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The Significance Of Plastic Money To The Hospitality Industry: A Case Study Of

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Researchjournali’s Journal of Economics
Vol. 4 | No. 5 June | 2016 ISSN 2347-8233 1

The Significance Of
Plastic Money To The
Hospitality Industry: A
Case Study Of Rainbow Gerald Munyoro
Graduate Business School, School of

Towers Group Of Hotels Entrepreneurship and Business Sciences, Chinhoyi

University of Technology, P. Bag 7724, Chinhoyi,
Mash West Province. Zimbabwe

(RTG) Marvelous Matinde

Graduate Business School, School of
Entrepreneurship and Business Sciences, Chinhoyi
University of Technology, P. Bag 7724, Chinhoyi,
Mash West Province. Zimbabwe

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ABSTRACT

The study sought to investigate the significance of plastic money to the hospitality sector with the Rainbow
Towers Group of Hotels as a case study. Despite the fast progression in the adoption of plastic money especially
in the tourism sector the world over, its usage in Zimbabwe has remained relatively low and it is with that in
mind that the study sought to establish the significance of using plastic money in the hospitality sector in
Zimbabwe. The study also assessed consumer preferences as far as payment methods are concerned and also
established the various uses of plastic money while on holidays in Zimbabwe all in an effort to draw insight for
policy makers and players in the hospitality sector boost competitiveness. The study adopted a qualitative
approach informed by semi-structured questionnaires to collect primary data. Using purposive sampling
technique, the study used a sample of 100 tourists selected from Harare’s Rainbow Towers hotels; 50 from
Rainbow Towers Hotel and Conference Centre and another 50 from New Ambassador Hotel. The study had a
response rate of 67%. This study found out that plastic money is significant in the hospitality sector of
Zimbabwe as its use stimulates tourist activity as consumers transact with great ease and convenience. As a
result increased tourist activity attracts more foreign currency inflows and spending, thereby impacting
positively on the economy as a whole. However, the use of plastic money in Zimbabwe’s hotels is constrained
by limited facilities such as the Point of Sale and ATM devices. The majority of respondents in the study
preferred to use plastic money for making payments when on holiday, while the minority preferred other
methods of transacting such as using the traditional cash. The study also found out that plastic money was most
used to buy goods and services which include food and for shopping. The use of plastic money also proved to
be popular in entertainment and activities followed by online reservations. However, it was least popular in
buying air tickets. The study recommended awareness campaigns to promote the usage of plastic money as a
safe and convenient method of transacting. It encouraged players in Zimbabwe’s hospitality sector to take
advantage of such technological innovations in order to maximize revenue and remain competitive. Also the
study recommended the branded loyalty card system as a way of attracting and retaining customers with the
overall objective of maximising sales in the sector.

Key words: Plastic money, Debit card, Credit card, Significance, Bank account, Transactability, Consumers

1. INTRODUCTION

Plastic money has been used by many countries over the years as an alternative to cash as it allows users access
to their electronic bank accounts where they are able to withdraw their money at any time as noted by Kass
(1994). Furthermore, plastic money allows consumers ready access to their bank accounts electronically; make
enquiries, perform withdrawals and payments along with other services. In addition, Goi (2005) suggests that
plastic money has released banks and other service providers from the constraints of time and geographical

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location. It is important to note that the adoption of plastic money is in response to the dynamic environment
where business is constantly changing and new alternate means of payment are believed to bring greater value
to the customer. The effects of globalization and emerging trends in the digital world have also compelled the
standardisation of payment systems the world over and organisations in different industrial sectors need to be
responsive to this new phenomenon in order to remain competitive as consumers now prefer quick and easy
means of transacting (Patel, 2012). With the tourism sector being one of the four key sectors of the Zimbabwean
economy as far as foreign exchange generation is concerned (RBZ (2015), there is need for a study on how to
improve competitiveness in the sector. Therefore, this study sought to explore the significance of plastic money
to the hospitality sector in Zimbabwe. In addition, the results of this study will inform government and
stakeholders in the hospitality sector in formulating sound policies which have an impact on the economy as a
whole. Furthermore, the findings of this study will also add current body of literature on plastic money in the
hospitality sector in Zimbabwe and beyond.

2. LITERATURE REVIEW

Plastic money is a term that has been predominantly used to refer to hard plastic cards which are an innovation
to money used in place of bank notes everyday (Sudhakar, 2014). On the other hand, Sumi et al (2012) defines
plastic money as an electronic module which stores all information about card holder and the bank and can be
executed through the use of Automated Teller Machine (ATM) and Point of Sales (P.O.S.) terminal. They also
classify plastic money as an electronic module where all the information about the card holder and the bank are
stored and can be executed through the use of ATM and P.O.S terminals. From the above assertions, it is clear
that money is an exchange medium, while plastic money is a development that heightens money’s essential
purpose there by making plastic money an electronic replacement of hard cash. Furthermore, Patel (2012)
defines plastic money as card based method of transacting by use of either a debit or credit card with a magnetic
strip whereby consumers with their authorization can make payments for services and goods up to their credit
limit which is predetermined limit. In addition, Manivanna (2013) acknowledges the usefulness of plastic
money in paying for travel and accommodation, buying food and commodities or simply for cash withdrawal.
With this in mind, it is clear that money is an exchange medium, where plastic money is a development from
the traditional hard cash that seeks to address convenience and ease of transacting among other issues on an
electronic platform. That said, Ramasamy et al (2006) and Sumi et al (2012) acknowledge the ever changing
form of money over time; from coins, paper money, to the modern cashless form characterized by debit cards/
credit cards/ ATM cards otherwise known as plastic money. For the purposes of this study, plastic money shall
refer to all types of credit cards, debit cards, bank cards and all smart cards for electronic payments as stated by
Ullah (2014).

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2.1 TYPES OF PLASTIC MONEY

More than 30 years ago, cash and cheques dominated the market as the only payment methods available before
the inception of plastic money (Manivannam, 2013). The introduction of plastic money however revolutionized
the ways of transacting as it in various functions that include; permitting users cash withdrawals up to a specific
maximum or to the extent of credit in the account. There are four types of plastic cards as suggested by Nisar
et al (2015) and these are Credit Cards, Debit Cards, Check Cards and International Cards. In addition, Ullah
(2014) identifies ATM Cards as a plastic card based electronic form of money that grants consumers to
withdraw money from their accounts through Automated Teller Machines (ATMs) and Pint of Sale (POS)
devices. Patel (2012) suggests that ATM cards are useful in making funds transfers, cash withdrawals and
making deposits and swiping when payments for goods and services. As suggested by Patel (2012), the various
forms of credit cards include; Smart Cards, Master Card and Visa, Co- branded card, Amex Card, Diners Club
Card, Affinity Global Card, Card Add on Cards and Change Cards. The major difference between the credit
card and debit/ATM card is interest which accrues when one makes a credit purchase by the use of credit cards
whereas the debit card does not attract any interests. The Master Card and VISA card are the most common
internationally recognized credit cards used in credit transactions across the globe (Patel, 2012). These cards
allow tourists to pay for bills, goods and/or services around the world with great convenience. While credit
cards and store cards are essentially the same, store cards are credit card used for purchases in specific stores
and accrue interest at the end of the month. Also, because they are store specific, they do not depend on the
Visa/Master Card network. Store Cards are similar to Credit Cards, but Credit cards as defined by Lanjewar et
al (2015) are electronic based plastic card that grants its user/holder to a certain amount of credit to access goods
or services based on the user’s assurance to pay later for such goods or services. It is therefore necessary that
players in the Zimbabwean hospitality sector be equipped with facilities that allow international tourists to
access to the Master Card/VISA services if Zimbabwe is to be a favourable tourist destination if they are not
yet using them.

2.2 THE EVOLUTION OF PLASTIC MONEY

The roots of money can be traced back as far as the barter trade era. The barter system, as suggested by
Manivanna (2003) involved the exchange of goods for other goods and services. The system therefore depended
on basic commodities including grains; salt, sugar and cattle. People were able to exchange goods for other
goods and services. The barter trade system consequently relied on basic commodities such as cattle, salt, sugar
and even seeds which commodities were for other important goods such as kitchenware while in some cases
some depended on their skills such as hunting in exchange for other goods they needed. Following the
challenges of tradability of some of the goods under the barter trade system, there was commodity money. As
suggested by Mankiw et al (2007), commodity money was based on reserves such as gold, silver, copper, salt
and tea which commodities were deemed valuable. Furthermore, Patel et al (2012) asserts that barter trade

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system remain in use for a long period of time up to a point people began to trade items they did not want/need,
thereby the introduction of commodity money. In as much as commodity money had no intrinsic value as is the
case with paper money. This is substantiated by Khan (2009) who says that with commodity money system,
traders would trade wares for a given weight of precious metal. Whilst the commodity money system was better
than the barter system, it still had challenges with acceptability among other things as identified by Manivannan
(2003) hence the introduction of money. Money in the form of notes and coins backed by gold reserves was
introduced and was universally accepted as a medium of exchange. Ramasamy et al (2006) and Sumi et al
(2012) acknowledge the progression of money over time; from coins to paper money until its formless form
today that is plastic money or electronic cash. It is clear that money has consistently evolved to bring ease and
convenience to consumers among other things, hence the widespread use of plastic money today. The
introduction of the credit card is one of the most significant contributions to the banking industry to date. In
America, plastic money has proved quite prevalent with an estimated 10 000 cards transacting around the world
every second according to statistics by American Bankers Association as cited by Schulz et al (2009).

The history of credit cards as they are known today dates back as far as 60years when they were introduced by
European merchants as credit vouchers (Patel, 2012). Sudhakar (2014) on the other hand, argues that plastic
money’s history starts as early as 1920 when they stared with buy now and pay later system which was
introduced by American business sector for their shoppers. By 1980, credit cards were the most preferred
instrument used for buying on credit. First world countries led in the adoption of multiple payment systems
which depended more on plastic money and other electronic payment methods and this stimulated economic
growth in the process. This shows how the world has been dreaming of cashless society ever since credit
instruments were introduced in the 1950s (Patel et al, 2012). Thus most financial researchers such as Patel et al
(2012) and Sudhakar (2014) are also of the opinion that plastic money was a result of the credit facility. In
addition, Manivannan (2013) traces the origin of plastic cards to Biggins, who launched a credit plan called
‘Charge-it in’ in 1946. By 1950 the first Diner’s Club Cards by American Express was changed from a metal
plate to a card in the process marking the first plastic card (Sudhakar, 2014). With such mottos and brand name
as ‘charge it in’, plastic cards were composed to win the heart of the consumers. Is Ullah (2014) suggests the
introduction of ‘The Diners Club in partnership with American Express’ became the first to launch plastic
money and in 1951 and it issued credit cards to 200 of its customers in New York. The interesting thing to note
is that the Diners Club Card was specific to its own specific merchants hence not accepted by other retailers
(Patel, 2012). Furthermore, it was the Bank of America which took a step further to globalise plastic cards by
introducing the first bank card which was called Bank Americard in the late 1950s. Later on the Bank Americard
was renamed VISA as it is now known today after the Bank of America made licensing agreements with other
banks outside California (Ullah, 2014; Sudhakar 2014). Later on more banks signed up for the bank card under
these licensing agreements. The cards later on, went regional, global and would allow users to swipe and

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withdraw their money from any recognised service provider across the world over. An estimated one million
plastic cards were issued the world over in the early 1990’s with half of them being Visa cards and about 30%
being Master Cards (Nisar et al, 2015). It is such borderless methods of transacting that inspired the use of
plastic money world over.

2.3 THE USE OF PLASTIC MONEY

As Dator (2014) claims, the credit card is one of the most important inventions in electronic communications
as it can now be used almost everywhere in the world. Thus, Pudaruth (2013) suggests that plastic money has
successfully become an indispensable part of the modern payment system and human life and in the process
outshining traditional cash. In short, there has been surge in the use of plastic cards in payment systems
especially in developed countries where emphasis is on replacing cash with plastic cards because of their
convenience and ease of use. A number of developed countries such as United States of America, United
Kingdom have witnessed fast progression in the volume and value of plastic card based payments over the past
decade (Bank for International Settlements, 2003). In Turkey, Zandi et al (2013) notes an increase in card usage
by 0.7 %. Furthermore Klee (2006) and Gerdes et al (2005) suggest that the usage of electronic payments
translated into global economic growth of $983 billion in between 2008 and 2012 and this involves 56 countries
that make up most of the world Gross National Product (GNP). Patel (2012) on the other hand claims that over
90% of transactions in developed countries have gone cashless as a result of the use of plastic money. Such
statistics clearly show the immense contribution of plastic money to the development of several economies
world over. In addition, Bjoklund (2007) notes that the United States of America alone has realised an amazing
growth in debit card usage while Ron et al (2008) reveals a 20% annual year on year increase in plastic cards
usage in the United States of America since 1996. Al-Laham (2009) is of the opinion that electronic money has
capacity to take over from cash as the primary method of making payments of small value and can possibly
make such transacting easier and cheaper for both consumers and sellers. For example, Sweden has an aggregate
3% cash transaction (Patel 2012) in against the United States of America which has 7% cash transactions which
are mainly transactions comprised of very small amounts. These figures suggest that electronic based
transactions, that is, plastic money is prevalent in developed countries while cash transactions consist of the
very marginal proportions that is 3-7% (Patel 2012; Weaver, 2005). Hence, Weaver (2005) proposes that plastic
money is preferred in developed economies especially in the hospitality sector as it provides flexibility for
holidaymakers because it is as good as an international currency and also because of the reason that there is a
direct connection between credit and tourism. Patel (2012) further illustrates the use of plastic card transactions
in developed countries which now have above 90% cashless transactions with Sweden having a cumulative 3%
of cash transactions while the United States of America has 7% cash transactions consisting of very small
amounts. However, Kesh et al (2015) note that with the dynamic environment, business is changing and also
adapting to new alternate payment methods to serve customers. The world has been dreaming of a cashless

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society ever since credit instruments were introduced in the 1950s (Patel et al, 2012). That said, it is suggested
that the credit facility brought about the need to have cards. Unfortunately, there is not enough information on
the use of plastic money in developing economies, even though various studies show consumer preference
towards plastic money payments compared to cash as methods of transacting in some parts of the world such
as America and Europe (Amromin et al., 2009; Humphrey et al., 2006; Guibour et al., 2007: Stanhouse et al.,
2007). The reason for the increase in the use of plastic cards is because plastic money provides consumers with
convenience, ease of use, record of transaction, transaction speed, dispute resolution capability, and reliability
among other benefits hence the growing preference towards the adoption of plastic cards (Jonker, 2007;
Amromin et al, 2007; Jonker and Kosse, 2013). Plastic cards have now made it possible for consumers the
world over to travel without hassle as a result of their benefits over cash. Kass (1994) and Goi (2005) contend
that plastic money has freed financial institutions and other service providers from the limitations of time and
geographical location in accessing the same service which could have otherwise be provided electronically.
Consequently, international travellers are able to pay for their travel and expenses, hotel accommodation, in
various destinations without the need to carry cash. Therefore, plastic money has improved activity in the
tourism industry in some parts of the world except Africa, in terms of numbers, frequency of visits and even
motivating the need to travel.

Although Garcia –Swartz et al (2006) have anticipated the use of cashless to rise through the increased use of
electronic payments systems. However, many developing countries are still dominated by cash as most
monetary transactions are made using bank notes and coins for goods and services (Chavan 2013) and
Zimbabwe is not an exception. Thus the dependency on traditional cash has resulted in laggard approach to the
advancement of key electronic payment infrastructure resulting in the subsequent late adoption of electronic
payment system in many developing economies. For example, the progression of electronic payment systems
in Kenya has been slow as revealed by Ogony (2005), as Kenyans only started using debit and credit cards in
the early 1990’s. Over time, plastic card based methods of transacting have however gained prominence as
suggested by Simiyu et al (2012).over the past two decades, Kenya is believed to have issued out in excess of
80 000 credit cards and 618 000 debit cards proving an upsurge adoption of this technology. In other parts of
Africa Ogony (2005) and Adepoju (2010) note that of the 89 banks in Nigeria, only 7 had ATM machines and
an aggregate of 19.1 percent were offered internet banking. These statistics in such a large country, Africa’s
highest populated economy suggests that the slow advancement of electronic payment technology which is
largely attributed to inadequate telecommunication and power infrastructure has affected the growth of Nigerian
economy. Electronic card based payment system in Zimbabwe started two decades ago when ATMs were first
set up by the Standard Chartered Bank and the Central African Building Society (CABS) about thirty years
after it had started in the United States (Dube et al, 2009). As Dube et al (2009) suggest, the use of plastic
money in Zimbabwe began in the early 1990s when ATMs were installed by the Standard Chartered Bank and

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the Central African Building Society (CABS). Having said that, twenty fours years after its inception in
Zimbabwe, the usage of plastic money is still relatively low according to the Financial Gazette (2014) and thus
supported by RBZ statistics which indicate that low point of sale usage, accounting for less than 4 percent,
while ATM usage averages 6.2 percent. Furthermore it is suggested that plastic money usage is relatively low
as indicated by the RBZ (2014) whose statistics suggest low point of sale usage estimated at less than four
percent, while ATM usage averaged 6.2 percent because Zimbabwean people have not yet embraced or
understood the significance of electronic based payment systems (Uzuru et al, 2010; Chitokwindo et al, 2014).
This is also supported by Munyeza (2009) who maintains that Zimbabwe’s tourism sector is operating on a cash
basis while most international tourists prefer to use plastic money, with up to 99% of international tourist relying
on plastic money. Hence some suggestions in the tourism sector that the country’s low tourism arrivals may be
due to the limited use of plastic money for tourist on holiday. Yet, the world over is becoming more and more
digital and tourists are now opting to use plastic money instead of carrying around cash and making cash
transactions. Then it is against this background that the research seeks to explore the significance of plastic
money in the Zimbabwe hospitality sector.

3. METHODOLOGY

This study adopted a qualitative approach. With the qualitative approach, it is possible for the researcher to
explore the views of different as well as homogenous groups of people as social capital is relational. As
suggested by Neuman (2006) the qualitative approach makes it possible to consider theoretical philosophical
paradigm in an open ended setting. This approach was used to look deeper for underlying values, assumptions
and beliefs. The population of the study consisted of both domestic and international tourists/ vacationers who
booked and paid for their accommodation at the Rainbow Towers Group of Hotels in Harare which are;
Rainbow Towers Hotel and Conference Centre and New Ambassador Hotel. Purposive sampling was used to
select respondents. Primary data was collected through the use of semi-structured Likert scale type
questionnaires. Issues of validity and reliability were addressed by pilot testing of the questionnaire as well as
using standardised questionnaire. Statistical Package for Social Sciences (SPSS) software was used to analyse
data collected and data was presented in the form of frequency distributions and analysed with various statistical
measures.

Primary and secondary data were collected by the researcher using stratified random sampling techniques.
Wilkins (2007) asserts that primary data is obtained straight from the source, that is, from tourists themselves
and hotel staff in this instance. Questionnaires helped the researcher collect primary data. The researcher was
partly involved in data collection with the aid of a trained research assistant in order counter the time limitations.
Questionnaires were administered to respondents by the hotel reservationist came into contact with all

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customers. Secondary data was obtained through the internet, journal studies and some through hotel
publications such as magazines. In addition, the researcher sought the consent of individual tourists before
distributing questionnaires to them. Tourists were selected randomly from hotels’ foyer and asked to fill in
questionnaires, while the researcher waited in an effort to maximize on response rate as well as clarify any
sticky areas. Tourists who denied completing the questionnaire will be noted as non-response Questionnaires
were quick, simple and easy to complete and the researcher collected responses immediately after
questionnaires were completed.

Qualitative data analysis and collection occur together, a point emphasised by Merriam (2009). As prescribed
by Merriam (2009), the researcher will begin with data from the first participant after collection, compiling all
returned questionnaires, the process of coding will commence and the data collected will be input into SPSS.
Data will be converted to tables, graphs and pie charts showing relationships, trends and patterns. Of the
quantitative data gathered, frequency distributions will be calculated. Statistical diagrams will then be used to
summarize statistical data to enhance the presentation and to make it easier for analysis. All quantifiable data
will be analyzed using SPSS. Each possible answer will be given a unique code for easy, answers to responses
will also be grouped and coded accordingly. With the use of computer, analysis software such as SPSS in
conjunction with Microsoft excel will be
used to code and analyze quantitative data. According to Greener (2008) nominal variables such as text names
will need a unique number in order to be entered into SPSS. Non responses will also need an exclusive
recognizable number while dichotomous responses including gender will need to be coded.

4. FINDINGS

This research found out that plastic money is significant in the hospitality sector of Zimbabwe. The use of
plastic money stimulates tourist activity as consumers transact with great ease and convenience. In turn,
increased tourist activity attracts more foreign currency inflows and spending, thereby impacting positively on
the economy as a whole. Despite the immense contribution of plastic money to the tourism sector and the
economy as a whole, there is notable resistance to the use of plastic money as it is considered risky by many as
it is susceptible to fraud among other risks. The adoption of plastic money in the hospitality sector was found
to be low because of the limited/ absence of online payment facilities where relevant such as in-store, air ticket
reservations. As observed, access to such facilities like Point Of Sale devices and ATM still limits the use of
plastic money in the hospitality sector. Players in Zimbabwe’s hospitality sector therefore need to take
advantage of such technological innovations in order to maximize revenue and remain competitive.

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5. DISCUSSION

The good thing to emerge from the findings is that most participants believe and agree that plastic money is so
significant in the hospitality industry although the facilities are not readily accessible in most parts of the
country. In order to address the challenge of accessibility of plastic money facilities, it is apparent for aggressive
marketing to encourage awareness of the benefits of using plastic money. Firstly, the Zimbabwe Investment
Authority in partnership with banking institutions needs to encourage players in the hospitality sector to install
Point of Sale devices for use by transacting by consumers. Such facilities should accept Visa and MasterCard
to accommodate foreigners as well. Thereafter, an awareness campaign should be carried out to advertise such
facilities to clients and potential clients also educating on the benefits associated with using plastic money. In
addition, players in the hospitality sector need take advantage of tourists preferring to use plastic money in
transacting in order to boost sales and attractiveness of their services. With this opportunity in mind, it is
important that more services be accessible with plastic money such as online reservations and purchasing air
tickets where activity in low as much as transacting with plastic money was noted. Therefore, hotels need to
invest more in plastic card facilities as well as e-commerce as these allow for quick, easy and flexible online
payments which are beneficial to consumers. As supported by Kapil et al (2013), a number of online tourism
services such as railway ticket bookings, airline ticket bookings, car rental, hotel bookings and cruise bookings
can be accessed using plastic money. Such initiatives provide flexibility to consumers and accessibility and in
turn giving hoteliers the opportunity to maximize revenue.

6. CONCLUSION

The age profile analysis from the survey indicates that most of Zimbabwe tourism sector is characterized by
active business clients in the working age group. This study revealed that plastic money is the preferred method
of payment as suggested by Munyeza (2009). The hospitality sector needs to take note of these findings in order
for the sector to remain competitive. The participants also agreed that plastic money is easy as a method of
payment when they re on holiday as compared to carrying hard cash. Despite the above point, access to plastic
money platforms like point of sale machines and ATMs are still limited in various tourist attraction destinations
in Zimbabwe. The hypotheses tested and proved that there are other factors that explain (75%) of changes in
the plastic money usage that are related to accessibility and ease of use. Most tourist prefer plastic money to
buy goods and services which include shopping and food, entertainment as well as reservations with buying of
air tickets being the least popular. Tourists perceive as risk in the current environment. The majority of
respondents use plastic money transacting while on holiday with the smaller percentage not preferring the
plastic money at all. The accessibility challenges of online payment system and in store swiping facilities for
air ticket bookings is the main reason why so few are making plastic money transactions.

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