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Money at your fingertips
SINCE the introduction of credit cards by a multinational bank in 1994, plastic money and cashless transactions have continued to see an expansion in both usage as well as methods of payments. In their quest to offer enhanced services domestic banks have quickly turned their attention to the Automated Teller Machines (ATM) which provide a secure and easy method of banking.
Inter-bank ATM usage: In order to encourage use of ATMs, banks have connected their systems to one another. Whenever a cash withdrawal request would be made at any bank, the request would be electronically sent over to the customers’ account holding bank and if there is enough balance, the transaction would be executed.
While conceptually simple, the actual cost and logistics of deploying such a solution could be prohibitive. With each bank connecting to the other, it would be a management nightmare in terms of settlements and traces of transactions.
A simpler and more effective solution would be that each bank could be connected to a central hub which in turn would route transactions to other banks. Such mechanisms will comprise of hardware and software components. A generic name for such an arrangement is “switch.” The switch takes transactions from originating banks, and connects them to destination or customer banks.
Currently there are two such switches operating domestically. These are known as M-Net and One-Link. While the former is owned and operated by one of the major private banks of Pakistan, the latter is managed by a consortium of 4 major sponsoring banks.
Procedure: Whenever, a bank issues an ATM card, it records key data of the consumer and itself on the magnetic strip of the card.
When the card is swiped, this information is downloaded by the ATM through the card reader slot and then sent over to the Transaction Authorization System (TAS) of the card owner’s bank.
TAS is a specialized software which is procured, operated and maintained by the customer’s bank and resides either locally or remotely, within the bank’s premises.
TAS identifies the Bank Identification Number (BIN) of the card and routes it accordingly for processing. Hence if the BIN on an ATM card matches the local host BIN, the incoming transaction request is routed to the local host. If it matches other authorized banks, then TAS routes it to the central switch, which may be either One-Link or M-Net.
This in turn carries the transaction to the remote host of the target bank and executes the transaction. It also handles exceptional conditions like timeouts, duplicate transmissions, late replies, etc.
Among the more well-known TAS software engines, EuroNet and Phoenix are deployed within the local market. EuroNet is the core software running at M-NET on switch level. The key advantage of EuroNet has been its international deployed base.
Phoenix is offered by its vendors known as Transaction Processing Systems (TPS). This software has been solely marketed and developed in Pakistan.
Applications: The customer database machines of banks are connected to TAS engines over Local Area Networks (LAN). A software program known as host interface is written to facilitate transmission of transaction messages between TAS and the banking databases.
Once the transaction has been processed, the host interface sends the required response back to the switch’s client application. The switch in turn routes it back to the origination point, that is, the ATM where the transaction is requested from and where the transaction is executed.
Due to an increase in demand, consumers were faced with the problem of inter-bank ATM transactions. For example, while the holder of ATM cards from member banks on M-Net, were able to execute transactions one another’s ATM machines, they were not able to execute any queries from ATM machines of banks which were members of One-Link.
Thus in 2003, the operators of both switches provide the facility whereby customers on one switch could execute transactions on the other. This consequently led to inter-switch connections.
This means that ATMs, could now, at least theoretically, be used at any ATM in the country, regardless of the issuing bank.
The inter-switch connectivity is a delicate matter which involves sophisticated and complex technology implementation. Since it is directly related to financial transactions, reliability and maintenance of audit trails take precedence over speed of and convenience.
Given the recent changes made by banks, one can’t help but wonder why ATM users have problems with their cards. Let’s look at some of the common causes which hinder ATM transactions:
1. No money: every ATM, irrespective of the make and model, has an internal storage to hold currency notes of various denominations. These cassettes are replenished by owner banks according to their frequency and requirements of cash. Hence, whenever an ATM machine runs out of its currency, it will churn out a message reflecting its inability to execute transactions.
2. No authorization: as explained earlier, each ATM talks to the owner bank’s TAS. If communication between an ATM machine and TAS is affected, transactions will not be executed.
3. Link problems: If the BIN on the ATM is of a different bank than the host bank, then TAS will route transaction authorization over to the “switch” for onward processing. Transactions will not be executed if the link is broken.
4. Power outage: ATMs consume a lot of power for operation. Hence, ATMs shut down with power outage unless backup power sources are provided.
5. Non-availability of remote host: ATMs will not provide service if the system component of the target bank is unavailable for any reason.
While ATMs have matured to a reasonable level, there are too many factors which may not exactly be under the control of ATM issuing banks. Since communication occurs over a variety of different lines and frameworks, glitches along the route produce undesirable and aggravating results.
The writer
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