Коллектив авторов - Money, money circulation and credit

Banking cards are supposed to be issued and used for performing of banking operations: opening of the accounts, settlement and cash services, currency trading, etc. Such card is a long service result of banking system of payment mechanism improvement and an integral feature of a modern human.

This card contains the following information: on the front the name of holder, number, term of validity, emitting bank logotype and payment system logotype are recorded. Some cards have a hologram either as one of protective means from forgery and on the back side of card there are a place for holder’s signature, magnetic stripe, sometimes holder’s photo and logotypes of cash machines’ net where a card could be cashed.

Card’s number consists of 16 figures: the first six figures are an emitting bank code (Issuing Bank), the following nine figures are a banking card number (a number of card-account) and the last figure is confirming.

Payment card is a personalized payment instrument which offers its holder a possibility of cashless payment for goods and/or services and of encashment in the bank’s divisions (branches) and in the banking cash machines. The trade/service enterprises and bank divisions which accept the cards form a net of servicing points (or receiving network).

As electronic data storage device payment cards are divided on cards with magnetic stripes and cards with chips (microcircuits). The first are called magstripes and the second – smart cards or chip cards.

Cards with magnetic stripes have magnetic stripes on the back side which keep data including card’s number (banking current account), name of a holder, date of expiry (VISA, EUROCARD, MASTERCARD). Magnetic stripe doesn’t contain an information about the holder’s account status.

When card «passes through» a point-of-sale terminal it reads out a number of holder’s banking account from a magnetic stripe after that the terminal connects to a banking processing center in order to receive a confirmation about the required sum availability. Otherwise speaking the bank’s permission of an emitter is requested to perform an operation using this card.

Bank’s permission to perform an operation by means of banking card which constitutes bank’s obligation to transfer money according to settlement document drawn with its help is called authorisation. Upon the bank’s permission receipt a point-of-sale terminal prints a slip (a special trade check) in three copies: one for buyer, second stays in trade enterprise and third should be sent to bank for payment. On the basis of presented slip the bank debits the card’s holder account and transfers money to the trade enterprise account.

Integrated circuit card (smart card) – memory card. Instead of magnetic stripe it has a built in microcircuit (microprocessor) which itself keeps an information about holder’s banking account current status and confirms availability (or absence) of required sum. As a result the speed of such cards authorization in passing through a terminal station is much higher – 5-10 seconds. Their information capacity is much bigger than the cards with magnetic stripes have but they are more expensive.

One of modifications of smart cards is «an electronic wallet». The conception of its creation is quite new and only high-powered card systems make its issue. Unlike the common plastic cards the electronic wallets are not linked to the client’s current banking account absolutely. It is «charged» on a definite sum of money thus the settlements made with its help do not require any authorization.

During an electronic wallet purchase in bank in the form of a definite type of card it is «empty». It could be purchased by a some money place to a common account which wouldn’t be refilled before the full write-off this sum. This sum is an amount of an electronic wallet’s «charge», i.e. this sum is at holder’s disposal during the purchases of goods and services. When the sum will be exhausted an electronic wallet could be «charged» again.

As can be seen from the above it plays role of a sort of a money vault electronically. Due to its limited capacity its loss doesn’t result any heavy losses thus it doesn’t require any costly systems of protection and holder identification, i.e. it is anonymous.

Nowadays magnetic cards are most popular. But experts say that smart cards are future. Recently a substantial increase of exactly this type of cards usage as a mean of payment is observed.

Cards could be separated according to identification information spread method (card holder name, number, term of validity, etc.). These data could be inserted by an embossed print (pressed) by a special machine (embosser) and this card is called embossed.

On non-embossed cards this information is burned out and as a rule such cards are intended only for an electronic usage.

According to the functional characteristics banking cards are separated on credit cards and debit cards. Credit card allows its holder to receive a definite credit during the payments for goods or services the cost of which is higher than a bank account balance pegged to the card (card account).

The debit card owner can make payments for the purchased goods and services and to cash it in the cash machines only up to the amount available on the card account. In the USA the credit cards prevail, in Kazakhstan – debit cards which consist the bigger part of all payment cards.

Both credit and debit cards can be individual and corporate. The individual cards (Customer cards) are issued only to private persons and corporate – only to companies (enterprises).

Corporate card is linked to a companies’ account and can be issued only on a companies’ employee for payment of expenses coming from his business activity and official trips.

In a frame of cards classification on individual and corporate to a separate type the family cards could be divided. They are issued as individual only to private persons but also as corporate could be issued separately for every family member of a card account owner. Family cards in some specified sense are analogue to corporate – the right of making payments under the fixed limits is allowed to the card’s holder family members. Whereby the additional users are supplied with separate personalized cards.

Banking cards could be either separated according to payment systems or Card Associations in frames of which services are rendered. The most widely spread in the world are the cards of the following systems: VISA, EuroCard/MasterCard and American Express (AMEX). One card could be supported and served only by one payment system.

One more type of cards issued in the frame of payment systems is electronic cards. Many payment systems have them. In VISA for example it is VISA Electron, in MasterCard – Maestro. As was mentioned before such cards are non-embossed and intended only for electronic application. They could be cashed in cash machines and used for making payments for the goods and services purchased in the points of sale equipped with special electronic terminals. There are electronic cards which are intended only for getting cash money in cash machines, for example in MasterCard system the card Cirrus.

Virtual money is a special type of electronic money and its appearance is linked to the Internet opportunities. Nowadays there are a vast number of different services rendered in the Internet and paid by cybercash.

Thus it is possible to make shopping in the cybershops, to visit a cyber casino, to take up the shares, to use the analytical information, to get the consulting services, etc. For the goods and services payments via Internet there are some cyber payments systems intended for quick and secure settlements between the numerous of users. Money in these systems are represented by digits, thus it is called digital money.

Digital money could be kept on a computer hard drive or on a memory of smart cards (microprocessing plastic cards). The emission of digital money is also performed by bank which serves the cyber payment system. The issued digital money are provided by the means kept on the client’s banking account. Special security measures and tariff policy make the usage of these cards cost effective and reliable.

Nowadays throughout the entire world the co-branded plastic cards are very popular. Recently they are actively implementing into the CIS countries. Co-branded credit and depositary cards are the cards issued by banks and some companies collaboratively. They allow not only making payments of the goods and services but either give an opportunity to receive discounts and bonuses form a company- partner of the bank.

Abroad the co-brands constitute the best part of all plastic cards. Thus in Europe every fifth card is co-branded and in USA – every second.

The most successful and numerous cards are the cards which are issued in cooperation with the gross trade networks and supermarkets, they consist about 60 % of all the co-brands in the world. On the second place are the projects with the airline companies (about 10 %), then the projects with the petrol station chains and cellular service providers follow (5 % of each).

The most attractive in such cards for consumers is «cashback» – bonuses calculation for each purchase, usually it is 1-2% from the goods cost. The amount accrues gradually and in the end of the year the client can get it.

As to the co-brands with the airline companies here the client gets not only a money interest but the bonus miles either which in following can allow to get a free of charge ticket, to upgrade a service class or to book a hotel room.

Such projects require a heavy spending, large marketing work and motivation of both sides. It is not enough only to issue the card, it is necessary to implement it into the market actively. Herein it should be noted that the usage of co-branded plastic cards is very profitable form of sales. According to the statistics the turnover of these cards in the sales and service networks is on 30 % higher than of common.

The most perspective sphere in Kazakhstan is telecommunications because nowadays the cellular service providers have one of the most numerous clients base, because today the mobile phones are available for almost all.

The comprehension questions

1. List the types of metal money circulation.

2. What three kinds of bimetallism do you know?

3. Explore the meaning and name the types of gold monometallism.

4. Explain the meaning of paper money and tell about their evolution.

5. What kinds of credit money do you know?

Money plays an exclusively important role in the market economy. Market is impossible without money and money circulation. Money circulation is a monetary movement in an internal business volume in cash or non-cash basis which serves to the goods realization and also to non commodity payments in business.

Money circulation mediates the gross national product turnover including the incomings of different classes. Money circulation maintains the movement not only of the goods but of loan and fictitious capital.

In the conditions of commodity-money relations in the processes of trading in a commodity, rendering of services and also execution of various commitments in monetary form the payments and settlements appear. The whole complex of all the money payments forms a money turnover the bigger part of which the wire transfers of enterprises for the realized goods and services consist. Such payments also mediate a part of money incomes and expenses of population.