The Voice for Banking and Finance in Africa
February 2013 ÂŁ3.99
A Banking Lesson Out of Africa The Non-Cash Payments Landscape in Africa
Alternative Payment Gain Momentum
Newgen: On Payment Related Challenges Faced by Banks in Africa
The use of debit and credit cards is still on an upward trend, albeit slower than mobile payment
Denee Carrington, Forrester Senior Analyst, discusses alternative payment interface methods
Payment related challenges that face African banks according to Newgenâ€™s Senior Vice-President
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FROM THE EDITOR
Welcome to Technology Banker - Informing, Influencing and Insipiring Business When it comes to mobile payment, it is no secret that Africa is leading the world in maximising the potential of this new payment technology. There is now week that mobile payment and mobile banking are not mentioned in the news. Travellers who land at any of the major African airports are bombarded with massive billboards, advertising mobile money. Everyone seems to be talking about it. An observer can be forgiven for thinking that mobile payment is Africa’s number one choice for non-cash payment and that it will soon make ATM, debit and credit cards obsolete. However, the reality is far from it. In fact, in Kenya, the first country in Africa to introduce mobile payment, debit card transactions have gone up nearly 100%, during the period between June 2011 and June 2012, amounting to $4.4 billion in monetary value. Furthermore, a staggering 8.12 million debit cards were issued in the same period; a tangible proof that, far from going obsolete, debit cards and credit cards are gaining strength in the continent. So, don’t do away with you plastics yet. In this issue of Technology Banker, industry experts and providers share their views about the African Market and its non-cash payment industry. I hope that, once again, you will find this issue interesting and informative. On a different note, for those of you who want to access our website and magazine on your iPad, Technology Banker is now available on iPad version. If, however, you still prefer the feeling of flicking through our paper copies, don’t hesitate to request for one. Printed copies of every issue of Technology Banker are also now found at the British Library.
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The Non-Cash Payments Landscape in Africa Cash is still king in Africa. But, when it comes to non-cash payment; contrary to popular belief, mobile money does not rule.
The Non-Cash Payments Landscape in Africa
Alternative Payment Gain Momentum
A Banking Lesson Out of Africa
Current Market Trends in Islamic Banking
Alternative Payment Gain Momentum Denee Carrington, Forrester Senior Analyst, discusses alternative payment interface methods.
Executive Interview: Thales SA on Cloud Computing and Cyber Security
Daniel Jaeger: ‘Africa is only at the beginning of a technology revolution’
Newgen: On Payment Related Challenges Faced by Banks in Africa
VENDOR A Banking Lesson Out of Africa Amit Dua, Associate Vice President & Head of EMEA, Infosys Finacle, discusses mobile payments and the lessons that Africa taught the global banking industry.
Vendor’s Page - Fiserv: On Payments Products and Doing Business in Africa
TECHNOLOGY PAGE 27
How Can Mobile Apps Enhance Payment Security
Current Market Trends in Islamic Banking Islamic banking is the fastest growing sector in the financial industry. This article discusses the current trend of the sector and the challenges it faces.
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Events for your Diary
The Non-Cash Payments Landscape in Africa By Hope Varnes
lthough mobile money is growing rapidly in Africa, the use of debit and credit cards is still on an upward trend, albeit slower than mobile payment. Of course, in a continent where there are more small vendors and traders, cash will remain king. Nonetheless, as countries in Africa continue to grow and embrace technology, noncash payment is gaining ground. Here, we will explore non-cash payment trend in Africa, including payments levels and usage channels, regulations and industry projects that drive the development of the payments landscape in Africa, and the challenges and opportunities that confront the financial industry. Understanding the non-cash payment trends in Africa can help you assess the size of the potential market for payment services and plan your strategy to tap this still hugely untapped market in Africa. Moving money over distance is critical to the African people, be it to send remittances, to transfer emergency funds to families, to pay government taxes, to pay for business and personal purchases, or to pay utility bills and school fees.
Photo: ÂŠ John Hogg/World Bank
Forward and Upward Non-cash payments in Africa continued to grow, and have proved resilient to the effects of the financial crisis. According to World Payments Report 2011, published by Capgemini in cooperation with The RBS and Efm, noncash payments in the CEMEA Regions, which includes Africa, has grown by up to 22% between 2007 and 2009. That is equivalent to around $7 Billion, and that excludes data from South Africa. As of June 2012, Nigeriaâ€™s ATM transactions has gone up to 178,421,736, an increase by 8.3% from the same period in the previous year.
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Photo: ÂŠ Georgina Goodwin/World Bank The value of transactions also rose to $5.99 billion, signifying a 34.3% increase. The value of Point of Sale transactions also increased by 104.4%, to $166.4million. According to the CBN, the growth in POS transactions was driven by the increase of people using debit cards and merchants accepting them. In the same month last year, the Central Bank of Kenya also revealed that debit card transactions in Kenya has gone up from around $2.4 billion between January and June 2011 to approximately $4.4 billion over the same period in 2012, while credit card transactions has jumped up from $299 million to $322 million. Card issuance in the country rose, with commercial banks having issued 8.12 million debit cards and 131,397 credit cards. Looking at the figures from two these two countries, it is safe to conclude that the use of plastic as mode of payment is not showing any decline. Despite the dramatic rise in mobile money, debit and credit cards still dominate the non-cash payment landscape in Africa.
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Opportunities Lie with Debit Cards The continued upward trend of debit cards in Africa opens another revenue channel for African regional banks and helps reduce their costs.
Increase revenue and cost reduction Customers who use debit cards to pay for their purchases are likely to be higher earners, particularly in Africa. In addition, customers who particularly use their debit cards to pay for purchases tend to keep their average daily balances at a higher level, as they want to ensure there is enough funds to cover their purchases, compared to customers who withdraw money from ATMs and pay for purchases in cash. So, by encouraging customers to use their debit cards for daily purchases, banks can keep the customers money for much longer and increase their revenues. Additionally, the widespread use of cards reduces the banksâ€™ costs on processing cheques and handling cash.
than that of wealthy customers. However, they are likely to have higher education and younger than those in the affluent segment. They are also well informed about debit cards. However, although they actively use their cards, their use is less frequent than affluent customers use. They know that using debit cards are safe, but they are still unaware of most of its benefits, such as keeping track of their expenses. Strugglers form a large part of the developing countries’ population. They have similar average income as those in the emergent segment, but they are less educated, but not necessarily naive. They rarely use banking products. They are not aware of the benefits of debit cards; they fear losing control of their expenses and are more concerned about fees related to banking products. Photo: Arne Hoel / World Bank
Understanding of customers’ spending behaviour Information about the customers’ behaviour is the one of the most powerful benefit of issuing debit cards. It is vital to the success of any business to understand the mind of its customers, so that the business can create products that are better tailored to customers who spend the most in the business. Additionally, it also allows businesses to segment their customers, which will enable them to focus their efforts to the most profitable segment, plan appropriate marketing approach and choose products to cross-sell. Very few business tools can provide specific information that debit card usage provides. MasterCard has classified customers into three segments: Affluent, Emergent and Strugglers. Affluent customers form just a small part of the population in Africa. However, they have the most money to spend. They are generally well educated and mature. They have a higher level of debit card use, and they see the plastic as a convenient way to carry money. These customers are heavy users of banking products and networks. Many of the customers in urban cities of developing countries, such as countries in Africa, can be classified under emergent segment. Their average income is lower
Maximising the Opportunities Having all the information doesn’t mean success, therefore banks should put in place strategic plans to follow up the information they gather from customers’ debit card transactions. The plans should include marketing campaigns, particularly direct marketing, product development for the active users, and education campaign for the less active customers. As customers life changes, their needs also change and it is important that banks are actively evaluating their customers’ status to ensure that they offer relevant products. For instance, married couples banking needs change once they have a baby. In the developing countries, married couples’ main concern will be their child’s university education. Banks can use these life changes to offer the couples a banking product that will allow them to secure their child’s future.
‘Customers who use debit cards to pay for their purchases are likely to be higher earners, particularly in Africa.’
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Alternative Payment Solutions Gain Momentum By Denee Carrington
igital wallet innovators are capitalizing on evolving smartphone technology to deliver what each hopes will be an effective and engaging mobile interface for use at physical points of sale. As mobile digital wallet options expand, so will interface methods, but, broadly, they can be grouped as Near Field Communication (NFC)-based solutions and non-NFC solutions.
NFC Will Build Momentum But Still Faces Barriers To Entry Google Wallet, Isis Mobile Wallet, and the announced Microsoft wallet all rely on NFC or mobile contactless payment technology. Contactless payments have been available for more than a decade, but adoption has been stymied by a classic chicken-or-egg dilemma between retailers and card issuers. NFC-based contactless payments need both NFC-enabled handsets and point-ofsale (POS) equipment if there is to be a hope for adoption. Now market forces are converging to give NFC-based contactless payments a much-needed boost that will finally provide a fertile environment for broad adoption in the US within the next three to five years. Hereâ€™s what we expect to see:
Denee Carrington, Forrester Research Senior Analyst
â€˘ By 2016, more than a quarter of US consumers will own an NFC-enabled handset Indeed, most new smartphones will be NFC-enabled by 2013, as nearly all leading handset manufactures have announced plans to deliver NFC-enabled handsets to market. Apple is the obvious outlier... for now. But, even if Apple opts out of NFC, the other manufactures collectively have well over 65% penetration of US smartphones, a market that turns over about every two years. In addition, innovators such as DeviceFidelity have developed iPhone cases to make handsets NFC-capable. The handset dilemma will soon be solved.
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• EMV conversion will drive POS upgrades, and some retailers will future-proof with NFC American Express, MasterCard, Visa, and other industry leaders are pushing the US market forward in the adoption of contactless cards using the EMV payment standard. Credit card networks will impose a fraud liability shift as an incentive for merchants to accept and banks to issue EMV-compliant cards by 2015. The migration to EMV will spur point-ofsale terminal upgrades that can be configured to support NFC as well. This will create a synergy, as leading terminal manufacturers such as Verifone will incorporate NFC capabilities along with EMV in their products - essentially helping merchants “futureproof” their investments. • The power of NFC will be revealed in new consumer interactions In-store NFC payments will gain broader reach and adoption over the next three to five years, but there are even greater opportunities at unattended venues. Unattended points of sale such as vending machines, parking, and transit can deliver faster and
more convenient payments, and there are many trials currently underway. In addition, branded, programmable NFC tags can be easily deployed, introducing a new way to engage with consumers. So, as NFC handsets gain prevalence in the marketplace, the two-way exchange of information will inspire innovators to create new experiences with consumers wherever they are: realtime interaction on the street with smart posters, instore with smart displays, or even in the consumer’s home.
Hardware-Agnostic Solutions Face Fewer Hurdles And Faster Adoption Many payments innovators, from new entrant startups to well-funded incumbents, are focused on solutions that are not reliant upon the rollout of an NFC infrastructure. These solutions range from full terminal integration to utilizing barcodes and cloud-based payments. In most cases, they present fewer hurdles for merchants and consumers than NFC-based solutions, and as a result, we will see many of them launch with faster adoption rates in the marketplace.
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Both are rolling out PayPal-like digital payment solutions. Both networks aim first to establish their digital wallets online and then extend them for use in person at POS. • Startups such as LevelUp and Pay with Square offer compelling new business models Both innovators enable consumers to access a digital wallet via their mobile phones at POS - LevelUp uses a barcode to access data in the cloud, and Pay with Square uses location and visual confirmation of identity to facilitate payment. But, unlike other digital wallets, LevelUp and Square’s Register application also deliver clear value to the merchant through embedded loyalty programs and back-end analytics, and merchants who don’t have either should find these features appealing. • Branded wallets such as Starbucks’ leverage customer affinity and enable deeper engagement Organisations, such as banks and retailers that have developed strong customer affinity, existing payment products, and existing loyalty programs, should consider a branded digital wallet experience. Starbucks is the classic example of leveraging existing customer affinity to deliver a pleasing mobile payment experience linked to its loyalty program.
There are three main groups of hardware-agnostic digital wallet competitors: • PayPal, Mastercard, and Visa go head-to-head PayPal is the leading alternative payment for online purchases, and the company is moving aggressively to extend its success offline. PayPal is placing multiple bets to enable customers to directly access their PayPal accounts at POS. Last year, PayPal introduced POS integration at Home Depot, and this year, it launched a cloud-based mobile payment solution in partnership with Erply. While PayPal is focused on growing its business in stores, MasterCard and Visa have their eyes on what has historically been PayPal’s sweet spot - online payments.
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White-label solutions such as those provided by mFoundry or Paydiant can deliver branded digital wallet solutions that enable richer customer engagement and deliver benefits unique to each brand and its customer relationships. However, consumers are likely to utilise only a few digital wallets, so any company pursuing this path should be confident that its existing affinity is compelling enough to make it one of the few wallets that consumers are likely to use. Denee Carrington is a Senior Analyst at Forrester Research serving Consumer Product Strategy Professionals.
‘Indeed, most new smartphones will be NFC-enabled by 2013, as nearly all leading handset manufactures have announced plans to deliver NFC-enabled handsets to market. Apple is the obvious outlier... for now.’
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K2 Telecom Targets Youngsters with Cheap Rates Despite coming into the market at the height of intense competition, K2 is making good progress. Just a week after its launch on 1st January 2013, K2 Telecom has already gained 60,000 subscribers. Currently, Uganda’s telecom operators are fighting head to head to get to the top of the market. Inter-connection charges and network infrastructure sharing are hot topics, with currently no agreement in sight. Already, K2 Telecom is already facing some brick walls, with its subscribers unable to call other networks. And it is still negotiating the interconnection charges with its competitors. Hoping that it would be easy for them to set up interconnection with other networks, K2’s has set the price of calling other networks at Shs150 - 250 per second, making it the cheapest offer in the country. However, with the current tough negotiation it is going through, it is likely that the prices will go up. Currently, the provider offers the lowest intra-network charges in the country at Shs100 per minute and Shs40 per SMS sent. K2 is also expected to roll out promotional offers in the near future. K2 is targeting the younger the market, which makes up the biggest chunk of its subscribers.
Telkom Kenya to Allow Subscribers to Use Rival’s Mobile Money Services
Etisalat Nigeria Teams Up with Alcatel-Lucent to Build 350 Base Stations
Kenya: Orange subscribers will now be able to use the mobile money services of the rival firms such as M-Pesa, YuCash as well as Airtel Money to buy airtime credits and process money remittances.
Nigeria: West African mobile provider, Etisalat has teamed up with Alcatel-Lucent to pursue its plans to build 350 more base stations.
The telecom provider has entered into a joint venture with the electronics payments provider, Pesapal to enable its users to purchase online credits. This also includes credit and debit card purchases. According to Mickael Ghossein, Chief Executive Officer of Telkom, the company has taken advantage of the online payments and electronic airtime distribution available in the country to provide convenience to its subscribers.
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The two companies had started the long-term agreement in 2008, which aims to build 1,000 sites in the coming years. The agreement stipulates that Alcatel-Lucent will provide the equipment as well as services for the site construction. According to the Chief Executive Officer of Etisalat Nigeria, Steven Evans, the agreement between the two companies will improve the quality of service that Etisalat delivers and also enable its network to carry more subscribers.
Bharti Airtel’s Boss Quits On the 15th of January 2013, Sanjay Kapoor, the CEO of Bharti Airtel’s India and South Asia unit, announced that he was leaving the company. Kapoor’s announcement came as a surprise as he had served the company for 15 years and had been running the India, Sri-Lanka and Bangladesh operations of Airtel for 3 years. Kapoor did not give any reason for quitting. Kapoor will be succeeded by Gopal Vittal, the current Airtel’s Special Project Director. Vittal will take over the CEO role on the 1st March 2013. He will be reporting to Sunil Mittal, Bharti Airtel’s Chairman and Managing Director. Bharti Airtel is the third world’s largest mobile group with almost 270 million connections by the end of 2012. It is only behind China mobile and Vodafone. Around 186 million Airtel customers are served by its India unit.
A Banking Lesson Out of Africa A World Economic Forum report on the mobile financial services ecosystem across 20 countries observed that ‘a distinct lack of alternatives, more than supportive institutional or market environments, has been the primary driver of initial adoption.’ And Africa stands testimony to that observation.
n estimated 80 percent of adults in Africa still remain unbanked. But the continent accounts for 15 of the top 20 countries in the world by mobile money usage. Compared to just 3 percent in the developing world, at least 16 percent of adults in Sub-Saharan Africa have used a mobile phone for cash transactions in the past 12 months. The report also goes on to state that services deployed in countries with high adoption level focus primarily on payments. Put all the pieces together and the real value of even a basic money transfer service for an infrastructure deprived economy like Africa emerges. Yes, it’s about shopping, paying the bills and sending money to the family back in the village. But it’s also about enabling quick, low cost international remittances. Remittances from the diaspora are an important source of funding for most developing countries. According to estimates, about $27 billion was transferred last year to 48 of the world’s least developed countries.
Amit Dua, Associate Vice President & Head of EMEA, Infosys Finacle
In Kenya, for example, where 80 percent of those who use mobile phones have a mobile money subscription, international remittances can be sent directly to the receiver’s M-PESA account in real time. Since it’s launch in 2007, the M-PESA service has gone on to become a socioeconomic phenomenon and the de facto case study for mobile money services. The 23,400 M-PESA outlets across the country represent more than five times the total number of postal outlets, Post Bank branches, commercial bank branches and ATMs in the country combined. But the service is now looking beyond the basic ‘cash transfer’ model to deliver truly inclusive banking to nearly 12 million Kenyans who are so far unbanked. M-Shwari, a new service launched under the M-PESA service menu in partnership with the Central Bank of Africa (CBA), will now give subscribers access to formal
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Launched by the First Bank of Nigeria, along with network partners, Globacom, Airtel, Etisalat and MTN, the FirstMonie platform enables subscribers on one network to send and receive money across networks. The service also allows consumers to make payments for goods and utilities as well as withdraw cash from an ATM without a bank card.
Photo: © Dana Smillie / World Bank financial services like interest bearing savings accounts, loans and microfinance. With this service, subscribers can now open bank accounts directly from their phone menu at no extra cost. They can query the loan amounts they are eligible for and loans will also be delivered instantly to their accounts. This evolution of a money transfer tool into a financial services platform marks the first inflection point for the mobile banking ecosystem in Africa. The M-PESA model started as a value added service offered by a telecom service provider because of context. At the time, there were only 1.5 bank branches and one ATM per 100,000 people but for every Kenyan with access to a bank account, there were at least two others with access to a mobile phone. It was the participation of the CBA that enabled its transformation into a financial services platform. In other markets, like Nigeria for example, the mobile banking effort is being kicked off with the active participation of banks, with the stated objective of driving financial inclusion. With an estimated population of 167 million but with only 25 million bank accounts, a large percentage of Nigerians do not have access to even basic financial services. But the 90 million mobile phone subscriptions offer a significant opportunity for providing financial access to the unbanked majority in the country. With the objective of bringing in 20 to 35 million Nigerians into the formal banking system over the next three years, the Central Bank of Nigeria (CBN) issued operating licenses to 16 companies to develop a mobile banking and payment system. A product of this licensingled inclusive banking exercise is FirstMonie, one of the first cross-network mobile services in the world.
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The keyword here is interoperability because FirstMonie, like other services currently available in Nigeria, is just a cash transfer and payment system. So in that sense, it is a half-step ahead of M-PESA but still one level short. That being said, there’s no doubt that this service can lend impetus to the country’s inclusion agenda. Finacle’s partnership with banks and telecos provides an interesting insight into how each of the market players is leveraging this opportunity. Large banks in Africa like Standard Bank have the capability to offer this service to both their existing and new customers with value-added services around electronic vouchers, merchant payments and agent assisted transactions on remote devices. While existing customers will benefit from these services, it also lowers the transaction cost for banks by offering a non-branch channel to remote customers. Standard Bank, leveraging Finacle, will onboard and manage agents, using the mobile or Internet channels to service remote customers cost-effectively. Even though most mobile banking deployments may still be focused on payments and peer-to-peer transactions, the platform has the potential to deliver savings, credit and insurance products to the unbanked and the underserved segments of the population. Historically, the high cost of infrastructure needed to reach out to low value accounts has been a deterrent to that business. Mobile banking has changed the economics of the financial services distribution model. But the World Economic Forum report points out that regulation may turn out to be the key obstacle to delivering true financial inclusion to the unbanked. That’s because mobile money is still largely a regulatory grey area, and because such accounts are treated as a “payment” service, they are denied the benefits of interest payment and deposit insurance enjoyed by regular savings accounts. Probably, the next big mobile banking lesson to come out of Africa will be about regulatory models that promote financial inclusion.
How Device Manager™ Helped ATM Solutions Meet Its Network Availability Goals To succeed as the largest independent operator of retail ATMs in Africa, ATM Solutions must ensure that its network of more than 4,500 ATMs is operating at peak efficiency. Ensuring the highest availability of each machine is paramount, and the company’s biggest challenge. Gavin Reubenson, Business Executive for ATM Solutions talks about how Device Manager™ helped the company meets it network availability goals. Consumers’ growing affinity for self-service and 24/7 banking has spurred the growth of the global ATM market in recent years. ATM Solutions, a rapidly growing and entrepreneurial ATM provider, had outgrown the ATM management system it had been using for more than a decade. We needed a flexible and cost-effective solution that could grow with us. In our business, every transaction counts. Every second a machine is down, we lose revenue. Our processes are aligned to achieving 100% availability all of the time because our reputation and that of our banking partners are on the line.
Gavin Reubenson, Business Executive for ATM Solutions
To support its goals, ATM Solutions needed a more automated solution for monitoring, tracking and managing its ATMs. We previously used a customized, off-the-shelf program that enabled us to monitor the network, but there were a lot of manual, labour intensive processes involved in identifying and responding to faults. Our exponential growth has now rendered that system obsolete. We’re now a bigger and more mature business, and our objectives for customer service have evolved. We needed a system that was as sophisticated as us.
An Automated, Real-Time Solution In 2011, ATM Solutions implemented Device Manager from Fiserv to manage its ATM network. Transitioning to the new system was complex because we couldn’t shut down the network while we made the switch. We were literally changing the wheels while the car was moving.
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To ensure a successful rollout, Fiserv worked with ATM Solutions’ staff, to create a detailed plan and sent a team of technical experts to Johannesburg to assist with the implementation. Using Device Manager, ATM Solutions can now manage the availability of its ATM network in a seamless, automated fashion - from fault detection to resolution and reporting. Device Manager is an event-driven problem management system. It receives, analyses, responds to and manages critical self-service device information. It includes automated problem detection, tracking, dispatching and service provider management, escalation and resolution functionality. In addition, it offers automated report generation and distribution for real-time visibility of the network.
Increased ATM Availability ATM Solutions can only reach its revenue targets through maximum device and network availability. Device Manager tracks each of the company’s ATMs and sends real-time alerts to operators. Based on the alert, the system can enable automatic currency replenishment or automatically dispatch a technician. Tracking, logging, and escalation features are invoked at each stage of the resolution process so that no time is wasted and less revenue is lost. Before we had Device Manager, opening a trouble ticket was a manual process. If a device went down at night, a team would be dispatched first thing the following morning to do a repair service. Today, Device Manager automates many of the decision-making processes related to ATM faults, based on error codes and customized rules defined during the implementation. The system can reset a machine to correct a soft error, flag an emergency cash order or dispatch a service technician. When we get to work, the number of problems our staff must review is dramatically reduced. Device Manager has reduced the work in its call centre as well since many ATM errors are automatically repaired or reset. We have realized a definite cost savings by reducing outbound calls to our technicians.
Improved Visibility and Performance The Device Manager dashboard provides ATM Solutions with real-time information about the performance of every ATM. We get a list of machines without any transactions every 15 minutes. With more than 4,500 ATMs to manage, this is a great deal of information, so the system prioritizes the report based on ATM volume.
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With the help of Device Manager, we can now manage and improve our service through automated escalation rules. For example, if a technician doesn’t respond in a timely manner, the incident escalates all the way to management. This allows us to measure and report on our performance and makes the necessary changes to meet our customers’ expectations. Increased Efficiency and SLA Management Because ATM Solutions deploys and manages ATMs on behalf of banks and retail organizations; meeting the requirements of their service level agreements (SLAs) is critical to the company’ reputation. To that end, Device Manager provides the technology to help ATM Solutions control and improve the company’s performance. • The solution also supports both centralized and decentralized device management models, promoting both central policy management and enforcement • To support complex compliance initiatives, Device Manager provides enterprise-wide reporting and automates report distribution to management as well as vendors. The system makes it easy for us to develop customized reports without programming help.
Solution for a Growing Enterprise Because of its open architecture and design, Device Manager can be integrated and scaled with any size network, an important benefit for a rapidly growing enterprise like ATM Solutions. As new devices and vendors are added, the solution easily accommodates new equipment, messages and larger business rule sets, helping to control operational costs. In just a few months, Device Manager has given us the tools to improve our efficiency, reduce our costs and handle our growth through automation. We’re well prepared for future growth.
“In our business, every transaction counts. Device Manager has given us the ability to improve our efficiency, reduce our costs and handle our growth.” Gavin Reubenson, Executive, Business Development ATM Solutions
Thales SA: On Cloud Computing and Cyber Security France based company, Thales Group, is an internationally renowned technology and security provider for aerospace, defence and transport industry. Technology Banker speaks to, Justice Tootla, Deputy CEO and the first South African leader of Thales SA - the SA office of the global technology company to find out about his views on cloud computing, cyber security, and the African market.
Q How do you guarantee the security of the service? by means of a strong service level agreeA Naturally ment which makes provision for rapid response,
network recovery and restoration of service within a set time period.
the financial industry use cloud computing? Q Should Why?
Yes, it is the latest evolution in ICT trends. And remember; cloud computing in its purest form is merely a customised client centric solution that integrates all customer operations both support operations and production systems in the most cost effective manner.
last year, cyber-attacks hit the headlines; can Q Late you tell us how serious is the problem? And what
can the financial industry do to protect themselves?
A Justice Tootla, Deputy CEO of Thales SA you tell us a little about the service that Thales Q Can provide to the financial industry?
Thales provides NOC (Network Operations Centre Management) and SOC (Security Operations Centre Management) services to the financial industry.
the subject of Cloud Computing, how secure is Q On it?
Cloud computing is a new concept to almost all organisations both public and private, it is fairly secure (prepared for a known environment) but, its resilience is yet to be tested by un-known attacks.
It is a very serious problem as the result of a cyberattack can bring about lack of confidence in financial institution capability, it can result in sabotage of institutional operations, espionage resulting in loss of competitive edge advantage, and attacks to promote propaganda.
Q Is Africa a big market for you? a big market because the African contiA Absolutely nent by all indications is the latest economic frontier. Q What makes Africa a desirable market? is an untapped market of note, its citizens are A Itmore aware and demanding of superior quantities and qualities of services at a quick delivery pace.
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US Dollar bills printed earlier than 2006, rejected by Nigerian banks Nigeria: Nigerian importers and other citizens who have had foreign transactions were disappointed after their US dollar bills were rejected by the banks. All Nigerian banks are refusing to accept dollar bills printed earlier than 2006. The US embassy had confirmed the reports that Nigerian Banks are rejecting US dollar bills. However, it corrected that the affected bills were those printed earlier than 2004 and not 2006. According to the Embassy spokesperson, Deborah Maclean, some banks and other business outside of the US have decided to accept just bills recently produced. This is because the 2004 series of the US currency has a greater chance of being counterfeited. She added that the US government still accepts bills printed before 2004 as a legal US tender, but banks and businesses are left to decide whether to accept these bills or not.
CBK to Introduce New Currency Design In conformity with the decree outlined in Kenya’s Constitution, which prohibits the use of individual portrait on its currency, the Central Bank of Kenya (CBK) will be introducing a new set of currency designs. According to the currency department of CBK, the new images and designs came from suggestions received from Kenyan citizens. According to Samson Burgei, Head of Communications of CBK, the country’s central bank is now finalizing the design details of the currency. There is no definite schedule set as and when the new currencies will be released for circulation, but the CBK has set 2014 as the target year.
18 | Technology Banker February 2013
Ecobank Exceeded First Phase of Recapitalisation Plan Tanzania: Ecobank reported that it has added $15 million more to its capital to comply with the new minimum capital requirement set by the Reserve Bank of Tanzania. In compliance with the BASEL III recommendation, The Reserve Bank of Tanzania has increased the minimum capital requirement of banks to $100 million. The Reserved Bank has structured the recapitalisation plan in stages. In the first phase of the recapitalisation plan, banks had to have $25 million in capital by the end of 2012. It will be an on-going process, and by 2014, all banks are expected to be in full compliance.
Reduced CBR Weakens Kenya’s Shillings The monetary policy established by the Central Bank of Kenya to cut down its lending rates has resulted in the weakening of Kenya’s shillings. Earlier in January, the Kenya’s Shillings depreciated for five consecutive days, going down to as low as 86.70 to a dollar. The central bank’s Monetary Policy Committee, led by central bank Governor Njuguna Ndung’u, has reduced the lending rate for the fourth time since July 2012 to encourage economic growth. The lending rate has gone down from 11% to the latest 9.5% rate.
Daniel Jaeger: ‘Africa is only at the beginning of a technology revolution’ Alcatel-Lucent has been a major player in providing connectivity in Africa, particularly in the rural areas. Technology Banker speaks with Daniel Jaeger, Vice-President of Alcatel-Lucent in Africa, to find out more about the company and the African technology market.
has a wide footprint coverage in Q Alcatel-Lucent Africa, and it looks like it is still growing. Can you tell us why Africa is an important market for the company? indeed our footprint, our business and our A Yes, market share are growing in Africa. Africa is a very important market for Alcatel-Lucent; it is one of the global growth markets for Telecommunications. With all the submarine cables that have arrived at landing points all around Africa, now is the time to bring these connections (or broadband connections) closer to the people. There is very strong demand for that, and it is a very big sized project for the whole industry in that - and we are very happy to be part of that, working with our customers (the network operators, mainly) to literally “connect” the African people. have worked with a number of telecoms Q You network providers in Africa, what gives Alcatel
Lucent, the edge over its competitors?
Daniel Jaeger, Vie-President of Alcatel-Lucent in Africa
of all, we have a strong base in most of African A First countries, with our experts on the ground, in many places with a history of years and even decades.
Secondly, we do have (in contrast to most of our competitors) a full portfolio - Submarine, Transmission, IP, Wireline Access, Radio Access, Applications, Services etc. - in particular in Africa, where there are still a lot of Greenfield deployments, that is very important for our customers.
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you tell us more about the successes that Q Can Alcatel-Lucent has achieved in connecting rural Africa? is strongly involved of the telecom A Alcatel-Lucent infrastructure development in this part of the world, with many successful projects implemented around Africa. The African continent is definitely still yearning for affordable connectivity, as it is essential for social and economic development.
It is easier for them to have one partner, who can take full responsibility, not just for all of the equipment, but even for the management of a network or the training of the staff, where this is required.
Thirdly, we have the innovations. Just a few months ago, Alcatel-Lucent has been awarded by the MIT as the only telecommunication vendor as part of its “most innovative companies” list - for innovations such as Light Radio, just to mention one.
your view, how can fast broadband connection Q Inchange the technology landscape in Africa? change it a lot! Let’s not forget, we are only at A Itthewillbeginning of the revolution here. Many services
The need for more connections is particularly vibrant in high-growth economy countries, where submarine cable networks can help bridge the digital divide and fuel economic and social development. International bandwidth in sub-Sahara countries has dramatically increased by 2012. This massive bandwidth has landed in West African and East African coasts; thanks to EASSy, SEAS, GLO1, LION, MENA (Orascom Telecom), TE North (Telecom Egypt), ACE, TEAMS, Seacom, WACS, and a few other submarine networks. As a result, the cost of International connectivity is reducing considerably; and the continent will witness explosive growth for mobile, fixed and broadband traffic at competitive rates.
like telemedicine, e-learning, etc. have been around “theoretically” for a long time, but only now (with the networks being built and with devices such as tablets becoming slowly but surely affordable), they can really go towards mass deployment. terms of product development and customer Q Inservice, how can the banking sector in Africa maximize the potentials that technology companies, like Alcatel-Lucent, bring into the continent? would say the banking sector is already very much A Iusing the technology advantages, starting with using simple SMS-based services already some time ago, and now growing and evolving these services with better networks, higher security standards, and better devices (as said before, such as tablets). I am sure the banking sector will continue to innovate along these technology advances.
20 | Technology Banker February 2013
‘With all the submarine cables that have arrived at landing points all around Africa, now is the time to bring these connections closer to the people.’
Fiserv: On Payments Products and Doing Business in Africa Having been recognised as Best in Class mobile banking vendor “2011 - 2012 Mobile Banking Vendor Scorecard,” by Javelin Strategy & Research and “Best AML Compliance Solution Provider” in the Waters Rankings 2012, it is safe to say that Fiserv is a leader in its industry. Technology Banker talks to Carol Cowan, Fiserv’s VP Product Management and Marketing, to find out more about Fiserv’s products and its views on doing business in Africa. you tell us a little about Fiserv and its products Q Can and services? is a leading global provider of information A Fiserv management and electronic commerce systems for the financial services industry, providing integrated technology and services that create value and results for our clients. Fiserv delivers technology solutions in five areas of competence: Payments, Processing Services, Risk & Compliance, Customer & Channel Management and Insights & Optimisation. Whether a retail bank is looking for its core banking infrastructure or a trading firm is looking to improve its risk management, we have the personnel and technology to provide solutions and strategies that enable best-in-class results.
Q Who are your customers? of the top financial technology companies in A Astheone world, Fiserv works closely with the full range of financial services organisations - including banks, credit unions, billers, mortgage lenders and leasing companies, and brokerage and investment firms. Our clients are those organisations that recognise the power of innovative technology to enhance performance, reduce cost and ultimately deliver better services to customers.
We work closely with our clients on an ongoing basis, delivering technology and advice that gives our clients the ability to meet current demands, as
22 | Technology Banker February 2013
Carol Cowan, Fiserv’s VP Product Management and Marketing
well as the flexibility to meet the challenges of tomorrow. Fiserv has over 16,000 clients worldwide wide, including ACLEDA Bank in Cambodia, Tesco Bank in the UK and ATM Solutions, in South Africa.
Q Which countries do you operate? is a global company and operates across A Fiserv North and South America, Europe, the Middle East, Africa and the Asia Pacific region. To name just a few countries in which we have clients, we work in the U.S., Canada, Brazil, the U.K., Vietnam, Egypt, South Africa, Nigeria, China and Australia. As part of our continued growth, we have remained committed to entering new countries and passing on our extensive experience in the financial services industry to new clients. different is doing business with an African Q How company from a Western company? country throughout the continent is diverse in A Each its cultural, social, political and legal framework. With its booming population, the continent has great potential and a need for increased financial services. Innovative and forward thinking technology providers, like us, are collaborating, with existing and new financial service providers, to bring advanced digital solutions to the African continent.
In many developing countries, like those in Africa, it is often essential to develop a partnership with a local company that operates there and can guide through the local business customs. The local partner can help plug you into important networks.
Other considerations for working with an Africanbased vs. Western financial institution:
An understanding of Mudarabah banking principles is essential in Islamic states
Service rates must take into account the local economy, not Western standards
• International companies operating or launching technology-based products in developing economies must take into account the power and communications grids to anticipate any potential challenges with outages or other structural impediments to business.
can your products, particularly payment Q How solutions, help banks increase customer acquisition and improve customer service? particularly banks, use Fiserv advanced tools A Clients, to understand their customers’ needs so they can offer a unique and personal customer experience regardless of touch point - online, mobile or inperson. Customers want to get the right information at the time they want. They also want quick access to tasks that they perform most often. Our integrated solutions enable banks and financial institutions to meet these demands. Two best examples of our payment solutions are Corillian Online® and Mobiliti ReachTM.
Corillian Online® combines Online Banking, Payments, and Personal Financial Management. It allows banking customers to access financial overview information, initiate transactions, and review them all from one page, making customer transaction much easier and hassle-free. This makes customers happy, which leads to increased adoption of services and enhances retention. Mobiliti Reach™, on the other hand, enables banks to move beyond the limitations of in-house or multi-vendor strategies to achieve a complete mobile solution that allows them to quickly reach existing banked customers, new unbanked and under-banked segments. It goes beyond mobile interfaces and includes a complete set of tools that enable financial institutions to make the mobile channel successful;
this includes enrolment, customer care, security management, reporting and diagnostic capabilities, which financial institutions need, to meet both internal and regulatory obligations. Currently, I believe that it is the fastest-selling mobile channel solution in the world. It is the preferred solution of more than 1,100 financial institutions in both developed and emerging markets.
As for the customer and channel management needs of banking organisations, two of the best examples are Aperio™ and Signature®.
Aperio™ brings together four essential cross-channel components of customer relationship management (CRM): operational CRM, analytical CRM, campaign management, and integration for sales force automation. It enables financial institutions to manage their customer interactions, deploy consistent organisation processes, and integrate applications and data throughout the organisation.
Signature® brings together assets from across the company to create a total banking solution that spans an increasing array of channels. It is currently used in 45 countries, in 21 languages, and it manages around 80 million accounts.
infrastructure do banks need to run your Q What product? is unique to each individual client and A Infrastructure differs depending on the solutions selected, and whether the client is deploying the technology in-house, or in an outsourced capacity.
Q What is in store for Fiserv this 2013? pressure on financial institutions to rapidly A The innovate is increasing. Fiserv is helping clients deliver innovative products and services, in areas like person-to-person (P2P) payments, mobile banking and online banking, among others. In addition to attracting and retaining customers, financial providers must increase efficiency, ensure compliance and manage risk. These are areas that we continue to focus vast development resources.
‘In many developing countries, like those in Africa, it is often essential to develop a partnership with a local company that operates there and can guide through the local business customs.’
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Windows 8: Cybercriminals “Next Big Fish” According to the threat predictions report 2013 from security provider, McAfee, Windows 8 is the “Next Big Fish” of cybercriminals as it will be the next most popular upgrade for consumers. Therefore, it is imperative for Windows 8 to provide heightened security features against malware and other forms of attack other than what it offers on the earlier versions. Malware writers are much more competitive these days, and they are likely to release a malware that specifically target Windows 8 platform. According to McAfee, there are five main threats for 2013. Threats include ransomware to target mobile devices, mobile malware that goes on unlimited shopping, tap and pay worms to infect mobile platforms, botnets and single-click hacking to online web pages.
Increasing mobile malware threats also increases risk on BYOD
Experts Advice Consumers to Disable Oracle’s Java Software
Mobile Threats Target Android Devices
According to experts, the most common exploit for 2013 is likely to target mobile devices.
Computer users were urged to temporarily disable Java on their computer due to the security risk it poses.
Over the past years, malware targeting Android devices has grown massively.
Smartphone and tablet use are often used by employees to complete company related work, which can put the corporate information at risk if restrictions are not implemented. Africa, Asia, India and some parts of Eastern Europe face highest risk from mobile malware attacks. Mobile applications that acquire data such as location, contact as well as other important information can be a potential threat to the user. According to a survey conducted by Kaspersky Lab and B2B International, involving professionals and businesses across 22 countries, around 33% of companies give employees full corporate access using their own devices.
24 | Technology Banker February 2013
It was discovered earlier in January that Java has some security weaknesses that expose users’ machines to various forms of attacks including virus infection and ransomware. Criminals use ransomware to shut down the user’s computer and users have to pay them to get their access back. Meanwhile, Oracle has announced that it has already issued 86 new security vulnerability fixes. The software developer suggests that customers update Java on their computers as most websites and software can only run properly with Java enabled.
The surge in growth of malware started in 2011, when discovery of malwares rose from a monthly average of 8 malicious software in January 2011 to an average of 800 monthly by the end of the year. At the end of 2012, Kaspersky lab detected, on average, 6,300 malware each month. According to the Kaspersky Security Bulletin 2012, about 99% of new mobile malware detected, targets Android devices. There are only minimal recorded attacks on Java and Symbian-based devices.
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26 | Technology Banker February 2013
Mobile Apps to Enhance Payment Security By Grey Thomas
ards with a magnetic strip have been the frequent cause for massive monetary loss and cases of fraud in the past. Today, there is a growing concern involving making payments across mobile devices. Due to an increase in the numbers of new competitors that are not affiliated with banks, consumers are afforded the opportunity to turn elsewhere. This development has led banks to their very own banking applications, all of which are accessible via mobile platforms. However, it is important to note that whilst these apps are convenient, cheaper alternatives, they are not immune to breaches and risks. There are a number of fraudsters targeting sensitive transfer information, and utilising it to steal money. Consequently, new apps have been designed to fight this onslaught and keep bank accounts and private information secure. Designed to suit a variety of audiences and different needs, these apps are highly effective in preventing fraud that can have damaging
effects to individuals and businesses alike. The two main mobile phone applications can help improve customersâ€™ mobile security available in the market are CSI globalVcard and Qwick Codes Mobile.
Virtual Card Number Also advertised as the CSI globalVcard for those who use MasterCards, this handy application makes it possible for the user to generate multi-functional virtual account numbers from their phone, smartphone or tablet consoles. Whilst it is restricted to one type of card at present, opportunities for expanding to incorporate various other brands as technology advances are imminent. Issued by the Regions Bank, the general target market for this product includes small to mid-size businesses that need to use their mobile platforms on a day-to-day basis. It was constructed to boost the security of individuals who own a CSI MasterCard, and includes innovative features.
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Qwick Codes Mobile Wallet is aimed mostly toward those who shop and make frequent purchases online. However, it can also be useful to merchants who make a living from selling goods and services to the consumer market. Its fundamental design, replacing cash with tokens, is highly effective in safeguarding real assets, whilst also being efficient and convenient. Whilst it must be compatible with the payment device you are using, many banks and organisations are making the necessary changes in order to incorporate this feature. • Security features - You will be able to set up a unique protective PIN, as well as having the option to create multiple computer-generated account numbers • Control features - Control elements are included, imposing purchase limits, and creating user-specific profiles in merchant groupings, financial quantities and payment restrictions. In addition, you are also at liberty to inspect or block any existing cards • Convenience features - With the CSI globalVcard, you are afforded the ability to copy-paste any card account information within the smartphone browser. Owners can also send virtual numbers via text, e-mail or any MasterCard compatible software. This form of protection is especially effective when combined with various other security mechanisms. Any purchases you make will appear on your monthly bank statements, exactly as any other transactions.
Tokenisation A group of developers, including California based, Seal Beach, MagTek, produced an app known as the Qwick Codes Mobile. It is designed to replace payment card data with tokens, making online transactions far more secure for all users.
Essentially, a Qwick Code is a scrambled number or token that serves to substitute for the user’s actual card account number. It is triggered by using any app on a mobile phone or by swiping your card swiped when making purchases. The app then authenticates the transaction by communicating with the Qwick Codes host in the cloud. The transactional information is then tokenised and given back to the user. This form of data protection can be used in areas that accept the Qwick Code token service, as well as ATMs. They can be shared amongst others to perform direct payment transfers. Effective in preventing many instances of fraud, users can be assured that no scanning or copying of card information can occur in shops or at abandoned payment terminals. It is small and easily integrated with your phone, requiring no special hardware or downloads apart from the card reader. Unlike the CSI globalVcard, it is compatible with all kinds of cards. Fast, secure and convenient, it is a simple matter to exchange carrying cards around to simply presenting your Qwick Codes, greatly reducing the risk of fraud. Both apps are best when matched with their target market, and people have found them to be very efficient when making purchases online, or off.
‘Whilst apps are convenient, cheaper alternatives, they are not immune to breaches and risks.’
28 | Technology Banker February 2013
Newgen: On Payment Related Challenges Faced by Banks in Africa Mobile Money, mobile payments and cash ‘less’ society, are the current buzz words in Africa. Of course, banks and big businesses would like most people to use their mobile phones or debit cards when paying for goods, as cash is expensive to manage. However, though the idea of a cash ‘less’ society is turning into a reality in Africa, it is not an easy process. Technology Banker speaks to Newgen’s Senior Vice-President - Technology Mr. Virender Jeet, to discuss the payment related challenges that African banks face. your experience as a vendor, what are the key Q Inpayment-related challenges that banks face? payment-related challenges have got to do A Many with the bank’s inability to adapt to the changing technological ecosystem and regulatory environment. Some key issues are: a. Bandwidth and Infrastructure constraints: Many banks in developing countries don’t have adequate infrastructure to cater to the growing technology requirements. For example, remote branches have bandwidth constraints, and whatever limited bandwidth is available, is taken up by the Core Banking System. Consequently, it is tough, if not impossible, for them to decentralize the implementation of regulatory payment related mandates like cheque truncation, ACH and EFT. b. Multiple Disparate Payment Systems: Due to evolving payment systems within Africa, many banks have separate silos for various payment systems that are disconnected. The relationship manager cannot get a single 360 degree view of all the payments of his customers, the IT manager needs to manage and troubleshoot many different applications and the administrator needs to manage multiple user management modules. With the newer payment
Mr. Virender Jeet, Newgen’s Senior Vice-President
systems taking shape and electronic transactions increasingly replacing paper, this problem is only going to increase. c. Accessibility in Remote locations: Banks are not able to provide last mile connectivity in remote locations/branches as well as decentralize their operations to bring their operations closer to the customer. Banks have to install legacy systems on each desktop, so deployment and patch/version management becomes a concern. Banks are not able to get the full advantages of a payment system like cheque processing because they don’t have online access. Lack of access in remote locations also has a direct adverse impact on customer service. does Newgen help banks overcome these Q How challenges? has been providing banks with A Newgen technological products and solutions to cater to the regulatory mandates as well as streamlining and improving the payment processes. It has a wide experience in implementing payment solutions at banks across the globe, especially in the AsianAfrican market - from Cheque Truncation System to SWIFT processing to ACH/EFT processing, Direct Debits, Future Cheques and other payment processes.
www.technologybanker.com | 29
For example, a leading bank in Ghana had little or non-existent network connectivity at remote locations most of the times. Newgen provided it with offline cheque scanning capability, allowing it to upload images and data to the central server when connection is available. This helped the bank decentralize their cheque clearing operations to the remotest branches, even without a reliable network.
Newgen solutions enable Banks to stay ahead of their competition in today’s fiercely competitive market. The approach adopted by Newgen is centralization of operations. Newgen Business Process Management (BPM) and Enterprise Content Management (ECM) solutions help to leverage existing business and legacy systems to meet the demands of the financial marketplace. Newgen solutions are easy to use, require minimal training, and allow paperless processing. The solutions can be deployed for both centralized and distributed operations and result in reduction of Turn-Around-Time (TAT) through automation and streamlining of various banking processes. Newgen has successfully built and demonstrated its ability to enable both Human-Centric and Straight through Processing (STP) for almost all banking processes.
Newgen also pioneered the use of consolidated payments hub. In fact, in one of the largest panAfrican banks in the region, Newgen has automated various payment processes on the same platform, offering them great stability and scalability. Most of Newgen’s products are web enabled, so banks don’t have to worry about deploying the patches at each desktop in branches separately, and they access the User Management and Administration centrally. Newgen solutions also adhere to the latest security standards.
advice would you give to banks that are Q What looking to change their legacy system, particularly regional banks in Africa, so that they can avoid expensive mistakes?
While choosing any system, the banks have a decision to either build or buy. Each has its own pros and cons. Banks should look at a solution that is built on a framework that is flexible and agile enough to cater to ever-changing market scenario. BPM makes this factor an achievable component.
why should banks choose Newgen as a Q Finally, vendor and not its competitors?
Newgen provides a framework that is most suited for the African market. The knowledge of the market and addressing the volumes is most suited with Newgen solutions.
30 | Technology Banker February 2013
‘Banks should look at a solution that is built on a framework that is flexible and agile enough to cater to ever-changing market scenario. BPM makes this factor an achievable component.’
Current Market Trends in Islamic Banking By Newgen
rough estimate of Muslim population worldwide puts the number at 1.61 billion, which makes Islamic banking one of the fastest growing sectors in the financial industry. Islamic banking has grown at a consistent pace over the last three decades. As of 2011, the volume of transactions undertaken by Islamic banks and financial institutions touched $1.086 trillion. During the last three decades, Islamic Financial Institutions (IFIs) have increased substantially in the Middle East and North Africa (MENA) countries, and expanded to the Far East and Europe. By 2010, there were more than 350 IFIs in more than 60 countries worldwide. According to Standard Chartered, Islamic banking assets are set to reach $1.1 trillion in
2012. The sector continues to grow rapidly in its native Middle East. Islamic banking assets in the Middle East and North Africa (MENA) region reached up to US$416 billion in 2010. Among individual countries - Iran, Saudi Arabia and Malaysia were highlighted as having the largest volume of Shariâ€™ah compliant assets. However, like any banking system, its genealogy perpetuates gaps and grey areas. In Islamic banking, most of these are in the financing domain. With some minor changes in their practices, Islamic banks can reorganize their cumbersome and sometimes ambiguous forms of financing, and offer a transparent and efficient interestfree banking experience.
www.technologybanker.com | 31
information about the generated profit. They also have to deal with shortage of manpower specializing in Islamic Banking Products.
Key challenges faced by Islamic Financial Institutions:
Another point of concern for the sceptics is the level of fragmentation in the Islamic banking industry. According to latest estimates, most Islamic banks hold less than US$13 billion in assets and face an up-hill task as they try to sustain their scale of operations and profitability. In addition, the downgrading in real estate markets leaves many Islamic banks exposed to the economic meltdown and this may affect future growth prospects.
Challenges Faced Islamic Financial Institutions are new players in the financial market; therefore, they are still building up their regulatory system and trying to contribute to the country’s economy in line with the Shari’ah law. The investors are reluctant to trust Islamic Financial Institutions in the same way they trust the conventional financial firms. Currently, most of the Islamic Banks are local or regional Banks. Limited recognition by central banks due to their low contribution to the financial markets creates a barrier for these institutions in their internationalization. Like any banking system, the need of a central body to formulate policies, rules and regulations is of paramount importance. All Islamic Financial institutions that offer Islamic Banking products and services are required to establish a Shari’ah Supervisory Board (SSB). However, there is no standardization among the SSBs in different countries. For instance, if one SSB approves some transactions in one country, it does not secure their approval by another SSB in a different country. The prohibition of pre‐determined interest rates on loans puts pressure on these institutions to monitor the borrowers at a reasonable cost and get the exact
32 | Technology Banker February 2013
• Lack of Liquidity in the Islamic Financial sector • Need for regulation and greater supervision • High cost of processing the transaction in Islamic banks • There is a lack of consistency and industry standards, which leads to non-uniform policies. Every bank does the same Islamic product in a completely different way • Terminologies being used with Islamic financial products need to be simplified and awareness created on the different available products • Maintenance of Documents and Contracts which make a large part of the credit financing business including Personal Banking as well as Trade Financing • Additional legal risks as Islamic Banking contracts involve a number of separate contracts • Profit-loss sharing involves monitoring of the clients performance very closely which is both expensive and cumbersome. Newgen has published a white paper on Islamic Banking that thoroughly explains Islamic banking and the solution opportunities available for running an Islamic bank. You can download a complete copy of the white paper from the Technology Banker website at www.technologybanker.com
‘Islamic Financial Institutions are new players in the financial market; therefore, they are still building up their regulatory system and trying to contribute to the country’s economy in line with the Shari’ah law’
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What: Merchant Payments Ecosystem When: 12 - 14 February 2013 Where: Berlin, Germany Website: www.merchantpaymentsecosystem.com
What: World Cards and Payments Summit 2013 When: 19 - 20 February 2013 Where: Dubai UEA Website: http://www.fleminggulf.com/conferenceview/4th-Annual-WorldCards---Payments-Summit-2013/362
What: ICT for Africa 2013 When: 20 - 23 February 2013 Where: Harare, Zimbabwe Website: http://www.ictforafrica.org/
What: 2013 Mobile Payments and NFC Forum When: 26 - 27 February 2013 Where: Aukland, New Zealand Website: http://www.conferenz.co.nz/ conferences/mobile-payments-nfcforum
What: Mobile World Congress When: 25 - 28 February 2013 Where: Barcelona, Spain Website: www.mobileworldcongress.com
What: AITEC Banking & Mobile Money West Africa LAGOS 2013 When: 13 - 14 March 2013 Where: Eko Hotel, Lagos, Nigeria Website: http://aitecafrica.com/event/view/90
What: Broadband MEA 2013 When: 19 - 20 March 2013 Where: JW Marriott, Dubai Website: http://mea.broadbandworldforum.com
What: Cloud World Forum MENA 2013 When: 19 - 20 March 2013 Where: JW Marriott, Dubai Website: http://www.cloudworldseries.com/mena/
www.technologybanker.com | 33
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