What About Smartcard?
Overview
The System consists of a suite of software programs and selected hardware utilizing Net1‘s patented Funds Transfer System (FTS) methodology to deliver a payment, switching and settlement environment which underpins the transaction processing system. The software primarily runs on three devices: the smart card, the transaction device (POS/ ATM/self-service kiosk/mobile phone) and the back-end system host that processes all transactions and stores audit trails. By moving processing to the computer chip embedded on a smart card, BGS has been able to provide an alternative card system for markets in developed and emerging economies that have no or limited access to traditional banking facilities.
OPERATIONAL-CONCEPT
The System uses secure smart cards operating offline to provide a fully integrated payment, switching and settlement platform suitable for multiple applications and services. At first, during the registration process, all relevant client account information is stored on the client card. A card acceptance device (CAD) such as a POS terminal enables offline communication between a client and a terminal/merchant card in real-time. All transaction data is stored on the terminal/merchant card for delayed settlement with the System Host. The term “offline“ refers to card transactions that are effected without the need to establish an online connection to the card issuer when the transaction occurs, as the smart cards themselves perform the required authorization directly from card to card. Whilst offline, the smart card can engage in sophisticated transaction processing using state-of-the-art data encryption and PIN/biometric fingerprint authentication to ensure security.
With all software and transaction records on the smart card, the CAD device itself requires far fewer components, circuitry and memory. Each transaction is recorded on both participating cards, transferred to additional smart cards in subsequent transactions and ultimately reported to the host computer, thereby creating a full, multiple audit trail that significantly reduces the potential for theft and fraud. Instead of having to build the overall system to handle peak loads, the System further reduces costs by smoothing the transaction flow over time and using batch processing at the back-end or System Host.
Security Architecture
With worldwide card fraud estimated to be in excess of USD 10 billion annually, security is paramount. Thanks to security on the smart cards, PIN/biometric fingerprint authentication, and the fact that no data is held or managed by typically unsecure devices such as POS terminals, mobile phones or ATMs, BGS has been able to prevent all the typical fraudulent attacks that can occur on traditional banking system platforms.The funds held on each smart card are protected from illegal access through PIN/biometric fingerprint technology. Every transaction is verified by the two smart cards involved in the transaction using state-of-the-art cryptographic systems. The smart card serves as a substitute for cash, but provides for loss tolerance which protects the cardholder in the event of loss or stolen cards. Simply stated, cardholders do not lose their money if they lose their cards.
Positive offline card holder verification is critical to ensure that a payment system does not effect fraudulent transactions. At the same time, the System must ensure that the genuine card holder’s transactions are not rejected.
Multiple Applications?
In addition, access to an application can be either protected or unprotected. Protected applications require PIN/biometric verification of the card holder to effect transactions. Unprotected applications are normally used for low value transactions such as transportation for which speed of processing rather than security is critical. In both cases the transaction itself is encrypted.Since the audit trail of all transactions performed by the active applications is stored on the smart card’s history file, card holders can provide third parties with a comprehensive record of their transaction histories, which can help evidence payments, such as insurance premiums and demonstrate a regular income stream from wages or other sources.
Selected List of Applications:
· Preauthorized Payment (purchasing power on the card - money on the account)
· Bank Credit (flexible financial services for clients)
· Savings Book (profit from the monetary float of mass savings)
· Time Deposit (offer a wide range of maturities and interest payment dates)
· Micro-Lending/Savings (designed to attract low-income clients in emerging markets)
· Deferred Payment (win and retain clients with flexible financial terms)
· Government Payment Application (taxes, fees, fines, utilities, etc.)
· Merchant Credit (allows merchants to offer their customers individual credit lines)
· Petrol Application (effective fleet and consumer servicing programme)
· Loyalty Application (win and retain clients through additional benefits)
· Health/Social Benefits Application (efficient distribution and management of social funds)
· Voucher Application (automated, secure, controlled scheme management)
· Data/ID Application (i.e. driver’s license, government ID, access etc.)
Microfinance based on Smart Cards
In many developing countries microfinance scenarios have become a profitable business scheme as microfinance institutions worldwide have shown that poor, unbanked people are creditworthy and that the daily microsavings of a mass population can accumulate into substantial amounts of money generating a profitabel money float for the microfinance institution. In general, microfinance is the provision of a broad range of financial products such as deposits, loans, payment services, money transfers, insurance and others to low-income households and, their micro enterprises which are usually concentrated in rural and thus more underdeveloped areas. Client access and efficient provision of banking products in rural markets, usually fails through missing branch infrastructure which in turn is the result of a low populated environment. One of the core problems for banks is high transaction and service costs. Creating the necessary branch and service infrastructure to reach a large number of small borrowers who require credit frequently and in small quantities, requires large investments in service outlets and personnel.
System DescriptionThe DUET system platform has been geared to offer financial institutions, operating in rural and urban cash dominated mass markets, the means to provide a flexible and profitable financial card based solution. In order to achieve the necessary outreach and functionality in areas lacking telecom and branch infrastructure, microprocessor smart cards utilizing the offline card to card transaction conception are the basis of the solution. The establishment of a full-coverage, low cost agent network will enable Banks and Microfinance Institutions (MFI) to successfully tap into the microfinance market, using one common system platform.
MF Product 1: Remote Savings bookThe Microfinance Host Center provides the field agent with client specific account information prepared for this day. This information, such as client current account balances and amounts to be collected, could be prepared based on the predefined route taken by the agent reflecting his periodic customer visits schedule. At the point of interaction in the field, the client enters his card into the hand held terminal of the agent, the two cards establish a secure session in an offline mode during which any updates for this specific client, available on the agent card as described above, are transferred to the client card. If we assume a further savings transaction, cash against savings, the value of the respective amount collected in cash is written to the client card (savings certificate). This savings data transaction is signed by the agent using the agent PIN and the transaction is stored on the agent card from where it is transferred to the host at the end-of-day upload. The host then uses this transaction information to perform the necessary updates to the client savings account, making this information available at the next agent download for this client’s visit.
MF Product 2: Remote Microcredit OperationsThe Microfinance Host Center approves and issues a Microcredit against prior client application delivered through a field agent. The approved value is transferred to the clients microcredit account and is made available as a secure certificate for the agent download prior to the client visit. As part of the secure offline communication between agent and client cards, the credit value is transferred onto the client’s card. Now the client card has spending power which can be used for the purchase of goods and services at a merchant terminal. At future agent visits to the respective client, the agreed repayment amount would be paid in cash to the agent and recorded on the agent card as a repayment transaction, ultimately being uploaded to the host for microcredit settlement and account update. With every repayment, the outstanding loan value would be decreased on the client card, offering the client a reference to his account’s status. The cash repayments would also always be performed against the agent’s available cash collection limit maintained on his card.
Benefits
· Provision of customized financial services to low-income households in rural markets that would otherwise remain unbanked
· Establishment of a low-cost agent-host network in areas lacking the necessary infrastructure through the use of smart card technology
· Provision of mobile, manageable and transparent “last mile” delivery channels through field agents
· Architecture soundness guaranteeing secure, uninterrupted and fault tolerant system operation
· Improved system reliability due to usage of distributed server resources and a combination of online and offline transaction processing
· Lowest total cost of ownership consisting of costs of infrastructure, transactions and operations
· Reduction of all manual procedure generating immense paper work and manual error
· Increased speed of operations: Transactions that usually take a couple of minutes each can now be done in just a fragment of time
· Reduced administration costs due to automation of process flows
· Easy and convenient monitoring of financial operations viewable with a pocket sized Value checker, at ATMs or banks as often as required
· Dynamic information on customer behavior and habits
· Provision of customized financial services to low-income households in rural markets that would otherwise remain unbanked
· Establishment of a low-cost agent-host network in areas lacking the necessary infrastructure through the use of smart card technology
· Provision of mobile, manageable and transparent “last mile” delivery channels through field agents
· Architecture soundness guaranteeing secure, uninterrupted and fault tolerant system operation
· Improved system reliability due to usage of distributed server resources and a combination of online and offline transaction processing
· Lowest total cost of ownership consisting of costs of infrastructure, transactions and operations
· Reduction of all manual procedure generating immense paper work and manual error
· Increased speed of operations: Transactions that usually take a couple of minutes each can now be done in just a fragment of time
· Reduced administration costs due to automation of process flows
· Easy and convenient monitoring of financial operations viewable with a pocket sized Value checker, at ATMs or banks as often as required
· Dynamic information on customer behavior and habits
Selected Client List
Savingsbank of the Russian Federation
System DescriptionNationwide Interbank Payment System
Business SectorsRetail, Salary, Wholesale Networks, Petrol Stations, E-Government, Loyalty, Online Trading with Stocks
Click here for the Case Study
National System Uzbekistan
System DescriptionNational Interbank Payment System with 18 Participating Banks
Business SectorsRetail, Salary, Loyalty, Petrol, Mass Transit
Click here for the Case Study
Oman Arab Bank
System DescriptionNational Payment System
Business SectorsRetail, Fleet Management, E-Government (Customs, Fines, Taxes, etc.)
Click here for the Case Study
Savings Bank, Mongolia
System Description Nationwide Payment System
Business Sectors Retail, Salary, Loyalty, Utilities, E-Government
Mircard, Russia
System DescriptionInterregional Payment System with 3 Participating Banks
Business SectorsRetail, Salary, E-Government
Viet A Bank, Vietnam
System DescriptionRegional Payment System
Business SectorsRetail, Utilities
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