Virtual bank

Eight years and 4.5 million smart cards later, ISC is upgrading its infrastructure as it plans to expand its range of services.

Tags: ATMBanking and financeInternational Smart Card ( Business Services
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Virtual bank According to Dr Hasan Alkhatib, MD, CQI, 2 million people had to queue for two days at a time to pick up their pension payments.
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By  Greg Wilson Published  March 22, 2016

International sanctions imposed in the wake of the 1990 Kuwait invasion, and then another 13 years of war or insurgency have shattered the financial infrastructure of Iraq. There are few recognisable modern financial services — no internet banking, ATMs, call centres and limited products. Just a handful of dusty branches and long queues. While the affluent save their money abroad, or in a private bank, many lower income families still prefer to keep their money at home, where they can count it.

The chaos of Iraq’s recent history has also created nearly two million pensioners, all claiming monthly benefits from the government. But with no electronic banking services to speak of, distribution of funds meant that everybody had to converge on the limited number of state-owned banks to collect their money.

“People lined up at the beginning of the month at the branches… and received their pay by standing in line for two or three days until they got their turn,” explains Dr. Hasan Alkhatib, managing director, Canny Quest International (CQI) the Dubai-based technology development arm of International Smart Card (ISC).

“Due to the many deaths of ‘heads of households’, children and women became eligible to claim pensions. As a result the number of pensioners multiplied disproportionately to the population,” he adds.

The largely manual, paper-based system was also open to abuse on a massive scale; whether it was a teller short changing somebody in the branch, or a person collecting payments on behalf of deceased relatives or more organised identity theft, cheating the system was rampant. “The system of distributing pensions was riddled with fraud,” says Dr. Alkhatib. “One particular employee of the pension department was discovered masquerading with 26 different identities,” he adds.

In the absence of any viable banking alternative, ISC working in partnership with government banks started developing a system to tackle fraud and improve customer services. “We started exploring a system with the two largest banks in Iraq, where we could track electronically what was being handed out to recipients,” says Dr. Alkhatib.

If beneficiaries “were paid into an electronic account, which only they could access after their data was verified with [their] biometric data”, then it was hoped this might be able to tackle fraud and improve services, explains Dr. Alkhatib.

Work began in 2008 on a pilot scheme using smart cards, biometric data and independent ‘cash out’ merchants. A limited number of pensioners had their identities verified using their government issued IDs, were then fingerprinted, and issued with a smart card carrying personal information and their biometric ‘template’, which is basically the customers’ fingerprint.

However, instead of approaching a branch to collect their payment, they were directed to ‘cash out’ merchants or agents, who effectively acted as remote cashiers for the bank. “The cash out agents [are] primarily, individuals with a point of service (POS) terminal, equipped with a biometric reader, and a box with [their] own cash. They act as mini-ATMs,” says Dr. Alkhatib.

“This human-operated ATM... is making commission on each transaction. It creates an opportunity for him to have a business, and make a living out of it,” he adds.

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