Attitude and Behavior of People using Plastic Money 1

Chapter 1

INTRODUCTION

The development of information technology and emerging a number of

new innovations are taking place in the area of retail payments known as
electronic money or plastic money. Recent evolutions of the technology
for financial transactions pose interesting questions for policy makers
and financial institutions regarding the suitability of the current
institutional arrangements and the availability of instruments to
guarantee financial stability, efficiency and effectiveness of monetary
Policy. In the Indian market, the development of plastic money is
probably the most significant phenomenon of the modern banking era.
Plastic money, comes in various forms but the most predominant form
that it takes is that of credit card. Plastic money and other forms of
electronic payments are nothing but newer and more convenient options
of payment. Even though today, cash is still the order the day, as a
payment mechanism plastic money is making incisive forays into the
cash turf. In fact, in the western developed world, higher value
purchases are increasingly being made through plastic and cash in
relegated to the world of low value purchases. This study is an attempt
to unveil the perception held by card users and member establishments
in India.

1.1 Meaning and Definition of Plastic Money

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 generally prepaid payment instruments in
which a record of funds owned by or available to the consumers is stored
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on an electronic device in the consumers 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.
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 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.

1.2 Properties of Plastic Money

When implementing an plastic money a big effort has been made to

make an plastic money as close as possible to real, physical money.
The security of plastic money does not depend on a special physical
conditions. No special hardware is necessary and money can be sent
over the network.
Plastic money cannot be copied, modified, or double-spent.

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Anonymity and non-traceability. Privacy of user is protected. No-body

can deduce the link between user and his payment. The customer may
perform operations anonymously.
The Protocol for plastic payment between customer and merchant can
be performed off-line. No direct link to third party (e.g. bank) is
necessary.
The plastic money can be transferred to any other user.
The plastic coin C can be divided to any number of other coins. Any of
these coins can have any value, smaller than C, and the sum of value of
these coins is equal to the C.

1.3 Development of Plastic Money

Plastic money is gradually strengthening its position with the potential

of further growth in the future. It is worthwhile to observe how plastic
money will evolve in the future in a competitive environment in terms of
safety, efficiency and convenience. The use of plastic money has been
expanding quite rapidly and its development is a prominent trend in the
area of retail payment. There are many evident advantage of an
electronic mode of transfer as compared to conventional clearing house
because banks are increasingly turning to technology for managing their
payments. Some of the value attributes include secure payments, cost-
cutting, payment on due date and easier cash management compared to
conventional systems. Plastic money in recent years is gaining
momentum in India as merchant establishments and customers are
realizing the safer mode of making payments compared to conventional
payment The plastic culture is influencing into the daily purchasing
habits of Indian customers and the payment card business is growing as
never before. With the change in technology and the improvement in
the payment system has lead to further development in plastic money.
This development in plastic money helps the customers to satisfied their
ever changing needs. The development in plastic money in the modern
era is as follow:
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1.3.1 Debit Card

Debit cards are designed for customers who like paying by placard but
do not want credit. A debit card is a plastic card which provides an
alternative payment method to cash when making purchases.
Functionally, it is similar to writing a cheque as the funds are withdrawn
directly from either the bank account or from the remaining balance on
the card. The debit card is thus ideal for those who have a tight budget
and want to keep within it. Making a purchase with an online debit card
is similar to withdrawing cash from an Automated Teller Machine
(ATM). The card is passes to a traditional magnetic reader, which is
connected by a phone to a computer. On entering the personal
identification number (PIN), computer verifies the PIN and checks to see
if one has enough money in the bank to cover the transaction, all of
which will not take more than a few seconds.

1.3.2 Charge Card

A charge card is a mean of obtaining a very short term (usually around 1
month) loan for a purchase. Thus, a charge card is a convenience
instrument, not a credit instrument. Under this facility, the cardholder
needs to make a consolidated payment to the issuer for all purchases
effected with the card during a specified period of time.
There is no minimum payment other than full balance. A partial
payment (or no payment) result in a severe late fee and the possible
restriction of future transactions and risk of potential cancellation of the
cad. The Diners club card of Citibank, American Express, Travel and
entertainment cards falls under the category of charge card.

1.3.3 Combi Card

These are magnetic stripe plastic cards with a microprocessor chip
attached to them. They can work as normal credit cards and also have an
additional function of storing information which store loyalty points,
information about balance etc. ABNAmro and ICICI bank have already
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launched this card which can store loyalty points for customer and
customers can redeem their points from the card itself.

1.3.4 Smart Card

Smart cards, sometimes called chip cards, contain a computer chip
embedded in the plastic. It has the capacity to store upto 80 times more
information than other magnetic stripe cards. Smart cards carry the
electronic proof of its holders identity enabling its holder to make
secure purchases anywhere on the globe, leading to a dramatic increase
in electronic commerce. It is estimated that by the year 2018, five billion
smart cards will be in use in over 100 countries covering 24 percent of
the world populations. Presently, smart cards are used primarily for
telephones, healthcare, transportation, movies, fast food outlets, internet
banking and loyalty programs. There are two types of Smart cards. First,
contact Smart cards that requires insertion into a reader and contact less
smart cards which requires only close proximity to an antenna via radio
waves.

1.3.5 In Store Card

also known as in-house cards. These cards are issued to customers by a
retailer or company and in general can only be used in that retailers
outlet or for purchasing the companys products. Store cards are enticing
because they offer shoppers discounts for signing up, such as 10% or
15% off the first item cardholder buy. After that cardholders receive
special offers and membership evenings to be a part of their little club.

1.3.6 Affinity Card

A card offered by two organisation, one a lending institution, the other a
nonprofit group. Non-profit groups, schools, pro-wrestlers, popular
singers and airlines are among those featured on affinity cards. Usually,
use of the card entitles holders to special discounts. Card users benefit
from most of the facilities such as frequent flyer miles or reward points,
the non-profit organisation receives some special incentives such as
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fraction of the annual fee or a small amount per transaction and the card
company benefits from brand loyalty. In short, all three wins. Some
affinity cards are also a mechanism to donate money to a charity or
cause. For every rupee that cardholder spend from the card, a percentage
is donated.

1.3.7 Travel and Entertainment Card (T and E)

These are primarily for travel and entertainment purposes and known as
T and E cards. They are a method of payment rather than a source of
credit and did not provide a credit limit. In this category, the Diners
club was the first to appear in America and was introduced to Great
Britain in 1951, a year after its launch in America. These cards only
offer credit for the brief period between purchase and billing. If full
settlement is not made on time, resulting in an overdue account and
penalty is normally imposed. However, no interest is charged-instead a
joining or annual fees is levied. Additional revenue is generated from the
T and E company by charging merchants a commission on the sales,
charged to the card.

1.3.8 Co-Branded Card

A credit or debit card issued jointly by a member bank, and a non
financial organization, bearing a brand of both. Co-branding is
essentially two major brands coverging to enhance the usefulness and
image o the product. The benefit to the cardholder comes mainly in the
form of reward schemes and discounts offered by the creditcard
company. Co-branding, apart from the reward schemes with a number of
redemption options, also allows for discounts at specific outlets when
using the card, free merchandise, frequent buyer programme similar to
frequent flyers points. For example, Bharat BOBCARD premium is a
co-branded card issued in association with Bharat Petroleum
Corporation Ltd. Stan chart and Hindustan Lever Ltd. have a cobranded
card to sell Aviance beauty products.

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1.3.9 Student Credit Card

Students generally have little or no credit history. This type of credit
card is set up to help students build up the credit history that most of
them do not already have. If used wisely, a student can take the first step
towards building a solid credit history with student credit card.

1.3.10 Farmers Green Card/Rural Card

Farmer green card can be issued to parties for undertaking any activities
coming under the purview of direct finance to agriculture. The scheme
enables the cardholder to get instant credit from the branch which has
issued the card. These cards provide farmers to buy agricultural inputs
without repeating visits to the bank branch. Dena Bank took the
initiative to launch Rural card. Presently banks like Canara Bank,
Corporation Bank, are also providing the same.

1.3.11 Credit Cards

Credit can easily go from good to bad with poor judgement,
mismanagement of credit cards or simply a change in job or financial
situation. This does not mean ones cannot get a credit card. There are
several options available for the people who had bad credit in the past
and for these who are currently trying to rebuild poor credit histories-
There are: 1. Secured Card 2. Prepaid Card Secured Credit Card Secured
credit cards requires collateral for approval. With secured credit card, a
security deposit of a predetermined amount is needed in order to secure
the credit card. Generally, the security deposit needs to be of equal or
greater value to the credit amount. Collateral comes in the form of a car,
a boat, a jewellery, stocks as anything else of monetary value. Secured
credit cards are for people with either no credit or poor credit who are
trying to build credit history. Prepaid card are, infact, not credit cards at
all but rather are used like credit cards, whenever credit cards are
accepted. Prepaid cards are multipurpose payment cards that can be
obtained by paying cash upfront. These cards can be used to make bill
payments such as telephone bills or to make purchases at shops. These
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can only be used at point-of-sale terminals and for making payments but
not for withdrawing cash. Some of the bank that issue prepaid cards are
ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Axis Bank.

1.3.12 Switch Card

It is an electronic debit card which enables holder to make payments at
retail outlets. The payments are directly to the retailers bank account
from the cardholder bank account. It will be an extension of the debit
card which may get into the market in the near future.

Chapter 2
LITERATURE REVIEW
Achim Hartmann (2000)' in his dissertation work Credit/Debit/Cash
Card Fraud and Abuse - An Outlook on Prevention and Possible
Value Added found that Plastic Money fraud has become a global
business and he made an attempt to track down fradulent and crime
activites involved in the usages of the Debit and credit card, but it is
found difficultbecause the development differs from country to country
and moves on fast.

Robert et.al, (2001)" in their study. Money Attitudes and Intentions

towards Credit Card Use and Compulsive Buying among American
CollegeStudents used a casual modeling approach to investigate the role
of money attitudes and credit card use in the campus buying within a
sample of American college students. It was found in the study that the
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money attitudes, power, prestige, distrust and anxiety are closely related
to compulsive buying and that Credit card often moderates these
relationships.

Kaynak and Harcar (2001)^ in their study, Consumers Attitudes and

Intentions towards Credit Card Usage in an Advanced Developing
Country, made an attempt to investigate consumer attitudes and
intentions towards credit card ownerships and usage in an advanced, and
developing countries. In particular, knowledge structure, beliefs, likes
and dislikes as well as attitudes of credit card owners in the possession
and the use of credit cards are investigated.

Caron et.al, (2002) in their work. Plastic Choices: Consumer Usage of

Bank Cards v/s Proprietary Credit Cards, examined the substitution of
general purpose (bank) cards for proprietary cards and how issuers can
predict which consumers are most likely to substitute convenience and
rebates are the primary reasons for using a bank card. However, it was
revealed during the work that consumers use their proprietary retail
cards to obtain better service. These results in the study helped to
explain the growth in popularity of co - branded cards.

Ramayah et.al, (2002)^ in their research study Cardholders Attitude and

Bank Credit Card Usage In Malaysia: An Exploratory Study
identified, examined and validating attributes that influence the
differences in attitudes among active and inactive cardholders. It is
believed that banks issuing credit cards can position themselves
effectively via their marketing strategies to activate the usage rate of
their existing cardholders and as well as to attract new, active
cardholders. Thirteen important attributes were used to measure the
attitude of a credit cardholder in this study. These attributes include
acceptance level, credit limit, interest free payment period, annual fees,
application approval period, ancillary fiinctions, handling of card
holder's complaints, issuing bank image, gift/bonus to new applicants,
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card design, leaflet to describe the card and advertising by the issuing
bank.

Angela Lyons (2002)^ in their work Credit Usage of College Students:

Evidence from the University of Illinois, studied the greater insight into
the credit usage of college students at the University of Illinois and to
encourage the University of Illinois, other campuses, and community as
well as state organizations to identify ways in which they can help
students to better manage their credit usage and avoid future misuse of
credit down the road. In his work, it provided some intriguing findings,
especially with respect to those students who are most at risk financially.

Tej Paul Bhatla et.al, (2003)^ in their work Understanding Credit Card
Frauds, stated that as the card business transactions increase, so too do
frauds. So it is clear that, global networking presents as many new
opportunities for criminals as it does for businesses. While offering
numerous advantages and opening up new channels for transaction
business, the internet has also brought in increased probability of fraud
in credit card transactions. The good news is that technology for
preventing credit card frauds is also improving many folds with passage
of time. The study was concluded by stating that educing cost of
computing is helping in introducing complex systems, which can
analyse a fraudulent transaction in a matter of fraction of a second.

Gupta Promod (2004) in his article The Future of Plastic Money,

discussed the use of Plastic Money and its growth in India in recent
years. He identified that the Use of Plastic Money is growing at an
unprecedented rate in India. Lesser number of installed Points - of- Sale
(PoS) terminals is the major obstacle in the growth of debt cards. Smart
Card has many innovative features which may spurt the use of cards in
India. Smart Card is safer to use in electronic form than the present form
of cards.

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Metwally and Prasad (2004) in their research paper Factors Restricting

the Use of Credit Cards in GCC Countries, examined the factors
determining probability of using credit cards more frequently in
domestic transactions in the members of the GCC (Gulf Corporation
Council) which includes: Baharain, Kuwait, Oman, Qatar, Saudi Arabia
and the UAE. The state of Qatar is used as a case study where a sample
of 385 consumers was surveyed. Respondents, who hold credit cards,
were asked to indicate their degree of agreement using a five - point
scale, with 23 statements relating to their reluctance to use credit cards
frequently in domestic transactions

Rysman Mare (2004)'^ in his paper/In Empirical Analysis of Payment

Card Usage, exploited a unique data set on the payment card industry to
study the issues associated with network effects and two sided - markets.
The study showed that the consumers concentrate their spending on a
single payment network (Single - Homing), although many maintain
unused cards that allow the ability to use multiple networks (Multi -
Homing).

Master Card International Incorporated (2004) in its report Attitudes and

Trends toward Credit and Debit Card Use for Healthcare Services
revealed the usage habits, preferences and opinions of both patients and
healthcare providers regarding the use of various payment card types as
payment options for office visits and treatments. The information was
obtained from two market research studies, commissioned by Master
Card and referenced in this report, from an independent research
organization in the spring of 2003.

Jin et.al, (2005)''* in their study Determinants of Debit Card Use: A

Study from the Consumers Perspective Services investigated the Debit
Card use from the perspective of the demand side i.e. the consumer. The
impact of consumer's demographic, socio - economic and credit related

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characteristics on Debit Card use were examined by using data from the
2001 Survey of Consumer Finances (SCF).

Goyal and Anitha (2006)'^ in their study Consumer Perception towards

the Purchase of Credit Cards, focused on understanding how
consumers perceive and consider service product features (core benefit,
facilitating services and supplementing services) in pre-purchase
evaluation and to understand the position of supplementary services at
product levels.

Ron Borzekowski and Elizabeth (2006)^'' in their article Consumers'

Use of Debit Cards: Patterns, Preferences and Price Response studied
that the Debit Card use at the point of sale has grown dramatically in
recent years in the U.S. and now exceeds the number of Credit Card
transactions. However, the study identified that many questions remain
regarding patterns of Debit Card use, consumer preferences when using
Debit, and how consumers might respond to explicit pricing of card
transactions. Using a new national representative consumer survey, this
research paper describes the current use of debit cards by U.S.
consumers, including how demographics affect use.

Chetsada Noknoi et.al, (2009)^' in their article Have Debit Cards

Changed Thai Consumer Shopping Behavior? studied the behavior of
using debit card and the quality perceiving on using debit card of the
consumers in Thailand. The research found that the demographic
characters of the consumers were females between 21 - 30 years old, and
held bachelor degree. Two - third of the consumers were students,
government and company officers. By studying their demographic
details, it tried to assists the issuing bank to pay the attention or define
strategy to the right target group and expand the market to the new target
group such as males.

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Tufan Ekici and Lucia Dunn (2009)^^ in their work Credit Card Debt
and Consumption: Evidence from Household - Level Data,
investigated the relationship between Credit Card debt and consumption
using household level data. This is a departure from previous studies
which have used aggregate measures of consumption and general debt
such as the Debt Service Ratio or total revolving credit.

Rajani (2009)^'* in her thesis An Evaluation of Business Deals Using

Plastic Money in Kerala, studied the various aspects of debit cards and
credit cards from the point of view in both the cardholders and merchant
establishments. Volume of business transactions using Plastic Money in
Kerala has shown an increasing trend in recent years. In her study, it is
expected that in the near future the Plastic Money will acclaim as one of
the most widely used financial instrument that accelerate business deals
and economic prosperity.

Margie Tidwell et.al, (2009)^^ in their work The Swipe and Spend
Economy, stated that the Credit Card uses and abuses have found a
worldwide audience with the recent downturn of the economy. This
paper discussed the beginnings of credit card usage with the recent
marketing by credit card companies to teenagers and will continue
through the senior citizen's need for credit card usage to pay medical
bills. How the emphasis will be placed on the use of credit cards by
college students whether the student is 20 years old or 40 years old is
also discussed.

Muhammad Imtiaz Subhaniet.al., (2011)^^ Plastic Money/Credit Cards

Charisma for Now and Then (A Thin Line between Easy Money and
Risky Money), studied that the monetary rattle between consumption
and affordability slammed the household severely for every now and
then in all spheres of life from one pole to another. This research
focused on the charisma of Plastic Money, its usability and affordability
while they are impacting on its preference to use. The research pointed
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out that friends and family have an influence on the use of Plastic
Money which is taken as a proxy of Plastic Money charisma while
convenient use of Plastic Money along with spending adjustment and
use of Plastic Money along with prediction of ftiture income are the
proxies of its usability and affordability.

Rupa and Vani (2011)^' Debit Card Usage in India - A Perspective,

states that Debit cards are the important components in the retail
payment system. It is seen that while the number of valid debit cards is
currently 10 times higher than the number of valid credit cards, the
average number of transactions per debit card is 10 times lower than that
of creditcards.

Govindarajan et.al, (2012)^'' in their study A

Study on the Awareness and Utilization of Credit Cards in India,
discussed about the hectic efforts of bankers in India to popularize
Internet Banking, Mobile Banking, Debit Cards and Credit Cards, so that
their cost of operation will come down. The work identified the fact that
though in terms of number of cards in circulation. Debit Card is higher
than that of Credit Card in terms of business, Credit Card is better
placed. Users of credit card must be aware of various features of Credit
Card such as safety and security, utility, operational difficulties and
support provided by the Credit Card Department.

Sudhagar (2012)^^ in his research article A Study on Perception and

Awareness on Credit Cards among Bank Customers in Krishnagiri
District, discussed how credit card, a small plastic card issued to users as
a system of payment, allows its holder to buy goods and services based
on the holder's promise to pay for these goods and services. It also
pointed out that the issuer of the card creates a revolving account and
grants a line of credit to the consumer (or the user) from which the user
can borrow money for payment to a merchant or as a cash advance to the
user.
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Chapter 3

METHODOLOGY

3.1 Problem Statement

To study the attitude and behavioral of the people towards the plastic
money and also their perspectives about plastic money

3.2 Objectives of the Study

The objective of this research is:

1) To assess the level of adoption and use of plastic money as payment
system.
2) To analyze the factors for adoption of plastic money that replaces the
paper or cash money.
3) To find problems of using plastic money.
4) To study the impact on banks
5) To study the features of credit cards offered by banks.
6) To evaluate the risk involved in the credit card usage.
7) To find out the customers attitude towards plastic money

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3.3 Hypothesis

H0: There has been no significant relation between in consumer usage

and plastic card benefits.

H1: There has been significant relation between in consumer usage and
plastic card benefits

3.4 Methods of Study

Questionnaire
Personal Interview Method
Google Docs form of Questionnaire

3.5 Material and methods

STUDY DESIGN: Attitude and behavior towards plastic money.

SETTING: This research will be conducted with in Bangalore .
DURATION OF STUDY: Study will take place between Jan 2017 to
April 2017.

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SAMPLE SELECTION:
Convenient sampling will be used in exploratory research where the
researcher is interested in getting an inexpensive approximation of 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 results. Without incurring the cost or
time required to select a random sample.

3.6 Data Collection Procedure:

The primary data was collected by administering structured
questionnaire to the investors. Data to be collected from nationalized
banks customers randomly. Data collection by customers were not using
credit cards with in Bangalore.

Chapter 4

QUESTIONNARE AND ANALYSIS

A total of 71 respondents were finalized for the study. Out of the same,
31 were Male and 40 were Female the respondents is as given in
Figure1.

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Count of 10 : How do you control your spending when you carry

debit card ?

There were mixed type of answers we got for this question. But
when closely analysed approximately 20 percent of the
respondents were unaware of a particular way of controlling
their spending or did not have a control of spending when they
carry debit card. Most of the respondents i.e upto 80 percent of
the respondents had ways of controlling their spending. Some
were minimizing shopping , sticking to a list , setting a limit, etc.
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Count of 13. Give your preference on scale of 1 to 3 why you don't

prefer cash or paper money

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Chapter 5

INFERENCE

The study has clearly highlighted the advantage of instant transaction as

one of the major factors favoring the use of plastic money over real
money by the population today. It has already been highlighted by the
study that convenience of not carrying cash and ease of transaction is
one of the major psychologically influencing factors that encourage the
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use of plastic money instead of real money. Additionally, the results of

the study have also stressed upon the convenience and ease of use while
paying or shopping by plastic money. The saving of time and the fact
that the plastic money seems to be more portable also seems to further
the cause of a possible change in the scenario of money usage in the
economy. On the other hand, Security comes forward as a major cause
for concern for the population using plastic money. Therefore, it is easy
to conclude that the population is ready as ever to use plastic money at a
greater level due to its high levels of ease and convenience.

Chapter 6

FUTURE SCOPE
This research can be carried out in a larger scale mainly focusing on non
usage of plastic money which helps the banking sector to formulate
strategies to overcome these drawbacks and government to take steps in
implementing and encouraging the usage of plastic money.

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Chapter 7

REFERENCES
2. Bansal. N. K. (2006). Plastic Card Currency A Convenient Mode
of Payment, The Indian Banker. March. pp. 86-89.
3. Canner, Glenn B. and Anthony W. Cymak. 1985. Determinants of
Consumer Credit Card Usage Patterns among U.S. Families. Journal of
Retail Banking, 8: 9-18.
5. Lee, Jinkook and Kyoung-Nan Kwon. 2002.Consumers use of credit
cards: Store credit card usage as an alternative payment and financing
medium. The journal of Consumer Affairs, 36(2): 248.
6. Sarangapani, A. and T. Mamatha. (2008). The Growing Prominence
of Debit Cards and Credit Cards in the Indian Banking Industry.
Marketing Maslern-2irza', 6, J unc, pp. 63-66.
7. Xiao, J. J.; Noring, F. E. & Anderson, J. G. 1995. College students
attitudes toward credit cards. Journal of Consumer Studies and Home
Economics, 19: 155174
8. https://abhinavjournal.com/journal/index.php/ISSN-2320-
0073/article/viewFile/556/pdf_152
9.http://shodhganga.inflibnet.ac.in/bitstream/10603/10144/9/09_chapter
%201.pdf

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