INTRODUCTION.

The debit card has emerged from the shadow of its older sibling, the credit
card. Over the past decade, debit card has grown from accounting for 274
million transactions in 1990 to8.15 billion transactions in 2002, to
challenge the credit card as the preferred payment card.As it stands, the
debit card industry is a multi-billion dollar engine that helps drive
bank profits and point-of purchase consumer sales - but is also beginning
to redefine traditional payment options in the business and government
sectors, such as food stamps, benefits, and payroll.

. MEANING AND FUNCTIONS OF DEBIT CARDS

Two decades ago, the number of debit cards in circulation was
approximately 19 million. This figure is projected to cross 34.4 million by
2016.A debit card (also known as a bank card or check card) is a
plastic card that provides an alternative payment method to cash when
making purchases. Functionally, it can be called an electronic check, as the
funds are withdrawn directly from either the bank account , or from the
remaining balance on the card. In some cases, the cards are designed
exclusively for use on the Internet, and so there is no physical card
In many countries the use of debit cards has become so widespread that their
volume of use h a s o v e r t a k e n o r e n t i r e l y r e p l a c e d t h e check and,
in some instances, cash transactions. Like credit cards, debit cards are used
widely for telephone and Internet purchases and, unlike credit cards, the funds are
transferred immediately from the bearer's bank account instead of having the
bearer pay back the money at a later date. Debit cards may also allow for instant
withdrawal
of
cash,
acting
as
the
ATM
card
for
withdrawing cash and as acheck guarantee card. Merchants may also offer
cash back facilities to customers, where a customer can withdraw cash along with
their purchase. Debit cards can also allow for instant withdrawal of cash, acting as
the ATM card for withdrawing cash and as a cheque guarantee card. Merchants can

also offer "cash back"/"cash out" facilities to customers, where a customer can
withdraw cash along with their purchase.

. TYPES OF DEBIT CARD SYSTEM

There are currently three way s that debit card transactions are proce
ssed: onlinedebit (also known as PIN debit), offline debit (also kno
wn as signature debit) andthe Electronic Purse Card System. It
should be noted that one physical card can include the functions of an
online debit card, an offline debit card and an electronic purse card.
Although many debit cards are of the Visa or MasterCard brand, there are
many other types of debit card, each accepted only within a
particular country or region.

Online debit cards

Online debit cards require electronic authorization of every transaction
and the debits are reflected in the users account immediately. The
transaction may be additionally secured with the personal identification
number (PIN)authentication system and some online cards require such
authentication for every transaction, essentially becoming enhanced
automatic teller machine (ATM) cards. One difficulty in using online debit
cards is the necessity of an electronic authorization device at the point of
sale (POS)and sometimes also a separate PIN pad to enter the PIN

Offline Debit System

Offline debit cards have the logos of major credit cards (e.g. Visa
or MasterCard) or major debit cards and are used at the point of sale
like a credit card (with payer's signature). This type of debit card may
be
subject
to
a daily
limit,
and/or
a maximuml i m i t e q u a l t o t h e c u r r e n t / c h e c k i n g a c c o u n t b a l a n c e f
r o m w h i c h i t d r a w s f u n d s . Transactions conducted with offline debit
cards require 23 days to be reflected on users account balances.

Prepaid Debit Cards

Prepaid debit cards, also called reloadable debit cards or reloadable prepaid cards,
are often used for recurring payments. The payer loads funds to the
cardholder's card account. Prepaid debit cards use either the offline
debit system or the online debit system to access these funds.
Particularly for companies with a large number of payment
recipients abroad, prepaid debit cards allow the delivery of
international payments without the delays and fees associated with international
checks and bank

Working of Debit Card

The user has to present the card to merchant who will swipe it through the
electronic terminal and enter the amount of purchase. The customers need to
sign the transaction slip. Account will be automatically debited for the
amount of the purchase and the transaction can be verified by entering
the PIN. It can
a l s o b e u s e d a t o v e r 4 m i l l i o n Vi s a E l e c t r o n m e r c h a n t l o c a t i o n
s a n d e q u a l l y s t r o n g MasterCard outlets. If Debit Card ever gets
lost or stolen, card companies protect from fraudulent usage at the loss. It
is necessary to have a savings or current account with the debit card
issuer; by filling an application form. The card company then couriers the
card across around a weeks time. The Debit card does have a daily limit
which could be somewhere around Rs. 15,000 at ATMs, and Rs. 10,000 at
merchant locations. This again is subject to the balance available in the
account