The future of banking

In a bid to successfully participate in the global economy, banks in the Middle East are revamping their ATM infrastructures ahead of the Europay MasterCard Visa migration deadline.

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By  Sarah Gain Published  April 25, 2005

|~|card-into-atm1-BODY.jpg|~||~|Financial institutions across the region are upgrading their banking and point of sales (POS) infrastructures to meet the Europay MasterCard Visa (EMV) mandate for smart chip cards by January 2006. Having come to recognise the value of World Trade Organisation (WTO) membership, these nations are striving to achieve compliance so that they can successfully participate in the global economy. The Arab Gulf Cooperation Council has set measures for compliance with the international security mandate that was introduced by the joint industry working group created by major card issuer MasterCard and VISA.

The mandate aims to facilitate the introduction of chip technology in the international payment systems environment by developing collaborative specifications for integrated circuit cards (ICC) and terminals. National card scheme such as the Saudi Payment Network has also provided further incentive for regional banks to speed up the migration process, as the institutions hasten to enable online electronic funds transfer (EFT) capabilities for ATM and POS terminals.

However, the Middle East’s ATM and POS networks are already proving to be ahead of their Western counterparts. “The struggle of countries around the world to roll out the technology necessary to support EMV standards makes it extremely apparent that the Middle East is driving a well developed and highly innovative payments landscape,” says Osman Mehta, general manager for Level Four Middle East.

The smart cards have advanced security measures, which allow offline verification of PIN codes, the pre-setting and adjustment of authorisation parameters and the introduction of risk management procedures.

The EMV compliance will bring benefits to both card issuers and users, decreasing the threat of credit card frauds. However, the benefits of the solution do not end with security, according to Mehta. “The inclusion of an EMV chip [allows] banks to develop schemes such as loyalty and customer relationship management (CRM) packages, with banks opting to add value to customer services by providing rewards, which will in turn drive card usage,” he says.

In order to cope with the changes, regional banks are deploying technologies that can support the infrastructure for their ATM networks. Level Four’s suite of integrated software modules is emerging as the de facto standard for the development and end-to-end testing of new ATM and POS applications.

The Kingdom of Saudi Arabia (KSA), which is a dominant economic force in the region, is leading the way both in terms of debit card issuance and transaction volumes. Through its payment network initiative, the Kingdom is rolling out banking services such as bunch note acceptance and bill payment via ATMs.

“Saudi Arabia is the first nation in the region to adopt the self-service banking trend and we anticipate that other GCC countries will quickly follow suit. The deployment of banking solutions in Middle East is based on a ripple effect. Saudi Arabia is the drop that instigates the ripple and this then spreads to the other GCC countries, expanding to banks of Kuwait, Qatar and the UAE,” Mehta adds.

Banque Saudi Fransi (BSF), which serves its international and domestic customers through its network of 162 ATMs and more than 2,600 POS terminals, has overhauled its infrastructure in order to comply with the EMV standards. In addition, the bank has licensed a simulation of an automated ATM deposit facility, hoping the move will encourage customers to use its self-service offerings.

"We aim to create long-term and personalised partnerships with all our customers through recognised banking expertise and customised financial solutions. The new solution will help us to offer unparalleled quality of service,” explains Ahmad Al Kassim, manager of BSF’s ITD/development department.

Other KSA-based banks are also concentrating on their migration plans. In May 2004, Samba Financial Group positioned itself at the forefront of the Kingdom’s banking sector by implementing advanced technology. "We pride ourselves on being early adopters of advanced technology. Our customers will benefit from a smooth migration to EMV smart cards and more importantly, faster deployment of new functionality at ATMs," says Derek Sham, assistant general manager of Samba Financial Group.

To ensure that its customers are amongst the first to benefit from enhanced ATM features and services, an EMV FastTrack tool was deployed by the organisation to update its multi-vendor ATM network.

The upgrade created EMV-compatible ATM downloads and end-to-end transaction testing directly from the chip card, through the ATM and up to the host system. With high volumes of ATM transactions, a high standard of quality assurance was necessary. It licensed a network stress tester module from Level Four, which simulates the stress of increased ATM network usage, allowing the bank to make sure it is able to continue to provide quality customer service by offering swift and centralised uploading of new functionality to the ATM network. ||**|||~|Osman-Mehta_Level-Four-(2)-.jpg|~|The Middle East is driving a well developed and highly innovative payments landscape, says Level Four’s Osman Mehta.|~|Another bank that is reading itself for the EMV standards compliance is the Arab National Bank (ANB). The bank has strengthened ATM functionalities with an EMV FastTrack, which has enabled the bank to automate testing directly from the smart card, tracing the transactions through the ATM and the host system.

ANB has also upgraded the security of its network, using a 3DES FastTrack to simulate and test the additional cryptography introduced to meet the requirements of the 3DES security standard and ATM remote key management. "The Arab National Bank will save both time and money by using automated testing tools, while gaining a greater level of control and flexibility for future additions to its ATM network,” Mehta claims.

Furthermore, as one of the first locally incorporated bank in the Southern Gulf, the National Bank of Dubai (NBD) has been quick to follow the example set by the Saudi financial institutions. In order to ensure that its network will be ready to support the smart card system, NBD commenced its switch to the Postilion transaction-processing platform from Mosaic Software, a new platform of next-generation payment processing software, in 2004. According to Mehta, “The NBD has led the way amongst UAE banks to comply with mandated standards for EMV and 3DES.”

The bank has deployed core elements of Level Four’s ATM Channel Development suite to interface with the new Postilion switch system as a virtual ATM, making it possible for NBD to automate the regression testing of transactions and provide faster delivery of new ATM content and customer services to the bank’s multi-vendor network.

The ATM Developer solution was also deployed to enable the desktop development of the upgraded ATM content and graphics, allowing NBD to design and test the new content from any desktop PC within its network. “The competitive nature of the banking industry in the UAE requires us to constantly provide new offerings to our customers,” says Abdulfattah Sharaf, divisional head of cards business at NBD.

Once banks in the Middle East become fully compliant with the international security mandates, these organisations will be to work in partnership with other sectors. In addition, the opening up of the local banking sector will also increase competition from foreign banks, which means this sector will have to capitalise on the head-start it has already made in order to retain existing customers and attract new ones.

“Over the next 18-24 months organisations will look to add further functions to the chip cards, rolling out new services and loyalty programmes,” Sharaf says. “Banks in the Middle East are in a strong position to leverage their relationships with large customer populations, in conjunction with their existing ATM and POS network infrastructure. Since customer service is becoming a key differentiator, the delivery of new services via the ATM and POS channels will play a significant role for Middle Eastern financial institutions,” he enthuses. ||**||

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