CUSTOMER PERCEPTION OF INTERNET BANKING AND CREDIT CARDS SERVICES

Submitted By

S.N

o

Regn.No Name of the Student Course

1 1226113139 TEJEESH CHANDRA.P MBA(IB/IBF/GSCM)

2 1226113158 SURYANARAYANA MURTHY MBA(IB/IBF/GSCM)

2 1226113127 PRIYANKA .P MBA(IB/IBF/GSCM)

3 1226113160 DEVI SARANYA VILLA MBA(IB/IBF/GSCM)

In Partial Fulfillment of Requirement for the Award of the Marks towards Mini-Project as

part of Master of Business Administration (IB/IBF/GSCM)

GITAM School of International Business, GITAM University, Visakhapatnam

Andhra Pradesh, India-530045

GITAM School of International Business,

GITAM University, Visakhapatnam

CONTENTS

TITLE PAGE NUMBERS

ABSTRACT 3

INTRODUCTION 3

LITERATURE REVIEW

BANKING SERVICES AND

INTERNET BANKING

CREDIT CARD SERVICES

4

OBJECTIVES 34

RESEARCH METHODOLOGY 34

CHARACTERISTICS OF RESPONDENTS 36

ANALYSIS OF REPORT 38

ANALYSIS OF DIFFERENT VARIABLES 48

SUGGESTIONS 52

CONCLUSION 56

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Abstract

There have been major changes which are witnessed in the world and at the centre is the

ever changing phase of technology, like advances in the way people communicate, do

businesses, exchange of information. At the heart of all this lies the World Wide Web and the

same has revolutionized the way people are communicating and transferring the data and

information. The best part about being that there exists no single entity or person who owns the

World Wide Web some organizations and other companies are handling the management of the

system and the administration of the World Wide Web.

There has been contrasting views with respect to electronic commerce, however it needs

to be noted that Electronic commerce is a structured method with the use of different methods

and technologies for undertaking the business activities in a global arena which includes

different methods like business-to-business (B2B) and second more famous is business-to-

consumer (B2C) . The dramatic increase in the usage of internet has enabled the development of

different businesses like the banking, insurance; supermarkets and other related elements like

hospitals have also integrated the information technology into different segments of their

operations. 

Introduction:

Banks are expanding across borders. Offering diverse portfolio of competitive services

and restructuring their services in order to make use of rapid technology and to meet the

challenging needs of customers. Customers whether at retail or corporate level, have always been

a life line for the banks. During the last few years, banks in India have been increasingly

expanding and diversifying beyond the boundaries of traditional banking. Most of the Indian

banks have subsidiaries through which they are providing a wide range of specialised financial

services. Earlier, banking was considered to be business activity of accepting and safeguarding

money owned by other individuals and entities, and then lending out this money in order to earn

profit.

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Literature review:

INTERNET BANKING

A number of studies have been carried out to explore the satisfactory levels of customers on

internet banking. Athanassopoulus examined the impact of customer satisfaction on customer

behavioral responses. The sample consisted of 793 individuals and statistical tools such as chi-

square test and factor analysis were applied for the analysis. The results showed that there is a

direct effect of customer satisfaction on the following behavioral responses of customers:

1. Decision to stay with existing bank.

2. Positive word of mouth communications.

Information Technology (IT) is very powerful in today’s world, and financial institutions are

the backbone of the Indian economy. Indian Banking Industry today is in the midst of an IT

revolution. Nearly, all the nationalized banks in India are going for information technology based

solutions. The application of IT in Banks has reduced the scope of traditional or conventional

banking with manual operations. Nowadays banks have moved from disbursed to a centralized

environment, which shows the impact of IT on banks. Banks are using new tools and techniques

to find out their customers need and offer them tailor made products and services. The impact of

automation in banking sector is difficult to measure.

Technological development in the banking sector

The technological development in the banking sector began with the use of Advanced

Ledger Posting Machines (ALPM) in the 1980s and nowadays banks are using core banking

solution (CBS) for providing better services to their customers. Over the years several studies

have been conducted both at the industry and academic level to examine the impact of IT on

banking productivity and profitability.

E-banking Services through Websites of the Banks

The website technology has totally transformed the banking business. The success of

Internet banking depends upon the well designed website of a bank. It needs to be informative

and functional. So, the basic aim of a website is to make the electronic banking services more

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functional, desirable, accessible and consumer friendly. Internet banking can be provided by the

banks in two ways. Firstly, an existing bank with its physical offices can establish a website and

offer the internet banking services as an additional delivery channel. Secondly, the facility of e-

banking can be provided solely through the internet without having any physical office. The

following diagram highlights that accessibility, speed, navigability and content are the important

factors which make a website effective in its use.

It is evident from the above diagram, if the website is easily accessible by its users, it can

increase its quality. The speed of a website enables its users to make their transactions within a

reasonable time. The linking of the website with another page is called navigability. Each page

of the website should be self-sufficient and provide link to the main contents. Poor web design

will result into loss of users. Further, content means that website must have that required

potential which satisfies the need of the customers. The website of a bank carries various features

like product information, services provided, information on location, contacts of the bank,

history of the bank, security issues, information regarding operation of different services, and

details of various transactions. On the basis of these features, a website can be classified into two

categories:

a) Informational websites

b) Transactional websites

(a) Informational Websites:

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Informational websites provide the general information about the bank and its products.

On such websites, customers can access all kinds of information but they cannot transact.

(b) Transactional Websites:

These websites enable the customers to conduct any transaction through the website of the

bank. The website provides a wide range of services to the customers. These services are

classified into wholesale banking, retail e-banking services, personal banking, etc. Some retail

and wholesale e-banking services are commonly offered by all the financial institutions on their

websites. The banks offer retail services like account management, bill payment , new account

opening, investment/ brokerage services, loan application and approval, account aggregation, etc.

Wholesale services include cash management, small business loan applications, business to

business payments, employee benefit/ pension administration, etc. However, the services

provided through transactional websites are more risky than informational websites. The reason

being that transfer of money is involved in it. So, the following measures are effective to curtail

such a risk:

Security control for safeguarding customer information.

Liability for unauthorized transactions.

Losses from fraud, if the institution fails to verify the identity.

Security from violation of rules and regulations.

The present study is based upon two considerations; firstly, only those banks which are

providing services through transactional websites have been selected for the study; and secondly,

the extent to which these services are being provided by the banks. The purpose of this chapter is

to fill significant gaps related to electronic banking in India. For the fulfillment of gap, a survey

was conducted on the websites of banks to determine the number of electronic banking services

provided by the banks. To study the extent of e-banking services, an attempt has been made to

conduct ranking of electronic banks, so that an approach can be developed to assess which of the

banks are providing qualitative

services to the customers.

Internet banking, however, is now used as the term for new age banking system (Singhal and

Padhmanbhan,2008). Internet banking is defined as the use of the Internet to deliver banking

activities such as funds transfer, paying bills, viewing current and savings account balance,

paying mortgages and purchasing financial instruments and certificates of deposits (Singhal and

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Padhmanbhan, 2008; Ahasanul et al, 2009). Internet banking is also called Online banking, e–

payment and e–banking (Ozuru et al, 2010; Singhal and Padhmanbhan, 2008; Beer, 2006; Jun

and Cai, 2001; IAMAI, 2006). E–payment is described as a means whereby banking businesses

are transacted through automated processes and electronic devices such as personal computers,

telephones, and fax machines, Internet card payments and other electronic channels (Turban et

al, 2006; Ozuru et al, 2010). The electronic communications used in Internet banking includes:

Internet, e–mail, e– books, data base and mobile phones (Chaffey et al, 2006). Cell phone

banking apart from Internet banking is considered the way of the future (Fisher – French, 2007;

Masocha et al, 2011).

In the recent time, the development in technology has affected business organizations in

several ways, most especially in terms of management and control; marketing and research;

operations and decision making. It is therefore, the vogue that every organization wants to tap

the benefits accrue from technology development. In other word, most organizations find means

of enjoying the advantages encapsulated in the new technologies (Larpsiri and Speece, 2004;

Durkin and Howcroft, 2003; Masocha et al, 2011). There was reduction of cost through

substantial improvement in efficiency by business organizations. This resulted in banks diverting

their focus towards extensive computerization and electronic operations (Masocha et al, 2011).

The electronic delivery of banking service has become ideal for banks in meeting customers’

expectations and building close customer relationship (Ching, 2008; Lamb et al, 2002). It is

therefore, no doubt that e–banking will definitely overwhelm traditional banking in the near

future; since more developing nations seem to direct their focus on building up their

infrastructure with specific attention on e–banking, e–commerce and e–learning (Kamel, 2005;

Masocha et al, 2011). Internet banking started with simple functions such as real time access to

information about interest rate, checking account balances and computing loan eligibility.

However, these services have graduated to online bill payment, transfer of funds between

accounts and cash management services for corporate organizations and individuals (Khan et al,

2009; Singhal and Padhmanbhan, 2008). The development experienced in Internet and other

global online networks have thus created new commercial opportunities for e–commerce and

creation of completely new sets of global and national trading relationships. This consequently,

led to the perception that e-banking and e-commerce are now an inevitable aspect of financial

services (Harris and Spencer, 2002). The use of e–banking has brought many benefits amongst

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which include: there are no barrier limitations; it is convenient; services are offered at minimal

cost; it has transformed traditional practices in banking; the only way to stay connected to the

customers at any place and any time is through internet applications; it results in high

performance in the banking industry through faster delivery of information from the customer

and service provider; customers prefer the use of e–banking because it saves time; it makes

possible the use of innovative product or service at a low transaction fees and it encourages

queue management which is one of the important dimensions of e–banking service quality

(Gonzalez et al, 2008; Singhal and Padhmanbhan, 2008; Brodie et al, 2007; Williamson, 2006;

Beer, 2006; Cooper, 1997; IAMAI’s, 2006 and Joseph et al, 1999).

Committee Reports

Information Technology and the Communication Networking Systems have

revolutionized the functioning of banks and other financial institutions all over the world.

Reserve bank of India has played an important role in implementation of information technology

in banking sector. Various researchers have also contributed in this regard. In addition to the

work done by various scholars in the area of Information Technology and Banking organization,

RBI had appointed various committees to work in this area. The reports of various committees

are briefly summarized below:

Dr. C. Rangarajan Committee [1983]

Dr. Rangarajan committee had drawn up in 1983-84 the first blue print for

computerization and mechanization in banking industry and looked into modalities of drawing

up a phased plan for mechanization for the banking industry covering period 1985-89. The

committee in its report in 1984 recommended introduction of computerization and

mechanization at branch, regional office / zonal office and head office levels of banks.

In 1988 another committee was constituted under the chairmanship of Dr. Rangarajan for making

plans for computerization for the next five years from 1990-94 for the banking industry. It

identified the purpose of computerization as improvement in customer service, decision making,

housekeeping and profitability. The committee observed that banking is a service industry and

improved efficiency will lead to a faster rate of growth in output and help to expand employment

all around. The work force in the banking industry must, therefore, look upon computerization as

a means to improve customer service and must welcome it in that spirit.

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W.S. Saraf Committee [1994]

In 1994, the Governor, Reserve bank of India had appointed a committee on technology

issues under the chairmanship of W. S. Saraf. The committee looked into technological issues

related to the payment system and to make recommendations for widening the use of modern

technology in the banking industry. The Saraf committee recommended setting up institutions

for electronic funds transfer system in India. The committee also reviewed the

telecommunication system like use of BANKNET and optimum utilization of SWIFT by the

banks in India.

Shere Committee [1995]

In 1995, RBI formed a committee under the chairmanship of K. S. Shere, to study all

aspects relating to electronic funds transfer and propose appropriate legislation. The Shere

committee had recommended framing of RBI (EFT system) regulations under section 58 of the

Reserve bank of India Act 1934 (RBI Act.), amendments to the RBI act and to the bankers book

evidence act, 1891 as short term measures and enacting of a few new acts such as EFT act, the

computer misuse and data protection act etc. as long term measures.

Narasimhan Committee [1998]

In order to examine the various issues related to the technology up gradation in the

banking sector, the Reserve Bank of India appointed Narasimhan committee in September 1998.

The committee consists of representatives from the Government, Reserve Bank of India, banks

and academic institutions associated with the information technology. The committee dealt with

the issues on technology up gradation and observed that the most of the technology that could be

considered suitable for India in some form or the other has been introduced in some diluted form

or as a pilot project, but the desired success has not been achieved because of the reasons inter-

alia lack of clarity and certainty on legal issues. The committee also suggested implementation of

the necessary legislative changes, keeping in the view the recommendations of Shere committee.

The need for addressing the following issues was also emphasized:-

• Encryption on Public Switching Telephone Network (PSTN) lines

• Admission of electronic files as evidence

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• Treting Electronic Funds Transfers on par with crossed cheques / drafts for purposes of Income

Tax etc

• Electronic Record keeping

• Provide data protection

• Implementation of digital signatures

• Clarification on payment finality in case of EFT

Taking into consideration the recommendations by various committees appointed by RBI and

guidelines of RBI, banks have started using IT to automate banking transactions and processes.

Waves in banking technology

As per the Reports of RBI the first wave in banking technology began with the use of

Advanced Ledger Posting Machines (ALPM) in the 1980s. The RBI advised all the banks to go

in for huge computerisation at the branch level. There were two options: automate the front

office or the back office. Many banks opted for automating the front office in the first phase.

Whereas banks like State Bank of India also concentrated on the back office automation at the

branch level.

The Second wave of development was in Total Branch Automation (TBA) which came in

late 1980s. This automated both the front-end and back-end operations within the same branch.

TBA comprised of total automation of a particular branch with its own database.

In the third wave, the new private sector banks entered into the field of automation. These

banks opted for different models of having a single centralized database instead of having

multiple databases for all their branches. This was possible due to the availability of good

network infrastructure. Earlier, banks were not confident of running the whole operation through

a single data center. However, when a couple of private sector banks showed that it can be done

efficiently, other banks began to show interest and they also began consolidating their databases

into a single database. The banks followed up on this move by choosing suitable application

software that would support centralised operations. The fourth wave started with the evolution of

the ATM delivery channel. This was the first stage of empowerment of the customer for his own

transactions. The second stage was the Suvidha experiment in Bangalore. This showed the power

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of technology and how the reach can be increased amazingly at a great pace. Seeing these, all the

banks started revamping their retail delivery channels. Their core focus became increasing the

number of customers they can service at a lower cost. The main channels for these were

internetbanking and mobile banking. After this, came the alliances for payment through various

other gateways. The third important development happening now is the real-time gross

settlement system of the RBI. Once this was in place, transactions between banks could be done

through the settlement system, online, electronically thereby, ensuring faster collection. The

process of computerisation had started from Back Office Application, after that Total Branch

Automation and nowadays it is the period of implementation of Core Banking Solutions (CBS).

A key trend in the last couple of years has been the focus on core banking systems. With

the implementation of core banking systems across the banks, the usage level of IT for customer

management has increased. Core banking systems have enabled banks to launch new products

and services targeting specific customer segments after understanding their banking and

investment requirements.

ATM, internet banking and mobile banking have improved customer convenience by providing

anywhere any time banking services. The utility bill presenting and payment has helped

customers to pay their bills online at the click of a button. Electronic clearing system and

electronic funds transfer have facilitated faster funds movement and settlement for the customers

of different banks and different centers. The electronic data interchange and cash management

service facilities have enabled better funds management for the customer.

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Very few banks offered customers the ability to access their accounts and perform at least simple

money transactions using internet banking. Advancements in information technology have made

it possible for the banks to use the internet as a delivery channel for banking services.

Technological developments have introduced tremendous changes in the ability of financial and

non financial firms to efficiently collect, store, use and sell information about their customers.

Applications of IT in the banking sector

Rajshekhara K. S. (2004) described the adoption of IT in banking has undergone several

changes with the passage of time. Today IT has become an inseparable segment of banking

organization. The application of information technology in the banking sector resulted in the

development of different concepts of banking such as – E-banking, Internet Banking, Online

Banking, Telephone Banking, Automated teller machine, universal banking and investment

banking etc. Information technology has a lot of influence on banking transactions. It ensures

quick service with low transaction cost to the customers. The real success of IT in the banking

sector depends upon the customer’s satisfaction. Therefore banks should organize and conduct

customer awareness program in their service area. Security is an important issue in the context of

E-banking. The development of technology for the identification of customers with different

means of communication devices is a must for successful business and also to reduce frauds in

banking. In this paper the author has studied customer related aspects only.

Vij Madhu (2003) presents the changing profile of Indian banks with the help of a

comparative study of three private sector banks in India namely ICICI bank, HDFC bank and

IDBI bank. The comparative analysis of the three private sector banks shows that HDFC stands

out as a clear winner with ICICI at number two. In the study the researcher concludes that the

challenge for the future will be the synergetic use of internet, proper understanding, measuring of

risk management as also nurturing and retaining the intellectual capital. The author suggested the

following strategies that need to be focused on:

• Develop and innovate new products so as to widen customer base

• Strategic alliances

• Setting up of an effective software system for ALPM the way banks in most of the developed

countries are using.

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Gulati V. P. listed the following possible applications that can be easily complimented by

the Indian financial sector.

• Quick disposal of loan/investment proposal

• Forex information from branches to the office dealing with forex

• Fund information from clearing centers to the fund management office for optimal allocation of

funds

• Inter-branch interbank reconciliation

• Fund transfer/payment messages (EFT/EDI) (intra-bank and inter-bank)

• E-mail

• Organizational bulletin boards may contain the following: circulars, undesirable parties, hot

list, bulletins, missing security items, confidential circulars on attempted frauds

• Organizational/customers database may include statutory returns, control returns, standardized

returns, adhoc reports

• Banks-corporate customers connectivity

• Management information systems: Borrower’s profile; Branch profile; employee’s analysis;

products/services profile; business profile of branches

• Banks owned ATM/credit-debit card and other applications on the financial network.

IT framework for Indian banking sector

IT planning is an ongoing effort intended to match the bank’s technology capabilities with its

changing strategic objectives. It is necessary for a bank to identify technology gaps and develop

a plan that supports the bank’s long/medium term-strategic goals in order to bridge the gaps. It is

imperative for banks to have a clearly defined technology planning process that is based on a

well founded technology action plan for the following reasons:

Increasing competition, new products and changing distribution channels.

Banks currently spend a huge amount of their budget annually on technology. Such

investments will only continue to escalate.

Effective technology management requires an underlying technology plan. Without it,

scarce resources are likely to be wasted and opportunities missed.

Gulati suggested IT policy framework for Indian banks as follows. IT strategies need to be

formulated by banks taking into consideration the critical aspects of long/short-term planning to

align technology systems with business objectives. Conscious efforts must be made to place the

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entire organization’s proper perspective and to have a holistic approach to planning. The

following strategic evaluation needs to be made:

• Current state (Where are we?): There should be a self-assessment process which analyses the

present/current technology in use. It also involves evaluation of staffing, training, organizational

processes and controls, communication and management reporting. To successfully integrate

new technologies, banks must objectively confront internal operating issues and be willing to

make changes wherever necessary. Business process re-engineering should be accorded top

priority to successfully absorb new technology.

• Desired state (Where do we want to go?): Identification and prioritisation of the reasons behind

technology adoption is vital. Technology goals should always be firmly grounded in an

understanding of the marketplace. Sizing up the competition and measuring up to its pace, based

on a SWOT analysis, must be the foundation of the decision on where to go.

• Destination (How do we get there?): This phase of the technology planning process, involves

making decisions about, how to implement the technology action plan and the technology

initiatives required to be pursued in the short/mid/long term.

Internet Banking in India

Jadhav Anil (2004) described various channels of e-banking services such as ATM,

Telephone banking (Tele-banking), Mobile banking, Internet banking and its features. The focus

is also given on e-banking opportunities, challenges and security aspects while performing the

banking transactions on the internet. Comparison of public, private, foreign and co-operative

banks and barriers to the growth of e-banking in India. Finally the paper discusses an overview

of the major private sector banks such as ICICI, HDFC, IDBI, UTI & GTB banks which

provides e-banking services.

The author’s observations are: Many Indian banks are yet to make a desirable progress in

implementing the technology and gearing up to confront the challenges posed by the rapid

changes that are sweeping the banking sector globally. Private and Foreign banks have been fast

in adopting and adapting to the Internet technology. Very few public sector banks offer Internet

banking services whereas; none of the co-operative banks offer Internet banking services. ATM

is becoming a most preferred delivery channel from the common banking services. In order to

enhance the reach to the rural population in the remote areas, the banks will need to automate the

delivery channels in the local language which could eventually lead to shrinking of the number

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of branches. The banking industry’s security is at a higher risk, due to the advent of e-banking.

The banking organizations which provide e-banking services should take the following

precautions/responsibility:

a) The Banks should hire the services of anti Cyber crime professional to avoid cyber crime

b) To take the responsibility of customer’s transactions

c) Create awareness of e-banking services amongst the customers and motivate/encourage them

to use it.

Operational risk:

Operational risk, also referred to as transactional risk is the most common form of risk associated

with i-banking. It takes the form of inaccurate processing of transactions, non enforceability of

contracts, compromises in data integrity, data privacy and confidentiality, unauthorized access /

intrusion to bank’s systems and transactions etc. Such risks can arise out of weaknesses in

design, implementation and monitoring of banks’ information system. Besides inadequacies in

technology, human factors like negligence by customers and employees, fraudulent activity of

employees and crackers / hackers etc. can become potential source of operational risk. Often

there is thin line of difference between operational risk and security risk and both terminologies

are used interchangeably.

Security risk:

Internet is a public network of computers which facilitates flow of data / information and

to which there is unrestricted access. Banks using this medium for financial transactions must,

therefore, have proper technology and systems in place to build a secured environment for such

transactions.

Security risk arises on account of unauthorized access to a bank’s critical information

stores like accounting system, risk management system, portfolio management system, etc. A

breach of security could result in direct financial loss to the bank. For example, hackers

operating via the Internet, could access, retrieve and use confidential customer information and

also can implant virus. This may result in loss of data, theft of or tampering with customer

information, disabling of a significant portion of bank’s internal computer system thus denying

service, cost of repairing these etc. Other related risks are loss of reputation, infringing

customers’ privacy and its legal implications etc. Thus, access control is of paramount

importance. Controlling access to banks’ system has become more complex in the Internet

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environment which is a public domain and attempts at unauthorized access could emanate from

any source and from anywhere in the world with or without criminal intent. Attackers could be

hackers, unscrupulous vendors, disgruntled employees or even pure thrill seekers. Also, in a

networked environment the security is limited to its weakest link. It is therefore, necessary that

banks critically assess all interrelated systems and have access control measures in place in each

of them.

In addition to external attacks banks are exposed to security risk from internal sources

e.g. employee fraud. Employees being familiar with different systems and their weaknesses

become potential security threats in a loosely controlled environment. They can manage to

acquire the authentication data in order to access the customer accounts causing losses to the

bank.

Unless specifically protected, all data / information transfer over the Internet can be

monitored or read by unauthorized persons. There are programs such as ‘sniffers’ which can be

set up at web servers or other critical locations to collect data like account numbers, passwords,

account and credit card numbers. Data privacy and confidentiality issues are relevant even when

data is not being transferred over the net.

It is significant not only for a single bank but also for the system as a whole. Under extreme

circumstances, such a situation might lead to systemic disruptions in the banking system as a

whole. Thus the role of the regulator becomes even more important as not even a single bank can

be allowed to fail.

Legal risk

Legal risk arises from violation of, or non-conformance with laws, rules, regulations, or

prescribed practices, or when the legal rights and obligations of parties to a transaction are not

well established.

Other reasons for legal risks are uncertainty about the validity of some agreements

formed via electronic media and law regarding customer disclosures and privacy protection. A

customer, inadequately informed about his rights and obligations, may not take proper

precautions in using Internet banking products or services, leading to disputed transactions,

unwanted suits against the bank or other regulatory sanctions.

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In the enthusiasm of enhancing customer service, bank may link their Internet site to

other sites also. This may cause legal risk. Further, a hacker may use the linked site to defraud a

bank customer

Reputational risk

Reputational risk is the risk of getting significant negative public opinion, which may

result in a critical loss of funding or customers. Such risks arise from actions which cause major

loss of the public confidence in the banks' ability to perform critical functions or impair bank-

customer relationship. It may be due to banks’ own action or due to third party action.

The main reasons for this risk may be system or product not working to the expectations

of the customers, significant system deficiencies, significant security breach (both due to internal

and external attack), inadequate information to customers about product use and problem

resolution procedures, significant problems with communication networks that impair customers’

access to their funds or account information especially if there are no alternative means of

account access. Such situation may cause customer-discontinuing use of product or the service.

Directly affected customers may leave the bank and others may follow if the problem is

publicized.

Money laundering risk

As Internet banking transactions are conducted remotely banks may find it difficult to apply

traditional method for detecting and preventing undesirable criminal activities. Application of

money laundering rules may also be inappropriate for some forms of electronic payments. Thus

banks expose themselves to the money laundering risk. This may result in legal sanctions for

non-compliance with “know your customer” laws.

To avoid this, banks need to design proper customer identification and screening

techniques, develop audit trails, conduct periodic compliance reviews, frame policies and

procedures to spot and report suspicious activities in Internet transactions

Cross border risks

Internet banking is based on technology that, by its very nature, is designed to extend the

geographic reach of banks and customers. Such market expansion can extend beyond national

borders. This causes various risks.

It includes legal and regulatory risks, as there may be uncertainty about legal

requirements in some countries and jurisdiction ambiguities with respect to the responsibilities of

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different national authorities. Such considerations may expose banks to legal risks associated

with non-compliance of different national laws and regulations, including consumer protection

laws, record-keeping and reporting requirements, privacy rules and money laundering laws.

If a bank uses a service provider located in another country, it will be more difficult to

monitor it thus, causing operational risk. Also, the foreign-based service provider or foreign

participants in Internet banking are sources of country risk to the extent that foreign parties

become unable to fulfil their obligations due to economic, social or political factors.

Cross border transaction accentuates credit risk, since it is difficult to appraise an

application for a loan from a customer in another country compared to a customer from a

familiar customer base. Banks accepting foreign currencies in payment for electronic money may

be subjected to market risk because of movements in foreign exchange rates.

CREDIT CARDS

The credit card business got momentum in the sixties and a number of banks entered the

field in a big way. Credit card culture is an old hat in western countries. In India, it is relatively a

new concept that is fast catching on. The present trend indicates that the coming years will

witness a burgeoning growth of credit cards which will lead to a cashless society. Credit has

become an important vehicle of trade promotion. Credit cards provide convenience and safety to

the buying process. One of the important reasons for the popularity of credit cards is the sea

change Witnessed in consumer behaviour. Credit cards enable an individual to purchase products

or services without paying immediately. The buyer only needs to present the credit cards at the

cash counter and sign the bill. Credit card can, therefore, be considered as a good substitute for

cash or cheques.

A Credit card is a card or mechanism which enables cardholders to purchase goods,

travel and dine in a hotel without making immediate payments. The holders can use the cards to

get credit from banks up to 50 days free of cost. The credit card relieves the consumers from

botheration of the carrying cash and ensures safety. It is a convenience of extended credit

without formality. Thus credit card is a passport to, “safety, convenience, prestige and

credit.”104 A credit card is a plastic card having a magnetic strip, issued by a bank or business

authorizing the holder to buy goods or services on credit. Any card, plate or coupon book that

may be used repeatedly to borrow money or buy goods and services on credit is called credit

card.

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A credit card is a card establishing the privilege of the person to whom it is issued to

charge bills. Most retail firms accept credit cards. Credit cards allow consumers to make

purchases without paying cash immediately or establishing credit with individual stores. They

eliminate the need to check credit ratings and to collect cash from individual customers. The

issuing institution establishes the card’s terms, including the interest rate, annual fees, penalties,

the grace period, and other features. Credit card debt is typically an unsecured debt.

Repossession is not easily accomplished by the lender to ensure payment. Banks have often

priced the product assuming maximum risk exposure.

A credit card is a device which enables the holder to obtain goods on credit from

specified supplies. The holder of the card, in some cases, has to pay the yearly subscription and

the suppliers also have to pay commission on sales to the bank or the body issuing the card. The

suppliers are paid promptly and so are protected against bad debts, while the holder makes a

single monthly payment to cover all his purchases for that period. Credit cards are issued only

after the applicant’s credit worthiness has been accepted as satisfactory. According to credit

rating, holder of the credit card may be allowed a specified amount of credit from one month to

another

A credit card, as the name indicates, enables the cardholder to enjoy credit from the

issuing bank for a specific period after the purchases. During this intervening period, the

cardholder is allowed to use the card for incurring further expenses.108 A bankcard is used to

make an electronic withdrawal from funds on deposit in a bank, as in purchasing goods or

obtaining cash advances. Credit cards are one of the most popular forms of payment for

consumer goods and services in the United States.

FEATURES OF CARD

The features of modern credit cards such as owner identification, credit limit for its cardholders

and floor limit for its merchant establishments, convenience and safety to add value of cards,

wider usage or popularity all over the world and dependence on technology to keep operating

cost to the minimum, have been a runaway success for credit cards.

Along with convenient, accessible credit, credit cards offer consumers an easy way to

track expenses, which is necessary for both monitoring personal expenditures and the tracking of

work-related expenses for taxation and reimbursement. Credit cards are accepted worldwide, and

are available with a large variety of credit limits, repayment arrangement, and other perks (such

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as rewards schemes in which points earned by purchasing goods with the card can be redeemed

for further goods and services or credit card cash back). Some countries, such as the United

States, the United Kingdom, and France, limit the amount for which a consumer can be held

liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen. A

credit card is part of a system of payments named after the small plastic card issued to users of

the system. The issuer of the card grants a line of credit to the consumer (or the user) from which

the user can borrow money for payment to a merchant or as a cash advance to the user. A credit

card is different from a charge card, which requires the balance to be paid in full each month. In

contrast, credit cards allow the consumers to 'revolve' their balance, at the cost of having interest

charged. Most credit cards are issued by local banks or credit unions, and have the same shape

and size, as specified by the ISO 7810 standard.

EVOLUTION AND GROWTH OF CARD

The number of credit and debit card users in India is climbing fast, and rising affluence is

likely to erode Indians’ lingering reluctance to spend on credit. Indians have traditionally valued

thrift and frugality. But the spread of affluence in the wake of rapid economic growth is

challenging these values, at least for many middle-class and high-income families. One sign of

this is the phenomenal growth in the number of credit and debit cards in India—in the past three

years, the number of credit cards has more than doubled and the number of debit cards has

almost quadrupled. Credits cards are a relatively recent development. The VISA Company, for

example, traces its history back to 1958 when the Bank of America began its Bank Americard

program. In the mid-1960s, the Bank of America began to license banks in the United States the

rights to issue its special Bank Americards. In 1977 the name Visa was adopted internationally to

cover all these cards. VISA became the first credit card to be recognized worldwide.

Credit cards are relatively new to India. Andhra Bank and Central Bank of India

introduced credit cards in 1981. As of now there are about more than dozen major banks in

Indian and foreign which have entered this line of business, besides some non-banking

institutions. Since the plastic money has become as good as legal tender more people are using

them in their day-to-day activities. The attitude of people towards credit cards has changed. A

phenomenal amount of money moves get transacted nowadays through electronic transfer, credit

cards and debit cards. The Indian credit card market is in its growth phase, it recorded a growth

of about 30 per cent a year. Debit cards are growing at 40 per cent. The RBI data put total

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electronic transaction in the country at over Rs.2,35,000 crores in 2006-07. This increased to

Rs.3,60,000 crores in the first 10 months (April-January) of 2007-08. At the end of April-January

2007-08, all of us together held about 27.5 million credit cards transacted Rs.47,476 crores

through these cards in 10 months of the year.

The Indian credit cards industry is still in a relatively nascent stage when compared to

economies in West Asia, a survey by Master Card International. According to the survey results,

only 14 per cent of Indians currently own a credit card. This is in sharp contrast to countries such

as the United Arab Emirates and Kuwait where 63 per cent and 50 per cent of respondents,

respectively, own a credit card. The results indicate that the high growth potential for the

payment card industry in India,

In terms of the single most important factor influencing choice of credit card, 30 per cent of

Indians say they are influenced by the credit card brand, closely followed by 23 per cent who

choose a credit card depending on the credit limit. Interestingly, 8 per cent of cardholders say

they are influenced by the card design, while only 5 per cent and 2 per cent cardholders say they

are influenced by the interest rate and the bank staff recommendations respectively.

Drivers of growth in card payment market

Several factors have combined to fuel the astonishing growth in the use of credit and debit cards

in India. Apart from the convenience offered by cards, these factors include the following:

1. Rising consumerism

2. Improved payment infrastructure

3. Competition and lower costs

4. Co-branding.

Credit card outstanding rising in India

The outstanding on plastic cards has risen by more than 50 per cent to Rs 19,345 crores as on

February 15, 2008 according to the RBI. The credit card industry in India is still nascent

according to VISA. Indians make just 1 per cent of their total purchases by credit cards against

20 per cent by Koreans. The global average is around 9 per cent. The Indian Credit Card market

is expected to touch 55 million cards by 2010-2011.

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Indian credit card user base grows 30% YoY

India had just 3.5 million credit cards in 2000. As of March-2006, the number has swelled to 19

million, by January 2007 there were 22 million credit cards in India at the end of April-March

2007-08, all together held about 28 million credit cards and Indian had already transacted

Rs.56,846 crores through these cards in the year. It represents the average growth of 30 per cent

yearly. Not just the number of users have increased, but also the average spending has gone up

from $368 (Rs.16,560) in 2000 to $437 (Rs.19,665) in 2006 and in 2007-08 to Rs.56,846 crores

Big players in India’s credit card industry

ICICI Bank leads the pack with a 30 per cent market share and has issued 5 million credit cards

by the end of March 2006. At present upto March 2008, ICICI Bank is the largest credit card

provider in the country with 9 million credit cards, has shown a growth of around 20-22 per cent,

lower than the average growth of 30 per cent it has seen in the past three years. HDFC Bank

(after merger with Centurion Bank of Punjab) has become the second largest credit card issuer in

India beating Citibank and SBI-GE Money in the race. HDFC Bank now has a base of 4.3

million credit card customers while CITI India has around 3.4 million and SBI-GE Capital have

around 3.6 million customers at the end of FY 2008. HSBC credit card base 3.5 m by 31 March

2008. ICICI Bank, HDFC, HSBC, SBI and Citi Bank have over 80 per cent share of the Indian

credit card industry.

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CLASSIFICATION OF CREDIT CARD

Before we apply for a credit card it is always better to know what type of credit card is best

suited to our profile. Catering to different types of consumer needs, credit card companies issue

several types of credit cards. Each type has its own benefits. They can be classified as follows:

Based on Franchise / Tie-up

i. Proprietary Card: Cards that are issued by the banks themselves without any tie-up, are

called proprietary cards. A bank issues such cards under its own brand. Examples include SBI

Card, CanCard of Canara Bank, Citicard.

ii. Master Card: This is a type of credit card issued under the umbrella of MasterCard

International. The issuing bank has to obtain a franchise from the MasterCard Corporation of the

USA. The franchised cards will be honoured in the MasterCard network.

iii. VISA Card: This type of credit card can be issued by any bank having tie-up with VISA

International Corporation, USA. The banks that issue such cards are said to have a franchise of

VISA International. The advantage of a VISA franchise is that one can avail the facility of the

VISA network for transactions.

iv. Domestic tie-up Card: These cards are issued by a bank having a tie-up with domestic card

brands such as CanCard and Indcard are called ‘Domestic cards’.

Based on geographical validity

i. Domestic Card: Cards that are valid only in India and Nepal are called ‘domestic cards’. They

are issued by most of the banks in India all transactions will be in rupees.

ii. International and Global Card: Credit cards with international validity are called

‘international cards’. They are issued to people who travel abroad frequently. They are honored

in every part of the world except India and Nepal. The cardholder can make purchases in foreign

currencies subject to RBI sanction and FERA rules and regulations.

Based on mode of credit recovery

i. Revolving Card: This type of credit card is based on the revolving credit principle. A credit

limit is fixed on the amount of money one can spend on the card for a particular period. The

cardholder has to pay a minimum percentage of the outstanding credit which may vary from 5 to

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10 percent at the end of a particular period. Interest varying from 30 to 36 percent per annum is

charged on the outstanding amount.

ii. Charge Card: A charge card is not a credit instrument; it is a convenient mode of making

payment. This facility gives a consolidated for a specific periods and bills are payable in full on

presentation. There is neither interest liability nor no per-set spending limits.

Based on status of Card

i. Standard Card: Credit cards that are regularly issued by all card-issuing banks are called

‘standard cards’. With these cards, it is possible for a cardholder to make purchases without

having to pay cash immediately. They however, offer only limited privileges to cardholders.

Some banks issue standard cards under the Brand name “Classic” cards, which are generally

issued to salaried people.

ii. Business Card: Business cards also known as ‘Executive cards’, are issued to small

partnership firms, solicitors, firms of chartered accountants, tax consultants and others, for use

by executives on their business trips. They enjoy higher credit limits and more privileges than the

standard cards.

iii. Gold Card: The gold card offers high value credit for elite. It offers many additional benefits

and facilities such as higher credit limits, more cash advance limits that are not available with the

standard or the executive cards.

Innovative card

In addition, credit cards which have evolved into a variety of innovative cards over the years are

also issued by banks.

i. ATM Card: ATM cards allow customers to access their accounts at any time-24 hours a day,

every day of the year, through Automated Teller Machines. Customers can withdraw cash,

transfer funds, find out their account balance and perform other banking and financial

transactions with the help of ATMs.

ii. Debit Card: A debit card, like an ATM card, directly accesses a customer’s account. It is a

hybrid of ATM and credit card. The card directly debits a designated savings bank account.

Whereas in the case of credit cards, a grace credit period of 20 to 50 days for making the

payment is available, no such credit period is allowed under debit cards. These cards can be used

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either at merchant locations who have this facility to buy goods and services or at ATMs.

Presently, ATM-Cum Debit cards issued by Indian banks are in use.

iii. Prepaid Card: Prepaid cards are also known as ‘Stored Value Cards’. These cards are with

stored value paid in advance by the holder. The card issuer and the service provider are identical.

They are also called Limited Purpose Prepaid Cards which can be used for a limited number of

well –defined purposes. Its use is often restricted to a number of identified points of sales within

a specified location

iv. Private Label Card: These cards are uniquely tied to the retailer issuing the card and can be

used only in that retailer’s stores. A bank, on the basis of a contractual agreement with the

retailer extends credit under this type of card.

v. Affinity Group Card: These are credit cards designed for a collection of individuals with

some form of common interest or relationship, such as professional, alumni, retired persons’

organizations, sports teams, schools, or service organizations. This credit card carries the logo of

the affiliated organization on the card design and brings special benefits and discounts on

products from that company. In case the affiliated company is a charity or non-profit

organization, a part of the credit card expenses go into the affiliate organization's account. For

example: The Help Age India Credit Card issued by ICICI bank.

vi. Smart Card: A smart card is a credit card sized plastic card with an embedded computer

chip. The chip allows the card to carry a much greater amount of information than a magnetic

strip card. The telecom industry, was perhaps the pioneer in smart cards, the most prominent

being Subscriber Identity Module (SIM) cards in the GMS digital cellular network. Using special

terminals designated to interact with the embedded chip, the card can perform special functions.

This is essentially a prepaid card.

vii. Chip Card: A chip card is a plastic card with an embedded integrated circuit or as microchip

as opposed to magnetic strips on a conventional card. The chip can be used on existing debit and

credit cards as well as on emerging products like stored value cards. Inserting the card in a pin-

pad effects the transaction, and the value on it reduces accordingly. It is re-loadable and

disposable. The idea is to do away with the trouble of carrying cash. The chip card also scores

over the magnetic card, in that it can retain 50 to 60 of the latest transactions, which can be

produced on demand. It is also considered more durable and secure since the cardholder alone

can access it through a Personal Identification Number (PIN).

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viii. Co-branded card: The Times Card, a co-branded credit card, is the first of its kind, from a

publishing house in the Asian subcontinent. This is a cobranded credit card of Times of India

Group and Citibank MasterCard. The co-branding concept caught the credit card industry the

world over during the last five years

Other types of credit card

i. Special purpose Card: The eighties saw the development of special purpose cards. A host of

special purpose cards were issued by departmental stores, airlines, oil companies. For instance,

the International Bank of Asia in Hong Kong launched the first ‘women only’ card, ‘My card’ in

the year 1988. A highly encouraging membership and increasing potential of such special

purpose cards are called “Lady’s card” in Malaysia. In 1990, the Green card was launched in the

U.K and Europe to promote contributions towards the protection of the environment. HDFC

issued ‘My City’ credit cards used in particular city with special discount offer for oil and petrol

and also an offer for cash back. AXIS Bank also offers special purpose credit cards like Gift

card, Travel currency card and Remittance card.

ii. Add-on card: An add-on card is more of an additional Credit card that the customer can apply

in the name of their family members (father, mother, sister, brother, spouse, children), within the

overall credit limit. Family members applying for Add-on cards have to be 18 years and above.

All the payments for the services made from Add-on card(s) is done by the original cardholders.

Most banks allow for at least two Add-on cards.

iii. Photo card: If a card comes with the imprinted photo, then it is a Photo card. This type of

card is considered safer as it is easier to identify the credit card user. It also serves as more

identity card.

iv. Power card: It is a comprehensive credit card product that enables banks and financial

industry to enter into issuing and acquiring business of Credit Cards. The basic advantage of this

efficient tool is to improve productivity and control the risks involved in day-to-day activities of

any financial institutions in credit cards. The product is 24 7, multi language, multi currency,

multi-bank and multi country.

v. Regular credit card: This is the most basic type of credit card. It has a low credit limit and

the most basic status among various credit cards. Credit card companies can club various other

reward programs like travel rewards, cash back offers to enhance its value and appeal to

customers.

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vi. Silver credit card: Silver credit cards have higher eligibility criteria than regular credit cards.

They bring more benefits to the customers, and have higher credit limits than regular credit

cards.

vii. Gold credit card: Gold credit cards have a higher status and credit limits than silver credit

cards. Needless to say these types of credit cards have higher income requirements as their

eligibility criteria. In addition to the regular benefits, banks extend special privileges to their gold

credit card holders.

viii. Platinum or Titanium credit card: These types of credit cards bring more benefits to

credit card holders than regular, silver or gold card. These credit cards generally have platinum

or titanium hue and are issued to a select class of clients who have excellent financial

background and good income levels. Platinum credit cards have personal concierge services, in

addition to exclusive platinum benefits.

ix. Signature credit card: A league of its own, the Signature Credit Cards usually have no pre-

set spending limits, personal concierge service, signature travel, and lounge and membership

benefits. Offered to a very elite group these credit cards, requires an excellent financial status.

On June 9, 2007 ICICI bank introduced the Visa Signature Card and became the first credit card

issuer in India to launch a premium credit card. This has a joining fee of Rs.25,000/- and an

annual fee of Rs.2,500/-. The exclusivity of this signature card is exemplified by the statement.

x. Credit cards by invitation only: The earliest of the elite, no one can apply for these card. For

example, the American Express Black Credit Card, popularly called the Centurion Card, is

issued by invitation to the most exclusive and elite, to those who spend a certain minimum

amount (which can run into crores of rupees). These cards have huge annual fees and minimum

spending levels. In fact, these credit cards are so exclusive, that they have an aura of mystery

surrounding them and are considered status symbols.

xi. Reward card: There are cards which offer rewards for specific kinds of purchases. For

example, the Airline Reward Card offer rewards on air travel, Cash back card offer cash rewards

on every card purchases, Fuel Reward Card offer rebates on petroleum and other fuel purchases

from specified outlets and preferred partners. Similarly, Hotel Reward Card give rebates on hotel

stay and related expenses and Health Rewards Card give benefits on medical expenses, health

treatments and related activities. The rewards offered by credit card companies in alliance with

various brands and stores, make them more attractive for the credit card holders.

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xii. Student credit card: As the name implies, these credit cards are especially designed for

students and help them start their credit card journey. These bring lots of rewards especially

suited for students, which help them save time, money and enjoy their student life. They are a

first step towards building credit history. A good credit history goes a long way in creating a

relationship with banks helping to secure much needed loans and credit in the future.

xiii. Special feature credit card: Credit cards can also be grouped on the basis of their features.

For example, based on their introductory interest rates, credit cards can be low introductory

interest credit cards, or 0 (zero) Interest credit cards. The Zero introductory interest credit cards

provide interest free credit (0%) for a specified time period, which is called the introductory

period. Similar is the case with credit cards that come without any annual fee what so ever and

are called ‘no annual fee’ credit cards.

xiv. Balance transfer credit card: Credit card companies provide lucrative offers with 0 per

cent introductory interest or low introductory interest charges on balance transfers. This allows

credit card holders to transfer the outstanding balances on their existing credit cards to a credit

card with low or zero interest on balance transfers. This brings them a lot of savings in the

interest rates. The balance transfer credit cards may charge a balance transfer fees for every such

operation.

xv. Kisan Credit Card (KCC): The Kisan Credit Card Scheme aims at providing need based

and timely credit support to the farmers for their cultivation needs as well as non-farm activities

and cost effective manner to bring about flexibility and operational freedom in credit utilization.

The Kisan Card is for a period of 3 years subject to an annual review. It was launched in 1998-99

by the Government of India in consultation with the Reserve Bank of India and National Bank

for Agricultural and Rural Development is a huge hit with the farmers in India. According to the

RBI, presently there are about 66.56 million Kisan Credit Cards in use across India, which have

been issued by various banks.

xvi. Secured credit card: Secured credit card is a type of credit card secured by a deposit

account owned by the cardholder. This deposit is held in a special savings account. The

cardholder of a secured credit card is still expected to make regular payments, as with a regular

card, but should they default on a payment, the card issuer has the option of recovering the cost

of the purchases paid to the merchants out of the deposit. The advantage of the secured card for

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an individual with negative or no credit history is that most companies report regularly to the

major credit bureaus. This allows for building of positive credit history.

GLOBAL PLAYER IN CREDIT CARD MARKET

MasterCard: MasterCard is a product of MasterCard International and along with VISA is

distributed by financial institutions around the world. Cardholders borrow money against a line

of credit and pay it back with interest if the balance is carried over from month to month. Its

products are issued by 25,000 financial institutions in 220 countries and territories. In 1998, it

had almost 700 million cards in circulation, whose users spent $650 billion in more than 16.2

million locations. The company, which had been organized as a cooperative of banks, had an

initial public offering on May 25, 2006 at $39.00 USD. The stock is traded on the NYSE under

the symbol MA.

VISA card: A VISA card is a product of VISA USA and along with Master Card is distributed

by financial institutions around the world. Visa Inc. commonly referred to as VISA, is a

multinational corporation based in San Francisco, California, USA. The company operates the

world's largest retail electronic payment network, managing payments among financial

institutions, merchants, consumers, businesses and government entities. Before Visa Inc's IPO in

early 2008, it was operated as a cooperative of some 21,000 financial institutions that issued and

marketed Visa products including credit and debit cards. A VISA cardholder borrows money

against a credit line and repays the money with interest if the balance is carried over from month

to month in a revolving line of credit. Nearly 600 million cards carry one of the VISA brands and

more than 14 million locations accept them.

American Express: The world’s favourite card is American Express Credit Card. More than 57

million cards are in circulation and growing and it is still growing further. Around US $ 123

billion was spent last year through American Express Cards and it is poised to be the world’s

no.1 card in the near future. In a regressive US economy last year, the total amount spent on

American Express cards rose by 4 percent. They are very popular in the U.S., Canada, Europe

and Asia and are used widely in the retail and everyday expenses segment.

CREDIT CARD SYSTEM

Interest charges

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Credit card issuers usually waive interest charges if the balance is paid in full each month, but

typically will charge full interest on the entire outstanding balance from the date of each

purchase if the total balance is not paid. The credit card may simply serve as a form of revolving

credit, or it may become a complicated financial instrument with multiple balance segments each

at a different interest rate, possibly with a single umbrella credit limit, or with separate credit

limits applicable to the various balance segments. Interest rates can vary considerably from card

to card, and the interest rate on a particular card may jump dramatically if the card user is late

with a payment on that card or any other credit instrument, or even if the issuing bank decides to

raise its revenue.

Fees charged to customers

Interest free credit period is applicable only on retail purchases and if previous months balance

outstanding is paid in full. It may vary from banks for 20-50 days. The major fees are for: No

joining fees, annual fees and renewal fees are applicable on the primary and secondary card

member unless indicated by the banks. Late payments or overdue payments (30% of

minimum amount due, subject to minimum of Rs.400 and maximum of Rs.600)

Charges that result in exceeding the credit limit on the card (whether done deliberately

or by mistake), called over limit fees (2.5% of over limit amount, subject to a minimum

of Rs.500)

Returned cheque fees or payment processing fees (Rs.250 )

Cash advances and transaction fees (2.50% on advanced amount, subject to a minimum

of Rs.300) on Easy deposit card – NIL for ICICI Bank ATM cash withdrawals fees.

Transactions in a foreign currency (3.5% of the amount).

Outstation Cheque Processing Fee (1% of the cheque value, subject to minimum of

Rs.100)

Dial-a-Draft – Transaction Fee (3% of the draft value amount subject to a minimum of

Rs.300)

Railway Booking Surcharge (1.80% for Internet transactions and 2.5% for other

bookings)

Fee on Cash payment at Branches(Rs.100) Interest will be charged if cardholder do not

pay back the previous bills is full, and also on all cash advances from the data of

transaction until date of settlement.

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Grace period

A credit card's grace period is the time the customer has to pay the balance before interest is

charged to the balance. Grace periods vary, but usually range from 20 to 50 days depending on

the type of credit card and the issuing bank. Some policies allow for reinstatement after certain

conditions are met. Usually, if a customer is late paying the balance, finance charges will be

calculated and the grace period does not apply. Finance charges incurred depend on the grace

period and balance, with most credit cards there is no grace period if there is any outstanding

balance from the previous billing cycle or statement (i.e. interest is applied on both the previous

balance and new transactions). However, there are some credit cards that will apply finance

charge only on the previous or old balance, excluding new transactions.

Benefits to customers

Because of intense competition in the credit card industry, credit card providers often offer

incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 to 5

percent based on total purchases) offers try to attract customers to their programs. Low interest

credit cards or even 0 per cent interest credit cards are available.

Benefits to merchants

For merchants, a credit card transaction is often more secure than other forms of payment, such

as cheques because the issuing bank commits to pay the merchant the moment the transaction is

authorized, regardless of whether the consumer defaults on the credit card payment . In most

cases, cards are even more secure than cash, because they discourage theft by the merchant's

employees and reduce the amount of cash on the premises. Prior to credit cards, each merchant

had to evaluate each customer's credit history before extending credit. That task is now

performed by the banks which assume the credit risk

CREDIT CARD SERVICES IN INDIA

Indian credit card market is growing upwards due to the global business environment.

This is not only new but also benefit to the existing and new cardholders by giving the important

innovative services offered under the following heads.

Merchant establishment services

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Wider acceptance of credit cards, discount facility offered to the customers and quick

processing of transactions for the credit cardholder is the important services made by the

merchant establishment at their PoS. Credit cards give the cardholders the facility of anytime

cash and convenience of using it anywhere in the world and a whole bunch of benefits. These

benefits range from lifetime free cards, Global emergency assistance service, discounts, utility

payments, Travel discounts and a lot more. Bank Credit Cards Special Offers include payment in

monthly EMIs on their Credit Card, Family Plus - a complete insurance plan that is flexible

enough to cover every member of the family. Heavy Discounts, Best Shopping Deals Ever,

Exclusively for Bank Credit Card Holders.

Banks Gold Cards are welcomed at all Merchant Establishments displaying the VISA

logo - over 1,10,000 and MasterCard logo - over 77,000 establishments across India and Nepal

and the Silver and Gold Cards are accepted globally by over 22 million VISA Card and 22

million MasterCard accepting establishments.

Insurance services

Once own a credit card, there are some insurance benefits available to us who come along

with the newly-issued credit card, we will find an insurance company that is offering various

kinds of covers. The best part is that the insurance company pays for these covers by purchasing

group insurance schemes. The insurance benefits include the following are (i) Credit insurance

(ii) Personal accident insurance (iii) Lost baggage insurance (iv) Purchase protection (v) Health

insurance (vi) Protection Plus (vii) Credit Shield.

Value added Services

The following are the important facilities give more value for the card and its cardholders such

as:

Utility bill payment /Bill pay service

Utility bill payment /Bill pay service is simple, convenient and secure way to pay utility

bills such as electricity, telephone, insurance, gas, and other payments by using Credit Cards.

Some banks offering cash back and waiver of charges. For example Barclays bank cards offers

10 per cent, Standard chart cards offers 5 per cent cash back to their cardholders to pay utility

bill through their credit cards.

The card issuers offering to the customer for tracking and paying multiple bills service. The Bill

Pay Service is a simple and convenient service through which we can set up a Standing

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Instruction on Bank Credit Card for payment of their utility bills. Simply enroll for Bill Pay

service and leave where worries over bill payments to bankers. This offers only to Visa- and

MasterCard-holders

Balance transfer facility

Bank's Balance Transfer facility gives cardholders the option of transferring outstanding

balances from one banks card to any other bank's credit card. It can enjoy an interest rate as low

as 0 percent on the transferred amount for 3 months option or 0.75 per cent rate of interest (9%

p.a.) for 6 months, followed by 1.49 per cent rate of interest (17.88% p.a.) after 6 months - This

is the Life Time Balance transfer option along with the zero documentation and speedy draft

delivery make the Bank Credit Card balance Transfer programme. To avail of Balance Transfer

customer should contact 24-hour Customer Care of the banks. This benefit of it to save on

interest cost, pay back in easy EMI of 6 months, 12 or 24 months. Banks reserves the right to

modify or change the balance transfer offering at any point of time within the terms and

conditions of bank balance transfer facility.

Cash advance facility

Cash advances are convenient and easiest facility to draw cash for the cardholders’

urgency. Banks in India charge a transaction fee as well as service fee / interest charge on cash

advances. This service fee accrues from the date of the advance (as soon as they receive the cash)

to the date of full payment. The charges vary from banks to banks. Cash advance facility is a part

of the overall credit limit assigned to a cardholder. The limit is of cash advance is 30 percent to

40 percent of total credit limit approved by the banks it may vary and is always lesser than the

borrowing limit or the credit limit.

Dial-a-draft facility

In order a draft from the convenience of customers’ home or office. The cardholders

simply call their bank 24 hours Customers Care numbers and ask for a draft, payable anywhere

in India. If any company or individual can order a draft up to the available cash limit on the

cardholders account. The draft will be delivered to the credit cardholders mailing address. For

each draft request, a transaction fee of 2.5 percent of the amount withdrawn, subject to a

minimum of Rs. 300, will be levied. In addition to the transaction fee, an interest charge will also

be levied from the date of Transaction to the date of repayment. The amount of the draft will be

billed in banks

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monthly Credit Card statement.

EMI on Call

EMI-on-call gives credit cardholders the option to pay back credit card purchases in easy

installments. Now they can convert any credit card purchases of over Rs. 2,000 into EMI-on-call

with just a phone call, can avail of the EMI-on-call facility instantly without submitting any

documents. Simply call 24-hour customer care and put request within 15 days of buying. The

cardholders benefits are ease of repayment and pay back in 6, 12, 18 or 24 months easy

installments, flat interest rate of 10 per cent per annum. It may be subject to change and for

selected customers.

“Cash-in” – Personal loan

Cash-in is a personal loan on credit card. The loan can be against the credit / cash limit or

over and above the credit limit. Not only is Cash –In pre-approved, it can be availed without

submitting any documents. Cardholders need to do call their 24 hours customer care /send SMS

to the banks at any time. Any where facility provided to the cardholders they have used their card

for at least six months.

Express Rewards Programme

Under the new Xpress Rewards Programme, Credit Cardholders spend more on this card

greater are the rewards, For example ICICI Bank Credit Cards Rewards Programme, is an

exclusive initiative aim at rewarding customer relationship with ICICI Bank. This is the widely

accepted reward program in the country that allows cardholders to earn up to 10 reward points

for every Rs.200 spent and redeem these points against exciting options. All we need to do is

collect a minimum of 500 points and start redeeming them for gifts, great benefits and services

Objectives:

PERCEPTION OF CUSTOMERS ON INTERNET BANKING.

PERCEPTION OF CONSUMERS ON CREDIT CARDS.

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RESEARCH METHODOLOGY

The study focuses on seven banks, (1) two from public sector (i.e., state bank of India,

Indian overseas bank) and (2) five from private sector banks (i.e. ICICI, HDFC, karur vysya,

ING vysya, AXIS bank). In total 100 questionnaires were distributed by using the convenience

sampling. For the purpose of data analysis, descriptive statistics and factor analysis were applied.

Respondants were asked to give opinion on different aspects of customer satisfaction on a five-

point scale ranging from strongly agree to strongly disagree. The analysis was conducted using

the SPSS.

The questionnaire consists of different variables that we considered to find the perception of the

consumers. We also involved a five point scale to rate them according to the preference

1: STRONGLY DISAGREE.

2: DISAGREE.

3: NEITHER AGREE NOR DISAGREE.

4: AGREE.

5: STRONGLY AGREE.

Types of research used Descriptive research

Research approach Survey

Research instrument Questionnaire

Sample design

Sample size 98

Tools SPSS

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CHARACTERISTICS OF RESPONDENTS

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Characteristic of respondent

Frequency(n=98) Percentage(%)

GENDERMale 64 65.30

Female 34 34.69TOTAL 98 99.99

AGE15-35 27 27.5535-50 28 28.5750-60 29 29.59>60 14 14.28

TOTAL 98 99.99

INCOME2-3 25 25.513-5 36 36.735-7 31 31.63>7 6 6.12

TOTAL 98 99.99

INTERNET BANKING

Y 81 82.7N 17 17.3

TOTAL 98 100

TIME OF USING CREDIT

CARDS<6 months 22 22.441-2 years 30 30.612-4 years 27 27.55>4 years 19 19.38TOAL 98 99.98

The variables used in the questionnaire are as follows

VARIABLES DESCRIPTION OF THE VARIABLE

V8 EASE OF USE

V9 SAFETY &SECURITY

V10 COST OF USING INTERNET BANKING

V11 LOW SERVICE CHARGE

V12 CONVENIENCE

V13 EASY TO MAINTAIN BANKING TRANSACTION ACTIVITY

V14 HOME BANKING

V15 NET BANKING

V16 PHONE BANKING

V17 AT-PAR CHEQUE BOOK

V18 GLOBAL DEBIT CARD

V19 DEMAND DRAFT

V20 24 Hr ATM

V21 ADDITIONAL SAVINGS A/C

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The variables used in the questionnaire for perception on credit cards are as follows:

VARIABLES DESCRIPTION OF THE VARIABLE

V5 EASE OF USE

V6 SAFETY &SECURITY

V7 COST OF USING INTERNET BANKING

V8 LOW SERVICE CHARGE

V9 CONVENIENCE

V10 EASY TO MAINTAIN BANKING TRANSACTION ACTIVITY

V11 HOME BANKING

ANALYSIS OF RESULTS

Factor analysis is a statistical method used to study the dimensionality of a set of variables. In factor analysis, latent variables represent unobserved constructs and are referred to as factors or dimensions.Exploratory Factor Analysis (EFA) Used to explore the dimensionality of a measurement

instrument by finding the smallest number of interpretable factors needed to explain the

correlations among a set of variables – exploratory in the sense that it places no structure on the

linear relationships between the observed variables and on the linear relationships between the

observed variables and the factors but only specifies the number of latent variables

Confirmatory Factor Analysis (CFA) Used to study how well a hypothesized factor model fits

a new sample from the same population or a sample from a different population – characterized

by allowing restrictions on the parameters of the model

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The results of the factor analysis are :

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From the above rotation matrix we can find out the correlation between the variables

From the above rotated component matrix we can say that the factors phone banking, global

credit card and additional savings account as a group has a combined effect on the internet

banking performance. Similarly the factors 24 hours ATM facility and bank transaction activity

has effect on the internet baking performance. From the KMO test we have the value of 0.4 so

we can say that the data is not that much suitable for factor analysis.

FROM THE ABOVE ROTATION MATRIX

CONVENIENCE, SERVICES AND SERVICE CHARGES:

VARIABLE LABEL VALUEV6 LOW SERVICE CHARGE -.323V12 GLOBAL DEBIT CARD -.767V7 EASY TO MAINTAIN BANKING

TRANSACTION ACTIVITY.714

V3 COST OF USING INTERNET BANKING

.349

INTERNET BANKING CHARGES AND CONVENIENCE

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VARIABLE LABEL VALUEV8 HOME BANKING .740V4 COST OF USING INTERNET BANKING -.577

CONVENIENCE

CONVENIENCE -.344

V6 LOW SERVICE CHARGES .826

NET BANKING AND EASE OF USE

VARIABLE LABEL VALUEV2 EASE OF USE .543V9 NET BANKING .312V14 ADDITIONAL SAVINGS ACCOUNT -.

ADDITIONAL CHARGES AND SERVICES

VARIABLE LABEL VALUEV4 COST OF USING INTERNET BANKING .740V9 NET BANKING -.577V11 PHONE BANKING .492V14 ADDITIONAL SAVINGS A/C -.377

VARIABLE LABEL VALUEV13 24 Hr ATM .741V3 SAFETY AND SECURITY .675V6 LOW SERVICE CHARGES .312

The variables show a correlation with the other variables so we can combine all the 4 variables

and put as a single variable. All together can contribute a increase in the preference of the

consumers towards the internet banking and its services. when these are services are improved

by the banks they will have more customers opting for these services. Each variable's correlated

to each other like some customers prefer 24hr atm, safety and security, and low charges . These

factors may help for the improvement of the services there by offering services to many people.

INTERNET BANKING SERVICE AND QUALITY

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A large percentage of the respondents indicated that they believe that the services and products

found within the Internet banking domain removes the need for them to visit a bank branch as

83% of the female respondents and 84% of the male respondents supported this fact. Although

the neutral responses were relatively significant, both the female and male respondents stated

that they believe that the level of service found within branches is not superior to that of Internet

banking. The male respondents came out stronger in terms of this result.

The results of this section of the questionnaire highlighted key aspects that must be taken into

consideration with regard to Internet banking service quality and delivery:

• If high quality standards are maintained in a bank branch, then these standards must be

entrenched within Internet banking products and services, as some of these 'brick-and-mortar'

customers could make use of Internet banking in future.

• There is still a need for a 'brick-and-mortar' branch. Not all transactions can be carried out via

the Internet without the involvement of a bank consultant or employee.

• Just one negative incident whilst doing Internet banking could be enough to change or damage

the perception customers have of the Internet banking quality and service they received, thus

creating the need for a 'brick-and-mortar' branch.

Service reliability and quality are key focus areas which banks should invest in as these 'softer'

issues are the cornerstones to what shape the perceptions of clients whilst doing Internet banking

related tasks.

INTERNET BANKING TRUST

The mindset created around a financial institution's IT and financial capabilities play a huge role

in terms of trust. If customers generally perceive their banks financial and IT capabilities (i.e.

performance and/or security) as secure, they will generally trust the services and products they

make use of via this medium. The results show that across all age groups, the respondents trust

the capabilities of their financial institution .

No clear result could be obtained with regard to the influence respondents' families, friends and

colleagues have on their trust of Internet banking products and services.

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Internet banking fraud can take place during the log-in and authentication process. It has been

found that in some cases clients are directed to a malicious Internet banking site that appears to

be their own financial institution's Internet banking homepage. Once the customer logs on, their

account details and passwords are intercepted and used for malicious purposes. The results

highlight that Internet banking clients have faith and trust that the login and authentication

procedures they use are trustworthy.

The results show that Internet banking is currently perceived as more secure than a few years

ago. Significant advances have been made within the Internet banking space regarding online

security and many customers are reaping the rewards of this; all age groups supported this fact .

An interesting highlight of this section of the questionnaire is that most of the respondents

indicated that they will make use of Internet banking even though they know of fraudulent

instances that occurred via this medium. Reasons for this include:

• A breach of security has never happened to this specific client.

• They believe that they have the latest security software available and are vigilant when using

the medium.

• They have great trust in their financial institution's ability to protect them from attacks.

It can thus be argued that the educational endeavors of financial institutions on Internet banking

security principles are starting to pay off. Once again all the respondents indicated that it is not

safe to supply personal banking details online. More could be done in this regard as roughly 13%

of the respondents still believe that it is safe to send private banking information via email.

INTERNET BANKING CONVENIENCE AND RELATIONSHIPS

The impact that Internet banking has on perceived convenience and fostering or building

relationships can be termed as significant. The use of technology can often be seen as impersonal

and not conducive to the establishment of long-term financial relationships.

Nearly all of the respondents indicated that Internet banking is more convenient than traditional

forms of banking. This result also clearly aligns with previous analysis where respondents

indicated that they prefer Internet banking over traditional forms of banking. Internet banking is

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in many instances more convenient as banking can be performed 24 hours a day from any

location.

Understanding and meeting the needs of financial institutions' Internet banking customers are

key building blocks in establishing a fruitful, long-term relationship. Financial institutions need

to understand the advances in technologies in relation to the usage patterns and financial needs of

its customers. All of the age categories confirmed that their Internet banking needs was met.

These results highlight the need for financial institutions to better deliver on the needs of the

Internet banking customer, especially in the younger age (18-25) segment. This could be a

difficult task as the Internet banking clients formally interact with financial institutions (visit a

branch) far less than in the past.

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FACTOR ANALYSIS FOR “PERCEPTION OF CREDIT CARDS”

From the above rotated component matrix we can say that out of 10 variables we have services

and alternate credit card in other bank factors which shows a major effect on the credit card

service performance.

The KMO test indicates the proportion of variance in variables that might be caused by

underlying factors. High values generally close to 1 indicate that a factor analysis may be useful

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with the data we have collected. And if the value is less than 0.5 the results of the factor analysis

probably won’t be very useful. Here we got the value 0.523 so we can say that the data we have

is suitable to do factor analysis.

VARIABLE LABEL VALUEV .741

V11 ANOTHER BANK CREDIT CARD .675

VARIABLE LABEL VALUEV9 RE-ISSUE .741V5 HIGH INTEREST RATE .675V10 OVERALL SATISFACTION .312

VARIABLE LABEL VALUEV6 LIMITED ACCEPTABILITY .765V8 GRIVIENCES SORTED OUT .660

Customer Awareness about Credit Cards

It is observed from the analysis of bank customers‟ awareness about credit cards that ICICI

credit cards are more popular which follwed is by SBI Card and HDFC Card. Can Card is found

to be less popular among the sampled respondents. Regarding the source of information about

credit cards the respondents revealed that the agents of ICICI bank were the source of

information about ICICI card. In the case for SBI Card, advertisements provided the necessary

knowledge and for HDFC cards, the bank was the source of necessary information for the

customers.

Regarding the conditions and charges on credit cards, majority are aware of the basic

conditions and 76 percent of the respondents know about the charges imposed on the services.

Cash withdrawal facility on credit cards is not known to majority of the respondents. None of

the sampled respondents have awareness about the interest free credit period.

Card Holders’ Perception and Experience

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The analysis pertaining to card holders perception and experience regarding the role of core and

supplementary service elements show that majority of the sampled credit card holders (87.25%)

consider credit cards as a convenient mode of payment and 90.75 % consumers carry the feeling

of reduced risk of carrying cash and 96% consider revolving credit in evaluating purchase of

credit cards.

Facilitating service of easy acceptability procedure of credit cards at retail outlets is

considered by majority of the respondents while making purchase decisions of credit cards.

Presence of additional features (supporting services) of free insurance coverage and

discounts have not been strongly felt by majority of the card holders.

Card holders experiences were very high regarding all the core services such as

convenience in payment (86.25%) reduced risk of carrying cash (92.75%) and revolving credit

facility (96.5%). Facilitating services of easy acceptability at retail outlets have also been

experienced by majority (94.50%) of the card holders. The importance of supporting services of

free insurance coverage and added discounts were not actually experienced by majority (70.25%

and 85.75%) of the card holders.

Thus the analysis revealed that respondents considered basic benefits, facilitating services

and supporting services prior to purchase of credit cards. However, facilitating services were of

low consideration.

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FEW COMPARISIONS BETWEEN DIFFERENT VARIABLESGENDER:

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 5.055a 8 .752

Likelihood Ratio 4.625 8 .797

N of Valid Cases 97

a. 7 cells (46.7%) have expected count less than 5. The minimum expected

count is .06.

Chi-square test gives the degree of association between the variables. If the value is close to 1

then we can say that there is high degree of association between those variables. Here we have

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taken gender and internet banking as two variables and we can say that there is high degree of

association.

INTERNET BANKING:

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 2.266a 4 .687

Likelihood Ratio 2.088 4 .719

N of Valid Cases 97

a. 5 cells (50.0%) have expected count less than 5. The minimum

expected count is 1.05.

Here we have considered internet banking, safety and security as variables and there is high degree of association. many prefer internet banking since the think the recent technology has changes alot and it provides security and high confidentiality .

RELATION BETWEEN THE AGE AND SALARY:

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Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 3.850E2a 429 .938

Likelihood Ratio 249.872 429 1.000

Linear-by-Linear Association .739 1 .390

N of Valid Cases 98

a. 476 cells (100.0%) have expected count less than 5. The minimum

expected count is .02.

RELATION BETWEEN THE AGE AND INTERNET BANK:

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Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 36.867a 33 .295

Likelihood Ratio 38.578 33 .232

N of Valid Cases 98

a. 67 cells (98.5%) have expected count less than 5. The minimum

expected count is .17.

SUGGESTIONS

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Business-to-Consumers (B2C):

B2C category are included single e-shops, shopping malls, e-broking, e-auction,e-banking,

service providers like travel related services, financial services etc., education, entertainment and

any other form of business targeted at the final consumer. Some of the features, opportunities

and concerns common to this category of business irrespective of the business segment, are the

following.

Opportunities:

Internet provides an ever-growing market both in terms of number of potential customers and

geographical reach. Technological development has made access to Internet both cheaper and

faster. More and more people across the globe are accessing the net either through PCs or other

devices. The purchasing power and need for quality service of this segment of consumers are

considerable. Anybody accessing Internet is a potential customer irrespective of his or her

location. Thus, any business targeting final consumers cannot ignore the business potential of

Internet.

Internet offers a unique opportunity to register business presence in a global market. Its

effectiveness in disseminating information about one’s business at a relatively cost effective

manner is tremendous. Time sensitive information can be updated faster than any other media. A

properly designed website can convey a more accurate and focussed image of a product or

service than any other media. Use of multimedia capabilities, i.e., sound, picture, movies etc.,

has made Internet as an ideal medium for information dissemination. However, help of other

media is necessary to draw the potential customers to the web site.

The quality of service is a key feature of any e-commerce venture. The ability to sell

one’s product at anytime and anywhere to the satisfaction of customers is essential for e-business

to succeed. Internet offers such opportunity, since the business presence is not restricted by time

zone and geographical limitations. Replying to customers’ queries through e-mail, setting up

(Frequently Asked Questions) FAQ pages for anticipated queries, offering interactive help line,

accepting customers’ complaints online 24 hours a day and attending to the same, etc. are some

of the features of ebusiness which enhance the quality of service to the customers. It is of crucial

importance for an e-venture to realize that just as it is easier to approach a customer through

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Internet, it is equally easy to lose him. The customer has the same facility to move over to

another site

Concerns:

There are a number of obstacles, which an e-commerce venture needs to overcome. Trust

of customers in a web venture is an important concern. Many customers hesitate to deal with a

web venture as they are not sure of the type of products and services they will receive. This is

particularly true in a B2C venture like e-shop, e-mall or eauction site. Traditional business with

well established brands and goodwill and having a physical presence face less resistance from

customers in this regard than a pure eventure.

Many B2C ventures have ultimately to deliver a product or service in physical form to

the customer for a deal contracted through Internet. This needs proper logistics, an efficient

distribution network, and control over quality of product or service delivered. These issues are

not technology related and any let off in this area can drive the customer away to the competitor

or from e-commerce.

The privacy of information on the customer’s preferences, credit card and bank account

details etc. and customers’ faith in a system where such privacy is stated to be ensured are

important issues to be addressed. These are mainly technological issues, but human factor is

important both at the business and at the customers’ end and also in building the trust in the

system.

Security of a transaction, authenticity of a deal, identification of a customer etc. are important

echnological and systems issues, which are major sources of concern to ecommerce Equally

important are questions of repudiation of a deal, applicability of law, jurisdiction of tax laws etc.

These are important to all forms of e-commerce, whether B2C or B2B and all segments of

business, i.e, manufacturing, services and finance and are addressed in different chapters of this

report.

Popularizing the Credit Cards

Can Card is found to be less popular among the respondents. Hence methods should be

adopted to bring a higher degree of popularization of this credit card through mass media

channel like television, radio, railway centers, and super markets with a pictorial review of the

card facility.

Creating Awareness about Interest Free Credit Period

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The most lucrative feature of a credit card is the interest free credit period offered to card

holders. Non-holders of credit cards are not aware of this benefit of credit cards. Hence

awareness should be created about this benefit of credit cards among the non-holders.

Direct Marketing

Credit card issuers, though offer international levels of service and credit support to the

card holders, have failed to make an impression among the less educated and the agricultural

category with middle level income. They also feel that the cost of credit cards is high and

therefore make it a status symbol rather than meeting their needs. Hence, direct marketing by the

banking clubbed with other services will be helpful to impress this untapped segment.

Implementing Regulatory Measures

The credit limit availed by many card holders are found to be less than their eligibility

limits. The working group on regulatory mechanism for credit cards has suggested measures

aimed at encouraging card usage in a safe and secure manner. This guideline should be

implemented so that the entire eligible credit limit may be availed by the card holders.

Extending Incentives to all Types of Cards

Despite more widespread usage, most of the credit card users are the more educated with

professional types of jobs and high income earners. Most of the card holder incentives are

offered for high value cards. Hence it is suggested that incentives should be extended to all types

of cards to promote greater usage of credit cards like Exclusive and Silver held by lower and

middle income earners.

Providing More Facilitating Services

It is found from the analysis made in the study that supplementary services are perceived

more as the expected features of the credit card by the card holders. Hence maximum

supplementary service elements should be added to the credit cards.

Providing Knowledge about Supporting Services

It is identified from the study that respondents did not consider the supporting services

for purchase evaluation. This is due to inadequate information regarding supporting services.

Providing knowledge about supporting services to customers can help the marketers to develop

an advantage for themselves in the market Visa Vis other players.

Reducing Interest Rates

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One of the reasons for low level of satisfaction of card holders has been the high rates of

interest which the card holders are actually paying ranging from 36 to 45 percent. Hence it is

suggested that these rates be brought down.

Making the Internal Control System Effective

With the average credit limit of Rs.10,000 to Rs. 30,000 the credit cards have not made

an attractive case of fraudsters, still a few cases of credit card frauds (02%) have been reported in

the study. Hence banks are advised to implement the Internal Control System formulated by the

RBI effectively to combat frauds.

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CONCLUSION

The impact that security and IT have on Internet banking levels of trust. Internet banking

can be a risky endeavour, as many clients are faced with Internet attacks from various sources. In

some cases, clients are not well-equipped on an IT infrastructural level and these inadequacies

also amplify the chances of being targeted by viruses, phishing attacks, individuals with

malicious intent and so forth.Education and security awareness are topics often covered, albeit to

a limited degree, by financial institutions. Often financial institutions have specific educational

mechanisms to inform their clientele about the new Internet banking threats that exist. In many

cases, the information is displayed when a client logs onto an Internet banking site to perform

Internet banking transactions. The actual effectiveness of this information is uncertain. Financial

institutions should educate their clients sufficiently, but the bank's clientele must also make use

of the various opportunities given to them to broaden their knowledge with regard to Internet

banking.

The results clearly highlighted that the respondents are not aware what hardware and

software requirements they must comply with for Internet banking purposes as only 38.6% of the

respondents indicated that they are aware of what hardware and software must be utilised.

The highlighted findings of this research could assist financial institutions with fostering

and building greater value adding relationships with their customers. These value-adding

endeavours will ensure that customers experience and perceive their Internet banking experience

to be enriching.

As reflected within the findings the main users of Internet banking products and services

are post-graduate students and customers mainly within the older age brackets. We are, however,

seeing an increasing number of younger users requiring this service via more mobile, 'always-on'

platforms such as cellular phones. Financial institutions will have to develop strategies to gain a

piece of this growing market with totally different and varying needs.

Education and awareness campaigns are key focus areas which financial institutions

should continuously invest in. Information should be easily retrievable and communicated in a

manner that makes sense to a wider customer base, especially within the context of South Africa

with its diverse cultures and languages.

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Internet banking products and services will continue to grow across various divides and

platforms. As Internet costs decrease in future, the growth of Internet related products and

services such as Internet banking will increase.

The credit card issue in terms of number of credit cards witnessed a whopping growth during the

past five years. In terms of key players ICICI has notched the landmark figure of 90 lakh credit

cards by 2008 taking the position of number one player in the segment. It is further concluded

that there are a number of bank customers who do not have any knowledge about credit cards.

Many people have knowledge about credit cards, but do not possess credit cards because of the

fear of falling into debt trap. High income earners and highly educated class use credit cards

more, availing high credit limits.

Extent of usage of credit cards is smaller among higher proportion of the card holders.

Customers satisfaction is found to be less because of high rate of interest. Customers perceived

core services and facilitating services at higher level. Card holders face the major problem of

lack of proper advice from banks. Credit card market is yet to realize its potential.

The scenario of credit cards during 2009-2010 is very significant. Many card holders

surrender their credit cards and instead of using credit cards the banks customers prefer debit

cards. The debit cards too help them avoid carrying cash and enable withdrawal of cash through

ATM and they need not be afraid of falling into debt trap as in the case of credit cards. Due to

financial inflation, many banks have stopped issuing credit cards to their customers. As people

are yet to realize the complete potential of credit card, its market is falling down.

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