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Developmentofplasticcardsmarket:past,presentandfuturescenarioinIndianbanks.

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Developmentofplasticcardsmarket:past,presentandfuturescenarioinIndian
banks.

BestSchoolinBangalore
OakridgeBangaloreOffersWorldClassIBProgramswithProgressiveTeaching
Methodology.Gotoadmissions.oakridge.in
Abstract:
ThecurrentstudypresentsanoverviewofthedevelopmentofbankinginIndiafromtimetotimespecificallyfocusedontheplasticcards
usagetrendssincethesehavebeenintroducedinIndianbankingsector.VarioustypesofplasticcardsprovidedbybanksinIndialike
ATMcards,DebitCards,CreditCardsandSmartcardshavebeendiscussed.Thestudyalsohighlightstheroleofthesecardsas
electronicpaymenttooltobeusedbycustomersanddiscussesclearingandsettlementprocessofthesecards.Somefutureplansmade
byvariousbanksandinstitutionsarealsosummarizedinawaythatitdepictsthepictureofitsfuturegrowthandprospectsinIndia.
Keywords:PlasticMoney,ElectronicBanking,InformationTechnology.

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Authors:
Kaur,Mandeep
Kaur,Kamalpreet
PubDate:
10/01/2008
Publication:
Name:AsiaPacificBusinessReviewPublisher:AsiaPacificInstituteofManagementAudience:AcademicFormat :Magazine/Journal
Subject :BusinessBusiness,internationalCopyright :COPYRIGHT2008AsiaPacificInstituteofManagementISSN: 09732470

Issue:
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Developmentofplasticcardsmarket:past,presentandfuturescenarioinIndianbanks.

Date:OctDec,2008SourceVolume:4SourceIssue:4

AccessionNumber:
198547969
FullText:
Introduction
IndianeconomyhasflourishedwiththeadventofLiberlisation,PrivatisationandGlobalisation.Bankingsectorisnotanexceptiontoo.
ThesereformshavepresentedachallengebeforeIndianbankingsectortoshakehandswiththepaceofnewtechnology.However,mere
technologyupgradationorintroductionofinnovativeproductscannotimprovethestateofaffairsuntilcustomersdon'trespondtoit
positively.Hence,itbecomesverynecessaryforthebankstooffertheservicesorproductswhiletakingintoconsiderationthecustomers
needs,preferences,perceptionsandconvenience.Also,thebanks'servicesarenotjustconfinedtotheirparticularbranchcustomers
only.Customerisnowtreatedascustomerofbanksasawhole,whichmeansthatheisnowcapableofenjoyingfacilitiessuchas
anywhere,anytimebanking(Kamesam,2003).Thisconcepthasenabledthebankerstoestablishlongtermconnectionwiththeir
customers.
Hence,Electronicbankingisthenewtrendsignificantlyadoptedbybankingsectorworldwideduetoitswiderscopeforthecustomersas
wellasbanksatlarge.Varioussophisticatedproductshavebeenlaunchedbythebankswhichhelpthemtomeetthebasicrequirements
oftheircustomers.Withtheentryoftechsavvyprivatesectorbanksandforeignbanks,thecompetitiveenvironmenthasstartedprevailing
inbankingsectortoo.Nodoubt,Publicsectorbankshavelargenetworkoftraditionalbranchestoapproachtheircustomersascompared
totheprivateandforeignplayers.However,withthehelpofinformationtechnology,ithasnowbecomepossibleforbankstodeliver
productsandservicesefficientlyandtoimprovecustomerbasewithoutopeningnewbranches.Hence,thesenewprivateandforeign
playersaretryingtocompetewiththemonthebasisofadoptionofnewtechnologicalserviceslikeplasticcards,PCbanking,Electronic
FundsTransfer(EFT),Internetbankingetc.toapproachthemaximumcustomersinspiteofhavinglessphysicalbranches(Venkatesan
andKumar,2007).Duetothisreason,publicsectorbanksarealsolikelytomovetowardselectronicbanking,whichultimatelyleadsthe
entirebankingsectortotheremarkableimprovementwithrespecttoitsefficiency,customerservices,productivity,profitabilityetc.Thus,
Banksarenowreengineeringthewayinwhichtheirservicescanbereachedtotheircustomersbybringinginflexibilityintheir
"distributionchannels"(DeSarkaret.al.2001).
Traditionally,bankswereonlyconcernedwithacceptanceofdepositsfromcustomersandlendingsurplusmoneytothesuitablecustomer
whowanttoborrowatsomerateofinterest.Themostcommonproductsbeingofferedbybanksweresavingsaccount,currentaccount,
termdepositaccountandlendingproductsbeingcashcreditandtermloans.Banker'smainpurposewastomanagethesavingsof
peoplethroughthemobilisationoffunds(Deva,2005).
Intheseventies,BanksinIndiastartedmovingtowardsthesocialorientationduetowhichnationalizationtookplaceinJuly1969.The
IndianGovernmentnationalizedthe14largestcommercialbanksandafterwardsnationalisationof6morecommercialbankswere
followedin1980.Themainreasonforthenationalisationwastogivethegovernmentmorecontrolofcreditdeliveryinordertodischarge
socialobligations(Suneja,1994).Duetothiseffectofnationalization,Bankstriedtouplifttheneglectedareaslikeagriculture,smallscale
industries,tertiarysector,remoteareasandweakersectionofthesocietybyprovidingthemwithfundsatreasonableratesofinterest.
Thus,tillnineties,thegovernmentwashavingdirectcontrolonthe90%ofthebankingbusinessinIndia(Suneja,1994).Whilefulfilling
thesocialobjective,thecostofbankingoperationsincreasedandthusprofitabilityofbanksdeclineddrastically.Toovercomethese
problems,itbecamenecessaryforthebankstointroducenewproductsandserviceswhicharecommerciallyviableandhelpedthemto
improvetheirprofitabilityandproductivity(Deva,2005).Hence,modernerahasbroughtprogressivechangeinbankingindustryasa
wholewhichisresultedfromdisintermediationprocessandinformationtechnology.Newentrants(privateandforeignbanks)inthe
bankingindustrygenerallyknownasNewGenerationtechsavvybankstendtointroducevariousinnovativeserviceswhileincurring
minimumcostbutalsosuitthecustomerpreferences.Thisistheperiodwhenautomationofbankingoperationshasgainedmuch
importance(ThakurandSingh,2005).

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Hence,overlastoneandahalfdecadesthebankingenvironmenthaschangedprogressively.Afterfinancialsectorreformsduring
nineties,thebankingindustryinIndiahaswitnessedremarkablechangesduetoinformationtechnologyandcomputerapplications.The
informationtechnologyhasreplacedthebrickortraditionalbankingwiththewiderangeofebankingproductsandserviceslikeATM
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(AutomatedTellerMachine),InternetBanking,CreditCards,PCbanking,EFTs,DebitCards,SmartCardsetc.Indianbankshaveshifted
theiremphasisfromtraditionalbankingtobankingforcustomersascustomerisalwaysregardedasthekeydriverforthesuccessofany
newproductandserviceslaunchedinthemarketandthecustomershouldbesatisfiedwiththeofferingsofindustry(Deva,2005).
Therefore,tobesuccessfulinthelongrun,bankingindustrymustadapttothechangingneedsofcustomers,theirpreferencesandwants.
However,Electronicbankingalsomakesiteasierforcustomerstocomparebanks'servicesandproductswiththatofotherscompetitorsin
theindustryandallowsbankstopenetratenewmarketsandthusexpandtheirgeographicalreach(Vohra,2002).Withtheeffectofthis
changingenvironment,Indianbankinghaswitnessedremarkablegrowthsince2006asbankingsectorisgrowingby18%anditis6
timesmorethanthelastdecadegrowth(Khandelwal,2006).DevelopmentofbankinginIndiahasbeendiscussedwellbyThakurand
Singh(2005).
PlasticCards:AKeyElementofElectronicBanking
Moneyisalwaysregardedasanimportantmediumofexchangeandpaymenttool.Initiallybartersystemwasusedasthesignificant
modeofpayment.Overtheyears,moneyhaschangeditsformfromcoinstopapercashandtodayitisavailableinformlessformas
electronicmoneyorplasticcard(Ramasamyet.al.,2006).Hence,themajorchangeinbankswhichhasbeenbroughtinbytechnologyis
throughintroductionofproductswhicharealternativetocashorpapermoney.Plasticcardsareoneofthosetypesofinnovationsthrough
whichthecustomerscanmakeuseofbankingservicesjustbyowningthecardissuedbybankandthattoowithoutrestrictinghimselfin
theofficialbankinghours.Plasticcardsasthecomponentofebankinghavebeeninuseinthecountryformanyyearsnow.However,the
cardbasedusagehaspickeduponlyduringthelastfiveyears.Paymentbycardsisnowbecomingamuchpreferredmodeformaking
retailpaymentsinthecountry(ReportontrendandprogressofbankinginIndia200607,RBI).Thus,plasticcardsaresuchpaymenttool
whichgivesacustomeranopportunityofnoncashpaymentofgoodsandservicesandaredesignedtofacilitatesmallvalueretail
paymentsbyofferingasubstituteforbanknotesandcoinsandthustocomplementtraditionalpaymentinstruments.Theroleofvarious
partiesinvolvedinplasticcardspayment(RetailPaymentSystem,2004)isshowninFigure1.
(i)CustomersorCardholder:Theauthorizedpersonholdingthecardandcanuseitforpurchaseofgoodsandservicesalso.
(ii)Cardissuingbank:Thebankorinstitutionwhichissuesthecardtoitseligiblecustomers.
(iii)Merchants:Entitieswhichsellthegoodsandservicestothecardholderanddulyagreetoacceptthecardforpayment.
(iv)BankCardAssociation:Theassociations(VISA,MasterCard,AmericanExpress)whichactasanintermediatebetweencardissuing
bankandmerchant'sbankandauthorizethetransaction.
[FIGURE1OMITTED]
AutomatedTellerMachine(ATM)
Automatictellermachinesplayedavitalroleinthedevelopmentofplasticcards.InIndia,thereisacontinuousriseintheusageofATMs
bythecustomers.AccordingtoasurveyconductedbyBanknetIndiain2006,95%peoplepreferusingATMstotraditionalmodeof
banking(1).Since2000,sufficientnumberofATMshavebeeninstalledbyvariousbanksinIndiawhiletakingintoconsiderationits
popularityandusageamongthecustomers.TheATMsinstalledbybanksinyear2000wasjust1000innumberwhichincreasedto
27088inyear2007signifyingthetremendousgrowthin7years(SeeFigure2).ThegroupwiseshareinthenumberofATMsisdepicted
inFigure3,accordingtowhichthenationalizedbanksinIndiahascontributedmaximumtotheriseofonsiteATMsaswellastotal
numberofATMs.AsfarasthegrowthandnumberofoffsiteATMsareconcernednewprivatesectorbankshaveledovertheothergroup
ofbanks.Attheearlystage,customerscouldonlyuseATMsofthatrespectivebankwheretheyarehavingaccount.Butcurrently,this
constrainthasbeenweededoutfortheconvenienceofcustomersastheycanuseATMsofotherbanksalsowheretheydon'thaveany
account.Itisknownasinterbanknetworksandbankschargeextrafeetermedas"interchangefee"forusageofthisservice.Reserve
BankhasencouragedthebankstojointogetherinsmallclusterssothattheirATMnetworkscanbeshared.Currently,therearevarious
suchATMnetworkclustersfunctioninginIndia(SeeTable1).ThenumberofATMssharedbythesenetworksisalsoshownintheFigure4
whichindicatesthatNationalFinancialSwitch(NFS)issharingthelargestnumberofATMwithitsmemberbankswhileMitrishavingleast
numberofATMstobesharedwithitsmemberbanks.
[FIGURE2OMITTED]
[FIGURE3OMITTED]
[FIGURE4OMITTED]
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DebitCards
Debitcardisamagneticallyencodedplasticcardissuedbybankswhichhasreplacedcashandcheques.Itallowsthecustomerstopay
forgoodsandserviceswithoutcarryingcashwiththem.Insomecases,debitcardismultipurposewhichcanalsobeusedasATMfor
withdrawingcashandtocheckaccountbalances.Itisissuedfreeofcostwiththesavingsorcurrentaccount(Mishra,2007).Debitcardis
oneofthebestonlineepaymenttoolthroughwhichtheamountofpurchaseisimmediatelydeductedfromcustomeraccountandcredited
tomerchant'saccountprovidedifthatmuchamountisavailableincustomersaccount.Ithasovercomethedelayedpaymentprocessof
cheques,duetowhichsometimesmerchantshavetosuffer.Totransactthroughdebitcardiseasyandauthenticwayinwhichacardis
swipedthroughtheterminalwithmagneticcodereaderanditrecordscustomer'sbankandaccountnumber(CaskeyandGordon,1994).
CustomerhastoenterthePINcodeintheterminalinordertoperformthetransactionthroughwhichtheinformationistravelledto
electronicnetworklinkedtothemerchant'sbankwiththebankthatissueddebitcardtothecustomer.Ifthetransactionisapprovedthen
thecustomeraccountisdulydebitedandmerchantaccountiscreditedwiththatamount.Thewholeprocessisperformedinstantaneously
inspitetheinvolvementoflargenumberofparties(SeeFigure5).Hence,debitcardsareconsideredeffectivewherecustomersvalueitas
convenienceandmerchantsseeitasloweringcostorenhancingsales.
[FIGURE5OMITTED]
RobustprogresscanbeseenintheusageofdebitcardsinIndiaasperTable2,thetotalnumberofoutstandingdebitcardshasbeen
increasedto74.9millionin2007from49.8millionin2006,whichindicatesthegrowthof41%inayear.Thevalueoftransaction
conductedthroughdebitcardsalsowitnessedconsiderablegrowthofapprox38%everyyearfrom2003to2007.Thegrowthofmerchant
establishmentshasalsocontributedalotinthegrowthofdebitcardsusageinIndia.Apartfromthe
CreditCards
Theterm"creditcard"generallyreferstoaplasticcardissuedtoacardholder,withacreditlimit,thatcanbeusedtopurchasegoodsand
servicesoncreditorobtaincashadvances.Itisissuedbybanksholdingthelogoofoneofthebankcardassociationprivateandforeign
banks,manypublicsectorbankshavealsoenteredtheDebitcardsegmentleadingtotheincreaseinacceptanceandthetotalbase.Most
banksnowissueDebitcardsinplaceofATMcardsandhavealreadyconvertedalltheirATMcardsintoDebitcards.Thereasonbanks
aresoeagertopushdebitcardsisthatithelpsthemcutcostssignificantly(ChoudhuryS.,2007).Hence,thesedays,onlyafewpureATM
cardscanbeseenprevailinginthemarketlikeVisa,MasterCard,Dinnersclubetc.afterproperverificationofaccountholders.Unlikedebit
cards,creditcardsalsoprovideoverdraftfacilityandcustomercanpurchaseoverandabovetheamountavailableinhisaccountandthus
regardedasauthenticpaymenttool(Mishra,2007).Interestchargesareleviedontheunpaidbalanceafterthepaymentisdue.
Cardholdersmaypaytheentireamountdueandsaveontheinterestthatwouldotherwisebecharged.EquatedMonthlyinstallments
(EMI)schemeisalsoofferedbysomebankstothecustomerswhomakehugepurchasessothattheycanfeelconvenientwhilepaying
backtheoutstandingamount(Vardhaman,2008).
Clearingandsettlementthroughcreditcardisasimpleandreliableprocessinwhichbankplayacrucialrole(SeeFigure6).Ifacustomer
purchasesgoodsorservicesfrommerchantwithcreditcard,merchantswipesacreditcardthroughareader,thesoftwareatthepointof
sale(POS)terminaldialsastoredtelephonenumberviaamodemtocallanacquirer(2).Whenanacquirercompanygetsthecreditcard
authenticationrequest,itcreditsthemerchantaccountandcardholderacceptsliabilitybysigningthecreditreceipt.Themerchant
acquirerforwardsthetransactiondatatobankcardassociation,whointurnforwardsthedatatocardissuerbank.Thecardissuingbank
hastopaythebankcardassociation,whointurnpaytheoutstandingamounttomerchantacquirer.Thecardissuerthenaddsthe
outstandingbillamounttothecardholder'smonthlystatementandcardholderdulymakespaymenttotheissuerafterwards.Thecredit
cardbusinessinIndiahasbeengrowingatasignificantpaceandthattooattherateofalmost45%everyyearasdepictedbyTable3.
Thevalueoftransactionsconductedthroughcreditcardshasbeenalmostmorethandoubleinlastfouryearsi.e.ithasrecordedas176.6
billionin200304andincreasesto413.6in200607.Moreover,creditcardsaremorepopularamongtheIndiancustomersascompared
todebitcards.Thetotalvolumeandvalueofcreditcardtransactionsismuchhigherascomparedtotheusagetrendsofdebitcards(See
Figure7).
[FIGURE6OMITTED]
[FIGURE7OMITTED]
Themainreasonforthegrowthofcreditcardsascomparetodebitcardsismainlyduetoprovisionofoverdraftfacilitywhichfacilitatesthe
customerstomakepurchasesandpaymentevenwithouthavingenoughmoneyavailableintheiraccount.Theincreaseinthenumberof
commercialactivitiesandthegrowingmallsinsmallercitieshavealsocontributedpositivelyintheriseofcreditcardmarket.
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SmartCards
SmartCardsorStoredValueCardsisrelativelynewpaymentstechnology.Itisaplasticcard,withorwithoutmagneticstripe,capableof
storing,retrievingandmanipulatingdataandusedinvarietyofapplications(WeningerandLaster,1995).ItisalsoknownasElectronic
MoneyorEPurseissuedbybankstoitscustomershavingthesizeasofcreditcard.Acustomerneedsnottohavecurrencyinhispocket
asvalueoramountisstoredinthecarditselfbytransferringitfromhisaccount,duetothisfeatureitisregardedaselectronicpurse.The
emergenceofSmartCardarisesinordertoissuemultipurposecardswhichfunctionascreditcards,debitcardsandATMcardssothatit
suitsalltypesofcustomerbaseandtheirchoice(SeeFigure8).Thesearegenerallythereloadablecardsinwhichmoneyisloadedintoit
bytransferringtherequiredamountfromcustomersaccountviaATMs,telephoneorinternet.
[FIGURE8OMITTED]
Whenacustomermakespurchasesthroughsmartcard,unlikecreditcard,novalidationsandauthenticationsfromvendor'sbankand
bankcardassociationarerequiredasthemoneyisavailableinthecarditself.Fundsaredirectlydeductedfromthecardsandtransferred
tothevendor'sterminal(SeeFigure9).
[FIGURE9OMITTED]
Smartcardsaremultipurposeinnaturewhichcanserveasanidentitycardforacardholder,amedicalcardthatcontainsthemedical
historyoftheholderandasacreditcard/debitcard,facilitatingofflinetransactionswheresettlementacrossdifferentbanksisinvolved.
TheSmartRupeeSystem(SMARS)pilotprojectsponsoredbyReserveBankofIndia(RBI)hassetthefoundationforusageofsmartcard
basedfinancialapplicationsinIndia.ThesearecurrentlybeingissuedbyfewbanksinIndiahavingtiedupwithFINO(Financial
InformationNetworkandOperationsLtd).IDBIbankhasintroduceditssmartcardcalledMoneySmart,CorporationBankhasissued
CorpSmart,andBankofIndiahasissueditsEpursecards.PNB,SBI,ABNAmro,ICICIbankandBankofBarodahavealsolaunched
smartcardbasedbankingsolutions.Thus,banksarenowshowinginterestinthesmartcardsapproachtoreachouttotheunbanked
population.FINOisfocusingmoreonincreasingthenumberofcardsofitscurrentpartners(Niar,2008).Withthespreadofrapid
technologicaldevelopmentsandthepotentialoftheusageofsmartcardsformanypurposes,theReserveBankalsoteamedupwiththe
GovernmentofIndia,banksandthecardindustrytoconductpilotprojectfortheuseofsmartcardsformultiplepurposes.(3)
FutureScenarioofPlasticCardsMarketinIndia
TheuseofplasticcardsinIndiahasnodoubtinrisefromlastfewyearsbutthereisstillagreatpotentialleftforthebankerstointroduce
moreattractiveservicesinordertolurethecustomersononesideandincreasetheirprofitsontheother.Someaspectsorfacts
(organizedfromvariousstudiesandarticles)whicharecontributingtothegrowthofplasticcardsmarketandalsoindicateitsgrowthinthe
nearfuturearediscussedbelow:
*ThecreditcardcompaniessaythatconsumersspendRs50,000croreannuallywhichisexpectedtogrowat50%overthenext45
yearssince2007(EconomicTimes,19September2007).
*AccordingtoCLSAReport,theestimatedcreditcardbaseinIndiatill2020willbe127millionascomparedto23.1millionin2007.
*ThenumberofdebitandcreditcardusersinIndiaisanticipatedtoreach73.4millionand406millionbytheyear2010and2011.(4)
*AccordingtoanRBIannouncement,byApril2009,bankcustomerswillabletousetheirATMcardstowithdrawcashfromany
automatedtellermachineinstalledbyvariouscommercialbanksacrossthecountandtoofreeofcost.(5)
*AccordingtoanewRBRreportonGlobalATMMarketandForecastsTill2011,IndiaislikelytoinvestheavilyinATMstill2011.
*LeadingIndianbanksaresaidtotargetaratioof1:2.5forbankbranchesv/sATMsby2012.ThismeansthenumberofATMswillgrow
toaround1.75lakh,assumingthenumberofbranchesremainsatthesamelevel(TheHinduBusinessLine,29November2007).
*Nowanumberofnonbanksincollaborationwith/withoutbanksareplanningtoissueboth,limitedormultipurposeprepaidcards.(6)
*Inlate2007,mostofthecompanieshadannouncedplanstoconverttheircredit/debitcardstosmartcardsbyreplacingthemagnetic
stripesinthemwithcomputerchipsandincorporatinglatestencryptiontechnologies.Soitwouldnotbelongbeforesmartcards
establishedthemselvesinIndia(ArunachalamL.andSivasubramanianM.,2007).
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*Afewnonbankshavealsoenteredthedomainofprovidingvariousserviceslikeprovisionofinfrastructuree.g.,sharedATMnetworks
POSterminals,chequeprocessingcentresetcwhichwillleadtoenhancethepotentialofplasticcardsmarket(ArunachalamL.and
SivasubramanianM.,2007).
*AjointventurebetweenLifeInsuranceCorporationofIndia(LIC)andGEMoneyislikelytolaunchitsfirstcreditcardproductin2009
whichwillbeofferedonlytoLICcustomersandpolicyholders(Vardhaman,2008).
*Inanotherpositivedevelopment,ABNAMROwithIndia'stravelportalMakeMyTrip.comlaunchedadistinctivecobrandedcreditcard,'Go
Card'in2008.Thecardoffersspecialrewardbenefitsandgoodrangeoftravelrelatedpromotionsandpackages(Vardhaman,2008).
*BanksinIndiaarelookingatdeployingbiometricATMstargetedtoreachtheunbankedpopulationinruralIndia.Usingthumbprintand
voiceguidanceinATMsreducesliteracyrequirementstoaconsiderableextent.Thus,establishingtheidentityofaruraldepositorthrough
biometricsmakesitpossibleforilliterateorbarelyliteratepeopletobecomepartofthebankingusercommunity(MuraliD.andJaishankar
P.,2007).
*Therearealready1.6millioncustomersusingsmartcardsbankingsolutionandthatfigurewillgoupto4millionbytheendofMarch
2009andwillreachto25millioninfiveyears(SenA.,2008).
Hence,thefutureprospectsofplasticcardsinIndiaarebrightenoughtobringparadigmchangeinitspopularityamongcustomersaswell
asbanks.Also,plasticmoneyhasimmenseopportunitiesinagrowingeconomylikeIndia.Alltypesofbankswhetherpublic,privateor
foreignarecontributingpositivelytowardsthedevelopmentofplasticcardsinIndia.Untilnow,thegrowthandusageofplasticcardshas
beenseenmoreinurbanareasduetoexistenceofmoreliteratepeople,betterinfrastructurefacilitiesandproperawarenessas
comparedtoruralareas.Theruralpeoplecanonlyunderstandtheirregionallanguageandmostofthemareevenilliteratewhoareleast
awareabouttheusefulnessofplasticcards.Moreover,thereislackofadequateinfrastructuretopushthedevelopmentofcardsand
inducemoreinnovation.Thus,mostofthebankshavenowplannedtoexpandaggressivelyintoruralIndia,whereabout60%ofthe
populationlives,usinganinnovativesystembasedbiometriccardsthroughwhichcustomerswillbeabletodoanytimeanywhere
bankingontheirown(DavidR.,2007).
Theriseinconsumerismgeneratedbyeconomicreformsbeganin1990'shasalsosparkedrobustdemandforplasticcards.Thearrivalof
malls,multiplexes,onlineshoppingstoresandshoppingcomplexesencouragethecustomerstomakeuseofplasticcards.Themodern
day,Indiancustomersfinditeasiertomakephysicalpayment(creditcardordebitcardpayments)ratherthancarryingtoomuchcash
contributingtothegrowthofplasticmoneyinthecountry.Theprevalenceofintensifyingcompetitionhasfurtherfuelledtheusageof
plasticcardsinthecountrylikeneverbefore.Itbenefitstheconsumerthroughenhancedproductofferingsatalowercostandthattoowith
lucrativedealsdelightedwithrewardsscheme,loyaltybonuspoints,promotionalcampaignsetc.Thishasbeenaverywelcomechange
andthecontributionofalltheplayersisveryimportanttocontinuethemomentum(Parul,2008).However,operationalriskinvolvedwith
theusageofplasticcardslikechancesoffraud,carddamageetc.playsthenegativeparttoo(RetailPaymentSystem,2004).Moreover,
somecustomersarenotabletoutilisecardseffectivelyduetoitscomplexnatureandtheydon'tactuallyknowhowtooperateitforspecific
purpose.Thus,thebanksshouldgivethemsometrainingregardingitsusage.Thebankscanalsoprovidethemfacilitytouseplastic
cardsontrailbasissothattheycanbecomemoreconfidentwhileusingtheirowncards.Costhasalsoremainedanissueincaseofcredit
cards.Theinterestleviedonoutstandingamountisveryhighwhichsometimestakesthecustomersindebttrapultimatelydiscouraging
thepotentialcustomerstomakeuseofit.However,allthesehurdleswilldiminishovertimeandpositivelyinfluencingtrendsareexpected
tocontinueinthenearandfarfuture.Also,thegrowthofplasticcardsinfuturewoulddependuponthecapacitybuildingofthebanksto
meetthechallengesandmakeuseoftheopportunitiesprofitably.However,thekindoftechnologyusedandtheefficiencyofoperations
wouldprovidethemuchneededcompetitiveedgeforsuccessinplasticcardsbusiness.Furthermore,inallthesecustomers'interestisof
paramountimportance(GopinathS.,2005).
Conclusion
TheplasticmoneyintheformofcardshasbeenactivelyintroducedbybanksinIndiain1990's.ButitwasnotverypopularamongIndian
consumeratthetimeofitsintroduction.Thechangeindemographicfeaturesofconsumersintermsoftheirincome,maritalstatus,
educationleveletc.andupgradationoftechnologyanditsawarenesshasbroughttherelevantchangesinconsumers'preferences.
Thesechangingpreferenceshavealsomodifiedtheiroutlookanddecisionregardingtheacceptanceandnonacceptanceofparticular
productandservicesinthemarket.Thus,theplasticcardsaregainingpopularityamongbankersaswellascustomersandgetting
acceptedinthemarketplace.Itcanbewellimaginedfromthediscussionthatnodoubt,theplasticcardsmarketisgrowingatalarge
paceinIndiayetithaslongwaytogoasitlacksbehindifcomparedtotheusagetrendsofothercountries.Hence,ithasbecome
importantthatthepaymentsysteminIndiahastobemodernizedenoughtobeatparwiththesystemsprevalentinothercountries,since
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ourdomesticfinancialmarketsareincreasinglygettingintegratedwithmarketsabroad(CountrySurveyIndia,2005).RBIisalsotaking
importantstepsinordertoenhanceitsusageandpopularitythroughinitiativeslikeregulatingcardmarkettomaintainthesecuritylevels
andtobuildupconfidenceofbankersandcustomers.Despitethestrongadvancesinepayments,anestimated90percentofpersonal
consumptionexpenditureinIndiaisstillmadewithcash(CountrySurveyIndia,2005),whichindicatesthetremendousgrowthpotentialof
thisbusiness.SothiscanbeconsideredasmerebeginningwhichindicatesthebrightfutureprospectsofplasticcardmarketinIndia.In
nutshell,wecansaythattheIndianbankingsectorisacceptingthechallengeofinformationtechnologyasallthegroupsofbankershave
nowrecognizeditasessentialrequirementfortheirsurvivalandgrowthinfuture.
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Developmentofplasticcardsmarket:past,presentandfuturescenarioinIndianbanks.

MandeepKaur*andKamalpreetKaur**
DepartmentofCOmmerceandBusinessManagement,GuruNanakDevUniversity,Amritsar143005,Punjab,India
*Email:mkaur02@yahoo.co.in,**Email:Kamal54preet@gmail.com
Table1:SharedATMNetworksinIndia
ATMNetworkYearofSettlementBank/Institute
Introduction
Swadhan1997IndianBankAssociation(IBA)
Cashnet2003EuronetServicesIndianPvt.Ltd.
Cashonline2003CanaraBank
Mitr2003PunjabNationalBank
CashTree2003BankofIndiaandothersmemberbanks
National2004EuronetServicesIndianPvt.Ltd.
Financial
Switch(NFS)
Source:Adaptedfromvariousstudies
Table2:DebitCardsUsageinIndia
YearOutstandingTransactions(mn)ValueofTransactions
Cards(mn)(Rs.bn)
20030418.137.848.7
20040534.941.553.6
20050649.845.759.0
20060774.960.281.8
Source:http://www.rbi.org.in
Table3:CreditCardsusageinIndia
YearOutstandingTransactions(mn)ValueofTransactions
Cards(mn)(Rs.bn)
20030410.1100.2176.6
20040514.1129.5256.9
20050617.3156.1338.9
20060723.1169.5413.6
GaleCopyright:
Copyright2008Gale,CengageLearning.Allrightsreserved.

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