Proposal and Methodology

INDIAN INSTITUTE OF FOREIGN TRADE
Business Research
Report
Study and analyze the factors affecting credit
card usage in India for Diners Club
International
Group 11
Ankush Tyagi (8B)

Daivik Raval(17B)
Vibhav Joshi(55B)
Siddharth Attri(37B)
Ravi Teja B.(47B)
Contents
Introduction & Background ......................................................................................................... 2
Literature Review ............................................................................................................................ 3
Research Problem ............................................................................................................................ 4
Research Sub-Problem 1 .......................................................................................................... 4
Research Sun-Problem 2 .......................................................................................................... 4
Research Methodology .................................................................................................................. 7
Sources of Data............................................................................................................................. 7
Secondary Source: .................................................................................................................. 7
Primary Source: ...................................................................................................................... 7
Research Design .......................................................................................................................... 7
Sampling Design .......................................................................................................................... 8
Profile of the sample: ...................................................................................................................... 9
Data Analysis .................................................................................................................................. 11
Research Sub-Problem 1 ....................................................................................................... 11
Recommendations ........................................................................................................................ 20
Bibliography.................................................................................................................................... 21
Questionnaire Design: ................................................................................................................. 22
Introduction & Background

India is one of the fastest growing countries in the plastic money
segment. There are over 130 million credit/debit cards in circulation,
which is likely to increase at a very fast pace due to rampant
consumerism fueled by doubling of GDP every 6-7 years. Indias card
market has been recording a growth rate of 30% in the last 5 years. Card
payments form an integral part of e-payments in India because
customers make many payments on their card like paying their bills,
transferring funds and shopping.
In the recent years there has been an increasing use of cards to avail
premium services like access to airport lounges, holidaying, availing
premium services at top end restaurants etc. Established in 1950, Diners
Club International is one such service. It became the first multi-purpose
charge card in the world, launching a financial revolution in how
consumers and companies pay for products and services. Today, Diners
Club is a globally recognized brand serving the payment needs of select
and affluent consumers, offering access to more than 500 airports
lounges worldwide, and providing corporations and small business
owners with a complete array of expense management solutions.
The research seeks to analyze the market for Credit Cards in India and
use this to find the best growth strategy for Diners Club International in
the country.
Literature Review
India is among the fastest growing major economies. This fact forms the
bedrock of our research since rising disposable incomes are the primary
reasonthat leads to a paradigm change in the spending patterns that
lead to paradigm change in the spending patterns. For instance,
McKinsey & Company (2007) forecasted that if the Indian economy
grows at the rate of 7.3 percent between 2005 and 2025, then by 2025,
583 million Indians will be in the middle class, which is equivalent to the
current population of countries like Australia. The share of middle class
in the total population will increase from around 5 percent in 2005 to 41
percent in 2025.
Various lifestyle and demographic factors affect the credit card usage
(Okan Veli afakli, 2007). Demographics is one of the key influencers of
the credit card usage (Arpita Khare, AnshumanKhare, Shveta Singh
2011). The credit card use is influenced by the age of the customers.
Youngerpeople are more likely to use credit cards while older people are
comfortable withcash payment methods. Men are morelikely to have
credit cards than women. This is because women are still in mostcases
financially dependent on their families. Credit card ownership is with
menand it is used for shopping for the family.
Similar study conducted in Turkey (Prof. Dr. Kemal KURTULU) explores
the relation between credit card usage and credit terms and awareness
about them across demographics.In the light of this we have considered
several factors which might contribute to the spending patterns relating
to credit cards usage. These are:
Annual income of an individual

Significance of reward system
Transaction charges and interest rates
Age and Gender of the Consumer
These factors play a major role in influencing a consumer, especially in

India where the consumer tends to get swayed due to a variety of
reasons. We have tested various hypotheses based on above factors in
order to arrive at a conclusion.
Research Problem
Diners Club International wants to analyze the market for Credit
Cardsin India to find the best growth strategy in the country. The
main idea is to gauge the frequency with which an average consumer
uses his card and the factors affecting this frequency.
For this purpose we define the research problem as:
To determine the factors that significantly influence the frequency of
credit card usage
Research Sub-Problem 1
Does annual income of the card holder influence the credit card use?
The hypothesis can be stated as:
H0: The annual income has no significant effect on the
frequency with which an individual uses his credit card.
Ha: The annual income has significant effect on frequency of
credit card usage by an individual.
Research Sun-Problem 2
Would frequency of credit card use depend on the rewards offered
on credit card use?
H0: There is no significant effect of a rewards system on the
frequency of credit card usage.
Ha: Rewards system has a significant effect on the frequency of
credit card usage.
Whether transaction charges and interest rates exhibit a
significant effect on the credit card usage of a consumer
H0: There is no significant effect of transaction charges on the
Ha: The transaction charge has a significant effect on the credit
card usage of a consumer
Whether age and gender has a significant effect on the
frequency of credit card usage
1)
H0: There is no significant effect of age on a frequency of credit
card usage.
Ha: The age of the consumer has a significant effect on
2)
H0: There is no significant effect of gender on a frequency of
credit card usage.
Ha: The gender of the consumer has a significant effect on
Find out the most important factor that a consumer takes into
consideration when choosing a credit card company for its
services.
Finding out where exactly consumers use their credit card
most often.
Find out the important factors in deciding to opt for a credit
card
Research Methodology
Sources of Data
Secondary Source:
Research papers/ different reports on customers credit
card usage patterns available from different research
agencies or banks
Credit card issuance and usage data available on RBI
website
Primary Source:
For exploratory phase: A telephonic interview with an
industry expert working in a major consumer bank like
State Bank of India
For descriptive phase: A sample survey conducted in
Delhi NCR region and other metro and urban cities via an
online questionnaire, telephonic and face to face
interviews
Personal interviews under mall intercept
Research Design
The research design will comprise of two phases:
Phase1: Exploratory research Qualitative
To identify factors affecting consumers credit card usage
(income group, reward system, transaction charges, age,
service quality)
The data collection method to be used is reviewing existing
research papers, data published on RBI websites and
conducting expert survey through telephonic interview of an
industry expert. The expert survey will highlight the factors
forming the basis of hypothesis of the research. In addition to
this, it will also validate the information available on existing
credit card usage trends in the country.
Phase 2: Descriptive research Quantitative
To determine the significant effect of individual factors
on credit card
7
The data collection method to be used will be in a form

of an internet survey conducted with residents of NCR
and other major cities of the country
Data collection will also be through telephonic
interviews as well as personal interviews under mall
intercept
The questionnaire response will be validated by using
factor analysis
Sampling Design
Target Population: Residents of Delhi NCR and other major
cities across varied income and age groups
Sampling Method: We shall use convenience sampling with
sample being selected on the basis of accessibility and
availability.
For Descriptive phase:
For online questionnaire, sample will be selected from major
cities on the basis of accessibility across age groups of 23-75
years and subscribers of internet with sample size of 380.
For face to face interviews and mall intercept personal
interviews the sample will be selected from residents of Delhi
preferably from the regnion of Katwaria Sarai, Select city mall
etc. with sample size of approx. 8-10.
Sample size calculation:
Number of credit users in India=19.47 million (as of June 2014
from RBI)
Number of taxpayers in India=35 million(Economic times)
p=0.55, q=0.45
Z=1.96(95% confidence interval)
e=5%
n = (Z^2*p*q)/e^2
n = 380
For Exploratory phase:
We shall use judgment sampling to conduct an expert survey
through telephonic interview. Participants will be selected on
the ease of accessibility and availability.
Sample size: 1-2
8
Profile of the sample:

Total number of respondent: 189
Gender
Respondents
Male
142
Female
47
Respondents
160
142
140
120
100
80
Respondents
60
47
40
20
0
Male
Age(in years)
<18
18-25
26-35
36-45
46-55
>55
Female
Respondents
4
40
119
18
7
1
Respondents
140
119
120
100
80
60
40
20
Respondents
40
18
4
0
<18
18-25
26-35
36-45
46-55
Income group
Low income
Medium Income
High Income
1
>55
Respondents
59
82
48
Respondents
48
59
Low income
Medium Income
High Income
82
10
Data Analysis
Does annual income of the card holder influence the credit card use?
1.
H0: The annual income has no significant effect on the

frequency with which an individual uses his credit card.
Ha: The annual income has significant effect on frequency of
credit card usage by an individual.
Model Summary
Model
.576
Adjusted R
Std. Error of the
Square
Estimate
R Square
a
.332
.328
.804
a. Predictors: (Constant), What is your yearly income ?
ANOVA
Model
1
Sum of Squares
Regression
Df
Mean Square
32.979
32.979
Residual
178.429
187
.954
Total
211.407
188
Sig.
34.563
.000
a. Dependent Variable: usage

b. Predictors: (Constant), What is your yearly income ?
Coefficients
Model
1 (Constant)
What is your
yearly income?
Unstandardized
Standardized
95.0% Confidence
Coefficients
Coefficients
Interval for B
Std. Error
Beta
Sig.
Lower
Upper
Bound
Bound
1.464
.223
6.578 .000
1.025
1.903
.434
.074
.395 5.879 .000
.288
.580
a. Dependent Variable: usage
11
Analysis:
Null hypothesis fails
The annual income has significant effect on frequency of credit
card usage by an individual
33% of variation in frequency of credit card usage can be
explained by change in income level
2.
H0: The annual income has no significant effect on the value of

transactions through credit card
Ha: The annual income has significant effect on the value of
Model Summary
Model
.395
Adjusted R
Std. Error of the
Square
Estimate
R Square
a
.156
.151
.97681
a. Predictors: (Constant), What is your yearly income ?
ANOVA
Model
1
Sum of Squares
Regression
Df
Mean Square
60.070
60.070
Residual
120.882
187
.646
Total
180.952
188
Sig.
92.927
.000
a. Dependent Variable: How much do you pay by credit card(s) per month? (In Rs.)
b. Predictors: (Constant), What is your yearly income ?
Coefficients
Unstandardized
Standardized
95.0% Confidence
Coefficients
Coefficients
Interval for B
Sig.
Bound
Bound
1 (Constant)
.978
.183
5.337 .000
.616
1.339
.586
.061
.576 9.640 .000
.466
.705
yearly income ?
Beta
Upper
Model
What is your
Std. Error
Lower
a. Dependent Variable: How much do you pay by credit card(s) per month? (In Rs.)
12
Analysis:
The annual income has significant effect on the value of
15.6% of variation in value of transactions through credit
cardcan be explained by change in income level
Would frequency of credit card use depend on the rewards offered
on credit card use?
H0: There is no significant effect of a rewards system on the
Ha: Rewards system has a significant effect on the frequency of
credit card usage.
Model Summary
Model
.211
R Square
a
Adjusted R
Std. Error of the
Square
Estimate
.045
.039
1.039
a. Predictors: (Constant), How important are the rewards offered in deciding

whether to use credit card or not?
ANOVA
Model
1
Sum of Squares
Regression
df
Mean Square
9.428
9.428
Residual
201.979
187
1.080
Total
211.407
188
F
8.729
Sig.
.004
a. Dependent Variable: How often would you use your credit card(s) per month?
b. Predictors: (Constant), How important are the rewards offered in deciding whether to use credit card
or not?
13
Coefficients
95.0%
Unstandardized
Standardized
Confidence
Coefficients
Coefficients
Interval for B
Model
1 (Constant)
Std. Error
2.638
.235
.371
.125
Beta
Sig.
Lower
Upper
Bound
Bound
11.203 .000
2.173
3.102
2.955 .004
.123
.618
How important are the

rewards offered in
deciding whether to use
.211
credit card or not?

a. Dependent Variable: How often would you use your credit card(s) per month?
Analysis:
Rewards system has a significant effect on the frequency of
credit card usage
4.5% of variation in frequency of credit card usage can be
explained by reward system
Whether transaction charges and interest rates exhibit a
significant effect on the credit card usage of a consumer
H0: There is no significant effect of transaction charges on the
Ha: The transaction charge has a significant effect on the credit
Model Summary
Model
1
R
.299
R Square
a
.089
Adjusted R
Std. Error of the
Square
Estimate
.083
.950
a. Predictors: (Constant), change
14
ANOVA
Model
1
Sum of Squares
Regression
df
Mean Square
11.688
11.688
Residual
119.036
132
.902
Total
130.724
133
Sig.
12.961
.000
a. Dependent Variable: How the frequency of credit card use has changed for you, over last year?
b. Predictors: (Constant), change
Coefficients
Model
Unstandardized
Standardized
95.0% Confidence
Coefficients
Coefficients
Interval for B
1 (Constant)
Change
Std. Error
3.892
.473
-.520
.144
Beta
Sig.
8.236 .000
-.299
3.600
.000
Lower
Upper
Bound
Bound
2.957
4.826
-.805
-.234
a. Dependent Variable: How the frequency of credit card use has changed for you, over last year?
Analysis:
The transaction charge has a significant effect on the credit
8.9% of variation in change in frequency of credit card usage
can be explained by change in transaction charges & interest
rate
Whether age and gender has a significant effect on the
frequency of credit card usage
1)
H0: There is no significant effect of age on a frequency of credit
card usage.
Ha: The age of the consumer has a significant effect on
15
ANOVA
How often would you use your credit card(s) per month?
Sum of Squares
Between Groups
df
Mean Square
35.020
7.004
Within Groups
176.387
183
.964
Total
211.407
188
Sig.
7.267
.000
Analysis:
The age of the consumer has a significant effect on frequency of
credit card usage
2)
H0: There is no significant effect of gender on a frequency of
credit card usage.
Ha: The gender of the consumer has a significant effect on
ANOVA
How often would you use your credit card(s) per month?
Sum of Squares
Between Groups
df
Mean Square
.729
.729
Within Groups
210.678
187
1.127
Total
211.407
188
Sig.
.647
.422
Analysis:
Null hypothesis holds true
The gender of the consumer does not have a significant effect
on frequency of credit card usage
16
Find out the most important factor that a consumer takes into
consideration when choosing a credit card company for its
services.
Factor
Importance Ranking
1 2 3
4 Mean
Convenience of getting the card
17
15
47
110
3.322751
Rewards and discounts offered
69
50
40
30
2.164021
Transaction charges and interest rates
53
81
35
20
2.116402
Quality of service
50
43
67
29
2.396825
Analysis:
Among the given factors highest number of respondents
preferred Rewards and discounts offered as the most
preferred choice.
Overall, Transaction charges and interest rates with a mean
value of 2.12, is the most important factor that a customer
takes into consideration
Finding out where exactly consumers use their credit card
most often.
Usage place
Air travel
Clothes and shoes purchase
Electronics purchase
Grocery shopping
Medical services
Education
Dining (restaurant/ club/ online orders etc.)
Entertainment (movies/ parks, etc.)
Respondents
90
158
131
71
35
31
161
152
17
180
160
140
120
100
80
60
40
20
0
161
158
152
131
90
71
35
31
Analysis:
Among the respondents, Clothes and shoe purchases, Dining,
and Entertainment forms the preferred destination for credit
card usage
The most preferred destination for credit card usage is
Dining
Find out the important factors in deciding to opt for a credit
card.
Reason for usage
Can get discounts during shopping
Can get free gifts when applying the credit cards
Convenient to make payment
No need to carry cash
Availability of emergency fund
Helps me keep track of my expenses
Respondent
149
54
146
131
109
25
18
160
149
146
131
140
120
109
100
80
54
60
40
25
20
0
Can get
discounts
during
shopping
Can get free Convenient to

gifts when make payment
applying the
credit cards
No need to
carry cash
Availability of Helps me keep

emergency
track of my
fund
expenses
Analysis:
Among the respondents, Discounts offered during shopping,
convenience in making payment, and Avoidance of carrying
cash are the important factors for consumers while deciding
to opt for a credit card
Can get discounts during shopping is the most important
factor while opting for a credit card
19
Recommendations:
Since income has a significant impact on credit card usage
we recommend Diners Club International to target high
income groups
Rewards Systems has a significant impact on credit card
usage hence Diners Club should offer attractive rewards
systems like providing free movie tickets, dining coupons,
cash back facilities based on their initial tie-ups like retail
outlets such as West Side, Pantaloons etc
Diners Club should offer interest rates that are low and
transaction charges that are also low
By using ANOVA and descriptive analysis Age was found to
have a significant impact on credit card usage with young
people(26-35) being more prone to credit card usage than
people belonging to higher age group. Hence Diners Club
should target customers who fall in the younger
demographic
20
Bibliography
(2007). Bird of Gold : The Rise of India's Consumer Market. McKinsey.
Khare, A., Khare, A., & Singh, S. (2012). Factors affecting credit card. Asia Pacific Journal
of Marketing and Logistics.
KURTULU, P. D. (n.d.). Consumer Behavior of Credit Card Users in an Emerging Market.
6th Global Conference on Business & Economics.
Safakli, O. V. (2007). MOTIVATING FACTORS OF CREDIT CARD USAGE AND. Investment
Management and Financial Innovations, Volume 4, Issue 4.
21
Questionnaire Design:
The following Questionnaire was designed keeping in mind the tests
for hypothesis
The following Questionnaire was designed keeping in mind the tests
for hypothesis
1. Do you use a credit card:
a. Yes b. No
2. How many credit cards do you have?
a. 1-2 b. 3-4 c. 5 or above
3. Please mention your current credit card provider?
4. Rank following factors according to importance for you
while choosing credit card:
Convenience of getting the card_______
Rewards and discounts offered_______
Transaction charges and interest rates _______
Quality of service
_______
5. How often would you use your credit card(s) per month?
1. Every day 2. 2- 6 times a week 3. once a week
4. 2-3 times a month 5. Once a month
6. How the frequency of credit card use has changed for you,
over last year?
1. Increased significantly
2. Increased slightly
3. No change
4. Decreased slightly
5. Decreased significantly
7. Which of the following best describes your credit card
usage?
a. Regularly
b. Occasionally on specific purchases
c. In emergency situations
22
d. Rarely as last option

8. How much do you pay by credit card(s) per month?
a. 1000 or below
b. 1001 -5000
c. 5001-10000
d. 10000- 20000
e. 20001 or above
9. What do you use on your credit card on ( you can choose
more than one option)
a. Air travel
b. Clothes and shoes purchase
c. Electronics purchase
d. Grocery shopping
e. Medical services
f. Education
g. Dining (restaurant/ club/ online orders etc.)
h. Entertainment (movies/ parks, etc.)
i. Others
10. Why do you apply a credit card? (You can choose more
than one item.)
f. Can get discounts during shopping
g. Can get free gifts when applying the credit cards
h. Convenient to make payment
i. No need to carry cash
j. Availability of emergency fund
k. Helps me keep track of my expenses
l. Feel superior to others
m. Others, please specify:
11. What types of rewards you have received by using credit
card(s)?
n. Welcome gifts
o. Coupon rebate
p. Cash rebate
q. Payment discounts
r. Others. Please specify
12. How important are the rewards offered in deciding
whether to use credit card or not?
23
1. Important to great extent

2. Important to some extent
3. Not important
13. You intend to increase credit card usage if better rewards
are offered:
a. Strongly disagree b. Disagree c. Neither agree nor disagree
d. Agree e. Strongly agree
14. Do you have the information about the interest rate on
your credit card?
a. Yes b. No
15. What is the interest rate charged on your credit card?
a. 0-4%
b. 4.01-8%
c. 8.01- 12%
d. 12.01-16%
d. more than 16%
16. Has the interest charged on your credit card changed
over last year?
1. Increased significantly
2. Increased slightly
3. No change
4. Decreased slightly
5. Decreased significantly
17. Transaction charges and interest rates charged by your
card provider are justified:
18. Lower transaction charges and interest rates will lead to
an increase in your credit card usage :
19. What is your Age in years?
a. <18 b. 18 -25 c. 26-35 d. 36 -45 e. 45-55 f. >55
24
20. What is your Gender?

a. Male b. Female
21. What is your income per annum?
a. Up to Rs 200000
b. Rs 200001-500000
c. Rs 500001-1000000
d. Rs 1000001- 2000000
e. more than Rs 2000000
25

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INDIAN INSTITUTE OF FOREIGN TRADE

Ankush Tyagi (8B)

Introduction & Background

Annual income of an individual

These factors play a major role in influencing a consumer, especially in

The data collection method to be used will be in a form

Profile of the sample:

H0: The annual income has no significant effect on the

Std. Error of the

a. Predictors: (Constant), What is your yearly income ?

a. Dependent Variable: usage

.395 5.879 .000

a. Dependent Variable: usage

H0: The annual income has no significant effect on the value of

Std. Error of the

a. Predictors: (Constant), What is your yearly income ?

.576 9.640 .000

Std. Error of the

a. Predictors: (Constant), How important are the rewards offered in deciding

How important are the

credit card or not?

Std. Error of the

a. Predictors: (Constant), change

Convenience of getting the card

Rewards and discounts offered

Transaction charges and interest rates

Can get free Convenient to

Availability of Helps me keep

d. Rarely as last option

1. Important to great extent

20. What is your Gender?

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