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CREDIT CARD OPERATIONS IN BANGLADESH CREDIT CARD OPERATIONS IN BANGLADESH

A COMPERATIVE STUDYA COMPERATIVE STUDY

Course No: 501Course No: 501

Business Communication and Business Communication and Report WritingReport Writing

October 19,2009October 19,2009

CREDIT CARD OPERATIONS IN CREDIT CARD OPERATIONS IN BANGLADESH BANGLADESH

A COMPERATIVE STUDYA COMPERATIVE STUDY

Submitted ToSubmitted To

DR. BANDANA SAHADR. BANDANA SAHA

ProfessorProfessor

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Mr. A. N. K. MIZAN Mr. A. N. K. MIZAN

Lecturer Lecturer

Bangladesh Institute of Bank ManagementBangladesh Institute of Bank Management

Submitted By-Submitted By-

MD. RASHEDUL ISLAM DEWAN: ID-MD. RASHEDUL ISLAM DEWAN: ID-409011409011

GAUTAM KUMAR BISWAS: ID-409013GAUTAM KUMAR BISWAS: ID-409013

RAYHAN -AL- ISLAM: ID-409015RAYHAN -AL- ISLAM: ID-409015

ARIF MOHAMMAD ASHRAR HOSSAIN: ARIF MOHAMMAD ASHRAR HOSSAIN: ID-409017ID-409017

TAPAS KUMAR PAUL: ID-409021TAPAS KUMAR PAUL: ID-409021

An overview of the report An overview of the report ……

We will cover - We will cover - Objective of the study, methodology that Objective of the study, methodology that

has been used, scope and limitation of the has been used, scope and limitation of the study.study.

About the credit card- give a preliminary About the credit card- give a preliminary idea.idea.

Various card issuer of Bangladesh- their Various card issuer of Bangladesh- their products and facilities.products and facilities.

Process of issuing Credit Card and how it Process of issuing Credit Card and how it works.works.

Give a brief compression between the Card Give a brief compression between the Card Issuer and recommendationIssuer and recommendation..

Reason for choosing the Reason for choosing the MATTER…MATTER…The banking sector has flourished in our The banking sector has flourished in our country with a hopeful prospect. Banks country with a hopeful prospect. Banks

and other financial organizations are in a and other financial organizations are in a massive competition to provide better massive competition to provide better

opportunities to their customers. opportunities to their customers.

Modern banking facilities are introducing by Modern banking facilities are introducing by the banks to make the financial facilities the banks to make the financial facilities convenient and available for 24 hours. convenient and available for 24 hours.

Credit card facility is such an introduction. Credit card facility is such an introduction.

As students of Bank Management we As students of Bank Management we are interested to have a clear are interested to have a clear understanding of the issue. understanding of the issue.

Objectives of the ReportObjectives of the Report To study the banking product - To study the banking product -

Credit Card; its history and Credit Card; its history and features in Bangladesh perspective features in Bangladesh perspective

To give an comparative To give an comparative understanding of the present status understanding of the present status of Credit Cards in our countryof Credit Cards in our country

To describe the detailed To describe the detailed operational procedure of Credit operational procedure of Credit Cards along with their associated Cards along with their associated benefits and fees.benefits and fees.

Sources of DataSources of Data

To prepare this report, secondary To prepare this report, secondary data will be collected from different data will be collected from different sources. The sources are:sources. The sources are:

Annual Reports of banks.Annual Reports of banks.Different web-sites of the Different web-sites of the sample Banks.sample Banks.

Other published documents Other published documents of the Banks of the Banks

Limitations of the ReportLimitations of the Report Limitation of timeLimitation of time was one of the most was one of the most

important factors that shortened the present important factors that shortened the present study. Due to time limitation many aspects study. Due to time limitation many aspects could not discussed in the present study.could not discussed in the present study.

Confidentiality of dataConfidentiality of data was another was another important barrier that was faced during the important barrier that was faced during the conduct of this study. Every organization conduct of this study. Every organization has their own secrecy that in not revealed to has their own secrecy that in not revealed to others. While collecting data, personnel did others. While collecting data, personnel did not disclose enough information for the sake not disclose enough information for the sake of confidentiality of the organization.of confidentiality of the organization.

Rush hours and businessRush hours and business was another was another reason that acts as an obstacle while reason that acts as an obstacle while gathering data.gathering data.

What is Credit Card?What is Credit Card?

Credit card is an electronic based Credit card is an electronic based plastic card Mostly known as plastic card Mostly known as

PLASTIC MONEYPLASTIC MONEY bears bears

- an account number assigned to a - an account number assigned to a cardholder .cardholder .

- with a credit limit that can be used - with a credit limit that can be used to purchase goods and pay for to purchase goods and pay for services with a credit facility services with a credit facility

- without cash transactions from the - without cash transactions from the appointed merchants of issuer of the appointed merchants of issuer of the card card

- card holder is subsequently billed - card holder is subsequently billed by an issuer for repayment of by an issuer for repayment of availing credit facilities.availing credit facilities.

Physical Feature Physical Feature

The credit card isThe credit card is - - a rectangular and looks like a a rectangular and looks like a

phone card phone card a layered piece of hard plastic with a layered piece of hard plastic with

holograms and security features holograms and security features carries a strip of magnetic tape on carries a strip of magnetic tape on

the back which is loaded with the back which is loaded with electronic data including the card electronic data including the card holder’s details holder’s details

How How CREDIT CARDCREDIT CARD Looks Looks Like…Like…

A Sample of a Gold A Sample of a Gold CardCard

A Brief Overview of Global A Brief Overview of Global

Card IssuersCard Issuers Agents are-Agents are-

- Master card-- Master card- from its beginning in 1956 , from its beginning in 1956 , master card has evolved into a global master card has evolved into a global payments franchise. payments franchise.

- Visa card -- Visa card - Visa was founded by bank of Visa was founded by bank of America in 1960. Today, it has the largest America in 1960. Today, it has the largest worldwide card-base. worldwide card-base.

- American express-- American express- American express American express (Amax), which introduced its green card in (Amax), which introduced its green card in 1958, is the world’s largest issuer of debit & 1958, is the world’s largest issuer of debit & credit cards.credit cards.

- Diners club -- Diners club - The diners’ club card, the first The diners’ club card, the first debit & credit card, was introduced in 1950. debit & credit card, was introduced in 1950.

Credit Card in Credit Card in BangladeshBangladesh

- ANZ Grindlays Bank commenced its ANZ Grindlays Bank commenced its credit card operations in Bangladesh in credit card operations in Bangladesh in 1991 1991

- Initially they introduce 29 merchants Initially they introduce 29 merchants acceptingaccepting

Visa International and Visa International and MasterCard International MasterCard International in the five star hotels and the few of the in the five star hotels and the few of the

up market tourist oriented retailers.up market tourist oriented retailers.

- in January 1997 , ANZ Grind lays Bank - in January 1997 , ANZ Grind lays Bank launched its local currency based credit launched its local currency based credit cards from both visa and MasterCard and cards from both visa and MasterCard and with increased 850 merchants in total with increased 850 merchants in total

Credit Card in Credit Card in Bangladesh…Bangladesh…

- National Bank burst into the world of credit card in October 1997 - National Bank burst into the world of credit card in October 1997 It has It has

Gold International and Gold Local and Gold International and Gold Local and Silver International and Silver Local. Silver International and Silver Local.

- Prime Bank opened its business of credit card in - Prime Bank opened its business of credit card in November 1999 & quickly came across to the front line . November 1999 & quickly came across to the front line .

The bank has The bank has Gold International and Gold Local and Gold International and Gold Local and

Silver International and Silver Local. Silver International and Silver Local. - Now there are many banks LIKE Southeast bank, united - Now there are many banks LIKE Southeast bank, united

commercial bank, one bank, Brac bank and so on commercial bank, one bank, Brac bank and so on provide CREDIT CARD.. provide CREDIT CARD..

Various Card Issuers in Various Card Issuers in BangladeshBangladesh

Local & International Local & International Credit CardCredit Card

Issue by Issue by BanksBanks--- Prime Bank LimitedPrime Bank Limited- National Bank LimitedNational Bank Limited- Brac Bank LimitedBrac Bank Limited- Southeast Bank LimitedSoutheast Bank Limited- UCB UCB - Bank Asia LimitedBank Asia Limited- HSBCHSBC- Standard Chartered BankStandard Chartered Bank- Jamuna Bank LimitedJamuna Bank Limited- One Bank LimitedOne Bank Limited- And some other Commercial And some other Commercial

BankBank

Other Other Financial InstituteFinancial Institute LikeLike

- VANIK- VANIK

Duel Currency Credit Duel Currency Credit CardCard Issued ByIssued By

- Eastern Bank LimitedEastern Bank Limited- SCBSCB- National Bank National Bank

Limited Limited

Various category of the Various category of the Credit CardCredit Card

Mainly Eight CategoryMainly Eight Category

Master CardMaster Card

-- Gold LocalGold Local

-- Gold InternationalGold International

-- Silver Local Silver Local

-- Silver InternationalSilver International

VISA CardVISA Card

- Gold Local- Gold Local

- Gold International- Gold International

- Silver Local - Silver Local

- Silver - Silver InternationalInternational

Other Categories areOther Categories are

-Visa Mini Card -Visa Mini Card

-Master Card -Master Card Platinum Card Platinum Card

-VISA Card Platinum -VISA Card Platinum CardCard

-MasterCard Cricket -MasterCard Cricket CardCard

Special Type Credit CardSpecial Type Credit Card- - SADIQSADIQ- from SCB- from SCB

- Duel Currency Credit Card- Duel Currency Credit Card

Features of Features of CREDIT CREDIT CARDCARD……

Smart ShoppingSmart Shopping Bearing Bank Account in the pocketBearing Bank Account in the pocket Auto Bills Pay facilityAuto Bills Pay facility Installment Loan FacilityInstallment Loan Facility Rewards ProgramRewards Program Card ChequeCard Cheque Free All Accident Insurance Free All Accident Insurance

coveragecoverage Safety Net Insurance SchemeSafety Net Insurance Scheme SMS Banking FacilitySMS Banking Facility e-Statementse-Statements

Players of the Credit Card Players of the Credit Card Transaction SystemTransaction System

- - CardholderCardholder

- Card-issuing bank- Card-issuing bank

- - MerchantMerchant

- - Acquiring bank Acquiring bank

- Transaction - Transaction NetworkNetwork

- Affinity partner- Affinity partner

Criteria to be a Card Criteria to be a Card Holder Holder

A person has to fulfill some criteria to A person has to fulfill some criteria to be a cardholder. be a cardholder.

Every bank has its own policy by which Every bank has its own policy by which the qualification of an applicant is the qualification of an applicant is

assessed. assessed.

The criteria to be a Card Holder is-The criteria to be a Card Holder is-

- Income range- Income range

- Social status- Social status

- Place of living- Place of living

- Education- Education

- Designation - Designation

Credit Limit given by Credit Limit given by Different BanksDifferent Banks

Local Silver Credit CardLocal Silver Credit Card

Particulars SCB BRAC Prime National Southeast

Credit limit

10000-90000

10000-75000

10000-50000

10000-50000

10000-50000

Minimumincome

10000 10000 10000 10000 No ExactRequirement

Cash limit 50% 50% 50% 50% 50%

Local gold credit cardLocal gold credit card

Particulars SCB BRAC Prime National Southeast

Creditlimit

100000-300000

80000-300000

50000-300000

50000-300000

50000-300000

Cash limit 50% 50% 50% 50% 50%

Card Issuing Process and Card Issuing Process and OperationsOperations

Pre Issuance ActivityPre Issuance Activity- Compiling the credit card applications - Compiling the credit card applications

- Bank gathers necessary information regarding - Bank gathers necessary information regarding the applicants the applicants

- Authenticity of the documents tested- Authenticity of the documents tested

- Assessment of risk - Assessment of risk

- Approve or refuse the application & determine - Approve or refuse the application & determine the credit limit the credit limit Post Issuance ActivityPost Issuance Activity

The credit card operations The credit card operations that we normally refer are that we normally refer are actually the post-issuance actually the post-issuance activitiesactivities

How credit cards work? How credit cards work? Credit cards are issued after an account has Credit cards are issued after an account has

been approved by the credit provider .been approved by the credit provider .

When a purchase is made –When a purchase is made –

Cardholder indicates his/her consent to pay, Cardholder indicates his/her consent to pay, by signing a receipt with a record of the card by signing a receipt with a record of the card details and indicating the amount to be paid details and indicating the amount to be paid

Payment is made by-Payment is made by-

- By allowing Electronic verification - By allowing Electronic verification systems systems

- By putting PIN Number- By putting PIN Number

- By getting verbal authorizations - By getting verbal authorizations

Bill Pay System…Bill Pay System…

Each month, the credit card user is sent a Each month, the credit card user is sent a statement indicating the purchases statement indicating the purchases undertaken with the card, any outstanding undertaken with the card, any outstanding fees, and the total amount used. fees, and the total amount used.

the cardholder must pay a defined minimum the cardholder must pay a defined minimum proportion of the bill by a due date, or may proportion of the bill by a due date, or may choose to pay a higher amount up to the choose to pay a higher amount up to the entire amount used. entire amount used.

The credit provider charges interest on the The credit provider charges interest on the amount used if the balance is not paid in amount used if the balance is not paid in full.full.

Grace periodGrace period

A credit card's grace period is the time the A credit card's grace period is the time the customer has to pay the balance before customer has to pay the balance before

interest is charged to the balance. interest is charged to the balance.

Grace periods vary, but usually range from Grace periods vary, but usually range from 20 to 40 days depending on the type of 20 to 40 days depending on the type of

credit card and the issuing bank. credit card and the issuing bank.

Usually, if a customer is late paying the Usually, if a customer is late paying the balance, finance charges will be calculated balance, finance charges will be calculated

and the grace period does not apply.and the grace period does not apply.

Card Transaction Steps Card Transaction Steps ……

The cardholder pays for the purchase The cardholder pays for the purchase

The merchantThe merchant Submits the transaction to the acquirer Submits the transaction to the acquirer

The acquirer - The acquirer - Verifies the credit card number, the Verifies the credit card number, the

transaction type and the amount with the transaction type and the amount with the issuer. issuer.

Reserves that amount of the cardholder's Reserves that amount of the cardholder's credit limit for the merchant. credit limit for the merchant.

Cost, Benefits, and Cost, Benefits, and DetrimentsDetriments

Credit card issuers (banks) have several Credit card issuers (banks) have several types of costs:types of costs:

Interest expensesInterest expenses Operating costsOperating costs

Fees charged to customersFees charged to customers- Late payments or overdue payments- Late payments or overdue payments- Charges that result in exceeding the credit - Charges that result in exceeding the credit

limit , limit , Mostly Known as Mostly Known as Over Limit FeesOver Limit Fees - Returned cheque fees - Returned cheque fees - payment processing fees - payment processing fees - Annual fees - Annual fees

- Exchange rate loading fees- Exchange rate loading fees

Comparative Charges for Various BanksComparative Charges for Various Banks

Credit card fees - Local silver cardCredit card fees - Local silver card Particulars SCB BRAC Prime Southeast

Annual fee primary 1500 1500 1000 1000

Annual feesupplementary

600 400 500 600

Card replacement fee 300 400 500 400

Late payment fee 200 350 200 200

Over limit fee 300 350 300

Finance charge 2.5% 2.5% 2.5% 2.5%

Pin replacement fee 200 350 500 500

Return cheque fee 500 500 250 250

Outstation cheque fee 100 100 100

Voucher retrieval fee 100 250 200 200

Statement retrieval fee 50 100 50 50

Certificate charge 500 250 N/a N/a

AIT 3.00% 3.00% 3.00% 3.00%

Credit card fees - Local Gold cardCredit card fees - Local Gold card Particulars SCB BRAC Prime Southeast

Annual fee primary 3000 3000 2000 1900

Annual fee supplementary

1500 1200 1000 900

Card replacement fee 500 500 500 500

Late payment fee 500 500 300 350

Over limit fee 500 500 500 n/a

Finance Charge 2.5% per month

2.5% per month

2.5% per month

2.50%per month

Pin replacement fee 500 500 500 500

Return cheque fee 500 500 350 350

Outstation cheque fee 500 N/A 100 100

Voucher retrieval fee 100 250 250 250

Statement retrieval fee 100 100 50 50

Certificate charge 500 250 n/a n/a

AIT 3.00% 3.00% 3% 3%

Sector Wise Income Earned by Sector Wise Income Earned by the the

Card IssuerCard Issuer

Sector Wise Income

Foreign Exchange Income

1%

Interest Income61%

Cash Withdraw l Chareg

1%

Annual Fees14%

Late Payment Charge

1%

Exchange Gain17%

Other Income5%

Foreign Exchange Income Interest Income Cash Withdraw l CharegAnnual Fees Late Payment Charge Exchange GainOther Income

Benefits of Credit Benefits of Credit Card…Card…

General User’s BenefitGeneral User’s Benefit Increases purchasing power.Increases purchasing power. Eases the transaction process (money less Eases the transaction process (money less

transaction).transaction). Allows for obtaining credit facility for a definite Allows for obtaining credit facility for a definite

period period Convenient to carry a plastic card rather than Convenient to carry a plastic card rather than

bundles of cash. bundles of cash. Lowering the risks of losing money Lowering the risks of losing money Usually issued for a year with renewal facility Usually issued for a year with renewal facility

available.available.

Merchant’s BenefitsMerchant’s Benefits Credit card transaction is often more secure Credit card transaction is often more secure

than other forms of payment, such as checks, than other forms of payment, such as checks, because the issuing bank commits to pay the because the issuing bank commits to pay the

merchant the moment the transaction is merchant the moment the transaction is authorized.authorized.

Limitations of Credit Card… Limitations of Credit Card…

Unavailability-Unavailability-

There are many business centers There are many business centers which do not give which do not give

card facilities causing troubles to the card facilities causing troubles to the cardholderscardholders. .

Security-Security- Credit card security relies on the physical Credit card security relies on the physical security of the plastic card as well as the security of the plastic card as well as the

privacyprivacy of the credit card numberof the credit card number . . Merchants Merchants

often accept credit card numbersand give often accept credit card numbersand give authorisation without additional authorisation without additional verification may creat a scope of fraudal verification may creat a scope of fraudal casecase..

Our ViewsOur ViewsCredit card is a modern banking operation Credit card is a modern banking operation

and arrangement which makes and arrangement which makes transaction convenient and secured. transaction convenient and secured.

Government and Central Bank should take Government and Central Bank should take measures to form a common playground measures to form a common playground for the banks that are like to provide the for the banks that are like to provide the

card facilitycard facility..

This will be beneficial for the customers; This will be beneficial for the customers;

the transactions will be more convenient the transactions will be more convenient which will result in a sustainable which will result in a sustainable

economic development of the country. economic development of the country.

Question Question

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AnswerAnswer

Thank You…Thank You…