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 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
2	Oracle Financial Services Software (formerly i-flex Solutions)	Flexcube; Microbanker; Finware
3	Infosys Technologies	Finacle
4	FIS | Fidelity National Information Services (FNIS)	Corebank
5	TCS 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)
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
12	TCS 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 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, EBL
4	Phoenix / Iris	TPS Pakistan Limited, Pakistan	BRAC, 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 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

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.

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 System
Account 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 Computer
Cash-in	By bank’s Teller at branch	By bank’s Teller at branch and by Agent
Cash-out	By bank’s Teller at branch and at ATM	By 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 System
The customers access:	Mobile wallet / Mobile account	Bank 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 possible
Utility bill payment	Possible	Possible
3rd party (P2P) transfer	Possible, but not permitted in Bangladesh	Possible, 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)

2. Comviva:                             Comviva Technologies Ltd., India

3. mCheck:                              mCheck Limited, India

4. Fudamo:                              Fundamo Limited, South Africa

5. 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:

·               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 Registration

o        Cash : Cash-in/Cash-out through Agents, Bank Branches and ATMs

o        P2P: Fund Transfer from one customer’s mobile account to the mobile account of another customer

o        P2B: Utility Bill payment, Tuition fee payment, Mobile TopUp, Merchant payment, Buying Bus/Railway/Airline ticket, Cinema Ticket

o        B2P: Salary disbursement by corporate bodies / Industries / Office, Remittance uploading

o        G2P: Disbursement of government elderly allowances, freedom fighter’s allowances etc.

·               Other features:

o        Audit trail

o        Maker & Checker

o        PIN verification if interface is ussd / stk / utk / brew.

o        If interface is sms, PIN verification through IVR

o        sms for some Mobile Network Operators (MNO) and ussd/stk/utk/brew for some other MNOs

o        All transactions need to send confirmation message to the customer by sms

o        Revenue sharing between parties such as Bank, Agent and MNO

o        Merchant Commission deduction from Merchant payment and sharing between Bank and MNO

o        vat deduction at the month end by the system

o        Fee and charge definition for different services

o        Interest calculation on deposit accounts

o        Credit facility to the Agents and interest calculation

o        End of Day processing