INDEX

1. Introduction ...................................................................................... 3

1.1 Origin of Plastic Body ................................................................. 5

1.2 Meaning ....................................................................................... 7

1.3 Definition..................................................................................... 9

2. The History of Plastic Money ........................................................ 11

2.1 Credit Card Origin ..................................................................... 11

2.2 Plastic Becomes the Standard ................................................... 11

2.3 Bank Card Associations ............................................................ 12

2.4 Debit Card Emerge .................................................................... 12

2.5 The Future ................................................................................. 12

3. Types of Plastic Money .................................................................. 13

3.1 Different types ........................................................................... 13

3.2 Significance of Plastic world..................................................... 16

4. Advantages & Disadvantages ........................................................ 18

4.1 Advantages of Plastic Money.................................................... 18

4.2 Disadvantages of Plastic Money ............................................... 20

4.3 Features of Plastic Money ......................................................... 21

5. Importance of Plastic Money ........................................................ 22

6. Growth of plastic money ................................................................ 24

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7. Need of plastic money .................................................................... 27

8. Aims And Objective of Plastic Money ......................................... 29

9. Data Analysis and Interpretation ................................................. 30

9.1 Question..................................................................................... 30

9.2 Findings ..................................................................................... 40

11. Conclusion and Suggestions .......................................................... 43

12. Questionnaire.................................................................................. 48

13. References ....................................................................................... 52

14. Bibliography ................................................................................... 53

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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 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.

Credit cards or debit cards are called Plastic cards. Plastic cards are one of
the most popular forms of payment. In fact, Plastic cards are an inevitable part of
our life. They allow cardholders to pay for goods and services easily and
conveniently and provide an alternative to cash and cheques. As Credit Card, Debit
card, ATM card etc are, used as the alternative to money such as cash or cheque,
and are made of plastic, they are also called Plastic money. This article is
about: What are plastic cards? Debit cards and Credit cards, Kinds of Cards(Add-on
card, charge card), Details of plastic cards, EMV card, Analysis of card number.

Plastic cards are issued to users by a variety of organisations (called as card

issuers) such as banks, retailers such as Big Bazaar, Shopper Stop. There are various
plastic card schemes such as MasterCard, Visa, Rupay Cards, American Express,
Diners Club, Maestro etc. These operators work behind the scene to make sure that
card works The types of cards issued and their levels of functionality vary from card
issuer to card issuer and between the different card schemes under which the cards
are issued.

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 Indian economy has flourished with the advent of Liberlisation, 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 cannot improve the state of affairs until customers don't respond
to it positively. Hence, it becomes very necessary for the banks to offer the services
or products while taking into consideration the customers‟ needs, preferences,
perceptions and convenience. Also, the banks' services are not just confined to their
particular branch customers only. Customer is now treated as customer of banks as a
whole, which means that he is now capable of enjoying facilities such as anywhere,
anytime banking (Kamesam, 2003). This concept has enabled the bankers to
establish long term connection with their customers.

Hence, Electronic banking is the new trend significantly adopted by banking

sector worldwide due to its wider scope for the customers as well as banks at large.
Various sophisticated products have been launched by the banks which help them to
meet the basic requirements of their customers. With the entry of tech savvy private
sector banks and foreign banks, the competitive environment has started prevailing
in banking sector too. No doubt, Public sector banks have large network of
traditional branches to approach their customers as compared to the private and
foreign players. However, with the help of information technology, it has now
become possible for banks to deliver products and services efficiently and to
improve customer base without opening new branches. Hence, these new private
and foreign players are trying to compete with them on the basis of adoption of new
technological services like plastic cards, PC banking, Electronic Funds Transfer
(EFT), Internet banking etc. to approach the maximum customers inspite of having
less physical branches (Venkatesan and Kumar, 2007). Due to this reason, public
sector banks are also likely to move towards electronic banking, which ultimately
leads the 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 channels" (De Sarkar et. al. 2001).

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 1.1 Origin of Plastic Body

Money is the most important and useful inventions made by man. The word
“Money” has been derived from the Latin word “Moneta” which denotes the Roman
goddess Juno in whose temple money used to be minted (Crowther, 1972). We
know that this man made instrument became essential for the development of social
economy which is principally a monetary economy. An economic system in which
exchange is Introduction 3 facilitated by the use of money, as distinct from a barter
system, where no money is employed. In barter system, there is the direct exchange
of commodities and services against commodities and services in the society. In
other words, barter system is a system in which people sell goods and services
through direct exchange. Thus, it served the self interest of every individual in
society.

It has been observed that the barter system of exchange usually flourishes
among the uncivilized and economically backward communities and countries
(Devraj, 2004). It is next to impossible that all wishes of bartering individuals
should coincide as to the kind, quality, quantity and value of the things which are
mutually desired, especially in modern economy in which on a single day millions
of persons may exchange millions of commodities and services. In barter system of
exchange, people had to encounter the problems like: inconvenience of lack of
double coincidence of wants, common measure of value, mean of sub division, store
of value.

The inconvenience and difficulties of the barter system led to the evolution
and growth of a common unit of account. It has been observed that barter system of
exchange was suited to the primitive conditions under which the requirement of
human life were simple and limited only. It is obvious that under pure barter
exchange only a very primitive economy where people produced and exchanged
only very few goods and services could exist (Vaish, 1997). But with the passage of
time, people grew in the scale of civilization, wants multiplied and with the division
of labour, the difficulties and inconvenience encountered in barter system became
serious and intolerable.

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 The origin of money came as a multifold blessing to the mankind as the
barter system of exchange was an outmoded way of life for those people who were
keen to grow and impatient to conduct their trade cheaply and efficiently in many
commodities. Money deserves to be ranked among man‟s outstanding inventions.
By overcoming the difficulties of barter, man has made possible a tremendous
saving of time and trouble in marshaling productive factors and distributing the
output to ul Introduction 4 invent a system, a medium of exchange, which is free
from handicaps of barter. Money was found to be the best and lasting solution.

However, it would be a great mistake to presume that money was

discovered and introduced overnight. The introduction of money came as a
multifold blessing to mankind. Money is one of the most fundamental of man‟s
inventions. Every branch of knowledge has its fundamental discovery. In mechanics
it is the wheel, in science it is the fire and in politics the votes. Similarly, in
economics in the whole commercial side of man‟s social existence money is the
essential invention on which all the rest is based (Crowther, 1972).

From its very invention, money was circulated in society in different forms.
Money can be classified on different criteria, like the physical characteristics of
money material like animal money, metallic money, etc. In the beginning, ordinary
commodities like furs, skins, jaws of animals, etc were used as money. The
commodity money change in form and given the way to metallic money which in
turn has given way to paper and credit money. Money has been around in one form
or the other with some or all of the functions and characteristics, since almost 5000
BC. It has evolved over thousands of years to attain new characteristics and to
perform new functions.

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 1.2 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.

The term plastic money has been used in different settings to describe a
wide variety of payment systems and technologies (Basle, 1996). “Stored-value”
products are Introduction 6 generally prepaid payment instruments in which a record
of funds owned by or available to the consumers is stored on an electronic device in
the consumer‟s possessions, and the amount of “stored value” is increased or
decreased, as appropriate, whenever the consumer uses the device to make a
purchase or other transaction.

By contrast, “access” products are those typically involving a standard

personal computer, together with appropriate software, that allow a consumer to
access conventional payment and banking products and services, such as credit
cards or electronic funds transfers, through computer networks such as the internet
or through other telecommunications links (Hanacek, 1998).

According to Basel (1998) plastic/electronic money refers to “stored value”

or prepaid payment mechanisms for executing payments via point of sale terminals,
direct transfers between two devices, or over open computer networks such as the
internet. Stored value products include “hardware” or “Card- based” mechanisms
(also called “electronic purses”), and “Software” or “network-based” mechanisms
(also called “digital cash”). Stored value cards can be “single – purpose” or “multi-
purpose”. Single- purpose card (e.g. telephone cards) are used to purchase one type
of good or services, or products from one vendor, multi-purpose cards can be used
for a variety of purchases from several vendors.

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 Also, RBI (2002) quoted European central Bank (1998) definition which
states that plastic money is an electronic store of monetary value on a technical
device used for making payments to undertakings other than the issuer without
necessarily involving bank accounts in the transaction, but acting as a prepaid bearer
instrument. Basle (1998) argues that banks may participate in electronic money
schemes as issuers, but they may also perform other functions. Those include,
distributing electronic money issued by other entities; redeeming the proceeds of
electronic money transactions for merchants, handling the processing, clearing, and
settlement of electronic money transactions; and maintaining records of
transactions. Plastic money which includes stored value card could be of three
types–single– purpose card, closed-system or limited-purpose card and general-
purpose or multipurpose card.

The single-purpose card generally with a magnetic chip recording the

amount of fund therein is designed to facilitate only one type of transaction e.g.,
telephone calls, public transportation, laundry, parking facilities etc. Here, the
Introduction 7 distinguishing point is that the issuer and the service provider
(acceptors) are identical for the cards. These cards are expected to substitute coins
and currency notes.

The closed system or the limited-purpose cards are generally used in a

small number of well- identified points of sale within a well-identified location such
as corporate/ university campus. The multi- purpose card on the other can perform
variety of functions with several vendors‟ viz., credit card, debit card, stored value
card, identification card, repository of personal medical information etc. These cards
may reduce demand for currency accounts in the bank for likely reduction in
transaction costs and prudent portfolio management.

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 1.3 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.

It is a term increasingly being used to refer to all forms of credit cards,

debit cards, retailer cards, diner cards and other types of plastic cards which we use
daily instead of actual currency notes.

Plastic/polymer notes which is actual money printed on polymer notes is

also sometimes referred to as plastic currency but the former usage is the more
common one currently.

Plastic money is a term that is used predominantly in reference to the hard

plastic cards we use every day in place of actual bank notes. They can come in many
different forms such as cash cards, credit cards, debit cards, pre-paid cash cards and
store cards.

Plastic money is the alternative to the cash or the standard 'money'. Plastic
money is used to refer to the credit cards or the debit cards that we use to make
purchases in our everyday life. Plastic money is much more convenient to carry
around as you do not have to carry a huge sum of money with you. It is also much
safer to carry it along or to travel with it as if it is stolen one can consult the bank
whose service you are using and get it blocked hence saving your money from
getting stolen or even lost.

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 Nowadays even developing countries like India are encouraging the use of
this plastic money more than cash due to these reasons. Furthermore these credit and
debit cards also have plastic used in their making and that is where the name 'plastic
money' has originated from.

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2. The History of 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.

2.1 Credit Card Origin

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.

2.2 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.

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 2.3 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.

2.4 Debit Card 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 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.

2.5 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.

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3. Types of Plastic Money

3.1 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 swipe-

machines 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.

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 • 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

• 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.

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  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/Visa Card

• 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
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.

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  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.

3.2 Significance of Plastic world

Today's world is an ever changing place and the dynamicity of modern day
business market has experienced the greatest of paradigm shifts. The change is
undoubtedly buoyed by development in terms of technology to incorporate state of
the art facilities to people who are reaping the benefits out of this scenario. Of these,
plastic card is one of the smartest of technologies ever be made available to do
business with.

Plastic cards spread over the business world in terms of plastic money or credit and
debit cards as well as ATM cards,

Business cards and Identity cards, Smart Cards, Membership Cards and
loyalty cards of a retail shop, Hotel Key cards and Luggage tags etc. the plastic card
has changed and adjusted so fast and significantly with development and
modernization that in today's life it is virtually impossible to do away with these
cards in some forms or the others. From simple shopping to purchasing tickets in
trains and buses to amusement parks, availing different services and refuelling cars,
meeting new clients etc. are to name a few of the places when we reach our pockets
to take out a plastic card.

Plastic cards finding more and more and usage of them has metamorphosed
leaps and bound into thinner, more flexible and smarter looking cards of different
attractive shapes and colours. PVC cards, Polycarbonate cards, frosted plastic cards
had given the customers the benefits of reusing the cards and this more than
anything has help the environment. The throwing off of the plastic has been done
away with as plastic cards are immortal and beautifully and aesthetically done cards
remain attractive and worthy of usage for long.

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 Interestingly, it was in 1950, the Diner's Club in US has used a plastic card
as charge cards for their diners which they could use in 27 restaurants. It started
with two hundred takers which shot up to as high as twenty thousand by the end of
the year. Since then plastic card found its active usage in practically hundreds of
aspects of life as it is proven to be a greener, leaner, more durable and more cost
effective options to be ever found.

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4. Advantages & Disadvantages

4.1 Advantages of Plastic Money

The advantages of plastic card can be grouped as follows

 Advantages to the Bank:

• 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
customers.
• 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.
• 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.
• This also provides additional customer services to the existing
clients. It enhances the customer satisfaction.
• More use by the car holder and consequently the growth of banking
habits in general.

• Better network of card holders and increased use of cards means

higher popularity and image of the bank.
• Savings of expense on cash holdings, i.e. stationery, printing and
man power to handle clearing transactions while considerably is
reduced. It increases.

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  Advantages to Card Holder:

• 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.
• 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.
• Months purchases can be settled with a single remittance, thus,
tending to reduce bank and handling charges.
• The card holder has the period of free credit usually between 30-50
days of purchase

• 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.
• Availing credit with minimum formality.

• The credit card saves trouble and paper work to traveling business
man.

 Advantages to Merchant Establishment:

• This will carry prestigious weight to the outlets.

• Increases in sale because of increased purchasing power of the

cardholder due to unbilled credit available to the card holder.
• The retailers gain from the impulse buying and trading up the
tendency to buy the bigger or better article
• Credit card ensures timely and certainly of payments.

• Suppliers/sellers no longer have to send reminders of outstanding

debits.

• Systematic accounting since sales receipts are routed through

banking channels.

• Advertising and promotional support on national scale.

• Development of prestigious clientele base.

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 4.2 Disadvantages of Plastic Money

• Some credit card transactions take longer time than cash

transactions because of various formalities.
• The customer tends to overspend out of immerse happiness.

• Discounts and rebates can rarely be obtained.

• 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.
• Customers may be denied cash discount for payment through card.

• It might lead to spending habits and cardholders may end up in big

debts.

• Avoid the entire cost and security problem involved in handling

cash.

• Losses to bad debts and reduced an additional liquidity is

• It also allows him to delegate spending power to add on members

• Credit card is considered as a status symbol.

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 4.3 Features of Plastic Money

• 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.
• The Debit Card services in meant for withdrawals against the
balance already available in the designated account.
• It is the card holder‟s obligation to maintain sufficient balance in
the designated account to meet withdrawals and service charges.
• 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.
• No credit check is required to get a Debit card.

• Use of card is terminated without notice, upon the death,

bankruptcy or insolvency of the cardholder or for other valid
reasons.
• Spending is limited to our bank balance.

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5. Importance of Plastic Money

 Authorization
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.

 Merchant Balancing

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

 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.

 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.

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 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.

 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.

 Merchant ACH

During this stage the acquiring bank or card issuer transmits the merchant deposit
to the merchant‟s checking account.

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6. Growth of plastic money
Smooth, simple and secure payment processes will help bring about behavioural changes and
faster adoption of digital payments and banking among un-banked segments, When new
players enter the market, each with a slightly different take on the market and with differing
business models, the increased competition will help the environment and offer more options
for consumers to choose from. A larger pie with more players is definitely good for the
changing dynamics of the payments industry, which is still nascent in India. Indian
consumption is still dominated by cash, with cards contributing only 5 per cent of the personal
consumption expenditure. In developed countries, 30-50 per cent of spends happen through
cards. So there is huge growth opportunity. The rapid growth of smartphones, Internet
penetration and e-commerce is complementing these; card payment volumes have been
growing in excess of 25 per cent y-o-y.

“We expect this trend to continue, aided by the continued increase in debit card activation and
usage; debit card transactions have been growing at 31 per cent each year. Intense
competition and strategic collaboration among existing and new market participants like the
payments and small banks and wallets will help scale up acceptance and foster more
creativity, innovation and consumer choice. According to him, the future holds exciting times
for the payments industry in India, as all stakeholders and regulatory authorities come
together to achieve a “less-cash dependent” and eventually “cashless” society. The credit card
industry in India sees greater acceptance among consumers this year. According to Worldline
India Card Payment Report 2014-15, the credit card base grew at 9.8 per cent in the past year.
Worldline India is a leader in the payment and transactions services in the country.
Alternative methods like mobile wallets and prepaid cash cards accounted for 3 per cent of
digital transactions. This industry has been growing steadily over the past few years. Card
transactions, both by debit and credit cards, are on an upward trajectory. There are interesting
dynamics at play in the Indian payments industry.

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Growth in base

Credit card base grew 9.8% in the past year. Alternative methods such as mobile wallets and
prepaid cash cards accounted for 3% of digital transactions. Whereas the debit card base grew
40% in FY15. However, PoS terminals saw a modest rise in number. On a y-o-y basis, the
increase in the number of PoS terminals has been just 6%.

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Number of transactions

Debit card transactions have grown by 36.5% CAGR (compounded annual growth rate) over
the past five years, while credit card transactions have grown 21%. Debit cards have seen a
30% growth y-o-y, and credit cards 23%. Debit card transactions account for 57% of total
card transactions at PoS terminals.

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7. Need of plastic money

Money, money everywhere but is there really any to actually spend? As a good couple
of generations have become accustomed to give into our impulses of “must have it”
purchases with credit cards and paying for it later, and now the piper has come calling
and wants his money now.

That piece of plastic as that binding guarantee repayment created havoc to individuals
and companies alike.

The idea of a way of establishing a building block of financial worthiness, fitness, and
stability with smaller purchases leading to major purchases has become a nightmarish
quicksand for which few see any major way out.

Focusing on your individual credit card spending habit and establishing a positive
routine for your spending will better help manage your credit.

 Review your credit score annually. Most major credit reporting agencies will
provide a copy of your score and history once a year. It will also provide a
copy for a recent denial (30 days) of credit.

 Review whether the credit card spending was part of essentials or

disposable/luxury purchases. Essentials include basic food shopping, utilities,
etc. while disposable may include going to the hair salon, non-job related
memberships, and other luxuries. Ideally, the card shouldn‟t be totally relied
on for essentials purchases (making harder to get ahead).see which ones can
be redirected or reduced from this form of payment.

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  Reassess which purchases items can be placed on the back burner or totally
eliminated to help bring costs more in line with your income. The standard
rules of dividing your income into thirds to cover essentials and disposal
expenses maybe difficult to constantly maintain. But being able to work within
it is the key.

 Look at other options to making purchases such as prepaid debit or credit

cards thus eliminating the potential of overspending since a given amount has
to be available on account in order to spend.

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8. Aims And Objective of Plastic Money

Plastic money has brought a revolutionary change in the economy. While using plastic money
modern technology is used for digital transactions.

The term plastic money refers to the hard plastic cards which are used instead of actual bank
notes. For example, cash cards, debit cards, credit cards, pre-paid cards, and store cards.
These cards can be used to buy things from the market.

Aims and objectives of using plastic money are:

1. To reduce the expenditure on printing notes.

2. To make the monetary transactions more transparent.
3. To provide convenience. There is no need to carry big bulks of cash in the
wallet. Saves the time spent on repeated visits to the banks.
4. To ensure safety and security. If a card is lost the owner can ask the bank to
block the payment. In this way he does not lose any money.
5. To obtain a durable form of money. Plastic money is more durable than paper
notes.
6. To trace out the origin and development of plastic money.
7. To study the procedural aspect in the operation of plastic money.
8. To analyse the risk factors involved in the usage of plastic money and legal
9. protection available to card holders.
10. To judge the comparative spending pattern of active and inactive card
holders.
11. To study the role of member establishments in the progress of plastic money
in India.
12. To examine the present position and future prospects of plastic money in
India.

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9. Data Analysis and Interpretation

9.1 Question

1. Do you have Idea about plastic money? Which of them are you aware
about?

Interpretation:

Here we can see that the awareness seems to be little good but not 100%
awareness can be seen at any of the groups.

But more awareness in male than female we can see. Because only 2% of
male are not aware about the plastic money where in female though the female
respondents were half by the male the awareness was 97% and 3% of them are not
aware.

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2. Do you have any of them?

Interpretation:

Here as from the above bar chart we can see that the credit card users are 29
out of 200, Debit card users are 78 out of 200 and the highest card users are ATM card
holders as they are 91 out of 200 and
only 2 persons from the sample size are using special outlet card which are Pay in & i-
mint card.

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3. Which is the most convenient way to pay?

Interpretation:

Here 43.5% of the respondents are feeling that the Cash is the best
alternative to pay and for card only 17% of them are feeling best way to pay which
shows still the awareness and usage of Plastic money do not accelerated that much
in the market. And the ratio goes somehow equal to the cash users for paying
because again the people who are convenient in both the way cash and card are
39.5%.

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4. While travelling, According to you which is the preferred way of payment?

Interpretation:

Here 51% of the respondents are using cards (plastic money) while they
travel, which shows that the cards are the safest way while travelling for all kind of
transaction to be made. Only 38% of people are ready to carry cash while travelling
and settlement of the payment through the cash only. Only 11% of the respondents
are giving/using cheques while they travel.

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5. Do you find use of credit card/Plastic money to be safest modes of
transaction?

Interpretation:

Here 55% of the respondents are feeling that Plastic money is the safest
way for transaction, which shows that the cards are the safest way for all kind of
transaction to be made. 45% of people are ready to carry cash settlement of the
payment through the cash only.

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6. Give your preference in rank 1 to 3; when you do not prefer Paper money?

Interpretation:

Here the highest rank i.e 1st is given by the majority of the respondents that
they are not preferring paper money because of the duplicity of the money. Which
shows that the forgery is taking place in the Indian market. So the usage of the
plastic money must be given a big push by the Government by taking care of the
Public as well as the Financial System. 2nd highest rank is given that the feel that
paper must be torn so that they are switching to the Plastic money which again
shows that Indian market or RBI must think about to take more care for the quality
of the currency notes. Lowest rank given to the fear of theft.

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7. Do you find Credit Card to be expensive as many other charges are charged
on it?

Interpretation:

Here 56% of the respondents are using cards (plastic money) are agreed
that the cost of plastic card is more expensive than that of money to carry is much
less expensive. 44% of people are not agreed that it is expensive to carry a Card they
feel that they are getting proper services in front of the fees they pay so that.

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8. Do you find it cheaper and Beneficial as if gives you one Month Credit for
Payment?

Interpretation:

Majority of i.e 96% people are agreed that they are need of the credit
period for settlement of the payment. Only 4% of respondents do not want credit
period for settlement.

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9. Which of the options given you consider more reliable and secured?

Interpretation:

Here Majority of the respondents are using cards (plastic money) are
feeling that Paper money is more reliable and secured way to settlement of the
transaction.30% of people are believing that plastic money is more reliable &
secured. 25.5% of people are ready to carry cash as well as the Card both are the
reliable and secured.

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10. Which can be carried and kept easy and has more life?

Interpretation:

Here majority of the respondents are using cards (plastic money) and
feeling that it has more life and kept easy. Which shows that Plastic Money has
more life and can be kept easily. 26% of people are not believing so.

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 9.2 Findings

 Usage of Credit / Debit Cards Online

 The use of these cards is more and more increasing for online payment.

 However, the Secondary data shows that majority of online transactions

are made by Cash, ECS.

 % Usage of Each Type of Plastic Card

 Expenses through credit cards rose by 30% year on

- year to Rs. 22,128 crore during the April-June quarter of 2011-12

against Rs16,948 crore last year
 (RBI results.)RBI states that 572 Billion was used on credit cards and
325.79 Billion on Debit Cards as of Sept 2012.

 % of Payments Made Using a Credit / Debit Card

 Customers are using more of e-commerce sites to buy a product.

 The payment of such amount is done online by using such cards.

 The secondary data states that 58% of the users uses Direct Debit, 7%
uses Cash Card and 33% uses Credit cards. Mostly these cards are used
for booking railway tickets , movie tickets, shopping etc.

 Being a victim for any Credit / Debit Card Fraud

 The main reason for the increase in plastic money is that the 96% of
customers are not a victim of a fraud.
 The Research and secondary data also shows the same.

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  Experience with IVRS / TelephonicPayment opt

 The customers have rated that the telephonic payment option is average.

 It takes a long time to get through the telephonic process.

 This is also average because most of the customers not feel safe to share
their cards CCV / PIN number.

 Discrepancies in your Credit / Debit Card Bills

 The survey and secondary data suggests that customers have hardly
faced any discrepancies

 with their bills an are feeling their convenient payment methods so that
the responses are scattered.

 Frequency to visit the bank & Method preferred for cash withdrawal

 Now a days people are not visiting banks more often to withdraw the
cash.

 The use of these cards and also the introduction of ATM machines have
changed the banking process.
 Spending through debit or ATM cards, increased by 45% year-on-year

 Customers are preferring the ATM machines now to days.

 Customer Care support provided by your Credit / Debit Card

provider

 Banking industries has also provided the 24x7 customer service for their
customers.

 These services are often used by customer for any problems regarding
their cards.

 All these services has increased the use of plastic money in India.

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  Plastic money will help to crab Black money

 83.5% of the respondents are agreed that using plastic money will help
full to crab black money as each transaction will be having the record
with a mere swipe so that no corruption or misfeasance will take place in
all the cash or any kind of transaction of the goods services or money.

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11. Conclusion and Suggestions

 The use of Plastic cards is more and moraine rising for online payment.

 Around 50% of payments of the customers are done through credit/Debit

cards. Sample survey shows Debit cards are preferred over credit cards.
 The main reason for the increase in plastic money is that the customers are
not a victim of a fraud except 4%of them.
 The customers have rated that the telephonic payment option is average due
to long timeliness and security concern for CCV/PIN number.
 The survey and secondary data suggests that customers have hardly faced
any discrepancies with their bills.
 The introduction of ATM machines has changed the banking process also.
Customers are preferring the ATM machines now to days due to that
frequency of customers to visit the banks have become less.
 The use of plastic cards has also been increased because banking industries
has also provided the 24x7 customer service for their customers.
 The factors for adoption of plastic money over the cash and paper money are
mon- Discounts while shopping, No hassles of carrying cash, Security of
money, Hassle free EMI‟s, Easy to use, Personal Loan on Credit Card .
 About 60% of the people are feeling that the plastic money will penetrate in
society. So we can conclude that the future of plastic money in India seem to
be bright.

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  Conclusion:

The rise in consumerism generated by economic reforms began in 1990‟s

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. But some customers are not able to utilize
cards effectively due to its complex nature and they don‟t actually know how to
operate it for a specific purpose.

Thus, the banks should give them some training regarding its usage. The
banks can also prov de them the facility to use plastic cards on trial basis so that
they can become more confident while using their own cards. The cost has also
remained an issue in the case of credit cards. The interest levied on the 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.

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 The plastic money in the form of cards has been actively introduced by
banks in India in 1990's. But it was not very popular among Indian consumer at the
time of its introduction. The change in demographic features of consumers in terms
of their income, marital status, education level etc. and upgradation of technology
and its awareness has brought the relevant changes in consumers' preferences. These
changing preferences have also modified their outlook and decision regarding the
acceptance and non- acceptance of particular product and services in the market.
Thus, the plastic cards are gaining popularity among bankers as well as customers
and getting accepted in the market place. It can be well imagined from the
discussion that no doubt, the plastic cards market is growing at a large pace in India
yet it has long way to go as it lacks behind if compared to the usage trends of other
countries.

Hence, it has become important that the payment system in India has to be
modernized enough to be at par with the systems prevalent in other countries, since
our domestic financial markets are increasingly getting integrated with markets
abroad (Country Survey-India, 2005). RBI is also taking important steps in order to
enhance its usage and popularity through initiatives like regulating card market to
maintain the security levels and to build up confidence of bankers and customers.
Despite the strong advances in e-payments, an estimated 90 percent of personal
consumption expenditure in India is still made with cash (Country Survey-India,
2005), which indicates the tremendous growth potential of this business. So this can
be considered as mere beginning which indicates the bright future prospects of
plastic card market in India. In nutshell, we can say that the Indian banking sector is
accepting the challenge of information technology as all the groups of bankers have
now recognized it as essential requirement for their survival and growth in future.

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  Suggestion:

I have a suggestion to increase the use of plastic money. At present people

are being asked to pay extra to use cards in retail outlets. Is it possible to either
subsidize or incentive the use of card and reduce the use of cash. Government can
perhaps get into arrangements with companies like master card, visa or Ru pay to
achieve this. Today people avoid using cards only because they dont want to spend
that extra two percent by using a card.

Plastic money has today become the most common form of transactions in
the urban areas all over the world. In a few decades it will rule all transactions due
to increasing costs of printing currency notes and minting of coins. An attempt has
been made to map the history of credit cards, features, types, workings, frauds and
precautions to be taken while using the credit card giving valuable insight to readers
as well as to the credit card users.

Consolidating the results of the tests we can summarise that the needs and
expectations of the credit card users are satisfied with the services provided by the
issuers. the credit card holders are happy as they get proper bills on time, credit
cards are renewed and sent even before the old ones expire, points are redeemed
they are not misled by false promises and new charges or charges are revised only
after proper intimation is given. Some women respondents were please with the
points that would accumulate and the products they got in exchange from the
issuers. Whereas men on the other hand preferred money back to adjust the same
against charges or annual fees provided such a scheme was available. Moreover the
„Helplines‟ are reachable day and night, lost or stolen credit cards get blocked and
problems get resolved by approaching these „Helplines‟.

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 India being a patriarchal society it reflects upon the people who use the
credit cards. As compared to women the men have greater awareness about the
terms and conditions, interest rates and details about other charges levied by the
issuers. However the usage of credit card does not depend upon the marital status of
the credit card user, as married as well as singletons show the same preference
towards credit cards.

The correlation results establish the fact that the frequency of usage of
credit cards and the number of credit cards possessed by an individual go hand in
hand. Mathew L. and Slocum J. had established in 1969 - 1970 that there is a
correlation between the spending habits and the different social classes. Even after
40 – 42 years some things have continued to remain the same as even today people
who have more money and belong to the higher economic class have multiple credit
cards and use their credit cards more frequently than those from the middle or lower
economic classes.

The credit cards are popular because of the conveniences it offers rather
than for its snob value. Initially when they were introduced it was a matter of pride
to own a credit card. But today even the average man on the streets is using the
credit card to make purchases of daily use, to make reservations on trains and
planes, swiping it at restaurants and for petrol for his vehicle. In fact one of the
respondents Nitin Presswala stated that “in spite of a monetary loss I continue to use
the credit card for the convenience it offers although now I am a little careful”.

Looking at the overall situation and from the opinion from the respondents
we can say that the experiences of the credit card – users under the survey – has
been good and they are happy using the credit cards. If we convert the five scale
rating to three scale rating we find that 72.1% of the respondents have rated their
overall experience as „very good‟ and „good‟. Whereas only 1.5% of the
respondents have rated their experiences as poor and very poor with 20.9% having
no complains using their credit cards and have rated their experience as satisfactory.
The following can be clearly seen in the following graph.

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12. Questionnaire

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13. References

 http://www.ijetmr.com/Articles/Vol5Iss2/13_IJETMR18_A02_259.pdf

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 http://www.advancedjournal.com/download/894/3-1-11-604.pdf

 Hirschman, E. 1982. “Consumer Payment Systems: The Relationship of

Attribute Structure to Preference and Usage.” Journal of Business 55:531–
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Public Survey.”Mimeo.
 Feinberg Richard A. (December 1986). “Credit Cards as Spending Facilitating
Stimuli: A Conditioning Interpretation Journal of Research
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86_. pdf Accessed on: 12th July 2015
 Brito, D., and P. Hartley. 1995. “Consumer Rationality and Credit Cards.”
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 Telyukova, I., and R. Wright. 2005. “A Model of Money and Credit with
Application to the Credit Card Debt Puzzle.” Mimeo
 Zinman. Klee, E. C. 2006. “Families Use of Payment Instruments During a
Decade of Change in the U.S. Payment System.” Board of Governors of the
Federal Reserve System. Finance and Economics Discussion Series 2006-01.
 Mandeep Kaur and Kamalpreet Kaur(2008), “Development of Plastic Cards
Market: Past, Present and Future Scenarioin Indian Banks”, Asia-Pacific
Business Review, Vol. IV, No.4, pp. 62-74, ISSN: 0973-2470.
 Alvares, Cliford, Business Today; 3/8/2009, Vol. 18 Issue 5, p24-24, 1/3p, 1
Chart

 Journal of Post Keynesian Economics Winter 2010–11, Vol. 33, No. 2255 ©
2011 M.E.Sharpe, Inc.

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14. Bibliography

 www.google.com

 www.sundaramfinance.in

 http://scholar.google.com

 www.managementparadise.com

 http://moneycontrol.com

 http://scholar.google.com

 http://www.equitymaster.com

 http://www.sharekhan.com

 http://www.articlesbase.com

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