Golden present, silver future?
Technology and innovation have spelt doom for yet another product, the traveller's ' cheque (TC). The advent of global credit cards has almost eliminated its need. And the final nail in its coffin has been the introduction of Citibank's global ATM card. This scheme, named Suvidha, offers access to Citibank's world-wide 4.63-lakh ATMs network spanning 100 cities. The cost: A one-time fee of Rs 250 and $2.50 per transaction.The advantages are pretty obvious. The risk of carrying physical notes, as in the case of TCs, gets eliminated. Less cash is blocked. Withdrawals are as required. The only caveat being that some ATM had better be accessible to travellers. There is also the 30-day credit advantage of credit cards. So, who wants TCs anymore?
The flip side
However, there is another side to the matter. The traveller’s cheque loyalists claim that credit cards have not been able to dislodge the TC business even in high credit and ATM card-usage markets like America and Europe. The market there may not have grown but it certainly hasn't dropped. Another point in favour of TCs is that their purchase is an automatic cover against unfavourable forex movements as the conversion takes place at the time of purchase. This is particularly important in view of the fact that the rupee has fallen at least 10% every year against the dollar over the last decade.
In case of credit cards, the exchange rate booked is that at the billing time and for ATM cards that at the time of withdrawal. There is no hedge.
Another argument is that of credit limits. How many people will have credit limits as high as $3000 (Rs 1,30,500)? Such traveller's would already have moved away from TCs. And the core market, the first time travellers , would continue to use TCs.
The way around
That is not to say that the TC market is impregnable. Their main advantage is the exchange rate conversion lock-in. Were some bank to launch a facility to transfer travel quota to any of its foreign branches at the exchange rate prevailing during the time of the transfer and then offer an ATM or debit card, TCs would surely go for a toss.