Page 1 of 8
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 75
Plastic Money: An Effective Transaction Mode
Dr. Gaganpreet, Karnal
Abstract
Plastic cards are such payment tool which gives a customer an opportunity of non-cash payment of
goods and services and are designed to facilitate small value retail payments by offering a substitute
for bank notes and coins and thus to complement traditional payment instruments. The plastic money
generally a credit or debit card with a magnetic strip that many people carry in their wallets or purses
is the result of complex banking process.
Keywords: Plastic cards, Credit cards, ATM, Debit cards, Indian economy, transaction tool
Introduction
Money is always regarded as an important medium of exchange and payment tool. The prevalent
mode of settlement across India in the 20th century has been coins, cash and cheques. Over the years,
money has changed its form from coins to paper cash and today it is available in formless form as
electronic money or plastic card (Ramasamy et. al., 2006). As we move ahead into the 21st century,
payment through cash and cheques itself has become very complex. It has moved from being a
physical paper based transfer of value to a virtual electronic one. Usage of plastic money has come as
a form of amenity to customers. Plastic cards are one of those types of innovations through which the
customers can make use of banking services just by owning the card issued by bank and that too
without restricting himself in the official banking hours.
Concept of Plastic Money
Plastic cards as the component of e banking have been use in the country for many years. However,
the card-based usage has picked up only during the last twenty years. Payment by cards is now
becoming a much preferred mode for making retail payments in the country (Report on trend and
progress of banking in India 2006-07, RBI). Thus, plastic cards are such payment tool which gives a
customer an opportunity of non-cash payment of goods and services and are designed to facilitate
small value retail payments by offering a substitute for bank notes and coins and thus to complement
traditional payment instruments.
The plastic money generally a credit or debit card with a magnetic strip that many people carry in
their wallets or purses is the result of complex banking process. Carrying a lot of cash in modern time
is cumbersome, risky and sometimes, a person can run short of it, just when he most need it. A Credit
card is the smart solution to these problems. It is a convenient and safe alternative for cash. Holders of
a valid card have the authorization to purchase goods and services up to a predetermined amount,
called a credit limit. In particular these are required to appear on a credit card are name of the
customer, 16 digit card number, validity date, the name of the issuing bank, signature panel, magnetic
strip and personal identification number.
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European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 76
Review of Literature
Jeans S. Bowers (1999) in longitudinal study shows low income users of credit cards tend to use the
cards for the instalment feature rather than for service features such as convenience, safety, or
identification. It has been suggested that the instalment feature of credit is needed by the low income
consumer to permit purchases such as automobiles, furnishings, and other consumer durables.
Austin and Phillips(2001) claim that there is evidence that college students who are regular credit card
users are more likely to pay off their debt each month and that they have experience with credit cards
prior to entering college.
Bernthal et.al. (2005) stated that credit cards have the capacity to propel customers towards a lifestyle.
The credit cards convey certain values and lifestyle patterns about the users. An individual controlled
and uncontrolled use of credit card depends on “Internalization of ideologies of entitlement and
frugality".
Borzekowski and Kiser (2007) indicated that debit cards appear to serve primarily as a substitute for
cash and cheques while credit cards are very often used to extend payment especially for business
travellers and are especially useful when visiting many foreign countries with different currencies.
Mandeep Kaur and Kamalpreet Kaur(2008) in their article “Development of Plastic Moneys Market:
Past, Present and Future Scenario in Indian Banks” concluded that Indian banking sector is accepting
the challenge of information technology as all the groups of bankers have now recognized it as
essential requirement for their survival and growth in future despite the strong advances in e- payments, an estimated 90 percent of personal consumption expenditure in India is still made with
cash which indicates the tremendous growth potential of this business. So this can be considered as
mere beginning which indicates the bright future prospects of Plastic Money market in India.
Subhani (2011) conducted a study on ‘Plastic Money/Credit Cards Charisma for Now and Then’. The
study was based to find out the charisma of plastic money, its usability and affordability and its
impact on its preference to use. The research found that the preference to use of plastic money/ credit
card has its pros and cons with its usability and affordability. According to the consumer behaviour,
plastic money is a form of conditioning and acts as a stimulus which qualifies a consumer to spend.
Anupama Sharma (2012) has also thrown light on the increasing number of frauds the most affected
parties are the merchants of goods and services as they have to bear the full liability for losses due to
frauds, the banks also bear some cost indirectly.
Blankson et. al. (2012) examined college students motivation for consuming credit cards and their
usefulness to them. To measure college students decision criteria four key factors: customer service,
incentives, need for credit and buying power were considered.
Bansi Patel and Urvi Amin (2012) in their research paper “Plastic Money : Roadmay Towards Cash
LessSociety” discussed that now days in any transaction Plastic money becomes inevitable part of the
transaction and with it life becomes more easy and development would take better place and along
with the plastic money it becomes possible that control the money laundry and effective utilization of
financial system would become possible which would also helpful for tax legislation.
Loewenstein and Hafalir in 2012 conducted a study on “The Impact of Credit Cards on Spending”.
The study focused on two types of customers, revolvers (who carry debt) and convenience users (who
do not carry debt), and measured the impact of payment with credit card as compared with cash by an
insurance company employees spending on lunch in a cafeteria. It was found that there was change in
Page 3 of 8
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 77
the payment medium from cash to a credit card when an incentive to pay with a credit card was given.
It was then found out that credit cards do not increase spending.
P Manivannan (2013) in his research paper “Plastic Money a way for cashless Payment System”
examined that Plastic Money i.e. usage of Credit card was measured a luxury, and has become
needed. These plastic money and electronic payments was used by only higher income group. This
facility extended not only to customers in urban areas or cities, but also to customers residing in rural
area. However, today with development of banking and trading activity, the fixed income group or
salaried classes are also start using the plastic money and electronic payment systems and particularly
Credit cards.
Farhana Rahman Sumi and Ayesha Binte (2014) defined plastic money as an electronic module where
all the information about the client/card holder and bank are stored and can be executed by putting it
in the Automated Teller Machine and at the Point of Sales (POS).The entire process is so secured and
swift and that is why all the banks are trying to improve the services being provided through plastic
cards. Several kinds of cards have been issued to the client like credit cards, Debit cards, ATM cards,
smart cards, gift cards etc.
Dr Shaukat Ali (2014) has described plastic money as the money of future in spite of its inherent
limitations, risk and heavy charges due to increase in disposable income and revolutionary growth in
IT and retail sectors in India.
Hardeep Chahal et. al. (2014) investigated the effect of perceived risk on usage and service experience
link. Time risk is the strongest moderator. Sense of security and confidence benefits influence the card
usage and service experience respectively.
Anisha Bisht et. al. (2015) claimed that the plastic money is preferred over paper money because of
the handiness and easy accessibility it provides to its customers.
Process And Types of Plastic Money
Automated Teller Machine (ATM)
Automated teller machines played a vital role in the development of plastic cards. In India, there is a
continuous rise in the usage of ATMs by the customers. According to a survey conducted by Bank net
India in 2006, 95% people prefer using ATMs to traditional mode of banking. Since 2000, sufficient
number of ATMs have been installed by various banks in India while taking into consideration its
popularity and usage among the customers. The ATMs installed by banks in year 2000 was just 1000
in number which increased to 27088 in year 2007 signifying the tremendous growth in 7 years and
around 2,20,000 in 2018. As far as the growth and number of offsite ATMs are concerned new
private sector banks have led over the other group of banks. At the early stage, customers could only
use ATMs of that respective bank where they are having account. But currently, this constraint has
been weeded out for the convenience of customers as they can use ATMs of other banks also where
they don't have any account. It is known as interbank networks and banks charge extra fee termed as
"inter-change fee" for usage of this service. Reserve Bank has encouraged the banks to join together
in small clusters so that their ATM networks can be shared. Currently, there are various such ATM
network clusters functioning in India. The number of ATMs shared by these networks which
indicates that National Financial Switch (NFS) is sharing the largest number of ATM with its member
banks.
Debit Cards
