" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
Shreeyash S Sohani ssyash2974@yahoo.co.in
Dr. B .T Bandgar: bandgar2002@yahoo.co.in
ABSTRACT:
INDIA, the developing economy is witnessing new revolution every fortnight. The economy is booming and purchasing power is increasing by leaps and bounds .it is the age of malls, shopping complexes multiplexes, buying cars, expensive watches, owning a house and most importantly flashing a string of plastic cards some like to flaunt it, some to misuse it, some underutilize it and some benefit from it Ultimately we all love to own credit cards
The plastic cards culture seems to be spreading fast in the Indian economy since 2002
.the plastic money transaction through cards include volume of both debit & credit cards transaction volumes. Transaction volumes include both cash withdrawals and purchases made through such cards.
The present paper brings out the importance of use of plastic cards on three fronts
Consumers, government and the banks by an empirical approach .It also encompasses the strengths, weaknesses, opportunities and threats facing an economy. The paper concludes that use of technology, proper use of resources coupled with incentive structure for those involved in the system of plastic money will turn out to be a win-win situation for all.
Introduction:
The plastic cards culture seems to be spreading fast in the Indian economy since 2002 .the plastic money transaction through cards include volume of both debit & credit cards transaction volumes. Transaction volumes include both cash withdrawals and purchases made through such cards.
Plastic money encompasses words such as
1. 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.
2. 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
INCON – X 2015 142

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
A debit card is only accepted at outlets with electronic swipe-machines that can check and deduct amounts from your bank balance online.
3. 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.
4. 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. 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
5. 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
6. 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
7. Diners 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.
8. 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
9. Global Card: Global cards allow you the flexibility and convenience of using a credit card rather than cash or travelers checks while travelling abroad for either business or personal reasons
10. 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 For example, the Citi-Times card gives you all the benefits of a Citibank credit
INCON – X 2015 143

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065 card along with a special discount on Times Music cassettes, free entry to Times Music events, etc
11. Affinity Card: The card issuer ties up with popular organizations/ institutions which are often non-profit organizations (Citi-WWF card or the Stanchart-Cricket cards) to offer an affinity card. When the card is used, a certain percentage is contributed to the organization /institution by the card issuer
12. Add-On Card: An add-on card allows you to apply for an additional credit card within the overall credit limit. You can apply for this card in the name of family members like your father/ mother/ spouse/ brother/ sister/ all children above 18 years of age. Your billing statement would reflect the details of purchases made using the add-on card. You are liable to make good all the payments for the purchases made using the add-on card(s) more and more Indians are using them as a convenient mode of payment.
The motives behind use of plastic money vary from people to people & from organization to organization
For government:
Economy Driving Spends: Government can utilize electronic payments as a channel to modernizing and boosting efficiencies in their respective economies
For Banks
Profitable Usage: It is a means of additional fee income .banks can use plastic cards as a tool for increasing their market penetration and premium turnover
For Consumers
Growing Reach: We can understand that increasing trend to use credit cards in India is more need driven rather than just being a fashion statement .India is on a continuous move towards new advancement people have become more mobile and its becoming riskier to carry cash everyday on the other hand inflation has added to expenses, so to bridge the gap between the purchases and inability to carry cash the modern Indian generation is opting to use of plastic cards.
Actually everybody can be a winner here
Some of the most popular cards in India are:-
•
•
•
•
•
•
•
ANZ - Gold
ANZ - Silver
Bank Of India - India card
Bol - Taj Premium
Bol - Gold
BoB - Exclusive
BoB - Premium
INCON – X 2015 144

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Canara Bank - Cancard
Citibank - Gold
Citibank - Silver
Citibank WWF Card
Citibank Visa Card for Women
Citibank Cry Card
Citibank Silver International Credit Card
Citibank Women's International Credit Card
Citibank Gold International Credit Card
Citibank Electronic Credit Card
Citibank Maruti International Credit Card
Citibank Times Card
Citibank Citi Diners Club Card
Citibank Indian Oil International Credit Card
HSBC - Gold
HSBC - Classic
ICICI Sterling Silver Credit Card
ICICI Solid Gold Credit Card
ICICI True Blue Credit Card
SBI Card
Stanchart - Gold
Stanchart - Executive
Stanchart - Classic
Thomas Cook Standard Chartered Global Credit Card
Standard segregation of credit cards:
•
•
•
Standard Card - It is the most basic card (sans all frills) offered by issuers.
Classic Card - Brand name for the standard card issued by VISA.
Gold Card/Executive Card - A credit card that offers a higher line of credit than a standard card. Income eligibility is also higher. In addition, issuers provide extra perks or incentives to cardholders.
•
•
Platinum Card - A credit card with a higher limit and additional perks than a gold card.
Titanium Card - A card with an even higher limit than a platinum card.
However the evolution of plastic money as a concept and its practical implementation in various parts of the world has thrown open number of opportunities and challenges
The following are some of the plus features of plastic cards:-
•
Hotel discounts.
•
Travel fare discounts.
•
Free global calling card.
INCON – X 2015 145

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
•
Lost baggage insurance.
•
Accident insurance.
•
Insurance on goods purchased.
•
Waiver of payment in case of accidental death.
•
Household insurance.
Scope for plastic money in INDIA
INDIA, the developing economy is witnessing new revolution every fortnight, yes fortnight might sound like an exaggeration but you would have understood that we have used it to indicate the concurrent set of changes entering this era .The economy is booming and purchasing power is increasing by leaps and bounds .it is the age of malls, shopping complexes multiplexes, buying cars, expensive watches, owning a house and most importantly flashing a string of plastic cards some like to flaunt it, some to misuse it, some underutilize it and some benefit from it Ultimately we all love to own credit cards
Growing beyond Metros:
The growth in spending has so far been spearheaded by the burgeoning middle class in major cities, where consumer spending is concentrated on lifestyle and luxury goods.
Spending in rural areas has been mainly in cash. This has begun to change. By issuing plastic cards at 107 cities, ICICI Bank has established the largest reach. SBI, the largest bank in the country with over 9,000 branches, has fanned out its plastic card business in 45 cities.
Citibank, which operates in 40 cities, is planning to scale it up to the 94 cities in which group company CitiFinancial operates when the plastic revolution spreads; many farmers could be using credit cards to buy seeds and fertilizers. That would, in fact, put an end to the reign of unscrupulous money lenders in rural hinterland.
Huge market remains untapped:
The most heartening part of the growth is that so much still remains to be covered.
Consider this: only 2.4% of the working population in India owned a credit card in 2004.
McKinsey predicts that 35 million credit cards will be issued by 2010 with an outstanding balance of over $7 billion
Compared to other Asian markets, Indian plastic card market is still at a nascent stage.
Credit cards per bankable population in India is 0.03 per person against 3 in South Korea,
2.66 in Taiwan, 2 in Hong Kong, 1.1 in Singapore and 0.4 in Malaysia. ICICI Bank credit cardholder spends less than $500 on his card annually, compared to around $800 in Sri Lanka and over $3,000 in Hong Kong and Singapore
In India total transaction volume have rocketed 103 % to $4.29 billion (over Rs 19400 cr) making India the fastest growing market in Asia pacific .the comparative figures for2001 when the Indian market rose by 69 % was at $ 2.227 billion
INCON – X 2015 146

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
According to latest Nilsson report India has gone up in rankings by one notch and knows is the eleventh largest market in Asia pacific
However the total purchases through cards rose by only 31 % to $ 1.802 billion .India has a long way up to go compared with other Asian countries both in terms of total transaction & purchases South Korea the market leader in Asia pacific has shown a 39% rise in transactions volume to $ 296.139 and a 48 % rise in purchases in total purchases to $ 104.589 billion
It is followed closely by china which however seen a fall in total volume of 8 % to $
208.283 billion.
Figure out the figures:
Statistics show that there were about 22 million credit cards in India in January 2007. The number of credit cards has more than doubled in past three years. This increase can be attributed to the increasing consumerism in India, which is further expected to boost owing to the intensifying competition between credit card companies and more lucrative offers in the market each day. Moreover, apart from issuing of credit cards, the credit card transactions have also doubled from the FY 2003-4 to 2005-6. The current growth in the credit card industry is estimated to be around 28 percent, which is further predicted to be on an increase.
Moreover, the industry experts believe the increase in the transactions should be around 20 percent each year.
As you see these figures, you can easily predict the growing popularity of credit card. The introduction of credit card facilities to pay for mobile, electricity, movie tickets and other related transactions have also contributed to the growth of plastic money in the country.
Today, the payment structures are getting easier. In an aim to overpower the peers and to sustain and prosper themselves, the Banks and financial institutions have started cutting down the interest rates and offering lucrative deals. The competition in industry has further fuelled the usage of plastic cards in India. The banks are cutting down on interest rates and over head charges owing to the increasing competition. All this will certainly add up to this growth of credit card industry, and if you move in the sensible direction with sensible handling of cards, this growth is for good.
Plastic money if taken in the right spirit and implemented properly can be a win-win situation for all the participants viz the government, banks and the customers.
Advantage to government:
•
Electronic payment can be used to minimize leakages of government funds
•
Government can maximize returns through effective resource allocation within the economy
•
Government can use plastic money transactions for government expenditure for procurement, purchasing as well as for activities like tax collection
•
By using plastic money government can counterfeit money problems
•
Life span of plastic money is four to five times higher than that of paper money and it is far more difficult to forge
INCON – X 2015 147

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
Advantage to Banks:
•
Productivity of the employees increases
•
By providing quick payment service bank can improve the overall customer satisfaction resulting in higher customer retention levels
•
Increase in return on assets by building fees through sale of plastic cards
•
Banks can sell other financial products with the plastic cards
Advantages to Consumers:
•
Enhanced convenience on the part of the consumers
•
Easy access to claims as statements are available at regular go
•
Consumers can offer comprehensive other services by use of plastic cards
•
Global use
•
Customers security
•
Transactional secrecy and integrity
•
Alternative uses & Reliability
PLASTIC MONEY: - Emerging Trends and Strategic Challenges.
According to recent study plastic money is on the rise particularly in emerging markets. world wide it has gain a good foothold in markets with low transaction volumes also
Plastic money is an easy and safe mode of payment in different markets with highest penetration rate in Europe In Asia plastic money is gaining popularity particularly in India and china where restrictions have been eased .the research shows that social, cultural, as well as regulatory consideration and product complexity play a significant role in determining how successful plastic money will be in a particular market The outlook for plastic money remains positive while development in individual market will continue to depend heavily on each country’s regulatory and business environments Given the current relatively low plastic money penetration in emerging markets, plastic money will likely see further significant development in the coming years
Emerging Trends:
Though plastic money was traditionally targeted to the mass market distributors know have began to finely segment the market which has resulted in tailor made products for each segment .the quest for additional and the desire to market to specific clients segments has in turn led plastic money to shift its single channel sales approach to adopting a multiple channel distribution strategy .some issuers of plastic money have began to focus exclusively on distribution In some markets cash transaction are slowly on the decrease which tend to favor plastic money developments .nevertheless banks are starting to embrace direct marketing and internet banking tools to distribute plastic money . New and emerging
INCON – X 2015 148

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065 channels are becoming increasingly competitive due to tangible cost benefits embedded in pricing or through the appeal of convenience and innovation.
Now a day’s plastic money has gained ground in many countries with dedicated focus on niche client segments and the distribution of biometric cards, global use cards, alternative use cards, petro cards etc nevertheless distributors have shown a willingness to expand their product range to include products beyond those related to cash transaction alone.
Strategic Challenges:
These developments are expected to challenge traditional paper money transaction and overall economic environment in the following ways
1.
The shift from manufacturing to pure distribution requires banks to better align the incentives of different suppliers with their own
2.
Increasing sale of plastic cards requires banks to have sophisticated machinery and proper risk management technology
3.
Banks will have to be prepared for possible disruptions to client relations arising from the use of these cards
4.
The strategic challenge also lies with change in rules and regulation by the authorities
PLASTIC MONEY IN INDIA:-A SWOT ANALYSIS
Plastic card uses can be leveraged in many fields which hitherto was not thought of, this requires huge capital investment to create infrastructure particularly in IT and telecommunication. a call centre will have to created ,top professionals of both industries will have to be hired .an R&D cell will needed to be created to generate new ideas and products .it is therefore essential to have a SWOT analysis done in the context of plastic money experiment in India.
Strengths
In a country of more than 1 billion people, sky is the limit for use of plastic money .there is a vast untapped potential waiting to be mined there are more than 98% of bank A/c holders to be served for use of cards Millions of people traveling in and out of India can be tapped for use of plastic money .after discounting the population below the poverty line the middle class segment is the second largest in the world after china .the multinationals
Companies are eyeing for this why not our government pre-empt this move by doing it ourselves.
Our other strength lies in huge pool of skilled professionals and middle class people which can be users of plastic money.
Weakness
The IT culture is unfortunately missing completely in the popular mass it is therefore necessary to make an attempt to educate them, than it be a case of too late and too little
INCON – X 2015 149

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065
.Elementary IT requirements like networking (LAN) is not in place even in the headquarters of these institution .when need of today is of wide area network (WAN) and vast area network (VAN) .internet connections are not available even to the managers of operating offices.
The middle class population that we are eying today is overburdened first by the inflammatory pressures on their and then by the tax net, so these population need to be given tax exemption to further the cause of plastic money use and to increase domestic revenue for the country.
Another drawback is the inflexibility of the product i.e. it cannot be tailor made according to the requirement of the customer .for a plastic money venture to succeed it is extremely essential to have an in-built flexibility so as to make the product attractive to the customers.
Opportunities
Government and banks have enormous database of the of the population this can used to increase the use of plastic money in India .with a good IT infrastructure this can really do wonders .other developing economies like Malaysia ,Thailand ,and Singapore have already taken a leap in this direction and they are not doing badly .there is already an atmosphere created in the country after liberalization and there appears to be a political consensus also on the subject .therefore RBI should have no hesitation in encouraging the use of plastic money
.this can take form from merger or acquisition or setting up a joint venture or creating a subsidiary by either parties or just the working collaboration between banks and government.
Threats
Success of plastic money requires change in approach, thinking, work culture and technology on the part of everybody involved our population is so well entrenched in its classical way of transaction that there is a definite threat of resistance to any change that plastic money may bring in .Any relocation to a new company or subsidiary or change from one work to a different kind of work or provision will be presented with vehemence
Another possible threat may come from non-response from the target customers this has happened in many American countries
The IT infrastructure and regulatory framework should be realigned and repositioned to meet the current requirements of the plastic industry
PLASTIC MONEY IN INDIA –SOME ISSUES
The difference in working style and culture of the plastic card sector needs greater appreciation .it should however be recognized that plastic money is not just about convenient transaction but of changing the system as a whole .plastic cards has been widely discarded for the lethargic attitude and poor quality of customer service it needs to refurbish its blemished image or else it would be difficult to succeed.
Studies have revealed that poor bank infrastructure and machinery have led to failure of plastic money transactions. Moreover the topographic preposition of rural India would also
INCON – X 2015 150

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT" E-ISSN-2320-0065 be difficult task ahead .people also feel that plastic money would attract tax incentives, service charges and hidden costs.
In case the plastic money to be fully integrated in the system requires proper risk management techniques and different approach from all the concerned with the use of plastic money.
Moreover plastic cards have become increasingly complex over a period of time due to improvisation in the existing products as well as due to constant innovation of new products, emanating from the excessive competition adding to difficulties in comprehension of the products and leading to problems of industrial relations.
There are also problems relating to robbery of ATM machines, card lost reissue of new cards illegal duplication of cards etc.
In view of the above the machinery handling plastic money need to be more customer friendly and it would be the pre-requisite for success of plastic money with the financial reforms and technological revolution embracing the financial system there has been a great deal of flexibility in the mindset of people to accept change .the above outlined problems need not however deter the use of plastic money or any form of resistance from the different sections this could be tackled by devising an appropriate system commensurate with training to the concerned people.
CONCLUSION
Since when legislation has allowed plastic money it has been a phenomenal success and it is picking up at a great pace .with India becoming the IT hub there is no doubt that many hands will use plastic money
Moreover success of plastic money greatly linger on banks and government ensuring excellent customer relationship .therefore regulators should explore the possibility of allowing banks having tie-up arrangement with more distributors of cards for giving wider choice for customer
Going by the present speed plastic money would turn out to be a norm rather than an exception in future in India Adequate use of technology, proper use of resources coupled with incentive structure for those involved in the system of plastic money will turn out to be a winwin situation for all
Bibliography
1.
Gupta ,S P.Statistical Methods ,Sultan Chand And Sons New Delhi 2001
2.
Indian journal of finance
3.
Sharma ashok (2009) “the success of micro finance in India “ micro finance world
4.
www icici bank .com
5.
www. Stanchart bank .com
6.
www.plasticcardindia.com
7.
www.americanexpressindia.co.in
INCON – X 2015 151

" ASM’s INTERNATIONAL E-Journal on
Ongoing Research in Management and IT"
8.
www.eurojournals.com/EJSR_62_1_13.pdf
9.
www.citibank.co.in/CreditCards
10.
www.moneycontrol.com › News
11.
www.financepixel.com/financial.../using-plastic-money-smartly-and
12.
articles.timesofindia.indiatimes.com › Collections
13.
timesofindia.indiatimes.com › Topics › Plastic money
14.
finance.indiamart.com/investment_in_india/plastic_money.html
15.
hk.nielsen.com/news/index.shtml
16.
en.wikipedia.org/wiki/Polymer_banknote
******
E-ISSN-2320-0065
INCON – X 2015 152