Plastic money business has definitely been growing in Pakistan. Although credit card was introduced in Pakistan almost two decades ago when Habib Bank, the largest bank in Pakistan at that time, launched its gold card, but people hardly knew about this card because of its limited issuance. Approximately a decade ago, Allied Bank of Pakistan had launched its Master Card. In 1994 Citibank had launched its VISA Card and that was considered the turning point in the history of Plastic Money in Pakistan. Citibank did a good job in educating people about the use of credit card and through their aggressive marketing campaign they managed to increase credit card users in Pakistan. Other banks such as Muslim Commercial Bank, Bank of America, and National Bank of Pakistan also launched their credit cards. Now we have come a long way from there, we have many multinational and national commercial banks operating in Pakistan, prominent ones are, Bank Alfalah Limited, Habib Bank Limited, Bank Al-Habib Limited, Standard Chartered Bank Limited, City Bank Limited, United Bank Limited, Askari Bank Limited, MCB Bank Limited and Royal Bank of Scotland. All of them are not only offering credit/debit cards but also they are offering different types of credit cards which come with different benefits and payment plans. These credit cards however are backed by three prominent companies namely Master Card, Visa and American Express.

The importance of credit cards, both as a payment and short-term financing medium to today’s consumers, is no longer debatable (Chakravorti and Emmons 2001; Hayhoe et al. 2000).

The growth of plastic money can be divided into two main perspectives, one being the infrastructure perspective that involves banking infrastructure and the technological infrastructure and the other being the consumer perspective. We will study the infrastructure perspective first.

The penetration of credit cards has been slow in Pakistan despite the fact that it has grown. The primary reason is that at first it was targeted only at the upper class of the society. Now however we see a different picture. According to the latest data available, there were 6.4 million cards in circulation of which 24% are credit cards while the rest or 76% are debit cards. Similarly, more than 3200 ATMs and 54000 Point of Sale (POS) terminals have been working seamlessly across Pakistan, thus providing 24/7/365 banking facility to plastic money holders in Pakistan. With increased liquidity of banks, there has been an overall increase in the supply of consumer finance that includes personal loan, house mortgage, credit cards and auto loans. Consumer financing forms more than 25% of the total private sector credit (Economic survey, 2006-2007) in Pakistan.

Financial Institutions in Pakistan have seen a major reform in the shape of restructuring and privatization since 2000. Despite of increase in the interest rates over the last couple of years, banking sector witnessed a growth of 18.2% (Economic Survey, 2006-2007). In addition, State Bank of Pakistan (SBP) has laid out stringent requirements for banks to get formal approval of those given credit and the Credit Information Bureau needs to keep a check on non performing loans. However, SBP holds no strict regulation for the issuance of credit cards in the prudential regulations as compared to other consumer financing. The limit of credit cards can be extended to two million rupees in case of a privileged customer. The unsecured loans, in the form of credit cards, are increasing at a high rate. According to the Economic Survey of Pakistan 2006-2007 the credit card holders are increasing at the rate of 50% annually. In December 2006, the total credit card amount outstanding was Rs. 39198 Million (a substantial increase from Rs. 19340 Million in June 2005. Yet the market remains unsaturated and a low number of cardholders exist as compared to other developing countries.

Tough competition amongst the commercial banks has provoked different line of efforts by them. They now rely on quality and other non-price factors to market their products. These can then be used as a means of differentiation to achieve higher revenues and improve market share (Worington 2005).

Though the plastic money industry might have experienced a small set back recently due to reduction in the overall users of credit card due to increasing interest rates, double digit inflation, poor online links and power outages/telephone links being down which reduces the efficiency/effectiveness of credit cards.

As for the consumer perspective, consumers generally have different motives for holding cards. They also have different incentives to incur the time and psychological costs of searching for lower interest rate terms (Kim, F. Dunn, and E. Mumy 2005). However since Pakistani consumers are slowly grasping the concept of paperless transactions, there is a need to properly segmenting the market especially since there are different meanings of the use of credit card. On the other hand the gap between consumption and saving is widening due to financially insecure customers, who when unable to pay end up paying more with penalties. The highest default within the consumer portfolio has been increased from 1.4 percent in December, 2006 to 3.7 percent in March, 2007 (Ghani 2007).

Nowadays all banks are competing for the same market of consumers of credit cards and the majority carries multiple types of credit cards. New trends are shaping up, especially in terms of customization (introduced by UBL to allow a customized picture on the credit card), Awami card (introduced by Askari Commercial Bank) and Co branding of cards (e.g. PIA Co-brand cards by Standard Chartered Bank), and so on. Yet there is a need to further improve the credit card strategies by understanding the perception and attitude of potential and existing customers. This study attempts to observe the general behavior and attitude of the Pakistani consumers in the credit card market. Also we will see how the policies of State Bank of Pakistan, economy of Pakistan and the overall infrastructure affect the growth of the plastic money in Pakistan.

The significance of our research is that we want to improve an already existing research on the consumer perspective of plastic money usage. The difference in our research is that we have also included the aspect of infrastructure perspective that affects plastic money usage. We are going to use this study to improve the market for plastic money in Pakistan and see the benefits it brings