Ch.

1 Introduction

Plastic money or polymer money, made out of plastic, is a new

and easier way of paying for goods and services. Plastic money was
introduced in the 1950s and is now an essential form of ready money which
reduces the risk of handling a huge amount of cash. It includes debit cards,
ATMs, smart cards, etc. Credit cards, variants of plastic money, are used as
substitutes for currency. This book on plastic money is divided into two
sections titled Concepts and Experiences. The former covers articles on the
the emergence of plastic money, different types of plastic cards and their
growth in India and other related issues. An experience discusses the
experiences of banks like Standard Chartered, Citibank, which deal with
plastic money and their growth in the market.

Meaning
Plastic money refers to credit cards, you use them whenever you want
and pay later (with interest, of course). It makes it too easy for people to buy
things they normally could not afford, which makes it easier to get into debt.

Definition
A slang phrase for credit cards, especially when such cards used
to make purchases. The "plastic" portion of this term refers to the plastic
construction of credit cards, as opposed to paper and metal of currency. The
"money" portion is an erroneous reference to credit cards as a form of
money, which they are not. Although credit cards do facilitate transactions,
because they are a liability rather than an asset, they are not money and not
part of the economy's money supply.

Ch.2 The History Of Credit Cards and Debit Cards In

Plastic Money

Credit cards have evolved into a safe and secure manner to

purchase goods and services. The Internet has given credit card users
additional purchasing power. Banks have options like cash-back rewards,
savings plans and other incentives to entice people to use their cards. Debit
cards allow people the convenience of cards without the worry of racking up
debt. The convenience, security and rewards offered by credit and debit
cards keep shoppers using their cards as opposed to checks or cash.

Credit Card Origins

The first credit cards were issued by individual stores and

merchants. These cards were issued in limited locations and only accepted
by the businesses that issued them. While the cards were convenient for the
customers, they also provided a customer loyalty and customer service
benefit, which was good for both customer and merchant. It was not until
1950 that the Dinner's Club card was created by a restaurant patron who
forgot his wallet and realized there needed to be an alternative to cash only.
This started the first credit card specifically for widespread use, even though
it was primarily used for entertainment and travel expenses.

 Plastic Becomes the Standard

The first Diner's Club cards were made out of cardboard or celluloid.
In 1959 American Express changed all that with the first card made of
plastic. American Express created a system of making an impression of the
card presented at the register for payment. Then that impression was billed
to the customer and due in full each month. Several American Express cards
still operate like this as of 2010. It was not until the late 1980s that American
Express began allowing people to pay their balance over time with
additional card options.

Bank Card Associations

In 1966, Bank of America created a card that was a general purpose

card or "open loop" card. These "closed loop" agreements limited cards like
Diners Club and American Express to certain merchants, unlike the new
"open loop" cards. The new general purpose system required interbank
cooperation and additional regulations. This created additional safety
features and began building the credit card system of today. Two systems
emerged as the leaders--Visa and Master Card. However, today there is little
difference between the two and most merchants accept both card
associations.

Debit Cards Emerge

The Visa association of cards took credit cards to a new level in 1989
when they introduced debit cards. These cards linked consumers to their
4

checking accounts. Money was now drawn from a checking account at the
point of sale with these new cards and replaced check writing. This helped
the merchants check that money was available and made it easier to track the
customer if the funds could not be obtained. Consumers liked the
convenience of not having to write checks at the point of sale, which made
debit cards a safe alternative to cash and checks.

The Future

There were almost 29 million debit card users as of 2006, with a

projected 34.4 million users by 2016. However, online services like PayPal
are emerging as a way for people to pay their debts in new, secure and
convenient ways. Technology also exists to have devices implanted into
phones, keys and other everyday devices so that the ability to pay at the
point of sale is even more convenient.

Ch.3 TYPES OF PLASTIC MONEY

Different types:-

Credit card

A credit card is plastic money that is used to pay for products and
services at over 20 Million locations around the world. All you need
to do is produce the card and sign a charge slip to pay for your
purchases. The institution which issues the card makes the payment to
the outlet on your behalf; you will pay this 'loan' back to the
institution at a later date.

Debit card
Debit cards are substitutes for cash or check payments, much the same
way that credit cards are. However, banks only issue them to you if
you hold an account with them. When a debit card is used to make a
payment, the total amount charged is instantly reduced from your
bank balance.

 Don't borrow on your credit card! Here's why

A debit card is only accepted at outlets with electronic swipemachines that can check and deduct amounts from your bank balance
online.

Charge card
A charge card carries all the features of credit cards. However, after
using a charge card you will have to pay off the entire amount billed,
by the due date. If you fail to do so, you are likely to be considered a
defaulter and will usually have to pay up a steep late payment charge.
When you use a credit card you are not declared a defaulter even if
you miss your due date. A 2.95 per cent late payment fees (this differs
from one bank to another) is levied in your next billing statement.

Amex card
7

 Amex stands for American Express and is one of the well-known

charge cards. This card has its own merchant establishment tie-ups
and does not depend on the network of MasterCard or Visa.
Credit cards: Remember these dos and don'ts.
This card is typically meant for high-income group categories and
companies and may not be acceptable at many outlets. There are a
wide variety of special privileges offered to Amex cardholders.

Dinner club card

Diners Club is a branded charge card. There are a wide variety of
special privileges offered to the Diners Club cardholder. For instance,
as a cardholder you can set your own spending limit. Besides, the
card has its own merchant establishment tie-ups and does not depend
on the network of MasterCard or Visa.
However, since this card is typically meant for high-income group
categories, it may not be acceptable at many outlets. It would be a
good idea to check whether a member establishment does accept the
card or not in advance.

 Global card
Global cards allow you the flexibility and convenience of using a
credit card rather than cash or travelers cheque while traveling abroad
for either business or personal reasons.

Co-branded card
Co-branded cards are credit cards issued by card companies that have
tied up with a popular brand for the purpose of offering certain
exclusive benefits to the consumer.
A debit card with a difference
For example, the Citi-Times card gives you all the benefits of a
Citibank credit card along with a special discount on Times Music
cassettes, free entry to Times Music events, etc.

 Master card & Visa

MasterCard and Visa are global non-profit organizations dedicated to
promote the growth of the card business across the world.
They have built a vast network of merchant establishments so that
customers worldwide may use their respective credit cards to make
various purchases.

Smart card
A smart card contains an electronic chip which is used to store cash.
This is most useful when you have to pay for small purchases, for

10

example bus fares and coffee. No identification, signature or payment

authorization is required for using this card.
The exact amount of purchase is deducted from the smart card during
payment and is collected by smart card reading machines. No change
is given. Currently this product is available only in very developed
countries like the United States and is being used only sporadically in
India.

Photo card
If your photograph is imprinted on a card, then you have what is
known as a photo card. Doing this helps identify the user of the credit
card and is therefore considered safer. Besides, in many cases, your
photo card can function as your identity card as well.

Ch.4 CREDIT CARD

INTRODUCTION

11

A credit card is a small plastic card issued to users as a system of

payment. It allows its holder to buy goods and services based on the holder's
promise to pay for these goods and services. The issuer of the card grants a
line of credit to the consumer or the user) from which the user can borrow
money for payment to a merchant or as a cash advance to the user. Usage of
the term "credit card" to imply a credit card account is a metonym.
When a purchase is made the user would indicate consent to pay by
signing a receipt with a record of the card details and indicating the amount
to be paid. Issuer agrees to pay the merchant and the credit card user agrees
to pay the card issuer.

DEFINITION:The credit card can be defined as A small plastic card that allows its
holder to buy goods and services on credit and to pay at fixed intervals
through the card issuing agency.

MEANING:A credit card is a card or mechanism which enables card holder to

purchase goods, travels and dine in a hotel without making immediate

12

payments. The holders can use the cards to get credit from banks up to 45
days.
The credit card relieves the consumers from the botheration of
carrying cash and ensures safety. It is a convenience of extended credit
without formality. Thus credit card is a passport to, safety, convenience,
prestige and credit.

ADVANTAGES & DISADVANTAGES OF

CREDIT CARD

13

 ADVANTAGES OF CREDIT CARD

The benefits of credit card can be grouped as follows:

(A) BENEFITS TO THE BANK

a) A credit card is an integral part of banks major services these days. The
credit card provides the following advantages to the bank:

the system

provides an opportunity to the bank to attract new potential costumers.

b) To get new customers the bank has to employee special trained staff. This
gives the bank an opportunity to find the latent talent from among existing
staff that would have been otherwise wasted.
c) The more important function of a credit card, however, is simply to yield
direct profit for the bank. There is a scope and a potential for a better
profitability out of income / commission earned from the traders turn over.
d) This also provides additional customer services to the existing clients. It
enhances the customer satisfaction.
e) More use by the car holder and consequently the growth of banking habits
in general.

14

f) Better network of card holders and increased use of cards means higher
popularity and image of the bank
g) Savings of expense on cash holdings, i.e. stationery, printing and man
power to handle clearing transactions while considerably is reduced. It
increases
(B) BENEFITS TO CARD HOLDER

The principal benefits to a card holder are:

a) He can purchase goods and services at a large number of outlets without
cash or cheque. The card is useful in emergency, and can save
embarrassment.
b) The risk factor of carrying and storing cash is avoided. It is convenient for
him to carry credit card and he has trouble free travel and may purchase his
without carrying cash or cheque.
c) Months purchases can be settled with a single remittance, thus, tending to
reduce bank and handling charges.
d) The card holder has the period of free credit usually between 30-50 days
of purchase

15

e) Cash can usually be obtained with the card, either on card account or by
using it as identification when encasings a cheque at the bank.
f) Availing credit with minimum formality.
g) The credit card saves trouble and paper work to traveling business man.

(C) BENEFITS TO THE MERCHANT ESTABLISHMENT

The principal benefits offer credit card to the retailer is
a) This will carry prestigious weight to the outlets.
b) Increases in sale because of increased purchasing power of the cardholder
due to unbilled credit available to the card holder.
c) The retailers gain from the impulse buying and trading up the tendency to
buy the bigger or better article
d) Credit card ensures timely and certainly of payments.
e) Suppliers/sellers no longer have to send reminders of outstanding debits.
f) Systematic accounting since sales receipts are routed through banking
channels.

16

g) Advertising and promotional support on national scale.

h) Development of prestigious clientele base.

DISADVANTAGES OF CREDIT CARD

The following are the common disadvantages of the credit card:

a) Some credit card transactions take longer time than cash transactions
because of various formalities.
b) The customer tends to overspend out of immerse happiness.
c) Discounts and rebates can rarely be obtained.

d) The cardholder is responsible for charges due to loss or theft of the card
and the bank may not be party for loss due to fraud or collusion of staff, etc

e) Customers may be denied cash discount for payment through card.

f) It might lead to spending habits and cardholders may end up in big debts

17

i) Avoid the entire cost and security problem involved in handling cash.

j) Losses to bad debts and reduced an additional liquidity is

k) It also allows him to delegate spending power to add on members

l) Credit card is considered as a status symbol.

MARKETING STRATEGIES
American companies spend billions of dollars each year on marketing.
As a matter of fact, in 2001, U.S. advertising expenditures alone topped
$230 billion, more than doubling the $105.97 billion spent in 1980.

18

(Source: Advertising: Exposure and Statistics November 2003

newsletter of the Media Education Foundation)

Now, these figures may seem staggering to the independent

professional on a budget, but dont panic; there are lots of effective
strategies you can utilize that will help you grow your business fast.
Here are some of my favorites:

Identify your niche.

One of the easiest ways to attract customers is to figure out which
group of prospective customers you get your very best results for and go
after them exclusively. Many professionals are afraid to do this claiming that
theyll be leaving someone out, but many marketing experts agree that niche
marketing as the easiest and fastest way to get business.

Position yourself as an expert.

Why? Experts make more money and get more media attention and
thats free advertising! Lets face it; its easier to trust a specialist than a
generalist whos trying to be everything to everyone. Once youve identified
your niche, let the world know about how you can help. Provide free
information products, write articles and white papers about the problems
your clients face and how they can solve them.

19

Conduct workshops, seminars and tele-classes specifically geared

towards helping your prospective customers and before long youll be
regarded as an expert in your field. And, while youre at it dont forget to,
collect names, emails and addresses of prospects to keep filling your
pipeline.

Develop

ongoing

relationships

with

complementary

professionals and build your referral team.

These are other professionals who sell non-competing services or
products to the same niche customers you are targeting. For instance, my
clients often need the services of bookkeepers, accountants and business
attorneys. Likewise, they refer business to me. Here are a couple of other
examples:
Residential realtor, mortgage broker, real estate attorney, home
improvement contractor, architect and interior designer. 000000000
Commercial printer, copywriter, graphic designer.

Institute a system to keep track of all of the people who are

interested in your product or services, and find creative ways
of keeping in touch with them on a regular basis.

20

To start, go through your notes. Put together a list of all of the people
youve spoken to in the last 6-9 months whove showed interest in you but
havent become paying customers. Follow up with them in a variety of
ways: call them to touch base, use email, ask them to subscribe to a
newsletter, send them interesting articles, or invite them to join you at
events. It takes numerous impressions to make the sale; thats why you see
commercials on TV over and over again for the same products.
By Keeping track of all of the people whove showed interest and
keeping your business on their radar screen youll turn more of them into
paying customers.

Let your satisfied customers help you sell your products or

services.
Here are a couple of ways to do this: 00000000000000000000000000

Ask them for referrals - right away (if you were a car salesman you
wouldnt wait for the new car to get dirty and dented!)000000000000
Ask them to write testimonials for you, (also right away) and compile a list
of testimonials to use in your all of your marketing collateral.
Create a marketing calendar and keep to it consistently.

21

Scheduling marketing activities that take place weekly, bi monthly,

monthly and quarterly will help you to avoid the feast or famine syndrome
that most independent professionals fall prey to. And, by doing so,
marketing will become easier since it becomes a regular part of your
business life.
Identify innovative ways to get more business from existing customers.
Its much easier to get business from customers who are already
happy with your services or products. So develop additional services or
products to keep customers coming back for more.

STEPS FOLOWED
TRANSACTION

1. AUTHORIZATION
22

IN

CREDIT

CARD

 For Internet Merchants, the shopping card is connected to or

integrated with a Payment Gateway. For Retail Merchants, the card is
swiped through a magnetic reader on the point of sale terminal the
authorization is transmitted to the appropriate card issuer for approval.
The issuing bank of card issuer authenticates the card holder and
approves or declines the transaction amount.
It is important to note that no money changes hands during the
authorization. Merchants must re-present the transaction to receive
payment.

2. Merchant balancing

This is also known as batching out. Most pos terminals and all
payment gateway per firm an auto close functions at the and of the
day and batch out automatically.

3. Capture
The front end processor matches the authorization data to the
settlement data and transmits the card capture file to a back end
processor for V/MC transactions or to the appropriate card issuer for
other card types.
4. Clearing

23

 During this stage the back end processor performs compliance checks
and risk management procedures and transmits the transaction to
V/MC or to the appropriate card issuer for other card types.

5. Interchange (VS/MC Only)

During this stage the V/MC Association sort the transactions by
issuing bank and transmit them to the appropriate issuing banks for
settlement.
6. Settlement
During this stage the Issuing Bank calculates fees and deductions and
routs the net funds to the appropriate Card Issuer which determines
the daily deposits for the merchants.
7. Merchant ACH

During this stage the acquiring bank or card issuer transmits the

merchant deposit to the merchants checking account.

Different Types of Credit Cards

24

Credit cars are of various types, every one has to select credit cards on
the basis of the pros and cons of each type of credit card and at the same
time the nature of use. This article gives an insight into the several types of
credit cards available in the market
Today, credit card customers enjoy more options and choices than ever
before. To gain new customers, credit card companies compete by offering
new services and cards to customers. No matter what your needs, chances
are good that there is a card out there that would be ideal for you. If you are
looking for the right card, you can begin by considering the many types of
cards available to you:

Low Interest Credit Cards

These types of credit cards offer very low interest. In some cases,
these cards just charge a few percent interests. The reasons for this are
numerous. In most cases, the low interest rate is for a limited time only.
After a set number of months, you will begin paying higher interest rates. In
some cases, low interest credit cards are not really credit cards at all - they
are debit cards linked to a low-interest loan such as a line of credit. Check
your agreement to find out what type of card you have. If you need to
consolidate debts or if you like the idea of having low interest for a while,
this type of credit card can be perfect for you.
Instant Approval Credit Cards

25

These cards are really a product of our fast-paced society. The idea
behind this type of credit card is that once you fill out your application, you
will be told whether you are approved or not right away. The approval
process only takes a few minutes. Instant approval credit cards are very
popular online and applicants can apply via the internet or over the phone.
If you are very impatient or need credit right away, these types of
cards can be for you. However, you should be aware that these cards do not
guarantee that you will be approved right away - sometimes, more time is
needed to process your application. Another drawback to these cards is that
they rely heavily on your credit score. If you have poor credit or any
extenuating financial circumstances, these types of cards may not be for you.
Balance Transfer Cards
Balance transfer cards are a type of temporary low-interest card that is
meant to help you consolidate your debt. They work this way: if you have
several credit cards with a balance, you can get a balance transfer card. You
then transfer all your credit card debt onto the new card and work to pay it
off. Since the new card has a low interest rate, you can quickly repay your
bills.
If you are in debt, a balance transfer card can be a great way to get out
of debt. It offers the convenience of one bill and low rates. However, some
cards have high fees. Also, if you run up your other cards after consolidating
your debts or if you are unable to pay off your new card in the limited time

26

before the low interest rate increases, you may find yourself even more in
debt than before.

Rewards Credit Cards

Rewards credit cards offer you points, rewards, or bonuses for
every cash purchase made with your credit card over time. As you
accumulate rewards or points, you can redeem your bonus for entertainment
events, purchases, travel, and other fun prizes. Some cards even offer
customers extra automatic-enter sweepstakes and draws. Each time you use
your card, you are entered into a draw to win specific prizes.
These types of cards are really a marketing tool for card companies.
Companies know that customers love rewards and prizes and so offer these
enticements to lure customers. The major advantage of these cards is that
they can help you get more cash value for your money. They can also be fun
and rewarding for almost any credit card customer. However, not all reward
credit cards are a deal. Some charge high fees to offset the costs of the
bonuses. Some also have very low points systems, meaning that you need to
spend a lot with your credit card to get any rewards at all. Read the fine print
carefully before signing.

Cash Back Credit Cards

27

Cash back credit cards give you money rewards. When you make a
purchase with this type of credit card, you get some points based on the
amount of money you have spent with your credit card. When you
accumulate enough points, you get cash back. On most cards, you can get
back about 1% of your total purchases.
These cards are great for those who are budget-conscious as they give
you some money back from your purchases. However, there are several
drawbacks to these types of cards. Some cards have low cash-back
percentage rates. Some charge high fees or have limits on how much money
you can get back each year. Most cards only offer you cash back advantages
on purchases - not on your balance. If you decide this card is right for you,
do compare several card offers to find the best cash back credit card option.

Airline Credit Cards

This type of card allows you to accumulate frequent flyer points on all
your credit card purchases. If you travel a lot or love to travel, this card can
help you accumulate points for a free trip or for a discount ticket. In many
cases, these cards are great because they allow you to gather points for every
purchase. However, these cards can also charge high fees. In some cases,
your points will expire if you do not use them within a specified time.
Worse, some airline credit cards make use of a point system that is not very
user-friendly. You may have to slowly accumulate an enormous amount of
points to qualify for a trip. If you do not love to travel and if you do not use
your Credit card a lot, then, your ability to get rewards you like may be very
limited.
28

Prepaid Debit Cards

These cards are sometimes called junior credit cards. They are not
truly credit cards at all, since you are not getting credit or loans from the
credit card company. Instead, these cards work by having you deposit some
money into the card account. You can then use your card to charge any
amount up to the amount in the account. When you add more money, you
can charge more to your card.0000000000000000000000000000000000

Secured Credit Cards

Secured credit cards use collateral to ensure that the card company
will be paid back. Often, these cards are used by people with no credit or bad
credit. With secured credit cards, you can enjoy credit card convenience
even if you do not qualify for traditional cards. However, you will also have
to cope with the additional fees and low credit limits that these credit cards
have.

Credit Cards for Bad Credit

Bad credit credit cards are designed for people with poor credit
histories. These cards generally have very low credit limits and charge extra
fees. This is because they are designed for people who are considered far
less likely to repay their debts. If you have a bad credit rating, these types of
credit cards can be a great way to rebuild your credit history. These cards

29

can also allow you to have credit even if you would be rejected for most
other cards due to your credit history.

Student Credit Cards

Student credit cards are cards meant to attract college and university
students. These cards often offer sign-up bonuses for students. They are also
easier to apply for, since credit card companies recognize that students have
much shorter credit histories than the average customer.000000000000
If you are a student, student credit cards can be a great option. They
are simple to use and can help you build a good credit rating before you
graduate. However, there are some disadvantages to student credit cards.
These cards may have no reward programs and may have fewer benefits,
including fewer bonuses and services, than other cards.

Business Credit Cards

Business credit cards are created especially for business use. They
offer many of the same advantages as traditional credit cards, but also offer
services that can really help a business. With some business credit cards, for
example, you can enjoy higher interest rates, extra cards for business
employees, monthly reports on your expenses, and services that let you keep
your personal and business expenses separate on the same card. These
advantages mean that using this card for your business is more convenient.

30

 Types of Credit Cards offered by Indian Banks

Silver Cards
31

Silver credit cards rank lowest among the metal named cards, and,
because of lower prestige when compared to gold and platinum cards, are
commonly known as basic and standard credit cards. Silver credit cards
come with advantages such as lower annual membership fees if there is any,
and a lower threshold salary which banks use to evaluate your application in
case you should apply.
Silver credit cards will provide you with almost the same credit limit
as other cards provided you have a good credit history. You can also avail of
0% interest balance transfer schemes which are made available for a period
of 6-9 months for silver card holders.
There are also some disadvantages to using silver credit cards. One
would be the lower cash advance limits, less rewards and promotional
packages, and less travel perks compared to gold and platinum cards. HDFC
Bank, ICICI offer silver credit cards through their HDFC Bank Silver cards
and ICICI Sterling Silver credit card

Gold and Platinum Cards

Gold and platinum credit cards are a status symbol for any credit card
holder, bringing prestige since getting gold and platinum cards usually
require that you have good credit rating and a higher income levels. Gold
and platinum cards offer higher limit for cash advance withdrawals and
sometimes can provide higher credit limits as compared to standard or silver
cards.
32

If you have a gold or platinum card, you also get better perks and
privileges such as travel insurance, extended warranties for appliance
purchases and special deals on specific products, and purchase protection
insurance.
You can also engage in some loyalty schemes that are offered for gold and
platinum credit card holders which can sometimes involve cash back promos
and reward points systems.
Some popular gold and platinum cards available are the American Express
Gold card, and the ICICI Solid Gold Credit Card.
It is not possible to cover them the exact offerings of these cards but I
will highly advice you to check all these websites of the banks to get all the
info about the credit cards they are offering. Also try to talk to your friends
who are having credit cards to get more info.

33

Types of Credit
Cards offered
By
Indian Banks

34

 Credit Card Data

Credit Card is either Visa or MasterCard which is the Most popular and in
some instance American Express.000000000000000000000000000000
The Top 10 Credit Card Issuers in India are as follows,
ICICI

Bank

5.07

Mn

HDFC

Bank

4.42

Mn

SBI

Cards

2.65

Mn

2.54

Mn

Citibank
HSBC

Cards

1.3

Mn

ABN

Amro

0.78

Mn

Axis

Bank

0.57

Mn

Deutsche

Bank

0.495

Mn

American

Express

Data Courtesy - The Reserve Bank of India

35

0.45

Mn

Ch.5 DEBIT CARD

A debit card (also known as a bank card or check card) is a plastic

card that provides an alternative payment method to cash when making
purchases. Functionally, it can be called an electronic cheque, as the funds
are withdrawn directly from either the bank account or from the remaining
balance on the card. In some cases, the cards are designed exclusively for
use on the Internet, and so there is no physical card.
In many countries the use of debit cards has become so widespread
that their volume of use has overtaken the cheque and, in some instances,
cash transactions.
Like credit cards, debit cards are used widely for telephone and
Internet purchases and, unlike credit cards, the funds are transferred
immediately from the bearer's bank account instead of having the bearer pay
back the money at a later date.
Debit cards may also allow for instant withdrawal of cash, acting as
the ATM card for withdrawing cash and as a cheque guarantee card.
Merchants may also offer cash back facilities to customers, where a
customer can withdraw cash along with their purchase.

36

 Types of debit card systems

Online Debit System

Online debit cards require electronic authorization of every
transaction and the debits are reflected in the users account immediately.
The transaction may be additionally secured with the personal identification
number (PIN) authentication system and some online cards require such
authentication for every transaction, essentially becoming enhanced
automatic teller machine (ATM) cards. One difficulty in using online debit
cards is the necessity of an electronic authorization device at the point of
sale (POS) and sometimes also a separate PIN pad to enter the PIN, although
this is becoming commonplace for all card transactions in many countries.
Overall, the online debit card is generally viewed as superior to the offline
debit card because of its more secure authentication system and live status,
which alleviates problems with processing lag on transactions that may only
issue online debit cards. Some on-line debit systems are using the normal
authentication processes of Internet banking to provide real-time on-line
debit transactions. The most notable of these are Ideal and POL.

Offline Debit System

Offline debit cards have the logos of major credit cards (e.g. Visa or
MasterCard) or major debit cards (e.g. Maestro in the United Kingdom and
other countries, but not the United States) and are used at the point of sale
like a credit card (with payer's signature). This type of debit card may be
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subject to a daily limit, and/or a maximum limit equal to the

current/checking account balance from which it draws funds. Transactions
conducted with offline debit cards require 23 days to be reflected on users
account balances. In some countries and with some banks and merchant
service organizations, a "credit" or offline debit transaction is without cost to
the purchaser beyond the face value of the transaction, while a small fee may
be charged for a "debit" or online debit transaction (although it is often
absorbed by the retailer). Other differences are that online debit purchasers
may opt to withdraw cash in addition to the amount of the debit purchase (if
the merchant supports that functionality); also, from the merchant's
standpoint, the merchant pays lower fees on online debit transaction as
compared to "credit" (offline) debit transaction.

Electronic Purse Card System

Smart-card-based electronic purse systems (in which value is stored
on the card chip, not in an externally recorded account, so that machines
accepting the card need no network connectivity) are in use throughout
Europe since the mid-1990s, most notably in Germany (Geldkarte), Austria
(Quick), the Netherlands (Chipknip), Belgium and Switzerland (CASH). In
Austria and Germany, all current bank cards now include electronic purses.

Prepaid Debit Card

Prepaid debit cards, also called reload able debit cards or reload able
prepaid cards, are often used for recurring payments. The payer loads funds

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to the cardholder's card account. Prepaid debit cards use either the offline
debit system or the online debit system to access these funds. Particularly for
companies with a large number of payment recipients abroad, prepaid debit
cards allow the delivery of international payments without the delays and
fees associated with international checks and bank transfers. Providers
include Caxton FX prepaid cards, [Escape prepaid cards and Travelex
prepaid cards. [ Whereas, web-based services such as stock photography
websites (stockpot), outsourced services (odes), and affiliate networks
(Media Whiz) have all started offering prepaid debit cards for their
contributors/freelancers/vendors.

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 BENEFITS & FEATURES OF DEBIT CARDS

BENEFITS OF THE DEBIT CARD

FREE WITH OUR BANK ACCOUNT
Obtaining a debit card is easy. If we qualify to open a bank account, we
usually get a debit card, if our bank offers the service.
NO BACKGROUND CHECK
When we are applying for a debit card, the ban does not need to look into
our credit history. All we need is the documentation to open a bank, account,
and money in our bank when we use our debit card.
CASH WITHDRAWALS
The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10,
000/- per day
CONVENIENCE
A Debit card fees us from carrying a lot of cash or a cheque book. In case,
we are an international traveler, we dont need to stock up on Travelers
Cheques or cash. We can use our debit card to withdraw Cash from over
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500,000 ATMs around the world in over 100 countries. We can withdraw in
the local currency of the country we are in, limited only by the money we
have back home in our account, and Business Travel Quota (BTQ) limit
arability.
FAIR EXCHANGE
If we return merchandise or cancel services paid for with a Debit card, the
transaction is treated as if it were made with cash or a check. Customers
usually get cash back for offline purchases; for on-line transactions, the
amount is credited to our account.
STATEMENT OF ACCOUNT
A statement of transactions can be obtained from the customers branch. For
example, a mini statement containing the last four transactions and balance
can be obtained at a State Bank Group during the working hours of the
customers branch.
BANKING CUM SHPPING CARD
Your Debit card can be used as ATM card at any ATM across the world, as
well as for making purchase at merchant locations. You can also withdraw
cash from any of the 12000 ATMs in India.
WIDELY ACCEPTED, INTERNATIONALLY VALID

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 FEATURES OF DEBIT CARD

The following are features of Debit cards

A) It is a combination of a Cheque and ATM card. Therefore, there are no
fees for using the ATM for cash withdrawal, or as a debit card for purchase.
B) The Debit Card services in meant for withdrawals against the balance
already available in the designated account.
C) It is the card holders obligation to maintain sufficient balance in the
designated account to meet withdrawals and service charges.
D) A Debit card is more affordable than credit card. We just our bank
account for all our transactions. No credit period. Our bank account is
debited immediately.
E) No credit check is required to get a Debit card.
F) Use of card is terminated without notice, upon the death, bankruptcy or
insolvency of the cardholder or for other valid reasons.
G) Spending is limited to our bank balance.

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 Process Debit Card Transactions

A successful business will usually accept debit cards as a part of their
overall profile of payment solutions. If you dont process debit cards, you
may not be taking full advantage of all the potential that your merchant
account can deliver. There are essentially two ways you can accept debit
cards, online and offline.
Off line debit card transactions
An offline debit card transaction is still the way most merchants
accept debit cards. This is essentially the same as processing credit cards.
You swipe your customers debit card through a credit card terminal and
have them sign the receipt.
If you choose to accept debit cards offline, be sure that the debit card
has a VISA or MasterCard logo. Otherwise, the debit card wont be
approved and you wont be able to process the debit card offline

Online debit card transactions

The most advantageous way to process debit cards is to do it online.
You will still be able to accept debit cards at the point of sale, but you will
need to install a PIN pad on your credit card terminal.

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An online debit card transaction works much like a credit card

transaction, except that after your customer swipes his or her debit card, they
will enter a PIN instead of signing the receipt.
At this point the encrypted debit card information is sent to the
customers bank for authorization, and youll receive the funds just as you
would for a credit card transaction.
Your business has many advantages when you accept debit cards.
For example, you pay a flat fee for each debit card transaction that
you process, instead the flat fee plus percentage rate that you are charged
when you accept credit cards. Over time, this can potentially save you a lot
of

money.

0000000000000000000000000000000000000000000000000

Another advantage when you process debit cards is that you cant be
charged higher downgrade fees.
In a credit card transaction, you are usually charged the discount
rate. However, some transactions are considered to be a higher risk or
expense to the bank, and you are charged a higher rate as a result.
But when you accept debit cards, you always pay the same flat rate,
with no danger of the rate increasing.
You can also cut down on checkout time when you accept debit cards.
It takes an average of 30 seconds to hand over the pen, wait for the customer
to sign the receipt, and then take the pen back.
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If you process 20 credit card transactions a day, youre losing 100

minutes a day just passing a pen back and forth! Thats almost two hours.

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 Plastic Fraud
State-of-the-art thieves are concentrating on plastic cards. In the past,
this type of fraud was not very common. Today, it is a big business for
criminals. Plastic cards bring new convenience to your shopping and
banking, but they can turn into nightmares in the wrong hands. This
pamphlet describes credit and debit cards and some common schemes
involving card fraud with tips to help you avoid them
The following are the types of frauds

1. Stolen Cards at the Office

2. Extra Copies of Charge Slips
3. Discarded Charge Slips
4. Unsigned Credit Cards
5. Loss of Multiple Cards
6. Strange Requests for Your PIN Numbers
7. Legitimate Cards
8. Altered Cards
9. Counterfeit Cards

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Ch.6 Advantages & Disadvantage

Advantages
Plastic money, unlike paper money, will not burn easily and can resist
higher temperatures than paper money.
You have no fear to be theft. And its easy to use.
Plastic money, unlike paper money, will not burn easily and can resist
higher temperatures than paper money.
Paper money also picks up dirt and stains more easily than plastic money.
Plastic money is the debit and credit cards. Plus point of plastic money is
that you won't have to carry your cash around all the time.
It also doesn't wear after time as paper does nor does it rip and tear.
Give you incentives, such as reward points, that you can redeem.
Be more convenient to carry than cash.
Provide a convenient payment method for purchases made on the Internet
and over the telephone.
Help you establish a good credit history.
Disadvantage

Cost much more than other forms of credit, such as a line of credit or a

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 Personal loan, if you don't pay on time.

Damage your credit rating if your payments are late;
Allow you to build up more debt than you can handle;
Have complicated terms and conditions;
It also doesn't wear after time as paper does nor does it rip and tear.
Paper money also picks up dirt and stains more easily than plastic
money.
I can't really see any advantages to have paper money, unless it is
cheaper to make.
Its disadvantage is that, some extra money will be deducted for the bank
services.
Its around 2.5% of the money you spent.

Ch.7 TECHNOLOGY AND INFRASTRUCTURE

One of the most important features that Plastic Money offers is the
technology associated with this business.

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 Credit card businesses rely on very reliable and secure technology and
demands very Strong connectivity backbone.
Although a third world country, with lot of insecurities and almost no
infrastructure, Pakistan has no exception when it comes to credit card
business.
There is approximately 3000 Point of Sale Terminals (POST) present on
merchant's sites connected with bank host system.
Inter-city connectivity is accomplished through X.25 networks.
Perhaps, it is the most important time in the history of Pakistan as the
parameters of its Infrastructures are coming into existence.
There is an immense need of reliable wide area connectivity and this
market is so huge and lucrative that it can accommodate many more
industry giant

Ch.8 CASE STUDY

What Happens in Credit Card Fraud Cases?

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1. The Basics

A variety of crimes constitute credit card fraud. The term can

describe a person using a stolen credit card to purchase goods or services
posing as the person named on the card. It can also describe illegally and
fraudulently withdrawing funds from an account that is not yours. Identity
theft, which is the act of posing as an individual to make purchases, is often
classified together with credit card fraud. A victim of credit card fraud can
sometimes see bank accounts emptied of all their funds or negative marks
going on her credit report for things she had nothing to do with. Many
banks will monitor transactions made with a credit card and alert the person
named on the account of any potentially suspicious activity. This is to
protect the bank or Credit Card Company just as much as it is to protect the
customer.

2. Investigation
Exactly what happens during a credit card fraud case depends a
great deal on the actions of the Credit Card Company or bank involved. If
fraudulent transactions are proven to have been made on a person's account
but the amount of the transactions is lower than the cost of an investigation
the company can credit the money back to a person and then close the
account to protect from further harm.00000000000000000000000000
If the amounts of fraudulent charges are so great that an
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investigation is warranted, the police will be notified. The credit card

company can look at a list of the fraudulent charges and determine where
they were made. At that point an officer can question witnesses and review
security camera footage in an attempt to identify suspects. If a suspect is
arrested he can be tried in a court of law.

Ch.9 CONCLUSION

21ST Century banking has become wholly customer-driven &

technology driven by challenges of competition, rising customer
expectations & shrinking margins, banks have been using technology to
reduce cost & enhance efficiency, productivity & customer convenienence.
Technology intensive delivery channels like net banking, mobile banking,
etc have created a win-win situation by extending great convenienence. &
multiple options for customer.
From educating customers about credit cards there is a need to
educate them about the differentiating factors of the cards. Because visa and
master card are advertising regularly and thereby increases awareness. The
strategy should be to emphasize on its differentiating characteristics.
They also need to identify potential customers and target those using
mailers. As internet is growing at a fast rate the net users can be targeted by

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having interactive sites. The prospective companys card personality could

also be used in the home page to solve customer queries in the Best
Possible Manner.

Ch.10 BIBLIOGRAPHY
BOOKS
INOVATION IN BANKING & INSURANCE
FINANCIAL MARKET & SERVICES
INDIAN BANKING INDUSTRIES
INDIAN BANKING
TIMES OF INDIA NEWS PAPER (1st OCT 2010)

WEBSITE
WWW.GOOGLESERCH.COM
WWW.YAHOO.COM
WWW.RBI.ORG
WWW.WIKIPEDIA .COM

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 WWW.INFOSEE.COM
WWW.INDIANMBA.COM
WWW.INDINBANKING.ORG

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