Understanding the Impact of Consumer Attitudes, Knowledge, and Social Factors On the Purchase Behaviours of Credit Card Users in India and Bangladesh

(Last Name) 1
Understanding the Impact of Consumer Attitudes, Knowledge, and Social Factors
On the Purchase Behaviours of
Credit Card Users in India and Bangladesh
(Professor’s Name)
(Course)
25 October 2014
(Last Name) 2
Executive Summary
As one of the primary branches of electronic banking, credit cards are financial tools that
provide the option of borrowing funds against the user’s earning potential, usually at the point of
sale or through cash advances dispersed through ATMs. Globally, credit card ownership and
usage has been seen to increase substantially in recent decades (Wickramasinghe &
Gurugamage, 2009). Various factors, including consumer attitudes toward debt, knowledge of
the terms and conditions set forth by credit card agreements, social factors, and advertisements
all work to influence the propensity of consumers to own and use credit cards. This report
focuses on the frequency and impact of credit card usage and ownership in the emerging markets
of South Asia, specifically that of India and Bangladesh.
Key issues associated with the credit card industry of South Asia that bear further
investigation are the factors that work to explain the purchasing behaviours of credit card users
in these emerging markets, the effects of credit card ownership on consumer buying patterns, the
relationship between credit card usage and demographic differences, South Asian consumer’s
approach toward the concept of debt and the impact of debt on credit card ownership and usage,
and the awareness of the financial tool among users. While previously cash was king in this
region of the world, with the increasing pushes toward globalization combined with the
technology infrastructures being implemented in order to accommodate more frequent credit
card usage, it is easy to see how these countries are now surging forward in credit card usage and
acceptance.
The broad objective of the study is to determine credit card ownership and usage
behaviours of cardholders in India and Bangladesh. This study utilizes a descriptive survey as a
means of approaching this particular topic of research. The sample size has been calculated at
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148 with a confidence level of 95% and a precision of 10%. 151 individuals were surveyed with
a structured questionnaire using judgmental sampling as no sampling framework could be
identified. Of these, 34 were female and 117 were male with 127 individuals from Bangladesh
and 24 from India, all of whom represented the working population.
Face validity was used as a means of deciding upon 8 complex variables and 24 simple
variables under the parameters of ownership and usage. The complex variables chosen include
demographic factors, attitude toward debt, promotional factors, features of the credit card, social
factors, buying behaviour, usage particulars, and convenience factors. All questions asked were
based on those 24 simple variables with two additional questions asked as a measure of
ownership (preference to cash) and usage (frequency of usage). For the majority of questions a 5-
point Likert scale was used, with options ranging from “Strongly Agree” to “Strongly Disagree.”
The Cronbach’s Alpha for this research, based on standardized items, was 0.552,
suggesting that the items used to construct the scale have an acceptable internal consistency. In
order to analyse the data gathered from the surveys, a similarity test for gender, marital status,
occupation, and income was completed in order to find the statistical similarities between the
categories. Individually, for ownership and usage, a comparison between the index of all relevant
questions and the two separate composite measures of ownership and usage were conducted.
Inter-item correlation analysis was undertaken in order to determine how well the individual
variables were related to the preference of owning a credit card versus paying in case and the
frequency of card usage. Factor analyses and multiple regression tactics were used in order to
determine the most important variables and the ability of those variables to predict a particular
outcome. In addition, hypothesis testing was done in order to gain better insights into the set
parameters.
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According to the tests of similarity, only occupation, out of all of the demographic factors
identified, affects the preference of the individual to cash; however, for frequency of usage, all
demographic categories had a similar impact. In terms of frequency analysis, an important
finding was the tendency to engage in unplanned buying as a result of credit card ownership was
higher in females than males. Hypothesis testing indicated that the majority of credit card owners
do not possess a positive attitude toward debt in spite of the fact that they do not directly
perceive credit cards as debt devices. Furthermore, the majority of credit card owners are not
aware of the terms and conditions attached to their credit cards, the offers associated with those
cards, or the privileges associated with credit card ownership, though in spite of this lack of
knowledge, they do feel as though those privileges and offers are important factors to consider
when using a credit card. Factors such as the cost of service and the security of the transaction
are also deemed as important to the majority of credit card owners. The study indicated that the
promotional tools that are used within this sector are week and fail to have any direct impact on
credit card usage or ownership within this region. The majority of individuals engaged in
unplanned buying with their credit card, though the exact opposite is true when it comes to
instalment purchases, online purchases, or cash withdrawals. The majority of respondents used
their credit card for electronic purchases, appliance purchases, supermarket purchases, clothing,
and for payment in hotels and restaurants. It was indicated that the majority of respondents do
not often exceed the limit of their credit card.
The index analysis found that variables including the features of the credit cards, the
social factors for ownership and the buying process, usage particulars, credit card features, and
convenience for usage were the most important variables for participants to consider. Correlation
analysis indicated that overall ownership, usage indexes, views on debt, and expenditures on
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electronics and appliances were the most correlated variables. Factor analysis indicated that there
were 13 key variables, while multiple regression analysis indicated that there were three
important variables that explained the variability of ownership and usage including (1) views on
debt, security, and advertising for ownership; (2) expenditure on hotels, restaurants, and
instalment buying; and (3) spending on electronics and appliances for personal use. Overall,
these findings sum up the manner in which certain factors stimulate the average consumer
ownership and usage activities in Bangladesh and India.
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Table of Contents
Executive Summary.......................................................................................................2
Introduction.................................................................................................................10
1.1 Introduction...............................................................................................10
1.2 Background...............................................................................................11
1.3 Research Question....................................................................................12
1.4 Research Objectives.................................................................................13
1.5 Main Issues..............................................................................................13
1.6 Hypotheses..............................................................................................14
1.7 Rationale.................................................................................................14
1.8 Types of References...............................................................................15
1.9 Methodology..........................................................................................16
1.10 Scope and Limitations..........................................................................16
1.11 Expected Results..................................................................................17
1.12 Summary..............................................................................................17
Literature Review....................................................................................................18
2.1 History...................................................................................................18
2.2 Similarities and Differences in Credit Card Ownership........................18
2.3 Economic Development........................................................................19
2.4 Demographic Influences.......................................................................20
2.5 Usage Behaviors...................................................................................21
2.6 Debt Perceptions...................................................................................22
2.7 Summary...............................................................................................23
Methodology..........................................................................................................25
3.1 Research Type......................................................................................26
3.2 Data Collection.....................................................................................26
3.2.1 Primary Data Collection Methods.........................................26
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3.2.1.1 Advantages and Disadvantages..............................28
3.2.2 Secondary Data Collection Methods.....................................28
3.2.2.1 Advantages and Disadvantages..............................29
3.3 Sample Size..........................................................................................29
3.4 Sample Frame.......................................................................................30
3.5 Variable Analysis (Schema).................................................................30
3.6 Measurement of Validity.....................................................................32
3.7 Reliability of Data...............................................................................33
Data Analysis.........................................................................................................35
4.1 Composite Measure of Ownership and Usage....................................35
4.2 Test of Similarity.................................................................................36
4.3 Frequency Analysis.............................................................................37
4.4 Regression Analysis.............................................................................44
4.5.1 Ownership.............................................................................44
4.5.2 Usage.....................................................................................45
Findings..................................................................................................................47
5.1 Findings from Frequency Analysis......................................................47
5.1.1 Demographic Profile of Respondents..................................47
5.1.2 Association between Credit Card Brands and Type............48
5.1.3 Purpose of Usage.................................................................49
5.1.4 Average Monthly Credit Balance........................................49
5.1.5 Association between Consumer Buying and Gender..........49
5.2 Hypothesis Testing Results.................................................................50
5.3 Attitudes towards Debt.......................................................................51
5.4 Knowledge of Credit Card Features....................................................52
5.5 Influence of Promotional Factors........................................................52
5.6 Influence of Social Factors..................................................................52
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5.7 Credit Card Usage in Specific Purchase Situations...........................53
5.8 Purpose of Spending and Scale of Purchase......................................54
5.9 Impact of Convenience on Usage Behaviour.......................................54
5.10 Findings from Objectives.................................................................54
5.11 Findings from Index Analysis.........................................................55
5.12 Findings from Correlation Analysis.................................................57
5.13 Findings from Regression Analysis.................................................58
5.14 Findings from Factor Analysis........................................................58
5.15 Summary.........................................................................................59
Conclusion..........................................................................................................61
6.1 Conclusion.......................................................................................61
6.2 Discussion of Knowledge...............................................................62
References.........................................................................................................64
Table of Figures
Figure 3.1 Determining Sample Size.................................................................30
Table of Tables
Table 3.1 Coordination Schema: Credit Card Ownership........................................................31
Table 3.2 Coordination Schema: Credit Card Usage................................................................32
Table 3.3 Results of Cronbach’s Alpha Test............................................................................. 34
Table 4.1 Similarity between Index Value and Composite Measures of Ownership and Usage35
Table 4.2 Cross Tabulation of Preference to Cash and Different Categories.............................36
Table 4.3 Cross Tabulation of the Frequency of Usage and Different Categories.....................36
Table 4.4 Frequency Analysis: Gender..................................................................................... 37
Table 4.5 Frequency Analysis: Marital Status.......................................................................... 37
Table 4.6 Frequency Analysis: Occupation.............................................................................. 38
Table 4.7 Frequency Analysis: Income.................................................................................... 38
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Table 4.8 Association between Credit Card Brands and Type of Cards Owned.................. 38
Table 4.9 Purpose of Usage.................................................................................................. 39
Table 4.10 Average Monthly Credit Balance...................................................................... 39
Table 4.11 Association between Buying Behaviour and the Gender Differences.................40
Table 4.12 Cross Tabulation of Gender and Different Purposes of Use..............................41
Table 4.13 Inter-Item Correlation......................................................................................... 42
Table 4.14 Regression Analysis Enter Ownership............................................................. 44
Table 4.15 Stepwise Regression Method.............................................................................. 45
Table 4.16 Regression Analysis of Usage............................................................................ 46
Table 4.17 Stepwise Regression Analysis of Usage.............................................................. 46
Table 5.1 Hypotheses Testing................................................................................................51
Table 5.4 Mean Ratings......................................................................................................... 55
Table 5.5 Medium Means...................................................................................................... 56
Table 5.6 Low Mean.............................................................................................................. 57
Table 5.7 Regression Analysis.............................................................................................. 58
Table 5.8 Factor Analysis..................................................................................................... 59
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Introduction
1.1 Introduction
In this era of rapid technological advancements, it becomes increasingly necessary for
institutions to fulfil customer needs through constant innovation and adjustment. Conveniences
has become one of the driving factors for business transactions and, as a result of this, banking
sectors around the globe, including those in India and Bangladesh, have introduced electronic
banking facilities. One of the primary methods by which the banking sector has worked to
address this desire for convenience is through the provision of credit cards. Credit cards offer the
luxury of affording the individual or the business to which the card has been issued with the
availability of borrowing funds at the point of sale to be paid back at a later date, with interest
(Consumer Financial Protection Bureau, 2014). Visa and MasterCard are the predominant cards
offered within the region (Visa, 2014).
As a result of the worldwide increases in credit card usage and credit card ownership, this
type of payment method is viewed as an active stimulus for changes in consumer purchasing
behaviours (Wickramasinghe & Gurugamage, 2009). This trend of increasing usage and
ownership serves as a means of reflecting the growing popularity of the credit card as a preferred
method of payment for goods and services in lieu of cash, checks, or other forms of payment
(Themba & Tumedi, 2012). Credit cards afford consumers with the benefit of acquiring and
using goods and services without paying for them instantly with cash, removing the burden of
carrying cash and even being used as a method of obtaining those goods and services without the
necessity of having the required amount of funds available to purchase those items or services
(Foscht, et al., 2010). Saturated demand levels for credit cards in developed nations have worked
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to shift the focus of the credit card companies toward emerging markets, opening up a new field
of exploration regarding the behaviours and preferences of individuals within those regions
(Kurtulus & Nasir, 2012). Various factors, including, but not limited to, consumer attitudes
toward debts, knowledge of the terms and conditions of credit cards, social factors, and
advertisements used to influence the propensity to own and use a credit card all play their own
roles in consumer preferences in these emerging areas. As a result of these considerations, this
study will focus on the frequency and the impact of credit card usage and ownership in the
emerging markets of India and Bangladesh.
1.2 Background
In Bangladesh the concept of a credit card is relatively new, with the primary use of this
financial tool to be by individuals living in the metropolitan areas of the country and, more
specifically, in the capital, Dhaka. A large portion of merchants in Bangladesh now accept credit
cards, with all banks in Bangladesh issuing either Visa’s, MasterCard’s, or both, with the
exception of a single bank who issues American Express cards; it is important to note that this
bank is the exception to the rule and does so as a result of its smaller customer base. In spite of
the frequency of credit card usage within the country, the majority of prepaid cards and/or gift
cards are largely unavailable within the country, though Shahjalal Islami Bank has recently
launched a campaign to bring prepaid cards for use in the common customer market. Moreover,
unlike developed economies, the strata of credit card owners in Bangladesh are limited to public
and private service holders and businessmen; it may be argued that the industry has a long way
to go in terms of diversifying its customer base. It should also be understood that the factors that
affect credit card usage and the patterns of consumers in this emerging market and the
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implications of those factors for developing market strategies will not be the same as those found
in developed markets as a result.
India’s credit market has historically played a significant role in assisting the upper class
and the growing middle class populations in meeting their various financial needs and wants.
Institutions that issue credit cards in India range from the large, well-established commercial
banks that are specialized in consumer financing to financing development companies to state or
region based smaller co-operatives. These institutions offer a wide range of cards with credit
options, ranging from the traditional credit card offerings to debit cards that may be used as
credit cards if the need arises. While the market for credit cards is especially large in the urban
areas and metropolitan cities, the credit card culture has also started to spread through the more
rural areas of the country, impacting the lives of all segments of the population. Driving factors
behind the rise of credit card issuance and usage in India include a combination of product
innovations, advancements in technology, and a rising culture of consumerism, areas that have
the greatest affect among the middle class and the “below 40” consumer segments. As it was
explained by an official at the Central Bank of India, “India did not have a credit card culture
because we like to pay off our debts soon. But with marketing, increased e-commerce, the
‘Americanization’ of our culture, and the new generation’s ease with the product, there is a
change in mind-set” (New Indian Express, 2014, p. 1).
1.3 Research Question
The research question that has been identified for the purposes of completing this
research study is: How do consumer attitudes, knowledge, and various social factors affect the
purchase behaviours of credit card users in India and Bangladesh?
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1.4 Research Objectives
The objectives that will be addressed through the completion of this research project
include:
The determination of credit card ownership and usage behaviours of cardholders in
Dhaka, Mumbai, and Kolkata in order to determine the extent to which these services are
utilized;
Analyse the consumption trends of the area prior to and after the introduction of credit
cards; and
To establish the relationship between the changes in behaviour of credit card issuers and
identify consumer behaviour changes regarding the consumption of those products.
Through the application of these objectives to the study it will be possible to determine
the different ways in which ownership and usage behaviours have changed, how noticeable those
changes are prior to the issuance of credit cards in those regions versus after the use of the same
became common practice, and to determine whether or not there is a correlation present between
the way that credit cards are marketed and the behaviours of consumers in regard to their
obtainment and usage.
1.5 Main Issues
The primary issues associated with the credit card industry in South Asia include an
understanding of the different factors that explain the consumer behaviours displayed by credit
card users in emerging markets, the effects of credit card ownership on consumer buying
patterns, the relationship present between credit card usage and demographic differences,
consumers’ approach toward the concept of debt and its impact on credit card usage and
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ownership, and the awareness of this financial tool among users. Previous research primarily
focuses on any one of those parameters of ownership and/or usage; however there are factors that
affect both the ownership parameters and the usage parameters in different ways. Most existing
research on the topic has been done from the perspective of a developed nation, and the impact
of the relatively new concept of credit cards as a means of payment in emerging markets have
yet to be discovered.
1.6 Hypotheses
It is hypothesized that:
The majority of credit card owners in emerging markets perceive credit cards as debts,
but view those debts with a positive attitude.
The majority of credit card owners in emerging markets are not aware of the terms and
conditions, offers, or privileges associated with credit card ownership.
The majority of credit card owners in emerging markets were influenced to get those
credit cards as a result of advertising or promotional marketing.
The majority of credit card owners in emerging markets engage in unplanned buying.
1.7 Rationale
This study attempts to understand the current state of the South Asian credit card industry
in terms of its ownership and usage behaviours through the use of demographics, behaviours,
consumer attitudes, and consumer knowledge. Little research has been done into this particular
field, and even less into the field in the context of emerging markets. The results of this study
will provide pertinent information regarding the marketing strategies of financial services,
retailers, and businesses in the promotion of credit card usage. The consumer credit card market
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in the developed world has reached the saturation point; as such, the industry will need to
develop the appropriate strategies designed to appeal to the changing customer needs of
individuals in these emerging markets in order to encourage further use of credit cards. Existing
credit card companies will gain insight into the different influences on consumer behaviours. The
primary beneficiaries of this report include:
I. Existing local and international banking institutions that have planned expansion into the
credit card industry.
II. Existing credit card service providers like Visa, MasterCard, and American Express.
III. New entrants into the credit card industry.
IV. Advertising firms who deal with credit card marketing.
V. Researchers and research institutions who wish to conduct further research into this field.
1.8 Types of References
In order to be able to effectively complete this research study, it is necessary to complete
a literature review, affording insight into the current body of knowledge on the matter. To this
end, a search of the school’s online library will be conducted, providing access to relevant
academic journals and peer reviewed articles present within the databases. In addition, a review
of available books on the matter will be undertaken, allowing for the obtainment of appropriate
published literature. Finally, a search of relevant online data will be undertaken, looking for
potential reputable websites as found through the use of such tools like Google and Google
Scholar. Material searched for will include information on credit card usage, advertising
strategies, information on the history of credit cards, and data on credit card ownership.
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1.9 Methodology
In order to complete this study, a descriptive survey will be utilized for the purposes of
obtaining information on the different influencing factors associated with credit card ownership
and usage within these markets and the relative importance assigned to each of those factors.
Qualitative and quantitative data will be obtained to this end. In addition, an interview with five
bankers from Standard Chartered, State Bank of India, HSBC, Citi, and ICICI were interviewed
regarding the current conditions in the India and Bangladesh markets, providing further insight
into the credit card industry in these regions.
1.10 Scope and Limitations
This research study is designed to only obtain data from current credit card holders; as a
result of this fact, through judgmental sampling, the research conducted its survey on the credit
card clients of different banks in three South Asian cities only. As the majority of credit card
holders live within the cities, the sample may be considered representative. Participants ranged
from public and private service holders to businessmen and businesswomen. The main focus was
solely on the ownership and usage aspects of credit card holders based on fixed variables.
The primary limitations faced in the completion of this study include:
The fact that the sample consists of individuals from only three cities.
The analysis and interpretation of the data treats the entire sample frame as one entity as
opposed to offering a breakdown by city.
Certain survey questions may have resulted in unclear data given the fact that they could
be interpreted in a variety of ways by respondents.
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The population of credit card holders of the three cities is an approximate number based
on the population of credit card holders of a certain bank and their market share.
The closed ended questions that made up the majority of the survey may have reduced
the survey’s validity.
Self-administered surveys were not always possible, potentially resulting in participant
confusion.
1.11 Expected Results
It is anticipated that the research will show that the majority of credit card users prefer
credit cards for certain types of purchases while eschewing them in other situations. It is further
expected that certain purchasing behaviours will be clearly displayed based on gender of
respondent. Furthermore, it is anticipated that the majority of users within the metropolitan areas
will have credit cards, but will not be well versed in the manner in which they work or the
associated facts regarding their ideal usage.
1.12 Summary
Chapter 1 of this dissertation has afforded the researcher with the ability of describing the
study and its different components, making projections regarding the data to be gathered, and
identified the specific questions to be answered during the completion of the study. Chapter 2
will provide the literature review, allowing for a clear understanding of background information
on this matter. Chapter 3 will consist of a description of the methodology that has been set forth
for the completion of this study. Chapter 4 will present the results, while Chapter 5 will offer up
a discussion of those results, ending with Chapter 6 providing concluding statements regarding
the research.
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Literature Review
2.1 History
The use of a credit card offers consumers the benefit of acquiring and using goods and
services without paying for them up front, removing the burden of carrying cash and granting
consumers the ability to acquire goods and services prior to having the requisite cash saved up to
pay for those goods in full. Credit cards likewise afford consumers with access to credit without
having to go through financing options fraught with paperwork, but in spite of these benefits, or
perhaps because of them, credit card ownership and usage is associated with increased consumer
debt and unplanned spending (Thomas, 2010; Norm, 2008). While many view the credit card as
primarily a modern convenience, the use of the credit card in developed society first started in
the 1900s (Anderson, 2014). Credit was originally perceived as a beneficial tool for those who
needed something immediately, though the manner in which such cards have been used in recent
years casts doubt on the fact that this was once the case (Anderson, 2014). The use of credit
cards affords started in the 1950s in South Asia with the arrival of American Express who first
started issuing credit cards in 1958 (Anderson, 2014). During the past sixty years, the credit card
industry within the region gradually evolved, with most banks now offering credit card services
to eligible customers.
2.2 Similarities and Differences in Credit Card Ownership
There are many different similarities and differences present in credit card ownership and
usage among the different nations of the world (Wickramsinghe, 2009; Bagnall, et al., 2014).
Similarities in the attitude and manner in which individuals utilize credit cards and perceive
credit cards in America and Canada are present, though there are differences between how credit
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cards are used and perceived when comparing the attitudes of America and Canada to those of
emerging nations (Bagnall, et al., 2014; Themba & Tumedi, 2012). In general, credit card
ownership and usage levels are higher in the countries that have higher per capita incomes and
the necessary infrastructure to process electronic payments, though it is important to note that
with the inclusion of technologies such as card readers that function through smart phones, this is
now not as much of a factor as it once was (Bagnall, et al., 2014; PayPal, 2014). It was
determined that there was a close relationship between the spread of credit card usage in a
particular country and the socioeconomic level of development found within that country (Aker
& Mbiti, 2010). In other words, the more developed the nation, the greater the prevalence of
credit card ownership and usage. In light of this information, it is unsurprising that the credit card
market in India is reported to be low as a result of the fact that approximately 40% of the
population does not own a bank account (Khare, 2011). Failure to own a bank account makes
credit card ownership a far less real possibility for those individuals due to the need to qualify for
a credit card based on income requirements, job status, and/or the amount of money that an
individual has in their bank account, depending on the type of card being applied for.
2.3 Economic Development
The payment industries in India and Bangladesh were approaching $14 billion in 2009,
though it is likely that since that time they have now surpassed that mark (Kamal, Thomas, &
Tinaikar, 2009). Electronic payments have increased significantly, now making up over 48
percent of total value due to the increased electronification of businesses as a result of strides in
globalization in these areas (Kamal, Thomas, & Tinaikar, 2009). These trends of continued
growth in the preference for an electronic medium lend insight into the economic developments
that are taking place within these regions, with payments increasing, debts increasing, and access
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to electronic purchase and payment options likewise on the rise (Kamal, Thomas, & Tinaikar,
2009). Continued increases in these trends will cause expansions within those markets, opening
up a host of new jobs and thus working to boost economic development in the regions.
In spite of this, however, there is not always a direct correlation between the level of
economic development present in countries and the amount of credit card ownership and usage
found within that country however (Goodwin, et al., 2008). Looking to the Middle East, it was
found that, in spite of the similarities in their economic development, there were striking
differences in the number of individuals who owned and used a credit card in the region,
demographically speaking, but regardless of regional location, or the demographics of that
region, credit card usage continues to grow (Visa, 2013). This type of discrepancy in the
ownership and usage of credit cards in two countries of similar economic development and
similar geographical location serves to indicate that other factors play a role in whether or not
credit card ownership is present, aside from whether or not the nation in discussion may be
identified as developed, developing, or emerging. Other research has indicated one possible
hypothesis regarding the matter, the idea that these differences arise as a result of the different
cultural influences present within the country and their effect on the perceptions of credit card
ownership and usage (Bagnall, et al., 2014).
2.4 Demographic Influences
Further research into the matter indicates that credit card ownership and usage behaviours
vary widely based on the demographic characteristics of the sample (Kalckreuth, Schmidt, &
Stix, 2009). Multiple studies have indicated that credit card ownership and usage are affected by
different factors including age, education level, income bracket, gender, marital status, and
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attitude toward the idea of debt, to name just a few (Kalckreuth, Schmidt, & Stix, 2009; Themba
& Tumedi, 2012; Wickramsinghe, 2009; Bagnall, et al., 2014). In Saudi Arabia, credit card
ownership was positively linked to age, education level, income bracket, and attitude toward
debt, while credit card owners in Turkey were influenced by the knowledge base, beliefs, and
attitudes of the owners (Themba & Tumedi, 2012; Kurtulus &Nasir, 2012; Yayar & Karaca,
2012).
Gender differences were another primary are in which differences were present in the
ownership and usage of credit cards (Themba & Tumedi, 2012; Kurtulus &Nasir, 2012; Yayar &
Karaca, 2012; Khare, 2011). In India, it was found that males were more likely than their female
counterparts to own a credit card (Khare, et al., 2011). Studies of other areas indicated that
females were more likely to own and use credit cards than their male counterparts (Bagnall, et
al., 2014). Gender differences were likewise found to play a role in the type of products and
services purchased using credit cards and the manner in which females opted to use their credit
cards (Wickramsinghe, 2009). Females were more likely to use credit cards in the purchase of
household goods, clothing, and personal belongings, while men are more likely to use credit
cards for travel or for food (Bagnall, et al., 2014).
2.5 Usage Behaviours
It is not just men and women who use credit cards differently; studies have shown that
credit card ownership has a direct influence on usage behaviour and vice versa, with individuals
displaying different spending habits when using cash and foregoing credit card ownership versus
those who own and utilize credit cards (Roth, 2008; Bank of America, 2014; Muniz, 2013;
Folgate, 2014). In addition, studies have shown that the number of credit cards that an individual
owns likewise works to influence their usage levels (Why is Credit Card Use Increasing?, 2013;
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Lange, 2014; Ray & Ghahremani, 2014). Credit card usage more than doubled in India and
Bangladesh between 1990 and 2003 and the numbers continued to rise (Kumar, 2013).
The more credit cards that a person has, regardless of their gender, the more likely they
are to utilize credit cards in the purchase of the good or service that they so desire; alternately,
those who had the least amount of credit cards were more likely to be sparing in their use of the
card to purchase goods or services, or were more sparing in their use of the credit card(s) than
individuals who had a greater number of cards available to them (Roth, 2008; Bank of America,
2014; Muniz, 2013; Folgate, 2014). Research indicates that individuals who have two types of
credit cards spend more than those with only one card available to them, a concept that increases
exponentially the more credit cards are owned by the individual (Ray & Ghahremani, 2014). The
lower the interest rates on the credit cards, the more likely the individual is to have multiple
cards (Kumar, 2013).
2.6 Debt Perceptions
While credit card ownership and usage is widespread in certain areas, many of these
individuals have little to no knowledge of the terms and conditions in their card agreement,
making such behaviours increasingly risky for those who have higher interest rates, resulting in
the potential for increased debt (Lange, 2014). An increased adoption of credit cards has
indicated a shift in public attitudes, resulting in the accumulation of debt being perceived as
normal or even natural, a common occurrence in the life of today’s individual and no longer
perceived as taboo, as it was in the past (Arias& Miller, 2010; Ahmed, Amanullah, & Hamid,
2009). Currently debt is perceived as a normal part of the lifestyle of modern society and is
viewed with the laissez-faire attitude that it will be addressed tomorrow, a side effect of the
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increasingly large shift in perception to society as instant gratification (Arias& Miller, 2010;
Ahmed, Amanullah, & Hamid, 2009). Using credit cards to make payments offers the perception
that larger transactions have become more practical and that the buying process as a whole has
become safer, giving an alternative means of funding when the individual is experiencing a cash
flow issue (Arias& Miller, 2010; Ahmed, Amanullah, & Hamid, 2009).
In spite of these perceptions, the improper use of credit cards and the lack of
understanding on the part of the owner regarding the terms and conditions of the card has caused
users to experience insufficient rates of income, trapping the individual into risky debt practices
and locking the user into a permanent struggle with debt (FTC, 2014; Konsko, 2014; Nolo.com,
2014; Luhby, 2013). Other issues arise as a result of the interchangeability with which
individuals perceive credit cards and debit cards, treating them, at times, as synonymous with
one another, in spite of their vast differences (Dwarkadas, 2011).
2.7 Summary
It is evident from the literature review that there is a large body of research into the
matter of credit card use as a whole, especially in recent years; however, in spite of this body of
research, little is present regarding the factors that serve to influence credit card ownership and
usage in emerging nations, specifically that of India or Bangladesh. The present study seeks to
address the lack of literature present regarding these two countries, and it hopes to add additional
insights into the existing body of knowledge encompassing credit card ownership. The majority
of literature reviewed has placed a large emphasis on the factors that impact ownership, however
they have failed to cover the factors that influence credit card usage, the direct influencers of
credit card ownership. In addition, the current body of knowledge fails to address how the same
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variable will influence credit card ownership and credit card usage in different ways. The current
study will not only work to shed light on credit card ownership in Bangladesh and India, it will
also work to explain usage behaviours in those two countries. Chapter 3 will provide the
methodology to be used in the completion of this study. Chapter 4 will offer up the data that has
been obtained as a result of the study and detail its analysis. Chapter 5 will offer up a discussion
of those results, and the dissertation will end with the concluding remarks of Chapter 6.
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Methodology
3.1 Research Type
For the purposes of this study, a descriptive survey was undertaken as a means of
determining the factors that influence the credit card owner’s propensity for ownership and use
of the credit card and the importance associated with each of those differing factors. As a result
of the different types of data being gathered, it was determined that a mixed methodology study
would be ideal for the completion of this project given the fact that some of the data being
gathered, like the demographic information, the income information, and so on, is quantitative in
nature, while other factors, such as the type of spending being done and the reasons for that
spending are of a qualitative nature. Without one type of data or the other, it would not be
possible to conclusively address the research question specified at the start of this study.
An interview of five bankers from Standard Chartered, State Bank of India, HSVC, Citi,
and ICICI respectively were completed. The bankers provided information on the market outlook
as well as feedback and opinion on the banking industry.
3.2 Data Collection
3.2.1 Primary Data Collection Methods
The primary method of data collection consisted of a survey questionnaire designed by
the researcher in order to ensure that all information that the researcher deemed necessary in
order to effectively answer the research question was included in the responses provided by
study participants. The questionnaire was presented to credit card owners in the cities of Dhaka,
Mumbai, and Kolkata. Individuals were randomly selected from individuals in shopping centers,
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being asked a series of preliminary questions regarding whether or not they owned any credit
cards prior to being given the study. Those who agreed to participate in the research were then
given the questionnaire and asked to fill it out to the best of their ability. Any incomplete
questionnaires were discarded. The completed questionnaires resulting from three days’ worth of
surveys provided the data set that would be used for this study. The questionnaire was designed
in such a manner to ensure that all of the simple variables present in the schema were able to be
properly judged, with all simple variables present within the schema placed there as a direct
result of the two primary parameters, credit card ownership and credit card usage, in conjunction
with multiple complex variables. The variables were chosen to ensure that the broad and specific
objectives of the research could be fully met.
The study included both close-ended questions, wherein the participant would respond
either using a 5-point Likert scale or through the selection of a multiple choice answer, and open
ended questions, wherein the participant had to provide a short answer to the question presented.
While the majority of questions were close-ended, there were certain questions that were best
asked and answered as open ended questions in order to work to decrease the potential for the
respondent to be led to a certain answer based on the phrasing of a given question.
Given the fact that the research places specific focus on the working populations of India
and Bangladesh, the majority of the surveys were sent to workplaces via email or social media
messaging, with a few sent to households and directed to the primary income earner within those
households. In this manner it was hoped that the study would receive the greatest selection
possible of the working class, thus ensuring a more accurate sample. All completed surveys were
returned within three weeks, and all individuals selected for survey completion were selected via
judgmental sampling.
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The five banks were contacted and asked if they had any individuals who were willing to
provide information regarding their thoughts on the current market, allowing for additional
background information to be obtained regarding the matter, serving to further assist in the
analysis of data. The information gathered from these bankers was included in the literature
review, as it served as background information to the study.
3.2.1.1 Advantages and Disadvantages of Primary Data Collection Methods
While it is clear that there are many issues with this particular methodology, including a
lack of uniformity in the manner in which surveys were sent out, an inability to conclusively
state as to whether the person the survey was intended for was the individual filling out the
survey, and the potentially leading nature of the questions, given the distance present in this
study and the desire on the part of the researcher for the questionnaires to be self-administered, it
was deemed that this method would be the most expedient in getting the data necessary in order
to move forward with this particular course of study.
3.2.2 Secondary Data Collection Methods
The literature review was completed utilizing a host of primary and secondary sources. It
served as a means of assisting in the identification of the areas of research that had already been
covered and those that needed more attention. Information was collected from online reputable
sources, online databases, the school’s online library, and books, with each reviewed on a case
by case basis.
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3.2.2.1 Advantages and Disadvantages of Secondary Data Collection Methods
While this method of data collection allowed for a wealth of information, it was
determined that the majority of information regarding the credit card industry, while interesting,
was not, on the whole, beneficial to the study. Many of the potential sources that came up were
too broad, too generalized, or did not deal with the topic of credit cards outside of the context of
developed nations or from the perspective of a developed nation; as such, much of the
information found was slightly biased, though with a continual refining of keywords and search
terms, it was possible to create a comprehensive literature review.
3.3 Sample Size
The total number of retail customers, consisting of credit card holders, general account
holders, deposit schemes, retail loans, etc. in Dhaka, Mumbai, and Kolkata is identified as (N) =
2,571,430. The number of credit card holders is thus defined as 610,000 based on this
information. Taking the proportion of credit card holders, and based on the anticipated total
number of individuals who meet the overall requisite qualifications to participate in the study,
the sample size has been identified as 148. The below figure serves as a means of indicating the
manner in which such a number was obtained:
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Figure 3.1: Determining Sample Size
3.4 Sample Frame
Individual credit card holders have been identified as the appropriate sampling units; as
such, a list of all the credit card holders is the sample frame. As a result of confidentiality
agreements and the prevailing banking laws of both countries, no bank was willing to, or could
legally share a list of its credit card customers. As a result of this situation, it was not possible for
the researcher to obtain a complete sampling frame, resulting in the need to rely on judgmental
sampling in order to accomplish this study’s completion, making educated guesses regarding
individuals that might be credit card owners and approaching them after making those
deductions.
3.5 Variable Analysis (Schema)
In order to ensure that the collected data was appropriately analysed, it was necessary to
create a specified set of schema. The coordination schema was created first, working off of the
different parameters of credit card ownership (Table 3.1) and credit card usage (Table 3.2). The
schema consisted of the complex and simple variables identified for each location, the values
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that could be used for each of the different variables, and the corresponding questions on the
survey created.
Table 3.1 Coordination Schema: Credit Card Ownership
(Name, 2014)
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Table 3.2 Coordination Schema: Credit Card Usage
(Name, 2014)
3.6 Measurement of Validity
Validity refers to the extent by which an instrument is able to measure what it is intended
to measure (Colorado State University, 2014). Different types of validity measures include face
validity, predictive validity, and construct validity (Colorado State University, 2014). For the
purposes of this study, it was determined that face validity would be the ideal means of judging
whether or not the items selected for use within the research study create a properly
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representative sample of the variable applications for the research. Face validity involves the
selection of items to measure a variable through observations on whether or not the variables are
truly related to the topic at hand (Colorado State University, 2014). Face validity refers to the
extent by which the variables are able to measure the specific characteristic or trait of interest
(Colorado State University, 2014). The ability of the study to address the research question
effectively is determined in large part on the instruments that are developed for data collection
and the data collection procedures used.
3.7 Reliability of Data
The reliability of the study is determined when the variables developed as a result of the
scales used are identified as effective predictor components in objective models (Colorado State
University, 2014). Given the fact that summated scales are an assembly of interrelated items that
are designed to measure the different underlying constructs of the study, it is essential to know
whether or not the given set of items would elicit the same responses if the questions are recast
and re-administered to the same set of participants (Colorado State University, 2014). Variables
that have been derived from the test instruments may be declared as reliable only when they are
able to provide stable and reliable responses after a repeated administration of the test (Colorado
State University, 2014).
Cronbach’s Alpha, a measure of the internal consistency, or reliability, of the instrument
used in the study, allows for an interpretation of the internal consistency in a test
(Explorable.com, 2010). Cronbach’s Alpha serves to measure how closely the different test items
are related to one another, allowing for a measurement of the same construct (Explorable.com,
2010). The results of the Cronbach’s Alpha test are displayed below, in Table 3.3. A Cronbach’s
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Alpha score of greater than 0.5 is considered to be acceptable for social research
(Explorable.com, 2010). The results for this particular study, based on the standardized items in
this case is 0.552, suggesting that the items have an acceptable level of internal consistency.
Table 3.3 Results of Cronbach’s Alpha Test
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Data Analysis
4.1 Composite Measure of Ownership and Usage
Based on the coordination schema and the different variables that were selected to
explain ownership and usage, the index value identified for ownership was the mean of the 9
simple variables of all samples and the index value for 22 of the simple variables of all of the
samples; however, the mean of the variable identified as a preference to cash, the direct
measurement of the ownership tendency, is the overall ownership index and the mean of the
variable identified as frequency of usage, a direct measurement of the usage behaviour, was
identified as the overall usage index (Table 4.1).
Table 4.1 Similarity between Index Value and Composite Measures of Ownership and Usage
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4.2 Test of Similarity
It is possible to determine the similarity of data in a variety of different ways. The test of
independence is useful for examining the statistical similarities between categories (population).
The following are the results of the chi-square analysis that were conducted for each of the
different categories (Table 4.2 and Table 4.3).
Table 4.2 Cross Tabulation of Preference to Cash and Different Categories
Table 4.3 Cross Tabulation of the Frequency of Usage and Different Categories
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4.3 Frequency Analysis
A frequency analysis of the different variables was undertaken in order to identify the
different percentages at which each of the different variables were present. Variables identified
include gender (Table 4.4), marital status (Table 4.5), occupation (Table 4.6), and income (Table
4.7). The association present between the credit card brand and the type of credit card owned was
likewise analysed (Table 4.8), as was the purpose for which the cards were used (Table 3.9), the
average monthly credit card balance (Table 4.10), and the associations present between the
buying behaviour of the credit card owners and the gender differences of those credit card
owners (Table 4.11). A cross tabulation of data regarding the gender of credit card owners and
the different purposes of usage associated between the two (Table 4.12) and the inter-item
correlation of the different variables (Table 4.13).
Table 4.4 Frequency Analysis: Gender
Table 4.5 Frequency Analysis: Marital Status