Manager's Guide

Core banking solution guide for managersA core banking solution, from the customers’ perspective, simplifies their banking experience by allowing them to conduct common financial transactions without visiting their bank’s home branch. They can thus save time and banks can improve upon operational efficiency and transparency with core banking.

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In this guide:

* Core banking solution components

* Market trends

* Implementation precautions

* Compliance and security

* Top vendors

* Related resources

Solution components

In terms of ‘retail banking’, core banking solution is an application that enables the bank customers to conduct common transactions from any branch and a large subset through net banking, ATM, kiosk-based, or phone-banking, instead of visiting their home branches. A few examples of common transactions are:

1. Deposits and withdrawals2. Issuance of account statements3. Issuance of checkbooks4. ATM usage5. Bill payments such as credit card or utility bills

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6. Electronic shopping (Online payments or card purchases)

The software accomplishes this by pushing all transaction data from various sources to a centralized database in near real time and securely. It makes the bank's operations simpler and cost effective by covering the following functions:

1. New business: Covers processes such as opening of new accounts, initiation, and servicing of loan applications, etc.

2. Customer relationship management activities such as standing instructions, pre-qualifying customers for offers, etc.

3. Internal accounts maintenance (general ledger showing income and expense, assets and liabilities)

4. ATM usage5. Specialized banking operations: The solution helps in carrying out all core

banking activities under wholesale banking (targeting other banks as prime customers), and commercial banking (targeting business entities).

 

Market trends

Most large and mid-sized banks in India use core banking. The increased customer demand for integrated banking and Web-based secure access will force small banks to adopt core banking in the near future.

 

ConsolidationsThe core banking software business can be said to be in a consolidation phase. Recently a solution vendor, Temenos, acquired Primisyn and introduced an integrated offering, Insight. Another core banking player, S1, was recently acquired by ACI worldwide. Fundtech was taken over by GTCR. Oracle Financial Services Software (formerly i-flex) is said to be up for sale. Oracle has reportedly recruited Credit Suisse to advise on the sale.

SOA and cloudNew products are being designed and existing ones are re-designed to adhere to service-oriented (SOA) frameworks. SOA is expected to bring flexibility as banks can pick-and-choose from a bouquet of services instead of buying large, tightly integrated packages that leave little scope for enhancements. Vendors are expected to offer their solution through SaaS model. 

Implementation precautions

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As with most enterprise solutions, core banking can be fraught with issues related to compatibility, integration, and change management. The following tips can be useful specially for small banks that are implementing core banking for the first time or mid-sized banks that are migrating to a new package.

* Even before buying any solution, assess and ensure that your bank’s business and operational requirements are future-driven. Once that’s in place, make sure that the chosen solution meets these needs. Measure progress regularly to make  the solution effective.

* If you are migrating from legacy core banking solution, evaluate the costs and benefits of moving to an integrated branded solution first:(i) Will the migration surely result in reduction in compliance and IT costs?(ii) Will it help the bank to adapt to changing customer needs and competitive requirements?(ii) Will it offer you a single view-driven customer service and assure consistency and facilitate cross-selling?

* In case of first-time implementation, ask yourself:(i) Will it result in any change in the bank’s organizational structure?(ii) Have you assessed the type of implementation you want? A standard implementation will be cost effective and speedy but will offer limited customizations and may lead to change management challenges. A functional implementation will offer high level of customizations to minutely match it to your existing processes and thus keep change management issues under control, but will also be expensive and time consuming.(iii) Do you want to maintain the application in-house or outsourced it? 

Compliance and security

For banks that are running in-house developed core banking systems, a small regulatory directive can prove expensive and time-consuming to comply with. In case of packaged solution, the vendors would be compelled to quickly accommodate the changes required.With applications or their parts being offered through cloud, data security and privacy will gain importance.As the entire banking sector relies on integrated core banking systems, even very small banks—regardless of their sizes—will be required to invest in information security policies and solutions to safeguard their customers, their own reputations, and for compliance.

 

Top vendors

Vendor Solution(s)

3i Infotech KASTLE

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Acute Softwares EasyBankCore

CMC Limited (TCS Group) TC/4 (Total Concept - 4)' and 'BRAINS 2000'

DataVision Software Data Mate(for microfinance, cooperative banks)

Dimensions Financials Core Banking Dimensions, Islamic Banking Dimensions

FIS Global Fidelity

HCL BancMate CBS

IDSSPL Dynamic CBS

Infosys Technologies Finacle

InfrasoftTech OMNIEnterprise

Laser Soft Infosystems Laser Panacea, Probanker CB, Laser Twig, Probanker PB

Mindmill BankMill

Nucleus Software FinnOne

Oracle Flexcube, Microbanker, Finware

Polaris Intellect Suite - OrbiOne, BankWare; BankNow

SAP SAP for Banking

Saraswat Infotech SwiftCore core banking solution

TCS FSBaNCS, QUARTZ, Quartz Securities, Quartz Payments, e-Portfolio

Temenos T24

Theme Technologies ThemePro

Trust Systems TrustBank, MicroFinS

 More News and Tutorials

Polaris Intellect CBS' rich functionality designed for Bangladesh banks, straddles the entire range of banking operations from basic Core modules, General Ledger, Operational Accounts, Deposits, Loans and Advances, Security Services Module, L/C Module, Counter Operations, Clearing Operations, Remittances, to other focused modules such as Integration Middleware, MIS and Analytics, Audit Trail and Access Control with Single Sign-on. This unique solution is perfectly suited to develop, modify and launch innovative products and services, thereby improving the go-to-market timeline in a rapidly developing economy like Bangladesh.

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Core Banking Software

What is CBS

Core banking systems are basically the heart of all systems running in a bank and it forms the Core of the bank's IT platform. Amongst other functionalities, it provides the customer information management, central accounting and the transaction-processing functions, which by far are the most fundamental processes in a bank. With the advancement in technology and with passage of time, core systems now-days tend to cover more and more functionality giving the bank an integrated solution for most of its operations in different business lines. Alongside, it also provides a central operational database of customers' assets and liabilities giving facility to generate a 360 degree view of the customer’s relationship with the bank, which is fundamental for the CRM strategy of the bank. Core banking systems reside either in the heart of a bank's data center or in other words can also be termed as the heart of the data-centre itself.

WEALTH BY CBS

“The CBS at SBI executes an average of 42 million transactions per day with a peak of 1,900 transactions per second through a network of about 17,700 branches.“The story began in 2000. With its growth curve heading northward, State Bank of India (SBI), the country's largest bank with the largest branch network, realized the need for a core banking solution. An expression of interest was invited in July 2000, and the actual implementation was started in August 2003 when the first branch of the bank was put on TCS' BαNCS core banking solution.

The planning stage lasted three years, while the BαNCS implementation took another five years (till July 2008) to complete. "The core banking solution rollout project enabled SBI to embark on a journey of transformation by implementing a state-of-the art technology foundation within a robust framework," says Krishna Kumar, the deputy managing director of IT for SBI.

The entire project of implementing the core banking solution was handled by TCS as the systems integrator, while other major technology partners in the project were HP, Datacraft, Cisco and Microsoft. The core banking solution implemented at SBI and its associate banks currently execute an average of 42 million transactions per day with a

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peak of 1,900 transactions per second through a massive network of about 17,700 branches and over 20,000 ATMs servicing nearly 243 million customers.

CONSULTANT ‘ THE CATYALYST’

When considering core banking transformation most banks start with a blank slate and work on the development of an aspirational core end state vision. Usually this vision includes the selection of a strategic core banking solution. The aspirational end state is normally intended to move the bank to a single platform, standardize master data through out the enterprise, and provide a clear view of all business processes while meeting stated business benefits.Problems start to arise after the initial core banking end state vision is developed. At this point most banks want to immediately communicate this vision to their internal teams, shareholders, and industry analysts. Banks communicate the vision without a clear path to achieve the vision. Banks are defining the “what” but not the “how”. When a bank communicates the vision and the start of the core banking transformation program to multiple stakeholders at the same time expectations are set. The early achievement of business benefits are required to keep momentum of core banking transformations going. It is also required to provide the transformation team with the confidence of the enterprise, which will in turn earn them the right to do more. When you approach the transformation with this frame of mind the aspirational end state becomes a series of core banking renovations based on a framework of the strategic aspirational end state.

Here, the role of Core Banking Consultant ‘The Catalyst’ starts.

“To develop a roadmap of smaller core banking renovations that will ultimately lead to the transformation that the bank aspirers to reach.”

Transformation initiatives will be taken by the Consultant are :

1. Develop a strategic aspirational end state2. Assess enterprise capabilities3. Develop a realistic roadmap4. Control communicationsPerhaps. all of these approaches can be valid depending on the context and the strategy of the organization. To compete in the fast-developing market of today and meet its customer Expectations, using the latest and advanced technology with secure and helpful environment. The bank can able to identify and respond to market opportunities which positively affect to increase market share while achieving significant use of IT as Core Banking.

EVERY BODY CAN AFFORD

In today's era of e-banking, Core banking or centralize database is the most demanding requirement for all banks - Co-Operative, Scheduled or Nationalized - to get accurate, speedy and real time,up-to-date information about bank's exposure to risks arising out of

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interest fluctuations & liquidity position based on assets & liability ratios as well as other risks. Creation of data center, IT security & lease lines and proper disaster recovery back-up arrangements as well as the cost of core banking software involves huge investments. Nationalised banks - with a large branch network and no budget constraints -can afford to invest in high-end Core Banking solutions from big software companies.

However, for Co-operative and small size banks with limited branches, fund and manpower constraints, investment in Core Banking becomes more of a luxury.

Objectives:

Facilitate regulatory compliance: The right regulatory platform will lower costs through improved asset reusability, faster turnaround times, and increased accuracy.Improve information flow: To improve the speed and accuracy of decision-making, banks must deploy systems that streamline integration and unite corporate information to create a comprehensive analytical infrastructure.Optimize customer value: Through a holistic core banking architecture, banks can target customers with the right offers at the right time with the right channel to increase profitability.Customer Satisfaction and Retention : Through a single view of the customer, you can build customer intimacy by analyzing customer needs and creating new products and solutions based on accurate, up-to-date customer profiles. In addition to building a long-term relationship with your customers, you can provide relationship-based pricing—offering special benefits and services such as preferential pricing for interest, charges, commissions, fees, brokerage expenses, and taxes based upon overall customer value.Create a service-oriented architecture (SOA): A flexible, robust IT architecture based on SOA is not optional. Banks must embrace SOA to survive.

Key Challenges:• Banks need to focus on key factors, which make the core banking transformation a successful   experience. Broadly speaking, the key challenges in core banking transformation are:• Vendor capabilities and credentials• Dependence on legacy/vendor applications and impact on envisioned technology architecture• Bank’s business goals and alignment to leverage the new technology

A Core Bank Consultant has the major role in the advent of state-of-the-art technologies and global best practices which offer improved agility, efficiency, CRM capability and faster implementation cycles, where banks need to be mindful of the challenges associated with core banking deployments . All the same, banks must appreciate that technology is an enabler and not a panacea. As history indicates, successful banks are those that have understood the potential of new technologies and aligned themselves to fully leverage its power. These are banks that have focused on the adaptive change that made the technology transformation process successful.

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CBS (IT ) Consultant Duties and Responsibilities

Following duties and responsibilities of an IT consultant are to be followed at Abhipurti Solutions to bridge the gap of the Client and Success by IT.

• The consultant has to meet the clients to determine the requirements and needs.• It will be needed to work with the working with the clients for defining the scope of the project.• He or she has to plan the timeline and resources that are required.• It is also needed to study the client’s specifications, perceiving the work practices.• He or she needs to maintain the coordination with the staff of the client’s organization.• It is also necessary to travel the customer sites timely.• There are many other basic tasks to fulfill such as defining network requirements, analyzing the   IT requirements within the companies, and offering objective suggestions on various matters of   IT.• It is also necessary to help the clients with different activities and purchasing the appropriate   systems.• The main and the basic duty are to design and installing new systems.• He or she also needs to do the documentation work properly which is needed to present to the   customers.• He or she has to organize the training process for other consultants.• It is the duty to seek the different ways of applying technology to the business processes.• He or she has to do the work of researching and providing information on diverse technical   trends.• He or she has to work for the development of the technical solutions so has to consult with the   project management.• It is also needed to work as a consultant to advice on options, costs, risks vs. benefits etc for the   proper level of development of the system priorities.

Views by RBI on CBSAbout Reserve Bank of IndiaThe Reserve Bank of India is the central banking institution of India. The institution was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 and plays an important part in the development strategy of the India. It is the monetary authority of India regulating and supervising the financial system, controls issue of currency etc. For more information, please visit http://www.rbi.org.in/

http://www.rbi.org.in/scripts/FAQView.aspx?Id=72

How does the Speed Clearing work?

Banks have networked their branches by implementing Core Banking Solutions (CBS). In CBS environment, cheques can be paid at any location obviating the need for their physical movement to the Drawee branch. The concept of Speed Clearing combines the

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advantages of MICR clearing with that of CBS. Cheques drawn on outstation CBS branches of a Drawee bank can be processed in the Local Clearing under the Speed Clearing arrangement if the Drawee bank has a branch presence at the local centre

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7500&Mode=0Issue of multicity / payable at all branches cheques by CBS enabled banksAs you are aware, various Core Banking Solutions (CBS) implemented in banks marked a paradigm shift in Customer Services. Customers of a branch are now the bank's customers as they can access their accounts from any branch for defined purposes. The new opportunities offered by CBS have enhanced customer service by way of offering various payment products and channels resulting in speedy movement of funds across the country. Leveraging the CBS, banks have started issuing “payable at par” / “multi-city” cheques to select customers with separate transaction codes (29, 30 and 31) by putting in place infrastructure for processing such cheques at all CBS enabled branches.

http://rbi.org.in/scripts/NotificationUser.aspx?Id=3939&Mode=0Delay in collection of outstation cheques – Need for issuance of Payable at par / Multi-city cheques

A few banks with core banking solution have started providing “payable at par"/ "Multi-city” cheque issuance facility to select customers as a value added service. The cheque books issued to such customers are slightly different. The cheque leaves bear the narration “payable at par at all branches” and the MICR code line of the cheques have transaction codes 29 (Current A/c), 30 (Savings Bank A/c) and 31 (Cash Credit A/c) to facilitate processing of such cheques as local cheques at the MICR cheque processing centres. CBS is used for signature verification and balance verification. For the purpose of funding the transactions, RTGS and NEFT are used effectively.It is suggested that such services should be made available by all the banks and should be made available to all the eligible and requesting customers. While designating a branch as CBS branch, it should be ensured that such branches are equipped to process these "payable at par"/ "Multi-city cheques". If the banking system offers this service in a big way, it would not only help banks provide better customer service and minimize complaints, but also help reducing the transaction cost in payment services in the long run.

http://www.thehindu.com/business/companies/polaris-to-implement-intellect-cbs-in-rbi/article2054865.ece

Polaris to implement Intellect CBS in RBIThe Reserve Bank of India (RBI) has chosen Polaris Software Lab, a financial technology company, to implement its Intellect TM core banking system (CBS) across the bank. The deal is valued at $55 million.

http://www.business-standard.com/article/finance/rbi-to-switch-to-cbs-use-in-its-

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operations-109060800084_1.html

the benefits banks say they enjoy from seamless working on Core Banking Solutions (CBS), the Reserve Bank of India (RBI) has decided to adopt this in its operations.It intends to integrate its system with banks and financial institutions on a CBS platform at a later date.The main objective is to achieve a cross-functional and seamless integration of banking activities, including the public debt office. It will pave way for a virtual banking department running on a single GL. It would enhance the system compatibility for multiple delivery channels.

http://www.moneylife.in/article/core-banking-rbis-half-baked-directions-to-banks/27766.htmlRBI has just come out with guidelines for issuance of “Payable at par/Multi-city” cheques to all eligible customers in a standard format. But the RBI should have thought of many other possibilities of offering a wide variety of services using CBS.http://articles.economictimes.indiatimes.com/2013-03-13/news/37684049_1_ucbs-urban-co-operative-branchesThe Reserve Bank today asked Urban Co-operative Banks (UCBs) to implement core banking solutions (CBS) in all their branches by December 31, 2013.http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-asks-urban-cooperative-banks-to-implement-cbs-by-dec-31/article4505328.ece“...very few UCBs have adopted CBS. Hence all UCBs are advised to implement CBS, in all their branches before December 31, 2013,” the RBI said in a notification.It further said the failure to implement CBS within the time frame could result in denial of various facilities like expansion of branches or area of operation to UCBs.http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7888

Implementation of Core Banking Solutions (CBS) by Urban Co-operative Banks (UCBs)

The usage of Information Technology (IT) is critical for the survival and growth of banking institutions as IT usage not only helps banks to reduce their cost of operations, but also enables them to offer products and services at competitive rates to their customers. IT has become not just an enabler but a differentiator for banks in a competitive environment. Further, for effective regulatory and supervisory compliance the banks need to use IT in their operations. Considering the importance of the matter, the Reserve Bank had included ‘Review of Mechanisation and Computerisation’ as one of the reviews to be placed annually before the Board of Directors of UCBs.2. Core Banking Solutions (CBS) essentially helps in integration of the range of services that can be offered by all the bank's branches from centralized data centers. It also helps the banks, apart from providing better customer service, in generating MIS reports for the top management and in submission of various reports to the regulators and the Government. The Government of India has also observed that UCBs without CBS do not integrate well with the banking system and hence there is the need to quickly adopt this model. CBS is a necessity in today’s banking scenario. UCBs are, therefore, advised in their own interest, as also in the interest of their customers, to adopt CBS as soon as

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possible. A large number of software are available today, including cloud based solutions, and UCBs may adopt the model that meets their bank’s requirement.3. Information available with the Reserve Bank indicates that very few UCBs have adopted CBS. Hence all UCBs are advised to implement CBS, in all their branches before December 31, 2013. The concerned Regional Office of the Reserve Bank may be kept informed of the progress made in implementing CBS. It may be noted that failure to implement CBS within the timeframe, could result in denial of various facilities (expansion of branches or area of operation etc.) to UCBs.

IT in Banking শনি�বা�র, ২৬ অক্টো��বার, ২০১৩

Various Software Systems for Bank

Various Software Systems for Bank

[ From chapter-8 of the book "Information Technology in Banking" written by Abul Kashem Md. Shirin and Nusrat Tamanna Prianka and published by Institute of Bankers, Bangladesh (IBB) ]

In Banks, many software are used for various purposes. The software used for opening bank account by deposit and loan customers, and recording their transactions is called Core Banking Software. For managing ATM and POS network, a Switching Software is needed. For credit card issuance and transaction authorization, Credit Card Software is used. Payment Gateway Software is used for settlement of e-commerce transactions. A Mobile Banking Software may be used for opening mobile account and recording such transactions. A brief description of the major software used by banks is given below.

1. Core Banking Software

Core operations of a Bank includes maintaining a ledger of various transactions, keeping customer information, interest calculation of loans and deposits, adjustments to accounts on withdrawal and deposits of funds etc. Previously these operations were done manually. With the advent of ICT (Information & Communications Technology), efforts were done to automate various banking processes using software applications so as to make them simple, efficient, effortless and cost effective. Thus, the platform where ICT is used to perform the core operations of a bank, like those mentioned above, is known as Core Banking System and the software used for this purpose is called Core Banking Software.

In Core Banking System (CBS), the data, instead of huge ledgers, are stored in backend databases in digital form. The same software can be made available in various branches

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of a bank using a WAN. The advantage, a customer can operate on his account from any branch of the bank and if the bank owns Internet Banking or ATM facilities, then the customer can operate on his account from virtually anywhere.

CBS has facilitated better operational efficiency by ensuring improved house keeping and preventing seepage of income. Inter branch reconciliation has become faster and accurate.

Thus, Core Banking System has radically changed the way in which banks function. The greatest advantage of having a Core Bank System is that introduction of new facilities and products wouldn't be a time-consuming process, and branch clearings would become instantaneous. Electronic funds transfer between banks, online trading in the stock markets etc. are examples, which were unheard of in banks pre Core Banking System era.

The international Core Banking Applications now-a-day available in the market are listed in Table-1:

The Core Banking Software available locally are “Flora Bank Online” of Flora Systems Ltd., “Bank Ultimas” of Leads Corporation, “Ababil” of Millennium Software and “Stealer” of ERA Infotech.

Table-1:

 SL Vendor Name of the software Company Logo

1 TEMENOS T24

2Oracle Financial Services Software (formerly i-flex Solutions)

Flexcube; Microbanker; Finware

3 Infosys Technologies Finacle

4 FIS | Fidelity National Information Services (FNIS)

Corebank

5TCS FS - Tata Consultancy Services Financial Solutions - formerly FNS

BaNCS - TCS BaNCS (formerly FNS Bancs - Financial Network Services B@NCS-24)

6 Misys Equation; Bankmaster; MidasPlus

7 Sungard Ambit

Ambit EBS (Enterprise Banking Suite) core banking - Retail banking, Corporate banking (formerly System Access Symbols)

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 SL Vendor Name of the software Company Logo

8 Silverlake Axis Silverlake  - SIBS, Silverlake Integrated Islamic Banking System (SIIBS)

9 3i Infotech KASTLE

10 Polaris Intellect Suite - OrbiOne, BankWare; BankNow

11 InfrasoftTech OMNIEnterprise

12TCS FS - Tata Consultancy Services Financial Solutions - formerly TKS-Teknosoft

TCS BaNCS private banking,

2. Switching Software

A Switching Software is an ATM/POS transaction processing and management system which is used for the following specific purposes:

i) Production of Debit Cards which in addition, includes insertion of customer’s data into the system and storing the inserted data into a database,

ii) Pre-authorization of on-us debit transactions (transactions made by bank’s own cardholders at bank’s own ATM/POS) or remote on-us debit transactions (transactions made by bank’s own cardholders at ATM/POS of another bank). Note: pre-authorization includes validation of Card Number, PIN, date of expiry and card status (normal, stolen, lost, blocked, hot etc).

iii) Routing of on-us and remote on-us transactions to Core Banking System (if debit card) or Credit Card System (if credit card); off-us transactions (transactions made by cardholders of other banks at bank’s own ATM/POS) to a switch or credit card system of issuing bank, or to a local/national payment network (Q-Cash, Cash Link etc), or international payment network (MasterCard, VISA, American Express, Diners Club, Discover etc) for its authorization,

iv) Fraud management,

v) Health monitoring of all the connected ATM and POS terminals,

vi) Settlement and reconciliation.

The standard Switching Software adheres to open system concepts and client/server or 3-tier architecture. The transaction processing engine resides on proven and robust UNIX

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platforms while the user and ATM device interfaces reside on Windows client workstations. System data is stored in an ANSI compliant relational database like Oracle.

In a typical environment, a switching system provides support to the hosted ATM/POS terminal, an ISO8583 interface to the Core Banking System or other bank’s core banking system, and connectivity to regional, national or international networks. Other interfaces may include a host security module (HSM) for PIN verification, card output device (or card personalization system) for production of card, automated notification system for sending sms to the cardholders and ancillary applications for credit card, Call center etc.

The following switching software are in use in different banks in Bangladesh:

SL Name of Software

Name of Developer Used by (bank)

1 IST/Switch Oasis Technologies Ltd., Canada (now FIS Global Services, USA)

Dutch Bangla Bank, Prime Bank

2 iSwitch Inter Block, Srilanka UCBL, Islami Bank

3 Cardsuite Tieto Enator, Latvia One Bank, EBL4 Phoenix / Iris TPS Pakistan

Limited, PakistanBRAC, Standard Bank, Dhaka Bank

5 Tranzware Compas Plus Ltd., Russia

ITCL

6 ITM Uronet Worldwide, USA

AB Bank (Cash Link)

3. Credit Card Software

A Credit Card Software is a Credit Card transaction processing and management system which is used for the following specific purposes:

i) Production of Credit Cards which in addition, includes insertion of customer’s data into the system, and storing the inserted data into a database,

ii) Pre-authorization and final authorization of on-us credit transactions (transactions made by bank’s own cardholders at bank’s own ATM/POS) or remote on-us credit transactions (transactions made by bank’s own cardholders at ATM/POS of another bank). Note: pre-authorization includes validation of Card number, PIN, date of expiry and card status (normal, stolen, lost, blocked, hot etc) and final authorization includes debiting card limit.

iii) Routing of on-us and remote on-us debit transactions to Core Banking System via switching system; off-us transactions (transactions made by cardholders of issuing banks at bank’s own ATM/POS) to a switch or credit card system of another bank, or to a

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local/national payment network (Q-Cash, Cash Link etc), or international payment network (MasterCard, VISA, American Express, Diners Club, Discover etc) for its authorization,

iv) Fraud management,

v) Health monitoring of ATM and POS terminals, if connected to Credit Card System

vi) Settlement and reconciliation.

The following Credit Card Software are in use in different banks in Bangladesh:

SL Name of Software

Name of Developer Used by (bank)

1 Transmaster Tieto Enator, Latvia Dutch Bangla Bank, EBL

2 CardPro SunGurd System Access, USA

Prime, National, BRAC, BEPS

3 CTL Prime Card Tech Limited, Cyprus (now Tsys Limited)

Premier, MTBL, Lanka Bangla

4 iCard Inter Block, Srilanka UCBL, Islami Bank

5 Tranzware Compas Plus Ltd. AB Bank

4. Payment Gateway Software

A payment gateway software is a software that helps in authorizing payments for e-commerce transactions. It is equivalent of a physical POS terminal located in most retail outlets. Some of the main features of a payment gateway include:

         Software application designed especially for ecommerce, although it can be used to authorize payments in traditional brick and mortar businesses.

         Encryption of payment and personal data.          Communication between the financial institutions involved and the business and the

customer.          Authorization of payments.

Some payment gateways feature tools that can help customers figure out shipping and handling costs, as well as sales tax. There are also fraud detection tools and other features that can be used with a payment gateway.

Functions of a payment gateway Software

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A payment gateway software facilitates the transfer of information from cardholder to merchant portal (such as a website, mobile phone or IVR service) to acquiring bank to payment association to the card issuing bank. When a customer orders a product from a payment gateway-enabled merchant, the payment gateway performs a variety of tasks to process the transaction:

a) When a customer selects items to be purchased from the merchant’s website and proceeds for payment by pressing the 'Checkout' or equivalent button, the payment gateway software at the bank to which the merchant’s website is linked activates and the customer enters his card details.

b) The payment gateway then brings the transaction details from merchant’s web-server to its own server located in the bank using SSL (Secure Socket Layer) encryption.

c) If the transaction is made by on-us card, the payment gateway forwards the transaction information to the Core Banking System (if debit card) or to the Credit Card System (if credit card) of the bank.

d) If the card is off-us (or not on-us), the payment gateway forwards the transaction information to the card association (i.e., Visa/MasterCard).

e) If an American Express or Discover Card was used, then the processor acts as the issuing bank and directly provides a response of approved or declined to the payment gateway.

f) Otherwise, the card association routes the transaction to the card issuing bank.

g) The card issuing bank receives the authorization request and sends a response back to the payment gateway via card association with a response code. In addition to determining the fate of the payment, (i.e. approved or declined) the response code is used to define the reason why the transaction failed (such as insufficient funds, or bank link not available)

h) The payment gateway receives the response, and forwards it on to the merchant website (or whatever interface was used to process the payment) where it is interpreted as a relevant response which is then relayed back to the cardholder and the merchant.

i) The entire process typically takes 2–3 seconds

j) The merchant close a "batch" of transactions made by different customers in an interval for settlement purpose. Bank only make settlement for the closed batches.

k) During settlement, the payment gateway checks and deposits the total of the approved funds in to the merchant's account. This could be an account with the acquiring bank if the merchant does their banking with the same bank, or an account with another bank.

In the above process, serial number (a) to (d), (h) and (j) to (k) narrates the functions of a payment gateway software.

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Many payment gateway software also provide tools to automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent for authorization. Tools to detect fraud include geo-location, velocity pattern analysis, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS (Address Verification System) checks.

There is a growing support by acquirers, issuers and subsequently by payments gateways for Virtual Payer Authentication (VPA), implemented as 3-D Secure by VISA, SecureCode by MasterCard and J/Secure by JCB, which adds additional layer of security for online payments.

In Bangladesh Dutch-Bangla Bank has launched the country’s first payment gateway software in the brand name of “Nexus Gateway” on 3 rd June, 2010. The software named “Card Suit E-Commerce” has been procured from the Tieto Enator, Latvia. The Nexus Gateway accepts DBBL’s Nexus Cards, debit and credit card suits of MasterCard and VISA (issued by any bank in the world). Thereafter BRAC Bank launched its internet payment gateway at the end of year-2010.

5. Mobile Banking Software

A Mobile Banking Software is an application used by a bank to register mobile users, agents and merchants; authorize and record cash-in, cash-out, P2P, P2B, B2P, P2G, G2P and ATM transactions. The P2P, P2B, B2P, P2G and G2P stand for Person to Person, Person to Business, Business to Person, Person to Government and Government to Person respectively.

5.1. Mobile Banking System VS Core Banking System

The following are the main differences between a core banking system and a mobile banking system:

Items Core Banking System Mobile Banking SystemAccount Number Conventional bank

account number (with one check digit)

Mobile number + a check digit (optional)

Customer registration

By bank officer at branch Input of mobile number by agent, data entry by bank/3rd party, and authorization by bank officer after verifying KYC.

Communication media

WAN (Fiber Optic, Radio Link, VSAT etc.)

Mobile network (sms/USSD) and/or WAN/internet

Posting device Computer Mobile Phone and/or ComputerCash-in By bank’s Teller at branch By bank’s Teller at branch and by

Agent

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Items Core Banking System Mobile Banking SystemCash-out By bank’s Teller at branch

and at ATMBy bank’s Teller at branch, by Agent and at ATM

No of transactions in a period

A few Huge

Amount per transaction

Large Small

Customer reach Around the branch Through-out the country

5.2. Mobile Banking system VS sms Banking system

Mobile Banking system is not a sms Banking system. The main differences between the two systems are given below:

Particulars Mobile Banking System Sms Banking SystemThe customers access: Mobile wallet / Mobile

accountBank Account (Savings, CD, STD etc)

Cash transactions? Possible through Agents, Bank branch or ATM

Not possible

Device used by the customer to access the system:

Mobile set or ATM Mobile set only

Connectivity between the Customer and the Bank’s data center

sms, USSD, UTK, STK or BREW

sms only

Merchant payment Possible Not possibleUtility bill payment Possible Possible3rd party (P2P) transfer Possible, but not permitted

in BangladeshPossible, but not permitted in Bangladesh

Note: sms stands for Short Messaging System, USSD for Unstructured Supplementary Services Data, UTK for UIM Tool Kit (where UIM = User Identity Management), STK for SIM Tool Kit (where SIM = Subscribers Identity Management) and BREW stands for Binary Runtime Environment for Wireless.

5.3. Available Software for Mobile Banking

In Bangladesh, Dutch-Bangla Bank, for the first time, started Mobile Banking services on 31 March, 2011 using the software named Sybase Mobilizer. BRAC Bank has selected the Fudamo as their mobile banking platform. It is now (April, 2011) under implementation. Commercially available mobile banking software are listed below:

Name of the software Developer . 1. Sybase Mobilizer: Sybase 365, Germany (now, acquired by SAP, USA)

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2. Comviva: Comviva Technologies Ltd., India3. mCheck: mCheck Limited, India4. Fudamo: Fundamo Limited, South Africa5. Obopay: Obopay, Inc., USA

5.4. Customers of Mobile Banking and menu items for them

Three types of customers are involved in mobile banking. They are consumer, agents and merchants.

Consumer:

The consumers are the mobile phone owners who are registered for mobile banking services. In their mobile device, they will find the following menu:

            Balance Check            Mini Statement            Fund transfer (P2P)            Utility Bill Payment            Tuition fee payment            Mobile Topup            Change PIN

Agents:

The agents are Bank nominated parties who will perform Customer registration and cash transactions on behalf of the bank. In their mobile device, they will find the following menu:

            Customer registration            Cash-in            Cash-out

Merchants:

The merchants are Bank nominated shop owners who will sale their goods and services and receive payment from the customers mobile wallet into their own mobile wallet. In their mobile device, they will find the following menu:

            Merchant Payment

5.5. Features of a Mobile Banking Software

A Mobile Banking Software should have the following features:

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               Provide connection to the mobile users, agents and merchants via a mobile operator using sms, USSD, UTK, STK or BREW. The sms stands for Short Messaging System, USSD for Unstructured Supplementary Services Data, UTK for UIM Tool Kit (where UIM = User Identity Management), STK for SIM Tool Kit (where SIM = Subscribers Identity Management) and BREW stands for Binary Runtime Environment for Wireless.

               Provide facilities to perform following activities by Agents, Consumer or Merchants:o        Consumer, Agent and Merchant Registrationo        Cash : Cash-in/Cash-out through Agents, Bank Branches and ATMso        P2P: Fund Transfer from one customer’s mobile account to the mobile account of another

customero        P2B: Utility Bill payment, Tuition fee payment, Mobile TopUp, Merchant payment, Buying

Bus/Railway/Airline ticket, Cinema Ticketo        B2P: Salary disbursement by corporate bodies / Industries / Office, Remittance uploadingo        G2P: Disbursement of government elderly allowances, freedom fighter’s allowances etc.

               Other features:o        Audit trailo        Maker & Checkero        PIN verification if interface is ussd / stk / utk / brew.o        If interface is sms, PIN verification through IVRo        sms for some Mobile Network Operators (MNO) and ussd/stk/utk/brew for some other

MNOso        All transactions need to send confirmation message to the customer by sms o        Revenue sharing between parties such as Bank, Agent and MNOo        Merchant Commission deduction from Merchant payment and sharing between Bank and

MNOo        vat deduction at the month end by the systemo        Fee and charge definition for different serviceso        Interest calculation on deposit accountso        Credit facility to the Agents and interest calculationo        End of Day processing

Lydia Justin ১৭ মা�র্চ� , ২০১৪ ৪ : ৩৪ am

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