Journal of Commerce & Management Thought

Vol. 8-4, 2017, pp 743-759

DOI : 10.5958/0976-478X.2017.00045.3

A Study on Future Prospects of Plastic

Money in Indian Banking System
Dr. Ramola Premalatha J, P. G. Suresh,
K.C. Arun Kumar, S. Harish Venkatram

Abstract
Due to the technological advancement in monetary sector, the payments in
banking industry have undergone a remarkable transformation. The
innovative products for creating payments have been developed subsequent to
the privatization and globalization. Customers have showed their preference
over the usage of the plastic money typically over a period of time within the
banking process. Plastic money is a substitute to the cash or benchmark
money. Plastic money refers to the credit cards or the debit cards that we tend
to use to form purchases. Other different kinds of plastic cards provided by
banks in India are ATM cards, Smart cards. This study presents a summary of
the event of banking within the plastic cards usage trends since these are
introduced in Indian banking sector. The study conjointly highlights the role
of those cards as electronic payment tool to be employed by customers and
discusses the penetration of those cards in replacement of cash and paper
money. The study is carried out by taking a survey of 100 respondents by
Convenient Sampling Technique from the city of Vellore by using a structured

743
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questionnaire and interview technique. The factors that influence for adoption
of plastic money in substitution of cash has been identified which reflects the
preference of customers towards plastic cards over paper money. Some future
plans developed by different banks and institutions for avoiding the frauds
arisen owing to the credit and debit cards also are mentioned in way that it
depicts the image of its future growth and prospects in India.
Keywords: Plastic money, Banking sector, Plastic cards, Electronic payment,
Replacement of cash.

Introduction
The advent of Liberalization, Privatization and Globalization in Indian
economy has been predominant. These developments have offered a test
before Indian banking system in adoption with the new leap in technology.
Innovation with efficiency in banking system always contributes for the
healthy economy in India.
Indian banking system should not limit itself from being problem free
but should be capable of facing the newer challenges imposed by advanced
technology and any other factors. The advancement of technology in banking
sector solely doesn’t influence the improvement of current affairs unless
customers respond to them positively. Therefore, the banks should consider
the needs, preferences and convenience of the customers before offering any
new services or products.
Customer doesn’t limit himself as a customer of a particular branch but
acts as a customer of whole banking system, where irrespective of place and
time he is capable of using the bank facilities. This conception prolongs the
relationship between customers and the banks for long term. Electronic
banking considerably is a new advancement in banking sector widely adopted
by customers and banking firms internationally due to its extensive scope.
Further large number of new products and services has been introduced to
satisfy the customer’s needs and preferences.
The development of private sector banks and foreign banks has led to
competition among the banking sector since their advancement in technology
 A Study on Future... 745

is rapid. The large number of people in India is dependent on the traditional

public sector banks which maintain a strong base of customers when compared
with private and foreign banks. By the advancement in Information
Technology in the country it is now easier to convey different products and
services resourcefully without the need of opening new branches.
Therefore, the newer private and foreign banks take on the traditional
public banks through their advanced technology in banking affairs like Internet
banking, Electronic Funds Transfer (EFT), plastic cards, Digital money etc.,
to expand the scope of their banks rapidly among traditional customers of
Public banks.
This ultimately led public banks to adopt and implement the services with
consistent innovation to compete with private and overseas banks. This
combative environment among the banks within the banking system has shown
outstanding development with respect to innovative services, productivity,
efficiency etc.
In traditional sense, accepting deposits from customers and lending
money to the customers at a given proportion were the major concerns for a
banking firm (Anisha, 2015).
The modern age in the banking sector has shown continuous change in
the whole system by advancement in information technology. The newer
private and foreign banks in the banking system have introduced many
innovative products and services with minimum cost and satisfying customer
preferences. From then for the next decade the development in banking sector
has shown significant improvement in all its fields majorly through
information technology and advancement in computer applications.
This development in the banking sector has replaced the traditional
banking through its advanced products and services which have wider scope
in satisfying the customers preferences like Electronic banking products and
services like Debit Cards, Credit Cards, Internet banking, Electronic Fund
Transfer (EFT), Smart cards etc.
This competitive environment in banking sector has led to remarkable
development in the banking sector i.e. 3% since 1996 to 18% by 2006 which
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was a 6-time increase in a decade. The country has far superior economic and
financial conditions than any other country in the world. Traditional public
sector banks still hold a strong base of 80% of the market while the newer
private and foreign banks hold the smaller percentage of market (Union Budget
2016-17).

Cash Still the Preferred Choice

Cash being accepted universally still remained a preferred choice, in spite
of people using other services as well.
Wide range of innovative services is changing the mode by which Indian
consumers use their financial need. But still cash remains most prioritised
medium. The ATMs account to 88% of aggregate amount and around 94% of
aggregate amount of debit card transactions, when compared, transactions at
point of sale (PoS) terminals reflect for only 12% of volume and 6% of total
value of transactions (RBI report, April 2016).
But the growth in ATMs and PoS machines has kept its pace. Between the
years of October 2013 and October 2015, the amount of ATMs raised around
43% while PoS machines rose at 28%. By the end of December 2015, the
number of ATMs were 0.19 million and there were 1.2 million PoS machines.
This rate is considerably low when compared to previous years (RBI report,
April 2016).

Rise of Plastic Money in Post Demonetisation

There was a major increase in usage of plastic money after
demonetisation. The unavailability of cash made customers to adopt the new
payment modes. There was around 37.4% increase in the usage of plastic
money in travel-related expenditure alone, further more than 57.9% travellers
preferred booking through online medium leading to huge decrease in offline
agent booking through cash (Yatra.com report, December 2016).
The usage of plastic money is not limited to travel-related expenditure;
the amounts of donations taken in educational and medical sectors are also
reduced to minimum or nil since the unavailability of hard cash in huge
 A Study on Future... 747

amounts. Further even if the 100% cashless economy is impossible the major
part of benchmark money is reduced and economy started moving towards
digitalisation (Vepa, 2003).

Recent Innovations
Even with competition among the banking sector, by the end of June,
2011 the amount of credit cards in circulation has declined over 7%. Further
even if there was a rise in amount of debit cards the rate of increase during the
period of June, 2011 is 25% which is considerably low compared to previous
years (RBI report, 2011).
With the sudden shift in the trend due to demonetisation the banking firms
realised the past mistakes of offering cards to customers without estimating
their creditworthiness. Several advancements have taken place by major
banking firms prioritising the plastic money. Banking firms mainly private
undertook various innovative product and services post demonetisation.
ICICI being the first to take the initiative and started marketing its new
kind of cards named “Prepaid card” where the customers are required to open
using a fixed deposit with minimum of Rs.50000 with different maturity
periods and further a linked credit card would be offered for usage of 80% of
the fixed deposit as credit. Followed by ICICI bank, the IDBI introduced a
combo card naming it “IDBI magic card” which depicts the features and uses
of both credit and debit cards.
More recent advancement was made by HDFC bank where three kinds
of premium cards are newly introduced namely, Regalia, Superia and Platinum
Edge concentrating mainly on travel expenditure with wide range of benefits
such as Free access to airport lounges, free air tickets etc.
All of these cards at the time of its lunch were widely unsuccessful and is now
in gradual progress towards increasing users.

Advantages of Plastic Money

1. COST INCURRED FOR PRINTING CURRENCIES: The benchmark
money is medium of exchange and has a value, but in addition to that
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the RBI spends about 2500 crores on printing of 17 billion currencies of

different denominations. Further, the more the cash is printed the more
cost of printing of cash takes place. One 2000 rupees note takes about
Rs.3.57 which is a lot if observed in huge printing process in India.
2. 24/7 BANKING HOURS WITH MINIMUM COST: The services of
plastic card are not bound to any particular time. We can avail services
throughout the day even during non-banking hours. This also helps in
saving money and time of travelling to branch office every time for all
transactions. All your transactions can be efficiently maintained by self.
3. TRACKING THE ACCOUNT AND PAYING BILLS ON TIME: On
usual case the bills are to be paid to service provider or the bank. But
with this advancement it is easy to pay bills online basis which makes
is more reliable for paying in time. All the transactions of the plastic
cards are clearly on account and SMS verification is done every time for
every single transaction.
Disadvantages of Plastic Money
1. UNIVERSAL ACCEPTANCE: The plastic cards don’t hold its usage in
global market. The preference depends upon various companies; few
accept cards and few don’t due to various reasons like regional conflicts
of particular cards. So, the acceptance of card is not sure all the time
leading to loss to time if the company fails to accept the card during
shopping etc.
2. SUSCEPTIBLE TO DAMAGE: The present generation prioritizes the
plastic cards and considers as a matter of prestige. The plastic cards are
carried out by people in wallets etc., but since it is a plastic it is
susceptible to damage. Due to constant usage magnetic strips of the card
gets damaged which makes card unacceptable.
3. TOO MUCH OF CREDIT: The plastic money provides the freedom of
credit depending upon the creditworthiness of the person. But in most
of the cases people become too reluctant of their credit credibility and
buy more of products forgetting the future consequences of paying the
bill. This freedom of credit by plastic money lets the person into
troubles during the payment of credit bills.
 A Study on Future... 749

4. FRAUD AND MISUSE: The credit/debit cards are constantly under a

risk of theft. A person might get away with theft if he knew that his card
has been stolen instantly, but in certain cases the person doesn’t realize
that the card has been stolen which in turn makes him liable for the
products bought by the thief through his card. In many cases people end
up paying bills for something which they haven’t bought or used.

Reserve Bank Of India’s Vision 2018 (Less-Cash India)

RBI has various visions which included less-cash India by 2018. This
predominantly concentrates on the payment and settlement systems in India.
The main motive of this vision is to promote the payments systems in more
secure, safe and for universal availability using technological applications,
which exhibits faster processing, convenient state, and keep tracks of all the
information that accompany payments.
All the modes of electronic payments have shown significant rise in terms
of usage and also of usage quantity. During the years from 2013-16 there was
a greater usage of Real-time gross settlement (RTGS) and National Electronic
Funds Transfer (NEFT) among all segments of people. The consistent increase
in banking firms providing mobile banking applications, internet banking and
also advancement in E-commerce in the country has increased the value of
transactions through this cashless medium. Not only mobile banking
applications but also the card transactions in both ATM as well as Point of
Sale (PoS) has also been increasing significantly.
In order to achieve the Vision 2018, various new policies are framed and
implemented by the RBI focussing on the electronic payments which in turn
reflects the trends of people usage of electronic payments. The vision is further
carried out by all banks, payment system operators, users, etc., which is
expected to exhibit the less-cash India by 2018.

Literature Review
Anisha Bisht et al., (2015) in his thesis “Analysis of use of plastic money: A
Boon or a Bane” showed the awareness and usage of plastic money among
various segments of people. Stratified random sampling method was used for
750 Journal of Commerce and Management Thought 8 - 4

data collection which included students, professionals, government officials,

house makers and senior citizens. The study reflected that people in major
prefer plastic money mainly for its convenience and easy accessibility. The
major problem is unavailability of cards to all the users and also lengthy
formalities to procure card from financial institutions.

Sushma Patil (2014) in her research paper “Impact of plastic money on

banking trends in India” reflected the outline in Indian banking sector with
respect to the development of plastic cards. The importance of plastic money
as digital payment method by the people and the amount of impact of these
cards in replacing the benchmark money is reflected in the study. The study
used convenience sampling method from a city of Mumbai by using structured
questionnaire. The paper concludes that Plastic cards will replace the
benchmark money in the near future.

Supriya Singh (2014) in her research paper “Impersonalisation of electronic

money: implications for bank marketing” examined variance among the
impersonality of plastic/online money and also customers wish to maintain
personal banking relationship. The explanation involves usage of sociology
of money, incurring of data and communication technologies and self-service
advancements. The study confirms that the activity-centred social marketing
strategy is adopted by bank-marketing professionals. This adopted strategy
provides a secure fit between the payment activities, services and other
transactions with regard to different aspects. The major conclusion is that
adoption of this strategy will increase trust in banks.

Subani and Hasan (2011) in their research paper “Plastic Money/Credit Cards
Charisma for Now and Then (A Thin Line between Easy Money and Risky
Money)” examines how user friendly the plastic cards are in the case of
affordability is concerned among various segments of people. Further the study
authenticates how useful and charismatic the plastic cards are in case of their
determination of income among family and friends. The study confirms that
the adoption of cards has a charismatic appeal among friends and family and
also revealed that it has its own usability and affordability.
 A Study on Future... 751

Martyn Gould (1993) in their research paper “Plastic Card Crime and Fraud
Prevention” completely deals with the various ways of frauds that affect the
productivity of banking sector. It discusses various Plastic Card Fraud
awareness programs for the people to understand what makes fraud? And what
precautions can never let fraud? The article concludes that the amount of frauds
directly influences the number of users since the certainty of loss of any policy
would not get on.

Objectives of the Study

The objectives of the study are as follows-
• To study the evolution of plastic money in banking sector usage
trends.
• To determine the elements for taking on of plastic money over
benchmark money.
• To determine the impalement of plastic money in day to day life over
the paper or cash money.
• To study the scheme of actions been brought by various banks and
institutions for more secure plastic cards.

Research Methodology
The nature of research study is exploratory. The research data was
collected from the people of Vellore Municipal Corporation. A structured
questionnaire was designed and distributed among 114 respondents using
convenience sampling method. A sample of 100 was retained as 14 responses
were incomplete. The sampling frame is confined within the Vellore Municipal
Corporation. Research papers, Journals, reference books and websites are used
for assortment of secondary data.
752 Journal of Commerce and Management Thought 8 - 4

Data Analysis and Interpretation

a. Online usage of plastic cards
• There is a consistent growth in usage of plastic cards online as agreed
by 88 percent which is shown in the following diagram 1.
• In any case, the Secondary information demonstrates that dominant
part of online exchanges made by RTGS.
Figure 1: Online usage of plastic cards

b. Percentage Usage of each type of plastic cards

• The survey reflected that debit card users are the highest (59 percent)
and has penetrated in all segments of the society when compared to
Credit cards (37 percent) which also contribute in huge amounts but
available for selected people depending on the credibility as reflected
in fig.2.
• The secondary data reflects the same.
Figure 2: Usage of plastic cards
 A Study on Future... 753

c. Percentage of transactions done through plastic cards

• Customers are utilizing a greater amount of web based business
destinations to purchase an item.
• The instalment of such sum is done in internet by utilizing plastic
cards.
• The auxiliary information expresses that 59% of the clients utilizes
Direct Debit, 4% utilizes Cash Card and 37% uses Credit cards. For
the most part plastic cards are utilized for booking railroad tickets,
motion picture tickets, shopping and so on as the fig.3 reflects.
Figure 3: Percentage of transactions done

d. Being a person who has been affected by fraud on plastic cards

• The primary purpose behind the expansion in plastic cash is that the
customers are not a casualty of a fake. 88 percent of respondents
reflected their experience with fraud as shown in the Fig.4.
• The Research and optional information additionally demonstrated
same.
754 Journal of Commerce and Management Thought 8 - 4

Figure 4: Affected by fraud on plastic cards

e. Observation of IVRS / Telephonic Payment opt (1-Excellent, 5-Least)

• The clients have reviewed that the telephonic instalment payment is
normal (Majority 3-normal) as shown in the Fig.5.
• It requires a big investment to get past the phone procedure.
• This is likewise normal on the grounds that the majority of the clients
to feel insecure to share their cards CCV/PIN number.

Figure 5: Observations of IVRS

f. Divergence in your Credit / Debit Card Bills

• The study and auxiliary information proposes that customers have
barely confronted any errors with their invoices. 64% of the
respondents reflected that they never had divergence in their
credit/debit card bills (Fig.6).
 A Study on Future... 755

Figure 6: Divergence in card bills

g. Frequency to visit the bank & Method preferred for

withdrawing money
• Presently people are not going to banks regularly to pull back the
money (35 percent) which is represented in Fig.7.
• The utilization of these cards and furthermore the presentation of ATM
machines has changed the way we handle money.
• Exhausting through charge or ATM cards, expanded by 45% year-on-
year
• People are leaning toward the ATM machines now to days.

Figure 7: Frequency to visit banks

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h. Client Care support offered by your Credit / Debit Card provider

• Banking ventures has likewise given the 24x7 customer service to
their customers (80 percent positive response) (Fig.8).
• These administrations are frequently utilized by client for any issues
in regard to their cards.
• All these administrations have expanded the utilization of plastic cash
in India
• Banks are presently giving many offers to their client on the off chance
that they utilize plastic cash.
Figure 8: Client care support

Findings
• The utilization of Plastic cards is increasingly expanding on online
instalment.
• Over half of instalments of the clients are processed through
credit/Debit cards. Sample overview indicates Debit cards are
favoured over credit cards.
• The primary explanation behind the expansion in plastic money is that
the clients are not a casualty of a cheat.
• The clients have evaluated that the telephonic instalment alternative is
normal because of long convenience and security sympathy toward
CCV/PIN number.
 A Study on Future... 757

• The survey and secondary data suggest that clients have hardly faced
any divergence with their invoices.
• The presentation of ATM machines has differed the saving money
handle too. Clients are favouring the ATM machines now to days
because of that recurrence of customers to visit the banks have turned
out to be less.
• The utilization of plastic cards has additionally been expanded on the
grounds that managing an account has likewise given the 24x7 client
administration to their clients.
• The elements for reception of plastic money over the money and paper
cash are monetary-offers while shopping, not to bother about
conveying money, Security of cash, Hassle free EMI’s, Easy to utilize,
Personal Loan on Credit Card.

Conclusion
The upsurge demand for the plastic cards is a reflection of developments
in economic reforms which contributed for rise in consumerism. Consistent
rise in the infrastructure starting from multiplexes, shopping malls to high-
class restaurants, online shopping stores have greatly contributed for
encouraging the use of plastic money. The mode of using plastic cards has
made things simpler for the consumers in India where carrying too much cash
is greatly replaced with a single debit/credit card.
One major factor that contributed for the rapid development in usage of
plastic money is the interior competition between the banks within the banking
sector. As a process of promoting the plastic money, banks and other
companies offer various discounts, rewards, loyalty bonus contributing a better
and quality product for the customer at lower price.
One major challenge for the plastic cards will be its complex nature
which sets a part of customers incapable of utilizing the card services due to
lack of knowledge in operation of plastic cards. To fix this issue, the banks
should provide proper training to the customers regarding the utilisation of
card services. Promotional activities like providing cards on trial basis will
758 Journal of Commerce and Management Thought 8 - 4

also contribute for the effective use of plastic money by the customers without
any panic relating to the usage of cards.
Major problem that disrupts every promotional activity is the cost. The
nature of the credit cards i.e. levying interest on the outstanding amount is too
high which might ultimately take the customers in debt setup dispiriting the
customers towards the use of it. Still, a positive trend in development of plastic
cards is observed and all the challenges will be addressed in near and distant
future. Demonetisation led to unexpected turn in the banking sector, when
people started their interest towards plastic cards.
The involvement of demonetisation is a great platform for the promotion
of plastic cards in the nation. Still, the development in plastic money in the
coming years would largely be consistent only if the banks provide high
secured system and utilize the opportunities in penetrating the plastic cards
over benchmark cash. And one factor that influences the convenience,
productivity, efficiency and security in usage of cards is advancement in
technology, consistent development in technology provides competitive
advancement in technology. The Supreme importance finally vests in the
customers’ concern.

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The Author
Dr. Ramola Premalatha is Associate Professor in the Department of Commerce at
VIT University, Vellore, Tamil Nadu.
P. G. Suresh, K. C. Arun Kumar and S. Harish Venkatram are students from VIT
University,Vellore , Tamil Nadu.
Email: ramolapremalatha@vit.ac.in, ramolapremalatha1@gmail.com
• Received on: 08, Jun. 2017
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