SUMMARY

Due to the technological revolution in financial sector, the payments in banking

system have undergone a tremendous change. The Number of innovative
products for making paymenthas developed after the privatization and
globalization. Customers have showed theirpreference over the usage of the
plastic money generally over a period of time in the bankingprocess.

Plastic money is an alternative to the cash or the standard „money‟. Plastic

money is referring to the credit cards or the debit cards that we use to make
purchases .Various other types of plastic cards provided by banks in India are
ATM cards, Smart cards. The current study presents an overview of the usage
of the plastic cards usage trends since these have been introduced in Indian
banking sector and factors behind the usage of Plastic Money and also the
consumer behavior.

The study also highlights the role of these cards as electronic payment tool to
be used by customers and discusses the penetration of these cards in
replacement of cash and paper money. The Study is been carried out by
taking a survey of 40 respondents by non-probabilistic convenience sampling
method from a city by using structured questionnaire and interview
technique.

The factors for adoption of plastic money in replacement of cash and paper
money have been identified which shows the preference of the customers for
plastic cards over the cash and paper money. Some future plans made by
various banks and institutions for avoiding the frauds arisen due to the credit
and debit cards are also been discussed in a way that it depicts the picture of
its future growth and prospects in India.

Keywords: Plastic Money, Plastic cards, ATM (Automated Teller Machine),

Debit card,Credit card, Electronic Banking, Information Technology
 INDEX
CHAPTER 1 :- INTRODUCTION
1.1: Introduction to Plastic Money
1.2: Emerging of the Plastic Money in
Financial Institution
1.3: Types of Plastic Money
1.4: Advantages & Disadvantages
1.5: Reserve Bank of India pitches for
Cashless Society
CHAPTER 2:- REASEARCH
METHODOLOGY
2.1: Objectives
2.2: Scope of Study
2.3: Sample size
2.4: Method of Data Collection &
Analysis
2.5: Limitations of the Study
CHAPTER 3:- LITERATURE REVIEW
3.1: Review
CHAPTER 4:- DATA ANALYSIS,
INTERPRETATION & PRESENTATION
CHAPTER 5:- CONCLUSIONS &
SUGGESTIONS
CHAPTER 6:- BIBLIOGRAPHY &
APPENDIX
 CHAPTER 1 :- INTRODUCTION
What is Plastic Money? The plastic money generally a

credit or debit card with a magnetic strip many people

carry in their wallets or purses is the result of complex

banking process. Holders of a valid card have the

authorization to purchase goods and services up to a

predetermined amount, called a credit limit.

In particular these are required to appear on a credit card are name of the customer, 16 digit
card number, validity date, the name of the issuing bank, signature panel, magnetic strip and
personal identification number.

INDIAN BANKING INDUSTRY:

Without a sound and effective banking

system in India it cannot have a healthy
economy. The banking system of India
should not only be hassle free but it
should be able to meet new challenges
posed by the technology and any other
external and internal factors. The first
bank in India, though conservative, was
established in 1786. From 1786 till
today, the journey of Indian Banking
System can be segregated into three

distinct phases. They are as mentioned below: 1. Early phase from 1786 to 1969 of Indian
Banks 2 .Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms. New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.1 Phase I The General Bank of India was set up in the
year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company
established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as
independent units and called it Presidency Banks.

These three banks were amalgamated in 1920 and Imperial Bank of India was established
which started as private shareholders banks, mostly Europeans shareholders. During the first
phase the growth was very slow and banks also experienced periodic failures between 1913
and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning
and activities of commercial banks, the Government of India came up with The Banking
Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in india as the Central Banking Authority.
Phase II Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive banking
facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of
India to act as the principal agent of RBI and to handle banking transactions of the Union and
State Governments all over the country. Seven banks forming subsidiary of State Bank of
India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was
carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14
major commercial banks in the country was nationalised. Phase III This phase has introduced
many more products and facilities in the banking sector in its reforms measure. In 1991,
under the chairmanship of M Narasimham, a committee was set up by his name which
worked for the liberalisation of banking practices. The country is flooded with foreign banks
and their ATM stations. Efforts are being put to give a satisfactory service to customers.
Phone banking and net banking is introduced. The entire system became more convenient and
swift. Time is given more importance than money.

HISTORY OF MONEY:

Money is anything that is commonly accepted

by a group of people for the exchange of goods,

services, or resources. Every country has its own

system of coins and paper money. it is hard to

imagine our world without money. A long time ago there was no such thing as money.
Before money was invented people had to get their food, clothing and other needs by trading
things. There is a special name for this kind of trading “barter”. The word barter comes from
a french word barater , which means to trade. The problem in the batter system was the
people traded some of the things that they didn‟t need or wanted. To solve the problems of
batter system there was the introduction of commodity money. A commodity is a basic item
used by almost everyone. In the past, salt, tea, tobacco, cattle and seeds were commodities
and therefore were once used as money. However, using commodities as money had other
problems. Carrying bags of salt and other commodities was hard, and commodities were
difficult to store or were perishable. After that old gold and silver coins of about 11 grams
were introduced. After 11 grams of gold and silver there was an introduction with the silver
Rupiya were issued gold coins called the Mohur weighing 169 grains and copper coins called
Dam. First time in 1903-04 coins were made with the machine. on 15th august 1950, a new
series was introduced replacing the king‟s portrait by the lion capital of the Asoka pillar. In
70th there was gradual discontinuance of 1 2 and 3 paise coins. Towards cashless society:
The world has been dreaming of a cashless society ever since credit instruments were
introduced in the 1950s. With the increase in smart phone penetration and 3G networks
becoming a reality, the outlook for mobile payments in India is optimistic. While we have
over 900 million mobile subscribers, less than 40% of our countrymen have bank accounts.
One of the lowest ATM density in the world, low share of Debit/Credit cards in the total
retail electronic payments, further contribute a strong business case. Organizations are now
also increasingly looking beyond the most basic forms of mobility like email. They are now
investing in sales force automation, CRM, ERP, Business Intelligence as they now recognize
mobility to be a significant enabler of revenue generation. 3 Due to major social and
technological advancements, the banking landscape is undergoing massive change. Key
drivers for this are generation Y consumers as well as early adopters of new technologies and
systems, who are driving debate around a cashless society and more specifically mobile
payments. The market is seeing increased availability of sophisticated technologies that can
enable cashless transactions; however the perceived disadvantages such as the need for high
IT investment by various service providers, security concerns, lack of technological
awareness and the traditional mindset of Indians who prefer to use physical money seem to
outweigh the potential benefits. Overall, there is currently a lot of innovation taking place in
the following areas in India, which will encourage development of a cashless society and
help the market move towards the idea of new payment methods such as m-payments: A less
known player, Uniphore, provides speech-based mobility solutions to illiterate mobile
subscribers, where many do not have a bank account. The company has developed a speech
biometrics technology to meet special needs of the uneducated segment and is currently
serving 200,000 banking customers, of which 100,000 are illiterate farmers.

BIRTH OF PLASTIC MONEY:

Credit cards as we know them today date back about 60 years, but buying on credit has been
around for a while. European merchants offered credit vouchers to customers as early as the
1890s. Stores also offered customers a paper or metal “card” that could be used only in their
stores and for years, it was up to each store to approve and monitor their customer‟s
creditworthiness. That changed after the Second World War, with what is largely considered
to be the first plastic charge card: The Diners‟ Club card, Introduced in New York City in
1950, the card al owed Diners‟ Club members to eat at 27 restaurants in New York City on
credit. However cardholders had to pay the balance back in ful to the Diners‟ Club within 30
days.
Operation of Plastic Money Figure 1 illustrates the general structural model common to most
electronic money systems, including participants and their in-tractions. Cardholder is the
person in whose name the card is and who being in possession of the card is legally entitled
to buy goods and services from merchant establishment and is under an obligation to pay for
the goods and services. The cardholder is an agreement with the issuer to pay for the goods
and services bought on the card along with the various applicable charges and the interest due
on the card. This agreement is known as the „cardholder agreement‟ and is ratified by the
cardholder as soon as he receives his card and sign on it. Merchant establishment (MEs) is a
shop or establishment which accept the card offered by the cardholder as a mean of payment
for the goods and services provided. The merchant establishment (MEs) enters into an
agreement with a bank, known as acquiring bank (since it acquires the business from the
MEs). Under this agreement, the merchant establishment provides goods and services to the
cardholder on credit and receives money from the acquiring bank within the few days
(generally 1-4 days). The MEs has to pay the commission to the acquirer for the services
provided. The commission generally ranges between 2%-5% of the total sales value. MEs can
be divided into two main categories based on the machines provided to them by the acquirers.
The machines are provided based on the volumes of the sale of the MEs. A high volume MEs
provided with an electronic data capture (EDC) machine while a low volume MEs is
provided general y with an imprinters are known as „manual merchant‟. Such merchants are
given „floor limits‟ by the acquirers.
The floor limit is an amount specified
by the acquirer, below which the
merchant need not take an approval
but he must refer to hot card bulletin.
If the transaction amount is above the
floor limit, the merchant must take
approval from his acquiring bank.
Acquiring bank is retained by the
retailer or merchant to process the payment card transaction on their behalf and licenses the
merchant to accept credit cards of one or more of the worldwide issuing bodies such as
VISA, MASTER, DISCOVER etc. The acquirer need not always be a bank but can be a
financial institution. In India, acquirers are known to be banks alone. The acquirers that
processes the transaction, routes the authorization request to the card issuing bank. The
merchant provides his acquirer with the charge slips for the day‟s transaction, irrespective of
whether the acquirer was the issuer of the cards accepted by the merchant. Thus, it is clear
that the acquirer need not necessarily be an issuer of the card which will be accepted at the
MEs. The acquirer pays the merchant the total transaction value minus a commission, known
as a service fee, which is agreed upon when the negotiations for the acquiring of the merchant
were taking place. The merchant thus gets the instant reimbursement for the goods sold.
Issuer/Issuing Bank is an institution which has issued the card to the cardholder. The issuer
has the responsibility for transaction that are put through on cards that they have issued and
responsible for debiting funds from the relevant cardholder‟s account. The card cycle works
when cardholder buys certain goods at a shop and pays through his card. The merchant has
three copies of the chargeslips. One for his own records, one for the customer (which he
signs), and one for his acquirer. The merchant present the copy of the charge slip to his
acquiring bank. The acquiring bank pays the merchant, on the basis of charge slip the amount
of transaction minus its own commission. The rate of this commission is lesser than the rate
of the merchant commission. The issuer consolidates all transaction for each card issued and
presents the charges to the cardholder in the form of monthly bil or „statement‟. The
cardholder has two options on receiving the statement. One is that he can pay off the full
amount due on his card on or before the due date, in which case, he is said to using his card
as a charge card rather than a credit card since he is not utilizing card facility on his card. The
second option is that he pays the minimum amount due (MAD) before the due date, or any
percentage greater than the MAD but lesser than the total amount due and „roll over‟ or carry
over the balance amount to the next month for a small finance amount charge. The small
finance charges generally varies between 1.5%-3% per month. In USA there is law which
prohibits issuers from charging a finance charges 4% or more per month, unfortunately there
is no such law in existence in India at the moment. Of course, if cardholder fails to pay even
the MAD, he has to pay either a service charge or fixed finance charge(depending on the
rules of the issuer) plus the interest charges. In the certain cases, where the acquirer and the
issuer are the same, the cycle have the three players instead of four. In this case, the issuer
makes a little more profit than with the presence of an acquirer in the cycle, since he doesn‟t
have to pay the commission to the acquirer. When translated over a transactions per day, this
means a lot of saving to the issuer. Thus there are many issuers who are vigorously pursuing
the business of acquiring too. The actions in this model are: credit (loading) means
transferring the monetary value from the issuer to the payment instrument (e.g. electronic
purse) of client. Debit (purchase, payment) means transferring the monetary value from
payment instrument of client to the payment instrument of merchant (that is usually payment
terminal). In the terminal is then created payment transaction, that contains the electronic
money and other payment details. Transaction collecting means transferring the payment
transactions from the merchant to the acquirer. Payment clearing means clearing of payment
request between acquirer and issuer.

Client
(Customer)
Debit Operation (Payment)
Credit Operation (Loading)

Client Bank
Merchant
(issuer)

Clearing Collecting
Merchant
Bank
(aquirer)

Fig. 1 General Structure of Electronic Payment System in Plastic Money

From the security point of view the most sensitive operations are credit and debit. The main
threats are concentrated in these two operations. These threats include using of fake payment
instrument, modifying communications of payment instrument, and illegal crediting. Other
two operations are less sensitive and the probability of security incident during these
operations is much smaller. Physical devices, such as smart cards or personal computers, are
held by clients and by merchants. Merchants interact with clients and with their acquiring
bank or other collection point, such as a third-party payment processor. Issuers receive funds
in exchange for prepaid balances distributed to clients and manage the “float” in the system
that provides financial backing for the “value” issued to consumers. In some cases, other
intermediaries, such as banks, retailers or service providers, distribute stored-value devices
and balances directly to consumers. The system may include a central clearing house or
system operators.
EMERGING OF THE PLASTIC MONEY IN INDIAN FINANCIAL
SYSTEM

Indian economy has flourished with the advent of Liberalization, Privatization and
Globalization. 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.
Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors However,
mere technology up gradation 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. 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 as 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 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 Sarkaret. al. 2001).

Traditionally, banks were only concerned with acceptance of deposits from customers and
lending surplus money to the suitable customer who want borrow at some rate of interest. The
most 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 mobilization of funds (Deva, 2005).

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 nationalization of 6 more commercial banks were followed
in 1980.

The main reason for the nationalization 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, modem 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. 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.

PLASTIC MONEY: SIGN OF MODERNIZING ECONOMY

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
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

i. Customers or Cardholder: The authorized person holding the card and
can use it forpurchase 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)
TYPES OF PLASTIC MONEY

Credit Cards
The term “credit card” general y 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
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 plays a crucial role.

Smart Card
A plastic card containing a computer chip and enabling the holder to purchase goods and
services, enter restricted areas, access medical, financial, or other records, or perform other
operations requiring data stored on the chip. Smart card is currently introduced by BRTS
which stands for Bus Rapid Transit Services in Gujarat in India.

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.
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.
MasterCard and Visa
MasterCard and Visa are global non-profit organizations dedicated to promote
the growth of the card business across the world. They have built a vast network
of merchant establishments so that customer‟s world-wide may use their
respective credit cards to make various purchases.
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.There are currently two ways
that debit cards transactions are processed
1. Online debit(also known as PIN)
2. Offline debit ( also known as signature debit)

ATM Cards
These cards are typically used at automatic teller machines (ATMs) to
withdraw cash, make deposits, or transfer funds between accounts. ATM card is
used by inserting the card into an automatic teller machine and enter a personal
identification number, or PIN, for security. The system checks the account for
adequate funds before permitting any transaction.
ADVANTAGES OF PLASTIC MONEY

• Purchasing Power:
Credit or Debit cards made it easier to purchase things. Now we
don‟t have any need to carry hard cash in a large amount. Plastic money is accepted
everywhere, anytime.

• Time Saving:
Through a credit card or debit card you can purchase anything from anywhere without spend
money on fare or cash transition. Just provide your card details to seller store or companies
and finalize your order. Now you don‟t have need to worry about time wastes. Use internet
for minimum time consuming.

• Extra Safety:
While you are not carrying cash, how can it be lost? But if your card has lost, just contact to
your bank or financial institution, which provide you cards. It will block the account and
nobody can draw a single coin without your permission. So it is 100% safe without any
tension.

DISADVANTAGES OF PLASTIC MONEY

• Shops Using Other Vendors:

There are numerous shops which accept credit cards of a specific company only. In this
situation the cash is the only way of payment for those who use a credit card of another
company.

• Less Global Availability:

There are many cases where various companies do not permit their cards to be used in areas
where they have a regional dispute with.
• Worn out Magnetic Strip:
The magnetic strip of a credit card can get worn out due to massive use. If such a condition
happens while travelling, and this is the only way of cash that the consumer has, then he or
she has to wait till the time they receive a new card, which can take a minimum of 48 h.

• Increased Debt and High Interest Rates:

Credit Card provider financial institutions and companies charge high interest rates (may be
10% to 25%) on extra money if you fail to pay off up to the fix date of the month. This
interest is their earning, for which they give you extra buying limits then your money. This is
not a good idea that you owe loan on high interest rates and spend it in unnecessary things or
purchasing. This is complete money wastages.

• Fraud:
Credit cards can be stolen. A thief may be use them directly or to get their information
(which is required in money exchange). In today‟s technical intelligence it is also possible
to get a clone of any credit card or debit card, which works like original and they can be give
you a heavy financial loss. So be aware from credit cards fraud as they are like stolen your
money from your pocket without your information Steps taken by the other countries towards
cashless transaction- As per a recent Washington post article, in Sweden, only 3% of
transactions involve cash. Credit and Debit cards are dominant in Sweden payment system.
Not only in Sweden, but in most of the developed countries, above 90% of transactions are
cashless. Mobile payment is bringing new way of cashless payment system. Other prominent
countries are Norway, Austria, Finland etc.

In the United States today, only 7 percent of all transactions are done with cash, and most of
these transactions involve very small amounts of money. Another method that can be used to
make financial identification more secure is to use implantable RFID microchips.
RESERVE BANK OF INDIA PITCHES FOR CASHLESS SOCIETY

With the Indian economy expanding rapidly at more than 7.5% per annum and the middle-
class budding, several financial firms believe and predict that the use of plastic money in
India will become very popular. However, according to the recent estimates by the Reserve
Bank of India (RBI), the use of cashless transactions through credit card usage among Indians
is actually falling.

The Reserve Bank of India (RBI) has prepared a road map to provide card swipe machines to
more than one crore retail businesses in the next three years to promote electronic
transactions for ushering in a less-cash society in the country. According to the road map
prepared by the central bank for cash-less transactions, all schools and colleges in the country
will also be equipped to handle plastic transactions. According to an RBI estimate, only six
lakh retail traders accept credit card in the country. Steps are being taken to make the facility
available to at least one crore retailers by 2015.The government and its financial institutions
will initially bear the cost of each card swap machine made available to retailers.
 CHAPTER 2 :- RESEARCH METHODOLOGY

Objectives Of The Study

The objectives of the study are as follows-

1) To study the development of banking industry in plastic cards usage trends.

2) To analyze the factors for adoption of plastic money this replaces the paper or cash money.

3) To determine the penetration of plastic money in day to day life over the paper or cash
money.

4) To study the future plans made by various banks and institutions for avoiding frauds
aroused due to plastic cards.

Back Ground of the Study

Consumer financing have become increasingly important in the private sector of India for the
last two decades. With the new reforms in the banking sector, the marketing of financial
products has become very competitive, creating a need for strategizing the marketing efforts.
This study investigates the shift of Indian consumers towards the use of plastic money, with
emphasis on credit cards. A survey of consumers holding (at least) one or no credit card were
used for data collection. Variables related to demographics such as age, income level and
gender have also been taken into consideration. This study makes (the) use of descriptive
variables in terms of analyzing the general attitude about the use of (Plastic Money) credit
cards and the factors contributing towards the selection of one particular credit card over the
other. A positive relationship has been found between the income level of a person and
his/her possession of the credit card. While making the choice of a credit card the trust in a
particular brand name seems to hold a very significant importance in the selection of a credit
card, instead of the logo of Visa or Master card. The profession of the person seems to play a
very interesting role with their behaviour towards credit cards. My study shows that the
bankers hold negative attitude towards the use of a (Plastic Money) or credit card. The
moderating variables include the marketing campaign of a particular bank, sales teams
support, openness from retailers for accepting credit card instead of cash, knowledge about
the true interest rate imposed by the banks. Based on my observations, suggestions have also
been made for managers to refine the target market.

Research Design

The research study is Exploratory in nature. The Study is been carried out by taking a survey
of 40 respondents by non-probabilistic convenience sampling method from a city by using
structured questionnaire and interview technique. .
Secondary data is collected through reference books, research papers, articles, and websites.

Type of Research

1. Exploratory research

2. Causal research

3. Descriptive research

In our Research we have used Exploratory Research.

Sources of Data

1) Primary sources
 Questionnaire

2) Secondary sources
 Textbooks
 Review articles
 Internet

Data Collection Method

4. Questionnaire
5. Interview
 Population

Total 40 Randomly selected people mainly employed are taken for the Research.

Sampling Method

Convenient Sampling

Convenience sampling is used in exploratory research where the researcher is interested in

getting an inexpensive approximation of the truth. As the name implies, the sample is
selected because they are convenient. This non-probability method is often used during
preliminary research efforts to get a gross estimate of the results, without incurring the cost or
time required to select a random sample.

Sample Size

From the population of 40 I have taken 30 samples for the survey.

Data Collection Instruments

1. Questionnaire

For our research purpose we have formed a structured questionnaire.

2. Interviews

At the time of our survey we had a personal meeting with the respondents and got
useful and implementable suggestions.
LIMITATIONS OF THE STUDY

 In my research I have prepared a structured questionnaire so it becomes hard to give

the time for our study by respondent so we have to manage according to their time.

 The respondent felt the questionnaire according to their mood and time so I couldn‟t

research properly.

 E-mails have not been answered.

 Some of the human error has resulted for cancelling the questionnaire.

 Some of the Respondents‟ responses are different from actuality as they are feeling of

theft of their resources and because of threat of leak of their personal information.
 CHAPTER 3 :- LITERATURE REVIEW

1. The literature relating to the topic as under: Mandeep Kaur and Kamalpreet
Kaur(2008), in their article, “Development of Plastic Cards Market: Past, Present and
Future Scenario in Indian Banks” conclude that 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 Despite the strong
advances in e-payments, an estimated 90 percent of personal consumption
expenditure in India is still made with cash 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.

2. P Manivannan (2013) in his research paper “Plastic Money a way for cash Less
Payment System” examined that Plastic Money i.e. usage of Credit card was
measured a luxury, and has become needed. These plastic money and electronic
payments was and used by only higher income group. This facility extended not only
to customers in urban areas or cities, but also to customers residing in rural area.
However, today, with development of banking and trading activity, the fixed income
group or salaried classes are also start using the plastic money and electronic payment
systems and particularly Credit cards.

3. Anupama Sharma (2012)in her research paper “Plastic card frauds and the
countermeasures: towards a safer payment mechanism” have thrown light on the
number of frauds increased considerably in the usage of plastic cards as in case of
plastic card frauds the most affected parties are the merchants of goods and services
as they have to bear the full liability for losses due to frauds, the banks also bears
some cost especially the indirect cost whereas the cardholders are least affected
because of limited consumer liability and concluded that all these losses can be dealt
with by making the prudent use of the new technology and taking the respective
counter measures.
4. Bansi Patel and Urvi Amin (2012)in their research paper “Plastic Money : Roadmay
Towards Cash Less Society” discussed that now days in any transaction Plastic
money becomes inevitable part of the transaction and with it life becomes more easy
and development would take better place and along with the plastic money it becomes
possible that control the money laundry and effective utilization of financial system
would become possible which would also helpful for tax legislation. In this research
paper an attempt has been made to study an overview of the development of banking
in the plastic cards usage trends since these have been introduced in Indian banking
sector. The study also highlights the role of these cards as electronic payment tool to
be used by customers and discusses the penetration of these cards in replacement of
cash and paper money. The factors for adoption of plastic money in replacement of
cash and paper money have been identified which shows the preference of the
customers for plastic cards over the cash and paper money.
CHAPTER 4 :- DATA ANALYSIS AND INTERPRETATION
Que.-1. Do you have Idea about plastic money? Which of them are you aware about?

Male Female Total

Aware 132 63 195

Not Aware 3 2 5

135 65 200

Female
Not Aware

Male
Not Aware
Que. 1 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.

Que.- 2. Do you have any of them?

100

Specific Outlet card

Que.- 2. 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 oulet card which are Pay
in & i-mint card.
Que.-3 Which is the most convenient way to pay?

Most convenient way to pay

Que.-3. 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%.
Que. 4 to 6. How do you make payment for purchases of household consumables?
Cash Cheque

Card ECS

goods

Cash, 67

50
Card, 47
40
30
20
10

Que.- 4 to 6: Interpretation:

Here the respondents have attempted all the alternatives in scatter way.
So that here we can conclude that they have their own convenience to pay such utility bills,
house hold items payment and luxury goods as well.

Here we cannot see the highest or lowest preference but scattered preference seems to be
taken place.
Que.-7. While travelling, According to you which is the preferred way of payment?

While travelling preferrd way to pay

Travellers cheques

Que.-7. 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.
Que.- 8. Do you find use of credit card/Plastic money to be safest modes of transaction?

Safest Modes of Transaction

Que.-8. 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.
Que.-10. Give your preference in rank 1 to 3; when you do not prefer Paper money?

Rank
Increasing Duplicity Tear of paper money

Que.-10. 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.

Que.-11. Do you find Credit Card to be expensive as many other charges are charged on
it?

Credit Card are expensive

Que.-11. 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.
Que.-12. DO you find it cheaper and Beneficial as if gives you one Month Credit
for Payment?

Beneficial if 1 month credit period for

payment is given

Yes

Que.-12. 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.

Que.-13. Which of the options given you consider more reliable and secured?

More Relaible & Secured

51

60

89

Que.-13. 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.
Que.-14. Which can be carried and kept easy and has more life?

Carried & Kept easy, has More Life

Que.-14. 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.

Que.-16. Which Type of security measurement you expect for stepping misuse of Plastic
Money?

Security Mesurement

Que.-16. Interpretation:

Here Majority of the respondents about 50 % are using cards (plastic money) are feeling that
Biological Imprints are the most secure measurement to the transaction.

About 40% of people believe that PIN make more reliable & secured.

Only 9% of people are ready to have password for security measurement.

Only 6% are feeling security Photo Card measurement.

Que.-17. Do you use credit or debit card online?

Online Usage By Card holder

Que.-18. How often do you visit the bank for cash withdrawal?

visit the bank for cash withdrawal

Once a week Once in a month

Once in a year
Que.-19. Have you been victim for any credit/debit card fraud?

Victim of credit/debit card fraud

Yes
 Que.-20. Rate the following in a scale of agreement.

Scale Of Agreement
5. Plastic money will penetrate in society more

3. Offers and Discounts while shopping are

Disagree
2. The OTP [One Time Password] protection is

1. Customer care support provided by

Que.-21. Do you think that there should be any limit on daily/monthly transaction
value?

Limit on daily/monthly transaction value

Que.-23. Do you think that more credit card/Debit card transaction in country
over cash transaction will help to crab black money circulation in economy?

Card transactions will crab black money

circulation in economy

180
Que.-24. If you are financial minister of the country, what would you prefer on
higher proportion?

Preference of higher proportion

Que.-25. Do you go through all the term and conditions and policy terms of the
credit/debit/ATM cards before applying or getting one of them?

Go through all term & conditons before applying

for Card
Que.-26. Do you think the telephonic connection or SMS alerts make your each
transaction much more secure?

SMS alerts make transaction secure

Que.-26. Interpretation:

Here Majority of the respondents 95% are using cards (plastic money) are feeling that SMS
alerts way to settlement of the transaction.

Only 5% of respondents don‟t feel that only SMS or telephonic connection make each
transaction more secured.
CHAPTER 5 :- CONCLUSIONS/ SUGGESTIONS

1. The use of Plastic cards is more and moraine raising for online payment.

2. Around 50% of payments of the customers are done through credit/Debit cards. Sample
survey shows Debit cards are preferred over credit cards.

3. The main reason for the increase in plastic money is that the customers are not a victim

of a fraud except 4%of them.

4. The customers have rated that the telephonic payment option is average due to long
timeliness and security concern for CCV/PIN number.

5. The survey and secondary data suggests that customers have hardly faced any
discrepancies with their bills.

6. 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.

7. The use of plastic cards has also been increased because banking industries has also
provided the 24x7 customer service for their customers.

8. 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 .

9. 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.
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 actual y know how to operate it for a
specific purpose. Thus, the banks should give them some training regarding its usage. The
banks can also provide 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.
 FINDINGS

1. 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.

2. % Usage of Each Type of Plastic Card

Expenses through credit cards rose by 30% yearon
- 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.

3. % 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.

4. 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.

5. 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.
6. 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.

7. 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.

8. 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.
• Al these services has increased the use of plastic money in India
• Banks are now providing many offers for their customer if they use plastic money.

9. 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.
CHAPTER 6 :- BIBLIOGRAPHY & APPENDIX

1. Anupama Sharma (2012), “Plastic card frauds and the countermeasures: Towards a safer
payment mechanism”, International Journal of Research in Commerce, It & Management,
Vol. 2, No. 4.

2. Bansi Patel and Urvi Amin (2012), “Plastic Money: Roadmap Towards Cash Less
Society”, Perspex Indian journal Of Research, Vol. 1, No. 11, ISSN-2250-1991.

4. Kamesam Vepa (2003), “Indian Economic Scenario Yesterday, Today and Tomorrow”,
Speech, Reserve Bank of India, Retrieved April 08, 2008 from http://www.rbi.org.in/
scripts/BS_SpeechesView.aspx?Id=137

5. Khandelwal Ani K (2006), “Doing Business in India: The Big Picture Bankers
Perspective”, US-India Business Summit, Retrieved March 20, 2008, from www.
buyusa.gov/india/en/327.ppt

6. Mandeep Kaur and Kamalpreet Kaur (2008), “Development of Plastic Cards

Market: Past, Present and Future Scenario in Indian Banks”, Asia-Pacific Business
Review, Vol. IV, No.4, pp. 62-74, ISSN: 0973- 2470

7. Manivannan P (2013), “Plastic Money a way for cash Less Payment System”, Global
Research Analysis, Vol. II, No. I.

8. Mishra Gaurie (2007), Indians Get Elastic with Plastic Money, The Economics Times,
Retrieved April 02, 2008 from http:// e c o n o m i c t i m e s . i n d i at i m e s . c o m
/articleshowl2382580.cms

Websites:
www.google.com
www.scribd.com
www.rbi.co.in
QUESTIONNAIRE

Factors behind use of Plastic Money: A Study of Consumer Behaviour

Gender : M F Annual Income: Below 1,00,000

Age: 1,00,000 - 3,00,000
Occupation: 3,00,000 – 5,00,000
Above 5,00,000

1. Do you have Idea about plastic money? Which of them are you aware of?
Credit card Others
Debit card All of them
ATM card No Idea than Skip to 9th Que.
2. Do you have any of them?
Credit card ATM Card
Debit card Specific Outlet card
3. According to you, which is the most convenient way to pay?
Cash Both
Card
4. How do you prefer to pay your utility Bills?
Cash ECS Online
Card Cheque Others
5. How do you make payment for purchases of household consumables?
Cash Cheque
Card ECS
6. How do you make payment for purchases of luxury and Durable goods?
Cash Cheque
Card ECS
7. While traveling, According to you which is the preferred way of payment?
Cash Cheque
Card DD
Travellers cheques
8. Do you find the use of credit card/Plastic money to be safest modes of the transaction?
Yes No

9. Why don‟t you prefer plastic money?

Unstable income Malpractices by Bankers
Lack of knowledge Lack of Trust Misuse by other
Malpractices by outlet owners

10. Give your preference in rank 1 to 3; when you do not prefer Paper money?
Fear of Theft 1 2 3
Increasing Duplicity 1 2 3
Tear of paper money 1 2 3
11. Do you find Credit Card to be expensive as many other charges are charged on it?
Yes No
12. DO you find it cheaper and Beneficial as if gives you one Month Credit for Payment?
Yes No
13. Which of the options given you consider more reliable and secured?
Paper money Both
Plastic Money
14. Which can be carried and kept easy and has more life?
Paper money Plastic money
15. Due to Duplicity of Paper money are you shifting to Plastic money?
Yes Others
No
16. Which Type of security measurement you expect for stepping misuse of Plastic Money?
Password PIN
Photo card Biological Imprints
17. Do you use credit or debit card online?
Yes No
18. How often do you visit the bank for cash withdrawal?
Once a week Once in a year
Once in a month Never
19. Have you been a victim of any credit/debit card fraud?
Yes No
20. Rate the following on a scale of agreement.
Strongly Agree on Agree Neutral Disagree Strongly Disagree
a. Customer care support provided by
credit/debit card provider
b. The OTP [One Time Password]
protection is enough for any online
transaction
c. Offers and Discounts while
shopping is attractive
d. Security of money
e. Plastic money will penetrate in
society more in future
21. Do you think that there should be any limit on daily/monthly transaction value?
Yes No
22. Do you prefer any add-on-cards on your credit/debit card?
Yes No
If Yes then in who‟s Name:-
Spouse Parents
Major Son or Daughter Close Friend
23. Do you think that more credit card/Debit card transaction in the country over cash
transaction will help to grab black money circulation in the economy?
Yes No
24. If you are a financial minister of the country, what would you prefer on
higher proportion?
Paper money Both in equal ratio
Plastic money
25. Do you go through all the term and conditions and policy terms of the credit/debit/ATM
cards before applying or getting one of them?
Maybe
Yes
No
you think the telephonic connection or SMS alerts make your each transaction much
26. Do
more secure?
Yes
No
27. Where do you see the Future of Cash & Credit card/Debit card?