SBI eyes Point of Sales Market

After installing maximum number of ATMs across the country the government owned State Bank of India (SBI) is aiming to become the market leader in the POS (Point of Sales) segment with a target of installing five lakh swipe machines across the merchant establishments in the country. Currently in the POS market ICICI bank has over 1.5 lakh swipe machines, followed by AXIS bank with over 1 lakh machines and HDFC Bank having 75,000 machines.

Once installed POSs help banks to generate revenue, as with each swipe the bank gets its share from the small fee paid by the merchant establishments where the machine is installed. Moreover with RBI’s new proposal that cash can be dispensed through POS terminals at merchant establishments for a fee, SBI’s initiative is surely going to help them in getting a bigger share of the pie from this segment.

SBI is planning to tie-up with VISA, Royal Bank of Scotland and Global Payments to install the POS machines. The Royal Bank of Scotland has POS presence in Europe and Global Payments which is a US based company has tie up with HSBC in India. With this tie up SBI will take a giant leap forward in the payment business. Post installation SBI will become the biggest automated cash dispenser of the country with its combined strength of ATMs and POSs.

Contributed By:
Mr. KRS Mani
SWIFT Consultant

ASBA

‘Application Supported By Blocked Amount’ or ASBA is used during the Share Application process by Individuals while applying for new shares coming in the market in forms of Initial Public Offer (IPO) or Follow on Public Offer (FPO).

The current practice that is followed so far is that the applicant submits a filled up application form along with a cheque for the amount of shares, to the registrar. Then the amount is debited from the account of the Individual and kept in an ESCROW Account. Once the allotment process is over the amount is adjusted against the shares allotted and the balance is refunded by way of a banker’s cheque/demand draft through courier.

With the computerization of the banking sector the scenario has changed over a period of time and core banking is the norm for all banks including private, public, and co-operative banks. This helps a user to access any account from any branch of the bank anywhere in the country.

This technology revolution in banks has helped SEBI (Stock Exchange Board of India) to come out with new innovations to facilitate people who invest in stock markets by introducing ASBA facility. In this process the payment for the shares applied for is not done immediately, but the amount is held blocked in the applicator’s account and as and when the shares are allotted the required amount is debited from it and the blockage is removed. This facility saves time and energy and also saves on Printing, Stationary and labor costs. This contributes in reducing the carbon emission.

With this kind of an arrangement the public is getting benefitted as the amount is debited only when the shares are allotted and the interest loss during the process which generally takes a month can be saved. The possibility of the cheque being lost in transit can also be avoided. The banks are also benefitted from this process as the deposit remains with the bank till the time the shares are finally allotted and thus helping it in CRR and SLR maintenance.

Despite having so many advantages it is yet to become popular among the common people and the primary reason of it is ‘lack of awareness’.

I have myself faced a situation when I wanted to apply for some shares of a company using ASBA and went to Worli North branch of State Bank of India (SBI). When I requested for ASBA form there, I found people were not aware of the new system despite the bank’s website showing the branch among the designated 1061 branches which can issue and accept ASBA form.

After explaining the system to them I was advised to visit their Capital Services branch where I found the situation was no different. This time I was also carrying the newspaper advertisement of ASBA but still the officials there could not help me and instead directed me to go to the Main branch of SBI at Mumbai Samachar Marg. After these two incidents I lost interest in using the new ASBA system and applied in the old system.

My above experience gives food for thought to SEBI who has introduced the system but the stakeholders of the system are not fully aware of it right in the city of Mumbai forget the rural areas. It is also a responsibility of the banks to educate its officials about any new service that it has started so that the common people do not suffer due to lack of proper knowledge of the bank officials.

Contributed By:

Mr. KRS Mani

SWIFT Consultant

Corporate Access to SWIFT

The issue of ‘Corporate Access to SWIFT’ was put on vote at the 2007 Annual General Meeting of SWIFT. Before that the issue was discussed in different committees of the board and was included in numerous papers to share it with wider community.

Anyone associated with the BFSI industry are aware that SWIFT does not sell directly to corporates rather it offers connectivity and creates awareness. The applications and services are offered by banks and third parties and it is important that this distinction be understood.

As far as corporate customers are concerned direct connectivity to SWIFT means cost effectiveness. Once connected, the Corporate Customers are able to choose one of the following existing and Board /AGM approved governance models in consultation with their Bank counterparts:

1. SWIFT Standardized CORporate Environment (SCORE)
2. Member -Administered Closed User Group (MA-CUG) or
3. Treasury Counterpart

Once this system is operational each corporate will be registered with a SWIFT id called Business Entity Identifier (BEI) and they will have to look to their Banks and vendors to provide the required business functionality. With the use of Swift Message Standards, corporates are allowed to exchange messages only with Banks. Currently corporates are permitted only to use payment related messages. Post the proposed changes it will be a matter of choice for the corporate to design their relay system independent of the connectivity option.

Contributed By:
Mr. KRS Mani
SWIFT Consultant

ATM Shops

One of the payment gateways which has revolutionized the Banking scene is the introduction of ATM Machines - called Automatic Teller Machines or Any Time Money.

The western concept of automatic money dispensing machines without human intervention was slow to catch up as people in India were not computer savvy and a less literate populace was suspicious to use gadgets and machines for an important function like withdrawing cash from their accounts.

With the opening up of the economy Indian Banks faced tough competition from foreign banks. One of the popular services provided by the foreign banks was the ATM service. Once this competition heated up, Indian Banks started installing ATMs all over and there was almost a race to set up the ATMs by the public sector banks and ATMs were installed both ‘on site’ and on ‘off site’ locations. In Railway stations and public places ATMs of various banks started cropping up and banks like UTI bank (now called AXIS bank) installed two ATMs in one railway station. The penetration of ATMs in the urban areas was fast and slowly all the district places were covered. Every bank’s ‘Department of Information Technology’ had huge targets to complete and huge money was invested on hardware. ATM cards were given to all account holders free of cost and thus machines replaced the ‘Human Teller’. People started getting better quality currency notes from ATM as they would not function otherwise.

Currently ATMs are managed and serviced by the respective bank’s branch to which it is attached. With the Introduction of Core banking solution in all the banks the ATMs got connected by a SWITCH and one could access their account from any bank's ATM and get their payment. For this a fee was prescribed and all banks participated in the same because their customers benefited with access to a large network of ATMs.

RBI reviewed the policy of charging customers while using other bank’s ATMs and they abolished the fee and made it free from 01-04-2009. After few months banks complained that their cost of operations were not getting covered due to increase in small withdrawals.

To solve this RBI came with modified instructions of ATM usage. Now customers would be allowed five withdrawals each month from other bank’s ATMs free of charge and from the 6th withdrawal onwards they would be charged for withdrawing from other banks ATMs and the upper limit of withdrawal was fixed at Rs. 10,000 per transaction.

This became effective from 15th October, 2009 and is applicable only to Savings Account Holders. The move was to help customers get access to the payment gateway which is nearest to him without burdening him with high cost of service charges. The charges incurred for the first 5 withdrawals from other bank's ATMs if any, are borne by the bank.

Recently RBI has come out with a new outlet for payments and that is both novel and innovative. They have authorized all the merchant establishments and card acceptors to make payments of cash up to one thousand for a small fee. This is a bold step as so far nobody was allowed to dispense cash on swiping the card except banks and their ATMs.

This new facility is a boon as you can get cash from anywhere where a card is accepted and use the card for drawing emergency cash or regular withdrawals from your nearest outlet.

Now you can visualize many shops opening up, having a swiping machine, with the sole purpose of dispensing cash. It will be like the telecom boom when STD and Phone booths opened all over India and you could see a phone booth round the corner with phones and a printer printing out the charges incurred. The indirect ATM outlets could connect the whole of India faster and bring the technology to the doorstep of the common man and the banks closer to their customers.

Contributed By:
Mr. KRS Mani
Swift Consultant

Sibos 2009

Yawar Shah, Chairman, SWIFT


Lázaro Campos, CEO, SWIFT

DepositNow! online check deposit

SIMpass Mobile Payment Solution

Use of Web 2 dot oh in SWIFT

Future of Payment Solution and Messaging Standards

When we talk about payment solution and messaging standards only one International Organization meets all the requirements and that is SWIFT – The Society for Worldwide Interbank Financial Telecommunication. It has taken the onerous responsibility of standardizing all the various types of messages originating between two financial Institutions engaged in international trade. They are the authority for giving Bank Identifier codes (BIC) to Financial Institutions and Business Entity Identifier (BEI) to non Financial Institutions/Corporates under ISO 9362. They have put an end to the earlier Telex and Telegraph system of communication and introduced the benefits of the technical advancement in Telecommunication and Computer Technology in the way banks communicate with each other. One of the major areas covered is the Payment Solution and over a period of time it has been fine tuned to take care of the latest requirement of Know Your Customer (KYC) and Anti Money Laundering (AML) norms.

RTGS or Real Time Gross Settlement payment systems of various countries are integrated with SWIFT, e.g. SEPA, TARGET 1 and 2 etc. In our country the RTGS payment solution used for settling funds is similar to SWIFT called The Structured Financial Messaging System (SFMS). This system is controlled by the Reserve Bank of India (RBI) and all banks have to subscribe to the same. RBI has made two Payment Solution systems for India – National Electronic Fund Transfer (NEFT) and RTGS. Payments below Rupees One lakh are sent by NEFT and above One lakh are sent by RTGS. The reason behind it is not to overload the payment network as there is a heavy load of small value payments.

The hardware and software infrastructure required to run SWIFT is very simple. The Swift system can work in Unix and Windows operating systems and a suitable server may be configured as required by the bank looking into the volumes and load.

The softwares available in India for the SWIFT Solution are:

1. Swift Alliance Gateway (SAG) & Swift Alliance Access (SAA) – Product of SWIFT Scrl, Belgium.
2. Turbo SWIFT – A product of Bank Serv, London.

Though there are many other vendors of SWIFT software approved by SWIFT but they do not provide service in India. For RTGS transfers the software prescribed by RBI is to be purchased.
The Telex service in India has been discontinued and there is no other system to communicate between banks apart from SFMS provided by RBI, which is still not used by all the banks. Only the payment solution of FMS i.e. payment messages are used by banks to make payments between them. Other types of SFMS messages are not used by the banks.

If Payment Solution is taken we have to consider the various methods used for payments.

1. National Payments Corporation of India (NCPI) – a Company which operates retail payments.
2. Centralized Funds Management System (CFMS) – Facilitating own account funds transfer across offices of the bank. CFMS is used as a mode of funds transfer to achieve National Settlement System (NSS).
3. RTGS – available at more than 55,000 branches across the country.
4. NEFT – available at more than 55,000 branches across the country (NEFT is extended to NEPAL under the Indo Nepal remittance Facility Scheme).
5. National ECS (NECS) – NECS leverages on the core banking enabled network of bank branches with access from a centralized location, thus providing pan-India coverage.
6. Local ECS extended to 76 major locations in the country.
7. Cheque Truncation System (CTS) successfully implemented in New Delhi and MICR clearing discontinued.
8. MICR Cheque Processing centres (MICR-CPCs) at 71 places.
9. Speed clearing was made operational to provide a facility for realization of outstation cheques at the local centre of deposit. It is available in 64 MICR-CPC locations across the country.
10. Mobile Payments using mobile phones – as per the guidelines issued in October 2008.
11. Automated Teller Machines (ATM) Payments – Now any customer of any bank can withdraw money from any ATM free of cost for a limited number of times every month. Further other operations like making a payment for credit card or paying or recharging your mobile or making payment of bills are all possible through ATM’s.
12. Payment through Credit Cards or Debt Cards.
13. Clearing Corporation of India Limited (CCIL) is used by banks to settle interbank deals and payment done by single settlement at the end of day.
14. Multicity Cheques issued for the use of local payment in different cities.

RBI has planned to improve the payment system further by 2012 and some of the steps in that direction are:

1. Implementing a feature rich new RTGS System: RBI is planning to move to a new version of RTGS where technological advancements are leveraged to provide better features and scalability. It will be similar to RTGS available in other countries which will enhance the flexibility in operations and liquidity saving features.
2. India Moneyline – a 24 x 7 system for one to one fund transfer: At present the NEFT system operates from 9 am to 5 pm and up to 12 noon on Saturdays. RBI is considering extending NEFT operations on 24x7 basis which is similar to United Kingdom.
3. India Card – A domestic card initiative: At present the Indian Banks are using Visa and Master Card affiliations where in the domestic payments amounting almost 90% of the total volume are being routed and processed through a switch located outside the country. Due to the absence of a domestic price setter the Indian Banks are paying a high cost for this facility. Therefore the apex bank is considering a similar domestic payment card – INDIA CARD, and PoS switch network for issuance and acceptance of payment cards.
4. Redesigning ECS to function as a true Automated Clearing House (ACH) for bulk transactions: At present 76 centres have the local ECS for bulk transactions like ‘one to many’ and ‘many to one’ functions. These processes are being centralized by launching NECS at Mumbai. The indigenously developed ECS/NECS is being redesigned to make it a feature rich, hi-tech ACH network to provide end to end STP.
5. Mobile payment settlement network: Mobile Phones are emerging as an important tool for transmission of payment instructions. The key to make mobile payments efficient is adequate security and Real Time transfer. At present the banks are using the existing payment systems for settling interbank mobile transfers. RBI is planning to build a national infrastructure for facilitating Real Time Mobile Payments.

Contributed By:
Mr. K.R.S. Mani