Debit Cards for Local Community’s Monetary Transactions: A Literature Review

Abstract

Rozzani, N., Mohamed, I. S. and Syed Yusuf, S. N. 23 System), and also Western Franklin County Massachusetts, United States (Common Goods). Debit cards are one of the many banking technologies that have emerged in modern society to facilitate retail payments (van der Cruijsen, Hernandez & Jonker, 2015). These are cards that are used to make payments for transactions by the removal of funds from a certain bank account. The functional difference between a debit card and a credit card is that the removal of funds through debit cards are made immediately after the transaction, while a credit card accumulates the funds to be removed until the end of the month when the cardholder pays the bill (Mann, 2002). Debit cards also serve as an account access device, as they are able to download value from the checking account to the accountholder’s card (Wenninger & Laster, 1995). They can then be used to initiate account-to-account transfers, which brings compatibility to an accounting system of exchange (Browne & Cronin, 1995). According to Mann (2002), this type of card is cheaper for merchants and also has greater resistance against fraudulent transactions compared to credit cards. Debit cards have been found to be preferred among consumers as they offer speedier payment to vendors, and, hence, provide convenience to consumers who prefer buying in smaller amounts to minimise the amount of time they have to wait to complete a transaction (Klee, 2006). Also, debit cards obtain a high market share at the point of sale as their electronic fund transfer payment mechanism allows users to minimise their cash holdings from automated teller machine (ATM) withdrawals (Stix, 2004). This implies that users would no longer have to access cash through ATMs in order to purchase items (Scholnick et al., 2008). Debit cards first entered the United States market in August 1987 as a product of its commercial bank (López & Roberts, 2002). The next two entrants came after a short time, and, by 1996, six additional operators had entered the market. After that, there was a wave of new entrants that occurred in 1996, which was caused by regulatory changes that allowed banks to provide regular checking accounts. Today, debit cards have emerged to become the most common non-cash payment instrument in terms of transactions (Runnemark, Hedman & Xiao, 2015). This change has made it unnecessary for banks to overcome this regulatory gap, which they often did through alternative and more creative means.