Executive summary

Banking has evolved a long way from the days of the medieval moneylenders
counting coins on the bench to the present scenario, where it is hard to trace the trail
of money from the beginning to the end.

The trial starts right from the small saver leaving a few rupees in his local bank o the
billions of rupee loans raised by syndicate banks and financial institution,capable of
financing projects in any country in the world.

Still this banking majors are heavily dependent.

1
 Chp1: 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 1950s and is now an
essential form of ready money which reduces the risk of handling the huge amount of
cash. It includes debit cards, ATMs, smart cards, etc. Credit card, variants of plastic
money, are used as substitutes for currency. This book on plastic money is divided
into two sections title Concepts and Experiences.

The former covers articles on the emergence on plastic money, different types of
plastic cards and their growth in India and other related issues. An experience
discusses the experience of banks like Standard chartered, Citi bank, which deal with
plastic money and their growth in the market.

MEANING:

Plastic money refer 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.

2
 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 moneyportion is an erroneous
reference to the credit cards has a form of money, which they are not. Although credit
cards do facilitate transaction, because they are a liability rather than a asset, they are
not money and not part of the economics money supply.

3
 Chp2: 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 plan 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 card keep shoppers using their cards as opposed to checks or cash.

Credit card origins

Credit cards got their start in the United States just before the beginning of World
War I. Department stores began the practice of issuing dog-tag style metal plates to
their favourite customers. By 1924 gas credit cards appeared on the scene, the first
cards that could be used at merchants all over the country. This was an important
advance, because as automobiles became more common so did traveling, and a gas
card that was not accepted away from home had limited value. Indeed, the increasing
mobility of the average person is one very important reason that credit cards have
exploded with popularity. For example, a merchant in California night not accept a
personal check from a customer but would take an American Express or MasterCard
without hesitation.

In 1951 Franklin National Bank of New York created a credit card which could be
used at many different types of merchants (at this time Diners was limited to
restaurants, hotels, and air travel expenses). Other banks began their own programs,
and then the very large Bank of America in San Francisco started its own card, the
BankAmerican card, which has evolved into the modern-day Visa card. Other
California banks implemented their own programs, which later became
the MasterCard of today.
In 1958 American Express noticed the profits of Diners Club and started its own
credit card program. Next, BankAmerican card really began to grow and succeed.
Other banks saw that there was big money in credit cards and wanted to have their
own. But they also recognized that in order to have a credit card operation they had to
have an abundance of customers. So toward the end of the 1960s banks began mailing
out cards to anyone with a name and an address, dead or alive, good credit or bad.
Card use rose and, unsurprisingly, credit card fraud was rampant. Mail theft also
became widespread as unscrupulous individuals discovered that envelopes containing
credit cards were just like envelopes full of cash. And there was little to stop card
companies from sending out cards which customers had never asked for, were not
expecting, and could not have known had been stolen until the issuing company began
demanding payment for the charges which had been run up.

4
Plastic becomes the standard

The first diners club cards were made out of cardboard. In 1959 American Express
changed all that with the first card made of plastic. American Express created the
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
loopcard. This closed loop agreements limited cards like Diners club and
American Express to certain merchants, unlike the new open loop cards. The new
general purposes system require interbank cooperations 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 MasterCard. However, today
there is little difference between the two and most merchants accept both card
association.

Debit Cards Emerge

The Visa associations of cards took credit card to a new level in 1989 when they
introduced debit cards. This cards linked customers to their checking accounts.
Money was now drawn from a checking account at the point of sale with this 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 fund could not be obtained.
Customers liked the convenience of not having to write checks at the point of sale,
which made debit card a safe alternative to cash and checks
The Future
There was almost 29 million debit card users as of 2006, with a project 34.4 million
users by 2016. However, online services like PayPal are emerging as a way for people
to their debt in new, secure and convenient ways. Technology also exist 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.

5
 Chp: 3 Types of plastic money

Different types:-

Credit card

A credit card is a payment card issued to users (cardholders) as a method

of payment. It allows the cardholder to pay for goods and services based on the
holder's promise to pay for them. The issuer of the card (usually a bank) creates
a accountant grants a line of credit to the cardholder, from which the cardholder can
borrow money for payment to a merchant or as a cash advance.
A credit card is different from a charge card, where it requires the balance to be repaid
in full each month. In contrast, credit cards allow the consumers a continuing balance
of debt, subject to interest being charged. A credit card also differs from a cash card,
which can be used like currency by the owner of the card. A credit card differs from a
charge card also in that a credit card typically involves a third-party entity that pays
the seller and is reimbursed by the buyer, whereas a charge card simply defers
payment by the buyer until a later date.

6
 Debit card

A debit card (also known as a bank card or check card) is a plastic payment card that can
be used instead of cash when making purchases. It is similar to a credit card, but unlike a
credit card, the money comes directly from the user's bank account when using a debit
card.

Some cards may bear a stored value with which a payment is made, while most relay a
message to the cardholder's bank to withdraw funds from a payer's designated bank
account. In some cases, the primary account number is assigned exclusively for use on
the Internet and there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume
has overtaken or entirely replaced cheques and, in some instances, cash transactions.
The development of debit cards, unlike credit cards and charge cards, has generally
been country specific resulting in a number of different systems around the world, which
were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit
cards issued in one country to be used in other countries and allowed their use for
internet and phone purchases.

Unlike credit and charge cards, payments using a debit card are immediately transferred
from the cardholder's designated bank account, instead of them paying the money back
at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash. Merchants may also offer cashback facilities to customers, where a
customer can withdraw cash along with their purchase.

7
 Charge card

A charge card is a card that provides a payment method enabling the cardholder to make
purchases which are paid for by the card issuer, to whom the cardholder becomes
indebted. The cardholder is obligated to repay the debt to the card issuer in full by the
due date, usually on a monthly basis, or be subject to late fees and restrictions on further
card use. It can also be a smart card.

Though the terms charge card and credit card are sometimes used interchangeably, they
are distinct protocols of financial transactions. Credit cards are credit instruments that do
not need to be paid in full every month. There is no late fee payable so long as the
minimum payment is made at specified intervals (usually every thirty days).
The balance of the account accrues interest, which may be backdated to the date of
initial purchase. Charge cards are typically issued without spending limits, whereas credit
cards usually have a specified credit limit that the cardholder may not exceed.

Though originally charge account identification was paper-based, in 1959 American

Express became the first charge card operator to issue embossed plastic cards
to ISO/IEC 7810 ID-1 standard. Cards have an embossed bank card number complying
with the ISO/IEC 7812 numbering standard.

8
 Amex card

The American Express Company, also known as Amex, is an

American multinational financial services corporation headquartered
in Manhattan's Three World Financial Centre in New York City, United States.
Founded in 1850, it is one of the 30 components of the Dow Jones Industrial
Average.[6] The company is best known for its credit card, charge card, and travellers
cheque businesses. Amex cards account for approximately 24% of the total dollar
volume of credit card transactions in the US.
BusinessWeek and Interbred ranked American Express as the 22nd most valuable
brand in the world, estimating the brand to be worth US$14.97 billion. Fortune listed
Amex as one of the top 20 Most Admired Companies in the World.
The company's logo, adopted in 1958, is a Centurion whose image appears on the
company's travellers, cards and credit cards.

Diners club card

Diners Club International (DCI), founded as Diners Club, is a charge

card company formed in 1950 by Frank X. McNamara, Ralph Schneider,
and Mattie Simmons. It was the first independent credit card company in the
world, and it established the concept of a self-sufficient company producing
credit cards for travel and entertainment. Diners Club International and its
franchises service affluent and well-travelled individuals from around the
globe, with operations in 59 countries.

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 Global card

Global cards allow you the flexibility and convenience of using a credit card
rather than cash or travellers cheque while travelling abroad for business or
personal purpose.

Co-branded cards

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 consumers
For example, the city-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.

10
 Master card and Visa
Master card and visa are global non-profit organisation 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 cards

A smart card, chip card, or integrated circuit card (ICC) is any pocket-sized card
that has embedded integrated circuits.] Smart cards are made of plastic,
generally polyvinylchloride, but sometimes polyethylene
terephthalate based polyesters, acrylonitrile butadiene styrene or polycarbonate.
Since April 2009, a Japanese company has manufactured reusable financial
smart cards made from paper.

Smart cards can be either contact or contactless smart card. Smart cards can
provide personal identification, authentication, data storage, and application
]
processing. Smart cards may provide strong security authentication for single sign-
on (SSO) within large organizations.

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 Chp 4: CREDIT CARD

MEANING

A credit card is a payment card issued to users (cardholders) as a method of payment.

It allows the cardholder to pay for goods and services based on the holder's promise to
pay for them. The issuer of the card (usually a bank) creates a account and grants
a line of credit to the cardholder, from which the cardholder can borrow money for
payment to a merchant or as a cash advance.
A credit card is different from a charge card, where it requires the balance to be repaid
in full each month. In contrast, credit cards allow the consumers a continuing balance
of debt, subject to interest being charged. A credit card also differs from a cash card,
which can be used like currency by the owner of the card. A credit card differs from a
charge card also in that a credit card typically involves a third-party entity that pays
the seller and is reimbursed by the buyer, whereas a charge card simply defers
payment by the buyer until a later date.

DEFINITION:
The credit card can be defines as a small plastic card issued by a bank, building
society, etc., allowing the holder to purchase goods or services on credit.

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ADVANTAGES AND DISADVANTAGES OF CREDIT CARD

ADVANTAGES OF CREDIT CARD

The benefits of credit card can be grouped as follows:

(A)BENEFITS TO CARD HOLDER

(a)The main benefit to the cardholder is convenience. Compared to debit cards and
checks, a credit card allows small short-term loans to be quickly made to a cardholder
who need not calculate a balance remaining before every transaction, provided the
total charges do not exceed the maximum credit line for the card.

(b)Different countries offer different levels of protection. In the UK, for example, the
bank is jointly liable with the merchant for purchases of defective products over 100.

(c)Many credit cards offer rewards and benefits packages, such as enhanced product
warranties at no cost, free loss/damage coverage on new purchases, various insurance
protections, for example, rental car insurance, common carrier accident protection,
and travel medical insurance.
(d)Credit cards can also offer a loyalty program, where each purchase is rewarded
with points, which may be redeemed for cash or products. Research has examined
whether competition among card networks may potentially make payment rewards
too generous, causing higher prices among merchants, thus actually impacting social
welfare and its distribution, a situation potentially warranting public policy
interventions.
(e)Currently, there are credit cards a 0% intro APR on Balance Transfers and no late
fees.

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(B)BENEFITS TO THE MERCHANT

The principal benefit offer credit card to the retailer is:-

a) This will carry prestigious weight to the customers

b) Increase in sale because of increased purchasing power of the

cardholder due to unbilled credit available to the cardholder

c) The retailer 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

debts

f) Systematic accounting since sales receipts are routed through banking

channels

g) Advertising and promotional support on nationalscale

h) Development of prestigious clientele base.

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 Disadvantages of credit card

The following are the common disadvantages of the credit card:

a) Some credit card transaction take longer time than cash transaction because of
various formalities.

b) The customers tend to overspend out of immerse happiness.

c) Discounts and rebates can rarely be obtained.

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MARKETING STRATEGIES

American companies spend billions of dollar 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.

Now, these figures may staggering to the independent professional on a

budget, but dont panic; there are lots of effective strategies you can utilise that will
help you grow your business fast.

Here are some of it:

Identify your niche

One of the easiest way to attract customer 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 they will 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

Experts make more money and get more attention and thats free advertising! Its
easier to trust a specialist than a generalist whos trying to be everything to everyone.
Once you have defined your niche, let the world know about how you can help.
Provide free information products, write articles and white papers about the problems
your client face and how they can solve them.

Conduct workshops, seminars and tele-classes specially geared towards

helping your prospective customers and before long you will be regarded as an expert
in your field. And, while you are at it dont forget to, collect names, emails, and
address of prospects to keep filling your pipeline.

16
Develop ongoing relationships with complementary professionals and
build your referral term:

There are other professionals who sell non-competing sevices or product

to the same niche customers you are targeting. For instance, my clients often need of
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.

Commercial printer, copywriter, graphic designer.

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Institute a system to keep track of all the people who are interested in
your product or services and find creative ways of keeping in touch with
them on a regular basis.

To start, go through notes. Put together a list of all the people you have spoken to in
the last 6-9 months who have sowed 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 impression to make the sale; thats why
you see commercials on tv over and over again for the same products.

By keeping track of all the people who have showed interest and keeping
your business on their radar screen you will turn more of them into paying customers.

Let your satisfied customers help you sell your product or service

Here a couple of ways to do this:

a) Ask them for referrals right away

b) Ask them to write testimonials for you, and compile a list of testimonials to
use in your all of your marketing collateral.

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Create a marketing calendar and keep it consistently

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 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 followed in credit card transaction

1. Authorisation

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 authorisation is transmitted to the appropriate
card issuer for approval. The issuing bank card issuer authenticates the cardholder and
approves or declines the transaction amount.

It is important to note that no money changes hands during the

authorization. Merchants must represent the transaction to receive payment

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 2. Merchant banking

It is also known s batching out. Most pos terminals and all payment Gateway per firm
an auto close function at the end of the day and batch out automatically.

3 .Capture

The front end processor matches the authorisation data to the settlement
data and transmits the card capture file to a back end processor for V/MC transaction
or to the appropriate card issuer for other card types.

4. Clearing

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 (V/MC only)

During this stage the V/MC Association sort the transaction by issuing bank and
transmit them to the appropriate issuing banks for further settlement.

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6) Settlement

During this stage the issuing bank calculate fees and deduction and routes 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
deposits to the merchants checking account.

Different types of credit cards

Credit cards are of various types, everyone 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 option and choices

Ever before. To gain new customers, credit card companies compete by offering new
services and cards to the 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.

21
 Low interest credit

This type of credit card offer very low interest. In some cases,

These cards just charge a few percent interest. The reason 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 card at all- they are debit card 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

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 way.
The approval process only takes a few minutes. Instant approval cards are
very popular online and applicant can apply via the internet or over the
phone.

If you are very impatient or need credit right away, these type 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 this card is that they rely heavily on your
credit score. If you have poor credit or any extending financial circumstances, these
types of cards may not be for you.

22
 Balance transfer cards

Balance transfer cards are a type of temporary low interest 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 cards. You
then transfer all your credit card debts onto the new card and work to pay it
off. Since the new card has a lower 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 rate.
However, some cards have high fees. Also, if you run up your other
cards after consolidating your debts if you are unable to pay off your
new card in the limited time before the low interest rate increases, you
may find yourself even more in debt than before.

Rewards credit cards

Reward credit card offer your points, reward or bonus for every

Cash purchase made with your credit card over time. As you accumulate reward or
points, you can redeem you 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 the cards, you are entered into a draw to win specific
prizes.

23
 This type of cards are really a marketing tool for card

Companies. Companies know that customers love reward and prizes so offer this
enticement to lure customers. The major advantage of this card 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 customers. However, not all reward credit card are a deal.
Some charge high fees to offset the costs of the bonuses. Some also have very low
points system, meaning that you need to spend a lot with your credit card to get any
reward at all. Read the fine points carefully before signing.

Cash back credit cards

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
amounts 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 purchase.

These cards are great for those who are budget

They give you some money back from your purchases. However, there are several
drawbacks to these type 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 your cash back advantage on purchase- not on your
balances. If you decide this card is right for you, so compare several cards offers to
find the best cash back credit card option.

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 Airline credit cards

This type of card allows you to accumulate frequently

Points on all your credit card purchases. If you travel a lot or love to travel, this card
can help you to 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 cards alot, then , your ability to get
rewards you like may be very limited.

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 this credit cards have.

Credit card for bad credit

Bad credit cards are designed for people with poor

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, this type of credit cards can be a
great way to rebuild your credit history. These cards can also allow you to have credit
even if you would reject for most other cards due to credit history.

25
 Business credit cards

Business credit cards are generally created for business use.

They offer many of the same advantage 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 rate, 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 advantage men that using this card for
your business is more convenient.

Prepaid cards

These cards are sometimes called junior credit card. They

truly credit card 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 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.

26
 Types of credit cards offered by Indian banks

Silver cards

Silver credit card 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 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 holder.

There is also some disadvantage to using silver cards.

One would be the lower cash advance limits, less rewards, and promotional packages
and less travel perks compared to gold and platinum cards through their HDFC Bank
silver cards and ICICI sterling silver credit cards.

27
 Gold and platinum

Gold and platinum silver credit cards are a status symbol for

Nay 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 limit as compared to standard or silver cards.

If you have a gold and platinum card, you also get

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

For gold and platinum credit card holders which can sometime involve cash back
promos and reward point system. Some popular gold and platinum cards available are
the American express gold cards, 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 the
info about the credit cards they are offerings. Also try to talk to your friends who are
having credit cards to get more info.

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 CREDIT CARD DATA

Credit card is either visa or master card which is the most popular
and in some instance American express.

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

Citibank - 2.54 Mn

HSBC Cards 1.3 Mn

ABN Amro 0.78 Mn

AXIS Bank 0.57 Mn

Deutsche Bank 0.495 Mn

American Express 0.45 Mn

Data courtesy: The Reserve Bank of India.

29
 Chp.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 use of debit cards has become so widespread that their volume of
use has overtaken the cheque and, in someinstances, 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 bearers 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.

30
 Types Of Debit Card System

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; some
online cards require such authentication for every transaction, essentially becoming
enhanced automatic teller machine(ATM) cards.
One difficulty with 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.

Offline Debit System

Offline debit cards have the logos of major credit cards (for
example, Visa or MasterCard) or major debit cards (for example, 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 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.

31
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 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)

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 Wertkarte), the Netherlands (Chipknip), Belgium
(Proton), Switzerland (CASH) and France (Moneo, which is usually carried by a debit
card). In Austria and Germany, almost all current bank cards now include electronic
purses, whereas the electronic purse has been recently phased out in the Netherlands.

Prepaid Debit Card

Prepaid debit cards, also called reloadable debit cards, appeal to a variety of users.
The primary market for prepaid cards are unbanked people. that is, people who do not
use banks or credit unions for their financial transactions, possibly because of poor
credit ratings.
The advantages of prepaid debit cards include being safer than carrying cash,
worldwide functionality due to Visa and MasterCard merchant acceptance, not having
to worry about paying a credit card bill or going into debt, the opportunity for anyone
over the age of 18 to apply and be accepted without regard to credit quality and the
option to directly deposit pay checks and government benefits onto the card for
free. Some of the first companies to enter this market were: MI Cash, Rush Card and
Net spend, who gained market share as a result of being first to market. However,
since 1999, there have been several new providers, such as Trans Cash, 247card and
kobo, that offer a number of other benefits, such as money remittance services, card-
to-card transfers, and the ability to apply without a social security number.[citation needed]

32
As of 2013, several city governments (including Oakland,
California and Chicago, Illinois) are now offering prepaid debit cards, either as part of
a municipal ID card (for persons such as undocumented immigrants, who are unable
to obtain a state driver's license or DMV ID card) in the case of Oakland, or in
conjunction with a prepaid transit pass (Chicago). These cards have been heavily
criticized for their higher-than-average fees, including some (such as a flat fee added
onto every purchase made with the card) that similar products offered by Green Dot
and American Express do not have.

The U.S. federal government uses prepaid debit cards to make benefits payments to
people who do not have bank accounts. In 2008, the U.S. Treasury Department paired
with Comerica Bank to offer the Direct Express Debit MasterCard prepaid debit card.

In July 2013, the Association of Government Accountants released a report on

government use of prepaid cards, concluding that such programs offer a number of
advantages to governments and those who receive payments on a prepaid card rather
than by check. The prepaid card programs benefit payments largely for cost savings
they offer and provide easier access to cash for recipients, as well as increased
security. The report also advises that governments should consider replacing any
remaining cheque-based payments with prepaid card programs in order to realize
substantial savings for taxpayers, as well as benefits for payees.

33
 Benefits And Features Of Debit Card

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 bank 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 customers can withdraw a minimum of Rs. 100/- and a

maximum Rs. 10,000/- per day

Convince

A debit card fees us from carrying a lot of cash or a cheque book. In

case, we are an international traveller, we dont need to stock up on
travellers cheques or cash. We can use our debit card to withdraw
cash from over 500,000 ATMs around in 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 card 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 purchase, for online
transactions, the amount is credited to our account.

34
 Statement Of Account

A statement of transaction can be obtained from the customers

branch for example, a mini statement containing the last four
transaction and balance can be obtained at a State Bank Group during
the working hours of the customers branch.

Banking Cum Shipping 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

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.

35
 Process Debit Card Transaction

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 potential that your merchant account can deliver.
There are essentially two ways you can accept debit cards, online and offline.

Offline debit card transaction

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

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 transaction

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.

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 authorisation, 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

transaction that you process, instead the flat fee plus the percentage rate that
you are charges when you accept credit cards. Over time, this can potentially
save you a lot of money. Another advantage when you process debit cards is
that you cant be charged higher downgrade fees

36
 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 fraud:

1) Stolen card at the office

2) Extra copies of charge slips

3) Discarded charge slips

4) Unsigned charge slips

5) Loss of multiple cards

6) Strange request for your PIN numbers

7) Legitimate cards

8) Altered cards

9) Counterfeit cards

37
 CHP 6: Advantages and disadvantages

Advantages:

Plastic money, unlike paper money, will not burn easily and can resist higher
temperature than paper money.

You have no fear to theft. And it is easy to carry.

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 wont have to carry your cash around all the times.

It also doesnt wear after time as paper does nor does it rip and tear.

Gives 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.

38
Disadvantages:

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

Personal loan if you cant pay on time.

Damage your credit rating if your payments are later.

Allow you to build up more debt than you can handle

Have complicated terms and conditions

I cant really see any advantage 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 spend.

39
 CHP: 7 Technology and Infrastructure

One of the most important feature is that plastic money offers the
technology associated with this business.

Credit card businesses rely on very reliable and secure technology and
demands very strong connectivity backbone.

Although, a third world company, with lot of insecurities and almost

no infrastructure, Pakistan has no exception when it comes to credit
card business.

There is approximately 3000 Points of sale Terminals (POST) present

on merchants 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 as the parameters

of its infrastructure 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.

40
CHP 8: Development of plastic cards market in Indian banks.

The current study presents an overview of the development of the

development of banking in India from time to time specifically focused on the
plastic cards usage trends since these have been introduced in Indian banking
sector. Various types of plastic cards provided by banks in India like ATM
cards, Debit cards, Credit cards and Smart cards have been discusses. The
study also highlights the role of these cards as electronic payments tool to be
used by customers and discusses clearing and settlement process of these
cards. Some future plans made by various banks and institution are also
summarized in a way that it depicts the picture of its future growth and
prospects in India.

Indian economy has flourished with the advent of Liberalisation, Privatisation

and globalisation. Banking sector is not an exception too. These reforms have
presented a challenge before Indian banking sector to shake hands with the
pace of new technology. However, mere technology upgradation or
introduction of innovative products can not improve the state of affairs until
customers dont respond to it positively. Hence, it becomes very necessary for
the banks to offer the service or products while taking into consideration the
customer needs, preferences, perceptions, and convenience. Also, the banks
services are not just confined to their particular branch customers only.
Customer is now treated as customers of bank as a whole, which means that he
is now capable of enjoying facilities such as anywhere, anytime, banking. This
concept has enabled the bankers to establish long term connection with their
customers.

41
 Hence, electronic banking is the new trend significantly adopted by banking
sector worldwide due to its wider scope for the customers as well as bank at
large. Various products have been launched by the banks that help them to
meet their basic requirement of their customers. With the entry of tech savvy
private sector banks and foreign banks, the competitive environment has stated
prevailing in banking sector too. No doubt, public sector banks have large
network of traditional branches to approach their customers as compare to the
private and foreign players. However, with the help of information technology
it has now become possible for bank to deliver products and services
efficiently and to improve customer base without opening new branches.

Hence, these private and foreign players are trying to compete with the on the
basis of adoption of new technological services like plastic cards, PC banking,
Electronic fund transfer (EFT), internet banking etc to approach the maximum
customers in spite of having less physical branches. Due to this reason, public
sector banks are also likely to move towards electronic banking and payment
system, which ultimately leads to entire banking sector to the remarkable
improvement with respect to its efficiency, customer services, productivity,
profitability etc. Thus, banks are now reengineering the way in which their
services can be reached to their customers by bringing in flexibility in their
distribution channel.

Traditionally, banks were only concerned with acceptance of deposits from customers
and lending surplus money to the suitable customer who want to borrow at some rate
of interest. The most common products being offered by banks were savings account,
current account, term deposit account and lending products being cash credit and term
loans. Banker's main purpose was to manage the savings of people through the
mobilisation of funds (Deva, 2005).

42
In the seventies, Banks in India started moving towards the social orientation due to
which nationalization took place in July 1969. The Indian Government nationalized
the 14 largest commercial banks and afterwards nationalisation of 6 more commercial
banks were followed in 1980. The main reason for the nationalisation was to give the
government more control of credit delivery in order to discharge social obligations
(Suneja, 1994). Due to this effect of nationalization, Banks tried to uplift the
neglected areas like agriculture, small scale industries, tertiary sector, remote areas
and weaker section of the society by providing them with funds at reasonable rates of
interest. Thus, till nineties, the government was having direct control on the 90% of
the banking business in India (Suneja, 1994). While fulfilling the social objective, the
cost of banking operations increased and thus profitability of banks declined
drastically. To overcome these problems, it became necessary for the banks to
introduce new products and services which are commercially viable and helped them
to improve their profitability and productivity (Deva, 2005). Hence, modern era has
brought progressive change in banking industry as a whole which is resulted from
disintermediation process and information technology. New entrants (private and
foreign banks) in the banking industry generally known as New Generation tech-
savvy banks tend to introduce various innovative services while incurring minimum
cost but also suit the customer preferences. This is the period when automation of
banking operations has gained much importance (Thakur and Singh, 2005).
Hence, over last one and a half decades the banking environment has changed
progressively. After financial sector reforms during nineties, the banking industry in
India has witnessed remarkable changes due to information technology and computer
applications. The information technology has replaced the brick or traditional banking
with the wide range of e-banking products and services like ATM (Automated Teller
Machine), Internet Banking, Credit Cards, PC banking, EFTs, Debit Cards, Smart
Cards etc. Indian banks have shifted their emphasis from traditional banking to
banking for customers as customer is always regarded as the key driver for the
success of any new product and services launched in the market and the customer
should be satisfied with the offerings of industry (Deva, 2005).

43
Therefore, to be successful in the long run, banking industry must adapt to the
changing needs of customers, their preferences and wants. However, Electronic
banking also makes it easier for customers to compare banks' services and products
with that of others competitors in the industry and allows banks to penetrate new
markets and thus expand their geographical reach (Vohra, 2002). With the effect of
this changing environment, Indian banking has witnessed remarkable growth since
2006 as banking sector is growing by 18% and it is 6 times more than the last decade
growth (Khandelwal, 2006). Development of banking in India has been discussed
well by Thakur and Singh (2005).

Plastic Cards: A Key Element of Electronic Banking

Money is always regarded as an important medium of exchange and payment tool.

Initially barter system was used as the significant mode of payment. Over the years,
money has changed its form from coins to paper cash and today it is available in
formless form as electronic money or plastic card (Ramasamy et. al., 2006). Hence,
the major change in banks which has been brought in by technology is through
introduction of products which are alternative to cash or paper money. Plastic cards
are one of those types of innovations through which the customers can make use of
banking services just by owning the card issued by bank and that too without
restricting himself in the official banking hours. Plastic cards as the component of e
banking have been in use in the country for many years now. However, the card-based
usage has picked up only during the last five years. Payment by cards is now
becoming a much preferred mode for making retail payments in the country (Report
on trend and progress of banking in India 2006-07, RBI). Thus, plastic cards are such
payment tool which gives a customer an opportunity of non cash payment of goods
and services and are designed to facilitate small value retail payments by offering a
substitute for bank notes and coins and thus to complement traditional payment
instruments. The role of various parties involved in plastic cards payment

44
(i) Customers or Cardholder: The authorized person holding the card and can
use it for purchase of goods and services also.

(ii) Card issuing bank: The bank or institution which issues the card to its
eligible customers.

(iii) Merchants: Entities which sell the goods and services to the
cardholder and duly agree to accept the card for payment.

(iv) Bank Card Association: The associations (VISA, Master Card,

American Express) which act as an intermediate between card issuing
bank and merchant's bank and authorize the transaction.

Automatic teller machine (ATM)

Automatic teller machines played a vital role in the development of plastic

cards. In India, there is a continuous rise in the usage of ATMs by the
customers. According to a survey conducted by Banknet India in 2006,
95% people prefer using ATMs to traditional mode of banking (1). Since
2000, sufficient number of ATMs have been installed by various banks in
India while taking into consideration its popularity and usage among the
customers. The ATMs installed by banks in year 2000 was just 1000 in
number which increased to 27088 in year 2007 signifying the tremendous
growth in 7 years (See Figure 2). The group wise share in the number of
ATMs is depicted in Figure 3, according to which the nationalized banks
in India has contributed maximum to the rise of on-site ATMs as well as
total number of ATMs. As far as the growth and number of offsite ATMs
are concerned new private sector banks have led over the other group of
banks. At the early stage, customers could only use ATMs of that
respective bank where they are having account.

45
 (ii) But currently, this constraint has been weeded out for the convenience of
customers as they can use ATMs of other banks also where they don't have
any account.

(iii) It is known as interbank networks and banks charge extra fee termed as
"inter-change fee" for usage of this service. Reserve Bank has encouraged
the banks to join together in small clusters so that their ATM networks can
be shared. Currently, there are various such ATM network clusters
functioning in India. The number of ATMs shared by these network
which indicates that National Financial Switch (NFS) is sharing the largest
number of ATM with its member banks while Mitre is having least
number of ATMs to be shared with its member banks.

Debit cards

Debit card is a magnetically encoded plastic card issued by banks which has replaced
cash and cheques. It allows the customers to pay for goods and services without
carrying cash with them. In some cases, debit card is multipurpose which can also be
used as ATM for withdrawing cash and to check account balances. It is issued free of
cost with the savings or current account (Mishra, 2007). Debit card is one of the best
online e-payment tool through which the amount of purchase is immediately deducted
from customer account and credited to merchant's account provided if that much
amount is available in customers account. It has overcome the delayed payment
process of cheques, due to which sometimes merchants have to suffer. To transact
through debit card is easy and authentic way in which a card is swiped through the
terminal with magnetic code reader and it records customer's bank and account
number (Casket and Gordon, 1994).

46
Customer has to enter the PIN code in the terminal in order to perform the transaction
through which the information is travelled to electronic network linked to the
merchant's bank with the bank that issued debit card to the customer.

If the transaction is approved then the customer account is duly debited and merchant
account is credited with that amount. The whole process is performed instantaneously
in spite the involvement of large number of parties (See Figure 5). Hence, debit cards
are considered effective where customers value it as convenience and merchants see it
as lowering cost or enhancing sales.

Robust progress can be seen in the usage of debit cards in India as per Table 2, the
total number of outstanding debit cards has been increased to 74.9 million in 2007
from 49.8 million in 2006, which indicates the growth of 41% in a year. The value of
transaction conducted through debit cards also witnessed considerable growth of
approx 38% every year from 2003 to 2007. The growth of merchant establishments
has also contributed a lot in the growth of debit cards usage in India.

47
Credit cards
The term "credit card" generally refers to a plastic card issued to a cardholder, with a
credit limit, that can be used to purchase goods and services on credit or obtain cash
advances. It is issued by banks holding the logo of one of the bank card association
private and foreign banks, many public sector banks have also entered the Debit card
segment leading to the increase in acceptance and the total base. Most banks now
issue Debit cards in place of ATM cards and have already converted all their ATM
cards into Debit cards. The reason banks are so eager to push debit cards is that it
helps them cut costs significantly (Choudhury S., 2007). Hence, these days, only a
few pure ATM cards can be seen prevailing in the market like Visa, MasterCard,
Dinners club etc. after proper verification of accountholders. Unlike debit cards, credit
cards also provide overdraft facility and customer can purchase over and above the
amount available in his account and thus regarded as authentic payment tool (Mishra,
2007). Interest charges are levied on the unpaid balance after the payment is due.
Cardholders may pay the entire amount due and save on the interest that would
otherwise be charged. Equated Monthly instalments (EMI) scheme is also offered by
some banks to the customers who make huge purchases so that they can feel
convenient while paying back the outstanding amount (Vardhaman, 2008).

Clearing and settlement through credit card is a simple and reliable process in which
bank play a crucial role (See Figure 6).If a customer purchases goods or services from
merchant with credit card, merchant swipes a credit card through a reader, the
software at the point-of-sale (POS) terminal dials a stored telephone number via a
modem to call an acquirer (2). When an acquirer company gets the credit-card
authentication request, it credits the merchant account and card holder accepts liability
by signing the credit receipt. The merchant acquirer forwards the transaction data to
bankcard association, who in turn forwards the data to card issuer bank. The card
issuing bank has to pay the bankcard association, who in turn pay the outstanding
amount to merchant acquirer. The card issuer then adds the outstanding bill amount to
the card holder's monthly statement and card holder duly makes payment to the issuer
afterwards.

48
The credit card business in India has been growing at a significant pace and that too
at the rate of almost 45% every year as depicted. The value of transactions conducted
through credit cards has been almost more than double in last four years i.e. it has
recorded as 176.6 billion in 2003-04 and increases to 413.6 in 2006-07. Moreover,
credit cards are more popular among the Indian customers as compared to debit cards.
The total volume and value of credit card transactions is much higher as compared to
the usage trends of debit cards.

The main reason for the growth of credit cards as compare to debit cards is mainly
due to provision of overdraft facility which facilitates the customers to make
purchases and payment even without having enough money available in their account.
The increase in the number of commercial activities and the growing malls in smaller
cities have also contributed positively in the rise of credit card market.

Smart cards

Smart Cards or Stored Value Cards is relatively new payments technology. It is a

plastic card, with or without magnetic stripe, capable of storing, retrieving and
manipulating data and used in variety of applications (Weiner and Lester, 1995). It is
also known as Electronic Money or E Purse issued by banks to its customers having
the size as of credit card. A customer needs not to have currency in his pocket as
value or amount is stored in the card itself by transferring it from his account, due to
this feature it is regarded as electronic purse. The emergence of Smart Card arises in
order to issue multipurpose cards which function as credit cards, debit cards and ATM
cards so that it suits all types of customer base and their choice. These are generally
the reloadable cards in which money is loaded into it by transferring the required
amount from customers account via ATMs, telephone or internet.

49
When a customer makes purchases through smart card, unlike credit card, no
validations and authentications from vendor's bank and bank card association are
required as the money is available in the card itself. Funds are directly deducted from
the cards and transferred to the vendor's terminal.
Smart cards are multipurpose in nature which can serve as an identity card for a
cardholder, a medical card that contains the medical history of the holder and as a
credit card/debit card, facilitating off-line transactions where settlement across
different banks is involved. The Smart Rupee System (SMARS) pilot project
sponsored by Reserve Bank of India (RBI) has set the foundation for usage of smart
card-based financial applications in India. These are currently being issued by few
banks in India having tied up with FINO (Financial Information Network and
Operations Ltd).

IDBI bank has introduced its smart card called Money Smart, Corporation Bank has
issued Corp Smart, and Bank of India has issued its E-purse cards. PNB, SBI, ABN
Amor, ICICI bank and Bank of Baroda have also launched smart card-based banking
solutions. Thus, banks are now showing interest in the smartcards approach to reach
out to the unbanked population. FINO is focusing more on increasing the number of
cards of its current partners (Nair, 2008). With the spread of rapid technological
developments and the potential of the usage of smart cards for many purposes, the
Reserve Bank also teamed up with the Government of India, banks and the card
industry to conduct pilot project for the use of smart cards for multiple purposes.

50
Future Scenario of Plastic Cards Market in India

The use of plastic cards in India has no doubt in rise from last few years but there is
still a great potential left for the bankers to introduce more attractive services in order
to lure the customers on one side and increase their profits on the other. Some aspects
or facts (organized from various studies and articles) which are contributing to the
growth of plastic cards market and also indicate its growth in the near future are
discussed below:

* The credit card companies say that consumers spend Rs 50,000 crore annually
which is expected to grow at 50% over the next 4-5 years since 2007 (Economic
Times, 19 September 2007).
* According to CLSA Report, the estimated credit card base in India till 2020 will be
127 million as compared to 23.1 million in 2007.
* The number of debit and credit card users in India is anticipated to reach 73.4
million and 406 million by the year 2010 and 2011. (4)
* According to an RBI announcement, by April 2009, bank customers will able to use
their ATM cards to withdraw cash from any automated teller machine installed by
various commercial banks across the count and too free of cost. (5)
* According to a new RBR report on Global ATM Market and Forecasts Till 2011,
India is likely to invest heavily in ATMs till 2011.
* Leading Indian banks are said to target a ratio of 1: 2.5 for bank branches v/s ATMs
by 2012. This means the number of ATMs will grow to around 1.75 lakh, assuming
the number of branches remains at the same level (The Hindu Business Line, 29
November 2007).
* Now a number of non-banks in collaboration with/without banks are planning to
issue both, limited or multipurpose prepaid cards.

51
 * In late 2007, most of the companies had announced plans to convert their
credit/debit cards to smart cards by replacing the magnetic stripes in them with
computer chips and incorporating latest encryption technologies. So it would not be
long before smart cards established themselves in India (Arunachalam L. and
Sivasubramanian M., 2007).

* A few non-banks have also entered the domain of providing various services like
provision of infrastructure e.g., shared ATM networks POS terminals, cheque
processing centres etc which will lead to enhance the potential of plastic cards market
(Arunachalam L. and Sivasubramanian M., 2007).

* A joint venture between Life Insurance Corporation of India (LIC) and GE Money
is likely to launch its first credit card product in 2009 which will be offered only to
LIC customers and policy holders (Vardhaman, 2008).

* In another positive development, ABN AMRO with India's travel portal

MakeMyTrip.com launched a distinctive cobranded credit card, 'Go Card' in 2008.
The card offers special reward benefits and good range of travel-related promotions
and packages (Vardhaman, 2008).

* Banks in India are looking at deploying biometric ATMs targeted to reach the
unbanked population in rural India. Using thumbprint and voice guidance in ATMs
reduces literacy requirements to a considerable extent. Thus, establishing the identity
of a rural depositor through biometrics makes it possible for illiterate or barely literate
people to become part of the banking user community (Murali D. and Jaishankar P.,
2007).

* There are already 1.6 million customers using smart cards banking solution and that
figure will go up to 4 million by the end of March 2009 and will reach to 25 million in
five years (Sen A., 2008).

52
Hence, the future prospects of plastic cards in India are bright enough to bring
paradigm change in its popularity among customers as well as banks. Also, plastic
money has immense opportunities in a growing economy like India. All types of
banks whether public, private or foreign are contributing positively towards the
development of plastic cards in India. Until now, the growth and usage of plastic
cards has been seen more in urban areas due to existence of more literate people,
better infrastructure facilities and proper awareness as compared to rural areas.

The rural people can only understand their regional language and most of them are
even illiterate who are least aware about the usefulness of plastic cards. Moreover,
there is lack of adequate infrastructure to push the development of cards and induce
more innovation. Thus, most of the banks have now planned to expand aggressively
into rural India, where about 60% of the population lives, using an innovative system
based biometric cards through which customers will be able to do anytime anywhere
banking on their own (David R., 2007).

The rise in consumerism generated by economic reforms began in 1990s has also
sparked robust demand for plastic cards. The arrival of malls, multiplexes, online
shopping stores and shopping complexes encourage the customers to make use of
plastic cards. The modern day, Indian customers find it easier to make physical
payment (credit card or debit card payments) rather than carrying too much cash
contributing to the growth of plastic money in the country. The prevalence of
intensifying competition has further fuelled the usage of plastic cards in the country
like never-before. It benefits the consumer through enhanced product offerings at a
lower cost and that too with lucrative deals delighted with rewards scheme, loyalty
bonus points, promotional campaigns etc. This has been a very welcome change and
the contribution of all the players is very important to continue the momentum (Parul,
2008).

53
However, operational risk involved with the usage of plastic cards like chances of
fraud, card damage etc. plays the negative part too (Retail Payment System, 2004).
Moreover, some customers are not able to utilise cards effectively due to its complex
nature and they dont actually know how to operate it for specific purpose. Thus, the
banks should give them some training regarding its usage. The banks can also provide
them facility to use plastic cards on trail basis so that they can become more confident
while using their own cards. Cost has also remained an issue in case of credit cards.
The interest levied on outstanding amount is very high which sometimes takes the
customers in debt trap ultimately discouraging the potential customers to make use of
it.

However, all these hurdles will diminish over time and positively influencing trends
are expected to continue in the near and far-future. Also, the growth of plastic cards in
future would depend upon the capacity building of the banks to meet the challenges
and make use of the opportunities profitably. However, the kind of technology used
and the efficiency of operations would provide the much needed competitive edge for
success in plastic cards business. Furthermore, in all these customers interest is of
paramount importance (Gopinath S., 2005).

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 Chp 9: Impact of plastic money on paper money

INTRODUCTION:

Paper money was first used in China around the seventh century AD, only to be
outlawedi n 1455. The use of folding currency re-emerged in
E n g l a n d i n 1 6 9 4 . T h e b i g g e s t problem which was occurring with the
paper note is the wear; the paper note has verysmall life due to shifting of
ownership by time to time and their usage. Firstly Australiawas the first who develop
the plastic note which have longer life but after wore they arerecycled for further
utilizing. The plastic notes also secure the government for copying because
paper note easily copied but plastic note cannot be copied. The plastic note are same
as paper but the only difference is that they are made of plasticand more secured
but in traveling and shopping people used to carry huge cash whichwas
very unsecured and also increasing crime rate. Then the cards are
introduced in theworld to resolve the issue of carrying huge cash. Then the
cards are known as PlasticMoney. The usage of plastic money(Cards) has
increased in the mode of payment of hugeamount and time by time there are lots of
different types of plastic money has introducedwhich enhanced the features of plastic
money like we can use it to anywhere in the worldand etc. Now the world is
becoming globalize so every card is accepted everywhere withthe power of VISA
which interconnect the different countries.As we have the different type of card as
listed below:

1. Credit Card
2 . D e b i t C a r d
3. Charge Card
4 . A m e x C a r d
5. MasterCard & Visa
6 . S m a r t C a r d
7. Dinners Club Card
8 . P h o t o C a r d
9. Global Card
10. Co-branded Card
11. Affinity Card
12. Add-on Card
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These cards are performing the function of money with different ways.
These cards areaccepted worldwide, in which you can utilize your own
money and also banks moneyThecard through which you spend your own
money is known as debit card. The cardthrough which you spend the amount of
bank as loan is called credit card

CHAPTER II - BACKGROUND

LITERATURE REVIEW:
Australia leads the world in plastic banknote technology. Due to the problem faced
withthe paper note the invention of plastic money has been introduced. The paper
money hassmall life cycle and cant be recycled but as compared with the plastic
money which haslong life cycle and can be recycled for further utilization in making
plumbing fittings andetc. Plastic money is secured and cannot be copied. As we know
that Australia was the firstcountry to have all polymer banknotes, but the rest of the
world is starting to follow our lead.There one problem arise that we cannot
keep the huge amount of cash with us so theygive the idea of Plastic cards
which known as plastic money accepted worldwide and wec a n k e e p t h e h u g e
a m o u n t w i t h u s w h i l e g o i n g t o a n yw h e r e i n t h e w o r l d . T h e
p l a s t i c money makes the society as cashless societies.As the usage of plastic
cards are increasing the number of supplier are also increasedwhich offering
the different features. Some suppliers (Bankers) are charging the and high interest
rate. The agent who convince the people to get the credit card by offering
the wonderful packages but in reality agent is hidden some important
factwhich was disclose after the receiving of the bill.In Pakistan first plastic
money is introduced by the Habib Bank which was not get thefamiliarity
among people and then Allied banks Master card was launched which
wasvery popular among the customers, then different banks come up with their
different formof credit and debit cards.

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 Questionnaire on relevance of plastic money

This questionnaire is based on the questions asked to the customers. The

survey is been done by asking questions to 31 people and the following
result is been found.

Q1) Do you use plastic money?

Options Responses
Yes 90.32%
no 9.68%

Do you use plastic money

no

yes

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Analysis: It has been found that about 90% of people are using plastic money for
their transaction. There are very few who are not using plastic money for their
transaction.

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Q2) which card do you use?

options Responses
Debit card 41.38%
Credit card 24.14%
Both 34.48%

which card do you use?

both

credit card

debit card

0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

Analysis: From the survey it has been found that about 41 % of people are
using debit card. Many of them are using both debit card as well as credit card.
And about 24 % are using credit card. Credit card users are less in no. Because
bank does not issue credit card to the issuer easily as some minimum amount
has to be there in the issuers account.

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Q3) How many no. of credit card are owned by you?

options Responses
1 35.48%
2 19.35%
3 12.9%
None of the above 32.26%

how many no.s of credit card are owned

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Analysis:From the survey we can analyse that many of them carry 1

credit card of single bank as well as 2 or 3 credit card are also been used by
people but of different banks as only a single card is been issued on a single
account by the bank. Credit card are issued only to whom who have minimum
amount as per the requirement in their account.

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Q4) How many no. Of debit card are owned by you?

options responses
1 35.48%
2 19.35%
None of the above 32.26%

how many debit card are owned

none of the above

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Analysis: from the survey it can be analysed that are there about 35%
of people who are using debit card. Debit card are issued to the people who
have no amount in their money. In that cases, some interest is been charged.
There are about 32% who are not been using debit card.

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 Q5) which bank card do you use?

option responses
HDFC Bank 31.03%
ICICI Bank 13.79%
IDBI Bank 27.59%
Any other 27.59%

which bank card do you use

any other

IDBI Bank

ICICI Bank

HDFC Bank

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Analysis: It has been analysed from the survey that different cards
like debit card and credit card are been used by people of the different banks.
Different facilities and benefits are being provided by different banks to their
customers. So as per the benefits beneficial to the customers the cards are been
issued by different banks.

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Q6) since how long you have been using debit/credit card?

options responses
Less than 1 year 20.69%
Between 1-3 year 31.03%
Between 3-5 year 31.03%
More than 5 year 17.24%

how long debit / credit card are

been used

more than 5 year

between 3-5 year

between 1-3 year

less than 1 year

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Analysis: There are many people who are using plastic money
from last 3 to 5 years. There are about 20% of people who are using their
cards from less than 1 year. So people are slowly getting aware of this facility.

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 Q7) normally for what purpose do you use?

options responses
Shopping 20.69%
Withdrawal of money 31.03%
Hotel and restaurants 24.14%
Any other 24.14%

For what purpose do you use

any other

withdrawal of money

hotels and restaurant

shopping

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Analysis: after the survey we can analyse that people are using their cards for
various purposes as it becomes easy for carrying, there is no fear of theft and
is convenient. Mainly people are using their cards for the withdrawal of
money.

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Q8) which card according to you is beneficial?

options responses
Debit card 46.43%
Credit card 32.14%
Both of the above 21.43%

which card is beneficial?

Both of the above

Credit card

Debit card

0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

Analysis: we can analyse from the above data, that debit card is
more beneficial as compare to credit card as there is no credit worthiness
being carried forward as in debit card. However, people use both the cards as
per their requirement.

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Q9) what are the benefits provided by debit/ credit card?

options responses
Security 24.14%
Free from fraud 13.79%
No interest charges 24.14%
Easy to carry 37.93%

what benefits are provided by cards

easy to carry

no interest charges

free from fraud

security

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Analysis: there are various benefits which are been provided by the debit and
the credit card. Because of these benefits it becomes easy for customers to use
the cards. From the survey we can analyse that the main benefit of plastic
money is that it is easy to carry.

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 Q 10) what are the future prospects of plastic money?

options Responses
Rapid growth 30.00%
Steady growth 33.33%
Stagnant 23.33%
declining 13.33%

future prospects of plastic money

declining

stagnant

steady growth

rapid growth

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Analysis: from the survey it can be analysed that there is a

steady growth of plastic money. In rural area there is less awareness about the plastic
money. By making awareness the growth can be increased. In urban areas there is
rapid growth of the plastic money due to the internet awareness.

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Questionnaire relevance to plastic money to bank manager

Questions related to plastic money were asked to the bank manager of Bank
of Baroda, following is the answers that were obtained by him.

Q1) which cards are being provided by bank of Baroda?

Bank of Baroda provides all types of cards such as debit card, credit card, master card,
smart cards etc.

Q2) what benefits the bank is providing to customers?

Bank of Baroda issues debit cards to all the customers even if it has zero balance in
their account. Credit cards are issued to the customers which has minimum amount as
per the requirement in their account.

Q3) what are the facilities the bank provide to customers?

Bank of Baroda has 50,000 ATMS so it becomes convenient for customers to use the
plastic money.

In other banks the minimum amount for issuing the credit card is 10,000 whereas in
Bank of Baroda after proper investigation and some minimum amount of 1000 they
issue credit card to their customers.

Q4) what interest is being charged by your bank?

For regular customers the interest rate charge is nominal in amount as other banks.
But for businessman and big corporative they charge about0.1% minimum and upto
2.5% maximum.

Q5) what are the major drawbacks your bank is facing from the customers?

Customers are mainly facing problems during the bad weather as during that period
they face the difficulty in transacting the money.

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 CASE STUDY

What happens in credit card fraud case?

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
service posing as the person named on the card. It can also describe illegally
and fraudulently withdrawing funds from an account that is not yet. 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 transaction made with a credit card and alert the person named on
the account of any potentially suspicious activity. This is to protect the ban of
credit card Company just as many as it is to protect the customer.

Investigation

Exactly what happens during a credit card fraud cases 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 persons account but the
amount of the transaction is lower than the cost of an investigation the
company can credit the money back to the person and then close the account
to protect from further harm.

If the amounts of fraudulent charges are so great that an 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
witness 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.

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Felony

Credit card fraud is considered a felony by the court of the United States. As a result a
person convicted of credit card fraud could face jail time (the exact amount of which
depends on the extent of the crime|). A felony conviction stays on a persons record
and can prevent the person from getting hired for a job. Having a felony on a criminal
record will also take away a persons eligibility in terms of running for public office.
If a person who is not a natural- born citizen of the United States commits credit card
fraud and is convicted of a felony the result could be being deported to their country
of origin.

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 Conclusion

21st century banking has become wholly custom- driven and

technology driven by challenges of competition, rising customer expectation
and shrinking margins, banks have been using technology to reduce cost and
enhance efficiency, productivity and customer convenience. Technology
intensive delivery channels like net banking, mobile banking etc have created
a win- win situation by extending convenience and multiple options for
customers.

For enhancing customers about credit cards there is a need to

educate them about the differentiating factors of the cards. Because visa and
master cards 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 having interactive sites. The prospective companys card
personality could also be used in the home page to solve customer questions in
the best possible manner.
 Webliography

www.googlesearch.com
www.yahoo.com
www.rbi.org
www.wikipedia.com
www.infosee.com

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 Annexure

Survey questions asked to the public:

Do you use plastic money?

a) Yes
b) no

Which card do you use?

a) debit card
b) credit card
c) both

How many no. Of debit card of different banks are owned by you?
a) 1
b) 2
c) None of the above

How many no. Of credit card of different banks are owned by you?
a) 1
b) 2
c) 3
d) None of the above

Which bank card do you use?

a) HDFC Bank
b) ICICI Bank
c) IDBI Bank

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 Since how long you have been using debit/ credit card?
a) Less than 1 year
b) Between 1-3 year
c) Between 3-5 year
d) More than 5 year

Normally for what purpose do you use plastic money?

a) Shopping
b) Withdrawal of money
c) Hotel and restaurants
d) Any other

Which card according to you is beneficial?

a) Debit card
b) Credit card
c) Both of the above

What are the benefits provided by debit/ credit card?

a) Security
b) Free from fraud
c) No interest charges
d) Easy to carry

What are the future prospects of plastic money?

a) Rapid growth
b) Steady growth
c) Stagnant
d) Declining

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 Questions to the bank manger:

1) Which cards are provided by you banks?

2) What benefits you provide to customers which other banks are not
providing?
3) How much % of your customers are still habitual to cash transaction?
4) What are the facilities you provide to your customers so that the
customer would choose your bank and not other bank cards?
5) What re the drawbacks which you are facing while transacting in cards?
6) What changes would you like to bring in your services that would be
beneficial to your customers?

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