Perceived Barriers in the Adoption & Usage of Credit Cards in Pakistan Banking Industry

Abstract

The purpose of this research is to present an exploratory insight into the current users and non-users of credit cards. The aim is to identify the different factors that cause low adoption and usage rate among the Pakistani population. It then aims to discuss barriers that are acting in the stumpy growth of a potential credit card market. A survey was conducted; statistical test is used to identify the intensity of each of the factor, identified through previous literature. A sample consisting of both credit cardholders and noncredit card holders is utilized to gauge the differences amongst the perception about credit cards in both the segments. Than statistical analysis tool t-test is employed to determine the associations between the results of cardholders and non-cardholders. The adoption & usage of credit cards is found to be significantly influenced by demographic factors as well as perceptions that include “credit card leads to overspending”, “unreasonable interest rates”, “and lack of information”,” low acceptability”. Certain variables create bigger barricade for the users like additional charges, high interest rates and insufficient credit limits etc. This research provides an in-depth understanding of factors or variables influencing the plastic money market negatively in Pakistan. Thus it is useful in designing marketing strategies for cardissuers for better growth of this payment mechanism. The sample was drawn from the narrower base than the actual target population of the Pakistan market. Hitherto there has been a very limited amount of research into payment cards in Pakistan and yet with the market for financial services opening up in Pakistan, this research is timely for both domestic banks wishing to issue credit cards and for foreign entrants, seeking to enter the Pakistani market through their expertise in credit cards. Despite the importance of consumer credit, virtually no literature or research exists on identifying the barriers in the adoption & use of credit cards in Pakistan. So this paper intends to close this gap. Further, by combining the demographics, costs incurred with the respondents’ perceptions concerning credit card ownership and use, our study offers a richer analysis to explain consumer behavior than previous literatures.

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