Term Paper on Mercantile Bank Ltd.

INTRODUCTION

In recent years banking industry in Bangladesh has been experiencing a dramatic growth. Use of credit card, a product of banks, is a relatively new phenomenon in Bangladesh, and its market has been growing rapidly with the increasing acceptability of plastic money in numerous outlets. According to the Financial Sector Review by Bangladesh Bank, between June and December 2010, the monthly volume of credit card transactions grew by 124%, debit cards increased by 112% and transaction through ATMs increased by 114%.However, since credit card is a relatively new phenomenon in Bangladesh, a large number of people are not familiar with the advantages and different features of using a credit card. Use of credit card reduces the complexity of human life. Therefore, credit card can play an important role in Bangladesh in improving people’s living standard or lifestyle. Several banks like Mercantile Bank Ltd and so on exist in the credit card market of Bangladesh.

Credit cards provide benefits to consumers and merchants not provided by other payment instruments. Since the credit card use and ownership have been expanding around the globe, credit cards have become as a major source in the financing of consumer purchases and a method of money transmission. Credit cards serve two distinct functions for consumers: (1) a means of payment and (2) a source of credit.  The popularity of credit cards as a payment medium has been attributed to convenience of not carrying cash. Credit cards provide consumers a secure, reliable and convenient means of payment. Consumers often receive incentives to use their credit cards such as dispute resolution services, frequent-use awards, and interest-free short-term loans if no balances are carried between billing periods. Credit cards also provide various security features and limit consumer liability in the event of fraudulent use.

Unlike other payment instruments, credit cards allow consumers access to long-term credit, mostly uncollateralized, at the point of sale.  Consumers that use this option are known as revolvers. Those cardholders who do not avail the credit feature are commonly referred to as convenience users.

Because of many convenient features of credit card usage, credit card has become a profitable product for many banks in Bangladesh. Therefore, while those banks that are offering credit card services at present are aggressively devising strategies to increase their customers and thereby capture increased market share, others are preparing to enter the market with the target to earn profit and establish a mark in the market. At present there are approximately

500,000 credit card users in Bangladesh and Mercantile Bank Limited has only approximately 20732 credit card customers which is 4.5% of the total market share. However, Mercantile Bank has taken an aggressive initiative to expand their credit card operations rapidly and thereby increase its cardholders and market share.

Background of the Study:

In today’s modern world of technology credit card is a very extensively used mode of financial transaction and is widely known as plastic money. Credit cards serve two distinct functions for consumers: a means of payment and a source of credit. Consumer sensitivity to various aspects of credit card pricing reflects these two types of use. It has created an immense importance in the life of the people in the well off countries. Bangladesh is also following this trend and has come up with a number of credit cards. Most of these credit cards are marketed in the Bangladeshi business arena with the help of Master Card and VISA Card. There are about 500,000 credit cardholders in Bangladesh from different banks offering credit cards services. Almost one third of the market share is captured by Standard Chartered Bank and the others are trying to capture more and more market share with different types of marketing strategies.

About a decade ago the private commercial banks of our country launched new products in the form of plastic money called Debit Card and Credit Card. The pioneers of these cards, plastic money in Bangladesh are foreign commercial banks Standard Chartered Bank and American Express Bank. This plastic money allows the customer to shop in a hassle free way without having cash in hand, and withdraw cash from designated Automated Taller Machines (ATMs) without standing long hours in a long queue in the banks.

With technological help from the Information Technology Consultant Limited (ITCL) the private banks have introduced credit cards, which enable the customers to manage their day-to-day cash related activities more conveniently. This product is an alternative to cash and cheque. It provides the cardholders with lots of benefits like acceptance at numerous merchant locations and ATMs in Bangladesh.

Technical support is the key for providing solid Debit and Credit Card facilities for the customers. It requires a set of online banking system to provide a facility through which a customer can use the power of his/ her bank account. For example if a person has a credit card with credit limit of Tk.100,000, s/he has the facility of purchasing anything, from anywhere that accepts credit cards, of that amount without having to carry cash in his pocket. So, credit cards actually offer economical security without exposing to risk. The Point of Sale (POS) machine and the ATMs all are linked with a network so that credit or debit cards can be easily used on them and the customers get the service of plastic money.

VISION, MISSION, OBJECTIVE & CORPORATE FOCUS

VISION

Would make finest corporate citizen.

MISSION

Will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank.

OBJECTIVE

Strategic objectives

  • To achieve positive Economic Value Added (EVA) each year.
  • To be market leader in product innovation.
  • To be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency.
  • To be one of the top five Financial Institutions in Bangladesh in terms of market share in all significant market segments we serve.

Financial objectives

  • To achieve 20% return on shareholders’ equity or more, on average.

Core values

For the customers-
providing with caring services by being innovative in the development of new banking products and services.

For the shareholders-
maximizing wealth of the Bank.

For the employees-
respecting worth and dignity of individual employees devoting their energies for the progress of the Bank.

For the community-
strengthening the corporate values and taking environment and social risks and reward into account.

New technology-

adopting the state-of-the art technology in banking operations.

CORPORATE FOCUS

Our VISION, Our MISSION and Our OBJECTIVE are to emphasize on the equity of product, process and service leading to growth of the company imbibed with good governance practice.

Financial product & services

The Bank has launched a number of financial products and services since its inception. Among these, Monthly Savings Scheme, Family Maintenance Scheme, Double Benefit Deposit Scheme, Quarterly Benefit Deposit Scheme, 1.5 Times Benefit Deposit Scheme, Advance Benefit Deposit Scheme, Consumer Credit Scheme, Small Loan Scheme, Lease Finance Scheme, Overseas Employment Loan Scheme, Car Loan Scheme, Home Loan Scheme and SME Loan have received wide acceptance among the people.

Deposit Products

Monthly Saving Scheme
It is our significant product; introduced to attract small savers for building up their habit of savings and thereby build up a healthy capital base for the economy. The monthly installments are in various sizes and one can adopt the schemes for a period of 05 years, 08 years or 10 years. Investor gets a lump sum (principal plus interest) at the maturity of the scheme. Installment amount should be deposited within the first 10 days of each month. In case of failure, 5% of monthly installment will be charged as late payment fee which will be added with the installment amount. In case of premature encashment, interest will be paid at Savings rate. The incumbent depositor can get a loan facility of maximum 80% of his deposited amount. At the end of 2009, BDT 13.58 billion was deposited against that of BDT 9.79 billion in 2008 recording 38.71% growth in this scheme.

Monthly Benefit Deposit Scheme
Under this scheme, depositor will get a certain sum of money in each month proportion to his/her deposit during the entire tenure. Benefit starts right from the first month of opening an account under this scheme and continues upto five years. On maturity, the principal amount is paid back. Objectives of this scheme are: help the retired persons for investing their retirement benefits, create investment opportunities for Non-Resident Bangladeshi, etc. Minimum deposited amount is BDT 50,000 or its multiples and the tenure is Five (05) years. This scheme is also known as “Family Maintenance Deposit Scheme (FMD)”. Under this scheme total amount of BDT 1.86 billion was deposited upto the end of 2009.

Double Benefit Deposit Scheme
Under this scheme, deposited amount will be double in a tenure of Seven and Half (7.5) years. Minimum deposited amount should be BDT 10,000 or its multiples. In case of premature encashment interest will be paid on Saving A/c Rate. Loan may be granted up to maximum 80% of the deposited amount, but minimum principle amount must be

BDT 20,000. At the end of 2009 total amount of BDT 6.93 billion was deposited under this scheme.

Quarterly Benefit Deposit Scheme
The ‘Quarterly Benefit Deposit Scheme’ will be maintained for a period of 3 (three) years and the minimum amount of deposit is BDT 50,000.00 (fifty thousand) or its multiples. Interest will be paid on quarterly basis. Benefit starts right from the first quarter of opening the account. On maturity, principal amount will be paid back. Savings account is needed to maintain this scheme. Loan may be granted up to maximum 80% of the forced encashment value on the date of loan processing. During the period of continuation of loan, quarterly benefits will be credited only to the loan account. Deposit under this scheme increased to BDT 229.40 million in 2009 from BDT 145.35 million in 2008.

1.5 Times Benefit Deposit Scheme
Under the ‘1.5 Times Benefit Deposit Scheme’ a deposit of minimum BDT 50,000.00 (fifty thousand) or its multiples will be received for a period of 4.25 years. On maturity, 1.5 times of the deposited amount will be paid back to the account holder. In case of premature encashment interest will be paid on Saving A/c Rate. However, no interest shall be paid if premature encashment takes place before expiry of 1 (one) year. Loan may be granted up to maximum 80% of the deposited amount. Total amount of Deposit under this scheme increased significantly to BDT 233.67 million from just 139.37 million at the end of 2008.

Advance Benefit Deposit Scheme
Under this Scheme, one can deposit a certain amount of money for two years. The depositor will receive the benefit on yearly basis. The benefit amount of first year will be received in advance at the time of deposit. On maturity, the depositor will get back the principal amount with the benefit amount of second year. That is Interest is paid in two phases, first phase paid initially BDT 9,500 and second phase paid BDT109,520 after maturity against BDT 1,00,000. Loan may be granted up to maximum 70% of the deposit. This is also known as “Agrim Munafa Amanat Prokolpo (AMAP)”. BDT 76.92 million was deposited under this scheme at the end of 2009.

Loan Products

Consumer Credit Scheme
Consumer Credit Scheme is one of the popular areas of collateral-free finance of the Bank. People with limited income can avail of credit facility to buy household goods including computer and other consumer durables. Total exposure under this scheme was BDT 49.83 million at the end of 2009.

Small Loan Scheme
This scheme has been designed especially for the businessmen longing for credit facility for their business and can’t provide tangible securities. Total amount of BDT 15.40 million was deployed under this scheme at the end of 2009.

Lease Finance
This scheme has been designed to assist and encourage the genuine and capable entrepreneurs and professionals for acquiring capital machinery, medical equipments, computers, vehicle and other items. Flexibility and term and conditions of this scheme have attracted the potential entrepreneurs to acquire equipments of production and services and repay gradually from earnings on the basis of “Pay as you earn.” Total exposure under this scheme was BDT 356.50 million at the end of 2009.

Doctors’ Credit Scheme
Doctors’ Credit Scheme is designed to facilitate financing to fresh medical graduates and established physicians to acquire medical equipments and set up clinics and hospitals and thereby make the medical facilities upgraded and available to the mass people. BDT 7.06 million was disbursed under this scheme till the end of 2009.

SME Loan Scheme
Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide financial assistance to new or experienced entrepreneurs to invest in small and medium scale industries with a comparatively low rate of interest as the same is assisted by the Bangladesh Bank with refinancing facilities. Exposure under this scheme experienced significant growth of  44.39% and amounting to BDT 983.39 million at 2009 end from that of BDT 681.08 million at the end of 2008.

Personal Loan Scheme
Personal Loan Scheme has been introduced to extend credit facilities to cater the needs of low and middle-income group for any purpose. Government and semi-government officials, employees of autonomous bodies, banks and other financial organizations, multinational companies, reputed private organizations and teachers of recognized public and private schools, colleges and universities are eligible for this loan. Total Loans and Advances under this scheme increased to BDT 364.38 million upto 2009 from that of 279.78 million at the end of 2008.

Car Loan Scheme
Car Loan Scheme has been introduced to enable middle-income people to purchase Cars/SUVs/Jeeps. Government and semi-government officials, employees of autonomous bodies, banks and other financial organizations, multinational companies, reputed private organizations, teachers of recognized public and private universities and businessmen are eligible for this loan. Total amount of BDT 201.98 million was disbursed under this scheme upto December 2009.

Home Loan Scheme
To meet the growing need of housing for middle and lower-middle income people, MBL has introduced Home Loan Scheme. We also support the Bangladesh Bank’s Home Loan Refinance Scheme. The Scheme will also boost up the growth of housing sector. Such loan shall be available for purchase or construction of new apartments for self-residing purpose.

Overseas Employment Loan Scheme
Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi youths seeking employment abroad but unable to meet the expenses to reach the workplace from their own sources. The ultimate objective of the scheme is to promote skilled -skilled manpower to different countries across the world as well as to provide support to Government Policy considering priority of this sector. By availing loan under this scheme, the active youths of middle and lower middle class can get overseas employment by avoiding borrowing from the illustrious class or village ‘mohajon’ at a very high cost or selling their paternal properties. The scheme will also help fetching foreign currency for the country as well as fulfill the Bank’s commitment to encourage Micro-lending for poverty alleviation, improve the quality of life and thereby contribute to socio economic development of the country

About Credit Card

Credit card is a plastic card bearing an account number assigned to a card holder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a card holder is subsequently billed by an issuer for repayment of credit extended at once or on an installment basis.

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 is read electronically by specialized machines called Point of Sale (POS) Terminals at merchants or Automated Teller Machines (ATM) in bank premises or elsewhere. The card is rectangular, looking rather like the familiar phone card. Its distinguishing feature is that it acts as cash, may be a large account being only a small piece of documented plastic. This is why it is popularly called plastic Money

Cards in Bangladesh

Standard Charted Bank first introduce Credit Card in Banagladesh & Dutch-Bangla Bank Ltd. Introduce Debit Card in Bangladesh.

Mercantile Bank Credit Card

Mercantile Bank Ltd. Card division Started operation in 2002 and the credit card started in  2006

Features of Mercantile Bank Credit Card

Credit Limit

Local

1.0 To 3.0 times of monthly gross income, Min. Tk. 10,000 and Max. Tk. 500,000.

Under special conditions the limit amount may be enhanced to a maximum of Tk.1,000,000 (Taka Ten Lac)only provided additional prime securities acceptable to the bank is/are furnished:

  • Wage Earner’s Bond
  • Fixed Deposits with Mercantile Bank Ltd.
  • Other form of bank deposits
  • ICB unit certificate

·         Corporate Undertakings

International

Limit may be determined as per Foreign Exchange policy of Bangladesh Bank regarding issuance of International Credit Cards (TQ, ERQ, RFCD etc) & qualitative judgment of the competent authority.

The basic process: Credit and Debit Cards initiation to approval

The initiation of the debit and credit Cards starts from direct marketing to the potential customers. All the necessary information of the customers is collected and sent to the credit committee for reviewing and final approval.

The application for a card may also come through the branches. The recommended applications of the customers of various branches of the bank are also sent to the credit committee for their approval. Card Division may contact with the applicants through the branch which recommended them if any document is required and to query about the applicant. An approved applications information will updated into the data base and issuance order is sent to the production house. When the credit card is generated, it is then sent to the customer.

Documentation: (Credit Card)

Name of Documents

Service Holder

Proprietorship

Partnership

Limited Company

2 copies of passport size photograph

Yes

Yes

Yes

Yes

TIN Certificate*

Yes

Yes

Yes

Yes

Trade License*

 

Yes

  
Salary Certificate*

Yes

 

  
Letter of Comfort (From employer)

Yes

 

 

 

Bank Statement

For last 6 months

For last 1 year personal & Co. A/C

For last 1 year personal & Co. A/C

For last 1 year personal & Co. A/C

Proof of Residence:
Gas/Electricity/Mobile Phone Bill/Land Phone Bill

Yes

Yes

Yes

Yes

Blue Book of own Vehicle (if applicable)

Yes

Yes

Yes

Yes

Other Bank Credit Card bill (if applicable)

Yes

Yes

Yes

Yes

Memorandum and Article of Association

 

 

 

Yes

Deed of Partnership

 

 

Yes

 

Letter of Incorporation

 

 

 

Yes

Corporate Guarantee

 

 

 

Yes

Letter of Commencement

 

 

 

For Public Limited Co.

Copy of Passport/Driving/License/Visiting Card

Yes

Yes

Yes

Yes

Club Membership, if any

Yes

Yes

Yes

Yes

Card Division exercise the following documentation according to types of cards applied for processing formalities related to credit card. This is also applicable for issuance of the same from Head Office as well.

Items with asterisk (*) are mandatory. Depending on customer profile and business relation bank may ask for other documents if necessary on case-to-case basis.

 However, minimum charge documents (DP Note, Letter of Lien, Letter of Encashment, Letter of Guarantee etc.) to be obtained.

Papers/documents required for insurance of Debit Card/Pre-Paid Card

(i) Two copies of passport size photograph.
(ii) Customer should maintain a deposit (SB/CD/STD) A/C with any branch of MBL.
(iii) Other than MBL account holders may also avail Pre-Paid card against deposit of money.

Papers/documents required for issuance of International Credit Card

(i) Two copies of passport size photograph.
(ii) TIN certificate.
(iii) Photocopy of passport from 1 to 7 pages including endorsement pages if any.
(iv) Lien confirmation of RFCD A/C is required from the concerned Branch/Bank for issuance of card against RFCD A/C.
(v) For issuance of card against the balance in ERQ A/C maintained with us or with other bank, lien confirmation should be obtained from the respective Bank/branch.
(vi) For issuance of card against new exporters and importers/producers quota relevant papers such as, recommendation letter from EPB/ copy of tax return etc. is required
.

Current Market Situation

Market Description

Many convenient features of credit card usage, credit card have become a profitable product for many banks in Bangladesh. Therefore, while those banks that are offering credit card services at present are aggressively devising strategies to increase their customers and thereby capture increased market share, others are preparing to enter the market with the target to earn profit and establish a mark in the market. At present there are approximately 500,000 credit card users in Bangladesh and Mercantile Bank Limited has only approximately 20732 credit card customers which is 4.5% of the total market share. However, Mercantile Bank has taken an aggressive initiative to expand their credit card operations rapidly and thereby increase its cardholders and market share.

Product Review

There are basically three types of cards:

·        Bank Cards, issued by banks (for example, VISA, Master card and Discover Card)

·        Travel and Entertainment (T&E) cards, such as American Express and Diners Club.

·        House cards that are good only in one chain of stores (sears in the biggest one of these, followed by the oil companies, phone companies and local department stores). T&E cards and national house cards have the same terms and conditions wherever you apply.

Review of CompetitionThe competitors of the Credit Card Business of Mercantile Bank Ltd. are HSBC, Standard Charted Bank Ltd. Dutch-Bangla Bank Ltd, Mutual Trust Bank Ltd, Trust Bank Ltd, AB Bank Ltd, EXIM Bank Ltd, Eastern Bank Ltd, City Bank Ltd, South East Bank Ltd, Brac Bank Ltd, Islami Bank Ltd, Shahajalal Islami Bank Ltd.

Review of Distribution

Distribution Channel

All loan applications are mainly sourced through following distribution channels:

  1. Directs Sales Team of Mercantile Bank Limited
  2. Branches
  3. Sales Center

Direct Sales Team

Customers in this segment are tracked by Direct Sales Executive (DSE) themselves. DSE source the loan/finance application in ways:

Sales Officer/Manager obtain list of local corporate and multinational corporate bodies and hand over to DSEs. DSEs set up appointments in these companies and visit the appropriate department from where a list of employees is obtained. Potential Customers are tracked down from the obtained list of employees and they are contacted either through phone calls or when the DSE visits the organization. DSEs reach the customers by making phone calls or by random visits to various shops, factories, trading agencies, business firms, consulting firms etc. Those customers are located by DSEs, when they visit various individual professionals at their chambers. Many customers are located through references from existing customers in this segment’s reach the customer by making cold calls, through references from existing customer or by random selection.

Branch

Customer visits the Branch and approach for the loan/finance. Customer is contacted by RM/Branch Managers over phone and approached for the loan/finance. Later customer visits the branch and performs necessary formalities to take the loan/finance.

Sales Center

Designated areas within bigger cities where Direct Sales Executives will report to a Relationship Manager (RM). RM shall supervise all sales and collection activities of the DSEs from those centers.

Position

Mercantile Bank Ltd. holds 5-7% share of the total card business of the country. At present there are approximately 500,000 credit card users in Bangladesh and Mercantile Bank Limited has only approximately 20732 credit card customers which is 4.5% of the total market share. However, Mercantile Bank has taken an aggressive initiative to expand their credit card operations rapidly and thereby increase its cardholders and market share.

SWOT Analysis

SWOT Analysis of the credit Card

STRENGTH

WEAKNESSES

  • Sound profitability and growth with internal capital generation.
  • Large number Branches including rural areas.
  • Strong CAMEL rating by Bangladesh Bank.
  • Strong and experienced top level management.
  • Consistent capital growth of the bank since its inception.
  • Offering highest interest rate on deposit
  • High Concentration on Fixed Deposits: high cost.
  • Poorly diversified portfolio
  • Centralized Decision-Making
  • Lack of full scale automation
  • ATM Operation not widespread like DBBL and SCB and other strong rivals
  • Inefficient Real Time On-Line Banking.
  • Low concentration on SME & Consumer credit due to weak CRM.

OPPORTUNITIES

THREATS

  • Scope of market penetration through diversified product.
  • Opportunity for launching new products relating to deposit and credit and also SME Banking.
  • Scope of expansion through increase in number of branches
  • Providing complete online banking
  • The initiative of expanding its ATM & POS through Euronet.
  • Increased competition for common market share.
  • Market Pressure for lowering of Lending Rate
  • High intensity of rivalry in the industry.
  • Unstable or changing government rules and regulations.
  • Political instability and related issues.
  • Meeting Basel II requirements

Objective & Issue of the Study

This research investigates two areas. It has been designed to find out the correlation between the satisfaction level of Mercantile Bank Cardholder with the performance of Mercantile Bank’s credit card based on their different features such as service quality, technological factors and economical factors. Therefore the specific objectives of this report, which are as follows:

  •   To find out overall satisfaction level of the cardholders and satisfaction level of each of the variables such service quality, technological factors, and economical factors
  •  To find out the correlation between service quality and satisfaction level of the cardholders of MBL
  •   To find out correlation between technological factors and satisfaction level among the cardholders
  •   To find out the correlation of economical factors and satisfaction level of cardholders of MBL
  •   To provide recommendations in order to improve quality of credit card services

Marketing Strategy

Target Market

Salaried Executive

Corporate executives of Multinationals, UN bodies, Large Local corporate, Medium & Small corporate bodies, diplomatic houses, government bodies, Private entities etc.

Businessperson

Applicants may be proprietor of sole proprietorship firm, partner of partnership firm and/or director of a private & public limited company.

Self Employed

Individuals making a living from their technical expertise, i.e. medical practitioner, engineers, architects etc and free lancers like consultants, landlords etc, who have an established source of income.

Eligibility of Borrower

Applicant must be ‘non-transitory’ in nature and his / her employment should not normally require frequent shifting of domicile. The Head of Cards will approve any exception to this criterion.

Marketing Mix

Price: Convenience, reasonable & market acceptable.

Product: various product such as toiletries, pharmaceutical, consumer, textile & telecommunication.

Promotion: Square Ltd. promoted their brand by different ways, like electronic media, print media, sales team, sales centre.

Place: Square Ltd. marketed their product with divisional Sales Depot covering commercially situated in the country

Position

Square hold a huge number of consumers which is 23.5% of the total market share.

 Implementation of the Company

The Square Ltd. is high share-high growth industry in Bangladesh.Square company  leading local established in bangladesh. For new business strategies of Square company Ltd. Total business help to grow up to AAA position. Customers are like to use Square Company Ltd.

Budgets

Profit and Loss Account

                                                Mercantile Bank Limited

Card Division

Position for the year 2009

In BDT

Month

Income (Upto)

Expenditure(upto)

Cumulative Net Profit/Loss

To Month Profit

January

3,360,249.89

2,542,107.38

818,142.51

818,142.51

February

6,623,075.94

4,714,648.67

1,908,427.27

1,090,284.76

March

9,742,590.10

7,217,467.61

2,525,122.49

616,695.22

April

13,218,960.55

9,415,710.39

3,803,250.16

1,278,127.67

May

17,000,077.06

12,376,383.28

4,623,693.78

820,443.62

June

21,115,101.17

15,445,927.61

5,669,173.56

1,045,479.78

July

25,096,480.01

17,949,575.43

7,146,904.58

1,477,731.02

August

28,981,467.29

20,351,624.31

8,629,842.98

1,482,938.40

September

33,050,148.50

22,851,156.59

10,198,991.91

1,569,148.93

October

37,101,321.05

25,949,920.85

11,151,400.20

952,408.29

November

41,414,450.57

29,928,756.23

11,485,694.34

334,294.14

December

49180589.83

34139166.69

15,041,423.14

3,555,728.80

 

 

 

Total Profit =

15,041,423.14

 

Total cards

 

 

 

Cards

Upto Nov 2009

 

 

 

International cards

1009

 

 

 

Local Cards

3,916

 

 

 

Total credit Cards

4,925

 

 

 

Debit & prepaid Cards

10,807

 

 

 

Total Cards

15,732

 

 

 

 

 

 

 

 

 

                                                Mercantile Bank Limited

 

Card& Mobile Banking Division

 

Position for the year 2010

 

In BDT

 

Month

Income (Upto)

Expenditure (upto)

Cumulative Net Profit/Loss

To Month Profit

 

January

5,073,685.21

3,299,720.12

1,773,965.09

1,773,965.09

 

February

9,959,061.30

5,254,739.55

4,704,321.75

2,930,356.66

 

March

12,108,102.51

7,362,953.24

4,745,149.27

40,827.52

 

April

26,349,089.82

6,328,627.23

20,020,462.59

15,275,313.32

 

May

30,847,793.35

22,019,364.54

8,828,428.81

-11,192,033.78

 

June

35,670,648.55

25,504,646.82

10,166,001.73

1,337,572.92

 

July

41,357,164.82

19,306,975.44

22,050,189.38

11,884,187.65

 

August

50,891,117.50

21,078,596.22

29,812,521.28

7,762,331.90

 

September

62,073,556.15

34,110,333.20

27,963,222.95

-1,849,298.33

 

October

58,352,847.54

37,048,049.30

21,304,798.24

-6,658,424.71

 

November

63,801,585.21

36,401,223.63

27,400,361.58

6,095,563.34

 

December

   69,398,677.24

38943787.54

30,454,889.70

3,054,528.12

 

 

 

 

Total profit =

30,454,889.70

 

 

 

 

 

 

 

Note :

 

 

 

 

1) Employee Salary not included

 

 

 

2) Premises Rent not included

 

 


Notes

2009
(BDT)

2008
(BDT)

Interest Income

18.1

6,066,171,939

5,106,008,463

Less : Interest Paid on Deposits, Borrowings etc.

19

4,755,901,859

4,045,970,142

Net Interest Income

 

1,310,270,080

1,060,038,321

Investment Income

18.4

696,663,198

520,333,916

Commission, Exchange and Brokerage

20

1,059,887,629

917,199,841

Other Operating Income

21

425,089,853

333,960,039

 

 

2,181,640,680

1,771,493,796

Total Operating Income

 

3,491,910,760

2,831,532,117

Salaries and Allowances

23

807,198,037

611,587,111

Rent, Taxes, Insurance, Electricity, etc.

24

184,168,069

155,724,646

Legal Expenses

25

7,994,350

5 ,045,236

Postage, Stamps, Telecommunication etc.

 

27,205,921

27,045,459

Stationery, Printings, Advertisements etc.

26

82,341,385

6 3,499,399

Chief Executive’s Salary and Fees

23.1

6,450,000

6 ,450,000

Directors’ fees

22

4,055,400

2 ,163,600

Auditors’ Fees

 

709,000

500,000

Depreciation & Repair of Fixed Assets

27

96,423,954

74,617,737

Other expenses

28

363,666,775

303,383,441

Total Operating Expenses

 

1,580,212,891

1,250,016,629

Profit before Provision

 

1,911,697,869

1,581,515,488

Provision against Classified Loans

12.5

159,621,000

117,958,107

Provision against Unclassified Loans

12.5

80,300,000

77,174,000

Other Provisions

12.5

9,000,000

104,700,000

Total Provisions

 

248,921,000

299,832,107

Total Profit before Taxes

 

1,662,776,869

1,281,683,381

Provision for Taxation

12.4

855,260,000

665,800,000

Net Profit after Taxation

 

807,516,869

615,883,381

Retained Surplus brought forward from previous year

 

2,076,907

2,266,026

 

 

809,593,776

6 18,149,407

Appropriations

 

 

 

Statutory Reserve

 

332,540,000

256,337,000

Retained Surplus

 

477,053,776

361,812,407

 

 

809,593,776

618,149,407

Earning Per Share (EPS)

29

37.41

 

Expected cost & revenue

Expected cost & revenue in 2010-2011 economic year Mercantile Bank Ltd. Card divisions expected net revenue 120,000,000 BDT. Where 2009-2010 economic year net profit is 80,000,000 BDT. This figure is 50% more then previous economic year.

Mercantile Bank Ltd. should minimize the figure of cost.

Controls

The Mercantile Bank Ltd. Will plan for closely monitor quality and customer service and satisfaction. It will enable will product to react quickly in correcting any problem that may occur. 24HRS call instant support service (Cell: +88 017 13452825, Phone: +88 027 121578) and 1 day express service will be included to control the management of this product. Other early earning signals that will be monitored for sign of deviation from the plan include monthly sale (by segments and channel) and monthly expense. Given the card market volatility, our product will develop contingency plan to address fast-moving environmental change such as new technology, new competition and new approach. That is what The Mercantile Bank Ltd. will bring a bit step ahead in the market.

CONCLUSIONS

Credit cards and similar financial products developed through technological kinetics became key factors for the banks in getting competitive edge. It is a rapidly growing market because the growth of urbanization and the desire to have a modern lifestyle and better living standard. However, to capture the market share and compete and survive with so many other competitors in the credit card market of Bangladesh, the service quality, technological factors, economical factors and satisfaction level of cardholders are important factors to consider. Thus this study investigates the influence of service quality, technological factors, and economical factors of credit card services on the satisfaction level of cardholders of MBL. The study identified that there is a significant, although not very strong, positive correlation between:

  1. Service quality of credit card services and customers satisfaction of MBL Card Division.
  2. Technological factors of credit card services and customers satisfaction of MBL Card Division.
  3. Economical factors of credit card services and customers satisfaction of MBL Card Division.

Thus, it is believed that service quality, technological factors and economical factors of credit card services of MBL positively influence the satisfaction level of its credit cardholders.

It is clear that developing effective marketing strategies in MBL should be accompanied by an understanding of these factors and items used in this study. These conditions represent a wide range of influences on customer satisfaction and thereby business performance.

The study findings are only suggestive for they rely solely on the use of questionnaires that might not capture the full nature and all the facets of satisfaction. Moreover, it might be difficult to generalize the findings of the present study given the shortness of the sample which was restricted to a very small number out the total cardholders. Furthermore, there might be biased responses, and, therefore, might influence the findings and conclusions of the study. However, such an approach has been used in previous studies. Therefore, the present study should be of useful for MBL Credit Card Division to devise strategy to improve its customer satisfaction and expand its market share by retaining the existing customers and capturing new ones.

 

 

About Credit Card

                   

Credit card is a plastic card bearing an account number assigned to a card holder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a card holder is subsequently billed by an issuer for repayment of credit extended at once or on an installment basis.

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 is read electronically by specialized machines called Point of Sale (POS) Terminals at merchants or Automated Teller Machines (ATM) in bank premises or elsewhere. The card is rectangular, looking rather like the familiar phone card. Its distinguishing feature is that it acts as cash, may be a large account being only a small piece of documented plastic. This is why it is popularly called plastic Money

 

Cards in Bangladesh

Standard Charted Bank first introduce Credit Card in Banagladesh & Dutch-Bangla Bank Ltd. Introduce Debit Card in Bangladesh.

 

Mercantile Bank Credit Card

Mercantile Bank Ltd. Card division Started operation in 2002 and the credit card started in  2006

 

 

Features of Mercantile Bank Credit Card

Credit Limit

Local

1.0 To 3.0 times of monthly gross income, Min. Tk. 10,000 and Max. Tk. 500,000.

Under special conditions the limit amount may be enhanced to a maximum of Tk.1,000,000 (Taka Ten Lac)only provided additional prime securities acceptable to the bank is/are furnished:

  • Wage Earner’s Bond
  • Fixed Deposits with Mercantile Bank Ltd.
  • Other form of bank deposits
  • ICB unit certificate

·         Corporate Undertakings

International

Limit may be determined as per Foreign Exchange policy of Bangladesh Bank regarding issuance of International Credit Cards (TQ, ERQ, RFCD etc) & qualitative judgment of the competent authority.

 

FEES & CHANGES FOR VISA CARDS:

  • CREDIT CARD

SL NO

Particulars

Dual Card

International Card

Local Card

Classic

Gold

Classic

Gold

Classic

Gold

01

 

02Annual/Renewal fee (Principal Card)

Annual /Renewal fee Supplementary Card-Loan
One Supplementary Card is free

$40

 

$80

 

$35

 

$70

 

Tk. 1000

 

Tk.500

Tk. 1800

 

Tk. 900

03

 

04

05

06

07

08

09

Card replacement fee

Late payment fee

Cheque return fee

Statement Retrieval fee

Charge Slip Retrieval fee

Outstation Cheque collection fee

PIN reissue charge

$20

10

5

5

10

10

10

$30

10

5

5

10

10

10

400

250

100

50

150

100

200

500

250

100

50

150

100

200

10Excess limit Charge

10

15

350

350

11Cash Advance Fee

Cash advance fee within the Q-Cash Network:2% of Withdrawal amount or Tk. 125 whichever is higher for local card and 2% of advance amount or $3 whichever is higher for international card.

1) MBL ATMs – No cash advance fee
2) Other ATMs – Tk. 10 per transaction.
12Minimum Payment Charge5% of outstanding amount or $25 whichever is higher5% of outstanding amount or Tk. 500 whichever is higher13

14

15

16Interest Rate

Cash Advance Interest

Interest free days

Interest on advance against credit card2.50% per month

2.50% per month

Maximum 45 days

12% per annum

 

 

DEBIT CARD / PRE-PAID CARDS

SL No

Particulars

Taka

01.

02.

03.Annual/Renewal fee.

 Debit Supplementary Card fee (One Supplementary Card is free). 

Replacement FeeTk. 500

Tk. 400

Tk. 400

Repayment:

(i) Credit Card account statement is generated on monthly basis if there is any outstanding in the cardholder account.
(ii) If the cardholder repays the entire amount within the due date of payment, no interest will be charged and thereby cardholders enjoy maximum 45 days credit facilities without interest for POS transactions.
(iii) If the cardholder repay the minimum payment amount as shown in the credit card account statement within the payment due date then no late payment penalty will be charged.

Calculation of minimum payment:

(i) When the outstanding in the statement is less than or equal to the credit limit, the minimum repayment for the current month is as under:

  1. For International Card: 5% of the billing amount or USD 25 whichever is higher. If the billing amount is less than USD 25, it should be paid in full.
  2. For Local card: 5% if the billing amount is Tk.500 whichever is higher. If the billing amount is less than Tk.500, it should be paid in full.

(ii) When the billing amount in the card account statement is more than the credit limit, the minimum payment is 5% of the credit limit plus excess amount of credit limit.

(iii) If the cardholder fails to pay the minimum of the current month bill then in the next month the minimum payable amount will be current month minimum plus previous month minimum amount.

Interest:

(i) In case of POS transactions, if entire amount is not paid within payment due date, interest will be charged @ 2.5% on the outstanding balance on daily basis from date of transaction.
(ii) In case of cash withdrawal, interest will be charged @ 2.5% per month on daily basis from the date of transaction irrespective of payment due date.

Cash advance fee:

(a) MBL card to MBL ATM: No fee.
(b) MBL card to other Q-Cash ATM: Tk.10 per transaction.
(c) MBL card to other ATM: 2% of transaction amount or Tk.125 whichever is higher.
(d) For international card: USD 3 or 2% of transaction amount whichever is higher.

 

Source: Internal Documents from Mercantile Bank Card Division

 

 

The basic process: Credit and Debit Cards initiation to approval

The initiation of the debit and credit Cards starts from direct marketing to the potential customers. All the necessary information of the customers is collected and sent to the credit committee for reviewing and final approval.

The application for a card may also come through the branches. The recommended applications of the customers of various branches of the bank are also sent to the credit committee for their approval. Card Division may contact with the applicants through the branch which recommended them if any document is required and to query about the applicant. An approved applications information will updated into the data base and issuance order is sent to the production house. When the credit card is generated, it is then sent to the customer.

Documentation: (Credit Card)

Card Division exercise the following documentation according to types of cards applied for processing formalities related to credit card. This is also applicable for issuance of the same from Head Office as well.

Items with asterisk (*) are mandatory. Depending on customer profile and business relation bank may ask for other documents if necessary on case-to-case basis.

 However, minimum charge documents (DP Note, Letter of Lien, Letter of Encashment, Letter of Guarantee etc.) to be obtained.

 

Papers/documents required for insurance of Debit Card/Pre-Paid Card

(i) Two copies of passport size photograph.
(ii) Customer should maintain a deposit (SB/CD/STD) A/C with any branch of MBL.
(iii) Other than MBL account holders may also avail Pre-Paid card against deposit of money.

Papers/documents required for issuance of International Credit Card

(i) Two copies of passport size photograph.
(ii) TIN certificate.
(iii) Photocopy of passport from 1 to 7 pages including endorsement pages if any.
(iv) Lien confirmation of RFCD A/C is required from the concerned Branch/Bank for issuance of card against RFCD A/C.
(v) For issuance of card against the balance in ERQ A/C maintained with us or with other bank, lien confirmation should be obtained from the respective Bank/branch.
(vi) For issuance of card against new exporters and importers/producers quota relevant papers such as, recommendation letter from EPB/ copy of tax return etc. is required
.

Current Market Situation