Shariah shopping cards

The demand for Shariah-compliant shopping cards is creating a need for flexible solutions to support compliancy. Colin Edwards talks to one company addressing this need.

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By  Colin Edwards Published  September 30, 2006

Procco Financial Services, the Bahrain-based, non-banking, backend payment processing services operation, is delivering a totally Shariah-compliant card payments and processing environment.

It is to provide dedicated backend operations and transactions processing services to its sister companies as well as other financial institutions in the region.

The company, established by Kuwaiti-based finance house, The International Investor (TII), is also among pioneers in the acquiring and issuing of chip and pin shopping and loyalty cards in the region.

Procco, which has been licensed by the Bahrain Monetary Agency, is implementing a solution from OpenWay, an international developer and vendor of new-generation processing solutions designed for managing bankcard-based products and services and processing financial transactions 24x7.

It will use OpenWay's WAY4 product and transaction framework to build its new multi-functional retail financing system.

"The first card based financial products to be supported by Procco will be unique and truly Shariah-compliant," says John Dolton, senior partner at TII and chief executive officer of Procco. "This required a partner and provider whose software could provide greater flexibility and scalability than normally available.”

The agreement includes the provision of software to cater for EMV-compliant chip card issuing and acquiring, product and transaction management, accounting, multi-branch management, terminal network management, and integration with Procco's IT infrastructure.

The software also lets Procco issue and acquire EMV-compliant private label and merchant branded cards.

Kamran Khan chief operating officer, OpenWay Middle East, which is based in Dubai, attributed his company's ability to rapidly roll-out a Shariah-compliant solution to WAY4's open architecture.

"Our system is similar to other standard systems in that it can be customised to meet specific needs, but I would say its flexibility lets us to do so with minimum development efforts and this really came to the fore when we set out to make it Shariah-compliant," he says.

To do so, the system had to be adapted to exclude revolving interest calculations, replacing them with the fixed fee model that a card customer pays under Shariah laws.

"It's critical to have totally open systems when approaching such a project. This is what is unique about OpenWay. Everyone claims they are flexible, but we believe we allow more flexibility than anyone else. We go down to the coding level, although this doesn't entail hard coding - it's soft coding.

Even the rates and fees and commissions are soft coded. This is not possible with many competitive or legacy systems. This is why we're able to address so many different global financial markets," he adds.

In line with its parent company's objectives, Procco can use WAY4 to design and manage server-based loyalty programmes, and support multi-application cards with Shariah-compliant instalment and purchasing applications. "There were a number of challenges facing the introduction of Shariah compliant cards in the market,” Khan explains.

“However, the most interesting challenge for OpenWay was how to convert the technology to fit in to Procco's unique business approach," he says.

TII and Procco's initial market focus will be in Kuwait where, to date, more than 200 merchants are said to have agreed to recognise the Shariah-compliant shopping cards. From there, the plans are to secure the endorsement of major regional retail chains and expand the service throughout the region.

"Our system has been scrutinised by the Shariah body and it will be operated under Shariah guidance by TII," he says.

As a unified e-payment platform WAY4, in addition to being Shariah- compliant, is a fully EMV-compliant solution catering to all card payment processes and supporting all the functions needed for each stage in the complete card product and transaction lifecycle.

"EMV is perhaps the biggest of the current challenges in the card technology. While the EMV concept has existed for quite some time, a fully functional Visa and MasterCard EMV solution still remains rare today," says Khan.

"OpenWay was among the first to provide full and real issuer and acquirer Visa and MasterCard EMV compliance. Again this was due to the modular structure of the WAY4 transaction management system, which ensures seamless merge of the new EMV upgrade with the existing magnetic stripe solution," he adds.

Systems architecture, explains Khan, is becoming more agile, more able to adapt than the legacy hard-coded systems. Soft-coded business rules and efficient rule engines mean that systems can be more flexible than ever before.

Throughout the payment card industry and further afield, common architectural patterns can be seen, leading to greater interoperability.

"This means that banks and others can have new, innovative, in-house systems that can give them more freedom and speed than using outsourced services from third-party processing systems. But, up to now, it was often assumed that new-generation and scalable card payment platforms were just not capable of high production volumes,” he says.

In addition to the ability to adapt WAY4 in-house to meet specific customer and market needs, a single installation can run multiple businesses in different geographies and time-zones, making it easy for businesses to meet cross-border and cross-industry demands.

A mature and tested product, developed over seven years for various markets running from Oracle 8 to the latest Oracle 10g - WAY 4 is a fault tolerant system underpinned by the reliability of the Unix/Oracle real-time application clustered architecture.

It is being run today in high-volume applications by customers achieving speeds of 3,000 authorisations per second and managing over 10 million cards across 11 time-zones.

"Our customers are typically innovators in their markets, developing new and exciting ways to meet their customers' needs. We're proud that we have had 100% customer retention throughout our history," concludes Khan.

“The first card based financial products to be supported by Procco will be unique and truly Shariah-compliant. ”

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