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How good are these bank products?

Bindisha Sarang, Outlook Money | November 24, 2008

Marketers dream of launching a product that everyone thinks is exactly what he wanted all along. Let's check out a few banking products which were launched recently to see whether they make the cut.

Virtual credit card

This takes care of your security concerns about online shopping by doing away with the need to reveal credit card details during transactions.

How does it work? Virtual cards require one-time registration with your bank. You will have to add your personal and credit/ debit card details to get your unique login and password. Specify the amount you want to spend with your virtual card on shopping. The card generated will have a new 16-digit number, CVV2 number and expiry date. The virtual card number can be used as a credit/debit card number to shop online at any merchant website which accepts the concerned service provider (VISA or Mastercard). The card can be used only for online purchases and not for telephonic order purchases or in a shop.

Features: The virtual card is valid for 24-48 hours. Once it expires, the unused amount is automatically credited back to the account from which it was created. If you do not use the card, you can cancel it to get the funds credited back to your account within 24 working hours.

There is no limit on the number of cards one may generate in a day, but banks usually allow expenditure of Rs 100-50,000 per customer per day. The card cannot be used again after a successful online transaction with it.

Cost: Many banks offer the virtual card free. However, you need to be a registered Net banking customer of the bank.

Risk: KVS Manian, group head (retail liabilities and branch banking), Kotak Mahindra Bank [Get Quote], says: "This product is relatively low-risk. But you should maintain the vigil that is needed during online transactions." Use of the card should not be delayed once it has been generated.

Among the banks that offer virtual cards are Axis Bank (eShop card), HDFC Bank [Get Quote] (NetSafe card) and Kotak Bank (Netcard).

OLM says: Free and low-risk. Thumbs up.

Debit-cum-credit card

If you choose the credit card as the default option in Standard Charted Bank's '1 Money' debit-cum-credit card, you will be able to make it a debit card post-purchase, and vice-versa. 

How does it work? If credit card is the default option, a debit card transaction can be made using 1 Money by specifying so in the reply to the SMS that the bank will send when the purchase is made. The reverse is possible, again through an SMS reply, if debit card is the default option, a version which will work at ATMs. The SMS replies should be sent within 24 hours of the transaction. This facility is currently available only for Platinum credit card customers of the bank.

Cost: The card is expensive at Rs 6,000 per annum. Like other credit cards, it gives reward points for purchases made. 

Subrat Pani, head (cards), Kotak Mahindra Bank, says, "Cards like these may be popular in south-east Asia, but I personally think they are quite a hassle. The entire procedure of swiping and replying to an SMS makes it cumbersome." Says Reema Singh (name changed), who works as a project manager in a consulate: "I have no issues carrying two separate cards. It is way too expensive to pay Rs 6,000 a year just to get a choice between a credit and a debit transaction." 

Most financial planners recommend keeping debit and credit card transactions separate. Zankhana Shah, certified financial planner and head of Moneycare Financial Planning, Mumbai, says, "It's good to have separate debit and credit cards. A debit-cum-credit card will spoil financial habits. It will even mess up other transactions. Will an ECS (electronic clearing system) running for an SIP (systematic investment plan) also have a choice?" 

OLM says: Expensive and cumbersome to use. Thumbs down. 

Global debit/ATM card 

If you have a global debit/ ATM card, you can access your bank accounts in more than 30,000 ATMs (VISA/ Mastercard as per your service provider) in India and over a million ATMs abroad. You can also use it to shop in India and abroad. Many banks provide this card with built-in travel insurance benefits: zero liability for all the charges after reporting loss of the card and cover for purchases made while travelling. 

Kotak Mahindra Bank, HDFC Bank, IDBI Bank, Syndicate Bank [Get Quote] and Vijaya Bank [Get Quote] are some of the banks that provide global debit/ ATM cards. Says Manian, "Kotak's global ATM card gives free access to all global VISA ATMs to preferred customers and to all VISA ATMs in India to standard customers."

The Reserve Bank of India [Get Quote] has asked banks to provide free inter-bank ATM access in India from April 2009. 

Risk: Low as the card usually comes with insurance.

OLM says: Does not overpromise or underperform. Saves money in India and abroad. Thumbs up.

Account aggregation service

Keeping track of finances can involve hopping from one website to another and remembering multiple login IDs, passwords and PIN numbers. Money Monitor, an account aggregation service launched by Yes Bank [Get Quote], claims to bring some method in this madness by monitoring all your accounts in one place across banks and products. The service is powered by Yodlee, a US-based online service provider. Money Monitor's single user interface supports more than 9,000 accounts across over 15 product categories.

What do you get? 

  • Holistic financial picture with all balances and transactions gathered from financial, bill and reward accounts.
  • Personal data reports such as a net worth statement, cash flow report and historical account balances.
  • Expense categorisation for all credit card and bank account transactions so that you can know, in an instant, exactly where you are spending your money.
  • Budgeting, including simple tools for setting goals and monitoring progress. 
  • Alerts via email or SMS to avoid fraud, late fees and overdraft charges.
  • Lifetime digital storage of all financial transaction history.
  • Universal portfolio tracker with quotes, company profiles, historical performance and asset allocation charts.

Cost: All Yes Bank customers can use this service for an annual fee of Rs 149. 

Suresh Sheti, president (transaction banking), Yes Bank, says: "Customer security is one of the top-most priorities for us. Money Monitor provides the convenience of remembering only a single Internet banking password to access and manage multiple accounts online with built-in security to protect consumers and their data." Deven Shah, business head, Money Mentor, a company that creates information and software tools for financial companies, says, "The banks can misuse your data by cross-selling it. It all boils down to trust." 

Microsoft Money and Egg Money Manager offer similar services in the international market. Microsoft Money was available initially as a product, but now you can get it only as a download.

Risk: This service is hassle-free, saves time and costs peanuts. But it has a problem: it stores your password and information about all your accounts in one central location. So, in a scenario where many people flinch while giving the details of one credit card online (which has brought products like virtual cards into existence), this product seeks to put the entire financial life of its customers online. If the security system fails, your entire financial portfolio could be wiped out. 

Shoba John, programme director, Health Bridge, says, "Keeping track of one's money and expenses will be easier with this product. My only concern is security, as all my details will be available at one place. The risk is way too high. I would prefer keeping my accounts separate. I am not impressed."

OLM says: The service is good -- economical and easy to use. But security is a major concern. In times when money is both precious and fickle, it's probably not worth the risk. Thumbs down.


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