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CHAPTER-1

INTRODUCITON

1.1 What is Debit card?

In order to know what a debit card let us first know the definition of a Debit
card. A Debit card is a plastic card which one can use as an alternate method
of payment when making purchases. Functionally, it can be called an
electronic cheque, as the funds are withdrawn directly from either the bank
account, or form the remaining balance on the card. In some cases, the cards are
designed exclusively for use on the internet, and so there is no physical card.

With which a customer may withdraw funds on deposit in the customer’s

account using an ATM. Some merchants accept debit cards, treating them the
same as cash. A debit card transaction pays the seller of goods or services by
withdrawing funds already on deposit in the buyer’s account, as opposed to a
credit card transaction in which funds are loaned to the buyer by the card issuer.

In many countries use of debit cards has become so widespread that their
volume of use has overtaken the cheque and, in some instances, cash
transactions. Like credit cards, debit cards are used widely for telephone and
internet purchases and, unlike credit cards, the funds are transferred
immediately from the bearer’s bank account instead of having the bearer pay
back the money at a later date.

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Debit card:

An example of the front of a typical Debit card:

1) Issuing bank logo
2) EMV chip
3) Hologram
4) Card number
5) Card brand logo
6) Expiration date
7) Cardholder’s name

An example of the reverse side of a typical Debit card:

1) Magnetic stripe
2) Signature strip
3) Card Security Code

What is a Debit card, like in different countries?

 Maestro Debit Card and Solo Debit card in United Kingdom.

 Carte Bleue Debit Card in France.
 Laser Debit Card in Ireland.
 “EC electronic cash” Debit card in Germany.
 EFTPOS Debit Card in Australia and New Zealand.

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A Debit card can have both the logos of Visa as well MasterCard.

What is Debit card compatibility and how important it is evident from the fact
that one might be hindered from accessibility across networks. This leads to
inconvenience on the customer’s part.

In order to know what is Debit card usage disadvantage one can go through the
following details.

 Unless required, one should opt for a plain ATM card rather than a Debit
card.
 If one uses a Debit card at all one should not give it to any merchant who
cannot be trusted.
 The Debit card information and details should never be given on the
Internet.
 What is a Debit card swiping may be a question which one might be
curious to know. Every shop has a terminal for swiping cards wherein the
necessary transaction details take place where the money spent is
deducted from the account.

Debit cards: Issuers

The banks issuing Debit cards include:
 Bank of America
 Citibank
 American Express
 Deutsche bank
 Standard Chartered
 Chase
 HSBC

Debit cards are becoming more popular because they use the funds from the
card holder’s savings or checking account, offering convenience and safety.
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1.2 Debit Card Company

For people who do not like to carry cash along with them, owing a debit card is
a preferable alternative. Every Debit card Company that is doing business in the
market is forever coming up with newer options and rewards to attract
consumers to own the Debit Cards issued by them.

A Debit Card Company issues cards that act as the substitute for cash while
either travelling or buying things from the market. These cards which empower
people to make use of the money from their accounts without having to take up
the risk of carrying it along are known as Debit cards. Debit cards draw the cash
from savings accounts that usually come with checking facilities.

Every Debit card Company offers almost the same range of benefits with little
or no variations to customers who subscribe to these Debit cards.

The most circulated debit cards issued by every Debit card Company are:

 Master Card Debit Card (owned by United credit Union of USA)

 Visa Debit Card (visa International service Association of USA)
 Visa Electron Debit Card (also owned by visa). Each Debit Card
Company offers its customers with more or less the same kind of
facilities and benefits which are:
 Hassle free travelling or shopping without carrying cash.
 The added advantages of drawing cash at will from ATMs when required.
 The debit Cards are generally protected by CHIP or PIN, so that even
when lost it cannot be used to draw money from the owner’s account.
 If misplaced or stolen, these cards can be blocked immediately from
further usage by informing the issuing company/bank supported by a
Police Department notification.

1.3 History of Debit Card

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The history of debit cards is an interesting one. Debit cards helped to change the
way that people used money and bank accounts. Debit cards are used to pay for
purchases at stores and other locations around the world. A debit card works by
debiting the money from your checking account. For many people debit cards
have taken the place of cash and checks. However, debit cards are still a
relatively new banking tool.

Credit cards paved the way for debit cards. Many people used credit cards to
pay for transactions. This also put in place the infrastructure that debit cards
needed to be practical as a method of payment.

Seattle’s First National Bank offered the first Debit card to business
executives in 1978. Initially they were like a check signature or guarantee card,
with which the bank would guarantee that the fund would be paid, but you did
not need a check to do the transaction. They also required a large savings
account be kept at the bank to cover the funds. These cards were only issued to
people who had a long and good standing with the bank, because the funds of
cards generally come with the Visa or Master Card symbol on them.

In 1984 Landmark created the first nationwide debit system, using ATMs and
other networks that allowed debit cards to be used nationwide. This allowed the
smaller banking systems within states to connect with banks systems outside of
states.

As technology improved the debit cards moved to a system that was able to
directly debit the money from a checking account. When this happened the
debit cards became available to more and more consumers. These types of debit
cards may have the plus symbol or other similar symbols on them. However
many banks will also use the Visa or Master Card symbol for a direct debit card
because they are accepted at so many different places around the country.

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In 1998 debit card transactions first outnumbered the use of checks around the
world. This number has continued to grow over time. Debit cards are now
commonly used for most transactions at stores in United States. Debit cards are
more convenient to use than a check. Debit cards speed up transaction at stores.
Additionally debit cards are safer than carrying cash, because banks can stop
fraudulent purchases and consumers are not held liable for purchases made
when the card is stole n. debit cards have made banking a much easier process
for many people.

In the future transactions will continue to move away from cash and check.
Debits cards may be left behind as well as banks move to using one card that
you can quickly scan at a variety of locations. This will speed up transactions as
well as virtually eliminate the need for cash in the future. Over time the history
of debit cards may be one step to moving to completely cashless system.

CHAPTER-2

REQUIREMENTS AND WOKING OF DEBIT CARD

2.1 Debit Card PIN

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A debit card PIN (personal identification number) is a four digit secret number
or code which is given to the customer at the time of issuing a debit card for the
purpose of security. The debit card is valueless without the debit card pin.

The debit card PIN pad consists of a series of numbers and some other buttons
like “Menu”, “Enter” ,”Cancel” ,etc.,.

A transaction using a debit card PIN is called an online debit card transaction.
The debit card PIN authenticates a transaction. With the help of a debit card one
can make purchases from any ATM (automated teller machine) terminal or shop
(point of sales).

The debit card PIN is required to be entered when making purchases. This debit
card PIN is card specific and customer specific. Prior to using a debit card the
customer is required to activate ones debit card by entering the debit card PIN
which comes in a sealed envelope.

It is advisable to change the debit card PIN at regular intervals to avoid theft. It
is assumed that a transaction using a debit card PIN is more secured than a
signature based transaction but several were reported where debit card holders
were ripped off their money due to debit card PIN theft or disclosure.

Transaction involving the debit card PIN is generally preferred by retailers and
merchants over signature based transaction because the retailers or the
merchants have to pay less for accepting a debit card.

Comparison between debit card PIN based and signature based transaction will
continue but one cannot deny that both methods have their own advantages and
lacunae.

2.2 Debit Card numbers

A brief introduction to debit card numbers:

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Debit card numbers refer to the numbers which are embossed on the debit card.
The debit card numbers are allotted to the debit cardholders at the time of the
debit card.

A debit card may or may not have the debit card holder’s name embossed on the
debit card, but the debit card numbers are obligatory.

Role of debit card numbers:

The debit card numbers embossed on the debit card is debit card specific and
consumer specific. During the debit card transaction, more than the name of the
debit card holder, the debit card numbers which are embossed on the debit card
play an important role.

On entering the PIN (personal identification number), the terminal at the point
of sale or any other terminal sends the debit card numbers to the debit card
issuing bank for the verification and authentication of the debit card numbers.

Once the authenticity of the debit card numbers is proved and presence of
sufficient balance in the debit cardholder’s account is established the purchase
amount is deducted from the debit cardholder’s account instantly.

Protection for consumers:

In the event of a debit card theft or stealing of debit card numbers one is
protected by the Electronic Funds Transfer Act (EFTA) provided the debit card
theft or debit card numbers frauds is reported timely.

2.3 Debit Card security

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Debit card security is making oneself securer from the manifold dangers which
lurk in the plastic card era. Debit card security ought to be dealt with, with
utmost care as several incidents of debit card security lapse have been reported
worldwide.

It is believed that most of the debit card security breach occurs with regard to
the PIN (four digit secret code which is card specific and customer specific)
number.

Signature based transaction also called offline transaction is more prone to debit
card security breach as compared to online (PIN based) debit card transaction.

Incidents of PIN based debit card security breach have also been reported lately.

One should be very alert with their PIN (which should not be disclosed) in case
of online transaction and with their signature (which one should not be forged)
in case of offline transaction.

Debit card security lapse can be avoided if one takes the following
precautions:

 PIN should not be written on postcards or envelopes which have the

chances of lying unattended.
 PIN should not be disclosed to anyone no matter how trustworthy one is.

 PIN should not be disclosed on the internet. Suitable measured to be

taken so that one can ones signature being forged.

If debit card security lacuna takes place the consumers are entitled to exercise
their rights. The consumers ought to know certain facts to recover from the
debit card security backslide.

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 What falls within the purview of debit card security fall back:
Any transaction which takes place through an electronic terminal. It may
include cash withdrawals, deposits, and deduction of charges, at the point
of sale or through an ATM (automated teller machine). It also included
transaction through non electronic terminal.

 Consumer indebtedness:
In event of an electronic financial fraudulence, if a consumer informs the
bank within 2 days of business days, consumer indebtedness is capped to
minimum. Within 60 days of notifying the bank the consumer
indebtedness is slightly more. Informing the bank at the earliest could to
some extent minimize the loss due to debit card security breach. A letter
to the bank is the best option which could be received and acknowledge.

 The bank’s role:

The bank is required to investigate the matte within 10n days. The
consumers should be informed within 3 days. If the bank fails to
complete investigation within 10 days, it is expected to issue a
provisional debit card to the consumer.

2.4 Debit Card Account

A debit card account can be any banking account, such as savings or checking
account. A debit card account is different from a checking account in that the
account holder does not get a checkbook for the former type of account.

How to set up a debit Card Account

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To set up a debit card account, you can either visit your local bank or apply
online. You will need to fill up form and submit the required documents, which
could be passport size photographs, a copy of your passport or driving license,
and proof of date of birth. Some banks may require you to keep a minimum
monthly balance in the account. Ensure that you get a debit card account for
which you will not have to pay a monthly fee.

Some banks may require minors, or people below the legal age of adulthood, to
get the debit card account opened with their parents. On the other hand, other
banks, such as the royal Bank of Scotland and Natwest, open debit account for
eleven to eighteen n year’s olds.

Advantages of a Debit card Account

The main advantages of a debit card account include:

 One of the main advantages of using a debit card account is that you will
get a debit card that you can use to withdraw money from an ATM. This
means that you will no longer need to carrying huge amounts of cash
when you are out of the house. Also, you will not have to get money
orders or use check cashing services. Debit cards are accepted at every
venue that accepts Master card and Visa cards. You can use your debit
card at gas stations, restaurants, garment and grocery stores.
 The amount of purchases you make automatically gets deducted form you
debit card account. This means that you ;no longer need to worry about
paying back the balance.
 The card holder is not required to pay an interest on his purchases.
 The debit card account holder can easily track his/her expenditures by
getting an account statement, which is available at ATM’s.
 Most banks offer mobile banking and internet banking services to inform
you about every transaction on your account.

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Disadvantages of a Debit Card Account

A debit card account also has certain disadvantages, such as:

 There is an danger of spending more than you have in your

account, or going into over-draft, which requires you to keep a
record of all your transactions.
 A lot of hidden charges are involved in using a debit card account.
 If you lose your debit card, consequences can be worse than those
for lost credit cards.

2.5 Debit Card Rates

A brief introduction to debit card rates

Debit card rates are the primary factors determining the revenue generation of a
debit card issuer. The debit card rates might be very confusing for the majority.

There are many debit cardholders who tend to exploit the several benefits of a
debit card without knowing the loopholes. This ultimately leads to
dissatisfaction and consumers find themselves in dire straits owing to the not-
so-transparent debit card rates.

Such is the scenario for most of the debit cardholders. Debit card rates may vary
greatly. Some debit card rates may vary anywhere between 7% to 29.99%.
Debit card rates in developing countries may also skyrocket as high as 150%.
Countries like Brazil may have debit card rates higher than most developing
countries.

Debit card issuers like Visa or MasterCard can offer an account to a debit card
holder for debit card rates as high as 240%. Such accounts are equipped with
low credit limit and meant for quick paybacks.

Logistics of debit card rates

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In order to get desired debit card rates of return a debit card issuers adds the
desired debit card rates of return to the loss rates to determine the debit card
rates of interest.

Assuming that the debit card holder will behave in a manner the other debit
cardholders do, the debit card issuing bank adopts a strategy for the client, by
gathering information from the application and history of the applicant and
decides the debit card rates.

The bank also keeps in mind to attract new account holders by offering the new
debit card holder, debit card rates which will be at par with the competitors and
also place the bank at a profitable position.

The debit card issuing bank can at any point of time with notice of 30to 60 days
increase the debit card rates within legal limits. If a debit cardholder refuses the
change the account is paid off.

Types of debit card rates:

 Cash debit card rates:

These debit card rates are usually a bit higher a charged by the bank for
cash likes transactions.
 Default debit card rates:
These debit card rates come into effect from the tie one of the following
conditions are true:
1. One or two late payments
2. Amount due after the due date.
3. Any returned payment.
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 Variable debit card rates:

These debit card rates are decided depending on publications in an
authentic respectable journal. An economic indicator indicates the market
conditions.

2.6 Debit Card Transaction, how it works

As a consumer, most people can pick up their debit card and know exactly how
a debit card transaction made with it will be processed to their account. But
apart from that the types of transactions and how they work from a technical
standpoint. While this is not vital information to have in order to use your credit
card, it can be helpful to understand how the process works in case a problem
occurs.

There are two classifications for debit card transactions, Online and offline. The
most typical thought to jump to is that an online transaction would take place on
the internet and an offline transaction would be at a store. But that is an easy
misunderstanding to make and is not correct. An online transaction is a
transaction that takes place within the debit card computer system.

This is anytime you are asked for your 4-digit PIN number at many places when
you use your debit card, and all of these are considered online transactions. The
online specification means that your transaction is being routed through the
debit card network with your PIN number.

An offline transaction is one that is processed like a credit card, without your
PIN number. Because the PIN number is not provided, it is immediately routed
the same way a normal credit card would be routed through the Visa or
MasterCard network.

Another important consideration is the fees a merchant must pay when

processing credit card or debit card transactions. This is how a credit or debit

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card company makes a majority of their money. They charge a certain amount
of money in order to process those transactions. Typically a debit card
transaction is charged much less so merchants are usually more willing to
accept debit cards than credit cards. And should you run across merchant who is
unwilling to process a debit card without the PIN number, this is likely why. In
some cases it can cost a store up to 3 times more to process an offline payment
than an online payment.

Once the transaction is made it is processed through either the online of offline
network and routed to your bank account. It goes to the merchant’s bank
account and they connect your debit card number to your account and collect
their funds. This is a very quick process and is usually completed in about one
to two business days. The end result of all this routing and processing is the
debit that you see on your bank account statement. Of course, like anything that
is electronic, mistakes can be made.

Although you should always play it safe and assume that a strange debit from
your card is fraud, just remember that it is always possible that it was just a
routing mistake. These do not happen often which is largely why debit cards are
so popular with merchants and consumers alike.

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CHAPTER-3

UTILITY OF DEBIT CARD

3.1 Debit Card use

Debit card use can be referred to as the usefulness of debit card. Debit card use
encompasses the innumerable benefits which a debit card holder enjoys. Debit
card use has increased manifold in the last couple of years.

Debit card use applies differently to different people. Debit card use holds
different meanings for the consumers, retailers, employees and employers.
Depending on the debit card use, one selects a debit card of one’s choice.

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Below is a list of debit card use for customers:

 Once the purchasing is done, payment can be made only by swiping the
debit card and entering the PIN (personal identification number). No
lengthy paperwork’s needed.
 PIN safeguards the consumers against fraudulence and theft.
 Consumers prefer debit card because it is the same as carrying cash which
is more secured.
 Debit card use is advantageous because any purchase made with a debit
card does not attract interest rates.
 Money can be transferred anywhere across any country with a debit card.
 Debit card use is also evident from the fact that individuals who are
unbanked can make payments and purchases on telephone.

Debit card use for retailers or merchants can be summarized as under:

 A debit card holder can make purchases as long as there is enough money
in the account. When a debit card holder buys anything it is assured that
the retailer will get paid for the purchases made.
 Debit card PIN based transactions are always welcomed by the retailers
because the merchants have to pay less to the banks issuing the debit
card.
 Advantageous for those who do not use credit cards or prefer not to use
them.

Debit card use for employers and employees cannot be ruled out:
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 Debit card saves a lot of money by eliminating the printing of cheques.

 The employees are saved from taking the trouble of getting their cheques
encashed.

Business debit card use can be enumerated as:

 Purchase assurance and extended warranty: An individual making

purchases with ones debit card in the event of the article being damaged a
90 days theft and damage protection is given.
 Master rental land insurance coverage: a business debit cardholder is
entitled to get coverage up to 31 days if the debit cardholder hires a
vehic1le with the debit card.
 Travel services medical protection: A business debit cardholder is
entitled to medical protection in case of emergency medical attention or
hospitalization.

3.2 Debit Card loan

A brief introduction to debit card loan:
One can avail of different types of debit card loan. The different types of debit
card loan may range from a student’s real estate to auto loans as well.

Compliance:
The features of debit card loan may vary from bank to bank but the norms by
which a debit card loan is compiled with, remains more or less same or deviates
slightly.

Essential features of a debit card loan:

 One can communicate directly with an official of the bank from where
an individual intends to take a debit card loan and put across ones
financial needs.

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 Mode of payment for repaying the debit card loan can be arranged for and
selected according to ones needs.
 Automatic deductions from the account to which the debit card is linked
can be arranged for. Instead of repaying by monthly EMIs (easy monthly
installments) through cheques one can opt for auto adjustments from the
account when applying for the debit card loan.
The different debit card loan products available are listed below:
 Auto loans: Loan term 1year to 5years. Debit care loan may also include
a 100% financing but certain conditions may apply. Debit card loan also
permits loan for a used vehicle under some circumstances.
 Real estate loans: Debit card loan permits one to avail of a home loan for
variable terms. It may range from 5years to 30years under different
conditions. The rates of interest and fees may vary from bank to bank
depending upon the type of debit card loan applied for.
 Personal loans: Debit card loan can also be availed off for loans needed
for it may also range from 31 to 48 months. One may borrow money
ranging from $500 to $15,000. This debit card loan has a fixed repayment
plan.

 Holiday/seasonal loans: To drive away all the stress which one is

subjected to, one may ask for a break for rejuvenation. Debit card loan
comes into play. It can grant a loan for the stressed out.

3.3 Debit Card payment

A brief introduction to debit card payment:

Debit card payment has become one of the most widely accepted options for
paying bills online. Debit card payments can either be processed online or one
can have the payment made by an agent.

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There are some debit card providers who allow the debit card payment to be
done only by opening an account with their website.

Payment time:

Debit card payment can be done any time of the day, seven days a week. This
flexible time of debit card payment makes the debit card payment option a
favorite with all and sundry.

Purpose for which debit card payment can be done:

In order to make payments for the following, debit card payment option can be
availed of.

 Airlines reservation
 Railway reservation

 Shopping at a business center or so called point of sale.

 Payment of bills, fees, various charges as applicable.
 Payment of medical expenses.
 Food joints
 Hotel reservation etc….

Fee charged for debit card payment:

A minimum of $3.50 to $4.00 is charged for using the system for making debit
card payment. The issuing banks or the financial institution charge the payment
agents. This fee in most cases is compensated by increasing the price of a
particular product which is unknown to the consumers.

Rejecting debit card payment request:

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In case a debit card payment is rejected an additional fee is imposed upon the
debit card holder. The reason is ascertained and debit card payment is re-applied
for.

Tools for making debit card payment:

 Debit bill payment allows one for debit card payment.

 BIN File Management: allows one to make debit card payment with as
many debit cards as possible and charges a very nominal fee for debit
card interchange expenses.
 Direct connection: a network of debit card payment at selected places.

Drawback of debit card payment:

There is drawback also for making debit card payment. Regular usage of debit
card for making payments throughout the month may lower the average
balance. This in turn makes one earn little or no interest at all.

CHAPTER-4

COMPARING WITH OTHER CARDS

4.1 Difference between Credit card and Debit card

Bank-issued debit and credit cards are used every day, and have become
common in shopping and paying bills. Credit cards were introduced in the
1950’s while debit cards came out in the mid-1970s. By 2006, there were more
than 984 million bank-issued Visa and MasterCard credit and debit cards in the
United States.

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Debit cards and credit cards have some things in common. Both are used to
access money for purchases; and both are used instead of cash as a method of
convenience. The biggest difference between a debit card and a credit card is
who owns the money which is being used. The next biggest difference is the
limit placed on these types of cards. But major difference is how they work.
Here are a few more differences.

1) Financial:

Debit and credit cards are linked to financial accounts which are handled
differently. Debit cards are tied directly to an account at a bank; while credit
cards are tied to a line of credit which has been made available to you. Debit
cards are funded directly from an account you own. Credit cards are funded by
an account owned by the financial institution. Debit cards use money you
already have. Credit cards use money on loan to you which must be repaid later.

2) Limitations:

Debit cards cannot help build a credit history; there is no record made
outside of your financial institution that you used funds drawn on from the card.
Debit cards also cannot be used at most Internet shopping sites because you
need a PIN number to access the funds. Debit cards also require a PIN (Personal
Identification Number) to access any funds while a credit card requires only a
signature. Credit cards are limited by the amount a financial company is willing
to lend you, while debit cards are more limited by the available funds you have
at a given moment in an account you own.

3) Legal:
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Credit cards have many consumers’ protection guidelines and regulations in

place which debit cards cannot be held to. If a credit card is lost or stolen, the
chance of identity theft is much higher than if a debit card is lost or stolen.
Return policies and protections are almost non-existent for debit cards where
they are common for credit card purchases.

You have protection from federal law if you dispute something on credit card.
The Fair Credit Billing Act relieves you of liability for fraudulent charges or
undelivered or low-quality goods. You have less protection in the case of a
problem with your debit card. If your debit card is stolen, the Electronic Fund
transfer Act allows for a $50 cap on unauthorized use of missing or stolen debit
cards if you report the loss or theft to your bank within two days of the
transaction.

4) Promotional:

The one thing debit cards don’t do is promoting themselves. Unlike debit
cards, credit cards try to get you to use them with gimmicks like cash back and
rewards.

Credit cards, like loans, need to be shopped for the best rates and offers; unlike
debit cards which are basically all just the same type of access to your money.
You don’t get numerous offers asking you to sign up for a debit card like you do
with credit cards.

4.2 Difference between an ATM card and Debit card

ATM cards and debit cards are used to access money in one’s checking account.
They have quite a few similarities, but they also have a few key differences in
terms of how they are used by cardholders.

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The cards are generally issued directly by the bank where you hold your
checking account and are not issued by credit card companies. It is also
important note that neither of these types of bank cards are credit cards.

1) Function:

Both ATM and debit cards serve the purpose of linking your checking account
to a plastic card that can be used to access and use your money 24hours a day.
Both cards can be used to withdraw money from a ATM machine and both
cards generally have PIN numbers that can be used to complete a secure
transaction.

2) Types:

An ATM card can generally only access cash through an ATM machine and
cannot often be used for purchases. A debit card, on the other hand, can be used
much like a credit card to buy products without cash or a check. When a debit
card is swiped as a credit card, the PIN number is optional. Whatever the case,
unlike a credit card, money spent through a debit card transaction is deducted
directly from your checking account.

You can tell the difference between a debit and ATM card by looking on the
front of the card.
Cards that serve as debit cards will have a branded logo of a transaction
processing company, such as Visa or MasterCard, on the front of the card. This
signifies that the card can be swiped like a credit card and the transaction will
be processed over that network. It can be used whenever the matching logo is
displayed.
An ATM card lacks these logos and lacks the capability to connect to these
processing networks. However, in some cases, select merchants may have a

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point of Service system that allows customer to purchase items with an ATM
card. Debit card processing is more common.

3) Benefits:

An ATM card is no-frills way of withdrawing money from one’s checking

account. The card comes with a customer-created PIN number that is entered
whenever the card is used to withdraw cash. The cash withdrawal is
immediately deducted from the checking account and the transaction is
immediately posted to the account.
A debit card can also withdraw money from an ATM machine with a PIN
number. The debit card can also be used to make purchases whenever the
processing company’s logo is displayed (such as Visa). The card can be swiped
as ‘debit’ meaning that a PIN number must be entered, or the card can be
swiped as ‘credit’ which requires no PIN. The benefit of using the ‘credit’
option is that some banks offer rewards programs for credit –swiped purchases.

4) Downsides:

An ATM card’s biggest downside is that it usually functions only as a cash

withdrawal mechanism and cannot be used for much else.
A debit card has few downsides. First off, a debit card used to make4 purchases
may not process the transactions for a few days. This means a purchase made
today might not show up on one’s statement or even show the money deducted
from the account balance for a few days. This can throw some people off and
cause them to overdraw on their account or bounce other payments.
Also debit card can be ‘swiped’ like a credit card, which does not require a PIN
number. This me4ans that theft of the card can mean the thief can use the card
with no PIN number. Additionally this means that the stolen card, when used, is
drawing directly from the owner’s checking account, whereas with a credit card

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the person’s own money is not accessed and the transaction only shows up on a
monthly bill to be paid later.
Liability is also an issue with debit cards. More and more banks are reducing
liability for unauthorized purchases on a debit card, but with a credit card the
user is generally not liable for any unauthorized purchases on a debit card, but
with a credit card the user is generally no liable for any unauthorized purchases
over $50. Even if the liability is zero for a debit card user, if the transaction
clears, the money is already taken from your checking account and you must
work with the bank to get the money replaced.

5) Misconceptions:

Even if an ATM is used for purchases, or if a debit card is swiped as “credit”

there may be a misconception that the “credit” status of the transaction means
that payment is not due at the time of purchase. However no matter how the
card is swiped, the money is taken out of the user’s checking account within a
few days of the transaction—there is no grace period or billing for a debit card
run through as a credit card.

CHAPTER-5

SWOT ANALYSIS

5.1 Advantages and Disadvantages of Debit Card

Debit cards: Benefits

Debit cards offer the following benefits:

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➢ They help people to be disciplined financially, since one cannot splurge

with the limited amount of funds deposited for the card.
➢ A person with poor credit can obtain a debit card without too much
trouble.
➢ Debit cards can be used to make online purchases and payments.
➢ They provide freedom from carrying cash and checks while travelling,
thereby offering more safety.
➢ Debit cards do not charge high interest rates or fees on card transactions.
➢ Wide acceptance: debit cards are more widely accepted than chques.
They are great for online shopping & travel.
➢ Easier qualification: since debit cards use the customer’s own money,
not his credit they are often easier to get than credit cards
➢ A consumer who is not credit worthy and may find it difficult or
impossible to obtain a credit card can more easily obtain a debit card,
allowing him/her to make plastic transactions.
➢ For most transactions, a check card can be used to avoid check writing
altogether. Check cards debit funds from the user’s account on the spot,
thereby finalizing the transaction at the time of purchase, and bypassing
the requirement to pay a credit card bill at a later date, or to write an
insecure check containing the account holder’s personal information.
➢ Like credit cards, debit cards are accepted by merchants with less
identification and scrutiny than personal checks, thereby making
transactions quicker and less intrusive. Unlike personal checks, merchants
generally do not believe that a payment via a debit card may be later
dishonored.
➢ Unlike a credit card, which charges higher fees and interest rates when a
cash advance is obtained, a debit card may be used to obtain cash from an
ATM or a PIN-based transaction at no extra charge, other than a foreign
ATM fee.

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Benefits to merchants:
➢ Increased sales: statistics show the average tickets sale in increased with
debit acceptance.
➢ Minimum investment: involves adding a low-cost PIN pad that works
with your existing equipments.
➢ Security: online debit transactions are encrypted to protect the integrity of
the cardholder’s personal banking information.
➢ Cash management: funds are available sooner than with personal
cheques. Debit transactions are funded within 2-3days of batch
settlement.

Disadvantages of debit cards

Debit cards, however, do entail certain limitations, such as

➢ Debit cards come with lesser fraud protection facilities than credit cards.
➢ Some transactions cannot be carried out with a debit card, such as renting
a car in a foreign country.
➢ You can only use as many funds as you have available. Therefore, in case
of an emergencies where credit is urgently needed beyond your account
balance, a debit card will not be enough to meet your needs.
➢ Many banks are now charging over-limit fees or non-sufficient funds fees
based upon pre-authorizations, and even attempted but refused
transactions by the merchants (some of which may not even be known by
the client).
➢ Many merchants mistakenly believe that amounts owed can be “taken”
form a customer’s account after a debit card (or number) has been
presented, without agreement as to date, payee name, amount and
currency, thus causing penalty fees for overdrafts, over- the limit,
amounts not available causing further rejections or overdrafts, and
rejected transactions by some banks.

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➢ In some countries debit cards offer lower levels of security protection

than credit cards. Theft of the users PIN using skimming devices can be
accomplished much easier with a PIN input than with a signature-based
credit transaction. However, theft of users PIN codes using skimming
devices can be equally easily accomplished with a debit transaction PIN
input, as with a credit transaction PIN input, and theft using a signature-
based credit transaction is equally easy as theft using a signature-based
debit transaction.

5.2 Risks of Debit Cards

Debit cards can be a convenient tool for managing personal fiancé. They give
cardholders the ability to make payments direct from a checking account and
remove the need to carry cash or spend time writing paper checks. However,
debit cards also carry certain risks of which all users should be aware.
1) Fraud:

Fraud is among the biggest risks for consumers using a debit card. Debit cards
control access to the entire balance of the accounts they’re linked to.

This means that anyone who steals a debit card and learns the PIN (personal
identification number) associated with the account can make purchases until the
bank account empty. Thieves can be commit debit card fraud even without
stealing the physical card. If they learn the card number and PIN they may be
able to make purchases online. Most debit cards also double as ATM cards.
This opens the door to unauthorized cash withdrawals anytime a card gets into
the wrong hands.

2) Liability:

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Debit card liability laws are not the same as those for credit cards. This creates a
risk for debit card users who make bad purchases. For example, if merchandise
a cardholder orders online or by phone never arrives, the debit card issuer may
not offer a refund of the purchase price.
3) Identity Theft:

One of the most dangerous risks of debit cards is possibility of identity theft.
Debit cards are linked not only to the cardholder’s bank account, but also a
wealth of personal information that may include address, phone number, social
security number and driver’s license number. Thieves who access a debit card
database or access a cardholder’s account online may be able to use this
information to make purchases, get a fraudulent line of credit or commit other
crimes using the cardholder’s name. Even when cardholders take steps to use a
secure PIN and keep online accounts protected with passwords or firewalls,
financial institutions must also safeguard all personal information provided by
cardholders.

4) Overdrafts:
Debit cards make it easier for account holders to accidentally overdraw an
account, charging purchases when there are insufficient funds. Some banks may
enact a fee for overdrafts, making this more than a simple inconvenience. Debit
card overdrafting often results from blocks, which merchants place on a card to
reserve a certain amount of the account balance. If the cardholders actually
spend less than the amount of the hold, the hold may remain on the account,
resulting in an available balance that is below the actual account balance.

5.3 Problems of Debit cards:

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Account overdraft:

Common sense says that your spending is limited to the amount you have in
your checking account. But with overdraft protection plans, you can keep
spending and may not even know you’ve overdrawn you account.

The biggest risk of using a check card, also called a debit card, is that
consumers can overdraw their checking accounts. And because most banks
provide “convenience” overdraft protection—which is basically a high-interest
loan to cover the shortfall in the account—a consumer who’s trying to manage
money responsibly could get hit with a fee of around $35.

Be sure to note all debit transactions in your check register and sign up for
overdraft protections is linked to your savings account to be on the safe side.

Consumers should also ask their banks in what order payments is made. Ask
where you can find information on non sufficient funds, or NSF. Most banks
manage payments by paying the largest item first and on down to the lowest. If
your biggest item overdraws your account, you’ll pay an NSF fee for every
subsequent check or debit.”

Blocking is problem with debit cards:

Some firms (hotels, gas stations and rent-a-car companies) routinely block a
card in an advance for the estimated cost of a transaction that may not be
completed for several days. But if you buy ten dollars worth of gas with your
debit card, you may not know that the station may routinely block all
transactions for $50-75,then doesn’t “un-block” as you drive away—it waits
until that evening, or worse, every few days to conduct a “batch” transaction. If
you are close to your checking account limit. You could end up bouncing
checked or be refused transactions buy other merchants due to faulty blocks.
Most banks do a poor job of informing consumers that they may bounce
transitions due to overdrafts created by blocks. Of course, virtually no gas
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station explains their blocking policy, which presumes everyone drives an RV

or tractor trailer truck, and is filling it up.

Finally, most banks don’t ask for consumer consent. When ATM cards expire,
they replace them with risky debit cards. And, we are unaware of any bank that
adequately explains the risks of debit cards.

In addition, if you are considering a credit or debit card, shop around. When
comparing credit and debit card offer, ask issuers if they permit blocks, for how
long, and from what types of merchants. You may want to consider an issuer
that uses shorter blocks.

CHAPTER -6

FACTS OF DEBIT CARD

6.1 Debit Card payments, Things You Should Know

Making debit card payments has become one of the most widely favored and
accepted methods of paying bills and making purchases. A debit card payment
can be initiated on the Internet, on the phone, or through any retailers that
accepts debit cards. Because of their flexibility, payments can be made
anywhere and at anytime.

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When you are making debit card payments to pay your bills online then it is
important to note that some merchants will only allow online payments if you
register an account with their website. This is normally a very simple process
that involves registering your debit card information and linking that to your
account with the retailer.

While this likely won’t delay your ability to make a payment the first time, it is
important to try and get this registration done early just in case you run into
problems. It is always better to have too much time to get a payment made than
have a payment be late.

There is a fee that is charged to retailers for accepting debit card payments. This
is based on the number of transactions processed and the amount of the total
transactions. This fee is not directly seen by the consumer that is using the debit
card since the issuing bank pays it and then they pass on the fee to the retailer
that accepted the debit card. This is fee that is not directly impacting of the
consumer but it can be a reason that certain merchants still choose not to accept
debit cards.

In the event that debit card payments are requested on an account that has an
insufficient balance, there are normally two outcomes that will result. In some
cases the customer’s bank may choose to pay the amount and adjust your bank
account balance to be negative. You will have to pay the bank this money since
they are essentially issuing you a small loan to pay for that purchase.

6.2 Debit card stolen: what you should do right now

It can happen to anyone. No one thinks that It could possibly happen to them
until it does. You open up your wallet one day and cannot find your debit card.
You know that it was just there. It crosses your mind that you might have had
your debit card stolen. But now what?

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The first thing to do is double check anywhere that you may have placed the
card. Maybe you overlooked it in your panic. If you live with anyone else. Ask
them if they’ve seen it. If you were at a store, Call them and see if they have it.
Once you have checked everywhere that you have been since you last saw the
card and still can’t find it, now is the time to consider reporting the debit card
stolen or lost.

Call the bank immediately, and do not wait a day or so. According to the
banking rules you may only have a few days to report the card missing or you
might be held liable for any unauthorized charges made with it. Reporting it at
once is essential if you do experience fraud on your bank account. However,
since you can’t be completely sure that you didn’t just misplace the card you
should ask the bank is you can put a hold on the card and explain that it is
missing.

This means that they will freeze the card and prevent it from being used unless
you call the bank back and give them permission to reinstate it. This will give
you some time to look for it before you cancel it.

If you cancel card now then you will have to wait up to a week for a new one in
the mail and if you do find the missing card it will be useless. Some banks will
not let you put a hold on a card if you report the debit card stolen or lost, they
will simply cancel it. But it is always worth it to ask.

You need to check your bank account daily for a few weeks. Look for any
suspicious transactions that you do not recognize. Even though the card has
been cancelled. There is a chance that someone used it to gain access to your
account before it was cancelled. Shockingly getting one number from the other
is not that difficult for an experienced scammer.

You need to report unknown transactions to our bank as soon as possible.

Again, you only have a limited time to report them or the bank will hold you

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liable for them. Once you report it they will have business days to complete an
investigation. Most likely the charge will remain on your account during that
time, but you can request a temporary credit if you need it.

CHAPTER-7

TYPES OF DEBIT CARD

7.1 Types of Debit Card

There are currently three ways that debit card transactions are processed:

 Online (also known as PIN debit).

 Offline (also known as signature debit).
 Electronic Purse Card System.

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It should be noted that one physical card can include the functions of an online
debit card, an offline debit card and an electronic purse card.

Online debit card

An online debit card is a debit card which reduces the amount spent instantly
from the account of the debit card holder. Online debit card ensures a much
faster way of processing the transaction. The online debit card can have either
the Visa logo or MasterCard logo embossed on it. Online debit card
transaction is also known as PIN debit. Owing to the superior status of the
online debit card several banks in Canada and Brazil issue only online debit
card transaction is considered to be much more secure than an offline or a
signature debit transaction.

As the signature debit is substituted by a PIN in case of an online debit card

transaction and the PIN in known only by the online debit card holder, the
chances of fraudulence is greatly minimized. The online debit card holder is
required to enter the PIN into a PIN pad instead of the normal signature.

When one enters ones PIN into the PIN pad the terminal encrypts the PIN
number and passes it on to the online debit card issuing bank for verification.
The retailer or the merchant is then paid for the transaction.

The merchants or the retailers prefer the online debit card over the credit or
signature debit card due to the following advantages.

• The retailers have to pay much less for accepting online debit card
transaction. The reason is they are required to pay much less. Saving
small amounts over a period of time amounts to a bigger amount being
saved.
• A standard fee has to be paid by the retailers as long as the purchasers are
entering their PIN.

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• The processing time for bill making etc., can be avoided. Writing bills
over the counters is more time consuming. The online debit card saves
this time.
• It is more convenient for the customer as well, as they do not have to
carry cash with them and can limit their purchase within their budget.

Offline debit cards

Offline debit cards have the logos of major credit cards (e.g. Visa or
MasterCard) or major debit cards (e.g. Maestro in the United Kingdom and
other countries, but not the United Stated) and are used at the point of sale like a
credit card. This type of debit card may be subject to a daily limit, and/or a
maximum limit equal to the current/checking account balance from which it
draws funds. Transactions conducted with offline debit cards require 2-3 days to
be reflected on users account balances. In some countries and with some banks
and merchant service organizations, a “credit” or offline debit transaction is
without cost to the purchaser beyond the face value of the transaction.

While a small fee may be charged for a “debit” or online debit transaction
(although it is often absorbed by the retailer). Other differences are that online
debit purchasers may opt to withdraw cash in addition to the amount of the debit
purchase (if the merchant supports that functionally); also, from the merchant’s
standpoint, the merchant pays lower fees on online debit transaction as
compared to “credit” (offline) debit transactions.

Prepaid Debit Card

A prepaid debit card is a reloadable debit card which allows the card holder to
spend only to the extent of the amount of cash pre deposited in the account. The
primary requisite in using a prepaid debit card is one should fill cash into the
prepaid debit card.

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The process of filling cash into a prepaid debit card is the same as filling ones
prepaid mobile card. In order to use a prepaid debit card there should be
sufficient balance in the account. This saves an individual from getting into debt
because the individual is using his own money.

The prepaid debit card can be used for various purposes as follows:

 Paying bills.
 Drawing money from the ATM
 Shopping online
 For reserving railway, airlines tickets and hotel reservations.
 Buying essential commodities.
 Transferring money from one place to another.
 Filling money in the mobile.

The prepaid debit card has some benefits which can be enumerated as:

 One can easily get hold of a prepaid debit card if he wishes to.
 While carrying out transactions online if one is cheated the individual can
get his money back.
 It is much safe to carry a plastic prepaid debit card than carrying money.
 The transactions carried out by one can be easily monitored. This is
because a detailed step by step statement is generated. So one can keep a
check while using his prepaid debit card.
 There is no risk of falling into the debt trap. The prepaid debit card can be
used only as long as there is cash in the bank. It’s functioning can be
compared to the usage of a prepaid mobile card. One can make calls only
as long there is balance of talk time.

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 One can travel to different places without the need to carry money with
him.

The reason being the prepaid debit card is network friendly and can be accessed
anywhere, in any country. Only the logos need to match.

Electronic purse Card system:

Smart-card-based electronic purse system (in which value is stored on the card
chip, not in an externally recorded account, so that machines accepting the card
need no network connectivity) are in use throughout Europe since the mid-
1990s, most notably in Germany (Geldkarte), Austria(quick), the
Netherlands(chipknip), Belgium and Switzerland (CASH). In Austria and
Germany, all current bank cards now include electronic purses.

Virtual Debit Card:

The term virtual debit card means exactly what it says; the card is a virtual card.
A physical debit card will not exist. Instead of receiving a debit card in the mail
you will receive all of your card information by email. Of course this does
present a few restrictions on how you can use the card. Since you will not have
a physical card, this limits the use of it to online purchases only. So, if you as a
consumer hardly ever shop online then this kind of debit card is probably not
right for you.

This particular type of card only exists on the internet. After a person applies for
a virtual debit card the card provider assigns a number to the user. This number
is usually a 16 digit number, and is emailed to the user along with other details
of the card. It is safe to say that the ‘card’ is actually an account.

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The next step is the actual usage of the virtual debit card. The virtual debit card
is to be loaded as other debit cards. While doing so bank accounts or another
credit card or another debit card is employed. In most of the cases the user of
the card has been loaded, it becomes valid for online purchase. While phrasing,
the verification code is to be submitted to the merchant. This number is an
identity verification number and is used along with the normal debit card
number. Thus to make a long story short while using virtual debit card you will
need only 3 things to make a safe payment:

• A loaded debit card

• A 16 digit card number
• A identity verification number

These cards have been designed as a measure to check the fraudulent activities
that are done through the Internet. There are a number of virtual debit cards
offered by the companies. Some of these cards are as follows:

 Payroll Cards:
For employees that, for one reason or another, do not have access to a
bank account (bad check history, not in close proximity to bank, etc.),
there is a solution, offered by most major payroll services providers.
Instead of an employee receiving a check, and paying up to 5-10% to
cash the check, the employees can have the direct deposit loaded onto a
debit card. In this, a company can save money on printing checks, not buy
the expensive check stock, and not having to worry about check fraud,
due to check being lost or check stock, and not having to worry about
check fraud, due to check being lost or stolen. A payroll card can be more
convenient than using a check cashier, because it can be used at
participating automatic teller machines to withdraw cash, or in retail
environments to make purchases. Some payroll cards are cheaper than

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payday loans available from retail check cashing stores, but others are
not. Most payroll cards will charge a fee if used at an ATM more than
once per pay period.
The payroll card account may be held as a single account in the
employer’s name. In that case, the account holds the payroll funds for all
employees using the payroll card system. Some payroll card programs
establish a separate account for each employee, but others do not. Many
payroll cards are individually owned dda (demand deposit account) that
are owned by the employee. These cards are more flexible, allowing the
employee to use the card for paying bills, and the accounts are portable.
Most payroll card accounts are FDIC-insured but some are not.

 Gift cards:
A debit gift card is a debit card which is gifted to someone. The debit gift
card is usually a prepaid debit card. A debit gift card is issued to the
recipient of the debit gift card only. Many debit card issuers keep
provision for customizing the debit card according to ones choice. A debit
card may have either the Visa or the MasterCard logo embossed on it. A
debit gift card having any of these logos can be used at any terminal
where credit cards are accepted.
 Reloadable debit card:
A reloadable debit card has the plus points of both the credit card as well
as debit card. It is like a credit card which has not credit line, and a debit
card which does not need a bank account. To operate a reloadable debit
card, all a person has to do is to periodically update it with cash, and then
he can use this card, wherever he wants to, up to the limit of the cash
money he has updated it with. Once the person uses the debit card to the
limit of the money updated by him, he has to reload the card again with

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some cash. A person, who reloads the debit card, has to pay a transaction
fee, every time he does that.
Reloadable debit cards fill wide range of financial needs. For those
without bank accounts, the cards allow them access to a debit card instead
of carrying cash. For those with bad credit, reloadable debit cards offer
them the opportunity to have a usable card for purchases where they
cannot use cash. Reloadable debit cards can even be used for depositing
payroll checks for those who want to avoid check cashing fees.
Reloadable debit cards do carry a range of fees, and they vary by who is
providing the card. Typically, there is a charge for obtaining a card, as
well as for loading money onto the card.

Some reloadable debit cards charge fee for every purchase, while others
charge only for ATM transactions. Keep a mind that some cards also
charge a fee for inactivity. Reading all of the fees involved for a
particular card.
 Incentive card:
Visa incentive card are prepaid cards that can be used at millions of
locations where visa debit cards are accepted. They are innovative, cost-
efficient solution for rebate programs, consumer promotions, employee
rewards, and trade incentives.
Visa incentive cards make it easier than ever for small business to reward,
motivate, and recognize- while giving recipients the power of choice and
universal acceptance. Use them to increase employee satisfaction, drive
revenue, influence consumer behavior, and motivate partners and sales
teams.
 Students card:
Alternatively, debit cards may help control a student’s spending. A
student opens a debit card account by depositing money with a bank or

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credit union, and funds are deducted whenever a purchase is made with
the card. If the available balance in the account is not enough to cover the
purchase, the transaction can’t be completed. In addition, there are no
interests or late- payment charges with a debit card, though other fees
may apply. The main disadvantage of debit cards is that they do not
establish credit.
Another option is a prepaid debit card. However, these are not really
credit cards, as no credit is extended- they function more like debit cards.

7.2 Example:
State Bank of India Debit Cards

1) Gold international Debit Card

 The Gold international Debit Card is a visa/Master based debit card. It

has daily cash limit of Rs. 50,000 at ATM’s.
 Purchases limit is of Rs.2,00,000
 Personal accident insurance of Rs 2Lac*
 Purchase protection coverage of Rs.5000*

Eligibility:
To avail this SBI debit card facility the account holder should maintain a
quarterly balance of Rs.50,000 in sole or joint operation and the mode of
operation should be either or survivor.

2) Yuva international Debit Card

 Cash limit: Daily limit of Rs. 50,000 at Domestic ATMs and USD.1000
at international ATMs.

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 Daily limit of Rs.2,00,000 worth of purchases at POS and USD.4000 at

international POS.
 Personal accident insurance of Rs 2Lac*
 Purchase protection insurance of Rs 5000*
 Can be used on internet shopping.

Eligibility:

You must have account in CBS (centralized) branch of SBI. Must be in between
18-30years of age.

3) Vishesh Debit card

 It has a daily cash limit of Rs.50,000

 Purchase limit of Rs.2,00,000
 Personal accident insurance policy or Rs.2lac*
 Purchase protection coverage of Rs.5000*
 This card is meant for all special customer of SBI who have a fixed
deposit of Rs.5,00,000 and more.
 The card is not charged any surcharge at any petrol pump and has no
annual maintenance charge.

Eligibility:

Bank account required with State Bank of India.

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CHAPTER-8

PRESENT SCENARIO

8.1 India Debit Card, Explosive Growth

In westernized countries, we think nothing of using debit cards but in some
parts of the world, the debit card is a brand new concept, one recently been
introduced. Such is the case for the India debit card. For a long time, many
Asian countries used only cash when buying things but as more and more
people are learning about the benefits that come from debit cards. We see
popularity increasing, although slowly.

Today, the number of people now using an India credit card is on the rise so we
wanted to provide some specific banks that provide this type of product.

Abn Amro Bank

This bank offers an India debit card that is an international card. In addition to
being helpful for cash withdrawals and deposits, the card also features rewards.
For instance, if the debit card is used for travel, people can get one free night
when they stay a minimum of two nights. The card also has a rewards point

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system whereby if the consumer spends Rs. 100, two royalty points would be
earned, which are equal to Re. 1 for retail and five royalty points equal to Rs.
2.50 for gasonline. Once 500 points are accumulated, they can be redeemed.

For shopping, this India debit card provides 12% off the minimum purchase of
Rs. 5000 and more when buying from Sangini Diamond Jewelry. If jewelry
were purchased from Adora, the consumer would receive a 17% discount, from
Allen Solly watches 15% off. Sparkles diamonds15% off, and for sunglasses,
eyeglasses, and contacts from GKB optical the discount is at 10%.

Axis Bank

This financial institution is also a great option, one that offers an India debit
card of varying levels. For the priority India debit card, consumers would enjoy
no fuel charges at all gasoline pumps and a rewards program that allows point
redemption for dining, home, magazines, personal, lifestyle, kids, electronics,
gifts, and even charities.

For travel, this India debit card provides a 15% discount when people stay at the
Brigade Homestead Serviced Residences in Bangalore and the same discount
for rooms at The Central Park Hotel. Additionally, this India debit card provides
a 15% discount for people needing diagnostic testing at The Apollo Clinics.
However, the offers for this particulars India debit card are only good until
March 31, 2010.

Citibank

The great thing about an India debit card from Citibank is that this bank has
locations throughout the world. Therefore, while different debit card offers are
made the international premium is considered the best. Some of the benefits of
this India debit card include free access to airport lounges for domestic travel
and free access to many of India’s premium golf ranges, to include green fee
discounts.
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Indian Oil

This India debit card is also offered by Citibank but well worth mentioning.
Considered a premium card, it too is loaded with business. For instance, when
gasoline is purchased at Indian Oil outlets, consumers would pay no fuel
surcharge. Then, for every Rs. 100 spent at these outlets. The consumer would
earn four Turbo points. This can then be accumulated and redeemed for
gasonline vouchers.

8.2 Indian Banks promoting Debit cards usage

The current economic turmoil is resulting into the lack of liquidity in the Indian
market. Banks have become more cautions while issuing credit cards to
consumers as the lack of liquidity could result in high delinquency rate and
default credit risks. In such a scenario, banks should focus on strategies that
would boost the usage of debit cards in the country, says our new research
report, “Indian payment Market Forecast to 2012”.

The report further says that India has seen remarkable growth in its debit card
market over the past few years. The number of debit cards issued by bank grew
at a CAGR of more than 43% from FY2006 to FY2008. However, the usage of
debit cards in India is largely confined to instant withdrawal of cash from
ATMs. There were over 102 Million consumers with slight more than Rs.125
Billion debit card spending during FY2008 compared to around 27.5 Million
consumers who spent Rs.580 Billion through credit cards in the same period.

“There is a huge potential for future growth in the Indian debit card market as
consumers, to a large extent, are not comfortable with using credit cards which
serves a plus point for the debit card players”, says a Senior Research Analyst at
RNCOS. The industry will have to work hard to educate people about the
benefits of using debit cards and will have to give some form of incentives to
promote the usage of debit cards, added the Analyst.
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“Indian payment card Market forecast to 2012” provides analytical study of the
payment card market, including debit cards and credit cards, in India. The report
has thoroughly studied the impact of current economic downturn and provides
unbiased data and rationale analysis of the Indian payment card market till
2012. It will help clients to identify the market trends and evaluate the leading
–edge opportunities critical to the success of the payment card market

From the above discussion it is clear that in India debit cards are more popular
than the credit cards mainly due to the fact that Indians are not comfortable with
debt moreover, only a savings account is needed to be eligible for debit card.
India is having a huge customer base who can afford a debit card but not a
credit card. There is tremendous scope for debit cards in the outlets and
business, etc. To conclude, though debit cards are more popular now, still the
ultimate winner in this bargain are the bankers, who are having both the cards in
their product-line and that gives the bankers a more competitive edge. This is
the reason why Citibank. HDFC Bank, State Bank of India etc., doing
exceptionally well in plastic money business in India.

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8.3 Debit Card Abroad

A brief introduction of debit card abroad

Using debit card abroad can save one from carrying cash with oneself especially
when one is travelling to a distant place away from ones hometown.

In order to use debit card abroad one should be aware of all the rules and
regulations followed in the country one is visiting and it is advisable to be aware
of the category into which one fits while making use of the debit card abroad.

One should remember the PIN of the debit card when one is using the debit card
abroad.

Reasons for using a debit card abroad

Using a debit card abroad is possibly the best option because even if one loses
the debit card the debit card can be easily cancelled. Moreover the debit card
comes for a very nominal fees and it is easy to use the debit card abroad.

Dynamic currency conversion

One of the points to be kept in mind while using the debit card abroad is one
might make payments with one type of currency when it is required to reload
the debit card a different currency is recharged with. This may should harmless
but the extra tax is imposed for this dynamic currency conversion.

It is suggested that while using the debit card abroad if one is in Europe, Euro
should be preferred for transaction. This is because some card operators like:

• Nationwide
• Saga
• Lombard direct, convert the currencies at no extra cost. There are other
card operators charging 2.75% to 4% as currency converting fee.

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Exchange rates

The exchange rates while making transactions with debit card abroad in case of
Visa and MasterCard is much less than traveler’s cheque.

While utilizing the debit card abroad unless it is very much necessary one
should avoid withdrawing money with debit card. From the time the cash leaves
the cash dispenses interest is charged on the transaction.

Different PINs

If one is having more than one debit card while using the debit card abroad the
same PIN (personal identification number) should not be used.

Debit card fees

For using the debit card abroad international ATM (automated teller machine)
machines charge a fee which is determined by the ATM owners. This fee may
be around $2 to $5.

The bank issuing the debit card poses a problem when it charges upto 3% for
each transaction using the debit card abroad. It may be a cash withdrawal or a
foreign transaction.

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8.4 DEBIT CARDS AROUND THE WORLD

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CHAPTER-9

CASE STUDY

9.1 CASE STUDY 1:

Expanding duty-free credit and Debit card purchases from the

airport to the airplane? No problem. With VeriFone’s wireless
solutions, the sky’s the limit.

When the Indian company IDFS Trading Pvt. Ltd. Wanted to increase in-flight
revenue with a wireless credit and debit card payment system. VeriFone created
a tailor- made solution that works well on the ground and in the air.

Customer profile: IDFS Trading Pvt. Ltd.

Business focus: Travel/Retail

Location: India

VeriFone solution: NURIT 8000 GPRS

Challenge:

Transform an outdated payment system into a wireless powerhouse for in-

flight sales

IDFS Trading Pvt. Ltd. is India’s premier travel retail operator, responsible for
managing an array of airport retail shops and duty-free concessions for the
country’s leading budget airlines and international carriers. IDFS’s previous in-
flight payment system, which used a handheld PDA to track cash-only

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purchases and to manually generate receipts, was very slow and hurt sales of
duty-free items and in-flight-consumables.

IDFS needed a quick and convenient way to keep customers shopping and
capture their credit and debit card sales in the sky- without compromising time
or security. Enter VeriFone, with a clever solution to increase in-flight revenues
and match high customer expectations.

Solution:

VeriFone’s NURIT 8000 GPRS takes to the sky for swift, secure
transactions

In order for IDFS to increase in-flight revenues, accepting credit and debit card
payments was a necessity. The NURIT 8000 GPRS has been combined with a
unique processing system, which obtains transaction authorization after the
plane touches down, to create a customized wireless payment solution.
Customer’s cards can be swiped during the flight and receipts printed instantly,
all while the cardholder’s data remains secure until the transaction is completed
on the ground. This means, rejected cards or insufficient fund problems are
resolved well before the customer disembarks.

The Benefits of VeriFone Wireless Payment Solutions

• VeriFone wireless payment solutions deliver the extended coverage and

flexibility that merchants need to accept payment anytime, anywhere.
• Wireless means merchants can eliminate the need for cash- only
transactions. VeriFone wireless payment solutions provide a fast and
efficient means of achieving increased and diverse revenue.
• VeriFone wireless payment solutions reduce the risk of fraud, because the
card never leaves the customer’s sight. Also, customer satisfaction
improves because of faster service.

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• VeriFone’s wireless portfolio includes every form of communications:

Bluetooth, WiFi, GPRS and CDMA.

Results:

In-flight revenue soars; passengers enjoy the convenience of on-board card

payments.

Passengers are no longer restricted to cash for in-flight food and beverages and
duty-free items such as jewelry, perfumes, watches and handbags. IDFS is able
to increase revenues and manage inventory more efficiently. The potential for
fraud is reduced significantly because all in-flight transactions can be reconciled
upon landing and before passengers depart the plane. Most importantly, wireless
convenience allows IDFS to extend its sales beyond the airport and into the sky
with minimum implementation and maximum results.

The extensive VeriFone product portfolio and our reputation as a flexible and
dynamic payment solutions partner in India are factors in the success of the
IDFS partnership. VeriFone’s continued commitment to cutting-edge
technology and products that offer the latest security compliance along with top
functionality and performance make us a global leader in payment solutions and
a top choice for innovative partnerships throughout the world.

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9.2 CASE STUDY 2:

FINANCIAL INCLUSION

VISA DEBITS OPENS DOORS TO INDIA’s UNBANKED

More than 58 million visa Debit cards have been issued to Indian consumers,
delivering convenience, security and control to many who are entering the
formal banking system for the first time.

India, with the world’s second-most populous nation and one of its fastest-
growing economies, is also one of the most under-banked. With a working
population of 600 million but a banked population of only 200 million, the
challenge for India’s financial service providers is to keep pace with the ever-
increasing number for Indians moving into the financial mainstream.

Scenario:

Some 91 percent of the US$703 billion spent by Indians annually is din the
form of cash, a massive and inherently inefficient approach for a nation with a
middle class estimated at 300 million citizens. Whether on the streets of
Mumbai, Bangalore or Delhi, or in the nation’s huge rural areas, it is not
uncommon to see people using handfuls of rupees to buy everyday items and
pay their bills.

Kunal chedda, a Mumbai resident, says that a cash- centered life was a huge
inconvenience, one in which he “needed to carry 2,000 rupees in my wallet…I
had to fill my wallet every two weeks or so and hope that it would last me till
the next time I visited the bank to withdraw money. So it really made it difficult
for me to make any transactions without planning well in advance.”

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A cash-dominated economy also meant that people like chheda would spend
time searching for goods and services on the internet- a favorite pastime- but
not actually take the next step and buy. “If I wanted to purchase anything from
the internet, I was not able to do that because I could not use cash,” he says.
With more than 34 million new bank accounts being opened every year,
including a large number o f Indians entering the modern banking system for
the first time, the strains on the economy form such heavy cash dependency was
reaching a critical point .

Solution:

To help manage the diverse needs of Indian consumers looking to access

modern banking and payment s services, Visa launched its first visa debit
product in India in 1999. In the 10 years since the first Visa debit card was put
in the hands of Indian consumers, 35 local and international Indian banks have
launched their own Visa debit card programs in India.

There’s huge population in India, both in remote communities and in the urban
centers,” says sachin khandelwal, senior general manger of ICICI Bank, India’s
second –largest bank by asset size. “Many of workers are paid in cash. Banks
are migrating and expanding their branches and opening up electronic payments
to smaller towns.”

The card can serve as a passport to a world of opportunities. For example,

Indians who want to buy a cell phone need to provide proof of residence and
work; there is no national identity card in India today. The Visa debit card
provides that proof of identity helps Indians obtain that mobile phone or apply
for a loan.

Chheda is one of the Visa debit cardholders who has benefited from the
convenient and secure access to funds on deposit in the bank account.

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In addition, he is more confident using an electronic payment card, and he feels

safer than having to carry large sums of cash in his pocket. “If I have any doubt
about a single purchase, I simply call up my bank to sort it. At the end of the
month, I have record of everything I have bought, and it helps me budget for the
next month. Visa debit gives me control.”

And it also gives chheda and other Indians control over what is very much a
way of life in Indian rail travel. Buying tickets with cash can take more than an
hour, while having a card means he can “book and pay online within a couple of
minute so that saves time and the bother that have encountered.”

Visa debit cardholders have also been turning to the visa Bill pay site to settle
some of their most common monthly expenses, such as mobile phone and utility
bills. Whereas previously they would have queued up to pay with cash at the
biller’s outlet or write a check and then drop it in the nearest collection box,
with Visa Bill Pay, debit cardholders are now managing their finances and bills
from the comfort t of their homes.

About Financial Inclusion:

Visa works with government agencies around the world to move form paper-
based distribution of electronic benefits to electronic means-such as prepaid
cards- for everything from child support to unemployment to emergency
assistance to disaster relief. In 2009 in the U.S. alone, visa had more than 65
disbursement programs operating in 38 states, providing consumers – even
those without traditional banking relationships- with secure, cost –effective and
convenient alternative to cash and checks to make everyday purchase, pay bills
and even deposits to their Visa prepaid card.

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CHAPTER-10

CONCLUSION
India has over 130 million people with bank accounts. Of this just 8 million use
credit cards and an estimated 16 million use debit cards. The strategy is to
expand the use of visa debit cards in the mass banked population.

Once a customer has a debit card to take care of low-value purchases, he will
naturally seek more value from credit cards since those will mostly be used for
higher-end transactions. This is where co-branding and affiliations come in.
Plain –vanilla cards will be overshadowed by customized offerings aimed at
specific categories, such as an airline affiliation card for frequent fliers. Or take
housewives with seasonal spend patterns: they qualify for a co-branded card
with lifestyle stores… The ICICI Big Bazaar card, for instance. Similarly,
entertainment options on youth cards for whom entertainment is the frequent,
big-ticket spend.

To the extent that one is not looking for an unsecured loan, a debit card scores
over a credit card in that it allows the customer to literally carry her bank
account around. It’s convenient, since it eliminates the need to keep at hand
cash for unexpected events, one doesn’t have to make those trips to the ATM,
and importantly, debit cards check unbudgeted spending. Moreover, use of
plastic brings down the unit cost of service for a bank; in mature, cashless
societies, these benefits are passed on to customers as incentives and
promotions that are linked to greater use of debit cards.

As the chip gets embedded in the card, issuers will be able to get a holistic
pattern of spending habits. As commerce moves to the internet and m-
commerce picks up, transactions security will become the key user concern.
Debit cards will gain in this scenario.

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Pre-paid cards and gift cards are the next innovations you will see in the card
market. These top-up cards will be for specific user categories like travel and
gifting. In fact, Citibank Cards and IDBI Travel cards already exist in this
category.

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CHAPTER-11

BIBLIOGRAPHY
WEBSITES:

www.economywatch.com

www.eHow.com

www.bankrate.com

REFERENCES:

Plastic money an introduction – E Mrudula.

Money and Banking system – B. L. Mathur.

Management of Banking & Financial services – Justin Paul.

- PadmalathaSuresh.

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