focus on the individual factors that affect on decision of using credit card payment among the current card users as well as the reason on not using all features of credit card payment or only using the most basic functions. This research is divided into five chapters as following:

Chapter I- Literature Review: This part contains the evaluation on past research of factors affecting credit card payment in particular. Engel-Blackwell-Miniard Model was considered as the most appropriate model for this research. The three individual difference factors, namely consumer resources, knowledge and demographic are concentrated to find out the target customers group and how the factors affect the decision of those groups

Chapter II- Methodology: The methodology part includes data collection method, data analysis method and the date collection results after survey. Naturally, in order to get the best results, the sampling method is also implemented and shown in this research. Finally, the data will be analysed using SPSS (Statistical Package for Social Sciences) software and the following are some of the tasks included Frequency test and descriptive statistics, Pearson Correlation Analysis, Regression Analysis and Charts and graphs

Chapter III- Main Finding & Analysis: The main finding from survey questionnaires with representative from the existing users of credit card payment service is presented in three points: the influence of consumer resources factors, knowledge factors and demographic factors. Based on this, the analysis provides a picture of card payment service usages of people in Hanoi and has understanding on the habit, characteristics and targeting at the targeted customers. In addition, the relationships between the three factors which are analyzed at the main finding have been examined. Besides, this part provides the estimation and evaluation on which factors have the most influence and how those factors might be adjusted. The discussion is the background to support the adequate recommendations at the following chapter.

Chapter IV- Recommendation: Finally, our report will contain some recommendation to develop the credit card payment service based on the target market.

INTRODUCTION

1) Rationale

Nowadays, in the period of modernization and globalization, economy develops more and more, naturally it leads to huge trading volume and payments. Therefore, if formerly, cash payment was considered as a very favorable and effective method, now using cash in transactions or payments is revealing many negatives such as the development of the usury, bribery, or tax evasion, etc. In addition, the problem of counterfeit money in circulation and transaction payment has lost hundreds of million to billions. Thus, the payment of cash caused, in fact, many obstacles to production and social reproduction. Hence, with the development of e-commerce, non-cash payment methods which do not only contribute to improve the quality of amenities for users but also create favorable conditions for state managing the cash flow rotation in the society were born. However, in these methods, credit card payment is more useful and convenient for users because the use of checks, payment, collection, and letters of credit are complex. Moreover, although using other cards such as debit card or ATM (Cash card) is also as safety and convenient as using credit card, the credit card can used for online payments and transactions, especially in the era of information technology today, almost of transactions are happening and implementing through internet. That is why all countries in the world including Vietnam, integrating into the global world economy after it joined WTO and AFTA, has concerned on developing this credit card market. However, whereas using credit card for payments is very popular in developed countries nowadays, in developing countries as Vietnam, this is not familiar with almost of people. This can see that through the latest figures of Vietnam Banks Association shown, by the end of March, 2011, although there were 1.6 million credit cards issued out of a total of 29 million cards type, using them for transactions or payments was only about over 74,775. In addition, according to Mrs. Duong Hoang Phuong (Deputy Manager of Payment Department of the State Bank of Vietnam), there are 80% in total transactions through using credit card used for cash-withdrawal. So, why this situation has happened and what reasons are. In general, from these given reasons, this paper is conducted to investigate about a topic - "Factors affecting customer behavior on using credit card for payments in Hanoi". From this research, it can partly help credit card market in Vietnam (in general) as well as in Hanoi (in particular) develop and get more successes in future.

2) Research objectives

To analyze these problems statement, this research has three objectives:

Give general understanding about credit card service and advantage of using credit card for payments.

Identify and discuss the different factors which might influence individual customer’s decision on using credit card for payments in Hanoi.

Recommendations to improve the trend of using credit card for payments in Hanoi.

3) Research question

To make clear for the above objectives, we are going to in turn research and answer following questions:

What are credit card service and advantages of the credit card payment method?

What is the current situation of credit card service in Vietnamese market?

What are the factors affecting on the trend of using credit card for payment in Hanoi?

How to improve the trend of using credit card for payment in Hanoi?

4) Scope of the research

To study the evolution of the credit card market in Hanoi through data of the credit card market in Vietnam from 2006 up to now.

Furthermore, the research will be limited to the sample of people who are from 18 years old (the age group who have income), consisting of female and male from all over Hanoi. The variables influencing the decision process consist of environmental influences and individual differences. Nevertheless, we will only examine the individual differences because we want to concentrate on the personal factors which are different between each group of individual customers.

CHAPTER I: LITERATURE REVIEW

I. Credit card & E-payment system

1) Definition of credit cards & Electronic Payment System

Credit card is a form of substitute for direct payment. This form of payment is carried out based on cardholder’s reputation. Cardholders do not have to pay cash upon purchase. Instead, the bank will advance money to the seller and the card holders will pay back the bank account transactions. In addition, credit cards also allow customers to "pay down" the amount paid on account. Cardholders do not pay the full balance on statement of monthly transactions. However, card holders must pay the minimum payment before the due date specified on the statement.

Credit cards are issued after the service provider approved the credit card account, the cardholder can then use it to shop accepting cards.

When shopping, card users will commit to paying for card issuers. Cardholders expressed this commitment by signing onto the bill has recorded details of the card with the money, or by entering a personal password (PIN). In addition, many sales points are also acceptable way to verify by phone or internet to verify the transactions are called transaction card or absentee landlords absentee cards (CNP - Card / Cardholder Not Present).

In addition, cardholders can also withdraw cash from credit card accounts (cash advances).

Electronic Payment System (E-Payment) is a critical and integrated part of e-commerce, which is known as money exchange in electronic environment. In general, e-payment is defined as a form of financial exchange that takes place among buyers and sellers facilitated by means of electronic communication.

Electronic system is used to verify within a few seconds the validity of the card as well as check credit card to pay for enough time shopping there. The verification is done by a card reader (POS - Point of Sale) connected to the receiving bank (Acquiring Bank) by the seller. The reader reads data from the card's magnetic stripe or chip on the card.

In online purchase, the online sales often use a different method to verify the account tags, which are often the cardholder must provide additional information such a security codes printed on the back of the card, the cardholder address or password to ago.

Every month, cardholders receive a list which shows the transactions made by card, the charges and the total amount owed. After receiving the statement, the cardholder may complain about a transaction denied that he or she is not right for. Without any complaint, before the due date, the cardholder must pay a predetermined minimum, or more, or pay off debt. Service providers will charge interest on credit outstanding share (usually with higher interest rates of most other forms of debt). Many financial institutions can arrange for automatic payment, cutting funds from the cardholder's bank to avoid late payment.

Most credit cards are issued by local banks or credit institutions. Credit cards were originally made of cardboard, take many forms, sizes vary from bank or credit institution issuing it. The way to use the card is also limited to a narrow region, where one can directly identify the cardholder. Due to the advancement of science, along with the growth of demand for, credit card today use plastic polymers, consistent with the same shape and size according to ISO 7810.

2) Advantages of the credit card payment method

The development of using cards (in general) and credit cards (in particular) in payments from inception until now has proved its special attractiveness. Naturally, its superiority characteristics have made this.

Convenience:

+ Whereas we must always carry a large amount of money in the cash payment method, or in the cheque payment or etc with many complicated procedures, using credit card in payment is much simpler. With a small card in hand, we can pay the goods or service at anywhere in the world with any currency.

+ Not limited by the amount of money which can be taken.

+ Be given a credit limit for spending first and pay money later.

+ Withdraw cash as needed in the card payment banks or through card payment system such as ATM around the world.

+ Be received and enjoyed a number of other services applying for the cardholders such as insurance services, medical services, global support, etc.

Safety:

+ Safety about property: the cardholder is only allowed to use the card and knows his own password (PIN) to use. Therefore, nobody can use that card if they do not know the password.

+ Comfortableness in psychology: when you bring a large amount of cash, you always have anxiety, insecurity, fear of being robbed or stolen, etc. However, with bringing cards or credit cards, your feeling is not only relieved, but you are also comfortable because if you are robbed, the robber it could not do anything because when he wanted to withdraw cash, he must know the PIN and numerous other things. In addition, if the cards are lost or misplaced, simply you only notify that card issuing bank to lock the card account, to avoid any risk and you will be re-issued another card. Thus, the money in your account will be safe.

+ Safety in the financial management of units accepting the cards because the transaction information stored should be no loss of cash as well as to avoid counterfeit cash.

II. Previous researches

In the era of modernization and globalization, using credit card for payment is very popular in the most countries in the world. However, this is a common problem which is still causing much controversy between the benefits and the limitations that it brings to. On the other hand, there are many subjective and objective factors affecting on users’ psychology when they decide to use credit card as their daily payment tool. Therefore, in order to find out the cause of this situation, there are many studies which relate to this topic was born. Naturally, we found and read those past researches which will help us a lot in the recognition, general assessments and orientations to guide our research.

Firstly, that is a study on "the credit card market in China" by Alvin Cheuk Him in April 2005. This study focused on the perspective of cardholders. The effects of credit attitudes and socioeconomics factors on using credit card from the side of cardholders were investigated through the secondary data from Survey of Customer Finances in China. In addition, this study also pointed out that the demographic, economic and credit attitude factors would together influenced the use of credit card and there was a correlation effect among those factors. Thus, through the information of this research, we can understand that although "42.3% Chinese people have the credit card (usually Visa card, Mastercard, AMEX and Discover card)", the using credit card for payment is still difficult because above factors, especially Chinese’s style, their regional differences, their personal relationships, their attitudes towards consumption and in particular how they finance their spending – a problem which is quite similar to Vietnam.

Next, the another study - "Factors affecting customer behaviour on utilizing e-payment service, in the case of Vietcombank" by NEU’s students provided the information about the factors impacting on customer behaviour on taking e-payment service including credit card in Vietnamese market through the case of Vietcombank. The report showed that different gender and age will have different needs and wants in using card, female uses card more than male and the young adults in the age 18-29 use card the most. The people who have higher level of education and do intellectual-office use more card service because of there knowledge about the new technology of e-payment. The higher income care-holder earn, the more requirement of using card they have because of the higher willingness for purchasing goods and services. After finding out those factors, the report also gave out some suggestion to attract customer for using card, such as invest into advertisement, deploy more promotion program, etc. However, the report did research on the Vietnamese market which is a large scope, so the result will not have a high level of accuracy because of the difference among cities. Furthermore, the research on e-payment service which includes many types of card, the respondent of user with different type of card is different because each type of card has it own function, so the report will not have a good sight of view on the situation of using card among customers. Learning from this past research, our research only focus on exploring in one type of card which is credit card, and narrow the scope in Hanoi city to give out more detail and accurate result about the factors affecting on using credit card, and then give out effective suggestion to increase the trend of using credit card in Hanoi.

III. Theoretical framework

The research focuses on the way of analyzing factors affecting on customers’ behaviour of using credit card for payment in Hanoi. In order to refer to the objective of research and interpret stages which will be accomplished in this research, specific theories relating to research questions will be identified. In this research, four research questions were mentioned.

What are credit card service and the advantages of paying by credit card?

What is the current situation of credit card service in Hanoi market?

How are the factors affecting on customers’ decision of using credit card for payment in Hanoi?

How to improve the trend of using credit card for payment in Hanoi?

Based on these questions above, with each research question, appropriate theories will be applied. In the first and second questions, since it is only a description of what credit card service is, the advantages of paying by credit card and the current situation of credit card service in Hanoi market, they do not need to be explained, these questions do not need to be applied the theories. Relating to the third question, based on the research objectives, we found out three possible alternative models which can be applied to the research: Nicosia Model, Howard-Sheth Model and Engel-Blackwell-Miniard Model.

The first model, which concentrates on the buying decision for a new product, was proposed by Nicosia (1976). The model concentrates on the firm's attempts to communicate with the consumer, and the consumers' predisposition to act in a certain way. These two features are referred to as Field One. The second stage involves the consumer in a search evaluation process, which is influenced by attitudes. This stage is referred to as Field Two. The actual purchase process is referred to as Field Three, and the post-purchase feedback process is referred to as Field Four. This model was criticized by commentators because it was not empirically tested (Zaltman, Pinson and Angelman, 1973), and because of the fact that many of the variables were not defined (Lunn, 1974).

Perhaps, the most frequently quoted of all consumer behavior models is the Howard-Sheth model of buyer behaviour, which was developed in 1969. The model is important because it highlights the importance of inputs to the consumer buying process and suggests ways in which the consumer orders these inputs before making a final decision. The Howard-Sheth model is not perfect as it does not explain all buyer behaviour. It is however, a comprehensive theory of buyer behaviour that has been developed as a result of empirical research (Horton, 1984).

By comparing and evaluating the effectiveness of the alternative models, we estimated and chose the third model - Engel-Blackwell-Miniard Model for analysing and discussing the factors affecting on customers’ decision of using credit card in Hanoi.

For the last research question, we rely on the analysis of the relationship and the influence level of those factors on the customers’ behaviour to make recommendation in order to help banks promote trends in payment by card use in customers. Solutions are divided into two main groups: target customers and credit card’s characteristics.

The Engel-Blackwell-Miniard Model

Figure 1: The Engel- Blackwell-Miniard Model

(Sources: Engel, Kollat, and Blackwell, 1968)

The Engel-Blackwell-Miniard Model (also known as the consumer decision model) has its origin in decades of work on the subject of consumer behaviour by Engel, Blackwell and Miniard. The model was originally developed in 1968 and is divided into four main categories, namely stimulus inputs, information process, decision process and variables influencing decision process. The starting point of this model is the process of customers’ perception about a specific problem which they feel satisfied. After that, the main point which this model focuses on is seven stages of buying decision process which are need recognition, search, pre-purchase alternative evaluation, purchase, consumption, post-consumption evaluation, and divestment.

Need recognition: This occurs when there is a difference between the consumers’ desired state and the consumers’ actual state. This is due to a problem in recognition and can be caused by anywhere and anything, new products, a look on somebody’s thing or the dissatisfaction with a current product or service, for example. Buyers are often compelled to confront these differences and this is what launches them into the buying process. Basically problem recognition is a sort of motivation, meaning an aspect that pushes a consumer to buy. The needs can be internal or external stimuli which can affect customer behavior in making decision.

Information search: is when the buyer has been pointed the problem; they look for details on the goods and services that could resolve the obstacle. This process can also be looked on as perception, the way by which the consumer collects, selects, interprets and organizes data to produce a significant concept. The buyer will also decide which promotional message he or she will be receptive to. This is done by the selective perception process as consumers will depict information that relates to their own, cultures, beliefs, experiences, attitudes and motives and will of course remember the message that touches them the most.

Pre-purchase alternative evaluation: This stage shows how consumers choose their products. After having searching information, the buyers will compare each brand and product; evaluate the functional and psychological advantages that each one offers. It needs to know how the customer processes information to arrive at brand choices.

Purchase: After the process of alternative evaluation, it is the stage which the consumer actually buys the product. Attitudes of others and unexpected situational factors are the two factors affecting customer purchase decision.

Consumption: This is the step the customer uses the product or service after possessing it.

Post-consumption evaluation: It is common for customers to experience concerns after making a purchase decision. The consumer, who bought a product, may feel that an alternative would have been preferable. In some circumstances, this consumer will not repurchase immediately but is likely to switch product brands next time.

Divestment: Described as the final stage of decision process, the product purchased is likely to be disposed after post-consumption evaluation.

As Schiffman and Kanuk (1994) stated, information from marketing and non-marketing sources feeds into the information-processing section of the model. After passing through the memory, which serves as a filter, the information has its initial influence at the need recognition stage. Search for external information is activated if additional information is required or if the consumer experiences dissonance because of dissatisfaction with the chosen alternative. The information processing section of the model consists of the consumer’s exposure, attention, comprehension, acceptance and retention of incoming information. According to Engel-Blackwell-Miniard Model, the consumer decision-making process is influenced and shaped by a number of factors and determinants, categorized in two broad categories, namely environmental influences and individual influences. As we know, environmental influences refer to affect of some factors like Culture, Social class, Personal influence, Family and Situation which can not be changed or controlled by banks. In this research, it is only suitable to select factors in individual differences because these factors are easy to control, it comes from individuals. In individual differences, three factors will be choosen, they are demographic, consumer resources, and knowledge. Demographic is in the Engel- Blackwell- Miniard Model, but in the illustration it lacks this factor. The reason to select these factors is to be convenient for our group to research and easy for giving suggestions and recommendations.

Demographics: Consumers can be differentiated on the basis of age, gender, education and so on (Bednall & Kanuk, 1997; Ward & Reingen, 1990). An understanding of consumer’s demography will inform about trends in consumer behaviour and expenditures, and can shed much light on the composition of markets, which will translate into the consumer decision-making process.

Customer resources: Each decision situation is characterized by the involvement of the three different consumer resources. First, the consumers use time, which is valued since time is often more important to consumers than money due to lack of time in a modern society. However, in this study, we find that it is really difficult to make a survey question and a clearly analysis about how much time which customers spend on their decision-making process of choosing and using credit card. Therefore, the sub-factor will not be covered. The second resource is money or economic resource, and the third is information reception and processing capacities. The consumer’s perception regarding the availability of these resources and may affect the willingness to spend time and money on product, which causes the consumer to carefully allocated these resources due to limited availability thereof.

Knowledge: Knowledge, defined as the information stored in memory, encompasses a wide variety of information, including the availability and characteristics of products and services. Information contains in memory regarding products include awareness of the product category and brands within the product category, attributes and beliefs of both the product category and specific brands, and the availability of the products in terms of the distribution channels and competitors selling products within the channels. In addition to the above, knowledge regarding products also includes when to purchase, since the consumer may be aware of specials at certain times during the year and may therefore delay the purchase decision. A final component of knowledge is the information contained in memory regarding the uses and the requirements to use a product. Consumer may, therefore, be aware of the uses of products, although they are not able to actually operate them. The implication here is that advertising and marketing campaigns provide a means by which consumers can learn about the particular attributes and profits of particular products.

Lifestyle: Lifestyle, reflecting an individual’s activities, interests and opinions, represents certain patterns in which people live and spend their time and money. Lifestyle can, therefore, be viewed as the result of all the economic, cultural and social life forces that contributes to an individual’s human qualities.

Understanding customer behaviour is crucial element to success in every business. In Vietnam, with the fast development of economics and globalization, people are more and more impacted by foreign culture and global trend (Nielsen Vietnam, 2007). Globalization makes countries come closer, the Vietnamese customers nowadays is looking for product/service as the same as in China, Japan or US, especially, their trend and psychology are much affected from these countries. They also have specific characteristics such as price conscious, get references from friends, family before buying decision (more than 45%) etc (Nielsen Vietnam, 2009). Such those characteristics seems quite similar to consumers in other countries. Hence, although the Engel-Blackwell model is developed and look for international perspective, they are possible to apply this to understand the behaviour of Vietnamese customers.

CHAPTER II: METHODOLOGY

I. Data collection method

1) Sources of data

In order to accomplish the end objectives for which this research is being conducted, both qualitative and quantitative techniques will be used.

Qualitative analysis aims to look for secondary data from different sources as books, internet, magazines, newspapers and journals for detailed description. Qualitative methods will be in form of using participant observation, in-depth interviews to analysis secondary data, and give our own opinions and recommendation (if necessary). Observation at several places where accept credit card payment in order to collect additional information about users’ life-style and behaviour in shopping or other services. An in-depth interview with two card issuance’s managers of Techcombank and ACB (Asia Commercial Bank) was arranged to gather maximum information as well as understand deeply on the subject of credit card.

For quantitative techniques, the method of collecting and classifying to synthesize used to analyze data, comparison method is also included. Primary data in form of survey questionnaire is planned to gather finalized results to be analyzed and provide additional information. The survey questionnaires were used as the basic research design. Data were collected by self administered questionnaires, from sample respondents. Structured questionnaires that were designed were utilized to collect data. Responses were measured through the combinations of Likert (5 point Likert Scale ranging from Strongly Disagree to Strongly Agree), category and rating scale which have been widely used to measure attitudes.

2) Sampling method

With questionnaires designed, to bring the best results for the research, it is necessary to select the suitable sampling method. The sample group includes 100 customers, male and female from over Hanoi, who own credit card. As it is difficult to define the list of customers of banks, non-probability sampling will be referred to. In non-probability sampling, quota sample is a reasonable technique to study the use of credit card in Hanoi market. This technique allows our group to determine which customers will be surveyed. Focusing on three main kinds of place, namely shopping malls/ department stores, supermarkets, and banks, our group will send out 100 questionnaires to 100 individuals going to these places and also having credit card.

II. Data collection result

1) Survey results

Based on 100 surveys collected from respondents, basic information about users of credit card will be indicated in the following table.

Variable

Frequency

%

Gender

Male

56

56.0

Female

44

44.0

Age

18-24

24

24.0

25-34

33

33.0

35-55

32

32.0

Older than 56

11

11.0

Education

High school

5

5.0

Under graduate

68

68.0

Post graduate

27

27.0

Monthly income

From 2,000,000 to 5,000,000 VND

19

19.0

Over 5,000,000 to 15,000,000 VND

39

39.0

Over 15,000,000 to 30,000,000 VND

24

24.0

Over 30,000,000 VND

18

18.0

Table 1: Demographic Profile of the Sample

2) Data analysis

In order to analyze the data, computerized analysis software, such as Excel or SPSS will be used. In this research, SPSS (Statistical Package for Social Sciences) is selected as the main tool to process data. There are several tasks applied by SPSS, namely graph and table, correlation analysis, and hypothesis testing. In order to describe individual results or the relationship among two results, graph and table are essential to show the representation of data. Various types of bar chart, pie charts, and cross tables will be used as a useful tool in data analysis. Correlation analysis includes scatter plot which indicates the interrelationship of one variable to another. Normally, scatter plot presents the relationship between two numerical, one called independent variable and the other called dependent variable. Another method to analyze the relationship can be mentioned by hypothesis testing. Hypothesis testing is the use of statistics to determine the probability that a given hypothesis is true. Hypothesis testing consists of null hypothesis (H0) and alternative hypothesis (H1), they are important hypotheses to prove the relationship between two variables.