Does profuse of credit cards lead to “fraud and death theft”? -Lloyds TSB Bank” by munazza zakaria

2008 Does profuse of credit cards lead to “fraud and death theft”? - A study of the safeguards used by Lloyds TSB Bank”

Present By: Munazza Akhter Zakaria Present To: Jonathan Trouncer 11/21/2008

Table of Content Page

Abstract Acknowledgment

CHAPTER 1: Introduction 1.1 Background of the Research

1-2

1.2 Historical Background and Foundation of Lloyds

2-3

TSB Bank 1.2.1 Lloyds Bank 1.2.2 TSB

3- 4

1.2.3 Lloyds TSB Group PLC

4- 5

1.2.4 Lloyds TSB - The up to date revise on the

5-6

proposed HBOS Acquisition 1.2.5 Company Overview

1.2.6 Key highlight point of Lloyds Financial Services

6-11

1.3 The Aims and Objective of the Research

1.3.1 General objective

1.3.2 Specific objective of the dissertation

11-12

1.4 Pattern Structure of the Research

12- 14

Introduction

CHAPTER 2: Literature Review

Part 1 2.1 An introduction to the Card systems

Table of Content (Continues...) Page 2.1.1 Plastic Money or Cards 2.1.2 Historical background of the Credit card

16 16- 17

2.2 Types of Card

2.2.1 Credit Card

2.2.2 Debit Card

2.2.3 Charge Card

2.2.4 Prepaid Card

2.3 Types of Consumer Credit Card

20- 22

2.4 The Credit Card Transaction Process Systems

22- 25

2.5 Basic Features of Credit Card

25- 27

2.5.1 Benefits for Card holders

2.5.2 Benefits for Merchants

2.5.3 Benefits for Issuing and Acquiring Banks

2.6 Advantages and disadvantages of credit card

29- 30

2.6.1 Advantages 2.6.2 Disadvantage

2.7 Plastic Card Fraud

2.7.1 Types of Card fraud

32- 33

2.7.2 Cheating at Cards: Customer suffering story

34-36

(Plastic fraud) Conclusion

Introduction

3.1 Strategy

38- 39

CHAPTER 3: Competitive analysis

Table of Content (Continues...) Page 3.1.2 Key major point for competitive Credit card

39- 41

issuers 3.3 Present situation of UK plastic Card

41-42

3.3.1 Credit Cards movement

42-44

3.3.2 Market size of UK Credit card

44-46

3.3.3 Key issuer of Credit card

46-47

3.4 Card fraud and theft Facts and Figure

47-49

3.5 Competitor analysis

49-50

3.5.1 New Product and Brand Development

50- 51

Conclusion

CHAPTER 4: Research Methodology 4.1 Research strategy

52-54

4.2 Research design

54- 56

4.3 Data collection method

4.3.1 Secondary data

56-57

4.3.2 Primary data

57-58

4.4 Design of questionnaire

58-59

4.5 Quantitative data analysis

4.5.1 Data types

4.5.2 The Questionnaire analysis

4.4.3 Advantage and disadvantage of questionnaire

4.6 Data analysis technique

4.7 Limitation and Problems Encountered

Table of Content (Continues...) Page CHAPTER 4: Research Methodology 4.1 Research strategy

52-54

4.2 Research design

54- 56

4.3 Data collection method

4.3.1 Secondary data

56-57

4.3.2 Primary data

57-58

4.4 Design of questionnaire

58-59

4.5 Quantitative data analysis

Introduction

CHAPTER 5: Finding and Discussion

Demographic Characteristics

62-66

a. Gender b. Age c. Occupation 5.2 Users Perspective 5.2.1 Population Satisfaction According the Credit

6767-68

Card Provider 5.2.2 Demographic Profile of Population According to

the Satisfaction level 5.2.3 Gender and Level of education profile over user

69-70

satisfaction 5.2.4 Income profile of user over user satisfaction

70-71

Table of Content (Continues...) Page 5.2.5 Profession profile of user over user satisfaction

5.3 Factor influencing the user choice

5.3.1 Payment Behavior under interest rate

73 -75

5.3.2 Typical use of Credit Card

76 -77

5.3.3 Difficulties of Credit Card use

77-78

5.3.4 User popular Banking provider rating

78-79

5.4 Nonuser Perspective 5.4.1 Awareness of Credit Card 5.4.2 Nonuser Interest on Credit Card 5.4.3 Demographic Profile of Population According to

79 79 - 80 80 80 â&#x20AC;&#x201C; 82

the Interest 5.4.4 Nonuser Population Demands on Credit Card

83 -84

Vendors according to Interest Conclusion

Introduction

CHAPTER 6 Conclusions and Recommendations

6.1 Summary of key findings

85 â&#x20AC;&#x201C; 86

Recommendation of the research

86 - 88

Future research recommendations

88 -89

Conclusion References Bibliography Appendix

ABSTRACT In the last half the twentieth century plastic cards are one of the most well-liked forms of payment in the United Kingdom. Plastic cards have changed the portfolio of payment methods the way that we pay for goods and services. Virtually, anywhere in the world, users can use his/her card, easily and conveniently and securely. Now a day, most consumers pay for at least half their purchases with plastic card, most large retailers, supermarkets and online shops take plastic as do an escalating number of professional service providers. The survey of the research, introduces the different demographic profiles such as sex, education level, age, profession, income, expenditure and the different attitude of the overall population according to the credit card prospects. The research survey principally focuses on two different projections: user and non user perspective. Using qualitative and quantitative approach I tried to find out the user satisfaction about credit card. Mostly, the Credit card users are satisfied with their Credit card providers. The aim of this research is to investigate and explore the credit card demographic profile and attitude of different users and nonuser and also identify the main issues of profuse of credit cards lead to “fraud and death theft”. By analysis the arguments according to their demographic prospects and different attitudes, I was trying to find out that are the users and nonuser, generally aware about credit frauds and the present facts. On the non user’s perspective, awareness of the credit is in satisfactory level. Mostly the new generation of the people is interested on the credit card. Finally, this research survey concludes with the user demands over their credit card vendors. The ‘excessive service charge’, ‘shortage place that accepts credit card cash withdrawn facilities’ and ‘data protection problem ’ are the major factors that influence the non user’s choice. Though the user satisfaction level is high there might be a possibility that the conservative nature of the card provider influences the overall credit card issue rate.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |

Acknowledgement

It gives me immense pleasure to thank a large number of individuals for their cordial cooperation and encouragement who have contributed directly or indirectly in preparing this dissertation.

Firstly, I would like to express my respected appreciation to my supervisor, Dr. Jonathan Trouncer, dissertation supervisor of the University of Wale Institute, Cardiff. His constant guidance and advice played the pivotal role in making this report a success. He always gave me his suggestions that were crucial in making this report as flawless as possible.

I must show my gratitude to all the Lecturers and administrative department of London School of Commerce, for giving me the opportunity to complete my dissertation required in the Management Consultancy Program.

The dissertation is dedicated to my beloved family. I wish to express my deep sense of appreciation to my family for their eternal love, continuous encouragement and understanding me throughout my study.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |

DOES PROFUSE OF CREDIT CARDS LEAD TO “FRAUD AND DEATH THEFT”? A STUDY OF THE SAFEGUARDS USED BY LLOYDS TSB BANK

CHAPTER 1: Introduction

2008

CHAPTER 1 Introduction

“To get a preparatory illustration of the studied subject, in this chapter, the author is going to demonstrate a critical background of the subject matter, verify the quandary area and classify the intention of the research, pursued by an illustration of its aims and objectives.”

1.1 Background of the Research From the beginning of this recent time, banking is undoubtedly one of the most regulated industries in the world, and the rules on bank capital are one of the most prominent aspects of such regulation. The bank plays an important role in financial intermediation, the bank capital therefore also plays an important role in the international community and being considered as capital standards. Their role as providers of liquidity insurance and monitoring services and as producers of information result in banking is the most important activities in business. Among bank systems inside a country or over the world also have competed with the influence of capital on the competitiveness of banks? This influence was in fact one of the key factors behind the international efforts of harmonies capital standards in the 1980s. Credit cards and charge cards are a relatively recent development in banking, having been invented in 1949, but with rapid market growth since then. The concept of cards or plastic money was first introduced by Western Union in the United States in 1914. Rapidly flourishing grow reason are in spite of some drawbacks, which provide them a number of advantages, for instant Credit cards have urbanized a global payment system capability, which provides card issuers with a network business model with low barriers to entry. (Grant Halverson, 2007).

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Alternatively, in this competition, the service sector becomes more and more important when considering the standardization and globalization of the products. This may be the reason that many studies investigates the service sector. Most of these studies aim to evaluate the quality of service through comparing customers’ expectations and perceptions. This is because there is a relationship between service quality, customer satisfaction and service loyalty (Caruana, 2000). Parasuraman et al., (2005) suggest that the challenges in the financial services industry of the United Kingdom (UK) have resulted in more pressure on banks to develop and utilize alternative delivery channels. The quality of service aims to keep the loyalty of customers and make them satisfaction, especially in the banking industry. In this research, UK bank was chosen such as Lloyds TSB Bank Ltd and other credit card service provider banks, the reason they are competitive and popular in the UK. In this research main frame was created on the base of the different demographic profiles and the different attitude of the overall population according to the credit card prospects, and also identify the main issues of profuse of credit card lead to “fraud and death theft”.

1.2 Historical Background and Foundation of Lloyds TSB Bank 1.2.1 Lloyds Bank In 1765, John Taylor and Sampson Lloyd make a bigger portfolio set up in a private banking in Birmingham, England. Later, in 1865 the partnership diverse its prominence to a joint- stock company, naming it Lloyds Banking Company Limited. Two sons of the original partners tracked in their footsteps by establishing their own bank: Barnetts Hoares Hanbury and Lloyds, in Lombard Street, London. In 1884, eventually, this was wrapped up in the growing Lloyds Banking Company. In 1914, Lloyds Bank stretched through a series of mergers, including the Wilts and Dorset Bank and the Capital and Counties Bank in 1918. By 1923, Lloyds Bank had made some 50 takeovers, one of which was the last private firm to issue its own bank notes – Fox, Fowler and Co. Of Wellington, Somerset. 1911 saw the formation of Lloyds Bank (France) 2

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

when Lloyds Bank acquired Armstrong and Co, based in Paris and Le Havre. From 1917 it was run mutually as Lloyds and National and Provincial Bank. In 1955, Lloyds Bank bought full ownership and it became Lloyds Bank (Foreign) and later Lloyds Bank Europe. In 1918 with the acquisition of the London and River Plate Bank, Lloyds developed a strong bond with South America. Soon after Lloyds merger with the London and Brazilian Bank resulted in the Bank of London and South America (BOLSA) (R.S Sayers, 1957). In 1971, Lloyds Bank bought the controlling interest in BOLSA and merged it with Lloyds Bank Europe to form Lloyds and Bolsa International Bank. In 1974 it was known as a Lloyds Bank International (LBI) and LBL was itself merged into Lloyds Bank in 1986. 1988 saw the Bank merge five of its businesses with the Abbey Life Insurance Company to create Lloyds Abbey Life. Early 1990s, Lloyds Bank repeatedly expanded their offices around the world, from Argentina to the USA. However, Lloyds also builds a new headquarters for its UK Retail Banking Division in Bristol and acquiring the Agricultural Mortgage Corporation in 1990. In 1994 with the takeover of the Rural Bank, Lloyds make a strong path line in New Zealand, by leading provider of agricultural finance. Cheltenham & Gloucester (C&G) joined the Lloyds Bank Group on August 1995, later the same year on December; Cheltenham & Gloucester (C&G) joined the Lloyds Bank Group. (Mediacentre.lloydstsb.com [Online])

1.2.2 TSB In 1810, to help the poorest parishioners save for times of hardship, the monk Henry Duncan of Ruthwell, Dumfriesshire, set up a bank which was such a popular scheme. In 1818 for attraction of this scheme, there were 465 saving banks in Britain (including 182 in Scotland) was established. The Trustee Savings Bank Association (TSBA) established in 1887 to help the individual banks co-operate and to advice on matters of common concern. (R.S Sayers, 1957) During 1973, The Central Trustee Savings Bank was building up and supplies the savings bank with banking and clearing service. By 1975 it turned to the member of the 3

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

London Bankers Clearing House. That same year, an organization puts 73 local institutions in place, and a later review reduced this again, to 16 regional savings banks. During 1970s to 1980s, the number of depositors was increased hugely. To control their value, Lloyds introduces another reorganization in 1983, and the lasting 16 savings banks gave up their individual identities to form TSB England and Wales, TSB Scotland, TSB Northern Ireland and TSB Channel Islands. The 1985 TSB Act opened the way for the Group to restructure in preparation for its stock market flotation in 1986. The following year saw a network of estate agencies set up, the acquisition of Hill Samuel Bank and Target Life, and the launch of Speedlink, Britain’s first telephone banking system. TSB England and Wales became a TSB Bank place in 1989 and the newly named TSB Bank Scotland PLC and TSB Bank Northern Ireland PLC became its subsidiaries that year. In 1991 Allied Irish Bank bought TSB Bank Northern Ireland and in 1992 TSB Bank Channel Islands became a subsidiary of TSB Bank. (Lloydstsb.com [Online]).

1.2.3 Lloyds TSB Group PLC In 1995, the merger between TSB and Lloyds Bank formed Lloyds TSB Group PLC, one of the largest forces in domestic banking. In June 1999, TSB and Lloyds Bank branches in England and Wales were re-branded Lloyds TSB. Branches in Scotland came under the new brand of Lloyds TSB Scotland, which now has branches stretching from the Northern Isles to the Mull of Galloway. During 2000 on March Scottish Widow joined the Group. This amalgamation created one of the UK’s largest providers of life, pensions and unit trust products. In October 2003, Lloyds TSB Group agreed the sale of its subsidiary, NBNZ Holdings Limited comprising the Group's New Zeland banking and insurance operations in Australia and New Zeland Banking Group Limited. In July 2004, Lloyds TSB Group announced the sale of its business in Argentina to Banco Patagonia Sudameris S.A and its business in Colombia to Primer Banco Del Istmo, S.A.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Most recently, on 20 December 2005, Lloyds TSB announced that it had reached an agreement to sell, for cash, the credit card business of Goldfish to Morgan Stanley Bank International Limited for a premium of G.B.P.175 million. (Investorrelations.lloydstsb.com [Online]

1.2. 4 Lloyds TSB - The up to date revise on the proposed HBOS Acquisition In 2008, on 18 September, Lloyds TSB joins with HBOS as an agreement of acquisition, and still in progress to finalizing the deal. This will involve securing shareholder, regulatory and other approvals with the aim of getting all matters agreed and approved by early next year. It is a landmark deal and a unique opportunity to create Britain’s leading financial company. A current credit crunch situation made it possible to do the deal and both banks agreed that I would be a great ideal to create the UK’s leading financial company. In this reason on 13 October, Lloyds announced that they revised the terms of the proposed deal to acquire HBOS and that we have agreed to raise £5.5 billion of new capital. This decision was made after careful consideration and will ensure that we have strong capital ratios, as well as giving Lloyd’s access to the Government guaranteed funding schemes. The capital will be split between a £4.5 billion used for equity injection and £1 billion in preferred shares. This capital raising will also allow us to access the Government’s increased funding. However, this proposal is still in progress with proposed acquisition of HBOS To make a strong portfolio in the present UK financial market, Government’s is very concerned and want to help Banks with bail out moneys. To ensure a more secure capital structure and with the support of Government Lloyds are increasing their capital ratios which then gives them access to a number of Government supported funding schemes. Other major UK banks have also taken action to strengthen their capital ratios and access these funding schemes and it is important that Lloyd’s are not underprivileged as a result. (Lloydstsb.com [Online]

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

1.2.5 Company Overview Lloyds TSB is providing a wide range of banking and financial services all around the UK, to personal and corporate customers. They are a major key player of the business activities, retail banking sector, commercial and corporate banking, general insurance, and life, pensions and investment provision. The Group has a large and diversified customer base and services are offered through a number of well recognized brands (Lloyds TSB, Cheltenham & Gloucester, Scottish Widows), and via a unique distribution capability comprising one of the largest branch networks in the UK and intermediary channels. Lloyds TSB Group is quoted on the London Stock Exchange and is one of the largest companies within the FTSE 100, with a market capitalization of £26.7 billion on 31 December 2007. At the end of 2007 total group assets were £353 billion and the Group has nearly 70,000 employees. Total income for the 12 months to 31 December 2007 was £18 billion with profit before tax totalling £4 billion. Their activities are organized into three businesses: UK Retail Banking, Insurance and Investments and Wholesale and International Banking.

1.2.6 Key highlight point of Lloyds Financial Services “Sir Victor Blank”, the Chairman Lloyds TSB introduces the first half of 2008 recently. He descried on his speech that the present current situation of half period and also explained the marketed slowdown in the UK economy. In opposition to this backdrop, he said that Lloyds TSB continued to deliver good growth momentum in all its core businesses and is well positioned for a lower growth environment. Given this strong performance and their confidence in the Group’s future earnings performance, the board has decided to increase the 2008 interim dividend by 2 per cent to 11.4 pence per share. This increase demonstrates the strength of the Group’s business model, balanced with a level of caution on the outlook for the UK economy.”

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Key highlights point:



Good underlying profit momentum. Profit before tax, on a continuing business basis, decreased 19 percent to £1,573 million reflecting the impact of £585 million of market dislocation. Excluding this impact, profit before tax increased by 11 per cent to £2,158 million.



Statutory profit before tax reduced by 70 per cent to £599 million. A strong underlying business performance was offset, largely by the impact of market dislocation and adverse volatility relating to the Group’s insurance businesses.



Strong income growth. Income, excluding market dislocation, grew by 9 per cent reflecting strong revenue growth of the Group’s relationship banking businesses.



Excellent cost management. The Group’s cost: income ratio, excluding market dislocation, improved by 2 percentage points to 46.6 per cent, reflecting a 4 percentage point difference between income growth and cost growth.



Satisfactory credit quality. Retail impairment charge as a percentage of average lending lower than in the first half of 2007. Corporate asset quality also remains good.



Strong liquidity and funding position maintained throughout the recent turbulence in global financial markets.



Robust capital ratios maintained, with a tier 1 capital ratio of 8.6 per cent and core tier 1 ratio of 6.2 per cent.



Interim dividend increased by 2 per cent, demonstrating the strength of the Group’s business model, balanced with a level of caution on the outlook for the UK economy. (Investorrelations.lloydstsb.com [Online])

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Figure 1: Summary of Results of 2008 Interim Result. (Source: Company Results - Lloyds TSB Group PLC)

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Figure 2: Summary of Results of 2008 Interim Result. (Source: Company Results - Lloyds TSB Group PLC)

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

In the Retail Bank sector Lloyds has done an excellent new business flow and achieved first place in the league tables for current accounts, added value accounts and personal loans. Alternatively, Lloyds success to achieve their target market share which was 24.4 percent of new lending in the mortgage market, and also increased the group balances to £109 billion, and did so at significantly increased new business margins and at an average new loan-to-value ratio of 63 per cent. During this term Lloyds opened nearly half a million current accounts during the half-year, the foundation of the customer relationship with their retail business, and increased their average additional cross-sell on account opening to 1.12 products per customer, up from 0.91 products per customer last year. In the credit card business Lloyd’s success to draw a strong uptake in their Lloyds TSB AirMiles Duo account which now has 1.4 million account holders and is the fastest growing credit card brand in the UK. Over recent years Lloyds has placed a strong focus on increasing deposits and our Wealth Management business has performed particularly well with deposits up 25 per cent, closely followed by bank savings, up 19 per cent, over the last 12 months. Across the Retail Bank, deposit balances showed strong growth, up 10 per cent on last year to £85.6 billion. Costs in the retail bank continue to be well managed with our cost: income ratio falling to 45.1 per cent, down from 47.0 per cent, resulting in strong positive jaws and double-digit profit before tax growth. Insurance and Investments, a core component of Lloyds TSB’s customer relationship based business model, put in a solid performance despite lower sales of equity based savings and investment products. Profit before tax was up 15 per cent in Scottish Widows driven by an increase in new business profit. In Wholesale and International Banking, profit before tax was down 52 per cent as excellent new business flow sand an improved cross sales performance were more than offset by the impact of market dislocation. In Corporate business we saw a significant uplift in volumes, resulting from Lloyd’s investment in people and the range of products available. With a premium on the availability of credit we were able to secure a higher proportion of lead manager roles during the period and a higher overall market share. With Commercial Banking growth was spread across both lending and deposit balances, with an increased focus on the more valuable higher turnover businesses where 10

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

the opportunity for cross sales is greater. Market share increases were achieved with customers across key target markets, reflecting good progress in attracting customers ‘switching’ from other financial service providers. (Investorrelations.lloydstsb.com [Online])

1.3 The Aims and Objective of the Research 1.3.1 General objective The general objective of this paper will be, to express the practical experience by doing research on real fields and to link the theoretical knowledge with its application in the real life situation. The objective of the first part of the research proposal is to familiarize with Plastic cards of United Kingdom, the present market situation of credit card provider, the services of credit card innovation, and the promotional packages, facilities, qualities, idea of product development and the new value creation of credit card processing through banking services. The objective of 2nd part of the paper is to introduce the Credit card or Plastic card safeguard policy of different banks, the general ultimate overview of types of plastic card fraud and how effective way personal data protection plan can help cards user to protect them self from data theft.

1.3.2 Specific objective of the dissertation 1. To determine the satisfaction level of user of the credit card. 2. To evaluate the threats that are discouraging to increase the rate of credit card users. 3. To identify the issues that persuades a card holder in selecting a service provider. 4. To spot the level of quality of services and level of satisfaction of the customer toward the services they get from their banks (Credit card provider). 11

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

5. To analyze the demographic profile and attitude of different user and nonuser. 6. Finally develop the scenario of the prospect of credit culture in the UK.

1.4 Pattern Structure of the Research Chapter One – Introduction, this part briefly discuss the background of the Research strategies, also carried out the Aim and objective of the research, and the major role of Credit card providers, historical background and foundation of Lloyds TSB Bank and their safeguard policy about identifying credit theft. Additionally, this chapter provides the reason why the research is approved. Chapter Two – Literature review, this part of the dissertation concentrates on the literature review which is almost collected from journal articles and textbooks. It represents the history of credit card innovations and definition of Plastic cards, and also describes the payment fraud and theft, including facts and safeguard plan for personal protection and its positive and negative ethics of credit card. All of them related to the topic of research. Chapter Three – Competitive Analysis, this chapter signify the present situation of UK plastic cards, its present market size and market share price of credit card sales and differentiation of others credit card provider and competitor analysis. However, this chapter also introduces present credit card fraud facts and figure. Chapter Four – Research methodology, the chapter begins with the description of Research Strategy, Research design, data collection method and questionnaire design is discussed. In last stage the limitation and problems of the data analysis technique are illustrated.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

Figure 3: Pattern Structure of the Research

Chapter Five – Finding data and Discuss, in this chapter starts by giving an overview of data on demographics, then moving to credit card user perspective and nonuser perspective view point, then moving to credit card users’ expectation and personal awareness of identify theft and the research question discussion.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

Chapter Six – Conclusions, summarizes the main ideas of the research and finding out the answer of occur on the research question and on the basis of the outcomes of the research some recommendations are suggested for the improvement of Lloyd TSB banking services as credit card provider. In the end, this chapter also draws a direction for future research which puts stress on the importance of this research as a foundation for the development of future research.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 1

2008 Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” CHAPTER 2: Literature Review

11/21/2008

CHAPTER 2 Literature Review

Introduction In this Chapter the theoretical concepts are going to be present, concepts results have the abilities to build a basement portfolio of questions answer of the research problem. The pattern of the theories vacant a clear vision of concepts which are strongly interrelated and valuable for this chapter and it also assembles the objectives of the research. In this part of the dissertation concentrates on the literature review which is almost collected from journal articles and textbooks. It represents the definition of Plastic cards and history of credit card innovations, and also describes the payment fraud and theft, including the facts and safeguard plan for personal protection and its positive and negative ethics of credit card. All of them related to the topic of research.

2.1 An introduction to the Card systems Modernization has changed many aspects of our daily lives already. Financial transactions, tools are modes of payments are no exception. For various reasons, people nowadays do not wish to carry cash for transactions they make especially for payments of a petty nature. Credit cards, ATM cards, Bank cards, charge cards or cards which are tools of ' electronic fund transfer at point of sales' are catching up fast all over the world. Many have already done away with the practice of carrying cash during their visits to shops, short distances within the country and even abroad as they can now settle their payments for groceries, boutique shop, jewelers etc. using various kinds of cards which are called the 'plastic money'.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.1.1 Plastic Money or Cards Plastic money or cards are a substitute of cash or cheque in payment of goods and services. As the concept of 'plastic money' catches on in our part of the world, the opportunities in the market remain phenomenal. It provides security, safety and convenience to its users and the freedom of carrying a card instead of large sums of cash for all kinds of necessities.

2.1.2 Historical background of the Credit card In today's economy, the payment system has come a long way since the days of barter. The concept of cards or plastic money was first introduced by Western Union in the United States in 1914. The system was very well appreciated by everyone and began to spread out in other contexts also. In 1924, General Petroleum Corporation of California introduced their own fuel card to be used at their oil stations all over the country. This gave their customers the privilege of buying gas from all the general petroleum outlets with this card instead of using cash money. The popularity of card encouraged the banks to introduce this product to their customers. Bank credit card was first introduced in the USA in 1952 by the Franklin National Bank. But the rising curve of the credit card popularity started in the later half of the 60's. 1950's witnessed the introduction of travel & entertainment cards such as Diners club, American Express and Carte Blanche. The incident that triggered the constitution of the Diners' Club is quite fascinating. The founder of 'Diner Club' Robert Mcnmara once experienced entertaining guests at a New York restaurant. This incident gave birth to the idea of charge cards. (Jarunee Wonglimpiyarat,(2004).(Edwin J. Perkins, (1990) The credit card innovation, stimulated by regulatory restrictions on Inter-state bank branching, provided the first national banking product in the US. Even so, collaborative development of cards was needed, to provide recognition of cards outside local regions, as the card issuing bank’s range, Inter-state, was limited in terms of communication and 16

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

funding. A national credit card was created in 1966 when the Bank of America licensed its credit cards to other banks across the US and Overseas. Disturbed by the leadership position BankAmericard had created, rival banks joined together in the same year to create a competitive system under the name of interbank, which later became Master Charge and the Master Card (Frazer, 1985, pp. 16-17; Vartanian et al., 1998, p. 56). In 1966, Barclays made an arrangement with the bank of America to issue credit card in the UK. Barclays imported the entire operation, including the computer programs and the terms and conditions of service to both retailers and cardholders. A computer program change was all that was needed to modify the Bank of America program for UK purposes. Travel and entertainment cards are used as a method of payment only and not considered as credit cards. In 1977 VISA were born. Both MasterCard international and VISA International are scheme operators who operate all around the world through a wide range of established banks like Citibank, Hong Kong Shanghai Bank, ANZ Grindlays Bank, Lloyds TSB Bank, NatWest, and Standard Chartered Bank etc.

2.2 Types of Card The basic underlying hypothesis of plastic cards is that a cardholder can use that card as a medium of payment at different points of sales (POS) in the place of cash currency, in a standard situation, every transaction through cards involves three parties. They are: 1. Cardholder 2. The card issuing bank 3. The merchant. Here the card issuing bank acts as an intermediary between the card holder and the merchant. There are several of the cards being used around the world. The main categories have been discussed in the proceeding section.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.2.1 Credit Card Credit card as a substitute for cash or check and services is becoming increasingly popular with the public since its introduction in the market. Global acceptability is a sine qua non for the success of credit card. It provides two aspects of the banking function together: the transmission of payment and granting of credit. The system is mutually attractive to parties involved in credit card operation card holder, merchant and the bank. A credit card has a limit on the amount the cardholder can spend on it; but at the same time it has the advantage of revolving credit. By definition, a credit card is a card which allows the cardholder to pay for goods and services or draw cash, up to a predetermined card spending limit and enables him to pay off the outstanding balance over from one statement to another. This charge covers the bank's expenses of carrying unclear debit balances in the cardholders account. Figure 1: Types of Plastic Card

Standard Cards

Credit Cards

Premium Card (Gold, Platinum and Black Cards)

Debit Cards

Charity/Affinity Cards

Types of Card Charge Cards

Prepaid Cards

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.2.2 Debit Card A debit card is issued by a bank to its account holders against a minimum level of deposit in their account. Then after regular intervals (usually 30 days) the transaction amount is debited from the customers account along with the service charge.

2.2.3 Charge Card Charge cards are a card which allows the card holder to purchase goods or services in a style similar to credit cards but without the provision of deferred payments. The outstanding balance owing at the end of each billing cycle must be cleared in full by payment within due date which is usually is days from statement date. Charge cards do not have spending or credit limits but the issuer normally establishes a spending pattern based on the cardholders usage volumes and investigations abnormally excessive of large transactions. Examples of charge cards include American Express, Diners club & JCB cards.

2.2.4 Prepaid Card Prepaid cards are a small but growing segment of the card market. The majority of prepaid cards in issue is closed-loop gift cards. Closed loop means the card can be used only at a specific retailer or chain of retailers. These cards have largely replaced paper gift vouchers. Some prepaid cards are now scheme (Visa / MasterCard) badged and are referred to as open-loop, i.e. they can be used at multiple locations with both point-of-sale and ATM functionality. It is these cards that banks and building societies are now beginning to issue in some numbers as they offer an opportunity to extend their customer base whilst offering a new product to existing customers.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Key target areas are the unbanked those who have no other access to card payments, and teenagers where the advantage is that spending can have limits that there is no possibility of exceeding. Prepaid cards are attractive to businesses such as insurers who may seek to issue claimants with a prepaid card to cover claims to a specific retailer. The travel sector provides a good opportunity as the cards can be used as an alternative to cash or travelers checks and can be used for cross-border payments. For the potential prepaid cardholder, benefits include allowing purchases to be made over the internet and by telephone, whilst it can also be a less expensive way of conducting financial affairs, e.g. through avoiding check-cashing outlets, although it may be a more expensive alternative to cash. One area of growth is in retail shopping centers. An example is the Trafford Centre in Manchester where a Visa Electron gift card program is in operation. Key to the success of this product will be the convenience, ease of point-of-sale and ATM transactions, and the level of fees attached to the loading and use of the card. The market can be expected to continue to evolve over the next year as there are many prepaid cards coming to the market. In some cases these are from issuers who are new to the market and this is leading to considerable product innovation. (Apacs.org.uk.com [Online] )

2.3 Types of Consumer Credit Card There are three main types of credit and charge cards, in addition to consumer credit and payday lending, and these are described in the following section. Bank cards: bank cards are the most common and useful credit cards. The best known and most widely accepted are Visa and MasterCard. Originally only banks issued Visa and MasterCard, but these cards can now be obtained from various financial institutions with membership of the Visa and MasterCard organizations.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

T&E (travel and entertainment) cards: Also called charge cards, T&E (travel & entertainment) cards generally charge a high annual fee and require the balance to be paid in full each month. American Express, Diners Club, JCB and Carte Blanche are well known examples of T&E cards. Retail/store cards: Retail/store cards are issued by merchants such as department stores or gasoline chains, and typically have no annual fee and are easy to obtain. Their interest rates are frequently higher than other credit cards, but retailers provide special deals, catalogues and advance sales to cardholders which can make them worthwhile.

Figure 2: Types of Consumer Credit

Bank Cards

T&E (travel and entertainment) cards

Payday Lending Types of Consumer Credit Card

Consumer Credit

Retail/store card

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Consumer credit: Consumer credit encompasses lending to consumers by banks and non bank financial institutions, including auto leasing and retail finance. Consumer credit not provided on credit cards is generally between two and four times more expensive than credit card lending. However, the industry is fragmented and differs markedly from market to market. Payday lending: Payday lending is a form of lending that focuses on stressed or distressed consumers. In its various forms it is the most unstructured form of consumer lending. In many countries, payday lending involves high interest rates and high default rates, and is often associated with unacceptable lending and collection practices, or ‘loan-sharking’, to give it its Hollywood name. Most payday lending is targeted at lower socio- economic groups that are unlikely to obtain loans from other sources. In most markets, a percentage of payday lending is conducted outside the legal structure. Credit cards are often singled out for regulatory attention and the advantages versus disadvantages are frequently not discussed. However, credit card lending makes up only 14% of total consumer lending even in highly developed markets such as the US and UK, Credit cards are not the dominant unsecured consumer credit product. (Grant Halverson, 2007).

2.4 The Credit Card Transaction Process Systems Since their inception, the introduction of more payment options has led to the development of a number of different payment card schemes. These include the following: Credit cards, where payments are set against a special purpose account associated with some form of instalment based payment scheme or a revolving line of credit. Cards typically have a spending limit set by the card issuer and the interest rate levied on unpaid balances it typically many times the base lending rate.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Debit cards, are linked to a checking/savings account. Normally, a payment cannot be made unless there are funds available to meet it. In effect, this type of payment can be considered a paperless check. Charge cards, work in a similar way to credit cards in that payments are set against a special purpose account. The principal difference is that the entire bill for a charge card must be paid at the end of the billing period. Often, there is no associated spending limit. Travel and entertainment cards, or charge cards whose usage are linked to airline, hotels, restaurants, car rental companies or particular retail outlets. (Donal O’Mahony et al. (1997)

Figure 3: Main Parties involved in a Credit Card System

Main Parties involved in a credit card system

Credit card Holder

Card issuer Bank

Acquirer Bank

Merchant

Figure 3, shows that the main parties involved in a credit card system. These are the card issuer, who supplies the cards to the customer and operates the account from which payment is made, the retailer (merchant), who exchanges goods or services for the 23

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

customer’s card details and consent to make the payment, and the merchant acquirer, who recruits retailers to the scheme, reimburses the retailer and obtains funds from the card issuer. The issuer has two sources of revenue from card transactions: revenue from the customers, such as annual fees and interest payments, and interchange fees paid by merchant acquires. The merchant acquirer derives revenue from service charges to the merchant. The merchant is a business establishment which has the facilities to accept credit card as a form of payment for goods and services. To have this facility the merchant needs to formalize an agreement with a bank which is called the acquiring bank. For scheme operators like VISA or MasterCard, who operate world wide through a number of member banks the acquirer bank and the card issuer bank are usually two different ones. Scheme Settles with Acquirer

ACQUIRER BANK

Authorize

SCHEME INTERCHANGE

ISSUER BANK

Acquirer transmits Settlement claim Issuer receives Settlement claim Merchant presents vouchers

Issuer Provides Stateme nt

Credit Cardholder pays issuing Bank

Acquirer credits Merchant Account

Merchant Supplies Goods

MERCHANT

CREDIT CARD HOLDER

Cardholder uses card

Figure 4: Entities involved in a conventional credit card Transaction.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

A credit card transaction is accepted by a participating merchant on the basis of either receiving a voice or electronic authorization or if the transaction is under a certain value (floor limit). The acquirer bank gives this authorization after checking with VISA/ Master card international or the card issuer bank to fund out in his account or not. This authorization also protects the merchant from accepting lost or stolen card being presented by any person other than the cardholders. In technically advanced countries, this authorization is done electronically with the help of electronic devices. After this transaction between the cardholder and the merchant has taken place, the merchant obtains reimbursement from the acquirer bank amount less a certain service charge and claims reimbursement from the card issuer bank through the scheme operator. The issuing of a credit card involves the creation of a credit relationship between the issuer and the cardholder. The issuer will perform a series of investigations to establish the reliability of the customer before providing a credit limit and a card. The card holder will receive a statement of transactions from the issuer on a regular basis which may include cash advances, sales and interest charges and request a minimum payment of the balance outstanding. A similar process is followed when an acquirer bank selects an establishment for becoming a merchant. The establishments past business records, financial performance, and bank’s recommendation along, with many more details are scrutinized before choosing it as a merchant and providing it with the necessary logistic and backup support to accept cards.

2.5 Basic Features of Credit Card The credit card system has become extremely popular with the modern consumers because of its following characteristics: Credit Limit This refers to a value, agreed by the card issuer bank which the cardholder can draw up to but must not exceed at any point of time.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Fees This includes joining, annual and penalty fees charged to the cardholder.

Interest or Service Charges on deferred payment This interest is applied to balance not cleared in full on the initial statement but deferred to the next cycle for payment under the provision of extended credit. This can be applied from the transaction date, posting date or the statement date.

Interest Free period If interest is charged from statement date, an interest free period exists from the transaction posting date till interest is charged. To encourage early payment and in some cases, to allow for delays in the positioning of statements, an additional grace interest free period up to 25 days can be added to the statement cycle days.

Cash Advance facilities The cardholder has the facility to withdraw cash as an advance, which is up to a certain percentage of the credit limit. In these cases, the interest rate is charged from the transaction date.

Supplementary (additional cards) Supplementary cardholders enjoy the same benefits and services as the primary cardholders. Charges incurred by the supplementary card will be reflected in the monthly statements of the primary cardholders. Each cardholder can have a maximum of five supplementary cards which operate within the limit assigned to the primary card holder.

Revolving credit facility Issuer gives its cardholders the flexibility to make their repayments through a revolving credit facility, which is the option to pay only the minimum amount due shown on the statement of account of the cardholder.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Security vs. Cash Credit cards provide the card holder security against cash because of the zero loss liability.

Lost or stolen card Lost or stolen cards must be reported within 24 hours at any of the branches or cash offices of the issuing bank. The Cardholder will not be liable for any fraudulent transaction if he/she can make lost/stolen report before the transactions.

In Brief Benefits of using credit cards One may ask how a cardholder be benefited by using credit cards. He/she can also ask what benefits a merchant enjoy by accepting credit cards. Let us discuss it here.

2.5.1 Benefits for Card holders The credit card issuing bank, offer a wide range of benefits like: Revolving credit facility Cash withdrawal facility Flexible and easy repayment option Convenient way of payment for purchases Safer than carrying cash Convenient to carry An opportunity of free credit period Other facilities: Instalment basis repayment facility Supplementary (Additional cards) facility Insurance facilities etc. 27

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.5.2 Benefits for Merchants By accepting credit cards merchants can also get benefits in the following ways: Attract market whose has credit cards Attract foreign customers Safer than cash for transaction because the currency might be false Safer than keeping cash Opportunity to earn foreign Currency

2.5.3 Benefits for Issuing and Acquiring Banks The sources of revenue of the credit card issuer and acquirer banks are as follows: 1. Membership fees Annual Fee Additional Card Annual Fee Replacement Fee Late Payment Fee Over Limit Fee Statement Retrieval Fee Check Return Fee Certificate charges 2. Commission from the merchants. 3. Interest charge on outstanding balance.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.6 Advantages and disadvantages of credit card 2.6.1 Advantages 

Convenience consumers can charge a purchase when they do not have a cash or checks without additional identification.



Universal acceptance consumers can make purchases almost anywhere where credit cards are accepted. Globally most merchants accept major credit cards for payment.



Bookkeeping made easy credit cards give consumers a record of all transactions for the months, enabling them to keep track of where the money is spent. This audit trail can assist with tax records and employment claims.



Security this varies from country to country but generally, if consumers lose credit cards and report it to the bank within two business days, the card company’s liability provisions protect them, offering a guarantee that is not provided with cash, checks or debit cards.



Emergency buying power credit cards are a security blanket that could cover emergencies such as unforeseen medical bills, auto repair bills or urgent family travel needs.



Positive credit history a history of on time payments can establish a good credit rating that will help consumers in the long run; in fact, the single strongest reference on a credit report is a major credit card, paying on time over time.



Consumer protection when consumers purchase goods or services, using a credit card is one of the best safeguards against unsatisfactory purchases and

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

uncooperative merchants. Additional legal protection is provided-this is not available with a cash purchase. 

Extra benefits many credit cards offer various benefits, including free frequent flier miles, extended warranties on merchandise bought with the card, free movies or gasoline and even cash rebates.



Free loan if consumers pay in full the next month, they have effectively received a free 30-65 day loan.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Convenience Universal acceptance

Free loan

Extra benefits

Advantages

Bookkeeping made easy

Emergency buying power

Consumer protection Positive credit history

Figure 5: Advantage point of Credit card

2.6.2 Disadvantage

Impulse buying the credit card makes impulsive and unnecessary buying all too easy.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2



High interest rate card issuers are charged higher interest rates than regular personal bank loans. However, store cards and other consumer loans often charge more, yet escape the same level of scrutiny.



Debts trap some cardholders make the mistake of thinking that a line of credit is the same as cash in the bank. They can easily become indebted to the limit of their card unless they control their spending habits. (Grant Halverson, (2007) “

2.7 Plastic Card Fraud The cards are always much safer than cash, but this concept changed day by day. The chances of becoming a victim of card fraud are increasing dramatically with maintaining balance with new technologies. APACS report shows that chances of you becoming a victim of card fraud are still low (fraudulent transactions make up 0.12% of all transactions, by value). Criminals are always looking for ways to get hold of your cards, but the banking industry is committed to fighting the fraudster on all fronts. Chip and PIN is a vital tool to help us further protect cards and we continue to work on a raft of other initiatives. However, in 2007, total card fraud losses increased by 25% to £535 million. The success of chip & PIN has meant that over the past three years losses on transactions on the UK high street have reduced by 67% from £218.8m in 2004 to £73.0m last year. To protect card for card frauds and thefts, there is one organization, which known as Card watch is one of UK banking industry, their main aims to awareness of card fraud preventions. (Apacs.org.uk [Online]).

2.7.1 Types of Card fraud Lost and stolen card fraud — a card is physically stolen from your wallet or home, or it is lost, and is then used by a criminal, posing as you, to obtain

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

goods and services. Most fraud of this type takes place before you have reported the loss.

Counterfeit card fraud (also known as Skimming) — a counterfeit, cloned or skimmed card is one that has been printed, embossed or encoded without permission from the card company, or one that has been validly issued and then altered or recoded. Most cases of counterfeit fraud involve skimming, a process where the genuine data on a card's magnetic stripe is electronically copied onto another card, without the legitimate cardholder's knowledge. Skimming can occur at retail outlets — particularly bars, restaurants and petrol stations — where a corrupt employee puts your card through a device, without your knowledge, that electronic copies the data from your card's magnetic stripe. Sometimes skimming takes place at cash machines where tampering has occurred and a skimming device has been fitted. The information is usually then sold on higher up the criminal ladder where counterfeit cards are made. Often you will be unaware of such fraud until your statement arrives, showing purchases that you did not make. Card-not-present (CNP) fraud — this includes fraud conducted over the Internet, by telephone, fax and mail order. It is perpetrated when criminals obtain card details through the theft of your card details. It is now the largest type of card fraud in the UK. The problem in countering this type of fraud lies in the fact that neither the card nor the cardholder is present at a till point in a shop.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Lost and stolen card fraud

Counterfeit card fraud (also known as Skimming)

Skimming can occur at retail outlets Types of Card Fraud

Card-not-present (CNP) fraud

Mail non-receipt card fraud Identity theft on cards

Figure 6: Types of Card Fraud

Mail non-receipt card fraud — this type of fraud involves your card being stolen in transit, once it has been sent out to you from your bank or building society. At particular risk for this type of fraud are properties with communal letterboxes, such as flats and student halls of residence. (Cardwatch.org.uk [Online]

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

2.7.2 Cheating at Cards: Customer suffering story (Plastic fraud) Phantom withdrawals have suffered raids on their accounts even when their card and their PIN have remained permanently, and exclusively, in their possession. Banks frown on ‘unauthorized overdrafts’. In their view, they show a marked lack of financial prudence, so the banks retaliate by imposing punitive interest rates and charges on those who transgress. The possibility that the overdraft might have been caused by a phantom, never enters their consideration. Banks do not make mistakes, and there are no such things as phantoms. Phantoms have simply entered popular mythology, like fairies at the bottom of the garden or unidentified Flying objects (UFOs) with voyagers from other planets. Each sighting leads to a dozen others, and soon everybody’s seeing fairies, or UFOs or phantoms, or whatever. This is the banks’ main fear. If they were to admit publicly that phantom withdrawals exist, they would open the floodgates to every customer who genuinely forgets a transaction, every customer with a convenient selective memory, and every crook in the kingdom. (Bryan Clough, 1994). Janette Watson of Stoke Newington London doesn’t believe in fairies, but she certainly believes in phantoms after her experience with Lloyds bank. She lost £980 within a month and when she complained, the bank accused her being partly to a fraud, insisting that the loss was not its concern. Janette could prove that she was elsewhere when six of the nine withdrawals had taken place. Even this didn’t satisfy Lloyds, who obviously suspected collusion. Nevertheless, when Janette took legal action the bank offered to write off the loss plus the £164 interest they had piled onto her account. When pushed hard enough, a bank will concede the financial loss, by making an ‘ex gratia’ payment. They don’t want to cause offense to a valuable customer; risk unfavorable publicity or worse, from their point of view- to become involved in a ‘test case’ Lloyds still refused to withdraw their accusation of fraud against Janette. She had been hurt by their false accusation, and it was not just a question of money. She was not the sort of person to commit fraud and that, she thought, should have been obvious. (Bryan Clough, 1994).

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

“Looking over someone’s shoulder to discover a PIN is known as “shouldering” or “shoulder surfing”. Observation can also be carried out at a distance, through binoculars or with a high definition video camera. In one London location, PINs can be discovered by watching from the top deck of a waiting bus. An alternative method is for the fraudster to dust the keys with powder and, if next in line, he can then see which keys have been used. Shoulder surfing can also be used to glean and account number. Even when it is not being filmed, the number is not too difficult to remember for someone with a trained memory who knows precisely what to look for. The first four, six or eight numbers can be ignored, provided that the fraudster remembers (for example) that it’s a Barclays’ Visa. Like all cards within the same family, Barclays’ Visa cards start with the same sequence of numbers. The last digit of the Account Number is a check digit and that can be calculated, if necessary. Typically, only about half the digits need to be memorized. The fraudster is also helped when cards contain a string of Zeros, because of their limited circulation. Gold cars fall into this category. The numbers are easier to remember and there is usually more credit available than with other cards. Fraudsters sometimes obtain the account number by collecting ATM receipts that have been thrown away. Many banks install in bin alongside an ATM, as a repository for vouchers that customers throw away. These are often filled to overflowing and provide a source of reference material for fraudsters. The times of withdrawals on the receipts can then be matched up to the times that PINs were observed. Even if the PINs are not identified, the crooks can often put the information on the voucher to some fraudulent use. Some London crooks employ teenage girls to scour for vouchers around Mayfair and Park Lane, and Pay them £5 for every voucher handed in that contains an account number. Card issuers are now abandoning the practice of putting the full account number on vouchers, thus blocking this particular source of intelligence. In august 1988, 18 year old Matthew Bailey Keyed in a request for £30 at Halifax ATM in Horsham, West Sussex and the machine paid out £2,670. He had hit the jackpot. Unlike most people, it’s mainly one way traffic for the banks. (Bryan Clough (1994) “Cheating at cards: Plastic Fraud: Plastic fraud: Sharp practices and Naïve systems Published by RMDP Publication, pp 62- 90) 36

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

Fake ATMs have been installed in France, Germany, Italy and the USA over the past three years. Usually, they are genuine machines that have been stolen and reprogrammed to produce a fake response. They usually invite users to enter their card and PIN and then, instead of disbursing cash, they display a message, ‘Transaction Refused’. In the meantime a copy of the information contained on the magnetic stripe and the PIN have been copied all that is taken to make a fraudulent withdrawal. If the card is returned to the user, he may have no idea that his account has been compromised. In the UK, many customers at a service station on the M4 took advantage of a special holiday offer that was advertised in 1991 ‘Two weeks in the Bahamas £99’. It was too good to be true, but greed took possession of the victims’ brains. As usual, the offer could only be taken up by credit card and only if the purchasers entered their PIN. One user tried to book a holiday but, wisely, he refused to enter his PIN. He heard no more about the holiday but, the next time visited the petrol station, the equipment had gone, and no one admitted knowing anything about it.

Conclusion This chapter is divided into two parts; in first part it’s provided the overview general definition of Plastics card and how the processes of credit payment system worked through and also provide us the basic overall identification of credit theft.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 2

CHAPTER 3: Competitive Analysis “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

CHAPTER 3 Competitive analysis

Introduction As the competitive scenario of the credit card market eventually developing and shifting and organizations seek to differentiate themselves from their competitors, innovation offers one strategic alternative for credit card issuers and also to achieve the impacts of the competitors with their critical analysis factors. In response there and other fundamental questions, an accurate analytical data information is required for drawing the present portfolio financial and marketing situation. Data is the key information card holder and also for providers. Without a measure of profitability, the debate about effective innovation will not develop. Segmentation measures, like profitability, allow the organization to apply a value to each customer relationship. One of the many myths about customer segmentation is that highly profitable customers are the most satisfied and the most loyal, these same customers will not brand switch or reduce their use of the credit card. This myth has been challenged and exposed as wrong. Highly use and high profitability may not translate into higher satisfaction and loyalty. To build a strong correlation with customers, Credit Card Company has to create positive relationships, which are not going to affect their assets. To become a successful market buyer in competitive credit card markets, competitor has to recruit new cardholders; overlooking the value of existing cardholder relationships and how innovation can deliver new enhancements to existing customers. However, Main point is that need to Credit card issuers need to understand this principle and begin to value existing cardholder relationships and try hard to achieve the credit card profits by built an ultimate relationship. (Grant Halverson, 2007)

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

3.1 Strategy Organizational commitment and attractive business plan with innovative strategy can develop a positive innovation in the credit card market. This can lead to a specific corporate vision and development of strategic goals for innovation. The example below Figure 1 represent a vision for a medium sized Asian bank and demonstrates the desire to develop innovation by building steps into its corporate vision and strategic plan. Figure: 1 Vision for a medium sized Asian Bank. (Grant Halverson (2007) Source: McLean Roche

Vision: To become the market’s most respected innovative brand

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

•Develop innovation services to strengthen customer relationship •example of innovation •products •features •services •Develop alliances with key partners •Enter new market segments

Increase market share and profitability of core consumer and business services

Develop innovation across all business units

Focus on core segments and leverage alliances in non-core segments

•Identify and target core segments- include all segments •Develop alliances and /or relationships •Build partner relationships

•Maintain relationships with corporations and share of commercial and consumer markets •Build market share and profitability of overall card market •Add new products to reach more key segments, e.g. small business, executive and platinum cards •Launch co-brand affinity cards •Launch upscale revolving products •Develop key new products

Brand building: build a positioning focused on a business brand that reinforces quality of service, prestige, and local and global reach. Marketing effectiveness: the key driver is the resource levels and quality of the marketing effort. Service delivery: the operating standards and performance need to be precise and specialized, standards and performance need to be globally consistent and measured, including: Application processing Card issuance “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Merchant acceptance Authorization control Card features and benefits Statements Payment solutions Information The standard of customer service staff also needs to be consistent with correct levels of training, technology and resources. Defining benefits: much of a brand’s credibility is achieved by the use of internal resources to deliver cost savings and technologies. Superior customer relationships: the development of measurable customer service standards and improvements focused on segments. (Grant Halverson, 2007) “

3.1.2 Key major point for competitive Credit card issuers As part of developing and innovation strategy, the card issuing organization needs to have complete understanding of the competitive environment. This involves a thorough knowledge of the existing products in the market, enabling the identification of possible product gaps. This first step in this process is to devise a range of questions and try to find the answer on the base of the questions. For example: if the question is about ‘current market and environment’, then first have to know about the current size of the credit card markets (sales volume, account and receivables). How has the market grown over the past few years and what is the outlook for future growth? And distinguishing features of the debt and credit product, also have to find the answer of charge cards (American express, Diners Club, and JCB) how they are competing in the market etc. However, in ‘Cultural attitude’ section you have to do research about consumer view point about credit cards and what factors play a significant role in card selection and “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

usage by the consumer, finally are consumer willing to try new products. ‘Typical product offering’ is the key success part of credit card success, reason in this part promote APRs, annual fees and rates and balance transfers actively and positive way. ‘Regulatory environment’, and ‘Credit information’, have to know the regulatory requirement for issuing change and consumer credit information is controlled-who owns the information and how comprehensive are the data (e.g. Negative and /or positive credit data). (Grant Halverson (2007). The most challenge part of credit card issuer is whether their organization can be successful at managing and growing all of these types of card and related products, and can their growth rate keep pace with competitors or more importantly, can their growth rate exceed their competitors?. So it is important to define the market size since credit card issuer’s face stifling competition, increasingly demanding customers, higher costs and in markets, strong growth. And also important to measure the total market size for all customer lending. That is, all non-mortgage lending, including unsecured and secured, such as auto lending. The relative growth rates of each market are also important. In the following example, personal loans are growing at half the rate of credit cards and retail installment. This review should also raise questions concerning the product range and competition. (Grant Halverson, 2007). Table 1 Asian Market size and consumerd CAGR for all consumer lending, 2008 (Source: McLean Roche)8 (Source: McLean Roche) Market size

CAGR 2000-08

CAGR 2009-15

(US$ billion , 2008e)

(%)

(US$)

Credit card

34.0

16.0

14.0

Retail store cards

13.5

12.5

8.0

Revolving credit

9.0

10.0

8.0

Auto lending

32.0

15.5

13.0

Student loans

2.5

5.0

6.0

Personal loans

17.0

5.75

6.0

Retail installment loans

14.0

18.0

15.0

Total

122.0

13.82

10.86

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

3.3 Present situation of UK plastic Card The use of plastic cards is rising dramatically and cards are becoming the major resources of obtaining cash. The Positive growth of debit cards suggests that consumers are increasingly seeing the card as an alternative to cash rather than as a way of obtaining credit. In addition, the very low growth in the use of store cards reflects the bad publicity they received when their high interest rates were revealed. The Association for Payment Clearing Services (APACS) reported the following in 2007: There were 165.4 million payment cards in issue – 67.3 million credit cards, 5.7 million charge cards and 71.6 million debit cards, 20.2 million ATM-only cards and 0.5 million check guarantee cards. There are 41.7 million personal debit card holders, representing 84% of the adult population The number of personal credit and charge cardholders fell to 30.8million, representing 62% of the adult population. The average number of cards per person was 2.4 credit cards and 1.6 debit cards. Spending on plastic cards in the UK amounted to £354.2 billion in 2006, which comprised £221 billion on debit cards, and £133.2 billion on credit and charge cards. Internet card payments rise nearly fourfold over the last five years, to £34 billion. There were 4.9 billion debit card purchases in 2007, an increase of 9% on 2006, with an average transaction value of £45. There were 1.9 billion purchases made on credit and charge cards in the UK, giving an average transaction value of £63.22. (Apacs.org.uk [Online] )

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

3.3.1 Credit Cards movement Credit-card spending is not rising, and its historical strength in the 1970s and 1980s, based on convenience and free credit for up to 56 days, has disappeared. The 1970s saw strong competition between Barclaycard and Access to acquire new cardholders with the credit card companies achieving 50,000 and 62,000 new customers per month respectively. In 1977, Barclays joined the Visa network to expand the scope of its card usage. In the 1980s, competition intensified as the popularity of cards encouraged retailers to launch their own credit card schemes (Worthington, 1992) and in 1988, the duality system allowing banks to join the both Visa and MasterCard credit card networks became possible. In the UK, the big four clearing banks are major issuers (80% of the market) as well as acquiring (90% of the market). Throughout the 1980s and 1990s, Barclays continued to old the largest market share in the credit card market. (Jarunee Wonglimpiyarat, 2004). By the mid-2000s, consumers began to notice the difference between real interest rates and the rates charged by credit-card companies. The differential was publicized by the National Consumer Council and referred by the Office of Fair Trading (OFT) to the Competition Commission, which issued its report in mid-2005. Average credit-card interest rates rose to 15.9% in September 2005, from 14.97% in September 2003 — against the trend of other forms of lending. During 2006, however, credit-card interest rates fell slightly (to 15.89%), and by September 2007 they had dropped to a low of 13.87%, despite four 0.25 percentage-point rises in the base rate since September 2006. Table: 1 End-of-Month Weighted Average Interest Rates for Credit Cards from Banks and Building Societies (%), 30th September 2003-2007 (Source: Keynote “Consumer Credit & Debit”, 2007)

End-of-Month Weighted Average Interest Rates for Credit Cards From Banks and Building Societies (%), 30th September 2003-2007 30th September 2003

2004

End-of-month weighted average 14.97% 15.65%

2005

2006

2007

15.90%

15.89%

13.87%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

interest rate (%) Source: Statistical Interactive Database (Series IUMCCTL) as at October 2007 — Bank of England

This historically low for credit-card interest rates have been driven in part by regulatory criticism that interest rates on the cards were too high, too opaque and delivered unfair returns to the issuer. It has also been driven partly by high levels of competition as new entrants from the US have increased their pressure. (Key note, 2007) Between 2003 and 2004, gross lending on credit cards rose significantly (by 6.8%), but was static during 2005 before falling significantly in 2006. A small recovery in 2007 meant that credit-card gross lending increased by an overall 2.8% over the 5 years. The quarterly data (in Financial Statistics, Table S3.2B) indicate an actual pay down of credit-card debt in the first quarters of 2006 and 2007. Credit cards are increasingly vulnerable to retailers charging users for use of credit, rather than debit cards. Increasingly, consumers are aware of the costs of credit cards, relative to other forms of borrowing. High charges levied by card providers for non-payment of the minimum amount of debt specified in monthly accounts led to high-profile controversy in 2006 and 2007. (Key note, 2008).

Table Error! Unknown switch argument.: UK Consumer Credit on Credit Cards by Gross Lending (£m and index 2003=100), 2003-2007 (Source: Keynote “Personal Loans”, 2008)

UK Consumer Credit with Credit Cards by Gross Lending (£m and index 2003=100), 2003-2007 %Change 20032003

2004

2005

2006

+2007

Credit cards (£m)

124,991 133,548 32,443

126,663 128,523

Index (2003=100)

100%

101.3%

106.8%

106.0%

2007

2.8

102.8%

† — analyzed monthly data Note: not seasonally adjusted; quarterly and monthly data analyzed by Key Note; “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Percentage change and index figures calculated by Key Note. Source: Table A5.6 and A5.12, Bank of England Statistical Database, March 2008/Key Note

3.3.2 Market size of UK Credit card APACS (the UK payments association) Card Expenditure Statistics [CES] reported in September 2007 that amounted to £33.2 billion, giving a 12 month growth rate of 8.7%. This is the highest plastic card monthly spend so far and reflects heavier spending on plastic across all sectors with the highest increases in other services and food & drink. However, the proportion of plastic spending on credit cards fell to 32.7%, a new record low. The number of transactions (671 million) was also the highest figure recorded, and brought the annual growth rate to 8.8%.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Figure 2: Card Expenditure Statistics [CES] – September 2008(Apacs.org.uk [Online] (Cite Nov 20, 2008) Available from <URL:http://www.apacs.org.uk/resources_publications/key_facts.html >)

Consumers are using their credit cards more heavily. Although the annual rate of growth in credit card spending reaching 4.1% in September this remains below the CPI measure of annual inflation of 5.2%. The average value of a credit card purchase in a supermarket in September was £34.75, lower than the averages for each of the years 2003 to 2007. In terms of the number of credit card purchases at supermarkets, these are 5%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

more numerous so far in 2008 than during 2007 – a lower rate of growth than comparing 2007 with 2006. (Apacs.org.uk [Online]).

3.3.3 Key issuer of Credit card According to The Association for Payment Clearing Services (APACS) reported the following in 2007, There were 165.4 million payment cards in issue – 67.3 million credit cards, 5.7 million charge cards and 71.6 million debit cards, 20.2 million ATM-only cards and 0.5 million check guarantee cards. On the other hand Key Note 2007 “Consumer Credit & Debt”- assesses that the market for credit cards remains dominated by the large banks. Since Barclaycard removed unused credit cards, it is no longer the largest issuer. Several banks issue cards on behalf of other companies or joint ventures, notably with retail groups such as John Lewis Partnership, Marks & Spencer, Sainsbury’s and Tesco. Throughout the 1980s and 1990s, Barclays continued to old the largest market share in the credit card market. Table 3: Number of Credit Cards in Issue by Issuer (million), 2007 (Source: Keynote “Consumer Credit & Debit”, 2007)

Number of Credit Cards in Issue by Issuer (million), 2007 Provider

Number of Credit Cards in Issue (million)

The Royal Bank of Scotland

15.1

Barclaycard

9.4

HBOS

10.4

Lloyds TSB

4.5

HSBC (UK cards)

5.9

Other

29.2

Total

74.5

Note: number of credit-card accounts. Source: Annual reports/media centers/Key Note estimates

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Number of Credit Cards in Issue (million) 29.2 30.0 25.0 20.0

15.1 9.4

15.0

10.4 5.9

4.5

10.0 5.0 0.0 The Royal Bank of Scotland

Barclaycard

The Royal Bank of Scotland

HBOS

Barclaycard

Lloyds TSB

HBOS

HSBC (UK cards)

Lloyds TSB

Other

HSBC (UK cards)

Other

Figure 3: Number of Credit Cards in Issue by Issuer (million), 2007 (Source: Keynote “Consumer Credit & Debit”, 2007)

3.4 Card fraud and theft Facts and Figure APACS’ reported that in 2006 plastic card totalled £428m (down from £439.4m in 2005), comprising 0.095% of turnover. This fall is widely attributed to the introduction of ‘Chip and PIN’ technology (the combined use of a microchip and a personal identification number). The plastic - card fraud had risen by 26% compared with the first half of 2006.However; this was due to a doubling of card fraud abroad, whereas UK domestic card fraud had decreased by 4%. Online banking fraud losses were down by 67% over the same period. In 2007, total card fraud losses increased by 25% to £535 million. The success of chip & PIN has meant that over the past three years losses on transactions on the UK high street have reduced by 67% from £218.8m in 2004 to £73.0m last year. Mail-non-receipt fraud also fell, dropping 34%, and lost and stolen card fraud showed an overall decrease of 2006 of 18%.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

In 2007, counterfeit card fraud increased by 46% to £144.3 million. However, despite this fraud decreasing domestically by 32%, the overall figure increased due to fraudsters copying UK cards and using these stolen cards in countries which do not yet have chip and PIN. The main area of card fraud to rise in 2007 was card-not-present (CNP) fraud. This increased by 37% compared with 2006. However, these losses need to be considered in the context of huge increases in both the number of people shopping online and over the phone, and the number of retailers offering telephone or online shopping. Since 2000, CNP losses have raised by 298%, but over the same time period the total value of online shopping transactions increased by 87%.(Apacs.org.uk [Online]) Table 4: Annual Plastic card fraud losses on UK-issued cards 2004-2007

Fraud type

2004

2005

2006

2007

Card-not-present

150.8

183.2

212.7

290.5

Counterfeit

129.7

96.8

98.6

144.3

Lost/stolen

114.5

89.0

68.5

56.2

Card ID theft

36.9

30.5

31.9

34.1

Mail non-receipt

72.9

40.

15.4

10.2

Total

504.8

439.4

427.0

535.2

On January 2008, Egg cancelled 161,000 credit cards (out of 2 million) because their holders’ risk profile appeared to have deteriorated between the date they took them out and the takeover date by Citigroup in May 2007. The bank accepted in February 2008 that not all of them were high risk or would default. (Key note, 2008).

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Table 5: Annual Plastic card fraud losses on UK-issued cards 2004-2007

Fraud type

2004

2005

2006

2007

UK Fraud

412.3

356.6

309.9

327.6

Fraud Abroad

92.5

82.8

117.1

207.6

Total

504.8

439.4

427.0

535.2

Figure 4: Card fraud losses split by type (as percentage of total losses)

Card Fraud losses split by type (as percentage of total losses) Fraud Abroad 9%

Card-not-present 15%

Counterfeit 13% UK Fraud 41%

Lost/stolen 11%

Mail non-receipt 7%

Card ID theft 4%

3.5 Competitor analysis According, to Table 4, detail number of Credit card issuer in the UK, the top three credit card providers are They Royal Bank of Scotland, Barclaycard and HBOS. In 4 th and 5th position is taken by Lloyds TSB and HSBC (UK). However credit card is a highly competitive market. In that reason advertising of credit card is also highly competitive.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

According to Table 7, Capital one, a U.S. company, in 2007 are the heaviest spender with £19.1m, spent in doing their product promotion. Barclaycard spent £13.2m for advertising their new products, for example: Breathe Football, Oyster and Sky). However, Egg spent around £6,550m and Lloyds TSB spent only £260m, although Lloyds introduces their new Duo Airmiles credit card. Table 6: Main Media Advertising Expenditure on Credit Cards and Store Cards (£000), Year Ending December 2007

Main Media Advertising Expenditure on Credit Cards and Store Cards (£000), Year Ending December 2007 Credit Cards

(£000)

Capital one

19,136

Barclaycard

13,160

Egg

6,550

RBS

1,713

NatWest

838

HSBC

683

Lloyds TSB

260

RBS — The Royal Bank of Scotland † — does not sum due to rounding by source Note: advertising expenditure for Visa and MasterCard have been added to Nielsen Media Research’s Credit Cards and Store Cards categories by Key Note. Source: Nielsen Media Research

3.5.1 New Product and Brand Development The Barclaycard One Pulse card was introduced experimentally in the UK in 2007, offering a combined Oyster contactless travel card on the London Underground. This also offers a chip and PIN facility for purchases over £10, and a laudable facility for purchases under £1.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

Halifax issued its first contactless debit cards on 12th November 2007 in the form of a Visa ‘payWave’ card, piloted among 25,000 existing customers in London. Customers can use the card for items up to the value of £10 without the need to enter their card or PIN when they see the contactless ‘ripple’ symbol, in up to 1,000 shops. Lloyds TSB introduced Lloyds TSB Duo Airmiles credit card. The Duo offers a ‘two in one’ easy-to-manage account, with one PIN, one statement and two cards (one American Express, one Mastercard with Airmiles). Lloyds TSB was market leader in new loyalty card issuance in 2007. More than 700,000 Duo cards were issued to generally high-quality, heavily transactional customers. (Key note, 2008)

Conclusion Lloyds TSB Bank uses different kinds of strategy and trying to be different from their competitors, as see that they have increased their branded outlets and profits also became branded financial products in consumer’s mind, as the strategy of the company that's different from others credit card provider such as the iconic black horse has appeared as the logo of Lloyds, a new strap line ‘Lloyds TSB for the journey’ has been accompanied by animated figures that adorn the website. Those entire images create a mind map attraction about Lloyd’s products.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 3

11/21/2008

CHAPTER 4: RESEARCH METHODOLOGY

DOES PROFUSE OF CREDIT CARDS LEAD TO “FRAUD AND DEATH THEFT”? A STUDY OF THE SAFEGUARDS USED BY

LLOYDS TSB BANK”

CHAPTER 4 Research Methodology

“Methodology means systematic ways represent the study of organization system or research methods. The Research Methodology is the main actor or actresses of the stage of investigating event (Sauder et al, 2007). In this chapter research methodology are going to provide a clean clarification of the strategy methods and how they can be presented by the used throughout studying and justify view points. The main attractive assessment of this chapter is to demonstrate the reader an all-inclusive perceptive of the advancement of the study and acknowledgment with every method used during the research.” Methodology chapter is represented as a three main important part. The chapter initiates its journey with the explanation of the aims and objective of the research, the research stratagem, and design pattern of the research, Data assortment method, inspection and Sampling Consideration, Data Analysis and Questionnaire layout structure, Research quality criterion, Scope and Limitation of the overall research views.

4.1 Research strategy Strategy of research means the plan pattern format of whole dissertation. Research approaching model is represented as three main ways, the first one is known as a deductive, 2nd one is families as an inductive approaches or the combination of these two approaches to research (Saunders et al, 2003). Deduction: Saunders et al (2003) represents it’s as a testing theory also authors argue that the approach entails the development of a theory and hypothesis and design a research strategy and focus to rigorous test. Inductive: Saunders et al (2003) represents this approach as a building theory, the approach is to create or make sense of the interview data that had collected by analyzing

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

this data and develop theory as the result of data analysis, and for instance, the result of this theory would be the formulation of the whole analysis process. The graph represents underneath and also exploring the different approach of these two methods:

Deduction Reasoning

Induction Reasoning

Theory

Hypothesis

Observation

Pattern

Confirmation

Observation

Figure1: Differentiation of two methods. (Source: Adapted from social research methods [online])

The methods of deduction and induction have its own different ways of “sense.” For instance, when the authors conduct researching, they used them in different feel ways. Deduction approach is the leading research approach in natural sciences, where law presents basic of description, authorizes the expectation of the phenomenon, forecast their occurrence and for that reason they allow them to be controlled. (Collis and Hussey, 2003 cited by Saunders et al., 2007) Moreover, deduction approach is very small width or narrower in nature it is also concerned with the testing of proving hypotheses. In contrast, inductive approach is very nature especially at the beginning is more open-ended and exploratory. In addition, each method has its own strong points and weak points and either one of these approaches can be held better than the other, Yin (1994) had mentioned that the best approach to be used for study depends on the research’s purpose and the supplementary research questions. By the way, inductive approach would suitable to find “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

out the answer and the opportunities also challenges for the aims and objective of this dissertation.

4.2 Research Design Conducting the whole work of the research pattern the researcher should make an image structure of his/her research work. The whole pattern picture should have a strong network path line with mentioning point of the research approach. The strategy or overall approach of the research is the general plan in which the researcher will make to answer the question(s) he/she had raised. It will contain clear objectives, derived from your research question(s), specify the sources from which you intend to collect data, and consider the constraints that you will inevitably have. (Saunders et al, 2005,). These authors mention six strategies that can be applied during the research process including experiment, survey, case study, grounded theory, ethnography, and action research. The research strategy formation model is set in five primary stages, they are linked with experiments, surveys, archival analysis, histories, and case studies Yin (2003). (See on the table 4.1 Five Strategies format of Exploring). Strategy

Form of Research

Requires Control over

Focuses on

Question

Behavioral Events

Contemporary Events

Experiment

How, Why

Yes

Archival analysis

Who. What, Where,

Yes/No

Yes

How many, How much Survey

Who. What, Where, How many, How much

History

How, Why?

Case study

How, Why?

Yes

Table 1: Research strategy model (Source: modified from Yin, 2003) “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

Saunders et al (2005) considers Experiment is a classical form of research that typically involve the definition of a theoretical hypothesis, selection of samples of individuals from known populations, measurement on a small number of the variables, control of other variables and so on. An experiment is not supposed in this research as no investigation cause/effect relations are intended. Archival is known as a collection of document, archival analysis means testify the collected document information, it stands on the collection of secondary data. Survey means consider something generally, in research strategy The Survey is known as a popular strategy in business and management research as it allows the collection of large amounts of data from a sizeable population in a highly economical way. Moreover, this strategy is not only usually associated with the deductive approach but also gives the researcher more control over the research process. Secondary data are collected by data concerning firms, institution, which helped researcher to maintain their time management and also it is cost effective. In this purpose Archival is considered as an appropriate research strategy in the context of the study. Overall point of views represents the suitable answer for the research question. History strategy are not really keen point of my Study, reason as it shows the lack of focus on contemporary events, which this study strain on. Case study is defined as “a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence”. (Saunders et al 2005:93 cited in Robson 2002:178) According to Saunders et al (2005:93), the case study should be applied when answering to the question ‘why’ as well as ‘what’ and ‘how’. There is a point that case study is suitable or very worthwhile to explore existing theory. However, in case study research, the lack of rigor in the research design is one of the main concern (Yin, 2003). There is a concern that researchers may have a biased view that will influence the findings of the study since the finding are not based on absolute figure.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

4.3 Data Collection Method Method of data collection generally represents in two parts, Secondary and primary data, according of collection of data information for this dissertation study, I am going to follow both data collection method stages.

4.3.1 Secondary Data “Second sources consist of data that already exists… Secondary sources include official statics, mass media product, diaries, and letters and government reports”, (Haralambos and Holbaorn, 1995). Simple definition of secondary data, which is subsequently congregated data, includes both raw and published summaries. On the other hand, it includes both quantitative and qualitative data. It can be used in both descriptive and explanatory research. Pros and cons both parts are exploring the data analysis process work. Ghauri and Gronhaugh (2002) claimed that using secondary data help saving in resources, in particular time and money. Secondary data bring benefits for sensitive situation and considered it an unobtrusive measure when collecting data with organization. Re-analyzing secondary data can also lead to unforeseen or unexpected new discoveries. Higher feasibility for longitudinal studies and permanence of data can be seen as other pluses of using secondary data. (Saunders et al, 2003) Nevertheless, according to Saunders et al (2003), the quality of data, unsuitability and access to data are problems which are worth to take into account when using secondary data. In order to answer the research question, the variety of secondary data was captured. They are not only the basic concepts about loyalty, for instance faithfulness definition, types and levels of loyalty, building customer’s reliability but also include many more relevant notions. Moreover, data about price, quality of service, customer satisfaction, market place as well as the proliferation of retail trusty schemes from exploratory researches takes an important part for author to conduct the research.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

Secondary data about customers’ reliability in the context of the hypermarket is divided into three main subgroups which are documentary data, survey-based data and multiple sources. Documentary secondary data include written and non-written documents. Written documents are known as books, journal and magazine articles or newspapers. Nonwritten documents are materials such as voice recording, video tapes, pictures, films and television programs. Survey-based secondary data is data gathered from surveys based on a questionnaire and this data already had purposed to analyze. Multiple-source secondary data is data based on documentary and survey secondary data or the combination between them (Saunders et al., 2007). In the context of this research, the multi-source secondary data is used to reach the purpose of investigation. The sources used here were mainly from academic journal articles such as marketing journal, international journal of detail and distribution management; magazines and some books. It helps to provide the picture of academic theories in the study field. Beside, survey-based data which gathered by some UK banking statistic market researchers and are from institutions of Banking societies in the United Kingdom and other countries were also very helpful for me to exploit the literature on fraud and predictable as well as understanding the context of this research. This source is available in City of Library, and British Library.

4.3.2 Primary Data “Primary sources of information consist of data collected by researchers themselves during the course of their work…” (Haralambos & Holborn, 1995) The author has carefully considered and evaluated all possible data collection methods, it was decided by the author that the use of questionnaires would be most appropriate in obtaining relevant data concerned with the research question and objectives. Questionnaires are frequently used during social research techniques and it was believed this would be the most appropriate option when considering consumer opinions. The quantitative method of questionnaire is employed in selecting and collecting data to understand which factors influence consumer the most when they make purchasing “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

decision and also evaluate the key element's consumer behavior, those factors are more influential than others. Saunders, M. et al (2003) said about the questionnaire is including all data collection techniques in which each person is asked to respond to same of a set of question in a predetermined order. The design of questionnaire differs according to how it is administered and in particular the amount of contact you have respondents.

Questionnaire

Selfadministered

On-Line Questionnaire

Postal Questionnaire

Interviewer administered

Delivery and Collection Questionnaire

Telephone Questionnaire

Structured interview

Figure 2: Hierarchy of Questionnaire Format. (Source: Saunders, et al, 2003)

4.4 Design of questionnaire A questionnaire is a basic planned technique of a series as written or verbal questions, also the data answer which collected from respondents. The lack of theory of questionnaire design is the largest weakness, since there are no principles technical that guarantee of best possible or an optimal, ideal questionnaire, questionnaire design acquired of a skill through experience (Malhotra, 2004) All the questionnaires had designed carefully for collecting the answers which design to use in major quantitative data and for the reason of easy to closed or complete the questions. The questionnaire design will be illustrated as ten steps such as;

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

Figure 3: Ten steps of Questionnaire design. (Source: (Malhotra, 2004) 1. Giving the accurate information needed to measurement and instructions

2. Giving exact type of interviewing method

3. Establish the content of individual questions

4. Design the questionnaire to attract respondent or interest to answer it

5. Selecting the structure of question

6. Create the question wording

7. Organize the question in order

8. Identify the format

9. Generate the questionnaire again

10. Test the questionnaire before issue.

In this dissertation, the questionnaire using of SPSS instrument was used as presented in the literature review. Questionnaire data sent by hand to respondents and collected it’s after they completed. The process was collected last time in the first week of Oct 2008 at High Street Kensington coffee shop. All respondents are international and different of age, gender, and occupation. The proposed length of time to answer the questionnaire was approximately 7-10 minutes which is the time could help the respondents consider the questions.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

4.5 Quantitative data analysis 4.5.1 Data types Quantitative data can be divided into two groups as Saunders et al, (2003) mentioned as categorical data and quantifiable data. Categorical data represent data which value not able to be measured numerically but can be classified into sets or groups. Quantifiable data are the data types which measure numerically the same as quantities, for instance, quantifiable data are more accurate than categorical data. (Saunders et al, 2003)

4.5.2 The Questionnaire analysis All the questionnaires which already collected from target groups. The author uses the SPSS software to apply the result which relates to literature review in order to precede the aim and objectives.

4.5.3 The advantage and disadvantage of questionnaire The questionnaire had used in many kinds of research. However, there are some points of advantage and disadvantage of researching which using questionnaire. Advantage of questionnaire Low cost The respondent can complete in his/her own time Display material can be included (mail) Disadvantage of questionnaire Lack of control over response Commonly low response rates High risk of bias “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

Limited ability to follow up on statements Short questionnaire

4.6 Data analysis technique The data from the questionnaires which author collected and selected it from the accurate target, after that author using Statistical Package for Social Science program (SPSS) to analyze and summarized along with ensure accuracy of all statistical procedures would be performed by computer software package. Moreover, the data which collected will be summarized in the appearance of frequency and descriptive statistics, the connection method will be used by linking and comparison of the data.

4.7 Limitation and Problems Encountered Due to the limited time and resources, the sample size was limited and therefore it was not possible to make assumptions of the customer’s attitudes towards retailers. When considering this, it cannot represent the customers in question as a whole. Refer to problem; the main is the difficulties of questionnaire filling within the limited time. For example, there are many nationalities stayed in London, therefore, it was difficult for an author to meet the desired target. Also, most people in London quite rush thus; they refused to fill the questionnaire. Furthermore, lots of people did not understand some of marketing vocabulary in the questionnaires. In order to overcome this, some author friends give a helping hand to distribute questionnaire which the author particularly explained to make sure all of them understanding deeply.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 4

November 21

CHAPTER: 5 Finding And Discussion

2008

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

CHAPTER 5 Finding and Discussion

Introduction This chapter corresponds to the results which found in the questionnaires and interviews to sampling of opinion view points about different credit card users’ and non users’ perspective. The data was analysis to resolve the consumer feedback on the Credit card services, awareness about credit card safeguard, user’s satisfactions and their dependence rate on credit card use.

5.1 Demographic Characteristics The descriptive statistics are methods connecting the collection, presentation, and characterization of a set of data with a purpose of describing properly the various features of all set of data. (Berebson and Levin., 1996) To go over the main points of the research result and descriptive statistic will be used to describe the response characteristics, which explain of the following information. Gender Age Occupation According to answer the questionnaire of this research, the principle of the chapter will be report the significance of the survey by using a questionnaire as a research instrument. Intending for managing and analyzing the data from the survey, the SPSS program will be useful for this purpose. The data or information that the author collected will be used to follow the objectives of the dissertation and to find out the answer for the research question, moreover, the information that collected could help set the finding of the learning in context. “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

This questionnaire had given to the different nationalities of respondents who have been studying at London School of Commerce, who have been working in retail Store and others different place.

a. Gender The statistic of the gender is shown as table 1 below: Table 1: The statistic result of Gender groups Frequency

Valid

Percentage

Valid

Cumulative

Percentage

Male

57.1%

Female

42.9%

100%

Total

100%

Gender of the Respondents Male

Female

42.90% 57.10%

Figure 1: Gender of the respondents

According to the total of respondents that had collected in this survey were 84 respondents; the result showed that there were slightly more males than female respondent. It was (43%) of female respondent and (58%) of male respondents of the total (see figure 1). “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

b. Age Table and chart below shows the total of 84 respondents, most respondents were between 26 and 32 years (39.3% ) or 31 respondents, respondents who have an age between 19 and 25 years with (34.5%) or 28 people, respondents who have an age between 33 and 39 years to (19%), between 40 or over 40 years with (3.6%) or 3 respondents and the smallest number of respondents was people who have age between 18 and under 18 years old with (3.6%) or 3 people. Table 2: Age of the Credit card users and nonusers Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

18 years or under

3.6%

19-25 years

34.5%

38.1%

26-32 years

39.3%

77.4%

33-39 years

19.0%

96.4%

40 years or over

3.6%

100%

Total

100%

Figure 2: Level of age respondent

Age of the credit card users and nonusers 18 years or under

19-25 years

26-32 years

33-39 years

40 years or over

4% 4% 19% 35%

39%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

c. Occupation and Qualification Table 3: Data of Occupation Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Student

20.2%

Part time job

44.0%

64.3%

Full time job

26.2%

90.5%

Unemployed

3.6%

94.0%

Other

6.0%

100%

Total

100%

Table 3 and 4 and figure 3 and 4 describe the Users and nonusers occupation and qualification level. In figure 3 most of the part time job holder uses credit card dramatically more than comparable to full time employees. However, in figure 4 employees in retail store use credit card highly compare to government employees.

Occupation of percentage rate of Credit Card Users and Nonusers

Full time job 26.20%

Part time job 44.00%

Other 9.60% Student 20.20%

Unemployed 3.60%

Other 6.00%

Figure 3: Statistic result of Occupation

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 4: Qualification of Credit card Users and Nonusers Frequency

Valid

Self employed

Percent

Valid

Cumulative

percent

Percent

2.4%

Employee in private firm

34.5%

36.9%

Employed in Government

4.8%

41.7%

Employee in a school,

3.6%

45.2%

35.7%

81.0%

1.2%

98.8%

Other

17.9%

100%

Total

100%

college and University Employed in Retail Store Retired

Figure 4: Percentage rate of User and nonuser Qualification 40.00% 35.70%

34.50%

35.00% 30.00% 25.00% 20.00%

17.90%

15.00% 10.00% 5.00%

4.80% 2.40%

3.60%

1.20%

0.00% Self Employee in Employee in Employee in Employee in employed private firm Government a school, Retail Store college and University

Retired

Other

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

5.2 Users Perspective In 2004, the number of personal credit card holder rose significantly by (15.3%), but in 2007 rate of credit holders fell to 30.8 million, representing (62%) of the adult population (APACS 2007). Table 5 shows that in 1985 to 1995, Visa and MasterCard are the major players in the credit card industry, providing scale based advantages in terms of the card processing operation, and supply extensive network of distribution. Table 5: Number of credit and charge cards in issue in the UK (‘000)

1985

1987

1990

1992

1994

1995

MasterCard 8,515

11,370

12,294

11,169

10,891

11,656

Visa

11,080

13,106

17,552

16,019

16,225

17,646

Others

1,442

1,340

1,476

Total

19,595

24,476

29,846

28,631

28,456

30,778

Sources: APACS (1995, 1999)

However, the collecting sample gave many interesting reasons for findings and analysis which focuses on different users and nonusers opinion about their credit card. In this section the major areas of users view point are briefly analyzed.

5.2.1 Population Satisfaction According the Credit Card Provider A majority of credit card users has no argument of their cc providers. According to the Table 6 and figure 5, the very satisfied (17%), satisfied (59%) and unsatisfied was (20%) was the uses' choice and population claimed very unsatisfied (3%) category.

The major reason might monopoly environment for the credit card vendors. So there is no option for the users to go for their best choice. However credit rating score also affects credit card users and higher rating charge also reason for unsatisfied.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 6: Level of Satisfaction of the Users according to their Credit Card Provider Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Very Satisfied

17.1%

Satisfied

59.2%

76.3%

Unsatisfied

19.7%

96.1%

3.9%

100%

Very unsatisfied Total

Percentage rate of Credit card Users Satisfaction Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

59.20%

17.10% 19.70%

Very Satisfied

3.90% Satisfied Unsatisfied Very unsatisfied

Figure 5: Percentage rate of satisfaction of the user according to their Credit card provider

5.2.2 Demographic Profile of Population According to the Satisfaction level The demographic profile of the uses focuses on sex, level of education, monthly income, age and profession of different level of people of the society.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

5.2.3 Gender and Level of education profile over user satisfaction Both male and female have equally likely level satisfaction with credit card vendors. According to the Table 7 and Table 8 most of user’s choice is ‘satisfied’. Table 7: Demographic profile of Satisfaction level of Male Gender Frequency

Valid

Very Satisfied

Percent

Valid

Cumulative

percent

Percent

13.2%

Satisfied

55.3%

68.4%

Unsatisfied

28.9%

97.4%

2.6%

100%

Very unsatisfied Total

Table 8: Demographic profile of Satisfaction Level of Female Gender Frequency

Valid

Very Satisfied

Percent

Valid

Cumulative

percent

Percent

21.1%

63.2%

84.3%

Unsatisfied

10.5%

94.7

Very unsatisfied

5.3%

100%

Satisfied

Total

Similarly the level of satisfaction doesn't vary across level of qualification which is described in Table 9. Both the gender and level of qualification do not have different level of satisfaction, because the total population has almost same degree of satisfaction.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 9: Demographic profile of Satisfaction level of qualification Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

MBA or Master degree

38.2%

Bachelor or Degree

34.2%

72.4%

High School or College

10.5%

82.9%

A lever

6.6%

89.5%

Other Professional Degree

10.5%

100%

Total

100%

Figure 6: Demographic profile over satisfaction level- Gender and Qualification category

Percentage rate of Level of Satisfaction 70.00% 60.00%

Axis Title

50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Male

13.20%

55.30%

28.90%

2.60%

Female

21.10%

63.20%

10.50%

5.30%

Qualification

38.20%

34.20%

10.50%

6.60%

5.2.4 Income profile of user over user satisfaction Table 10 descries the income profile of the total population of the people. Mostly the use satisfaction is all over the income range of the population. In Figure 7 the scenario is developed under all the income level. “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 10: Demographic profile of Satisfaction level of Average Annual Income Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Less than £5,000

21.1%

£6,000 - £8 000

26.3%

47.4%

£9,000- £11,000

9.2%

56.6%

£12,000 - £14,000

15.8%

72.4%

£15,000 - £17,000

5.3%

77.6%

£18,000 - £20,000

7.9%

85.5%

£21,000 - £23,000

9.2%

94.7%

More than £26,000

5.3%

Total

100%

Figure 7: Percentage rate of Average Annual income

Average Annual Income 30.00% 25.00%

26.30% 21.10%

Less than £5,000

20.00%

£6,000 - £8 000

15.80% 15.00% 10.00%

9.20%

7.90% 5.30%

5.00% 0.00%

£9,000- £11,000

9.20%

£12,000 - £14,000 5.30%

£15,000 - £17,000 £18,000 - £20,000 £21,000 - £23,000 More than £26,000

Therefore, the total population the user satisfaction is higher, and the income profile does not vary across the user satisfaction level.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

5.2.5 Profession profile of user over user satisfaction In the Table 11 most of the profession level has the same level of user satisfaction. Only the employee in the government organization differs from the other level. However, the government employees are not satisfied compared to all professions on their credit card providers. Table 11: Demographic profile of Satisfaction level of Professional Category

Profession

Level of Satisfaction

User

Self employed

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Employee in a school, college

Very Satisfied

and University

Satisfied

Unsatisfied

Very unsatisfied

Total

Employee in private firm

Employed in Government

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Demographic profile of Satisfaction level of the Professional Category continues…

Profession

Level of Satisfaction

User

Employed in Retail Store

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Very Satisfied

Satisfied

Unsatisfied

Very unsatisfied

Total

Others

5.3 Factor influencing the user choice There are certain factors that influence the cc user’s choices and behaviors. Interest rate one of the key factors that drive the user’s payment behavior. There are also a lot of consideration such as credit card uses and difficulties that commonly faced by the users. The overall population is also has some want to the card providers.

5.3.1 Payment behavior under interest rate User’s throughout the country basically influences by the interest of the credit card. Most of the population (78%) prefers on time payment so that no interest rate will cut down. From Figure 8 and 9 also and Table 12 and 13 it is obvious that the user takes conservative nature under interest rate.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 12: Credit card Interest rate Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

11.9% APR variable

3.9%

12.9% APR variable

5.3%

9.2%

13.9% APR variable

3.9%

13.2%

14.9% APR variable

21.1%

34.2%

15.9% APR variable

15.8%

50.0%

16.9% APR variable

9.2%

59.2%

17.9% APR variable

2.6%

61.8%

18.9% APR variable

6.6%

68.4%

19.9% APR variable

9.2%

77.6%

20.9% APR variable

6.6%

84.2%

21.9% APR variable

3.9%

88.2%

22.9% APR variable

6.6%

94.7%

Other (Please Specify)

5.3%

100%

Total

100%

Figure 1: Payment behaviour under interest rate of Credit card provider

Percentage rate of Users Interest rate 5% 7% 4% 7%

11.9% APR variable 12.9% APR variable

13.9% APR variable 14.9% APR variable

9% 7%

15.9% APR variable

16.9% APR variable

17.9% APR variable

16%

18.9% APR variable

21% 4% 5% 4% 0%

19.9% APR variable 20.9% APR variable 5%

10%

15%

20%

25%

21.9% APR variable

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table Error! Bookmark not defined.: Payment behaviour under interest rate of Credit card provider Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

On time

77.6%

Within one week of due date Within two weeks of due date Within three weeks of due date Within four weeks of due date Other

15.8%

93.4%

3.9%

97.4%

1.3%

98.7%

1.3%

100%

Total

100%

Figure 1 : Payment behaviour under interest rate of Credit card provider

Payment Behaviour under interest rate On time

Within one week of due date

Within two weeks of due date

Within three weeks of due date

Within four weeks of due date

Other

4% 1% 1%

16%

78%

Thus the interest rate is high according to the user perspective; the user does not want to take any risk for giving extra charges.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

5.3.2 Typical use of Credit Card Mostly the users like to use a credit card in Supermarkets (35.50%), Booking hotels or flights (13.2%), and online shopping and eating in restaurants around (11.8%). Also in department store (10.5%) and purchase travel ticket from the machine (7.9%) there are a user of the credit card. In Table 14 and figure 10 describes this user’s choice according to uses. Table 13: Scope of credit card users Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Online shopping

11.8%

Supermarket

35.5%

47.4%

Restaurant

11.8%

59.2%

Paying Utilities bills

2.6%

61.8%

Department store

10.5%

72.4%

Purchase travel ticket from the machine Booking Hotels or Flights

7.9%

80.3%

13.2%

93.4%

Order's purpose

6.6%

100%

Total

100%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Figure 8: Percent rate of typical user of credit card

Typical use of Credit Card 35.50%

11.80%

10.50%

13.20%

7.90%

6.60%

2.60%

Most of the departmental stores and the shopping mall have significant uses of cc than other sectors that is basically the user’s choice turn into these sectors.

5.3.3 Difficulties of Credit Card use (23.7%) population claimed about the ‘shortage of place that accepts the credit card’. ‘Excessive service charge’ (48.7%) and other factors are described in the Figure 11 and Table 15 and 16. Table 14: Difficulty to use a credit card outside the UK Frequency

Valid

Shortage of place that 18

Percent

Valid

Cumulative

percent

Percent

23.7%

accept Credit card Excessive service charge

48.7%

72.4%

Fraud awareness & Data

27.6%

100%

stolen protection problem Total

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 15: Concerned about credit fraud and theft Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Yes

71.1%

A Bit

19.7%

90.8%

9.2%

100%

Total

100%

The reason behinds this user’s argument is that no more credit cards are necessary if there is no proper place, where a credit card can be used.

Difficulties of CC uses and fraud awareness 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

71.10% 48.70% 23.70%

27.60% 19.70%

Difficulty to use 9.20% Concern about fraud and theft

Figure 9: Difficulties of credit card uses and fraud awareness

5.3.4 User popular Banking provider rating In this section, the author using question for popular Banking service provider on Credit card, and population demand of service rating represent on Table 17.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Table 16: User credit card provider (Banks) Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Lloyds TSB Bank

21.1%

Barclays Bank

25.0%

46.1%

HSBC Bank

15.8%

61.8%

NatWest

9.2%

71.1%

Halifax Bank

7.9%

78.9%

RSB Bank

6.6%

85.5%

Abbey Bank

5.3%

90.8%

Other

9.2%

100%

Total

100%

Table 17 and figure 12 above shows that from 76 respondents, (25%) use Barclays bank, (21%) prefers to use Lloyds TBS service and (16%) happy with HSBC compare to NatWest. However, other credit card provider service equally popular with RSB, Abbey and Halifax.

User Population demands on Credit card Providers NatWest 9%

Halifax Bank 8% RSB Bank 7%

HSBC Bank 16%

Barclays Bank 25%

Other 21%

Abbey Bank 5% Other 9%

Lloyds TSB Bank 21%

Figure 10 User population demands on Credit card Vendors “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

5.4 Nonuser Perspective The samples that are taken from the nonusers are focused on the non user demographic profile and the interest level. This part describes the different perspective of these nonusers.

5.4.1 Awareness of Credit Card In Table 18, 100% of the population is shown who are aware about the credit card. And they have basic knowledge how its work and also talked about the credit rating system.

Table 17: Awareness of Credit card Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Yes

100%

Total

100%

5.4.2 Nonuser Interest on Credit Card The nonuser populations who are aware about the credit card are facing two different choices according to the interest level. From Figure 13, (63%) of non user population have interest and (38%) does not have any interest on credit card. Table 18: Nonuser’s interest on Credit Card Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Yes

62.5%

37.5%

100%

Total

100%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Figure 11: Percentage rate of nonuser interest on Credit Card

Nonusers' interest on Credit card 37.50%

62.50%

Yes 0.00%

10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Nonusers interest

Nonusers not interest

5.4.3 Demographic Profile of Population According to the Interest According to the interest level the demographic profile of the non users is depicted in the Table 20, 21, 22 and 23. Statistic occupational data shown that Mostly Full time job holders are less interest than compare to part time employees and student, in Table 21. Table 19: Statistics result of Nonusers’ Gender Group

Valid

Frequency

Percent

Valid percent

Cumulative Percent

37.5%

Female 5

62.5%

100%

Total

100%

Male

Table 22, the people whose income levels in less than £12,000 - £14,000 have greater interest level, On the other hand, in gender level profile the female has a high interest level. In Table 22, the profession of employees in private firms and in retail stores percent rate (37.5%), which higher compare to another profession. Table 20: Nonusers occupation data Frequency

Percent

Valid percent

Cumulative Percent

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Valid

Student

25.0%

Part time job

25.0%

50.0%

Full time job

50.0%

100%

Total

100%

However the Table of Demographic profile of Nonusers’ income, most of persons annual earning capacity not more above than £26,000 comparable to Users demographic income profiles.

Table 21: Professional statistic data of Nonusers’ Frequency Valid

Percent

Valid percent

Cumulative Percent

Self employed

12.5%

Employee in private firm

37.5%

50.0%

Employed in Retail Store

37.5%

87.5%

Other

12.5%

100%

Total

100%

Table 22: Demographic profile of Nonusers’ income Frequency

Valid

Percent

Valid

Cumulative

percent

Percent

Less than £5,000

12.5%

£6,000 - £8 000

12.5%

25.0%

£9,000- £11,000

25.0%

50.0%

£12,000 - £14,000

37.5%

87.5%

£15,000 - £17,000

12.5%

100%

Total

100%

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Demographic Profile Under Nonusers Interest 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Statistics result of Nonusers occupation Nonusers’ Gender Group data Male &Female

occupation

Professional statistic data of Nonusers’ Professional

Demographic profile of Nonusers’ income

Income

Figure 12: Percentage rate of nonuser’s demographic profile

5.4.4 Nonuser Population Demands on Credit Card Vendors according to Interest Mostly the non users who do not have any interest are uniquely choosing the ‘Excessive service charge on credit card’ (25%) choice. On the other hand the interested non uses support ‘Charge rate on cash withdrawn’ (25%) and ‘Feel insecure to use every shopping store’ (12%) choice mostly. Table Error! Unknown switch argument.: Difficulty of Nonuser’ Frequency

Valid

Cumulative

percent

Percent

12.5%

25.0%

37.5%

The charge rate on cash 2

25.0%

62.5%

37.5%

100%

Feel insecure to use every 1

Percent

shopping store Excessive service charge

withdrawn Fraud

awareness & Data

stolen protection problem Total

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

Percetage % rate of Nonusers opinion on use Credit Card 13% Feel insecure to use every shopping store

38% 25%

Excessive service charge Charge rate on cash withdrawn

25%

Fraud awareness & Data stolen protection problem

Figure 13: Difficulty percentage rate of Nonusers on Credit card

In Figure 15, (38%) nonusers awareness about the data protection problem and also credit fraud and theft.

5.5 Conclusion Attitude of credit card users are varies from different levels of education. Most of people of the new generation such as students and middle age are highly interested in credit card. So the vendors may take different views among the students and professional people. Though the user satisfaction level is high there might be a possibility that the conservative nature of the card provider influences the overall credit card issue rate. The ‘interest rates’, ‘shortage place that accepts credit card’ and ‘Fraud awareness’ are the major factors that influence the non user’s choice.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” | Chapter 5

2008 CHAPTER: 6 Conclusions and Recommendations

[“DOES PROFUSE OF CREDIT CARDS LEAD TO “FRAUD AND DEATH THEFT”? A STUDY OF THE SAFEGUARDS USED BY LLOYDS TSB BANK”

]

CHAPTER 6 Conclusions and Recommendations

Introduction This chapter will summarize the main content of each part of the research survey. To summarize the main aim of the research survey, the last chapter is divided into three segments. The 1st part of these segments represents a summary of key findings, in comparison to the aims and objectives of the research. In Second section recommendations are suggested based on the research findings. Some recommendations are suggested for the improvement of Lloyd TSB banking services as credit card provider. In the end, this chapter also draws a direction for future research which puts stress on the importance of this research as a foundation for the development of future research.

6.1 Summary of key findings The key factors of finding this research are happening in the mind of the researcher since staying in UK that why people choose or preferred to have several credit card instead of having cash, the curiosity scale increased more, one day when I was identifying that booking a flight ticket via online, payment system are more acceptable by credit card preferred to debit card. Another incident increased my interested about credit fraud and theft, one day my friend, she identified that someone using her Pin card and twice time withdraw cash from her account without her consent. Therefore, in this research survey I was trying to analysis the present situation of the UK Credit market and the effectiveness of the credit fraud and theft safeguards policy. However, I was also trying to identify the efficient key point of the users and nonusers perspective attitude behavior on fraud awareness and factors of user credit card doesn't use credit card. The elements which using to find out answer the questions is included about the

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 6

present plastic card marketing strategy and fraud and theft awareness which are related to Lloyds TSB banking services to safeguard. Moreover, this survey transmits in the user satisfaction level which is high, there might be a possibility that the conservative nature of the card provider influences the overall credit card issue rate.

6.2 Recommendation of the research In the last half the twentieth century plastic cards are one of the most admired forms of payment in the United Kingdom and use of plastic cards is growing sharply and becoming the major possessions of obtaining cash. Now a day, most consumers pay for at least half their purchases with plastic card, most large retailers, supermarkets and online shops take plastic as do an escalating number of professional service providers. Own my research survey I realized as a credit card provider Lloyds TSB bank had some lacks that should need to improve to bit their competitor. Lloyds TSB is providing a wide range of banking and financial services all around the UK, to personal and corporate customers. They are a major key player of the business activities, retail banking sector, commercial and corporate banking, general insurance, and life, pensions and investment provision. Strategy of Lloyds TSB focuses on three priorities; the first priority is increasing income from the existing customer base, 2nd priority is developing a bigger franchise between customer and 3rd priority is improving productivity and efficiency. In 2007, Lloyds TSB became market leader in recruiting new account holders. However, income rose by 6% and sale grew by 17% in 2007, which indicated that they are doing well in current accounts, saving and personal lending. In credit card balances slightly lower. According to The Association for Payment Clearing Services (APACS) reported the following in 2007, There were 165.4 million payment cards in issue – 67.3 million credit cards, 5.7 million charge cards and 71.6 million debit cards, 20.2 million ATM-only cards and 0.5 million check guarantee cards. On the other hand Key Note 2007 “Consumer Credit & Debt”- assesses that the market for credit cards remains dominated by the large banks. “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 6

Since Barclaycard removed unused credit cards, it is no longer the largest issuer. In their ranking chart Lloyds position as a credit card provider held on 4th, compare to others. Although, Lloyds has done good incomes in current accounts, saving and personal leading compare with the credit card market. The new Lloyds TSB Duo Airmiles credit cards are Lloyd’s new product and brand development. As we know that in one pin you can access the both cards, one American express and one MasterCard with airmilies. But these products are not as popular compare to Barclay’s oyster card. In this portfolio I have attempted to draw some recommendations in the lights of my study on “Lloyds TSB bank, especially on credit card products” Take efficient & effective initiatives to raise deposit on the credit account. Introduce new credit card service charge with lower rates especially on cash withdrawn. Offer secure and safety financial advise to overcome debt problems If possible, pay interest on Credit card account if you they deposit sufficient amount. Offer varieties facilities, especially on credit card payment time, like if they pay on time they will get bonus points on their Airmiles, so that deposits will be increased. Provide rapid & quality services to the customers by providing a demo model of credit frauds and how to identify credit thefts. Provide more high systematic data protection security. For example recent Barclays introduced PINsentry for online banking. However, In July 6, 2008, on article about ‘Lloyds TSB under fire because of teen banks cards’, Claire Rogers reporter that One Father has complained to the bank after he discovered that his 15 year old son had used a debit card “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 6

from Lloyds TSB to buy cheap cigarettes, Viagra and a fake ID off the internet. Previously children aged 11 to 15 who have current accounts were restricted to cards which could only be used in cash machines or in branches. However the new cards are now Visa enabled which means they can be used anywhere displaying the Visa sign. This example can provide a guide for doing more practice in the line of the card industry before introducing any new scheme on their product. For that reason Lloyd needs to do more research on users and nonuser’s perspective attitude on use credit card and find out the way to attract nonusers mind. The plastic - card fraud had risen by 26% compared with the first half of 2006.However; this was due to a doubling of card fraud abroad, whereas UK domestic card fraud had decreased by 4%. Online banking fraud losses were down by 67% over the same period. To identify fraud and save your identity Lloyds offered in partnership with PrivacyGuard®. This Privacy safeguards will protect your accounts from credit card theft. But to get this service you need to pay £6.99 a month, if Lloyds can offer more competitive price compare with other service provider, they might be able to increase their income on credit card section.

6.3 Future research recommendations According to the many limitations of the research, the suggestion will be supported and obtained more accurate results for future researching. For those researching, if there is extra time to research the answer as from interviews and observations then the result would more accurately and the number of respondents would more than the number which researcher done at this time. Moreover, my data responders only around London, thus the researching are not representing the result of the whole population or much kind of area as outside London due to restraint of financial that the author could not transport to others London. “Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 6

The context of future project can be an investigation on the expectations and perceptions of all credit card users and nonusers, to the service quality of another bank, or two banks at the same time. Then the results elicited by such type of research can make a meaningful contribution to the development of the credit card industry. It can be at least a constitution for a marketing strategy of a bank and credit card providers. Furthermore, this study indicated that customers have high expectations of the service quality for the banking industry. The customers’ characteristics may, however, affect their expectations. Thus, future research can focus on how a number of factors such as demographic factors can shape credit card users and nonuser’s expectations and perceptions. Furthermore, I believed that if there are different languages such as Italian, French, and Spanish, etc. then it would support to get more respondents, reduces confusion and get more accurate answers because there are many kinds of nationality population in the UK which some of them are not able to speak or read English very well.

6.2 Conclusion This investigation had some methodological limitations due to time and monetary constraints. Among these limitations was the lack of a representative sample as well as the small sample size. As a result, as stated above, the findings of this work are not representative of the whole population. Despite these limitations, the results of this study point out that the quality of service is a very important factor in today’s competitive markets. Lloyds and other credit card providers, one of the most popular and competitors in the UK, still have some service weaknesses. It is hoped that the findings of this work can help Lloyds to focus its attention to the areas that require improvement.

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank” |Chapter 6

Appendix

Questionnaire This questionnaire is a part of my dissertation for an MSc degree’s at University of Wales Institute, Cardiff (UWIC). Your time and effort is much appreciated. All the information you provide will be regarded as confidential. Please mark with a  in the space to make your selection Part A: General information 1.

Gender:  Male

 Female

Age:  18 or under

 19-25

 26-32

 33-39

 40 or over

Occupation:  Student

 Part time job

 Full time job

 Unemployed

 Other (Please specific) ________________________________________________

4. What is your Profession and Qualification? Please specify _________________________________________________________

5. What is your Average Annual Income?  Less than £5,000

 £6,000 - £8 000

 £9,000- £11,000

 £12,000 - £14,000

 £15,000 - £17,000

 £18,000 - £20,000

 £21,000 - £23,000

 More than £26,000

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

Part B: For Credit Card Users

1. Do you use a Credit Card?  Yes (If your answer is yes, please continue answer the Part B)  No (if you are non credit card users please move to answer the Part C)

2. Are you satisfied with your Credit Card Service Provider?  Very Satisfied  Satisfied  Unsatisfied  Very Unsatisfied

3. How long have you been using Credit Card  Less than 3 months

 3 - 6 months

 6 months - 1 year

 1 - 2 years

 2 - 3 years

 3 - 5 years

 More than 5 years

4. How often do you use your Credit Card?  Every day

 2 - 3 times a week

 4 - 6 times a week

 Once a week

 Once a month

 2 - 3 times a month

 Yearly

5. How many Credit Cards do you have? 1

2

3

4

5

6

7

 More than 8

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

6. What is the maximum Credit limit, do you have on your cards? (Tick all that apply)  Less than £300

 £300 - £500

 £500 - £700

 £700 - £900

 £900- £1,100

 £1,100 - £1,300

 £1,300 - £1,500

 £1,500 - £1,700

 £1,700 - £1,900

 £1,900 - £2,100

 £2,100 - £2,300

 More than £2,300

7. How much do you spend through your Credit Card?  Daily

 Weekly

 Monthly

 Yearly

Amount  Less than £10

 £10 - £20

 £20- £30

 £30 - £40

 £40 - £50

 £50 - £60

 £60 - £70

 £70 - £80

 £80 - £90

 £90 - £100

 £100 - £200

 More than £200

8. In which place(s), you would like to use Credit card? (Tick all that apply)  Online shopping

 Supermarket

 Restaurant

 Paying Utilities bills

 Department store

 Purchase travel ticket from the machine

 Booking Hotels or Flights

 Others purpose (Please specify) ________________

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

9. What percentage interest rate (APR) does your bank (Credit Card Service Provider) Charge you?  11.9% APR variable

 12.9% APR variable

 13.9% APR variable

 14.9% APR variable

 15.9% APR variable

 16.9% APR variable

 17.9% APR variable

 18.9% APR variable

 19.9% APR variable

 20.9% APR variable

 21.9% APR variable

 22.9% APR variable

 Other (Please Specify) ______________________________

10. How do you pay out your Credit card bills?  By cash

 By Check

 By online transfer

 Minimum setup of direct debt

 By mail

 Other (Please specify) ________________________

11. How often do you pay your Credit card bills?  On time

 Within one week of due date

 Within two weeks of due date

 Within three weeks of due date

 Within four weeks of due date

 Other (please specify) ____________

12. If you pay out your outstanding balance through online, are you concerned about credit fraud and theft?  Yes

 A bit

 No

13. Have you ever used your credit card out of UK?  Yes

 No

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

14. Did you feel any difficulty to use your credit card, when you used it outside of the UK? Please Specify _________________________________________________________

15. Which banks Credit card are you using now?  Lloyds TSB Bank

 Barclays Bank

 HSBC Bank

 NatWest

 Halifax Bank

 RSB Bank

 Abbey Bank

 Other (please specify) __________________

“Thank you for taking the time to complete this questionnaire “

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”

Part C: For Credit Card Nonusers

1. Do you have some basic idea about Credit card using?  Yes

 No

2. In future are you interested in Credit card?  Yes

 No

If your answer is no or even yes, Can you explain us what the particular reason you are not interesting for using credit cards? (Tick all that apply)  Shortage of place that accepts Credit card

 Third parties interfere

 Feel insecure to use every shopping store

 Excessive service charge

 Uncomfortable to carry plastic card

 Feel difficulty to use it

 No interest on deposit money

Unavailability of cash machines

 The charge rate on cash withdrawn  Fraud awareness & Data stolen protection problem  Other reason (Please specify) __________________________________________

3. Finally, please indicate any other factors that you think it can influence your decision to make interest on credit card? _______________________________________________________________________________ _______________________________________________________________________________

“Thank you for taking the time to complete this questionnaire “

“Does profuse of credit cards lead to “fraud and death theft”? A study of the safeguards used by Lloyds TSB Bank”