F inancial I nclusion Standardization 1

Financial Exclusion There are several definitions for Financial Exclusion (perhaps we need a standard even for that) Financial Exclusion may be defined as – inability to access mainstream financial services Bank accounts Low cost loans – lack of reliable financial advice 2

Financial Needs access to safe, easy and affordable credit and other financial services for economic growth, reducing income disparities and reducing poverty 3

Supportive Financial Services Source : RBI 4

Progress in Financial Inclusion Accounts with Institutions (2007) (SCBs, RRBs, Primary Agri. Co-op Societies, Urban Co-op Banks, Self-help Groups) – Savings Accounts million (82/100 adults) – Credit accounts million (25/100 adults) “No-Frills” accounts (Mar 2008) millions 5

Challenges! Enrollment of large numbers Wide geographic spread High maintenance costs for accounts Small ticket size of transaction Illiteracy and use of vernacular Product & service pricing Trust and acceptance Lack of electricity Poor telecommunications 6

Salient Features of our RFP Proven Technology Scalable and interoperable system Contact or Contactless smartcards Fingerprint image acquisition as per RBI norms End-to-end Solution (technology and banking services) 7

Technical Specifications - RFP Smartcard – ISO / ISO 7816 – Standard dimension PVC / Polycarbonate Card – DES/3DES (key length 1024/2048) – EMV Compliant – 32 K EEPROM memory – Hold User Certificates, Smartcard OS, Applications, etc 8

Technical Specification - RFP Handheld devices – Integrated system or 2/3 components – ISO / ISO 7816 and ISO for read and write operations – Built-in PKI support – EMV Compliant – Multilingual support – Online & Offline capability – Secured storage and communication – Long hours of battery support 9

Technical Specifications - RFP Fingerprint Scanner – Image acquisition at setting level 31 of ISO/IEC – Contact area 1 x 1 sq.inch – Min. capture-size 13mm wide x 17 mm high – Pixel density 500 ppi with + 5 ppi – Pixel depth 8 bits – 200 grey levels (dynamic range of scanned image) – Sense live-scan plain finger impression – Strong anti-spoofing features – Protection from ambient light, residual images – Standard for Data-Interchange - ANSI-378 – Encrypt fingerprint minutiae with 3 DES – Scanner surface to be resistant to dust, humidity, shocks, electronic discharge, ambient light, extreme temperatures, etc 10

Responses to RFP BIDDER-1BIDDER-2BIDDER-3BIDDER-4 BIDDER-5 BIDDER-6BIDDER-7 End-to-End proven experience Yes NoYesNo Smartcard 32 KB Contact ISO KB Contactless ISO KB Contact ISO 7816 No Card 32 KB Contactless ISO KB Contact ISO KB Contact ISO 7816 Communication between Front-end and Middle-tier PSTN, GPRS, WiFi GPRS PSTN CDMA GPRSPSTN PSTN, CDMA GPRS, GSM, CDMA Front-end system Multilingual support Available Will be available AvailableNot AvailableAvailable Not Demonstrated Voice Prompt on Front-end system Not Available AvailableNot Available Not Demonstrated Backend Interface with Middle-tier tried and tested in their prior engagements Yes NoYesNo Not yet tried in a bank De-duplication of Biometric AFISPropreitoryAFIS Not factored AFIS Not factored Indication of the timelines for the solution to go live. 2 months1 month2 months1 month2 months 6 months 11

Pros and Cons of some Technologies - Source RBI 12

Pros and Cons of some Technologies - Source RBI 13

Smart Card Smart Card Reader POS Terminal Printer Biometric scanner Financial Switch Backend Banking Server ISO / ISO ISO ISO 8583 GSM/GPRS/PSTN/ LEASED LINE/ INTERNET FRONTEND SYSTEMSCONNECTIVITYBACKEND SYSTEMS Architecture suggested by Govt. of AP 14

By introducing standardization in financial inclusion we aim to “Establish, maintain and pursue adoption of standards so as to enable an open and interoperable infrastructure for smart cards, devices and systems that simplifies development, deployment and management of applications across industries” Objective Standardization 15

Interoperability – flexibility and freedom of choice Ability of one application to communicate seamlessly with another Ability to mix and match various components from one vendor with those of another Ability to interact between one organisation and another Ability to transact between different users that do not use same technology 16

Standardization in Applications Developing Generic Interface for Enrollment for use of  Business Agent  Customer  Bank Officer End-to-end Transaction handling  Application on handheld smart device  Application on Switching/Intermediate server  Backend Banking software (business logic).  Card Management Software  Interfaces/integration with existing Core-Banking software. Card Management Software  Generic to any Smartcard Type  Generic Card Personalization  Lifecycle management of different card types

Standardization in Transaction  ISO 8583 Standard for transaction request and response between HHT and Intermediate server  Cardholder-originated transactions include withdrawal, deposit, refund, reversal, balance inquiry, payments and inter-account transfers. Reconciliation of transactions of BC account and customer account  Standards for checking the validity of the card in HHT and routing of transaction from Intermediate server to other bank server

Standardization in Security  Enrollment station  Security of data stored on the system  Secured mode of data transmission to server  Hand Held Terminal  Authentication of business correspondent & Customer  Standards for Fingerprint scanning / threshold of match for authentication of customer  Secure transfer of Data between HHT and smartcard  Secure interaction between HHT and Intermediate Server  Intermediate server  Security of data

Technology Standardization aspects of Smart card ParameterContactContact-less InterfacePhysical Electrical ContactRF (13.56MHz) StandardISO 7816ISO A Deployment (approx)3 Bn (mature, single digit growth)1.5 Bn growing at 25-30% CAGR ApplicationsGSM SIM, EMV Dual Interface cards Ticketing, Id cards, e-passports, loyalty & e-purse, VISA Wave, Master card Pay pass cards SecurityCan support DES / 3 DES / AES / PKI Can support Dual Authentication / 3 pass authentication / DES / 3 DES / AES / PKI External Authentication Can support BiometricsCan Support Biometrics Memory <144 KB OS cards (16 / 32 / 72 / 144 KB) <144 KB Non OS (1KB / 4 KB / 4KB DESfire / 8 KB Desfire) OS cards (16 KB / 32 KB / 72 KB / 144 KB) OSNative or Java Inter-operabililty Inter operable only if OS is open conforming to JCOP 2.2 (java card 2.1 & Global platform 2.1.1) specifications Advantages Incumbent card for banking applications globally Chosen by global banks for credit/debit micro payment cards of the future (EMV Contact-less specs available) Suitable for Dust, Humid environment, does not need physical contact with the reader, Need not be in the card form factor (e.g, wrist strap, pendent etc) Future ProofingWill be replaced by contact-less except may be in SIM cards Next Generation Mobile Transactions would be based on ISO standard which is a super set of ISO standard + security aspects 20

Standardization of Integrated Hand Held Terminal  LCD display  Keypad  Optical Biometric Finger print sensor  ISO/IEC  Contactless Smart Card reader with Mifare, DESFire, JACOP, SCOSTA  Thermal printer  Speaker  Connectivity (GPRS/CDMA)  Support Offline/Online transactions Improved operational efficiency, reliability and better logistics. Eliminates challenges in identification of defects in multiple devices. 21

Deployment channel -1Card Many Applications The smart cards can be used for various purpose like Financial inclusion, Merchant Establishments, Government initiatives like Pension, NREGS disbursement, ATMs, Shopping Malls etc. ATMs Financial Inclusion Merchant Establishments Pension Disbursement Shopping Malls NREGP Disbursement 22

Achieving Synergies - Integration Technology Providers Service Providers Chip Manufacturers Card Manufacturers Device Manufacturers Software companies Application Developers Systems Integrators Banking Channels Smart Phone ATM Point of Sale Termnial Personal Computer Telephone Mobile phone Set-top Boxes Kiosks 23

Contact details: N. BHARATH BHUSHAN REDDY DEPUTY GENERAL MANAGER DEPT. OF INFORMATION TECHNOLOGY ANDHRA BANK, HEAD OFFICE, HYDERABAD 24