A STUDY ON LEVEL OF CUSTOMERS’ AWARENESS ON THE USAGE OF

CREDIT OR DEBIT CARDS IN KARNATAKA BANK LIMITED

(WITH SPECIAL REFERENCE TO BHADRAVATHI)

Introduction
The economic development of society and the socio-cultural changes had lead to the
spectacular growth of service industry .The technological advances have increased the
integration and efficiency of the financial system. After the basic needs were fulfilled, like
food, shelter and clothing, there was a tremendous demand for improved satisfaction and it
leads to a proliferation of variations in the same product. Increasing affluence combined with
increasing complexity of life has led to the phenomenon of Credit Cards. They provide
convenience and safety in the purchasing process. It is generally known as plastic money.

Information technology (IT) has brought about a revolution in the world. It has affected all
the business in one way or the other. It has changed the method of work, quality of products
and services. It has brought about enormous saving in terms of time and money for the
business. Now-a-days we find that IT is being used in every sphere of life. The use of Internet
and other e-channels increases the efficiency of the banks by enabling them to deliver the
bank services to the customers at a click of a mouse and by demolishing all the physical
boundaries. Use of electronic technology in banking can be termed as e-banking and it can be
confirmed that e-banking has increased the quality and range of the banking services.
Customers can use the banking services like ATMs, Credit Cards, Smart Cards, mobile
banking and e-banking and save time and money in doing the transactions.

The plastic cards began to be widely used only after 1970, when specific standards for
magnetic strip were set. In the late 1990s, plastic cards became very commen and by 2001,
plastic money has become an essential form of ‘ready money’.

Debit and Credit Cards: Indian Context

The credit cards are made of plastic is widely used by the consumers all around the globe.
The changes in consumer behavior and tastes led to the tremendous growth of credit cards.
Credit Card is a card which enables the consumers to purchase products or services without
paying immediately. This credit concept is based on the principle of Buy now pays later.
‘Plastic cards are the physical carriers of electronic cash.’ With e-cash we will no longer be
required to carry bills in our pocket or purse for exact change. This card can be used by
customers to pay for their shopping, transportation, parking, dining etc. Goods and services
can be purchased over the Internet by using electronic cash card.

Plastic money or polymer money, made out of plastic, is a new and easier way of paying for
goods and services. Plastic money was introduced in the 1950s and is now an essential form
of ready money which reduces the risk of handling a huge amount of cash.

Credit and Debit Cards: Global Scenario

Demands of trade for a reliable payment system led to the innovation of Credit Cards. The
use of credit cards originated in the USA in the 1920s,when individual firms ,such as Oil
companies and hotel chains, began issuing them to customers for purchase made at their
outlets. The period following the Second World War saw the USA become the world’s first
and the largest “service economy”. This factor greatly contributed to the growth and
development of the credit card business later.

In the 1920s that oil companies and hotel chains first began issuing credit cards to their
customers. After World War II, the use of credit cards rose rapidly. In 1950, Diners Club
became the first credit card company, which allowed its members to charge meals at 27
restaurants in New York. The credit card industry got a further boost with the arrival of
American Express began selling their card as a prestige to hotels ,restaurants, sho ps or
airlines in America and slowly expanded the network across the world. There are several
reasons for using a credit card such as, convenience, easy access to credit, wide acceptance
and the privileges offered. The success of these two players attracted many other banks to
join the credit card business.

The world’s first credit card was issued by Mobil in 1940. This card was initially issued by
the Company to give specialized services to its regular customers. It helped to boost sales and
increase the customer base. After the tremendous success of Mobil Card various
organizations began to think about the use of cards in different segments of the business. The
Diners Club, American Express and Blanche Cards have emerged. The credit cards were
popularly known in USA. During the Second World War USA saw the growth of the Credit
Cards. The first bank card was issued by Fanklin National Bank, USA in the year 1952. In
1960, the Credit Card operating system was developed by Bank of America, USA. An
international bank card system known as “VISA” International was established. Another
International Bank Card system called “Master Card” was established. At present the market
is dominated by the VISA and Master Card. In the year 1966 this system was launched by
Barclays Bank, UK and the named as Barclay Card. The Access Card was launched in the
year 1962 in UK by a Consortium of Banks. The EURO CARD was introduced in most of
the West European Countries. In the year 1988, the first woman card was launched “My
Card” by International Bank of Asia in Hong Kong. There was tremendous demand for that
card. The card was introduced as “Ladys Card” in Malaysia. In 1990, Green Card was
launched in UK and Europe. The credit cards are made of plastic. It is widely used by the
consumers all around the globe in the digital economy.

The origin of the bank credit card concept can be traced to the launching of a credit plan
called “charge-it” in 1946 by John.C.Biggins, a consumer card specialist at the Flatbush
National Bank of Brooklyn, New York. The bank issued scrip that was accepted by local
merchants for small purchases. After completion of the sale, the merchant’s deposits the
scrips with the bank, which billed the customer for the total scrips issued.

The successful operation of the bank cards system in the US saw a bouncing growth in other
parts of the world also. In the year 1966, the Barclays Bank, UK, launched Barclay Card
with a Visa tie-up. The Access Card was launched in the year 1962 in the UK by a
consortium of British and Scottish banks with a Master Card tie-up. With the astounding
success of credit card system in UK, the Euro card was introduced in most of the West
European countries with a tie-up with Access.

Polymer Money in Indian Banking Industry

The development of Information Technology has paved the way for a radical change in the
nature and mode of banking operations. Customers today have a wide range of products to
choose from. In order to meet the ever-increasing customer demand, banks which are highly
branch focused, are concentrating on multi-channel delivery. The first credit card to enter
India was the Diners Club Card in the year 1964. The first Indian banks to launch credit cards
were “Andhra Bank and Central Bank”. The first credit card introduced by Andhra Bank was
VISA Classic in the year 1981, followed by Central Bank of India’s credit card in
collaboration with Master Card Corporation in the year 1981. The other nationalized banks,
Canara Bank, Bank of India, and Bank of Baroda gradually introduced their credit cards in
India only later. Apart from these Indian Banks, many foreign banks such as Citi Bank,
Standard Chartered Bank, ANZ Grindlays Bank, Bank of America and American express
Bank have also introduced their proprietary and other franchised cards through their Indian
branches.

Citi bank issues Diners Club Card. Andhra Bank now offers four types of credit cards for
different categories of people, including the VISA ICC card for international usage.
Similarly, Canara Bank has a range of cards from their proprietary Can Card to franchised
cards such as Can Card Visa, Can Card Master, and VISA International Gold Cards etc. Bank
of Baroda has started its BOBCARD Master, and today this bank issues four types of credit
cards. SBI has made rapid strides in the credit card business as to come out with several.
Premium Cards. The bank issues regular card, international card, ATM card and recently, the
ATM-CUM-Debit card. There are about 12 major banks both foreign and Indian, which
currently provide cards in India. The other banks such as Indian Overseas Bank, Dena Bank,
Corporation Bank and Vysya Bank have affiliated with the principal issuers like Canara
Bank, Citi Bank, Bank of India etc for issuing credit cards. In India, oil companies issue
“petrocards” for easier payment at the company’s petrol stations. Similarly the” Mahanagar
Telephone Nigam Limited” (MTNL) has already introduced its “Virtual Calling Card” and
has recently launched a co-branded telecom credit card to facilitate payment of telephone
bills. India has 5.3 million Credit Cards’ and 6.5 lakh debit cards. The average spends on a
credit card, at Rs.22, 000 a year. The following data will reveal the development of credit
cards in India.

Plastic money and plastic currency: A Comparison in India

The plastic money culture seems to be spreading fast if the total transaction volume through
cards (both credit and debit) in the country for 2002 is anything to go by. Total transactions
volumes have raised 103% to $4.201 billion (over Rs19, 400 crore) making India the fastest
growing market in Asia Pacific. The comparative figures for 2011 when the Indian market
rose by 69 % was at $2.277billion. According to the latest Nilson Report, India has gone up
in the ranking by one notch and is now the eleventh largest market in Asia Pacific. However,
the total purchases through cards rose by only 31% to $1.802 billion. India has a long way to
go compared with other Asian countries both in terms of total transactions and purchases.
 The total number of debit cards issued in the country for the period was at 82.99 lakh. The
purchases through debit cards in the country were much lower at $103.6million. This could
be because debit cards in the country are still primarily used as ATM card for withdrawal
purposes rather than for purchases. The total volumes of Visa and Visa Electron in the
country for the year 2002 has shown a growth of 138% to $3.724 billion, while the purchase
volumes for MasterCard has shown a rise of 20% to $787.7 million while purchases had
increased by 22% to $665.6 million.

Review of literature

 Heggade 1
(2000) in his research study “The Bank-Customer Relationship in
India”, he analysed that customer’s views on one hand and employees on the other
hand. He concluded that there is a low correlation among the different occupations
and satisfaction from services in the PSBs.

 Verma 2 (2000) in the research article “Banking on Change”, stated IT is a threat for
the PSBs. It has to be a complete face-off for the PSBs. With the business per
employee, even for the front-run PSBs, being a mere fraction of that of NPSBs, the
PSBs have to do a lot on improving services on Internet.

 Varghese and Ganesh 3(2003) in his research study “Customer Services in PSBs
and old private sector banks”, stated that there is no significant differences in the
two types of the bank branches based on the study of customer responses.

 Hasanbanu4 (2004)in his research study “Customer Service in Rural Banks”, he

analysed and opined that rural customers are not know the complete rules, regulations
and procedures of the banks as the banks do not take interest in educating them.
 R.K.Uppal5 (2006) in his book “Indian Banking Industry and Information
Technology” stated the need of plastic money instead of carrying cash and made a
study on Electronic banking and explained the impact of computerization on the
satisfaction of customers of all bank groups.

 Richard gay et.al.,6(2007) in their book “Online Marketing-A Customer led

Approach”, stated that the internet has brought about huge advantages to e-marketers
as it provides means of advertising, possibility of increased sales, fast and convenient
way of effecting electronic contracts and access to a global marketplace. However, the
use of the internet by marketers has brought about concerns over the problem of
personal data of customers associates and partners.

 Jyotsna Sethi et.al.,7 (2008) in their book “Elements of Banking and Insurance”,
stated technological innovations witnessed by corporate sector during the nineties
have introduced new business strategies, wherein information technology is
increasingly paying a significant role in improving the banking services. As a result
most of changes have taken place both in the Financial Services and as well as
customers are accessing them.

 Ravi Kalakota et.al., 8

(2008) in their book “Electronic Commerce-A Manager
Guide”, analysed the effect and challenges of new technology for banks. It included
that the types, details of encryption, and secure electronic transaction and analysed
customer services in banks.

 A.Sarangapani et.al. 9(2008) in their article “The Growing Prominence of Debit

Cards and Credit Cards in Indian Banking Industry”. According to the research,
conventional branch-based banking is rapidly giving way to banking through plastic
 money i.e. ATMs, debit cards, credit cards etc. they studied about rapid growth in the
usage of credit cards and debit cards in the Indian Banking Industry.

 Benson Kunjukunju,10 (2008)in his book “Commercial Banks in India-Growth,

Challenges and Strategies he analysed the credit cards in the Indian Commercial
Banks and customer awareness towards that. He also made a survey on growth in
credit card based payments from 2003 to 2006.

 S.Mohan et.al. 11 (2008) in their book “Financial Services”, analysed that the history
of credit card in the global scenario as well as in the Indian scenario. The analysis also
included the parties involved in credit cards, benefits of credit cards, branding of
credit cards etc.

 L.M.Bhole 12
(2008) in his book “Financial Institutions and Markets-Structure,
Growth and Innovations”, he made a pioneering attempt to examine the issues
relating to delivery of customer services in Indian Banks and he also studied in detail
about credit cards.

 Vasanth Desai13 (2009) in his article “Bank Management”, including that the
detailed introduction about plastic money especially about credit cards.

 Macmillan14 publishing house published a book of “Information Technology-Data

Communications and Electronic Banking”, analysed that origin of credit and debit
cards, their applications, transactions, impact on economy etc.
  The Icfai University Press15 (2009) released an article of “E-delivery channel-
Customer Perception”. The article analysed all types of credit and debit cards and
the perceptions of bank customers towards e-delivery channels. It suggests some
strategies to be used by the banks to enhance their technological initiatives.

 V.A.Avadhani 16 (2009) in his work “Financial Services in India”, studied about the
plastic money. He found that increasing acceptance of plastic money has become a
source of income to banks and facilitate the public transactions. The currency is made
easier and costs lower. The banks and public both stand to gain by the usage of plastic
money. The use of plastic money raises many questions on technical security, control
and audit systems, most favoured technology to detect frauds and operational
problems, foreseeing and plugging the weak spots of the cryptography based system.

 D.Muraleedharan17 (2009) in his work “Modern Banking-Theory and Practices”

analysed the credit cards services provided by the bank. He concluded that banking
the world over is undergoing a rapid and radical transformation due to the all-
pervasive influence of IT. These changes also felt by Indian banks and he also
discussed about secured credit card and work of credit card.

 Subramanian Ravi et.al., 18 (2010) in their article “It’s Your Number…It’s Your
Life!” described the ‘plastic money’ has overtaken cash as the preferred method of
paying for goods and services today owing to developments in technology. Over the
years consumers have moved from using cards only for big ticket purchases to using
those for their daily expenditure.i.e.how plastic cards have come to occupy an
important place in our lives.

Objectives of the study:-

 To study and evaluate the perception of bank customers towards debit and credit
cards.

 To study the awareness of credit card and debit cards in Bhadravathi town.
  To examine the Karnataka Bank Ltd performance in providing new banking
technology services.

 To understand the factors influencing credit and debit cards in Bhadravathi Town;

 To offer few suggestions to improve the better banking technology and services to
their customers.

Hypothesis:-

There can be identifying two type of hypothesis. Such as, Null (H0) hypothesis and
Alternative Hypothesis (Ha).

1. H01:- There is no significant relationship between customer attitude and awareness

level.

Ha1:- There is a significant relationship between customer attitude and awareness

level.

2. H02:- The polymer money usage is not familiar among the bank customers.

Ha2:- The polymer money usage is familiar among the bank customers

3. Ho3:- Banking technology is not advantageous to the customer of the Karnataka

Bank Ltd .

Ha3:- Banking technology is advantageous to the customer of the Karnataka Bank Ltd.

Scope of the study:-

The present study focused on debit and credit cards in Karnataka Bank Ltd., Bhadravathi
branch, Shimogga district. This study cover the issue of plastic cards to their customers,
perception of polymer money, attitudes and awareness about the bank cards in Bhadravathi
town. The sample size for the study is randomly selected and total number of respondent take
for the study 75. The structured questionnaires were sent to all the customers of Karnataka
Bank Ltd., in the Bhadravathi town limit.

Sampling design:-

The number of credit and debit cards user is very large in Bhadravathi; it is difficult to make
detailed study of every consumer. Hence this study has planned to adopt simple random
sampling method and selected Bhadravathi town for the study.

Period of the study:-

The present study is for September-2010 to March-2011.

Methodology:-

The present study is based on;

01. Primary data

02. Secondary data.

The primary data: The primary data is collected from the bank customer or cardholders
through the structured questionnaires.

The secondary data: The secondary data are collected from the RBI reports/bulletin, books,
journals, magazines, articles/research paper/news paper ,online source and Indian Banks’
Association(IBA),Indian Institute of Banking and Finance(IIBF),Institute for Development
and Research in Banking Technology(IDRBT).

Statistical tools and techniques:-

The present study used different mathematical tools and techniques for the analysis and
interpretation of data.
They are frequency distribution, tables, charts, graphs, figures, chi square test(X2), F test, T
test and ANOVA etc.

Limitations:-

There are certain limitations of the study, such as;

• The data for the purpose of the study is collected from respondents in Bhadravathi
town only. Hence, the results cannot be generalized.

• It is a time specific study, since the results may be valid only for the study period.

• Samples chosen by me were 100 respondents, which is very small compared to the
actual number of customers.

Chapter scheme:

CHAPTER CHAPTERS NAME

NUMBER
I Research Design
II Profile of Karnataka Bank Ltd
III Credit and Debit Cards: A Conceptual Framework
IV Polymer Money in Bhadravathi: An Empirical Study
V Major findings, suggestions, Recommendations and conclusion
_ Bibliography
_ Annexure

01. The first chapter “RESEARCH DESIGN” deals with the introductory aspects of concepts
of growth of plastic money, Review of literature, scope of the study, Objectives of the study,
hypothesis, Methodology, sampling design, Limitation of study.
02. The Second chapter “PROFILE OF KARNATAKA BANK LTD.” deals with profile of
the Karnataka Bank Ltd, Origin, history ,evolution , mission and vision of the bank
,organization structure ,awards and achievement of the Bank, branch performance .

03. The third Chapter “CREDIT AND DEBIT CARDS: A CONCEPTUAL FRAMEWORK”
deals with theoretical aspects regarding credit and debit cards i.e. meaning, definitions etc.

04. The fourth chapter “POLYMER MONEY IN BHADRAVATHI: AN EMPIRICAL

EVIDENCE” is considering with tabulation and analysis and interpretation of the survey
results which was collected through structured questionnaires.

05. The last chapter is for the presentation of summary, major findings, suggestions and
conclusion.