Synopsis on Comparative study of PLASTIC MONEY in India

SUBMITTED TO MR. MUNISH KAPILA

SUBMITTED BY RAJAT ARORA 104602248743

Plastic Money: the Currency of Modern India Indian consumers have never had it so good. The soiled notes are definitely out. Carrying cash is no more `a pain in the neck' as consumers are relying more on the `plastic card' which gives them money on credit. Plastic money basically means debit cards and credit cards which is having a magnetic stripe, logo, signature of the cardholder made of plastic. Credit Cards have finally arrived in India. The card industry which is growing at the rate of 20% per annum is flooded with cards ranging from gold, silver, global, smart to secure.the list is endless. From just two players in early 80s, the industry now houses over 10 major players vying for a major chunk of the card pie. Currently four major bishops are ruling the card empire---Citibank, Standard Chartered Bank, HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8 million card users, is expected to double by the fiscal 2003. According to a study conducted by State Bank of India, Citibank is the dominant player, having issued 1.5 million cards so far. Stanchart follows way behind with 0.67 million, while Hongkong Bank has 0.3 million credit card customers. Among the nationalized banks, SBI tops the list with 0.28 million cards, followed by Bank of Baroda at 0.22 million. The credit card market in India, which started out in 1981, is on the verge of an unprecedented boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with almost 25-30 % growth in new cardholders. SBI, one of the late entrants in the card market, has managed to grab over 8 per cent of the market share from the bigwigs like Citibank and Standard Chartered Bank. The bank's credit card business has grown by 8 per cent over the last two years. According to bank officials, SBI's card issue so far is to the tune of 0.28 million which is expected to In a bid to tap the lower middle class segment, SBI is currently sharpening its marketing The bank is putting its best foot forward to compete with global card majors like Citibank and Standard Chartered Bank. The global bigwigs have already established themselves as the `bankable brands' in the metros.

However, in a bid to move to greener pastures, they are trying to tap the co-branded card market which has vast potential for growth. Citibank, which is leading the card empire recently launched a co-branded credit card in partnership with Indian Oil Corporation. The card will offer its members reward points on every international spend which can be redeemed for free fuel in India.

DEBIT CARD A debit card (also known as a bank card or check card) is a plastic card that provides the cardholder electronic access to his or her bank account(s) at a financial institution. Some cards have a stored value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a designated account in favor of the payee's designated bank account. The card can be used as an alternative payment method to cash when making purchases. In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card. In many countries the use of debit cards has become so widespread that their volume of use has overtaken or entirely replaced the check and, in some instances, cash transactions. Like credit cards, debit cards are used widely for telephone and Internet purchases. However, unlike credit cards, the funds paid using a debit card are transferred immediately from the bearer's bank account, instead of having the bearer pay back the money at a later date. Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a check guarantee card. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase.

Two types of debit cards: There are currently two ways that debit card transactions are processed: online debit (also known as PIN debit) and offline debit (also known as signature debit). In some countries including the United States and Australia, they are often referred to at point of sale as "debit" and "credit" respectively, even though in either case the user's bank account is debited and no credit is involved. In India there are basically three types of cards namely Visa, Master Card and Amex. Participating banks like ANZ Grindlays, BoB then issue these cards to the subscribers. Both Visa

and Master Card have been popular in India and Amex a relatively new player in India as it issues its cards only through American Express

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. Check Cards (VISA OR MASTER CARDS) These cards can be used to purchase products at any merchant that accepts VISA or MasterCard credit cards. On the surface, they look exactly like ATM cards. However, check cards cannot be used at automatic teller machines. When using a check card no PIN is used. Instead, you will be asked to sign a transaction slip as would be done with a credit card. Debit Card Problems can be worse than Credit Card Problems When an improper charge appears on the credit card it can not automatically out the money and simply need to work with the credit card issuer to have the charge removed from the bill. When an improper charge occurs with a debit card, however, the funds are automatically taken from the account and customer is burdened with attempting to get the money back. Meanwhile, he may experience cash flow problems and the legitimate checks could bounce. Traveling with your Debit Cards The reverse side of the debit card will display the names or symbols of the various ATM systems that will accept the card. Debit card can be used at any ATM in the world as long as the ATM displays one of the same system names or symbols that is on debit card. When obtaining funds at an ATM in a foreign country the funds dispersed will be in the currency of the country going to visit..

Advantages of Debit Card

y y y y y y

Debit Card is often easier to get than a credit card. Check approval or to show identification at store is not required. No need to carry cash, a checkbook or traveler's checks. Debit cards are more readily accepted than checks, especially at the time of traveling. No interest charges are to be paid by debit cardholders. Debit card processing fee for the merchant are generally lower than credit card fees.

Disadvantages of a debit card

y y

Enough money is required in bank account to have debit card. Once the amount is paid for purchase, if something goes wrong with the purchase.. Bank won't put money back into your account for items that are never delivered, don't work or were misrepresented.

Bank fees such as monthly service charges, per-transaction costs or penalties for dropping below the required minimum balance are charged by debit card holders.

More chances of lose or misuse of debit card than a credit card.

Credit card A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. 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. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 53.98 mm (33/8 21/8 in) in size. Credit card in India became popular with the introduction of foreign banks in the country. Credit cards are financial instruments, which can be used more than once to borrow money or buy products and services on credit. Basically banks, retail stores and other businesses issue these.

Major Banks issuing Credit Card in India State Bank of India credit card (SBI credit card) Bank of Baroda credit card or (BoB credit card) ICICI credit card HDFC credit card IDBI credit card ABN AMRO credit card Standard Chartered credit card HSBC credit card Citibank Credit Card

Parties involved: Cardholder: The owner of the card used to make a purchase; the consumer. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant. Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with. Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks. Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.

DIFFERENT TYPES OF CREDIT CARDS

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.

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.

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. y Photo card In this photograph is imprinted on a card, and 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. y Global card Global cards allow you the flexibility and convenience of using a credit card rather than cash or travellers checks while travelling abroad for either business or personal reasons. y 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. . y Affinity card The card issuer ties up with popular organisations/ institutions which are often non-profit organisations (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 organisation /institution by the card issue y MasterCard and Visa MasterCard and Visa are global non-profit organisations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customers world-wide may use their respective credit cards to make various purchases.  Visa card: Visa, Inc., commonly called VISA, is an economic joint venture of 21,000 financial institutions that issue and market Visa products including credit and debit cards. The company

was originally named Visa International Service Association. The name change occurred in the fall of 2007 as a part of Visas restructuring and IPO plan. The company is based in San Francisco, California, USA.

OBJECTIVES OF STUDY
Primary objectives y To know the perception of people towards plastic money.

Secondary objectives y To know the importance of plastic money in the daily life of consumers w.r.t credit and debit cards. y y y y To study the benefits of debit card and credit cards. To find out the market leader among the various banks/ companies issuing credit and debit cards To know the problems faced by respondents using plastic money. To study the satisfaction level of consumers towards plastic money.

RESEARCH METHODOLOGY

Research methodology deals with the method of study i.e. how the study can be carried out and what techniques can be used. It is the careful investigation and enquiry in a systematic manner in order to find solution to find problems in research. it consists of defining and redefining the problems, formulating the hypothesis or suggestions solutions ,collecting data and evaluating the data and at last carefully testing the conclusions to determine whether they fit he formulated hypothesis or not.

RESEARCH DESIGN: Research design states the conceptual structure within which
research is to be conducted. A research design is the arrangement of conditions for collections and analysis of data in a manner that aims of data in manner that aims to combine relevant the research purpose with economy in procedure. The different research designs available are: y Exploratory research: it generally emphasis on discovery of ideas and insights. Its more qualitative rather than quantitive. y Descriptive research: it is concerned with determining the frequency with which something occurs or extent relationship between two variables. This study will be having an exploratory research which is based on discovery of ideas and insights.

SAMPLING PLAN:Universe: the universe consists of all people who are using plastic money for different purposes.

Sample size: this refers to the number of respondents to be selected from the universe to constitute a sample. Large samples give more reliable results than the small samples. So the sample size of 100 respondents was taken into consideration in case of research work, which includes both debit and credit card holders. Sampling unit: sampling unit implies that who are the respondents. In this sample all those who are using debit cards and credit cards.

Sampling technique: the technique used for the study is convenient sampling that consists of questionnaire, which are given to respondents who are the regular users of plastic money.

METHODS OF DATA COLLECTION:

PRIMARY DATA: Primary data is that data which is collected for the first time and thus happens to be original in character. In the study, primary data will be collected from direct source of information like customers with the help of questionnaire survey and personal interview.  Questionnaire: The second tool used for study is questionnaire. Various questions regarding the purposes of plastic money and the various procedures for obtaining credit cards, the necessity of credit cards, increasing relevance of plastic money among consumers, market leader among various companies issuing credit and debit cards.

SECONDARY DATA: Secondary data are those which have already been collected by some one. For this study there will be following secondary data.  Websites  Magazines  Articles And Newspapers  Books  library

TOOLS OF ANALYSIS:
 Diagrams and Tables: Various graphs and tables are used to describe the performance of different credit cards and debit cards.  Weighted Average: Weighted average method is also used to analyze the comparison between plastic money. Weighted average means finding out the average by assigning the weights to different factors. Formula for calculating weighted average is WiXi/Wi.  Pie chart and percentage: Pie charts and percentage are also used as a tool for analysis.