H A N D B O ALTERNATIVE O DELIVERY CHANNELS AND TECHNOLOGY K ACKNOWLEDGEMENTS The authors would like to thank the IFC team: Andrew Lake, Charles Niehaus, Joseck Luminzu Mudiri, Lowell Campbell, Greta Bull and Margarete Biallas for their contributions to the development of this handbook including in-depth reviews and invaluable insights. Also, many thanks go to Anna Koblanck and Bonny Jennings for making this handbook a user-friendly and easy-to-read resource. This handbook was inspired by our clients and partners, many of whom have shared their experiences with us over the past few years and with whom we have partnered to scale up the provision of financial services through alternative delivery channels. In particular, we’d like to thank Denis Moniotte of Microcred, Nick Meakin of Urwego Opportunity Microfinance Bank and Kea Borann of AMK Cambodia for either providing specific feedback on the drafts or for allowing us to share their experiences in the handbook. The authors would also like to acknowledge the partnership with The MasterCard Foundation, particularly Ruth Dueck-Mbeba and the financial inclusion team, without whom this handbook would not have been realized. Finally, the authors would like to note that any errors, either of omission or commission, in this document are entirely their own. The views presented herein represent those of the authors and the IFC team working on this paper, and are not an official position of the World Bank Group. b ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY H A N D B O ALTERNATIVE DELIVERY CHANNELS O AND TECHNOLOGY K 2 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CHAPTER 1 CONTENTS CHAPTER 2 CHAPTER 1 12 Alternative Delivery Channels......................................................................................................... 12 ADC risks................................................................................................................................................. 15 ADC devices........................................................................................................................................... 16 ADC applications................................................................................................................................. 16 CHAPTER 3 ADC communications......................................................................................................................... 20 Authentication...................................................................................................................................... 21 CHAPTER 2 24 Step 1: Define ADC objectives......................................................................................................... 25 Step 2: Assess the environment..................................................................................................... 26 External assessment........................................................................................................................... 27 Internal assessment............................................................................................................................. 30 CHAPTER 4 Case Study: MicroCred...................................................................................................................... 31 Step 3: Develop the channel strategy and the business case............................................ 34 Case Study: Buy, build or rent?...................................................................................................... 35 CHAPTER 3 37 Step 4: Identify the available options.......................................................................................... 38 Step 5: Gather influencing criteria................................................................................................. 39 CHAPTER 5 Step 6: Select the platform.............................................................................................................. 41 Decision tree: mobile banking........................................................................................................ 43 Decision tree: agency banking ...................................................................................................... 44 From a technology perspective..................................................................................................... 46 Applications........................................................................................................................................... 46 Devices..................................................................................................................................................... 48 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 3 CHAPTER 6 INTRODUCTION CHAPTER 4 50 Selection overview.............................................................................................................................. 51 Initiation................................................................................................................................................... 51 Step 7: Collect the Requirements.................................................................................................. 52 Collect the requirements................................................................................................................... 52 Weigh the requirements.................................................................................................................... 52 Prepare requests for proposals...................................................................................................... 52 Step 8: Issue the RFP and evaluate proposals.......................................................................... 53 Who should be invited to the RFP................................................................................................ 53 How to evaluate the responses...................................................................................................... 53 Step 9: Contract the vendor............................................................................................................ 55 From a technology perspective..................................................................................................... 55 Front-end applications...................................................................................................................... 55 Back office systems............................................................................................................................ 56 Integration components.................................................................................................................... 59 ISO8583................................................................................................................................................... 60 HTTP/web APIs..................................................................................................................................... 60 EFT switches and middleware........................................................................................................ 60 Other requirements............................................................................................................................. 61 CHAPTER 5 64 Implementation methodology........................................................................................................ 64 Step 10: Prepare kick-off and analysis......................................................................................... 65 Project kick-off...................................................................................................................................... 66 Requirements analysis....................................................................................................................... 66 Hardware procurement...................................................................................................................... 67 4 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CHAPTER 1 Step 11: Configure and confirm the system................................................................................ 69 CHAPTER 2 Data migration...................................................................................................................................... 69 Installation.............................................................................................................................................. 69 User acceptance testing.................................................................................................................... 69 Training.................................................................................................................................................... 70 Step 12: Pilot and go live................................................................................................................... 70 Maintenance and review.................................................................................................................... 70 Implementation tips............................................................................................................................ 71 CHAPTER 3 From a technology perspective..................................................................................................... 73 Integration.............................................................................................................................................. 75 CONCLUSIONS AND LESSONS LEARNED 77 Case study: AMK Cambodia............................................................................................................ 79 CHECKLISTS 81 GLOSSARY 93 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 5 CHAPTER 4 CHAPTER 5 CHAPTER 6 ACRONYMS ADC Alternative Delivery Channel ADSL Asymmetric Digital Subscriber Line AML Anti-Money Laundering API Application Programming Interfaces ATM Automated Teller Machine BCP Business Continuity Planning BPR Business Process Reengineering CBS Core Banking System CFT Combating the Financing of Terrorism CIG Core Implementation Group CMS Card Management System CVV Card Verification Value DR Disaster Recovery DTMF Dual Tone Multi Frequency e-banking Electronic Banking e-money Electronic Money e-wallet Electronic Wallet EFT Electronic Funds Transfer EMV Europay, MasterCard, and Visa EOI Expression of Interest False Acceptance Rate, also known as False FAR Matching Rate FI Financial Institution FRR False Rejection Rate 6 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY FSP Financial Services Provider GPRS General Packet Radio Service GPS Global Positioning System GSM Global System for Mobile Communications HCM Human-Centered Design HSM Hardware Security Module HTML Hypertext Markup Language HTTP Hypertext Transfer Protocol IMEI International Mobile Equipment Identity ICT Information and Communication Technology ICC Integrated Circuit Card iOS Operating System developed by Apple IP Internet Protocol IRR Internal Rate of Return ISO International Organization for Standardization IVR Interactive Voice Response J2ME app Java 2 Platform, Micro Edition JSON JavaScript Object Notation KPI Key Performance Indicator KYC Know Your Customer LAN / WAN Local Area Network / Wide Area Network m-banking Mobile Banking m-wallet Mobile Wallet ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 7 Magstrip Magnetic Strip Card MDM Mobile Device Management MFI Microfinance Institution MFS Mobile Financial Services MIS Management Information System MM Mobile Money Mobile Network Operator/ Mobile Virtual MNO/MVNO Network Operator mPOS Mobile Point of Sale MTI Message Type Indicator NFC Near Field Communication OS Operating System OTA Over the Air OTC Over the Counter OTP One Time Password PDA Personal Digital Assistant POS Point of Sale PRSP Premium Rate Service Provider PSP Payment Service Provider RFI Request for Information RFP Request for Proposal ROI Return on Investment SaaS Software as a Service 8 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY SIM Subscriber Identification Module SMPP Short Message Peer-to-Peer SMS Short Message Service SSM Software Security Module STK SIM Application Toolkit SWOT Strengths, Weaknesses, Opportunities, Threats TAC Type Approval Code TAN Transaction Authentication Numbers TCO Total Cost of Ownership TCP Transmission Control Protocol UAT User Acceptance Testing URL Internet Shortcut USSD Unstructured Supplementary Service Data VAS Value Added Services VPN Virtual Private Network VSAT Very Small Aperture Terminal VSP Virtual Service Provider WAP Wireless Access Protocol Wi-Fi Wireless Internet XML Extensible Markup Language 3G 3rd Generation Mobile Network 4G 4th Generation Mobile Network ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 9 Introduction The ambition to reach full global financial inclusion requires that we address the challenge of delivering appropriate and affordable financial services to an estimated 2.5 billion unbanked individuals globally. One response to this challenge has involved the design of products such as microloans, low balance savings accounts, micro-insurance, and mobile money transfer that are specifically tailored to meet the needs of the often excluded low-income mass market. Delivering these products and services on a large scale, however, cannot be achieved without accessible channels that lower the cost of service and increase reach. Alternative delivery channels, defined as those result in poorly planned and implemented channels that expand the reach of services ADC projects. The net result is a patchy beyond the traditional bank branch channel, distribution of ADC success stories and many have emerged as a result of innovations in disappointing experiences, with poor uptake information and communication technology on channel platforms that are clunky, inflexible and a shift in consumer expectations. ADCs or costly. are transformative in nature, accommodating The world of ADC technology, with the the demand for access to financial services wide range of delivery channels, technology “anytime, anywhere, anyhow”. They rely platforms, and communications and device heavily on information and communication options on offer, can be daunting, particularly systems and devices ranging from ATMs to for FSPs that have limited technical capacity. mobile phones, all of which enable the instant This handbook serves as a tool for FSPs to transmission of financial and non-financial increase the technical understanding of ADC information between the customer and platforms and to provide practical guidance financial services providers. New technologies on how to approach an ADC technology increase efficiency through automation, project. While the focus is on the technical reduce operational costs, and improve service aspects of ADC projects, there are a host of quality by cutting down on waiting times and other market and business factors to consider, offering more convenient access and reduced which are introduced and discussed in brief cost to the end-consumer. where relevant. To help orient the reader, For Financial Services Providers, particularly each chapter first covers the relevant business microfinance institutions, ADCs can help aspects before delving into the more technical improve operational efficiency and cost- considerations for readers seeking deeper effectively expand outreach. Unfortunately, insight. many FSPs lack the technical knowledge The handbook has been organized according or skills needed to successfully implement to a phased implementation framework ADCs. This includes not only the skills to illustrated in Figure 1. This framework is manage the detailed implementation of ADC based on the understanding that all ADC projects, but also the skills needed to navigate projects must be based on a well-researched a competitive and crowded marketplace channel strategy that guides all future steps and build a relevant ADC strategy. Other in the implementation process. Equipped factors beyond skills, such as a history of with a strategy, the next step for the FSP failed or painful IT implementations, limited is to consider and select the technology budgets, and regulatory constraints can also 10 Figure 1: ADC technology implementation process STRATEGY 01_DEFINE 02_ASSESS 03_DEVELOP business objectives external milieu and channel strategy internal capacity and business case TECHNOLOGY 06_SELECT 05_GATHER 04_IDENTIFY the right influencing criteria available options technology SELECTION 07_COLLECT 08_ISSUE 09_CONTRACT requirements RFP and evaluate the vendor proposals IMPLEMENTATION 12_PILOT 11_CONFIGURE 10_PREPARE and go live and confirm the kick-off and analysis system platform(s) best suited to the strategy. This The handbook is structured as follows: This framework step is a prerequisite to vendor selection, as it • Chapter 1 provides an overview of ADCs forms an important input to the requirements is based on the or specifications used to select the vendor(s). and the technologies that underpin them. • Chapter 2 offers guidelines to develop a understanding that Once this information is available, and a channel strategy, taking into account the all ADC projects must vendor or partner selected, the FSP can finally internal and external factors that impact implement the preferred channel solution. This be based on a well- framework will be referred to throughout the strategy decisions. researched channel handbook. In addition, the handbook contains • Chapter 3 outlines the different components of a technology platform, aiming to provide strategy that guides a glossary to fully explain the terms used in guidance on how the channel strategy all future steps in the document. It may be advisable to review can be mapped to a specific technology this before launching into the handbook, to the implementation refresh the reader’s understanding of the platform. process. key terms and concepts as a background to • Chapter 4 highlights the importance of the discussion. Lastly, to help FSPs apply the identifying requirements and outlines the information in this guide to real-life scenarios, steps involved in selecting the right provider checklists are included at the end of the and solution. handbook. These checklists will help FSPs • Chapter 5 introduces a best-practice determine the key decisions or activities that implementation methodology and should be completed at the strategy, selection key considerations for a successful and implementation stages. implementation. In addition, the chapter discusses how a channel should be It is difficult to estimate how long an ADC monitored, maintained and scaled up after project will take or what financial resources going live. it will require, as institutional capacity and context vary widely from situation to situation. This guide should give a variety of FSPs some fundamental direction for any ADC project and equip project teams with the basic tools TECHNICAL DISCUSSION Those interested in a more technical discussion to successfully navigate the process. can refer to the “From a Technological Perspective” sections included in most chapters.   See From a Technological Perspective ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 11 CHAPTER 1 Basic concepts and terminology ADC implementations by FSPs employ many delivery approaches and use different terminologies, such as ‘e-banking’ and ‘branchless banking’. These variations in approaches and terminology are in part contributing to some of the confusion in the financial services sector about channels and technology. Hence, this chapter aims to ensure that all readers have a common understanding of the terms used in this handbook, and to introduce some of the basic concepts that will be referenced as we progress through the details of strategy, technology, selection, and implementation. Alternative delivery channels options through which a customer can now access financial services without visiting As a foundation to a discussion on ADC a branch. These include ATMs, Internet technology, it is important to clearly Banking, Agency Banking, Extension/Field distinguish between the channel and the Services2, Mobile Banking, and more recently technology. For this handbook, we define the Electronic or Mobile Wallets. These channels channel as the customer’s access point to a enable customers, FSP staff and agents to FSP – who or what the customer interacts with access banking services through technology in order to access the financial service or bank solutions which are built either on Web, account1. For instance, customers can access mobile or bespoke platforms. Figure 2 shows financial services at a bank branch, which is how these channels extend the services of a a traditional channel. With the advancement branch through systems which are connected of technology, the term Alternative Delivery to the Core Banking System (CBS) of the FSP. Channels denotes a broader range of 1 Given that FSPs are the target audience of this handbook, we will focus primarily on channels which are used to connect customers to bank accounts held at a FSP, as opposed to other financial products such as e-wallets and money transfer offered by non-bank financial services providers. An overlap clearly exists wherein FSPs may opt to use these non-bank services as one of their channels, such as when banks are linked to e-wallets services for cash in/out and payment purposes. 2 For the purpose of this handbook we have differentiated Extension Services from Agency Banking, based on the user of the channel. While Agency Banking relies on use of third-party operators, Extension Services involves equipping FSP staff with technology solutions. 12 Figure 2: ADC Ecosystem The term alternative ATM delivery channel denotes a broader AN CH ATM IN BR BA TER range of options NK NE IN T M through which a AT Internet G cafe customer can now PO S access financial le r Home services. Tel nch Bra Mobile BAN AGE ING K NT POS HQ Tablet FSP Back-office system: • CBS Agent • CRM • Accounting • Risk management EFT • Card management Internet/ switch VPN • Agent management • Channel management POS • Reporting Field staff Internet banking VIC ON interface ES SER ENSI MOBILE network Mobile POS T EX merchant Mobile app Mobile E BIL C MO KING CENALL BAN TER E-WALLET ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 13 01_BASIC CONCEPTS AND TERMINOLOGY The most commonly used channels are introduced in Figure 3, along with Figure 3: ADC (business) additional information on how to and who can use this channel. As shown in CHANNEL NAME TYPE OF WHO/WHAT CUSTOMER SAMPLE Figure 3, channels can be self-service CHANNEL INTERACTS WITH TO FUNCTIONALITY or Over the Counter, whereby the TRANSACT OFFERED BY THE customer interacts with staff or third- CHANEL party representatives such as an agent ATM Self-service ATM Cash out, balance or merchant – dedicated or not. This enquiry, payments, distinction is important to bear in mind, cash deposit as FSPs must always be aware of who or what owns the customer experience, and take measures to ensure that this interaction is equal, if not better than, Internet banking Self-service Computer, phone, tablet, Enquiries, transfers, what the customer would experience kiosk payments if using a traditional bank branch. The classification of a channel as either OTC or self-service becomes somewhat complicated for the case of e-wallets, Agent banking OTC 3rd party agent, Cash in, cash out, since these channels typically require merchant, phone, POS, payments some level of OTC interaction to cash in/ mobile out and thereafter can be used in a self- service mode. Extension services, OTC Bank staff: loan officer, Account opening, (field staff, mini susu collector, other FSP cash in, cash out, branch, branch on staff, POS, mobile loan applications, wheels) enquiries Mobile banking Self-service Phone Enquiries, transfers, payments E-wallet Self-service + Phone, computer, Cash in, cash out, (m-wallets, OTC merchant, kiosk, ATM, payments, transfers prepaid cards, agent, card store cards) Call center OTC Phone, customer service Enquiries, transfers, rep payments 14 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Five risk areas have been identified as If ADCs denote a point of access outside of the traditional bank channel, then ADC risks being particularly applicable to ADCs: ADC technology refers to hardware An additional topic to discuss as a devices, software systems, and the foundation for the rest of the handbook • Legal – the risk of lawsuits arising technological processes that enable deals with the risks associated with between any of the players involved the provision of financial products and the use of ADCs. While all FSPs in the channel (customer, agent, FSP, services over ADCs. For instance, a POS will have existing risk management or supplier), either due to misuse of device can be the enabling technology practices to safeguard their business, the channel, a lack of clarity of roles/ for agency banking. Whether self- the introduction of ADCs may require responsibilities, or breach of contracts service or OTC, each channel requires a reassessment of these policies and or laws such as data protection/AML. the customer to interact either with a the introduction of new controls • Operational – fraud/theft committed person (that is, an agent, field officer, and risk monitoring systems. Certain via the channel, failure to manage call center representative or a merchant) characteristics of ADCs, such as a the liquidity of agents and ATMs, or device (ATM, mobile phone or PC). In dependence on rapidly changing unauthorized fees charged for use of the case where the interaction is with a technology and their ubiquitous nature, the channel, poor quality of service, person, for example a third-party agent, mean that new risks may be introduced and loss of private data. it is typically the agent that initiates (for example, agent-level fraud). There • Technological – insecure data storage, the transaction on a technology device is also the likelihood of an increase weak back-office security, insufficient rather than the customer, although at in existing risks or their severity (for communication protection, poor some point during the transaction the example, in terms of dependency on the authentication/authorization of users, customer may also need to interact security of IT systems). A comprehensive inadequate integration between with the same device, for instance risk review is required as part of any ADC systems/third parties, or a lack of when entering a PIN on a POS. While project and the topic will be discussed service associated with hardware/ in some cases it is easy to distinguish at various stages in this handbook. software failures. between the channel and its underlying Other resources, including the Risk • Compliance – the risk of fines or loss technology, there are cases where Management Principles for Electronic of license as a result of noncompliance the channel and the technology are Banking developed by the Basel with laws or regulations, including AML, the same, such as ATMs and Internet Committee on Banking Supervision, CFT, Agency Banking, Mobile Money, banking. the Global Technology Audit Guide Consumer Protection, Regulatory series, and more channel-focused Reporting. A range of products and services is resources such as CGAP Focus Note • Reputational – a loss of customer accessible over the various channels. No 75. “Bank Agent: Risk Management, and market share as a result of A list of the functionalities most Mitigation, and Supervision” provide the occurrence of any of the risks commonly offered is shown in Figure 3, deeper discussions on the topic (for full described above. but this should be interpreted only as an references see page 99). example. Due to rapid innovation, the list These risks should be taken into of functionalities that is accessible to a consideration throughout the decision- customer over ADCs is changing almost making process, as they will impact all on a daily basis. ATMs are now offering aspects of an ADC technology project, money transfer services, mobile banking from channel design to mode of allows for emergency loan applications, authentication used by the end-user. and extension services are quickly scaling up to offer almost all services commonly offered in the branches. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 15 01_BASIC CONCEPTS AND TERMINOLOGY ADC devices The device is the physical object with which a user interacts, such as a mobile phone to access an e-wallet. Since mobile phones are the newer entrants to FROM A TECHNOLOGY PERSPECTIVE the ADC space and many FSPs now rely extensively on them, it is useful to pay For those readers interested in analyzing channels with a deeper technology extra attention to these devices. lens, the following section includes a more detailed summary of the technology platforms that drive ADCs. For the purpose of this discussion, it Mobile phones can be classified as is important to consider an ADC technology platform as the aggregation of being either basic, feature or smart. four components: A basic phone has only voice, SMS, and sometimes USSD capabilities, but 1. A physical device no data or GPRS capabilities. Feature 2. An application running on the device phones have data connectivity in 3. A communication channel used to exchange data between the device and addition to the basic features, and can the FSP’s host system therefore be used to connect to the 4. An authentication mode used to confirm the identity of the user of the Internet or run mobile applications. channel. Lastly, smartphones are the most advanced option, with processing Figure 4 on the following page shows the options available per channel in capacity nearing that of a computer, and terms of device, type of application, communication, and the different types are suitable for complex applications of authentication modes used per channel. or ‘smart apps’ in addition to the basic features and Internet access. Each of these classes of mobile phones use different operating systems, most commonly Android (Google), Windows (Microsoft) or iOS (Apple). These operating systems also apply to tablets. ADC applications The application layer of ADC solutions consists of front-end applications, back- office administration modules, and the integrations between these systems and the Core Banking System. These are shown in Figure 5, with some examples of the system or functionality available at each layer. 16 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Figure 4: ADC Technology Components CHANNEL NAME DEVICE APPLICATION COMMUNICATION AUTHENTICITY MODE ATM ATM, HSM Bespoke tech LAN (physical leased Card / PIN, bio, mobile line, P2P satellite, VPN over internet, wireless), modem (GPRS, dial-up) Internet banking Computer, phone, Web Internet (mobile, Username, password, tablet, kiosk wireless, leased line) OTP Agent / merchant Computer, phone, Web, POS, mobile Internet (mobile, PIN, card, bio, physical tablet, POS wireless, leased line), ID mobile data (GPRS, 3G, 4G) Extension Computer, phone, Web, POS, mobile Internet (mobile, PIN, card, bio, physical services, (field tablet, POS wireless, leased line), ID staff, mini branch, mobile data (GPRS, branch on wheels) 3G, 4G) Mobile banking Phone Mobile Mobile data (GPRS, 3G, PIN, OTP 4G), SMPP, USSD E-wallet Phone, computer, kiosk, Web, POS, mobile, Internet (mobile, PIN, card, physical ID (m-wallets, ATM, POS bespoke tech (ATM) wireless, leased line), prepaid cards, mobile data (GPRS, store cards) 3G, 4G) Call center Phone IVR Telecoms – Voice Password ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 17 01_BASIC CONCEPTS AND TERMINOLOGY Figure 5: ADC Solution Architecture: Front End, Back Office and Integration ADC FRONT OFFICE Web POS Internet portal application banking interface interface USSD menus, ATM mobile app screen interface ADC BACK OFFICE Customer authentication User administration Customer registration Security Reporting settings INTEGRATION API EFT SWITCH ISO CORE BANKING SYSTEM FLEXIBILITY SCALABILITY SECURITY ACCESSIBILITY 18 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Front office from FSPs who are looking for mobile applications that are manually applications that can be launched installed on the phone and run in The front-office component of the ADC independently of MNOs. Finally, almost the same way as a computer technology platform is the software both traditional SIM cards and skin program installed on a PC. Native application that runs on the device, SIMs can be used for Near Field apps will depend on the operating referred to as the front-end application Communication, a form of contactless system on which the mobile phone for the purpose of this handbook. ADC communication between devices runs, for example, Android, iOS or applications can be based either on which is being introduced for a range Windows. Native applications can be mobile, Web or bespoke platforms such of interactions, including payments developed to serve as a user interface as POS, ATM, and IVR. For instance, and vouchers. for staff, agents or customers. Native Internet banking runs on the back of a 2. USSD apps – Unstructured applications are also increasingly Web application. As with devices, mobile Supplementary Service Data being used as a replacement for the applications are the most complex, applications are supported by all traditional POS devices, with the with four main types of applications. handsets and involve an interactive evolution of mPOS apps that typically A more detailed comparison of these session consisting of a two-way interact with a card reader and/or applications is provided in Chapter 3. exchange of messages between the printer to replicate the functionality 1. SIM toolkit – The first type of FSP’s host system and the mobile of the traditional POS device. Lastly, application commonly referred to as phone user via an MNO network. USSD native apps can run in online or offline a SIM toolkit, or STK, is pre-loaded sessions can either be initiated by mode to allow for data capture in onto the mobile subscriber’s SIM dialing an MNO-defined USSD short areas of little or no connectivity, card, usually by a Mobile Network code (for example, *100#) or pushed which is of particular interest to FSPs Operator. The application consists by the provider to a customer’s operating in rural areas beyond the of a set of commands programmed handset as part of an SMS. Sessions reach of mobile coverage. on the SIM, and appears as a menu are typically limited both in terms of Web apps – The last type of application 4. of Value Added Services. STK time and message size, with variations is a mobile website that runs on the applications communicate using SMS existing from one MNO to another. browser of a mobile device accessed messages sent by the application Offering applications over USSD via a URL. Web apps function very directly to the MNO’s host system. In requires either a direct relationship much as a standard Internet website, this same category, one can include with the MNO or a contact with an but the size and features are designed emerging skin SIMs or thin-film SIMs, intermediary provider, sometimes to display and interact better on a a technology that consists of a paper- called an Aggregator or Premium Rate mobile device than on a traditional thin plastic sheet with an embedded Service Provider that is licensed by website3. The main advantage of Web chip that can be adhered to the top of the MNOs and usually the government apps over native apps is that they any SIM card. Touch points built into to provide services over this channel. work completely cross-platform on the skin SIM overlay filter information all devices with a browser, requiring 3. Native apps – The third category from and to the traditional SIM card. no installation or intervention to of mobile application, commonly Skin SIM technology, which originated update, as they rely on server-side referred to as native apps, includes in China, is attracting a lot of attention processing instead of a local, phone- based application. However, Web There are two types of mobile websites: Wireless Application Protocol and HTML. The first 3 is based on the WAP standard which is used to guide the design, creation, and display of apps operate in online mode only and a mobile website. Although it offers the benefit of running on millions of devices due to its hence are limited in terms of usability historical use, WAP is being upstaged and therefore replaced by a newer standard, HTML5. in areas of poor or no connectivity. HTML5 apps benefit from advancements in programming languages that mean they can provide a range of key capabilities such as offline support, graphics and video, geolocation, and field validation on the mobile browser. Currently, HTML5 can only run on mobile devices with the Webkit engine and are therefore limited in coverage. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 19 01_BASIC CONCEPTS AND TERMINOLOGY Back office the technology driving the channel. In could be over physical leased lines, many cases, ADC solutions also require wireless connections, VSAT/satellite While the front-office applications multiple integrations with third parties or a Virtual Private Network. LAN/ are perhaps the most visible to users (m-wallet providers, bulk SMS providers WAN is mostly just used with ATMs. of an ADC, they are reliant on back- and national switches), as well as several 2. Internet portals – Agents, extension office applications which form a critical in-house systems (m-banking software, services, and e-wallets may use component of the ADC platforms. These agency banking modules, accounting secure Internet portals to exchange systems play many different roles but software, and CBS). As with the back- information. Where ADCs use Internet are typically used to drive the front-end office components of an ADC solution, connectivity, a VPN is typically applications and devices. They also allow the integration software is often bundled configured to provide an additional FSPs to administer the channel users, with the solution, although increasingly, layer of security. define the products and services offered CBS providers are providing integration 3. Mobile data – Mobile applications via the channel, control the security of interfaces through which all external exchange information over mobile the channel, and of course monitor systems must communicate. The topic data services (GPRS, Edge, 3G or 4G4), and report on the channel activity and of integration is discussed in full in Wi-Fi connections, or satellite-based performance. These administrative Chapter 3. communications. For the purpose of systems can be sold separately from the front-end application, as is often the ADCs, mobile data services, which are case with Card Management Systems ADC communications provided by the MNO and accessible used with ATMs or POS, or could be wherever there is data coverage, are All ADCs ultimately require the bundled together with the front-end the most commonly used, although exchange of financial or non-financial application, as is commonly the case Wi-Fi and satellite may still be relevant information between the FSP and the for mobile banking and agency banking for some extension services. customer, which typically occurs over solutions. communication channels connecting the 4. USSD – The USSD communication device and the back-office component channel is a standard, publically available GSM technology, controlled Integration of the ADC. There are currently six by MNOs. As discussed above, USSD communication channels for ADCs: The final component of ADC application applications exchange information involves integration between the various 1. Local area network / wide area over this channel. The use of USSD for systems involved in the ADC platform. network – ATMs and extension services ADCs has achieved significant uptake Introducing ADC technologies in most like mini branches communicate over in markets where there is high mobile cases requires some level of integration the FSP’s LAN or WAN much like a penetration as a result of the user- between the FSP’s back-office systems computer on an internal network. friendly, menu-based service. The (such as CBS, Accounting and ERP) and Connectivity between these devices USSD communication channel creates a real-time connection that is more responsive and secure, as it does not store the customer’s data. 5. SMS – SMS is a ‘store and forward’ communication channel that involves 4 This refers to the generation of wireless communication technology which is differentiated the use of the telecom network and by the speed of data services available. GPRS and Edge are 2G technologies providing a SMPP protocol to send a limited maximum download speed of 114kbps and 384kbps, respectively. 3G provides up to 3.2Mbps and 4G up to 299.6Mbps amount of text from one phone to 5 Note that SMTP is a different protocol traditionally used for sending email, but also another, or from one to many phones5. commonly used for sending SMS messages via the Internet. Unlike true SMS on SMPP, SMTP The use of SMS for ADCs is extensive does not use the telecom network, which can potentially be cheaper, but also presents issues and ranges from STK and native in terms of reliability. 20 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY applications using SMS as the mode of communication, to basic applications tones during an interactive phone call between the customer and the Authentication being programmed entirely using FSP. These systems are designed to The last component of ADC technology the SMS channel, although these are handle routine interactions such as is the mode of authentication, as typically quite limited in terms of enquiries or transactions which can illustrated in Table 1. This is of particular functionality compared with other be relied on to follow an expected relevance, as one of the more apparent types of applications. SMS has proven workflow. Within the ADC world, IVR risks associated with ADCs is related to to be an effective tool for notification is of particular interest to FSPs serving fraud arising from the authentication services regarding One Time illiterate or low-literate people, and to of a customer’s or other user’s identity, Passwords, transaction confirmations, date has primarily been used in Latin and failures which may occur during this or repayment reminders. A distinction America and Asia. process. Branch-based transactions can is often made between ‘pull’ SMS rely on well-trained tellers or staff whose 7. NFC – Near Field Communication messages, which are initiated by a judgement can be used to confirm is being used to make contactless customer to solicit a response from a customer identity using scanned photos, transactions, including those for provider, or a ‘push’ message, which is physical ID cards, signatures, and other payment and access. NFC technology sent to the customer by the provider. tools. However, transactions initiated is a standards-based wireless To request a pull message, a customer remotely through ADCs often require communication technology that must send a request to a short code enhanced means of verification. allows data to be exchanged between (for example, send text ‘BAL’ to short devices that are a few centimeters The three most commonly used code *12345#)6. apart. Consumers can make payments factors are knowledge, possession, and 6. IVR – Interactive Voice Response uses with a wave or tap of their NFC- inheritance as shown in Table 1. a computer application with voice enabled card. recognition technologies and keypad Table 1: Different Types of Customer Authentication Factors Used in ADCs FACTOR DEFINITION OPTION AVAILABLE TYPE Something that customer Password, PIN, pattern, secret question, Knowledge knows image Something that customer Bank card, mobile phone, OTP/TAN, Possession owns or has physical ID card Biometric characteristic fingerprint, iris Inheritance Something that customer is scan 6 Note that while USSD and pull SMS both use short codes, these are not necessarily the same code and may require that a customer enter a different code depending on which action they wish to take. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 21 01_BASIC CONCEPTS AND TERMINOLOGY While exceptions exist for low- For ADCs, there are three commonly use at ATMs or on POS devices. Smart value transactions, best practice for used options for authentication: cards are increasingly being produced, authentication over ADCs dictates that payment cards, OTPs and biometrics distributed, and used according to two-factor authentication should be (fingerprint, voice and iris). Each of EMV® Specifications7. These EMV cards, used, meaning that a customer must these will be introduced here and referred to as ‘Chip and Pin’ cards, are provide a combination of two different discussed in further detail in Chapter 3 steadily replacing the older magstripe factors to access a system or transact to present the various advantages and cards. on it. For example, an ATM transaction disadvantages of each. requires both a card (Possession) These card types offer differing levels of and a PIN (Knowledge). Two-factor security based on the PIN authentication authentication should not be confused Payment cards method. For instance, to authenticate with two-step authentication whereby Payment cards are perhaps one of the the PIN associated with a magstripe a customer must go through a couple more traditional means of authenticating card, communication with a security of steps to access a system, but where users over ADCs. Cards are typically module is required. The function of a these steps do not necessarily involve dependent on a PIN for authentication, security module is to issue, validate, a combination of different factors (for and users are required to remember this and store certificates in a protected example, a PIN plus a secret question). PIN and input it as a means of verification environment. A security module can be The level of security delivered will be at the time of accessing the ADC. Two one of two types: a Software Security influenced not only by the number of main types of cards are used; magnetic Module or a Hardware Security Module. factors used in authentication but also strip (magstripe) cards and smart cards. The major difference is that an SSM is a by the relative security of the factor The former uses a machine-readable program that runs on a general-purpose itself. Therefore, poorly formatted magnetic strip on the back of the card computer, while an HSM is a dedicated passwords will not protect systems in to store data about the customer, while computer specifically designed to the same way as those which adhere the latter stores similar information on function in a security role. The HSM is to best practice in terms of complexity an embedded microchip, which includes a physical device connected to the and frequency of change. It is for this its own operating system, memory, network hosting the ATM, and has the reason that authentication via biometric communications interface, security primary functionality to generate the is typically used only as a single factor, features, and the ability to encrypt PIN numbers and store the encryption since its level of complexity makes and decrypt data. While smart cards keys required to authenticate the PIN it very difficult for this factor to be have many uses outside of the financial number provided8. In contrast, EMV compromised. sector, FSPs issue these primarily for cards have stored encryption details on the chip, which allows for a local authentication of the PIN, which is both faster and contributes to the high security standard associated with these 7 EMVCo was established to facilitate worldwide interoperability and acceptance of secure cards. payment transactions by managing and evolving the EMV® Specifications and related testing processes. Today there are EMV Specifications based on contact chip, contactless chip, common payment application, card personalization, and tokenization. This work is overseen by EMVCo’s six member organizations – American Express, Discover, JCB, MasterCard, UnionPay, and Visa – and supported by banks, merchants, processors, vendors, and other industry stakeholders who participate as EMVCo Associates. Adopting EMV cards enables FSPs to not only ensure the highest standard of security for card transactions, but also opens up the option of connecting local or closed systems to external networks, either regional or international. 8 Note that the HSM actually authenticates the PIN Block rather than just the PIN number itself. The PIN Block is made up of customer data read from the card combined with the encrypted PIN, generated using the ATM/POS pin pad. 22 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY There is a trend towards contactless or mathematical algorithm, whereas the with which a scan can be falsified, thus payments via smart cards and NFC TAN uses an algorithm that is dependent preventing the use of a picture of a technology which uses short-range on details of the transaction itself. The fingerprint. radio signals to exchange information most common use of OTPs/TANs is between a card or mobile device and currently within the Internet banking While biometrics is primarily used for a terminal equipped to read this signal. channel, but is increasingly being used authentication purposes, it can also When this technology is applied to for mobile channels. assist FSPs in performing deduplication cards, contactless payments9 are made checks to ensure that the same person possible without a PIN and merely This password or number is typically has not registered twice in the system. through the ‘tapping’ of the card on generated on request, either via use of This can be particularly useful where a terminal. MasterCard PayPass and a physical dongle or a specific security there is a risk of multiple borrowing, since Visa PayWave are just two examples software (for example, TruID10), which the same customer would be blocked of the applications of this technology, will require another security factor such from registering twice. Deduplication both of which are gathering increasing as a PIN to grant access. Alternatively, checks are not immediately possible popularity for low-value transactions the FSP’s system can automatically on all biometric systems, since it will where payment speed is of particular trigger and embed a TAN or OTP within depend how the biometric data is stored importance, such as on transport or an SMS message, which eliminates and the ability to search this data, which busy merchant locations. Mobile phone the need to distribute either physical can be both a factor of data type and operators and handset manufacturers devices or install additional security processing power available for the task. have also embraced this technology, software. with NFC-enabled phones and the ability of some phones to be certified by Fingerprint biometrics Visa/MasterCard to allow a user to link a With biometric systems, a fingerprint SIM to a PayPass/PayWave account. scanner is used to capture a person’s unique fingerprint in order to verify One-time passwords identity at a later stage. Two major For FSPs looking for higher levels of types of fingerprint scanners exist: security without cards or biometrics, optical scanners, which effectively read OTPs or Transaction Authentication a picture of the fingerprint as a visual Numbers are an option. These work on image, and capacitive scanners, which the basis of one authentication factor can sense differences in the ridges of being generated only when needed, a fingerprint using electrical currents. namely at log-in or transaction posting, Capacitive scanners, although more and act as a single-use password or PIN. expensive, are by far the most common An OTP is generated using either a time in the financial sector, given the difficulty 9 Contactless payment systems are credit cards and debit cards, key fobs, smartcards or other devices that use radio-frequency identification for making secure payments. The embedded chip and antenna enable consumers to wave their card or fob over a reader at the point of sale. Some vendors claim that transactions can be almost twice as fast as a conventional cash, credit, or debit card purchase. 10 TruID is a software token that creates OTPs which you use when logging on to the PortWise Application Portal. TruID can be installed on computers, cell phones, or PDAs. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 23 CHAPTER 2 Building a channel strategy Our journey to implementing an ADC solution starts with the formulation of a plan or channel strategy. This channel strategy is a critical component of the overall organizational strategy, and as such must be guided by the business’ vision, mission, and strategy, as well as market conditions. STRATEGY TECHNOLOGY SELECTION IMPLEMENTATION The channel strategy is informed by and is noted that a channel strategy does not imply meant to contribute to the general business choice of a single channel, but could result objectives of the FSP. For instance, if a in an integrated, multi-channel strategy that FSP’s vision, mission, and business plan are combines several channels and technologies focused on serving SMEs, this same focus to achieve the overall business objectives. This should be reflected in the channel strategy. is a common trend, with FSPs starting with A well-researched channel strategy should one channel (for example m-wallet) and then identify the channels to leverage and should linking this with other channels (for example be accompanied by a business case that m-banking or ATM). Finally, a channel strategy considers the financial and operational can be vastly transformative to a FSP’s core implications of each channel. These tools business, and therefore requires strong buy-in will serve as a guide to all future steps in the and support at the board and executive levels. implementation process. This chapter focuses on how to assess market The subject of a channel strategy is worthy conditions and the internal operations of of a paper of its own and the purpose of a FSP, and to develop a channel strategy this handbook is primarily to show what that is in line with the business’ objectives information must be available as inputs to the and customers’ needs. The following steps, technology decisions that will be discussed sometimes iterative, should guide the reader in later chapters. While our process shows through the decision-making process: a channel strategy as a prerequisite to the technology platform selection, in many cases 1. Define the ADC objectives there is a feedback loop between these 2. Assess the environment steps, so that the strategy is only finalized 3. Develop the channel strategy and business as/when a decision is taken regarding the case. technology or platform. It should also be 24 STEP 1: Define ADC objectives Typically, a business problem or This step should also result in the challenge has triggered the need for allocation of human resources – IT, an ADC solution. These triggers could audit, risk, and operations – in the include operational bottlenecks, a form of a channel strategy team. need for scale, customer demands Deciding whether these resources are and preferences, new segments, available in-house requires assessment or greater outreach. Alternatively, of availability and experience in the a market opportunity could act as subject area. Resources who have a trigger, presenting an attractive worked on similar exercises in the past business proposition based on a clear will be better equipped to conduct the gap between supply for and demand exercise building on experience, while of a product/service. Identifying these the use of external consultants for this triggers, even at a high level, offers task can bring the benefit of wider direction and focus in the early stages market experience. The team allocated of developing a channel strategy and to the development of the strategy is in will help the FSP define the objectives of most cases different to the one tasked the ADC strategy in alignment with the with implementation of the channel, as mission and vision of the organization. the skills required differ considerably. This step should also result in the allocation of human resources in the form of a channel strategy team. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 25 02_BUILDING A CHANNEL STRATEGY STEP 2: Assess the environment The decision to pursue a specific channel or channels must take into consideration many internal and external factors. These factors are summarized in Figure 6, which shows how the channel strategy is influenced by both the internal and external environments within which a FSP operates. The channel strategy therefore involves an assessment of each of these factors separately and collectively, as outlined in this graphic. Figure 6: ADC Channel Strategy INTERNAL EXTERNAL New channel strategy Client needs Vision & Mission and demands Products & services Competition Capacity ICT landscape FUTURE OPTIONS IT environment Strategic partnership Internet Business case/ ATM Agent/ banking Extension Merchant revenue model services Regulations Mobile Call banking Center E-wallet 26 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY External assessment financial literacy and technology to interact on a self-service basis or if OTC responsibility to assess and understand the obligations vis-à-vis the regulator The market is constantly changing, channels are required. and other relevant authorities. Clearly, influenced by innovations in ICT, regulations governing the use and competition, regulation, and customer issuance of e-money/mobile money, behavior – all of which are outside Competition mobile banking, agency banking, the control of a FSP. An assessment Assessing the competition in the Internet channels, and remote branches of these external factors can help one market is an essential component of are the most obvious ones to consider. understand customers’ needs and any business strategy, providing both But others, such as regulations market demand, as well as identify an offensive and defensive strategic governing access to communications, opportunities and threats which should context for the FSP’s channel strategy. interoperability, electronic documents be factored into the channel strategy. The first step in this analysis is to identify or signatures, KYC, biometrics, other companies providing similar national ID, and AML/CFT must also be or complementary channels, and to Customers’ needs and considered, as they may impact some conduct a thorough analysis on what is component of the channel. demands currently being offered, how it is being Developing a channel strategy should offered, and at what price. The easiest In markets where no regulations exist be a customer-centric exercise. It is the way to do this is to stage a mystery for these activities and/or where end-user who will ultimately determine shopping exercise to experience the regulators are unfamiliar with mobile the success of the channel strategy competitors’ offerings from a customer money or agency banking, a FSP based on their adoption and usage perspective. Further analysis can be may need to organize a workshop of the channels provided. Taking the conducted with media scans and or presentation with the regulator time to really understand the customer targeted research to determine how to explain the concept and its plans. ensures that their needs and capabilities competition might react under certain In such cases, an internal ‘champion’ are not assumed, but rather are circumstances. Lastly, primary market should be allocated the task of building confirmed through direct interaction research with existing customers is also a relationship with the regulator to and feedback. This assessment could a good way to get information on their ensure that it remains supportive of the be done through focus groups, surveys, experiences with competitor products project as the project moves through or by mining available customer data. and pricing. Once the FSP has a clear the phases of implementation. In cases Irrespective of the tools used, this stage picture of the competitive market, this where there is no specific regulation, serves to reach an understanding of information can be used to identify a FSP may need to consider applying which products, features, and services gaps in the marketplace that could be for a ‘Letter of No Objection’ as a quick are most valued by customers, the exploited by a channel strategy. and easy way to comply with regulatory difficulties that customers may have measures. with existing channels or competitor channels, the customers’ capacity to Regulation The regulatory assessment should not interact with these, and the willingness Regulatory policy influences the market only focus on the bigger picture of and capacity to pay for ADCs. Finally, by mandating who can do what, where, what is, or is not, allowed, but also on by combining direct customer input and which rules apply when it comes to how some of the details of regulations with target market analysis, a FSP financial services. ADCs are a complex may influence the implementation of should be able to decide if customers topic for regulators, as the space is the channel. For example, the agency are adequately equipped in terms of constantly changing. It is the FSP’s banking regulations in Kenya require the ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 27 02_BUILDING A CHANNEL STRATEGY production of a physical receipt for all the FSP’s strategy team or by external Next is to review the availability, quality, transactions performed by third parties11, parties, can provide some insights and and affordability of the communication meaning that a printer or receipt book is ideally would contain some additional options available to the target market. required12. information, including which models of The FSP will need to identify which each device are the most popular. This is communication channels are accessible particularly important for mobile phones to the target market, considering the full ICT landscape where the FSP will need to decide range of options, including SMS, USSD, By definition, ADCs require users to which type of phone to cater for: basic mobile data services, Internet, LAN/ be able to access systems that are phones, feature phones or smartphones. WAN, IVR, or NFC. Market research on remote to their location at the time of Included in this assessment should be these options should be conducted transaction. Such access is dependent the projected future uptake of particular to identify which of these options are on the availability of a supportive ICT devices to understand likely market reliable, affordable and have available infrastructure for the end-users of the trends. Additionally, the cost per device bandwidth to support the traffic of ADC. As discussed in Chapter 1, this – information infinitely easier to access the channel over time. In most cases requires access to a physical device, an than market distribution – can provide – and unless using IVR or NFC – the application running on the device, and a good proxy for penetration data, and FSP will be dependent on an MNO or a communication channel to transfer will also be an important input to the other connectivity provider for this data between the customer and FSP. As business case. component. Such partnerships can be part of the external assessment, the FSP problematic for some FSPs, particularly will need to analyze what is available Secondly, the FSP will need to assess where there is competition, real or to target customers or users at each of the availability of options for the perceived, between the two parties. these levels. application layer. Although important, This is most noticeable with the USSD this information is less critical than option, which is well suited to host an At the device level, it is important first the device or communication layer. ADC due to its compatibility with all to know what types of devices – such Ideally, ADC solutions should work on types of mobile phones, but in many as ATMs, POS, kiosks, computers and all operating systems, but the reality is markets is either restricted in terms of mobile phones – are accessible to the that many solutions are not immediately availability, is subject to poor quality target market. For some of these devices, cross-compatible and often require service, and/or is expensive to access. information about distribution and additional resources that may not be This reality has forced some FSPs to availability may be publically accessible, worth the investment. For example, consider alternative communication as with POS or ATM networks, which knowing what proportion of the target options such as data services, STK, thin are typically monitored by the regulator. market is using Windows phones may SIM, or IVR, so that they have more By contrast, the statistics regarding help with the decision whether smart control over this critical component. At the availability of personal computers apps should be built to work on this this stage of the analysis, the channel or phones may be harder to access, platform. strategy team needs to invest time in with only high-level statistics available. researching all of these options and Market surveys, either conducted by 11 The Central Bank of Kenya website (https://www.centralbank.go.ke/index.php/ banksupervision#agent-banking) states: “Bank agents are required to issue receipts for all cash deposit and withdrawal transactions. Additionally, the principal institutions are required to have in place adequate agent identification arrangements and customer feedback mechanisms to aid in the verification process. Further, bank customers are at liberty to verify the status of particular agents from local branches of principal institutions before using the services of any agent.” 12 http://www.bu.edu/bucflp/files/2012/01/Guideline-on-Agent-Banking-CBKPG15.pdf 28 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY ideally analyzing the various options as Operationally aligned they operate in the market to develop a • The FSP must ensure that a potential well-informed opinion regarding quality. partner is not targeting the same During this analysis, the channel strategy customers with the same or alternative team should bear in mind the potential products/services. In that case for ADCs to operate in a limited offline they are competitors, not partners. mode. Typically, this is only applicable Services should be complementary or to OTC channels, particularly extension value-add for your customers. It is important to services and possibly agency banking, • The FSP must be sure that it has done find partners that are and for a limited range of transaction types (non-financial transactions). sufficient research (has ‘shopped operationally, technically around’ sufficiently) to identify the and commercially best partner in the market (to be The last component of the ICT discussed more in Chapter 4). aligned. landscape that should be considered during the assessment is the availability • Partners must be willing to agree to of grid-based electricity or other power targets for the partnership and have alternatives to ensure that devices and the means to measure performance connectivity options can access power. against these targets. Designing a strategy in areas beyond • The FSP should assess the partner’s the grid, or where the electrical supply current infrastructure on the ground, is poor, one may need to consider and the reach and utilization/ backup alternatives to ensure continuity performance of this infrastructure to of service. The cost of these backup determine whether there is significant options should be incorporated in the overlap in the infrastructure of business case. the partner organizations or if it is complementary. Strategic partnerships Technically aligned Many ADCs will require partnerships to be formed between the FSP and a • The proposed partner’s competency third party. These third parties could needs to be confirmed based on be vendors, m-wallet providers, PRSPs, historical track record of delivery. MNOs, and national or international • The technology platforms of the switches. Irrespective of the purpose partners should be considered to of the partnership, it is important to ensure that they could be integrated find partners that are operationally, with the FSP’s systems (where technically and commercially aligned, applicable). and that revenue is generated and • Both partners must have sufficient distributed throughout the supply compliance and controls in place to chain13. mitigate issues which may put the partner or partnership at risk. Flaming, M, Mitha, A, Hanouch, M, Zetterli, P, and Bull, G (2014). Partnerships in Mobile 13 Financial Services: Factors for Success. IFC: Washington, D.C. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 29 02_BUILDING A CHANNEL STRATEGY Commercially aligned Product and service offering an existing mobile banking platform. • The costs being charged must Developing an integrated multi-channel ADCs by definition are a means for be confirmed as affordable and strategy will increase the number of the FSP to distribute its products and competitive in the market, ideally with touch-points for the customer and services. As such, any channel strategy a business case to support the fact. streamline the customer experience. needs to be designed with the specifics For example, an existing mobile banking • The partner’s business viability needs of the FSP’s products and services in platform could potentially be used to be confirmed so that the FSP is mind. Not every product and service to direct clients to the nearest ATM sure that it will play its role even in the is appropriate for every channel; the location or to enable NFC technology initial periods when the channel may FSP should review current and planned on the mobile for cardless transactions not be extremely profitable. products/services to determine which at the ATM. Lastly, the sustainability and • There should be benefit for all parties channel options would be most cost of implementation of the existing that is proportionate to the respective convenient for the customer to access channels should be reviewed not only to contributions to the partnership, these products/services. For instance, ensure sustainability but also as inputs whether this is through a revenue- a customer with a savings account to the budgets required for future ADC sharing model and commission needs access to deposit and withdrawal projects (for example, cost of integration arrangement or other means of shared services from this account outside of and resources required to manage the value, to properly motivate partners branch hours; a self-service mobile project). to participate over the duration of the banking application would not meet relationship. this need because one cannot withdraw • Lastly, it is good for FSPs to get a money from a phone. In this case, the IT environment and strategy measure of how important it will be to channel strategy team should consider The assessment of the internal IT the partner and to look at the relative channels that facilitate cash withdrawals environment needs to consider several size of the two parties. Will it be a such as ATMs, POS, or agency banking. different areas, including the state of the priority customer, a ‘big fish’ whom CBS, the IT strategy, and any existing or the partner will work hard to keep Current channel strategy planned IT projects that could overlap happy, or does its relative size mean with the ADC project. In terms of the Should the FSP have existing channels it is a ‘small fish’ that may struggle to CBS, the channel strategy team should in operation, it is critical that it takes get the partner’s attention? consider the current state of the CBS, this opportunity to assess the success including its stability, pending upgrades, Internal assessment of these channels. This could include an its capacity to support a full integration, analysis of performance (usage rates, While the external assessment can help and whether it is decentralized or registration rates, and valued services) identify consumer demand, market centralized. A weak or unstable CBS will and operational efficiency. Additionally, opportunities, and threats, an internal quickly sabotage any ADC project, and customer feedback should be obtained assessment allows an organization to difficult as the decision may be, FSPs to determine what improvements or evaluate its position with regards to may need to postpone ADC projects changes would be of benefit. Existing operational constraints and strengths. until their CBS is stable to the extent channels should also be reviewed to This assessment should ideally include that it can support the integration of a understand how they could complement five areas: channel, both functionally and from a new channels, such as linking ATMs with scalability point of view. 30 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CASE STUDY MicroCred Group is an investment company, established in 2005, that builds and manages an international MC identified the following quality targets: simplicity/intuitiveness, availability, robustness, and coherence MicroCred network of financial institutions in emerging markets. These FIs share the among channels to be applied as core themes throughout the channel strategy. common mission to provide quality To address these challenges, MC used financial services that are accessible and a human-centered design approach to adapted to the needs of unbanked and/ systems design and development that or under-served people, particularly aims to make interactive systems more micro, small, and medium entrepreneurs usable by focusing on the customer’s use in the five African countries of Côte of the system and applying knowledge d’Ivoire, Mali, Madagascar, Nigeria, and and techniques based on human Senegal, as well as through two affiliates factors, ergonomics, and usability. MC in China’s Sichuan and Nanchong empowered a cross-functional team to provinces. design the service based on extensive field research and observation. MC MC’s objective is to expand its monitors the quality of service provided distribution network and capacity to to customers, frequently releasing small reach new customers, especially in adaptations based on constant feedback rural areas. All MC operations have loops. been successful and have managed to achieve profitability using traditional Reflecting on its ADC strategy, branches. However, the economics of Microcred’s Head of Alternative branch channels have limited MC to Delivery Channels Denis Moniotte a primarily urban clientele. In 2013, noted: “The modern delivery channels MC launched a major transformation in financial services require a major shift program supported by a multi-channel in the way we organize ourselves within distribution network to reach mass- the bank. It pushes some functions market customers beyond the limits that have traditionally been managed of branches and into rural areas. The by our back-office staff into the front multiplicity of distribution channels, line, which brings new challenges. For accompanied by product development, example, when we implement agent market intelligence, process automation, banking, mobile/Internet banking or an and marketing efforts, is critical in ATM network, customers become users supporting the delivery of innovative of our banking IT platform. It is about products. opening new doors, and making sure that the core processes will support the new doors.” ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 31 02_BUILDING A CHANNEL STRATEGY The internal assessment must also of authentication used to verify a derived by the channel is also fed into consider the FSP’s IT strategy and customer’s identity, as introduced in this new data warehouse. how ICT will be used to deliver the Chapter 1. This typically involves a review The internal analysis must also consider organizational strategy. Most FSPs who of existing modes of authentication, the financial, operational and human are designing or updating an IT strategy be they cards, biometric or PIN/ resources available to launch and will feature ADC technologies as one password systems to determine the manage a channel strategy. The financial of the business’ critical systems. While appropriateness of these authentication resources required to introduce a new a linkage between the IT strategy and methods to any channel. For example, channel can vary depending on the the channel strategy must exist, these the cost and logistics of distributing scope of the project, and while the are very different plans, with the former cards for FSPs looking to launch a mass- IT systems component may be one primarily being determined by the IT market savings product may result in the of the larger elements of the budget, department, while the channel strategy conclusion that biometrics, as a mode provisions need to be made for channel is a result of inputs across the business of authentication, is more reliable and development, marketing, operational as a whole, with key components which easier to administer than PIN/password- pilots, and channel support services. The require input and support from the IT based systems. Additionally, FSPs may channel strategy team should consider department. The direction outlined in wish to make decisions regarding the the significant cost implications of the the IT strategy must be considered in interoperability of the authentication initial technology procurement, but also the formulation of the channel strategy mode, perhaps standardizing the use the running costs associated with the to ensure that they are well aligned. of EMV cards across all channels. This channel. An estimated budget should Topics of particular importance will topic will be revisited in detail during be assigned from the beginning and be the strategy for the procurement the requirements analysis phase. At stakeholder commitment obtained to of IT systems, preference for different this point the goal is simply to audit the ensure that the funds required will be hosting scenarios, disaster recovery/ existing authentication methods, and if allocated to this project. The subsequent backup policies, business continuity14, relevant, decide which method is most vendor selection process can help to security standards, and if available, any suitable. finalize the exact budgets required to protocols for the integration of systems. The final area for consideration is the finance an ADC project, but high-level At this point of strategy formulation, it existence of IT projects which may estimates should be considered at this is important to review and incorporate overlap with the timing of the ADC point based on information obtained any existing IT policies that are relevant project, or perhaps limit the resources from the assessment exercise. to the channel strategy, or potentially available to allocate to it. From a create new policies to complement the The resource assessment should also technical perspective, the impact and new channels. consider the skills and availability of potentially the integration of a new ADC staff to manage both the channel Either as part of the IT strategy review, will need to be considered. For example, implementation and ongoing operations. or perhaps as a direct assessment of if there is a plan to implement a new Required skills include project the existing internal security policy, data warehouse, the ADC project should management, channel management, the FSP needs to consider the mode bear this in mind and ensure that data A Business Continuity Plan (BCP) is of particular importance for FSPs to enable critical services or 14 products to be continually delivered to clients despite system interruptions or disaster. The business continuity planning process involves the recovery, resumption, and maintenance of the entire business, not just the technology component. While the restoration of IT systems and electronic data is important, recovery of these systems and data will not always be enough to restore business operations. The Federal Financial Institutions Examination Council offers the IT Examination Handbook, which includes a booklet on BCP, at http://ithandbook.ffiec.gov/it-booklets/business-continuity-planning.aspx. 32 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY IT, audit, risk, operational, finance and determined, ranging from doing nothing Ensuring that ADC operations and accounting, and agent management (if and accepting the risk as a cost of doing technology platforms are compliant applicable). An inventory that takes into business to applying a wide range of requires FSPs to be aware of and account these requirements can inform specific controls. conform to the requirements and a FSP’s need to recruit additional staff. regulations in their respective markets. This could be a temporary requirement New channels should be thoroughly Compliance is typically enforced for a project manager to drive the evaluated for any perceived risks and through a management process that implementation team, or a permanent measures designed to control, avoid, identifies the applicable requirements restructuring to manage ongoing accept, or transfer these risks to the (defined, for example, in laws, support once the channel is in operation. customer or a third party. Liquidity regulations, contracts, strategies, and A FSP should expect to employ an risk in cash management is particularly policies). FSPs will generally have a operational team that will work closely relevant for ADCs. For example, some compliance officer who is responsible with vendors, IT, audit, risk, and customer FSPs mitigate liquidity risk for ATMs for assessing the state of compliance support, all of whom will require training by outsourcing cash management and the risks and potential costs of on roles and responsibilities with respect to companies that specialize in this noncompliance, and for initiating any to ADC operations. service, with armoured vehicles and corrective actions required. While armed personnel. Developing policies governance and management controls Internal risk and compliance and measures to mitigate these risks are established to ensure that effective is a continual process, initiated in the information management and security As business processes change with the formulation of the channel strategy and principles, policies, and processes are evolution of technology and changing finalized throughout the subsequent in place, technical controls can be used customer expectations, threats emerge steps in the process to ensure that to ensure the reliability of almost every as new vulnerabilities are discovered. on implementation, the FSP’s risk other control in the organization. The Introducing ADCs increases an management framework is fully updated ability to automate technical controls institution’s overall risk profile and the based on the risks associated with the that demonstrate compliance with level of risks associated with offering ADC. With a sound risk assessment and management’s intended information- financial services, particularly legal, robust risk mitigation strategies, MFIs based policies is a powerful resource operational, technical, compliance, can successfully implement ADCs that for an organization. Similar to the and reputational risks, as discussed in will ensure the protection of assets, risk management assessment, at this Chapter 1. Risk management involves security of transactions, prevention of point in the ADC implementation it is a set of processes through which an fraud, protection of client privacy, data important for the FSP to identify any organization identifies, analyzes and security, and compliance with laws and potential compliance issues and adapt responds appropriately to risks that regulations that are applicable to digital the framework to address these. Other might adversely affect the realization of financial services, regardless of which measures such as internal auditing the organization’s business objectives. option is selected. For microfinance should be considered part of the long- Risk management tools include IT practitioners, we would recommend term risk management strategy to controls, which are selected and the “Digital Financial Services Risk continuously evaluate potential threats implemented on the basis of the risks Assessment for Microfinance Institutions and vulnerabilities and the manner in they are designed to manage. As risks Pocket Guide” developed by the Digital which the organization manages risk. are identified, suitable risk responses are Financial Services Working Group15. Digital Financial Services Risk Assessment for Microfinance Institutions Pocket Guide 15 (September 2014). The Digital Financial Services Working Group, Washington, D.C. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 33 02_BUILDING A CHANNEL STRATEGY STEP 3: Develop the channel strategy and business case The channel strategy 4. A SWOT analysis of the proposed channels and technology. Having defined the objectives and conducted an internal and external 5. A recommendation, based on the assessment, the FSP’s channel strategy analyses above, of which ADC solution team can now define a channel strategy. to pursue. 6. An operational, financial, and This is a project-planning document IT requirements analysis and a that outlines how the FSP will meet recommendation of whether to ‘buy’, customers’ needs and at the same time ‘rent’ or ‘build’. address the challenges identified in 7. A high-level timeline and project plan, Step 1. including roles and responsibilities of key stakeholders or internal teams. The channel strategy document should 8. A high-level budget, including the specify: source and uses of funds. 1. The business goals and objectives 9. A risk analysis, including potential that the proposed channels are meant impact and mitigation. to address, as established in the FSP’s At this stage, the focus should be on business plan or strategy. reaching consensus and eventually a 2. A market analysis, including market decision internally about which ADC research and competitor and solutions to pursue. Specifics, such regulatory reviews. as business projections, targets, and 3. An analysis of the proposed channels timelines can be tackled in the business and technology (device, application, case to analyze the commercial viability and communication) and how they of the chosen solution. will meet business goals and customer needs. 34 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CASE STUDY In the current market, the most commonly observed strategies for IT systems procurement are either to ‘buy’, licensed products also being stored in the cloud for security and ease of management. The decision regarding Buy, build or rent? ‘build’, or ‘rent’ systems which are defined as follows: an organization can procurement of systems is influenced by a range of factors, including uniqueness purchase either a license or bespoke of requirements, security, legal and solution from an existing vendor compliance issues, the organization’s (buy), choose to build a customized skill and available labor, hosting solution from scratch (build) or leverage requirements, cost, time, and vendor Software as a Service (SaaS) to ‘rent’ availability. FSPs will need to consider software from a vendor. This approach each of these factors carefully, alongside to procurement is separate from the the advantages and disadvantages of decision of how and where to install each option, which are summarized and host the systems used by the FSP, below. Some channels, such as mobile which could be either on in-house banking and ATMs which are used on servers, at an external data center, or in third-party networks, lend themselves the cloud. While there is an increasing particularly well to such models. The amount of overlap between these two SaaS option is especially attractive to strategies, that is, SaaS products being FSPs that are testing out new channels hosted in the cloud, this need not for the first time and are therefore always be the case, with in-house or unsure of the results. BUILD BUY RENT Custom Development Commercial System Software as a Service • Can provide solution exactly matched to FSP • Can provide complete solution to FSP. • Shorter implementation time. requirements. • Proven solution. • Ready solution. • Full ownership rights to all IP and source code, • Availability of support for a full team • Lowest initial cost to FSP. Advantages compared with commercial software. • Option to customize with support of vendor • No hardware investment required (if cloud • FSP will own the system. expertise. based). • Offers full control over data. • Flexible solution and could potentially lower • Minimal IT dependency for application and • Cost of in-house support potentially lowers costs, with more efficient workflows and hardware maintenance. ongoing maintenance costs. added functionality. • Solutions can be easily scaled up or down • Ownership of tangible software/hardware • Offers full control over data with little time and effort. assets. • Ownership of tangible software/hardware • SaaS upgrades are iterative, with limited assets. involvement required. • Higher upfront investment, including additional • Higher upfront investment, including • Usually not customizable and limited in hardware purchases if needed. additional hardware/software purchases if functionality. • May take much longer to implement. needed. • May not support all required functionality. • Fully dependent on expertise and reliability of • May require FSP to compromise to suit • Long-term cost can turn out to be higher for Disadvantages programming skills in-house (FSP becomes a available functionality. bigger FSPs. software house). • Customization for specific requirements can • Control is relinquished to vendor. • Presumes that the FSP has sufficient be costly and/or time consuming. • Potential regulatory issues about storage of knowledge of the systems to fully extract • Dependency on IT vendor for support data/business critical systems (if cloud). requirements and design the system well. can be a challenge, depending on upfront • Dependency on IT vendor for support • Generally seen as more risky, as typically relies negotiations. can be a challenge, depending on upfront on key individuals. • Upgrades can be expensive and time negotiations. • A less agile option and CBS will always take consuming and often mandated by vendor. • Integrations with other corporate systems preference, which may put severe constraints can get complicated; well-defined Web on your ADC plans unless carefully managed. services should be available from vendor. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 35 02_BUILDING A CHANNEL STRATEGY The business case 1. Assumptions based on the internal ‘reduce account opening time to two and external analyses, such as the size hours’), or sustainability (for example, A well-researched channel strategy of the addressable market, growth ‘achieve operational profitability in should be accompanied by a business projections, transaction volumes and two years’). The Chapter 2 checklist case that considers the financial and values, or other cost and revenue at the end of this handbook provides operational characteristics of each drivers. an example of a summary business channel. The business case can be a basic 2. Distribution of ADCs – the number of case document for an ADC, with some five-year financial model that captures touch points and projected growth proposed critical indicators to monitor. the investment required, ongoing costs, new revenue streams, and cost savings over time. As a last step, the channel strategy that are attributed to this new channel. 3. Cost structure, including capital team should test the business case While a positive financial return from expenditures, staff costs, and against global/regional benchmarks or transaction revenues would be the ideal marketing and IT costs. case studies. For instance, if in a similar output of the business case, some FSPs 4. Pricing structure and other fees per regional market, an ADC project typically may pursue a channel strategy despite transaction type or per product for breaks even by Year 5, then a business a poor return on the channel alone, as each channel. case that promises break-even in Year there may be indirect benefits to the rest 5. Number and types of partners and 1 would not be realistic. Global and of the business, such as opportunities the fees and costs accruing to each. regional benchmarks can be obtained to cross-sell, deposit mobilization, and 6. Projected cost savings and operational through secondary research (such as lower costs. Regardless of the profit efficiencies accruing to the FSP as annual reports or industry reports), as motive, FSPs deploying new channels a result of the new ADC, such as a well as from experts, practitioners, and should monitor the trend in transaction reduction in the cost of funds and vendors. Some FSPs may also wish to volumes, as this ultimately impacts on increased staff productivity. build a separate business case for other both costs and revenues. For instance, stakeholders, such as agents or MNOs, a high volume of transactions has cost The financial model can help the FSP to confirm that incentives are structured implications in terms of license fees to build KPIs and targets that can be used in a way that ensures the viability of be paid to vendors, commissions to be during and after implementation to the channel and also to quantify the paid to agents, or USSD charges levied assess the success of the ADC solution. investments (for example, in an agent by MNO partners. Similarly, knowing KPIs can be centered on outreach channel) or costs (for example, USSD how many transactions per customer (for example, ‘ADC will help reach 2 costs) over time. are required to break even can inform million clients’), impact (for example, marketing strategies to increase ‘15 percent of new customers will come customer adoption and usage of the from rural areas’), market share (for channel. Ideally, the channel business example, ‘become the leader in money case should include the following inputs: transfer’), efficiency (for example, 36 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CHAPTER 3 Mapping strategy to a technology platform It is important that FSPs carefully consider the implications of using one technology over another to ensure that the technology platform selected is aligned with the channel strategy and therefore enables the FSP to meet its business objectives. STRATEGY TECHNOLOGY SELECTION IMPLEMENTATION Equipped with an ADC strategy, FSPs are therefore enables the FSP to meet its business frequently tempted to select a vendor in a objectives. Determining the technology rush or to commence in-house development platform, which requires decisions at both the with little or no consideration for which application and device layer, needs to happen enabling technology best suits its strategy. before a FSP can proceed to vendor selection For some channels such as ATM or and implementation activities. This chapter Internet banking, this approach, while not aims to guide the reader on how to identify recommended, can still yield success, as the the right technology platform and involves solutions available to run these channels are the following steps: quite well defined and the technology is more 1. Identify the technology options available or less inherited by the choice of channel. In contrast, agency banking, extension services, 2. Confirm the criteria that will influence the mobile banking, and e-wallets present a decision broader suite of choices involving a host of 3. Select the preferred platform. different technology platforms, which offer very different user experiences. It is important For the more technical reader we will discuss that FSPs carefully consider the implications in detail the benefits and disadvantages of of using one technology over another to different applications and devices used for ensure that the technology platform selected mobile-based channels, as these are by far is aligned with the channel strategy and the most complex channels in the market at present. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 37 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM ADC technology, like most technologies, Figure 7 illustrates the range of STEP 4: is changing at a speed that is difficult for even the most avid technology technology options for each of the ADCs discussed in this handbook, depending Identify available options expert to keep pace with. It therefore on whether the channel will require a comes as no surprise that FSPs are third-party integration or can run on often confused about what options are the Internet, on a mobile platform, or available to them and for that reason through a bespoke application such tend to pursue the cheapest platforms as ATM. As the diagram shows, some or those touted by an aggressive channels like the ATM provide very few vendor. To avoid these mistakes, choices, while others such as mobile FSPs need to spend some time prior channels offer many options at the to vendor selection researching the device, application, and communication available options and understanding levels (for more on the components of the benefits and disadvantages of the a technology, please refer to Chapter 1). technology platform that they decide The technology selection needs to be to pursue. somewhat iterative, reverting back to the strategy with informed decisions about what is available in the market, Figure 7: Technology options for each Website portal which will continuously change in this type of delivery channel fast-moving ICT world. Call center Website SMS USSD Tablet Laptop Mobile phone STK • Smart • Feature PC Native app Internet banking, • Basic extension services – Mobile phone mini branch, branch kiosk Tablet • Bank led e-wallet • Mobile banking • SMS banking Web app • Agent banking INTERNET • Extension services – field staff ATM/POS MOBILE • Extension services switch MNO led – bank on wheels POS 3rd Party led INTEGRATION POS WITH 3RD app PARTY ATM Closed user group, shared network POS FSP Back-office systems ATM 38 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY STEP 5: Gather influencing criteria Once technology options have been • Mode of authentication – Closely identified, the FSP may consider related to the security levels, the the following criteria about which FSP should ideally decide how The technology technology to use: customers will be authenticated over the channel, a topic introduced in selection process • Types of transactions – The financial Chapter 1 and referred to again during needs to be iterative, and non-financial transactions the formulation of the strategy. At reverting back to the (account opening, loan applications, this point, a final decision is required and cash withdrawal/deposit) which to know if the channel must be strategy should be supported by the channel. compatible with cards, biometrics, The type of transaction is closely or OTPs. This decision will depend related to the size of data that needs on a series of other criteria, such to be transmitted via the channel. For as KYC regulation, availability of a example, account opening frequently national ID, customer literacy levels, requires capturing of a photo or other and use of cards and availability of image, which places a higher load on handsets within the target population. the platform in terms of data transfer. Table 2 compares the advantages and • Security levels – Depending on the disadvantages of each authentication type, value, and relative risk associated mode. with the transactions being processed, • Quality/availability of communication the FSP needs to decide what level of channels – It is critical that the FSP security is required from the channel. is aware of the availability, reliability, Other factors influencing this decision accessibility, cost, and quality of the include the security standards various communication options in its dictated by third-party networks target market and areas of operation. (EMV provides full specifications of This specifically means knowing the levels which must be available to whether USSD is available, the participate) and the reputational risk quality of mobile data services, and to the FSP should a breach of security the extent of coverage in the target occur. While most FSPs would always market. Additionally, the cost and prefer the highest levels of security reliability of these services need to be available, this decision may ultimately ascertained to prevent selection of a become a cost-benefit analysis, as the technology platform that is reliant on highest levels of security will always an inherently unstable network. require the largest investment. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 39 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM Table 2: Modes of authentication MODE ADVANTAGES DISADVANTAGES Card+PIN • Well-established process which is used • Expensive to produce, distribute and maintain globally as the most common way to secure cards (and PINS). financial transactions. • Not accepted widely in all markets (especially • Possession of cards can be seen as a status outside urban centers). symbol. • Customers have issues remembering the PIN • Convenient for customer to store value or write it directly on card. without carrying cash. • Cards can be misplaced or stolen. • Introduces options for a range of card-based products. Biometric • After upfront investment, cheaper to maintain • Not yet as widely used across all channels after one-off registration (bio cannot be lost so may need to be used in conjunction with or forgotten). card/PIN (few biometric ATMs). • Well suited to non-literate populations and • Upfront investment requires distribution of where no national ID card exists. biometric readers which can be expensive. • Provides additional functionality such as • Device failure/unreadable bio records can deduplication. occur and needs to be catered for with a • High-quality authentication factor, that is, backup process. hard to falsify so can be used as part of a • Quality of finger prints depend on profile of single factor authentication. customer – for example, people who perform manual labour such as in agriculture may have damaged finger prints. OTP • Cheapest option from the FSP perspective as • Transaction times will be influenced by no devices, cards to distribute. delivery time of the OTP which can be • User-friendly workflow. unpredicatable in many countries. • Requires all customers to have a phone which is pre-registered with the FSP. • Lower grade of authentication factor so must be part of a two-factor process. 40 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY STEP 6: There will be a huge Select the Platform difference from one country to another on handset availability • Handset availability in the market/ Equipped with a list of options and and it is imperative target market – Knowledge of the the information to make an informed that these local types of devices available in the decision, the FSP can now draw market and used by the target users some conclusions on three levels: the trends are taken into of the ADC platform is a critical input application level, the device level, and consideration. to the decision, particularly for mobile the communications level (refer to ADCs. In reality, this information may Chapter 1 for more information). be hard to obtain and may require the FSP to conduct a survey to determine, To illustrate the decision-making for instance, what phones their process, we have worked through customers are using. There will be a some examples for mobile and agency huge difference from one country to banking in Figures 8 and 9. There another on handset availability and it is no ‘one size fits all’ approach and is imperative that these local trends readers will need to weigh and adjust are taken into consideration. Analysis their decisions according to their best of local differences also needs to judgement of what is most suitable for take into account the requirement their target users. to support multiple languages and character sets and how this requirement can be met by various devices. Where the ADC platform will be operated by an intermediary, such as a field staff member or third-party agent, the FSP will have more control over the devices used and hence the analysis will be based more on cost, security, and durability. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 41 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM Decision tree: mobile banking For mobile banking, the communication connectivity, although this will introduce choice. For areas where data connectivity and devices that are available to the target some limitations on the types of services is unavailable, or too expensive, the only market dictate the technology choices. that will be available due to the size of the option is to use SMS. If we have data but In this decision tree, we have opted to message that can be communicated. no smartphones, then a Web app running consider the income level of the FSP’s on a feature phone would be the ideal The second option identified is where the target market as the initial input to the option, as it requires no installation by the FSP’s market is purely in the lower-income decision. The order in which these input customer. segment, in which case the key decision factors are applied could be switched, or would be availability of the USSD channel, The only option that has not been discussed indeed, considered through a different which would be the recommended option, in this graphic is a J2ME app, which could proxy, such as type of handset available to as it runs on all handsets and is an easy- be another consideration where the Web customers – smart, feature, or basic. The to-use, menu-based application. In case app has been recommended, as both run decision about which to use may depend this channel is not available, and only on feature phones. The major difference on the data available from the assessment very basic handsets are used, then the between these two is the requirement phase (for example, the question would only choice is SMS, which has limitations for J2ME to be manually installed be: “do we have a comprehensive survey in terms of security and complexity of and updated, which for customer-level of customer handsets?”). For those FSPs transactions supported. solutions is not ideal. targeting only higher-income customers, we presume a smartphone would be Our last option on the decision tree is available and that these users would be where a FSP wants to introduce a service more tech-savvy and hence capable of that caters to all market segments, which installing a native app. To finalize the again needs to consider USSD availability, decision for these users, we would need to which, if available, should be used. If only know the quality and availability of data data services are available from a mobile services on the customers’ phones, which, phone and smartphone penetration is if available, would imply using a smart high, then a smart app would be the logical app over a mobile data connection. If data is not available, a smart app could still be used, but with SMS as the means of data 42 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Figure 8: Technology Choices for Customer-level Mobile Banking USSD APP SMS BANKING SMART APP   VIA DATA SMART APP USSD  VIA SMS AVAILABLE? DATA  LOW AVAILABLE? SMART PHONE SMART APP PENETRATION VIA DATA HIGH TARGET MARKET USSD APP  BY INCOME  DATA AVAILABLE AND HIGH AFFORDABLE? LOW ALL USSD AVAILABLE?   SMS BANKING WEB APP VIA DATA ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 43 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM Decision tree: agency banking First, the use of peripherals may be suited when only financial transactions Other types of mobile applications, considered and this will be influenced are required, using high-security cards including J2ME and Web apps, also not only by the level of authentication or biometrics. Alternatively, smart apps have a potential role in agency banking required – which will dictate the need for are more appropriate when no USSD is technology, although each cater for quite a either a card reader or a bio reader – but available. They can also be used for card specific set of circumstances and one could also by the regulatory requirements for transactions, although the security may easily argue against using them, as the physical receipts to be produced, which be less than with a POS device, unless primary use is when there is a preference could introduce the need for a printer. an external pin pad or card encryption for a solution to run on feature phones. For FSPs using cards, an important factor is used. Smart apps will also play a role Given that agency banking works with to be considered is the level of security when a FSP wants to do non-financial a controlled group of users (agents and or card standard (EMV) that it wishes transactions, with options to use either a staff), FSPs may decide to invest in smart to apply, as this will impact both on the phone for small amounts of data entry, or handsets, given that the price differential device (the need for encrypted pin pads) a tablet for larger amounts of data. between smartphones and feature phones and on the application standards and is quickly disappearing, primarily due to certification. Other important factors USSD also plays a role in agency the decreasing cost of smartphones. include the amount of data captured banking, although it is limited to financial and the functionalities for non-financial transactions and typically requires both transactions, such as loan applications the customer and the agent, on different and social performance data. A decision USSD sessions, to securely complete is required if all data should be input both cash in and out (cash out would be (“does the FSP want to go digital in initiated by the customer on one USSD terms of data capture?”) and if any other and cash in would be initiated by the data types (such as GPS coordinates of agent on another session). The major client location, taking of a client photo, limitation with USSD for agency banking signature, or biometric data) need to be is that printed receipts, biometrics, and considered. cards cannot be used with this technology. Using this decision matrix, it can be concluded that a POS device is best 44 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Figure 9: Technology Choices for Agency Banking POS SMART APP EMV/HSM CARD SECURITY HIGH REQUIREMENT ANY  SMARTPHONE PENETRATION LOW NON-SMART (J2ME) APP PERIPHERAL REQUIRED? (CARD, BIO USSD APP FINANCIAL PRINTER)  USSD AVAILABLE  SMART APP ONLY  SMARTPHONE HIGH PENETRATION WEB APP LOW TRANSACTION TYPE HIGH DATA AVAILABILITY WITH SMART APP NON-FINANCIAL LOW ON MOBILE AMOUNT BASIC OF DATA REQUIRED SMART APP ON TABLET NON-SMART GPS (J2ME) APP ADVANCED OTHER USES APP/WEB EXCEL/MIS ON LAPTOP ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 45 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM FROM A TECHNOLOGY PERSPECTIVE For those readers interested in the more technical details, this section discusses the applications and different devices which could be components of an ADC platform. Applications Apart from ATM and Internet banking channels, which have standard software, all other ADCs operate on a variety of customisable software applications. Each of these applications has certain advantages and disadvantages, as outlined in Table 3. Smart and non-smart native apps have been combined as the major difference between the two is in the choice of device and not the application functionality. While SMS has mostly been talked about as a communication option, we include it in the analysis of potential applications to show how it can still provide some limited functionality as an application. Table 3: Application Advantages and Disadvantages APPLICATION ADVANTAGES DISADVANTAGES OPTION SMS • Available in all countries and relatively easy to set up. • Very limited functionality due to limit of message size and non- • Accessible on all handsets. real-time connection. • Lower dependency on relationship between the MNO and • Limited security, as data entered in SMS is available as clear text in the FSP (can send to all networks unlike USSD, which is per sent messages. network). • Delay in delivery of messages can occur and is beyond control of • Easy to use and most customers familiar with the the FSP. technology. STK • No software installation required. • Requires MNO or MVNO license. • Device independent, so will work on all handsets. • Involves issuing of SIM cards. • User-friendly menu interface. • Updates to the application are difficult to coordinate, requiring • Encryption keys are stored on the SIM, so applications have either reissue of SIMs or Over the Air push updates. control over the security levels. • Customers may need to manage a 2nd SIM card (though not • If FSP has access to STK, they can have full control over the necessarily replace their network SIM) or apply a skin SIM. channel – (less dependent on third party). 46 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY USSD • No software installation required. • Not available in all countries. • Device independent, so will work on all handsets. • Requires an agreement with an MNO, which is not always • User-friendly menu interface. forthcoming. • Encryption is in-built in channel, providing good security. • No support for peripherals, such as card readers, biometrics, or • No information is recorded on the device. receipt printers. • Usage is tied to a registered phone number, which aids in • Primarily supports financial transactions. the authentication process of the user. • Limited session length. • No offline support. • Can be more costly than others depending on MNO communication fees (which are often beyond the control of the FSP to influence). • Security (encryption) is fully dependent on the provider of the channel. • In many countries, the frequency of dropped sessions is high and still charged to the customer, regardless of whether a transaction was completed successfully. NATIVE • User-friendly and rich user interface. • Manual intervention required to install and updates often required. MOBILE • More functionality available – camera, signature, and GPS. • Requires support for specific or multiple devices/operating APPS • Supports connections to peripherals: bio devices, card systems, so different versions are required (Java, Android, or iOS). readers, and Bluetooth printers. • Security must be built in and is not automatically present. • Can work offline/online and even in online mode can be • Multiple functionalities typically require use of external devices. more forgiving of poor quality connections. • Compatible handsets tend to be more expensive (feature phone or • Suited to both financial and non-financial transactions. smartphone), hence less accessible to the full market. WEB APPS • No software installation required. • Requires good continuous data connectivity. • User-friendly and rich user interface. • No offline support. • Full functionality available, but limited access to peripherals. • Security must be built in and is not automatically present. • Can be used on different devices (mobile/tablet/netbooks/ • Requires support of multiple browsers. notebooks). • Limited access to peripherals. • Suited to both financial and non-financial transactions. • Compatible handsets tend to be more expensive (feature phone or smartphone), hence less accessible to the full market. WEB • Can use CBS directly if a Web-based system is available. • Requires a reliable and continuous data connection to use (no PORTAL • No software installation required. offline support). • User-friendly and rich user interface. • Limited access to peripherals (Bluetooth printers and card • Full functionality available, but limited access to peripherals. readers). • Can be used on different devices (mobile/tablet/netbooks/ • When used on a tablet/smartphone, usability may not be as good notebooks), with some limitations. as a mobile application. IVR • Ability to serve large numbers of customers simultaneously. • Speech recognition makes it more difficult to navigate an IVR and • Pre-recorded messages for consistent accurate customers will be inclined to speak with a live person. communication of information. • Complicated menu levels and choices; it can be easy to get lost in • Limited human intervention to maintain – enables IVR. customers to do their own transactions without having to • Cost of hosting can be high, depending on the usage. talk with someone. • Hosted solutions for small institutions with limited technology experience. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 47 03_MAPPING STRATEGY TO A TECHNOLOGY PLATFORM Devices Devices, whether used by the end-customer or an agent/staff member, carry with them many advantages and disadvantages that need to be considered during the selection phase. Some of these are outlined below, with the exception of the POS device, as the application and device need to be considered as one for this channel technology. Table 4: Device Advantages and Disadvantages DEVICE OPTION ADVANTAGES DISADVANTAGES BASIC PHONE • Cheapest handset/device available. • Only compatible with USSD and STK applications. FEATURE PHONE • Still relatively low cost compared with other options. • More expensive than basic phones. • Good battery life (compared to smartphones). • Phone features may limit its function and usability (GPS, • Flexible in many ways: operation types, peripherals, Bluetooth, touch screen – model dependent). multi-purpose. • Peripheral functionality is managed on separate devices (bio • Good usability if used for small amounts of data. reader and printers) and not in-built as with a POS. • Excellent portability. • Less popular platform for app development so may have less • Embedded data transfer/GPS capabilities. access to other apps (if required). • Peripherals are limited and need to be managed separately. • Not suited to entry of large amounts of data. • No in-built security. SMARTPHONE • Moderate hardware cost relative to processing • Peripheral functionality is managed on separate devices (i.e. bio capacity. reader, printers) and not in-built as with a POS • Flexible in many ways: operation types, peripherals, • Battery life may limit some uses (Bluetooth and GPS). multi-purpose. • Not suited to entry of large amounts of data. • Good usability if used for small to moderate amounts • No in-built security, but can be added as peripherals or of data. embedded in app. • Excellent portability. • More expensive option compared with feature/basic phones. • Embedded data transfer/GPS capabilities. • Access to a wide variety of apps/popular development platform. 48 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY TABLET • Flexible in many ways: operation types, peripherals, • Peripherals need to be managed separately, although some multi-purpose. accessories such as tablet covers are available with biometric • Good usability – including more comprehensive reader and card scanner built in. screens – reports, and data entry. • Battery life may limit some uses (Bluetooth and GPS). • Good portability. • No in-built security, but can be added as peripherals or • Good battery life for specific models. imbedded in app. • Embedded data transfer/GPS capabilities. • Relatively expensive option, although some low-cost options • Access to wide variety of apps/popular development exist. platform. LAPTOP/ • Flexible in many ways: operation types, peripherals, • Requires more training/support and computer literacy. NETBOOK multi-purpose. • Less portable. • Excellent usability. • Potentially less battery life. • Longest battery life for specific models. • No in-built security, but can be added as peripherals. • Can potentially extend the use: access Web-based • Most expensive device option. CBS and other systems directly. • Significant computational power compared with mobile devices. POS • Strong in-built security. • Restricted functionality due to numeric keypad (mostly suitable • Device is portable and durable. for financial transactions). (DEVICE + APP) • Specialized training required for users to operate and • Single device for multiple functions (bio, print, card reader, SIM card) which is a must for many agent troubleshoot the devices/application. banking platforms that require receipts. • Installation and updates support is required often, with some • Fast operation. level of manual intervention. • Limited misuse. • Communication capabilities are optional and influence the price (SIM card versus cable or Wi-Fi). • Limited offline capabilities. • Limited vendors/developers and often have restricted access to device. • Cost of device. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 49 CHAPTER 4 Vendor selection Following the selection of channels and technology platforms, the FSP is now ready to identify the right vendor or partner to help launch the chosen ADCs. STRATEGY TECHNOLOGY SELECTION IMPLEMENTATION Depending on the size and scale of the equipped with a deeper understanding ADC project, the FSP may choose to of the vendor’s solution and skills before follow a formal Request for Proposal commencing the full implementation. process. This decision will likely be This chapter will still focus on the more influenced by the FSP’s procurement formal, comparative RFP process, process, the available budget and although the same points covered previous experience. Some FSPs have could be applied to a non-comparative found that an in-depth gap analysis or competitive selection. Regardless of or requirements workshop with a which approach is used, this stage of small number of prequalified vendors the project must help the FSP define can still yield a successful selection. its needs, build consensus and obtain While this approach typically requires stakeholder buy-in for the project, and some consulting fees up front, it can ideally foster a rational and transparent contribute to considerable cost savings selection process. in the long term because the FSP will be 50 Selection overview The selection process can be divided into three main stages, as shown below: Figure 10: Selection process Ensuring full COLLECT ISSUE RFP CONTRACT THE participation across REQUIREMENTS AND EVALUATE VENDOR the business at the PROPOSALS outset can help build critical support for the »»Gather and list the requirements »»Shortlist the suppliers »»License project and protect »»Weigh the »»Issue the RFP »»Implementation against selection of a requirements »»Support »»Evaluate system that does not »»Prepare the RFP responses »»Payment terms adequately represent »»Calculate TCO the full needs of the »»View demos business. »»Check references Initiation Provided that a FSP has invested selection process, the scope of work the time in the previous stages, the and selection timelines in accordance initiation stage of the selection process with specific procurement policies and should be quite straightforward, as the requirements. Ensuring full participation business case and objectives would across the business at the outset can already be known. However, identifying help build critical support for the stakeholders and a specific project project and protect against selection team to lead the selection process of a system that does not adequately should ensure representation from represent the full needs of the business. across the relevant business units (IT, This selection team typically becomes audit, operations, and finance) so all the implementation team such that will have an opportunity to have their continuity exists between these two priorities considered. This project team critical stages. will be responsible for defining the ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 51 04_VENDOR SELECTION STEP 7: Collect the requirements Collect the requirements help identify the requirements, as can research. Lastly, learning from FSPs in 1. Brief background about the FSP. 2. Business and channel strategy (may FSPs should go into the selection process other countries that have implemented include a phased approach). equipped with high-level requirements similar channels can be a valuable input to for the various components of the ADC. 3. Business goals that the solution should the requirements analysis stage. To assist address. While some of these requirements may in this important step in the process, we be easily identified directly from the 4. Selection process and deadlines. discuss the most common requirements channel strategy and/or selection of 5. Criteria for decision-making, including including security, integration, and back- technology platform, some additional preferences on different licensing office systems in the technical section of requirements, such as transactional structures (license versus SaaS versus this chapter. For those looking for more workflows, are not obvious, particularly revenue share). detail on specific channel requirements, those related to the back-office the checklist will also provide some 6. Expected content and format for the components of the ADC solution. Taking additional information. response. the time to identify these additional 7. Functional, technical, and implementation requirements will not only increase the chances of identifying the right solution, Weigh the requirements requirements with weighting to reflect priority. but will directly influence the success After the selection team has clearly of the implementation. For all systems, identified what it is they want the ADC Given the large number of systems that a fully functional specification should system to do, it is important to make a are priced based on a user/account/ be documented at the beginning of the decision about the relative priority of transaction basis, it is useful if the implementation stage of the project, these requirements as it is unlikely that strategy section includes projections and it is at this point that detailed all hold equal importance. This can be so that a vendor has all of the required configurations and decisions are made. done either through a rating scale to information to cost the solution, and This requirements analysis stage is indicate those which are ‘must-have’ so that the FSP can analyze the full merely to ensure that core requirements functions versus those that would be cost over a five-year period. Disclosing are identified as inputs to the selection ‘nice to have’. This will provide valuable the criteria for decision-making will process. In fact, it is important that these input to the vendors so they know which allow the vendor to understand the requirements should remain quite high- items are of most importance and will organization’s priorities at a higher level, as it is very likely that detailed assist in the scoring of proposals. level while the functional, technical and requirements will change over time as implementation requirements should the selection team is made aware of Prepare the Request for provide a more granular representation available features and functionality of Proposals of what is important to the FSP. These the proposed solutions. functional requirements should be a Once requirements have been identified direct output of Step 2 and ideally are The selection team should agree on a and weighted, the FSP typically needs formatted in a table or worksheet to final list of requirements which can be to compile these into a RFP document ease the burden of analysis. Where circulated to potential vendors. Where that should provide all the necessary relevant, it is useful to indicate if certain the selection team has limited experience information to help vendors prepare a functionality will be required only in with ADCs, external consultants can suitable offer. With this in mind, the RFP a second or subsequent phase of the should include the following: 52 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY STEP 8: Issue the RFP and evaluate proposals project, as this way, cost proposals can Depending on the FSP’s procurement How to evaluate the be aligned to the actual timing of when the functionality will be used. policy, the timeline for the selection process and the organization’s responses? knowledge of the market, the FSP Evaluation needs to include several Clear directions and expectations need may choose to publish an open RFP steps to analyze the proposals received, to be provided as part of the RFP or to invite only selected vendors. calculate and compare the financials document so that vendors know what The latter is more efficient and can be and then to qualify this information by should be included in proposals. Ideally achieved with a formal prequalification viewing a product demonstration and each vendor’s proposal should include round, referred to as a Request for speaking with existing customers in the the following: Information or Expression of Interest, or market. In cases where there are more informally through some research into than three qualified participants, the • Executive summary. the potential vendors. While the formal organization can choose to rank the • Company information. prequalification round can help narrow participants and only evaluate the top • Scope of the solution. down a short list, it requires additional three participants further. • Requirements fulfilment (showing time for review and assessments of how vendor systems meet the submissions. Plot, analyze, and compare stated functional, technical and responses implementation requirements) and Who should be invited to Scoring RFP responses is the compatibility with back- and front- end interface. the RFP? most straightforward part of the evaluation. Compute the percentage • Proposed architecture. An Internet search is the easiest way to of the requirements that is met with narrow the list of firms invited to respond • Project implementation approach consideration to the weighting of these to the RFP. Technology conferences are – including design, piloting, risk requirements. Usually, a 75 percent fit is also useful, as are conversations with assessment, audit considerations. good enough, as it is unlikely that a single consultants and peers. The selection • Training and documentation. solution will meet all of the requirements. team can then contact the vendors to: • Description of support services and This step must be done with a certain location. amount of scepticism, as it is quite easy 1. Check if the vendor qualifies based for vendors to indicate on paper that • Cost for the solution, including on high-level requirements (online they can meet certain requirements, and license, implementation, upgrades, versus offline, and what applications/ later have difficulty demonstrating these and support. modules are available). capabilities or providing references in a • Payment terms. 2. Confirm that the vendor is interested live environment. • References. in participating in the RFP. • CVs of key team members. 3. Ask for the estimated price range to Flesh out the financial make sure that the solution is within • A copy of the License Agreement and the budget. While not all vendors will proposition Service Level Agreement for support. be willing to share this information, The cost of an ADC, just like any system, it is usually possible to at least get a continues past the implementation ballpark estimate of costs. phase. In comparing the costs for ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 53 04_VENDOR SELECTION each of the solutions, it is important to • Travel and accommodation costs (if to interact with the vendor and get a consider the Total Cost of Ownership needed). sense of the ability to respond to ad hoc of the system over three to five years. • Hardware cost and/or hosting cost. questions. However, in this connected While costs in the initial year are typically • Initial and recurring connectivity cost world, many vendors can provide easier to estimate, and hopefully clearly (data, SMS, and USSD). online demos, provided that clear laid out in the cost proposals from expectations are set regarding what • Supporting licenses cost (operating the vendors, costs for the second and should be covered during the course system and database licenses). subsequent years should anticipate of the demonstration. While it may not • Cost of devices and/or peripherals. enhancements to the system on top be possible to demonstrate all of the of the annual maintenance or support • Annual maintenance (or support) fee. functionality requested in the RFP, the fee. Additionally, it is critical that ‘like • Revenue share (if applicable). core requirements should be shown so is being compared with like’, both • Vendor daily fees for customizations/ that the selection team can get a good from a functional standpoint but also enhancements after the first year. impression of both the front and back financially, where vendors have used Of course, the financial decision can end of the solution. Those participating in different costing models. For instance, also be based on other criteria such as the demonstration should be prompted it is tempting to conclude that SaaS or the payment terms. The FSP (based on to give feedback to the selection team, revenue share models are much cheaper strategy and/or cash flow) may prefer noting their impressions of the system than upfront licensing when only a solution that costs less initially as and any concerns that they have. transaction levels for the first couple of opposed to the one with the lesser TCO. years are considered, but these figures Obtaining references from existing can quickly change as volumes and customers will help the selection team usage increase over time. Computing the Request demonstrations and evaluate the quality of the solution as TCO compares the financial evaluation seek references well as the quality of the implementation for the buy, build, or rent options. The proof of vendor quality lies in the and ongoing support services. A strong ability to demonstrate the functionality demonstration without corresponding The TCO should include the following: of the system, but also to provide clear positive references should be of evidence of satisfied customers using concern. Nevertheless, new vendors are • The solution’s license fee and/or the systems. This is therefore a critical emerging continuously and FSPs should usage fee for a ‘rent’ option. step in the evaluation process and due be aware that taking a calculated risk to • Implementation cost. care should be taken to ensure that it is go with a newcomer who may not have • Integration cost – both to the CBS carried out properly. Demonstrations of a long list of referees can at times pay and to any third parties that will be the systems should ideally be done in off. included in the channel. person, as this also gives an opportunity 54 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY STEP 9: Contact the vendor FROM A TECHNOLOGY PERSPECTIVE Once a full analysis of the proposals and As discussed above, to prepare a comprehensive RFP document, the FSP would vendors is complete, a preferred vendor need a good understanding of the technical systems involved in ADC platforms. This can be contracted. Where a preferred involves the front-end applications, back-office administration modules, and the vendor can be identified, the final stage integrations between these systems and the CBS as was previously introduced in involves agreeing on contracting terms Figure 5. While this handbook is not a comprehensive guide on each of these areas, for the product/service. Contracts need we will attempt to introduce the main areas that are relevant so that this information to be reviewed with care, with specific can be referenced during the requirements gathering step. attention paid to deliverables, payment terms, responsibilities on both sides, and support level agreements after the ‘go live’ stage. Sufficient time should be Front-end applications identified, this should also be mentioned (that is, compatibility with budgeted for the negotiation phase, as We have discussed in some detail in Ingenico POS or NCR ATMs). these legal agreements typically require Chapter 3 the different technologies review at different levels within each available for front-end applications, 2. Transaction types – The functionality respective organization, with input from including USSD, mobile apps, Web supported by the front-end legal teams. Commercial negotiations platforms and bespoke systems such application must be clearly stated in can be drawn out if there is a significant as POS or ATMs. Irrespective of which the RFP so that vendors can confirm gap between the quoted price and the technology is selected for the front end, availability of this functionality and FSP’s budget. certain functionality and features should also gauge the implementation efforts be present and, if deemed relevant, adequately. This would ideally include Sometimes though, the selection reflected in the RFP. This includes: a list of different types of transactions process may not yield a clear winner. In expected to be supported, perhaps this case, the FSP may need to reassess 1. Compatibility with devices/models with some phasing to show what its requirements, by either adjusting – The FSP has to clearly state what would be deployed initially versus these in line with what is actually their expectations are in terms later. So, for example, if the FSP available in the market, or by carefully of compatibility of the front-end needs the ADC platform to support considering the ‘build’ option to develop application with the devices available non-financial transactions such as a solution in-house. in the market. For mobile-based customer registration, photo capture, systems, this is typically stated as a and biometric enrollment, it is compatibility with operating systems worthwhile to list these. While support and versions of that system, i.e. for transaction types should be Android version 4.0 and above. For provided at the front, middle and back Web, the expected Web browser end, at this point we are considering and minimum version supported are how the end-user interacts with the also useful. For bespoke applications system to initiate and complete the where the device model has been transaction. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 55 04_VENDOR SELECTION 3. Registration – Most ADC solutions in terms of how user friendly the phone number verification step, but need to provide some support to application should be. This should typically also involves linking the cover the registration of users on the include any language preferences/ agent to a float account that will be system. This is typically initiated via translation requirements and whether used as the contra account for all a back-office administration system the interface needs to be designed for transactions posted by the agent. and then completed through some low-literacy target markets as this can Registration of agents also involves interaction between the front-end influence the design considerably. defining what operations they can application and the end-user. For access on the system and very often example for a channel such as mobile Back-office systems defines the hierarchy by which they banking, a customer would typically will be managed- i.e. master agent, The back-office systems for ADCs are request access to the channel through aggregator. Lastly, the registration of the systems which are used to administer an online application form. The FSP’s agents, which is typically bundled as the products and services offered via the back-office staff would then process an agent management solution, must channel and which support all processes this request by putting in the details also help to define the limits that are associated with their use. These systems into the registration module of the applied to agent-initiated transactions are typically accessible only to the FSP ADC solution. and the commissions that they staff, most often the IT department should be paid for conducting these FSPs should be clear about their responsible for the administration of transactions. expectations in terms of this the systems. Some examples of such registration process, which typically systems include: agency management, Registration at the back office is overlaps with the capture of the agreed an ATM device management system closely linked to user management, mode of customer authentication or the administration of an Internet which involves the administration of such as a biometric registration banking platform which would be used access rights and roles for end-users of or PIN creation. Where customer- to subscribe customers for the service. the channel, as well as administrators driven registration is required, the When considering selection of the of the system. Both back- and front- registration process needs to carefully back-office components of an ADC office systems must adhere to best consider the limitations of the solution the FSP should consider the practice in terms of user access roles technology used; for example, if using following functionalities, some of which and rights to ensure that all different USSD, the amount of data that can be are generic to all ADCs while others are types of users – from customers to input should be minimized to avoid relevant only for some channels. agents and system administrators – sessions being disconnected before 1. Registration – As discussed above, have appropriate access to perform completion of the process. the functionality to register customers their roles. The chosen back-office or agents typically involves both front solution must be able to standardize User interface – Although somewhat 4. and back-office applications. From the this user administration task, and difficult to specify in a quantifiable back-office perspective, particularly of course ensure that all access and way, the usability of the application for mobile channels, functionality use of the system is supported by a needs to be considered, particularly should be available to confirm the detailed and accessible audit trail. where end-users or third parties customer’s phone number, either are interacting with the front-end directly with the customer or with 2. Fee management – Back-office application. Within the RFP it may another source of information such systems should also provide the be wise to mention any specific as an MNO database. Registration necessary configuration tools to design criteria, usability metrics of agents may include this same administer the products and services or expectations that the FSP has 56 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY being offered over the channel. This is Device management – For certain 4. These back-office systems provide likely to include fees associated with ADCs, including agency banking, administrators with an operational different transactions, and must be ATMs, and extension services, a management and monitoring system flexible enough to cater for changes system would ideally be present to that must include reconciliation and over time and a range of different help control the access to and usage of fraud processing. Where ATMs/POS computation rules. Furthermore, these the devices used in the channel. These devices are part of a wider network systems should be parameterized, systems will differ depending on the such as VISA or MasterCard, these allowing an administrator to change technology platform used but roughly systems will also be responsible for fees with a user-friendly interface can be divided between Mobile routing, or switching, the transactions rather than requiring expensive Device Management solutions and to the issuing bank. changes by the vendor with hard pure device management associated coding. Finally, the calculation and with ATMs and POS devices. 5. Card management – For FSPs initiation of payment of agreed planning to use cards, the major The MDM solutions in the market help decision will be whether or not to fees should be automated through not only to secure the devices, but manage the cards in-house or to integration with the CBS with the also to monitor and support mobile outsource this function. This decision flexibility to set payments at the point devices deployed by an institution. will be influenced by a number of of transaction or at a pre-defined Such solutions can allow for a remote factors including the volume of cards interval. Depending on the CBS in deletion of data, which may be required, availability and costing use, the fee calculation can possibly particularly important if sensitive data of outsourcing options, in-house be done in the CBS itself with the is stored on the device as is often resources to operate card services ADC just triggering this charge, rather the case if solutions work in offline (applications, printing, distribution than calculating it. In such cases the mode. Additionally where the channel and help desk), required turnaround requirements for the back-office ADC involves merchants/agents or staff time for new and replacement cards, system is reduced. using devices remotely, functionality and the type of card that the FSP wants 3. Commission management – Specifically should be available to map a device to issue (private label vs. international for agent management systems, to a specific user so that access is network). While no hard rule exists functionality is typically required to tied to the use of a specific device. about which is better, an observed define and calculate commissions This can be done either by registering trend is for FSPs new to cards to due to the agent. Much like the fee a device serial ID or an International initially outsource this function and definition module, this needs to be Mobile Equipment Identity code, only bring this in-house when volumes flexible for the system administrator to which will be validated as part of the increase. Some networks supply the adjust these settings over time, ideally log on process and used to track GPS full suite of outsourced cards and ATM without a dependency on the vendor. location of the device. network management for many FSPs. Rules associated with commission By comparison, the device The risk here is that the FSP does not payments can often be complex and management systems for ATMs and have control of the ATM functionality. while a FSP need not define these in POS are much more complex in that Hybrid models also exist whereby full at this RFP stage, it should ideally they ultimately drive the functionality only the card production/printing is have some idea of the calculation of the devices, controlling the screens outsourced and all other functions are basis that will be used. and status of the machines, as well as handled in-house. handling all processing of transactions and the associated cash management. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 57 04_VENDOR SELECTION For FSPs that do decide to bring this file that is compatible with the card the channel usage and performance. function in-house, a Card Management producer. These reports will differ per system System will be required to support the and FSP but could roughly be grouped following functions at a minimum: 6. Settlement and reconciliation – Any as follows: card setup, application, production, solution that includes transactions »» Audit reports – Used to trace management (black listing, account passing through more than one system the usage of the system and help blocking, and card status changes), will need a reconciliation process to the FSP support team track any setup of system codes, fees, limits, and ensure that all information is matching problems which may occur. very often complaints management. between the various systems. While »» Channel performance reports – The CMS will need to be connected systems should be available to Show the volumes of transactions on to a HSM or SSM, which is responsible support reconciliation, the extent to the platform, ideally by transaction for generation and verification of which this process can be automated type and in both a summarized view PINs, generating encrypted card will depend on the availability of a and a detailed listing. Additional values such as Card Verification unique identifier stored in all of the metrics include the number of users Values, encryption key generation and reconciling systems. Ideally, back- registered, transaction growth management. The HSM is typically office systems will include such rates, and other metrics to measure connected to a designated printer for automated reconciliation support, channel uptake. These reports will PIN Mailers and typically both printer or at the minimum, the reports to be key for management to measure and HSM should be purchased in support the manual reconciliation the success of the channel, based duplicate for redundancy purposes. process. on a set of KPIs. CMS systems very often contain Functionality to support the »» Security/suspicious transactions a customer management or issue settlement process will be required – The ADC platform should management system for use by the for ADCs involving merchants or third contain reports to show any help desk running a card center to party card transactions. Settlement suspicious transactions which record and manage the customer can either be done manually using could be extracted, either based service side of card services. reports as a means of identifying on AML standards or using custom For those FSPs that opt for funds due/owed followed by manual definitions, and escalated for outsourcing, a CMS can be eliminated transfers. Alternatively where a further analysis by the FSP’s risk although it may still be necessary for settlement bank is in place, with all management team. some system, either the back-office parties holding an account at this »» System administration reports – administration system or the CBS, bank, settlement could be automated Used to show platform availability, to record card numbers allocated to as long as rules and schedules are up time, and transaction customers for reference purposes. clearly established between all parties. performance. Additionally, a robust process needs Functional requirements surrounding to be agreed on with the partner to settlement will really depend on the While the back-office systems are ensure that the application process role of the FSP in the network and necessary to support the operations of is seamless and completed in the whether they are the issuer, acquirer the channel, they also play a key role in shortest possible time. If only the card or payment service provider. the risk management of the channel. In production process is outsourced many cases these are the systems that 7. Reporting – All ADC systems need to are used to monitor the suitability of then the CMS is still required and will contain a suite of reports to help the the controls put in place to protect the need to generate a card production administrators and managers monitor channel. Risk managers and auditors 58 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY should be conversant with each of these The starting point for this discussion Several different types of APIs exist, systems, both to ensure that they are should be the fact that integration including those based on the Web, TCP configured according to best practice interfaces can be categorized into two communication, and direct integration and as such do not introduce new risk, types: real-time or batch processing. As to a database, or proprietary APIs but also so that they can extract the the name implies, real-time processing written for specific systems. Discussions required audit reports as part of risk ensures that transactions initiated at the about APIs very often overlap with the monitoring and testing of controls. ADC customer interface are updated in mention of messaging protocols, which the FSP’s CBS immediately at the point are the series of rules that govern this Integration components at which they were initiated. For batch interfaces, on the other hand, there is a exchange of messages sent via the API. These rules may include the sequence in The final component of ADC platforms delay between the point of transaction which messages must be sent and will involves integration between the various and the time when the transaction is be defined independent of the language systems involved in the ADC platform. reflected in the CBS. Batch integrations used to write the message. Table 5 Introducing ADC technologies in most are achieved through the transfer of files, provides some examples of APIs and cases requires some level of integration either manually or using the File Transfer protocols that are commonly found in between the FSP’s back-office systems Protocol, and though cost-effective, are the financial sector, the most common and the technology driving the channel. not ideal for financial transactions. of which will be further described in the In many cases, ADC solutions also section below. require multiple integrations with third Real-time integrations to the CBS parties (m-wallet providers, bulk SMS can be achieved through the use of providers, and national switches), as well Application Programming Interfaces, as several in-house systems (m-banking which specify how two different systems software, agency banking modules, can communicate with each other accounting software, and CBS). through the exchange of ‘messages’. Table 5: Integration APIs for ADCs EXAMPLE USED IN FINANCIAL SYSTEMS API Web service, TCP, database level, proprietary WEB SERVICE/WEB API REST, SOAP, XML-RPC MESSAGING PROTOCOL ISO 8583, ATM management protocols (NDC, AANDC, DDC) LANGUAGE XML, JSON, Java, C#, JavaScript, Delphi ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 59 04_VENDOR SELECTION ISO8583 defined as a set of Hypertext Transfer Protocol request messages that have ISO8583 is a standard messaging defined structured response messages. protocol used for exchanging electronic These messages can be written in various transactions between financial systems, different languages such as Extensible primarily used with card-based Markup Language or JavaScript Object systems. The protocol provides the Notation format. message format and communication flow for different systems to exchange transaction requests and responses, EFT switches and and consists of a series of Message middleware Type Indicators which describes the Systems integration for financial function of the message. For instance, institutions is increasingly being driven the MTI0100 refers to an authorization by the use of an Electronic Funds Transfer request. Each message consists of 128 Switch or equivalent middleware. The fields, some of which are pre-defined to primary function of these systems is contain certain data such as PIN, while to connect different ADC systems such others are configurable or optional. as ATMs, POS, mobile and third parties Several different versions of ISO8583 with the CBS. This software application are currently in use (1987, 1993 and is specifically designed to help 2003) and so with each integration systems communicate and exchange project the version and exact usage of information and will typically support the protocol must be agreed between one or more of the integration protocols the integrating parties. While ISO8583 and APIs described in the previous provides a commonly used standard section. For many FSPs, investment in the industry, it has some limitations, in a switch will lay the foundation for primarily related to the exchange of multiple integrations all via the same non-transactional data which may platform, which can help standardize require systems integration to consider the integration approach and provide combining ISO8583 with other APIs a single point of audit for external to fully achieve the desired level of transactions posted on the CBS. integration. The switch will provide conversion HTTP / web APIs services to translate messages received from one system to a format that Where integration is required not only is understandable to another. For for transactional data and/or when example, if a FSP wants to integrate ISO8583 interfaces are not available, its CBS with an m-wallet provider, more open Internet-based APIs are which has an API, then the switch typically employed. These are most or middleware would translate the commonly referred to as Web services transaction message received via the and can be used for two systems to API to a format that the FSP’s CBS can exchange information. APIs are typically understand. This could be an ISO8583 60 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY standard, a Web service or a database considerably from the traditional level integration. While communication installation on the FSP’s servers to and translation of messages are the core external hosting in a data center or functions of a switch, it can also provide in the cloud. Disaster Recovery Sites other functionalities such as ‘Store has become a recommended base and Forward’ options to ensure that practice for institutions that have the channels remain available even while the resources to maintain an additional CBS is offline for routine end of period environment offsite. Table 6 shows processing. This functionality is delivered some of the details for each of these by copying all core data required for options. Selection of an application processing, such as customer balances, hosting option need not overlap with to the switch and transacting against this the licensing model of the system. So data up until the host system is available while many cloud based systems are again, at which point these transactions on a pay-per-use basis, it is perfectly are sent for posting. This is commonly feasible to install a licensed product used with ATM systems to ensure that on a cloud environment. the channel remains available during end of day processes. Lastly, with every 2. Security – Security should be ADC the topic of reconciliation, and considered at every level of a in some cases, settlement, is critical. transaction system solution, from the The EFT switch can provide either front-end application to the database automated reconciliation, which will and CBS integration. Each of the match transactions posted in the various available channels will have different systems using unique transaction IDs, methods to assure the security of the or the required reports to manually system. Below are some specific areas reconcile all connected systems. to consider: »» Application installation – This Other requirements deals with how to protect against users installing an application While the ADC front and back-office on unauthorized devices and is applications and integration require typically handled by a device some specific functionality as discussed management module. above, there are some more general »» Application access – This helps features which must be reflected in the restrict access to only authorized RFP and considered during selection. users (via a user login, password, This includes: PIN, and biometric controls). 1. Hardware and networks – Clearly »» Data transfer/network security – all software applications must be This ensures that data transferred installed in a supporting hardware from remote devices is done and network environment. The securely through VPNs or channel choices regarding how and where to encryption. install the applications have evolved ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 61 04_VENDOR SELECTION »» Database security – This facilitates fees/commissions or it could involve encryption of data and logic stored getting estimated efforts for adding in a database with best practice in new channels. The FSP needs to applied for direct database access. determine how much effort (and »» Versioning control – This ensures cost) would be associated with that only an approved version of such changes and be confident that an application is circulated to users they will be able to respond to the and prompts users to update to the market feedback on their channel in a latest version, if applicable. reasonable amount of time. Flexibility »» Application level controls – This should also be approached from the refers to the processes that are customer’s perspective to ensure that built into the system, which must any customer – regardless of which be done in a specific manner so as handset they use or which network to minimize risk to the FSP. In many they are subscribed to – is able to cases this involves introducing access the FSP’s channel service. maker/checker concepts for 5. Availability – As with all business processes which are deemed high critical systems, the FSP needs to risk and system-based controls protect against system down time to minimize the risk of data entry through investment in a backup/ errors. disaster recovery strategy. The 3. Scalability – Introduction of a new complexity of these plans will vary channel needs to carefully consider considerably from one FSP to the next, the potential scale at which the and in general is directly related to the channel will be expected to operate to risk associated with system down time. ensure that the performance remains While all would like to ensure zero acceptable as the usage increases. downtime occurs, this comes at a cost Performance standards should be that needs to be justified by the FSP stated both in terms of volumes and in terms of the channel importance. transaction response times so that During the selection process, the the FSP can confirm with the vendor FSP needs to communicate its that the solution is capable of meeting expectations regarding continuity to these levels. Performance will always potential vendors, particularly where be influenced by both the hardware it is looking at a SaaS model which and software available so for in-house means that the responsibility for the systems, the FSP will need to ensure disaster recovery environment will lie that the required hardware is available fully with the vendor. In cases where a to not hinder performance. licensing mode is being pursued, the responsibility for disaster recovery 4. Flexibility – While difficult to measure is typically with the FSP, although it directly, a FSP looking for a new ADC will need to ensure that the vendors solution must try to ascertain the level can comply with its disaster recovery of flexibility of the solution on offer. plans and that all licenses will cover This could be done through system this secondary environment. settings to introduce new products/ 62 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Table 6: Application hosting options OPTION DESCRIPTION ADVANTAGES DISADVANTAGES IN-HOUSE FSP would be responsible for the • Limited/no dependency on third • Dedicated resources required to manage SERVERS / procurement of the servers, either parties so FSP has full control of the the hardware. environment. • Risk that in-house resources not specialist DATA CENTER through a direct purchase or leasing model. Typically, responsibility for • No requirement for connectivity to in this area, opening the FSP to risk of external hosting center and/or cloud. systems unavailability due to hardware maintenance is in-house, although issues. • No challenge with regulators, as there may be potential to outsource database is stored locally; regulators • Costs are incurred upfront on just the maintenance. are most familiar with this model, so no procurement rather than spread over need to educate. time based on usage. • Requires excellent planning to cater for growth and ensure that the servers are not limiting the system performance. • Planning and execution of systems to support disaster recovery lies fully with the FSP. EXTERNAL FSP would contract server space • Skills to manage the servers is left • Reliance on a third-party provider to DATA CENTER through a third-party company who with specialists with no need to bring ensure that business-critical systems maintains a physical data center that in-house. remain available. Not all data centers are • Generally is easier to scale up equal in quality, so this risk depends on they rent to the FSP. The FSP would performance by just renting additional the market/vendor. then set up a reliable connection space/processing capacity. • Regulators may raise issues with systems so that end-users can access these • Physical servers can be visited. not being in-house. servers as if they were in-house. • System availability dependent on connectivity to data center. CLOUD FSP contracts with a hosting • Skills to manage the servers are left • Reliance on a third-party provider to company that provides access to with specialists, with no need to bring ensure that business-critical systems servers hosted in the cloud. Like with in-house. remain available. a data center the FSP would then • Generally it is easier to scale up • Regulators may raise issues with systems performance by just renting additional not being in-house and not being able to need a strong connection for end- space/processing capacity. visit the physical data center. users to reliably access the system. • System availability dependent on Unlike with a data center, these cloud connectivity to cloud. servers cannot be physically accessed. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 63 CHAPTER 5 Implementation Following selection of a vendor, and equipped with all the information and decisions made in the previous steps, the FSP is finally ready to commence implementation of the channel solution and launch operations over that channel. STRATEGY TECHNOLOGY SELECTION IMPLEMENTATION This phase of the project has two Implementation methodology major components: the implementation The methodology followed during systems of the technology solutions and the implementation is not specific to ADC operationalization of that technology. The first solutions, and may vary slightly from one component is largely driven by the technology vendor to the next. The diagram below outlines vendor, who with input from the project team one suggested implementation methodology will work to install, configure, train and support that could be adjusted as required to fit a the live deployment of the ADC systems. The particular situation. For example, if the FSP second component will be driven primarily has opted for a cloud based system, then the by the internal project team and will focus on hardware procurement (step 4) will not be all of the supporting activities such as agent required. Alternatively, the implementation of recruitment, marketing, end-user/customer a new system will always look slightly different training, and setup of supporting structures from a project that replaces an existing system, for the channels, such as helpdesks and with the latter requiring additional steps to customer service lines. Given the technology cater for data migration. Lastly, where the focus of this handbook, we will put more implementation involves the introduction of a emphasis on the first component, although new channel, most FSPs opt to launch a pilot it should be clear that one without the other initially, with a closed group of users to test will likely result in either a failed project or one both systems and product offering. We will which fails to meet its full potential. talk through each step in brief in the following section so all are clear on what tasks should be completed in each step, and potentially who is involved in each task. 64 01_TEAM 02_KICK-OFF 03_REQUIREMENT 04_HARDWARE 05_TRAINING INFORMATION ANALYSIS PROCUREMENT 10_ 09_GO LIVE 08_ 07_ 06_USER MAINTENANCE CONFIGURATION INSTALLATION ACCEPTANCE AND REVIEW CUSTOMIZATION TESTING STEP 10: Prepare kick-off and analysis Most financial institutions opt The purpose of this step is to identify the of ‘super users’ or champions of the system. to launch a pilot Core Implementation Group who will likely Where the vendor adopts a ‘train the trainers’ initially, with a consist of members from the project team approach, this group will receive this training closed group of that participated in the selection stage, as well and be responsible for end-user training prior as relevant representatives from finance, IT, to going live. The CIG will take most of the users. customer service, marketing, operations and day-to-day decisions regarding the project audit. This operational group will be involved and work directly with the project manager in training, requirements analysis, and testing and team appointed by the vendor. of the systems, and typically form a group Figure 11: Project team structure PROJECT SPONSOR STEERING COMMITTEE PROJECT MANAGER CIG ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 65 05_IMPLEMENTATION In addition, a project steering committee should also be in place, Project kick-off wish to introduce specific policies on change management or systems used headed by a project sponsor to whom This is an official meeting to mark the during User Acceptance Testing. Lastly, final and more critical decisions should start of the project and takes place once an escalation process should ideally be be escalated. This person typically will the contracts with the vendor have been discussed at this early stage to resolve have a reporting line to the board if finalized and the team driving the project any issues that may arise. has been identified. From the vendor’s the project is tracked at this level, and side, the project kick-off meeting is an will weigh in on decisions regarding budget, “go live” and any other critical opportunity to introduce the project Requirements analysis manager and team assigned to the Throughout the whole ADC decisions that need to be taken during project. The kick-off meeting agenda implementation process, requirements the course of the project. The CIG and should focus on introductions of the steering committee need to decide at for the solution have continually been teams, with clear assignments of roles the outset how decisions will be made refined, starting with the high level and responsibilities. The implementation and project status communicated. channel strategy and culminating with methodology should be presented by Taking these simple foundation steps this implementation step where final the vendor and agreed with the internal regarding the team structure, decision- decisions on the configuration and team, as well as a high-level project making process and communication plan if possible, although most vendors customization of the ADC take place. can help prevent project delays and can only confirm on this plan after the This is reflected in Table 7 with an disturbances as things progress and detailed requirements analysis phase example of how it is applied to a channel, obstacles arise. is completed. The vendor may also in this case agency banking. Table 7: Levels of requirements analysis DEVICE OPTION REQUIREMENTS ANALYSIS EXAMPLE CHANNEL What do we want to do? Define the products and Introduce agent banking to reach rural customers and mobilize STRATEGY services that should be available over the channel. savings. TECH PLATFORM Which technology is best suited to our strategy? Agents to be given smartphones running an application and IDENTIFICATION connected to a biometric device for authentication. SELECTION What exactly do we expect the ADC solution to do, Support both financial and non-financial transactions with PROCESS both for short- and longer-term planning? biometrics. Provide a full agent management system. Integrate to the CBS using available web APIs. IMPLEMENTATION How do we configure / customize the solution for the Agents to be organized into a three-level hierarchy. Allowed initial implementation? Define the project phases and transactions restricted to cash in / out and customer registration. scope of each. Phase 1 with Phase 2 to include loan applications. 66 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY From the vendor’s side, the project kick-off meeting is an opportunity to introduce the project manager and team assigned to the project. The requirements analysis work done at FSP is aware of the existing functionality be customized to meet the FSP’s the implementation phase is typically of the system and can simply overlay requirements. led by the vendor, as they will know new needs onto this system, thereby Reporting – List of expected reports 4. what their system is capable of doing minimizing customization, which is from the system, ideally with detailed and should advise on the best way to always a risky and often costly task. specification as to what information is map this to the FSP’s products and Investing time in this initial workshop contained. processes in a gap analysis exercise. will not only help understand fully the For some ADC projects, particularly implications of decisions made in this At the end of this phase, the vendor those that involve the introduction of specification phase, but will also be a should be able to provide the FSP with a new channels, the requirements analysis foundation on which the training for final project plan, since up until this point done in the previous stages of the UAT can build. all plans were based on assumptions overall project will be a critical input rather than clear requirements. Many a to this phase. If such requirements are At the end of this phase, a detailed project faces its first obstacle at this point not available, this requirements analysis specification document should be when the vendor provides a delivery with the vendor can easily become a available and must be signed off by date beyond the FSP’s expectation. If prolonged exercise and at worst result in the vendor and the FSP, as it will form so, a compromise may be reached by the vendor rather than the FSP driving the basis against which delivery will splitting the project into phases, which is the channel implementation. Suffice to be measured in the later phases of recommended so that requirements can say that this is one of the most critical implementation. Changes may arise at a potentially be revisited or revised based steps in the implementation process, later point, but these should be tracked on inputs from live use of the systems. with many failed projects attributed to separately, usually through a change For many new channels, it is difficult a poor requirements analysis stage. It is request process. The specification for the FSP to envision exactly which imperative that at the end of this step, the document should ideally contain the functionality will be most important and CIG is comfortable with the functionality information listed below, and in general how users and customers will respond, that will be delivered and whether this the more detail available the better as it and hence a phased rollout will provide will entail configuration of existing will limit the risk of misunderstandings an opportunity to incorporate feedback system parameters, customization of between the FSP and the vendor. from live operations rather than building new functionality or a mixture of both. systems based on expected usage. Appendix 1 provides some guidance on 1. Process workflows that will be used with the system – Touches on how a the key decisions to be made during this phase. transaction will be initiated, validated Hardware procurement and processed. For those ADC systems that require the Different vendors will employ different 2. Configuration settings to be made FSP to procure supporting hardware methods to extract the FSP’s needs; – Relates to the products, fees, or implement new networks, this some may employ presentations or commissions, user roles, workflow, and project phase should clearly identify demos, others may conduct a gap screens that should be configured. these requirements and follow through analysis and others still may come with 3. Customizations – Functional with the necessary procurement. The a blank slate. A gap analysis workshop description of how the system will specific hardware needed will clearly is preferable, as it helps ensure that the depend on the ADC technology being ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 67 05_IMPLEMENTATION implemented, which can typically be loans for the device to be owned by the strategy and associated business case, split between front-end devices, used employee as a means of encouraging but may need to be revised based on by customers and staff, versus the back- users to take care of the devices. For the final decisions taken regarding office servers hosting the applications. agents, both models are observed and configuration/customization. Care must be taken to ensure that the the decision will really depend on the vendor of the ADC applications has fully types of agents that are available in ATM and other channels reliant on the tested these devices and can confirm the market, their willingness to either use of cards will require some specific that they are compatible with the invest some funds as a precondition to hardware ranging from the front-end software. Additionally, with an increased becoming an agent, or their existing ATM itself to the HSM and card printers number of options on the market, access to phones/tablets/laptops prior in case cards are being produced in- compatibility with the vendor’s solution to signing up as an agent with the FSP. house. For all of these systems, the or other systems in use by the FSP can FSP will need to research the available be a serious challenge. For the back office and for ADC vendors and with inputs from the vendor, systems that will be installed in-house, confirm on which to procure. Disaster Procurement requirements for front-end the implementation team will need to recovery or replacement systems need devices will also be heavily influenced identify or procure servers to host the also to be considered to ensure that the by the strategy the FSP has decided system. While many FSPs may have channel remains reliable and available to take with regards to the ownership requested these hardware specifications for the end-users. of these devices. Where agents will be during the RFP process, these may be required to procure their own devices, confirmed at this stage as it is only at the responsibility of the FSP will be less, this point that the vendor will have a although the issues of compatibility may very clear sense of how the FSP intends be more pressing given that the FSP will to use its system, and hence can provide have less control over which specific accurate sizing requirements. In the device is used. In many cases where this preparation of these specifications ownership strategy is desired, the FSPs and associated procurement needs, may discover that hardware/devices the implementation team needs to still need to be provided to agents to consider not only the hardware needed conduct the pilot or beta testing. This for production environments, but also will not only provide an opportunity to for backup/disaster recovery as well as test the solution working on different training. Typically most mid to large FSPs models but will also give these users the will require all systems to be available in opportunity to appreciate the potential triplicate: one for production, one for benefits that the system can bring to backup/disaster recovery and another them, hence convincing them of the for UAT or training. Lastly, procurement need to invest in the device. For staff of servers needs to take into account the users, it is typically the FSP that provides estimated transaction volumes expected the required devices, although some over this channel. Ideally this information have created incentive schemes or staff will be available from the channel 68 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY STEP 11: Configure and confirm the system Based on the output of the requirements how data will be migrated from the include both positive cases (that is, analysis phase, the vendor may need legacy system during the requirements the system behaves as expected when to configure or potentially customize phase. The implementation team and correct criteria is input) and negative the ADC system to meet the agreed vendor should agree on the data to be cases (the system does not allow specification. For the FSP, this phase may transferred, and cut-off dates. During operations if incorrect input) to ensure not require active involvement, although this analysis, it is not uncommon that the system is fully compliant with constant communication needs to be for some FSPs to encounter issues the FSPs requirements. Prior to this UAT, maintained between the implementation with compatibility, particularly of some training is typically required, so team and the vendor to ensure that authentication data such as biometric that those involved in the testing are progress is being made as expected records or PINs. This data is normally equipped with the skills to adequately and to handle any arising issues. By the stored as encrypted data, which may test the system. Additionally, some FSPs end of this phase, the vendor should be complicate the extent to which the new may choose to have a smaller team ready with a version of its software that vendor can access and migrate it to its prequalify the system before bringing is fully configured to meet the FSP’s systems. Difficult decisions may need to on-board a larger UAT team. This can requirements, with all configurations and be taken regarding resetting of PINs or help make the testing more efficient customizations tested by the vendor’s re-registering of biometric data. and really focus on pulling in end-user quality assurance team. feedback rather than have the UAT team interrupted by critical bugs which may Where the channel requires integrations Installation prevent it from completing its task. It is with third parties, this step will help to For ADC systems that will be installed on important to realize that this step will accomplish this task, which typically the FSP’s infrastructure, the installation be the first presentation of a working requires direct communication between of systems need to be done after the system to a group of end-users, and the ADC solution vendor and the third vendor confirms that the version is fully the way in which this introduction is party. This integration work will require configured or customized and has passed managed will influence the buy-in and decisions regarding integration protocols, through a quality assurance testing uptake of the system. Prolonged UAT a topic discussed later in this chapter. and the FSP has procured the required which is constantly interrupted by bugs devices, if applicable. This installation is and change requests will deflate the The FSP should also prepare UAT test typically done by the vendor although UAT team and sow seeds of doubt in cases at this stage. Test cases need to be ideally the FSP’s IT resources will be team members’ minds about the ability as detailed as possible to avoid missing trained on how to do this installation at of the system to deliver, which will likely out on bugs or issues. For example, a test the same time, so that for future releases propagate throughout the business. case to check that a customer withdrawal the task can be done in-house with less is functioning properly would outline the dependency on the vendor. UAT is a notoriously difficult exercise expected debits and credits, any fees for both FSP and vendors to navigate. or commissions to be calculated and Inevitably, changes or omissions from posted, and any reports to be generated. User acceptance testing the specification stage will arise once Once the vendor has installed the the system is in front of the users and system, the CIG can commence testing the team can finally visualize and Data migration (if applicable) the system to confirm it meets the interact with it directly. Assumptions Projects that involve replacement of an agreed specifications using the test of what the system is expected to do, existing system will also need to consider cases prepared. These test cases must and possibly cannot do, may arise ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 69 05_IMPLEMENTATION STEP 12: Pilot and go live and lead to disappointment within the Whether piloting or going for a implementation team and between replacement system with full-scale a new channel. These are typically the vendor and FSP. Having an agreed rollout from day one, the “go live” designed to operate with a restricted change control process from the kick- process must be carefully managed. closed group of users, perhaps staff off meeting will help to navigate this A series of tasks needs to take place only, to gain confidence in the systems process. Additionally, pilot projects with in a coordinated fashion to move the before introducing them to the wider phased delivery can help to schedule final UAT version to the production public. Deploying the systems in this issues arising to later phases, ensuring environment, which may involve third manner will also give the opportunity to that the project can continue albeit parties doing similar migrations at the test the systems fully before expanding with some compromises in terms of same time. Once this migration has been them to the mass market, and will functionality in the early deployment. done, a final check should be performed provide time for in-house support teams Lastly, clearly establishing the objectives to ensure the systems are still working to ensure that they are fully equipped of the UAT exercise at the outset of as expected and that nothing has been to support the end-users of the ADC. this step will help ensure buy-in to the lost from the migration process. Where The duration and success criteria for process and provide guidance should applicable, existing systems will be the pilot should be pre-defined with the issues arise that perhaps could derail switched off and services migrated vendor and project team so that all are the task. to the new platform. This may require clear on how it will be measured and some outage time for the channel, what will be required to migrate to a fully live environment. Training which should be communicated to users in advance. Depending on the decisions Following UAT, the system is ready taken regarding migration, customers Maintenance and review to be introduced to the end-users, The end of the implementation journey may be required to reset their PIN or re- which could be staff, agents or enroll for the channel, all of which has is the beginning of a new journey to customers depending on the ADC to be communicated and coordinated support, maintain and enhance the being implemented. For customers, during this phase. system over time. Transitioning from this training should be presented in an project implementation mode to easily accessible format, either through ‘Go live’ typically requires all hands on ongoing support must be managed marketing materials that guide them deck, both from the FSP and the vendor. carefully to ensure that end-users, on how to register and use the channel Initial usage of the system needs to whether customers, agents or staff, or online tutorials for channels based be carefully managed to ensure that receive prompt feedback to channel- on the Web. Field demonstrations by nothing has been overlooked in the related issues. Additionally, ADC systems staff or temporary sales teams are testing and that if any critical issues very effective. Irrespective of how it is very often need some adjustments in arise, they are dealt with promptly to the early days to cater for feedback or delivered, users will need not only initial avoid end-users reaching conclusions training but ongoing support for use enhancements identified by the users. that the channel is unreliable. Clearly if the “go live” was just on a of the channel, and this need has to be catered for ideally through a dedicated A “go live” approach based on an initial pilot basis, these enhancements can be help desk function as well as a customer pilot can provide many valuable lessons pulled into subsequent phases of the support service if the end-user is a for a FSP, particularly those launching project or at the time of full commercial customer or third party agent network. rollout. 70 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Projects don’t end with “go live” but rather transition to a new phase that Implementation tips adjust to new processes, and also to give customers and other end-users will require daily operational monitoring Implementation of new or replacement IT time to react to the changes and and support. This phase often sees systems is a notoriously difficult process to incorporate their feedback into the vendor migrate the project from and unfortunately ADC systems are no subsequent phases. an implementation phase to a support different in that respect. Fortunately 4. Be sure to define fully the business contract, whereby a dedicated helpdesk many lessons have been learned about processes surrounding the new team is available to respond to the FSP’s how to manage the risk associated with technology prior to taking decisions on issues. At this point the implementation these projects. While the next chapter of configurations and/or customizations. team conducts a post-implementation the handbook presents the wider ADC lessons learned, here we discuss some 5. Do not underestimate the time review to derive lessons learned, assess required to integrate with third parties the work that is still outstanding and of the implementation-specific lessons that a FSP may wish to bear in mind as it and be sure to consider the impact to evaluate the project against agreed of the CBS and any planned projects objectives. It is important that all embarks on these projects: for that system before you start parties are open in this review and work 1. Take time to be trained on the software integration towards mitigating project challenges you have purchased to understand 6. As with all projects, UAT is critical and and risks in the future. A support team how it works and what features are/ conducting this phase diligently will should assume the responsibility of aren’t there. While many are keen to help protect the FSP from systems actively monitoring the system to see the system live in the shortest not behaving as they need to on initial ensure that the system is operating period of time, investing a decent launch, which can be damaging in effectively from a technical standpoint. amount of time in these preparatory terms of reputation and uptake of the A set of reports and metrics can be used stages will not only help safeguard channel. to support this role. Most institutions against a failed implementation, but 7. ADCs will in almost all cases require also have a business team in place to can make subsequent steps in the setup of a help desk or support line monitor the operational and commercial process more efficient. for customers to contact in case they performance of the channel and 2. Hold workshops and meetings have difficulties using the channel. For measure the performance of the channel internally to gain consensus on some channels, this support may need against a set of pre-defined metrics aspects of the implementation to be available outside of office hours, or strategic goals, which should refer process. Project teams must have particularly for card-based channels. back to the ADC strategy discussed in representatives from operations, Chapter 2. These teams should report credit, finance, and audit, as well as IT, back to the implementation team or to ensure all angles of the business are project sponsor with results of their considered during implementation. analysis and any recommendations for 3. Where possible, try to phase the improvements or enhancements based deployments to allow staff time to on their observations. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 71 05_IMPLEMENTATION FROM A TECHNOLOGY PERSPECTIVE During the course of the implementation, and particularly during the requirements specification step, some key decisions need to be made. Table 8 lists some of the bigger decisions to be made during the implementation process of ADCs. Table 8: Decisions made during the implementation process of ADCs TECHNOLOGY KEY IMPLEMENTATION DECISIONS • Which bulk SMS provider to use for both sending SMS and short code (required for pull mesages). • Confirm maximum message length for SMS from the bulk SMS provider. • If short code needs to be accessible across multiple networks, need to identify which authority can allocate a single number. • Where to store customer’s phone number: in CBS / mobile banking system or other system. • How to register / subscribe customers for the service? Automatically versus on request. • Where to configure fees if charging for the service: in CBS of mobile banking solution. • SMS message definition – decide what text to send, when to send it and in which languages. • How to add / change messages over time. • Join existing third party ATM network or launch own. • Closed user group or integrate to other payment networks: national switch, Visa, MasterCard. ATM • Which system to apply the authorization policy and the rules of this policy. • Which system to store business logic such as limits and fees. • If own network: decide re hardware procurement, device management systems, liquidity management. • Configuration of card management – card production, administration, support, authentication management, HSM, card printers. • Reconciliation and settlement – policy and systems used to support. • Definition of screens and states (and in what languages). • Setup of an ATM help desk. • If joining other network: how to integrate> What connectivity required and how to test and settle / reconcile. 72 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY • How to do customer authentication: one factor, two factor, security tokens, TANs, pictures, passwords. • How to register customers for the service. • What systems to support on-going administration of channel i.e. help desk. • Workflow automation for processes originated via internet – check book requests, loan applications, high value transactions, currency exchange. INTERNET BANKING • Whether to print transaction receipts or use SMS . • How to manage the devices used by remote users: MDM versus other device management system. • How to manage agents including limits, commissions, access rights, liquidity and float accounts. • Whether to support both online and offline processing: offline for non-cash, all cash online. • If offline, what criteria to use to sync data: loan officer, region, other. • KYC implications on remote account opening. AGENCY • How to match incoming payments to the correct customer account i.e. which identifier: phone number, national ID, account number. • What business rules to apply to incoming payments: overpayments, group accounts, split to savings. • Outward payments – how to validate a customer’s phone number: one-off registration versus confirmation at time of sending. • How / when to reconcile payments between the systems: automated versus manual, daily. • Receipting payments received via M-wallet: manually versus SMS versus no receipt. • How to handle group loans over this channel: individual versus batch. M-WALLET INTEGRATION ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 73 05_IMPLEMENTATION • How to register customers for the service. • Where to store customer’s phone number: CBS or m-banking system. • How to support PIN setup and administration. • Where to configure fees if charging for the service. • Process flow per transaction type. M-BANKING • Enrollment process – new and historic customers. * Using biometrics in any business requires • Maker / checker versus one person enrollment. an appreciation of the performance metrics • Accessibility of bio verification across all systems – CBS by which the systems are measured, + channels. particularly the False Acceptance Rate and • Exception process – what happens if it does not work. False Rejection Rate. FAR, also known as • Deduplication process – when to run these checks, False Matching Rate, is the rate at which process to follow up if duplicate found. the system incorrectly accepts the wrong • Which fingers to capture. person at the point of verification. By • Which model of reader to use. contrast, FRR is the rate at which the right • Number of allowed attempts to authenticate. person is wrongly rejected by the system • FAR / FFR thresholds* due to a failure to match their authentication BIOMETRIC CARD • Catering for change to business process: who to capture, details with the stored record. FAR and FRR cashier processes. rates have an inverse relationship with one • Different types of cards – smart, mag, EMV. another. In other words, the more selective • Card administration as the application, processing and the biometric system is (a better FAR rate), on-going management of the card for the customer. the more likely it is that the system will also • Card production is the physical creation of the card, begin to occasionally reject the correct which is often done by an entity other than the one doing fingerprint. Biometrics systems will need to be administration. configurable to decide the best setting to use • First decision is who will administer and produce the to balance these two rates, which is both a cards. function of the size of the database as well as • Pre-printed versus customized-pros / cons. some individual system factors that a vendor • PIN management – HSM, PIN mailers. will need to advise on. • Card helpdesk support. • Registration. x x x x • Who / where to reset PINS. PIN 74 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Integration Given that most ADC solutions require integration of different systems and that this integration can often pose problems during implementation, we wanted to focus on the topic in more detail. We introduced the types of integration in Chapter 3 as either batch or real time, but now want to dive into more detail of the real time integration options, explaining at a high level the protocols that exist, how each of them works and their pros and cons. Table 9 provides an overview of how systems integration can be achieved either via bespoke protocols specifically designed to exchange certain types of data, such as ISO8583, or through more generic formats which we roughly class as APIs. Table 9: Systems integration protocols FORMAT / EXAMPLE ADVANTAGES DISADVANTAGES PROTOCOLS File transfer (local or FTP) Various file format batch or semi- • Typically easy to organize and • Errors on upload typically requires follow up real time. to maintain. manually resolution. • Low cost. • Dependent on the file structure work. • Typically lower security as the files can be compromised as they are waiting for processing. Low level TCP Such as ISO 8583, SMPP, SMTP, • Immediate notification in case • The standards are implemented in various ways ATM management protocols (NDC, of errors. by the vendors. AANDC, DDC), HSM protocols. • Fastest network integration • The communication is not human readable protocol. which makes it difficult to trace problems. • Dependent on constant network availability. Database Usually stored procedures. • Immediate notification in case • Requires access and deep understanding of the of errors. database. • No requirements for additional • Lower security due to the access to the middleware / system. database. • Dependent on the database type / dialect. HTTP-web services Such as REST, JSON, XML, SOAP. • Immediate notification in case • Not suitable for big data processing (relatively of errors. slow). • Not dependent on the • Dependent on constant network availability. programming language. • It is adding processing overhead. Other API’s Usually integration with vendor • Immediate notification in case • Usually propriety. libraries (DLL, operating system of errors. • Requires vendors to provide detailed API). • As it is provided by the vendor documentation. it should be the best and most • Hard to trace problems as it acts as a ‘black robust way to integrate with box’. the system. • Very often it is dependent on the programming language. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 75 05_IMPLEMENTATION Ultimately the decision of which 2. Identify the functionalities supported protocol to use will be a negotiation by the interface either through a between the two integrating parties, review of available documentation or which could be the FSP and a third through consultation with the CBS party or the ADC solution vendor and vendor. Check that both financial the CBS provider. In general, a FSP and non-financial operations are need not be heavily involved in these supported if required for the channel. technical decisions regarding protocols 3. Understand how existing licenses will as long as it is assured that the required be affected by use of an API/Interface. information is exchanged at the agreed frequency. In general, often one of the While agreeing protocols is one of the integrating parties will be limited in more important steps for integration terms of the types of integration that projects, it is only the first step in they can support and hence this factor actually connecting up systems. Once ends up dictating the integration for the the protocol is agreed, the business other party. logic governing the interface must also be discussed and may contain topics All ADCs require some type of CBS such as how to handle exceptions or integration and so FSPs need to be rollbacks, fees and rules associated with aware of what format or protocol the two channels and how reconciliation its CBS supports. The market is and/or settlement will be done. For increasingly seeing CBS containing APIs example, for ATMs this business as a standard which makes for easier logic must describe how the systems integration, although FSPs should be should behave in case a transaction aware of costs associated with the use is interrupted without completion. of these APIs and limitations of the Equipped with this information, which APIs since the mere fact that one exists should be supported by a signed does not imply that it will support the document between the parties to lay required functionality. To help gather out the responsibilities and agreements information about CBS integration, reached, the parties must configure the FSP should ensure it is equipped their systems. Once this is completed with the following information before it both parties must work together to test commences any integration: the various messages that will be sent over the interface, to ensure that both 1. Determine the types of integrations systems respond as required during the supported by the system (real-time or exchange of information. batch). »» If real time, what protocols are supported? »» Obtain documentation on these APIs. 76 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Conclusions and lessons learned This final chapter provides some of the observations or lessons learned with regards to ADC projects so that FSPs benefit from the experiences of others who have travelled ahead of them in this area. These are compiled from the authors’ experiences across multiple projects, several continents, and from a range of different types of FSPs. The intention is only to share some insights based on institutional knowledge gained from past ADC projects rather than dictate ADC strategies or projects, and these lessons must be applied carefully to the context of the FSP embarking on ADC projects. SON Use existing 1 networks/ LES platforms to test out new channels Where possible, build on existing networks decision of whether to rent, buy, or build. SaaS rather than launching your own, especially models can provide options to test out new if this is the first foray into ADCs. This may channels using partner platforms, which make mean looking for integrations to third-party commercial sense while transaction volumes networks/providers such as ATMs, agents or are low. However, one should be careful of m-wallets rather than launching these services lock-in periods which are sometimes applied yourself. Integrations to existing networks are with these costing models. Nevertheless, not only cheaper in terms of technology, but establishing a proprietary network may be also allow you to observe responses from the justified when customer experience with market to see if the uptake warrants the larger existing networks is poor, for instance due to investments required for proprietary solutions. poorly trained agents, high prices, or frequent This same lesson could easily be applied to the network downtime. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 77 06_CONCLUSIONS AND LESSONS LEARNED N SON Challenge SO Pick partners others, and hence must be considered 2 3 your current carefully in the formulation of any partnership. LES LES While it may be challenging to strike processes successful partnerships in MFS, other to maximize ADCs such as outsourced ATM/POS impact networks provide good examples of how partnerships can be designed to work for all involved. FSPs need to To get maximum benefit from ADCs, a Most ADC projects require some invest time and resources to critically FSP must be ready to really challenge type of partnership between the FSP assess compatibility, strategic focus, existing processes or ways of doing and other parties, such as m-wallet and commercial alignment to create a business and to include business providers, USSD aggregators, MNOs, win-win partnership. process reengineering as part of the or a technology vendor. The success of SON Prioritize implementation process. FSPs need the the ADC may ultimately depend on the 4 courage to leave old processes behind strength of these partnerships, making it flexibility and LES in order to enhance the customer a worthwhile investment to spend time experience and take full advantage in the initial selection process and to scalability of potential cost and time savings, as continually review these arrangements well as to optimize operations. This over time. A critical review of four MFS is especially necessary for extension implementations around the world service channels whereby third parties revealed the importance of ensuring Although flexibility is important in all or remote users are now embedded in that the business model for the channel IT systems for FSPs, it is perhaps even processes that were either branch or sustains all parties involved and of more critical with respect to ADCs, as in paper-based before and now have the ensuring that competitive forces are many cases the FSP does not yet know potential to be fully digitized. Change aligned for the greater good of the how the market will respond or what management is critical for such projects partnership. The same study showed will be needed in future. Parameters so that key users and decision makers that partnerships must be both patient such as fees, commissions, and types of are involved in the redesign process and enough to cope with slow growth operations can be altered over time in buy into the need to change the status initially and yet flexible enough to adapt response to feedback from the market. quo. Despite the tendency to blame and scale in response to the market A foundation infrastructure built around failed ADC projects on technology, in over time. Additionally, partners need a centralized integration platform or many cases deeper investigation often to consider both direct and indirect switch can ease the burden of adding reveals the root cause as poor change value that may arise from the ADC, such new channels or integration partners management, with internal factors as the additional revenues earned by over time and give the FSP assurance that preventing the overall success of the agents who find customers purchasing integrations are done against a common project. Addressing this resistance to goods from their shops/kiosks at the standard. Having catered for this level of change, which may exist within the time of cash out. Lastly, the role of flexibility, it is important for the FSP not organization at the outset of the project regulations and the restrictions they to adopt new technology too quickly, and continually through implementation, impose on partners can undermine but rather take the time to see which will help minimize the risk of project a partnership, providing competitive technologies are proving themselves failure due to a lack of buy-in from advantage to some partners over in the market before incorporating within the FSP. 78 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY CASE STUDY analysis, AMK developed a channel performance of the channel, constantly strategy to launch an agent network listening to feedback from the agent that would offer customers convenient network and tweaking the system based on AMK Cambodia access to savings accounts as well as a money transfer service for both account lessons and suggestions for improved client experience. and non-account-holding customers. The objective was to increase outreach to the After three years in operation, the agent unbanked, provide a convenient savings network raised the suggestion of upgrading product to the rural clientele, and create a the agent mobile solution to a smartphone. $ LOG value-added service (money transfer). This Many agents had their own smartphones IN new agent banking channel was not only and were only using the feature phone for intended to facilitate transactions, but also AMK transactions. This change represented to enable remote account opening at the an opportunity to upgrade the mobile local agent, including distribution of ‘no application to a smart app to offer a better name’ magstripe cards linked to a PIN for user interface. It was also an opportunity customer authentication. to reduce the upfront cost of setting up Angkor Mikroheranhvatho Kampuchea is an agent with a transition to a ‘bring your a microfinance institution in Cambodia, When selecting a technology platform, own device’ model for the agent network. operating 30 branches and 109 sub-branches AMK was faced with the challenge of a While AMK could not have predicted the to serve more than 400,000 customers. fragmented MNO sector, with 12 major penetration of smartphones at the time In 2011, AMK identified a challenge in providers in operation. This, combined with of its technology selection, the flexibility mobilizing savings in the rural communities the absence of a USSD aggregator, ruled out to respond to this request enables AMK due to a lack of convenient access to cash in the possibility of a channel based on USSD, to continue expanding the MMT agent / cash out services for customers in remote as that would mean setting up separate network to meet the objectives of the locations. The existing operational model USSD lines with each of the operators. On a channel strategy. of visiting customers on a weekly basis for positive note, the large number of providers scheduled loan repayments did not provide meant that there was relatively high mobile While maintaining regular operations, AMK sufficient access to savings customers, coverage for both phone and data services has proceeded with the implementation who desired a more convenient means to available. Given that AMK was launching of other delivery channels. In 2013, AMK access their savings without having to go a proprietary agent network, it had the launched an ATM pilot powered by an to the branch or wait for a loan officer to EFT switch solution and complementary control to determine which handset would pay a visit. AMK assessed the market and card management system. AMK now explored the potential channel options be used by the agent and selected a low-cost Nokia C1 feature phone, which has the offers its customers a broader range of available, concluding that an agent network capacity to run a J2ME mobile application. outlets to transact, using a personal debit that provided customers with greater access to their accounts in remote areas would card to access an AMK account. AMK has achieve both organizational objectives and In December 2011, AMK launched its implemented an SMS solution to deliver meet client demand, and would be cost agent banking system with a network of alerts and notifications to staff responsible effective to implement. local agents empowered by a secure mobile for monitoring the ATM network and application and through branch offices via is expanding the functionality of this Although there was an m-wallet provider a complementary Web-based portal. As of application to increase communication offering money transfer and bill payment October 2014, the MMT network consisted with customers via SMS. Today, AMK is services via a network of agents in the of 1,020 agents serving 26,663 AMK considered an innovator in delivery channels market at the time, a partnership with this customers, transacting an average of 85 for microfinance and has plans to continue organization was not feasible due to its deposits and 102 withdrawal transactions enhancing the delivery of appropriate and exclusivity agreement with a multinational a day. Once the MMT system was up and viable microfinance services to improve the bank. After considerable research and running, AMK continued to monitor the livelihoods of customers. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 79 06_CONCLUSIONS AND LESSONS LEARNED these in its ADC solution. A balance change strategy should evolve with needs to be struck between staying in the clients’ needs and expectations, touch with the market demands of the the business and the external market customers and ensuring a stable and in which it is operating. This does not reliable transactional platform on which mean reinventing the channel strategy to extend services. on an annual basis, but rather making adjustments and enhancements SON Consider to existing ADCs to align with new 5 conditions. These reviews should be the context LES supported by pre-defined performance carefully metrics or KPIs, which measure use, user satisfaction, volumes, down-time, and other relevant statistics which can be extracted via tools and reports that monitor channel operations over a FSPs should remember that there is no period of time to compare trends and ‘one size fits all’ in terms of channels. benchmark with other market data. FSPs need to consider both the Depending on the results of these external and internal environments, as reviews, FSPs may need to go back to discussed in Chapter 2, and care must the drawing board periodically to adapt be taken to not presume that what was to changes in technology, demand, and successful in one place will necessarily competition. The technology that makes be successful in another place. up the ADCs should be dynamic and flexible enough to support this evolving channel strategy. SON An ever- 6 LES evolving strategy As with all strategies, periodic reviews There is no ‘one size fits are recommended to assess how the institution has performed against its all’ in terms of channels. goals and whether the strategy needs to be adjusted based on technology trends, changes in customer expectations, and other relevant feedback from the market and operational results. A 80 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Checklists To help consolidate the information provided throughout the handbook, checklists have been prepared for each of the phases of the project. These are designed to be practical tips on what decisions or tasks need to be conducted at each phase and step of the project. Chapter 2 »» Automate business processes and service Channel strategy delivery to gain efficiencies. »» Leverage existing infrastructure (mobile or retail) to target new markets. These guiding questions can help draw some »» Enhance the security of existing systems conclusions as you navigate through the through user authentication. ADC strategy formulation process. Some are 3. Who will be part of the channel strategy more general and others are relevant only as team? FSPs investigate the potential to use specific channels. Step 2: Assess the environments Step 1: Define the business within which the FSP operates objectives 1. External environment 1. Confirm the vision, mission and business »» Customers’ needs and demands – Existing strategy of the FSP. and new customers: execute client 2. What is motivating the consideration to engagement exercises. What is client implement a new delivery channel? What feedback communicating? Are customers are our strategic objectives? What is satisfied with the current quality of the market opportunity we want to take service? What value is put on the product/ advantage of? service? Suggestions for improvement? »» Improve efficiency (no more batch What is the capacity to self-serve? Once processing, lower errors, instant you have a channel strategy in mind, processing, single-step data collection, or come back to the client – does this meet digital document management). the client’s needs? Is this in demand or »» Reduce costs (no more driving around can demand be created? What benefits with cash, and no more manual parts). are available for the client? »» Scale operations (serving people in new »» Competition – Who is the competition? areas, particularly remote and rural areas, What is currently being offered? How is but also in security-poor urban zones). it being offered? At what price? What »» Extend more convenient and/or more are your customers’ impressions of the affordable financial services. competition? »» Reach new customers through agency »» Regulation – What regulations exist for banking to serve unbanked individuals. channels: mobile, agent banking, KYC, ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 81 07_CHECKLISTS or signature requirements? What of these channels, are upgrades 2. A market analysis, including market indirect regulation could impact the or customizations required, what research, competitor, and regulatory design of a delivery channel (for costs should be considered (for reviews. example, signature, biometric, or example, if paying per user, will 3. An analysis of the proposed channels national ID)? each new agent be considered as and technology (device, application, »» ICT landscape – What a new user)? How does the current and communication) and how they communications are available: SMS, IT strategy impact the channel will meet business goals and customer USSD, mobile data services, Internet, strategy and what internal security needs. LAN/WAN, IVR, or NFC? Review the policies should be incorporated? 4. A SWOT analysis of the proposed availability, quality, and affordability How will the customer’s identity be channels and technology. of the communication options authenticated? 5. A recommendation, based on the available to the target market. What »» Capacity – Financial: what is analysis above, of which ADC solution devices are accessible to the target the budget allocated for this to pursue. market? Is there electricity and project (inclusive of technology 6. An operational, financial, and connectivity in the locations where systems, marketing, operations, IT requirements analysis and a your target market is based? and support)? Resources: what recommendation of whether to ‘buy’, »» Strategic partnerships – Are there is the capacity of the IT team and ‘rent’, or ‘build’. existing providers that we could IT infrastructure? Should the ADC 7. A high-level timeline and project plan, partner with? Are potential partners technology be bought, built, or including the roles and responsibilities operationally, technically, and rented? What human resources of key stakeholders or internal teams. commercially aligned? and skills are required to support the project implementation and 8. A high-level budget, including the 2. Internal environment continue operations? source and uses of funds. »» Product and service offering – What »» Internal risk and compliance – What 9. A risk analysis, including potential transactions, products, or services additional risk do ADCs expose the impact and mitigation. are currently offered, or do you have plans to offer in the short to organization to? How can these The matrix in Table 10 provides channel- medium term? Should these be self- risks be mitigated, controlled, and specific questions and considerations service or OTC? monitored? Are there any potential for each of the channels discussed in compliance issues which should be »» Current channel strategy – How are Chapter 1. The selected channels will considered? To what extent will the existing channels performing with be justified by the channel strategy business use paper versus digital regards to use and efficiency? How document, which summarizes the for the operations supported? Do are we performing against our goals objectives, market analysis, and initial we still use paper account opening with the current channel strategy? project plan detailing the operational, forms, do we need paper receipts for What are the opportunities for financial, and IT requirements and a transactions? What do regulations improvement? What bottlenecks high-level project plan. say about going paperless? exist in the current operations that would be resolved or reduced by an alternative channel? What Step 3: Define the channel adjustments are needed in the strategy operations to make it happen? Define the channel strategy, which must »» IT environment and strategy – Is the include the following information: CBS stable, centralized, and capable 1. The business goals and objectives that of integration (is an API available)? the proposed channels are meant to How will the CBS support the addition address. 82 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Table 10: Channel-specific Considerations CHANNEL MODEL QUESTIONS AND CONSIDERATIONS ATM n/a • Availability and cost of joining existing third-party networks. • Number and location (branch-based versus public) of ATMs currently available in market. • Interoperability available or desired (that is, proprietary system, open but with closed user group, national or international). • Resources to manage proprietary network. • Card production and management (Who is available to do this? Should you do in-house or outsourced?). • What types of cards (EMV or other) to use. • Cash servicing: in-house versus outsourced. Internet banking n/a • Access to Internet and Internet-enabled devices. • The proportion of the market that represents SMEs who typically have a higher demand for online banking from PC rather than mobile (for example, processing bulk payments for salaries). • Clients involved in value chain that require online transaction facility. • Regulatory position on initiating and securing transactions done over the channel. Agent/merchant n/a • Availability and quality of existing third-party agent networks. banking • Availability of potential agents considering factors such as float/cash, infrastructure, training, and security. • Investment required for agent recruitment, branding, training, and support. • Liquidity/float management: options available to ensure agents have access to cash/float. • Communication infrastructure at potential agent locations. • Existing devices available at potential agent sites (that is, PC versus mobile versus POS). • Customer acceptance of transacting with third parties. • Availability and cost of bulk SMS and short codes. • Client literacy levels and handset availability. • Market acceptance of SMS as an alternative to a physical receipt. • Security level required for this channel: risk of information going to wrong person. • Regulatory requirements and impact on services. Extension Field staff • Ability to handle cash operations versus non-cash. What functionality available from this point of service? services • Communication infrastructure: the need for online versus offline. • Physical devices available/affordable. • Security environment: will users be safe carrying tablets/phones/cash. • Printing, signing, and authentication requirements. Mini branch • Ability to handle cash operations versus non-cash. What functionality available from this POS? • Communication infrastructure: the need for online versus offline. • Existing devices available at mini-branch locations. • Printing, signing, and authentication requirements. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 83 07_CHECKLISTS Bank on wheels • Number of locations and potential clients that could be serviced (Where would the vehicle go? How often?). • Communication infrastructure: the need for online versus offline. • Level of security required both in terms of the vehicle and the escorts required for cash security. • Existing devices available at mini-branch locations. • Printing, signing, and authentication requirements. Mobile banking n/a • Availability of mobile devices with clients, with percentage of smartphones versus feature phones. • Availability of USSD in country: is this service interoperable, what is the cost, what is the quality, and who will provide access? • Availability of payment and channel aggregators to have a single point of contact to connect to all MNOs and frequently used billers. • Client comfort level with mobile: will they know how to use it? • Linkage/dependencies to other channels: withdrawal from m-wallet requires customer-initiated transaction, hence m-banking required. • Willingness of clients to pay for the service. • Revenue model of m-banking service providers: SaaS, revenue share, on-premise solution. E-wallet n/a • Availability, quality, and cost of existing m-wallet providers. • Services (both client side and FSP side) available from existing m-wallet providers considering P2B, B2P as well as reconciliation. • Types of integration supported by m-wallet provider. • Quality of existing m-wallet providers’ agent network (agent numbers, location, and level of activity). • Willingness to partner. • Motivations and regulatory requirements to introduce bank-led m-wallet. Call center • Access to phone services and coverage in the markets. • Availability of IVR in local languages of target market. • Cost of services by IVR vendor. • Client’s comfort level with phone banking. 84 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Step 4: Define the business of up-selling/cross-selling. Identify the non-monetary benefits, including a) case faster loan turn-around time; b) higher Create a business model with high- customer satisfaction/convenience; level financial scenarios based on c) better quality of evaluations; and initial assumptions related to the d) smooth introduction of product operational model, partnerships, a updates. product roadmap, customer adoption 4. Costs: This section provides a and usage projections, and technical snapshot of potential costs for the platform costs. Business and financial channel(s) for the FSP to quantify all models differ widely by institution, so it costs, including information obtained is very difficult to recommend a specific from the external analysis component template. However, all implementers to reflect actual costs (for example need to understand the key drivers – license and transaction fees). often transactions – and their costs and 5. Net revenues: This section helps revenue potential. Ultimately, regardless assess and compare the net revenues of the model used, the channel strategy accruing to the FSP vis-à-vis its document should include a summary partners and vendors. Net revenues table for at least five years, with the for other partners are based on what following details: the FSP is expected to pay to each of these potential partners for their 1. Key indicators: This section should services. give an indication of the use and growth of the proposed channel(s) 6. Analysis: Evaluate the financial impact over time. in terms of ROI, IRR, and the break- even point. 2. Pricing: Identify the payment and pricing models. Test the model to ensure it is generating 3. Benefits: Quantify all benefits, appropriate outputs. including a) the reduction in administration costs; b) the reduction Consider multiple scenarios based on in the cost of funding; and c) the the profile of the agent: staff, managed additional revenue from a higher rate network, and third party. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 85 07_CHECKLISTS Table 10: Channel Business Case Summary CHANNEL BUSINESS CASE SUMMARY TABLE Year 0 Year 1 Year 2 Year 3 Year 4 KEY INDICATORS Core customers/accounts (#) Customers/accounts using the channel (#, %) Number of access points/outlets/ATMs/agents (#) Txn per customer per day/week/month (#) Txn per channel per day/week/month (#) Average txn volumes per day/week/month (#) Average txn values per day/week/month ($, LCU) REVENUES ($, LCU) Financial revenues – from loans Channel revenue – from commissions and fees Interest on float Other cost savings COSTS ($, LCU) Financial expenses – cost of funds Channel expenses – from commissions and fees Interest on float CAPEX (investment costs) OPEX (operating costs) NET REVENUES – ECOSYSTEM FSP (Insert name) MNO partner (Insert name) if applicable Agent/merchant (Insert name) if applicable Aggregator (Insert name) if applicable Vendor (Insert name) if applicable Switch (Insert name) if applicable Acquirer (Insert name) if applicable Issuer (Insert name) if applicable Partner (Insert name) Partner (Insert name) 86 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Chapter 3 Step 2: Understanding the Technology platform influencing criteria Chapter 4 selection 1. Types of transactions – What Vendor selection These guiding questions can help draw transactions (financial and non- some conclusions as you decide which financial) will be offered over the technologies are most appropriate for channel(s)? These guiding questions can help draw your channel strategy and operating some conclusions as you navigate 2. Security levels – What means of context. through the ADC strategy formulation security will be implemented to process. Some are more general protect both the client and the and others are relevant only as FSPs Step 1: Know what options institution from risks such as fraud investigate the potential to use specific are available and theft of identity, information, and channels. value? 1. What applications are available – 3. Mode of authentication – What will For the channel(s) selected, review we use to identify and confirm the Step 1: Initiation the options available in terms of identity of both customer and agent • Identify stakeholders from relevant software applications. What are the if we do proceed to use ADCs: bio business units and establish roles and benefits and disadvantages of each versus card versus PIN? What existing responsibilities. option in your specific context? infrastructure can be leveraged to • Engage with stakeholders to establish Are any automatically ruled out facilitate identification? a communication channel within the due to regulatory requirements, socio-economic conditions, or 4. Quality / availability / cost of group and ensure alignment. Define communication limitations? communication channels – Review the selection process, the scope of the quality, availability, and cost of the work, and selection timelines. 2. What devices are available – For communication channels available. the channel(s) selected, review the options in terms of devices available Read the fine print. Reach out to Step 2: Identify functional partners to improve the quality of in the market and/or already with service where needed. and technical requirements the target users of the channel. What To assist with the extraction of are the benefits and disadvantages 5. Handset availability in the market/ target market – Research the types requirements for the functionality of each option in your specific components of ADC solutions, Table context? Are any automatically ruled of devices available in the market and used by the target users. Base 11 lists some of the common areas to out due to regulatory requirements, consider and questions to ask during socio-economic conditions, or the analysis on cost, security, and durability. Who will provide the device this requirements identification process. communication limitations? to the user? 3. What types of communications are available – Determine what communication infrastructure is Step 3: Select the platform available to support the channel(s). Decide which application, device, and What are the benefits and communication are best suited to the disadvantages of each option? channel. Multiple options may exist at each level to fully cater for the market and the range of users that will be targeted. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 87 07_CHECKLISTS Table 11: Questions to assist with general functional requirements REQUIREMENT RELEVANT FOR DESCRIPTION WHICH ADCs? Registration Potentially all 1. How will customers be registered to transact over the channel? 2. For mobile, how will the customer’s phone number be confirmed? Fees Potentially all 1. What types of fees should be charged for registration and transactions on the channel? 2. How are fees calculated and applied? 3. Where will these fees be configured? Settlement and All 1. Which systems will need to be reconciled? reconciliation 2. What type of reconciliation is required? 3. What will be the rules governing settlement? Interoperability Primarily mobile and ATM 1. What level of interoperability will be required from a user’s perspective? 2. What operating systems should be supported for mobile and Web platforms? 3. If biometrics are to be used, how to ensure compatibility? Reporting All 1. How will the channel activity be monitored? Scalability All 1. What are the expected transaction levels with projections for five years? 2. What number of users will be accessing the system? Flexibility All 1. What is needed in terms of flexibility? Standards All 1. Does the channel strategy dictate any specific standard that must be adhered to (for example, EMV or ISO)? Online/Offline Potentially all 1. For extension services, what systems, or functions, should be available in offline mode? 2. What should be the behavior of the ADC when/if the CBS is offline for end of day/ month? Integration/ All 1. What front-office and back-office systems will need to be integrated? 2. What type of integration? Batch or real-time? Middleware 3. What functionality must each interface support? Security All 1. What systems are required to support the preferred mode of customer authentication? Are these systems going to be external from CBS or within it? 2. How will the physical devices used for data entry be secured (agency or extension services)? 3. How will the communication networks required be secured? 4. What security measures are expected from the ADC back-office systems? 5. What support is required to fully audit the ADC and monitor the controls in place (system-based controls, audit reports, and additional systems – AML)? 88 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY REQUIREMENT RELEVANT FOR DESCRIPTION WHICH ADCs? Agent Agent/merchant 1. In which system will the agents be defined? management 2. How and where will limits on agent transactions be defined? 3. Will float accounts be used and if so which system will be used to define these accounts and then map them to the agent user? 4. What commissions will be due to agents, where to define these and when to pay? 5. Is there a hierarchy that needs to be enforced in the agent network? ATM/POS ATM (in-house) 1. Which system will drive and manage the ATM/POS devices? management 2. What system will be used for CMS? 3. Which Security Module will be used? HSM vs SSM? Step 3: Vendor selection • Which vendors have a reputation requirements, the financial costs, and for providing the type of product/ feedback from demos /references. 1. Prepare the RFP services that are required? • Brief background about the FSP. • Confirm with the vendors who will be Step 4: Contracting • Business and channel strategy (may participating and clearly communicate 1. Review the contracts with due care include a phased approach). the timeframe for the process so they and pay specific attention to: • Overview of project: objectives, can plan accordingly. • License terms scope, and related projects. 3. RFP issue • Project deliverables • Selection process and deadlines. • Decide who to invite to the RFP and • Milestones • Criteria for decision making, including whether they should be pre-qualified. • Payment terms preferences on different licensing • Issue the RFP with clear instructions to • Responsibilities on both sides structures (license versus SaaS versus vendors on the information required revenue share). • Support level agreements after ‘go and the deadlines. live’. • Expected content and format for the • How will the responses be evaluated? response. 2. Negotiate and sign the required Specify the criteria before the process contracts with the vendors, considering • Functional requirements with begins so there is no bias. both initial implementation and weighting to reflect priority. • Request an estimated price based ongoing support. It is advised that • Technical requirements (overview of on the requirements in the RFP to FSPs allocate sufficient time for CBS and current infrastructure). test financial proposals against the contracting. This process typically • Project timing. business case. takes longer than expected and • Expected services from the vendor. • Request contract templates to get can delay the project start if terms 2. Vendor shortlist familiar with payment, service, and cannot be negotiated in a timely • What criteria are being used for pre- support terms. manner. FSPs should consider that qualification? 4. Evaluation not all vendor contracts are identical • Which vendors are serving or have a • Calculate the scores based and contracting multiple technology presence in this market, most likely on proposals, references and vendors will require a resource to be working with your competitors or FSP demonstrations. responsible for vendor management. peers? • Evaluate the proposals received considering the match to the ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 89 07_CHECKLISTS Chapter 5 »» Defining and helping to achieve the • Confirmation on parameterization of Implementation project outcomes »» Identifying the priorities in the the system. • Identification of new system project – where the most energy processes. These guiding questions can help draw should be directed • Identification of any required some conclusions as you navigate »» Identifying potential risks customizations. through the implementation process »» Monitoring risks and plan for ongoing maintenance, In order to analyze the requirements, support, and evaluation. »» Monitoring timelines a concerted effort should be made to »» Monitoring the quality of the project gather all of the relevant requirements. as it develops We suggest the following methods and Step 1: Project team »» Providing advice (and sometimes categories to be included in the process: formation making decisions) about changes Identify the full project team which to the project as it develops. • Methods used for gathering includes: requirements Step 2: Project kick-off »» Brainstorming • Project managers – Each implementation Project kick-off establishes the »» Focus group project that uses an external solution foundation for effective business »» Business process reengineering should have a minimum of two project requirements gathering by aligning exercises managers, one for the FSP and one expectations and engaging the for the vendor. These individuals are »» Obtain and analyze relevant people who have knowledge of the documentation responsible for liaising directly on all business needs and can determine the matters as the primary communication »» Interviews requirements. Recommended steps are: channel and for communicating with »» Active observation their respective teams as needed. • Introduce team members and »» Prototyping • Core implementation group / assign responsibilities to create »» Requirements workshop implementation team – Includes accountability. »» Use cases – maps user interaction. representatives from finance, • Agree on a high-level strategy for the • Requirements categories IT, customer service, marketing, solution. »» Institutional information operations, risk, compliance, and • Agree on an implementation process audit. »» Client information and a high-level project plan. • Project sponsor – Heads the steering »» Credit management • Establish relevant processes, such committee and serves as direct line to as project governance, change »» Deposit management the board in most cases. management, and escalation. »» Accounting process. • Steering committee – Provides The output of this process is a Functional support, guidance, and oversight Step 3: Requirement analysis Specification Document, which outlines of project progress. Members do This step is best completed with the the following: not usually work on the project vendor on site, as it is an opportunity to themselves. Responsibilities include: show the vendor the FSP operations in • Executive summary »» Providing input to the development detail. Activities to include are: • Document purpose of the project, including the • An overview of the products for • Definition of key terms evaluation strategy the core team to begin learning the • Information sources »» Providing advice on the budget system. • Solution overview • Solution components 90 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY • Assumptions and dependencies, risks, Back-end considerations • Perform a minimum of two sample and controls data migrations to confirm all »» What servers are required to host • System users/players migration scripts are working as the system? • General navigation required. »» Preparation of all environments: • Core processes and workflows production, testing, and disaster supported recovery Step 6: Installation • Configuration settings »» Additional channel-specific • Request confirmation that the solution • Customizations required hardware (for example, HSM and has passed quality assurance testing • Reports description card printer)? before the system is installed. • Implementation considerations • Include IT in the installation process to gain familiarity with the system. Integration requirements Step 5: Configuration / • Install the system on all required customization environments. • Which systems need to be integrated? Which parties will actually be involved While the system is under configuration/ customization, the FSP will need to do Step 7: User acceptance in the channel? (Third-party entities: bulk SMS providers, m-wallet systems, the following: testing payment aggregators, and national or • Request regular status updates to • Focus on completing all test cases international interchanges.) monitor progress. (regardless of the success rate) so »» What type of integration(s)? • Provide prompt responses to inquiries that the vendor is aware of all issues »» What protocol/format to use for from the vendor to avoid delaying or bugs in the first round of testing. real-time integration? configuration or development. • Provide details of how you discovered »» How will settlement and/or • Participate in communications any issues and ensure that this can be reconciliation be done (automated between vendors, partners, and third recreated for investigation. or manual)? parties. • Compile a list of all change requests • Prepare UAT test cases to verify the and enhancements to be completed Step 4: Hardware exact functionality and expectations of as a separate project once this release is delivered as expected. procurement the system according to the functional requirements documentation and Step 8: Training This depends on the ADC technology agree to a test plan with the vendor. being implemented and includes: • Who will attend the training? How will this training be delivered/ Front-end considerations Step 5b: Data migration (if communicated to the end-users? • Who is furnishing the devices? required) • Consider using a ‘training of trainers’ »» FSP For those systems that require approach. »» Third party migration, the following tasks need to • Train a helpdesk for users – internal be completed: and external. »» Client • Compatibility • Decide on a data migration strategy Step 9: Go live »» Testing hardware with software – how data will be extracted, loaded, • Consider a pilot to test the channel »» Testing with peripherals and reconciled between the source and technology with live data to system and the new ADC platform. receive feedback from clients/end- users. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 91 07_CHECKLISTS • Consider how the customer • Create system support and a experience will change and prepare to maintenance plan with a monitoring engage with clients and be attentive schedule and criteria to ensure that and responsive to questions and the system is operating effectively. learning to encourage uptake – first • Understand the helpdesk protocols impressions have a lasting effect. and vendor support availability. • Gain confidence in the systems before • Conduct a post-implementation introducing it to the wider public. review to see what lessons were learnt and what work is still outstanding, and Step 10: Maintain and start the assessment of whether the project has met its goals. enhance • Schedule regular maintenance of • Distribute relevant documentation, hardware and software items to user manuals, and administrative ensure optimal performance. manuals. • Establish reports and metrics to • Offer continuous training and support measure the performance of the to ensure adoption and use. channel against a set of predefined • Allocate resources for adjustments metrics or strategic goals to track the and additional support in the early performance of the channel. days to cater for feedback or • Identify opportunities for improvement enhancements identified by the users. based on client feedback. 92 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Glossary TERM DEFINITION 3rd Generation Mobile Third generation of mobile telephony (cellular) technology. 3G telecommunication networks support services that Network (3G) provide an information transfer rate of at least 200 kbit/s and a maximum of 3.1Mbps. 4th Generation Mobile Fourth generation of mobile telephony technology, succeeding 3G and preceding 5G. As opposed to earlier Network (4G) generations, a 4G system does not support traditional circuit-switched telephony service, but all-Internet Protocol- based communication such as IP telephony, and provides higher download speeds relative to 3G. Agent A person or business contracted to process transactions for users. The most important of these are cash in and cash out (that is, loading value into the mobile money system, and then converting it back out again); in many instances, agents register new customers too. Agents usually earn commissions for performing these services. They also often provide front-line customer service, such as teaching new users how to complete transactions on their phone. Typically, agents will conduct other kinds of business in addition to mobile money. Agents will sometimes be limited by regulation, but small-scale traders, microfinance institutions, chain stores, and bank branches serve as agents in some markets. Some industry participants prefer the terms ‘merchant’ or ‘retailer’ to avoid certain legal connotations of the term ‘agent’ as it is used in other industries. (GSMA, 2014). Agent banking Banking services, often limited, carried out by an agent. Aggregator Servicer provider with existing integrations to a number of MNOs and/or PSPs to facilitate billing, technical, and operational relationships and interfacing across operators via one link to the aggregator, as opposed to separate integrations with each provider. Alternative Delivery Channels that expand the reach of financial services beyond the traditional branch. These include ATMs, Internet Channels (ADCs) banking, mobile banking, e-wallets and extension services. Android A Linux-based mobile operating system originally developed by Android and currently developed by Google. With a user interface based on direct manipulation, Android is designed primarily for touchscreen mobile devices such as smartphones and tablet computers. Anti-Money Laundering/ AML/CFT are legal controls applied to the financial sector to help prevent, detect, and report money-laundering Combating the activities. Financing of Terrorism (AML/CFT) Application A method of specifying a software component in terms of its operations by underlining a set of functionalities that Programming Interfaces are independent of their respective implementation. APIs are used for real-time integration to the CBS/MIS, which (API) specify how two different systems can communicate with each other through the exchange of ‘messages’. Several different types of APIs exist, including those based on the Web, TCP communication, and direct integration to a database, or proprietary APIs written for specific systems. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 93 Automated Teller An electronic telecommunications device that enables the customers of a financial institution to perform financial Machine (ATM) transactions without the need for a human cashier, clerk, or bank teller. ATMs identify customers via either a magnetic or chip-based card, with authentication occurring after the customer inputs a PIN number. Most ATMs are connected to interbank networks to enable customers to access machines that do not directly belong to their bank, although some closed-loop systems also exist. ATMs are connected to a host or ATM controller using a modem, leased line or ADSL. Basic phone The most basic type of mobile handset available on the market. This phone has no data or GPRS capabilities and for MFS is only compatible with USSD and STK applications. Branchless banking The delivery of financial services outside of conventional bank branches through the use of retail agents and ICT. For the purpose of this handbook we have considered this term to be equal to ADC and e-banking. Call center A centralized office used for the purpose of receiving or transmitting a large volume of requests by telephone. In this context, as well as handling customer complaints and queries, it is also used as an alternative delivery channel to improve outreach and attract new customers via various promotional campaigns. Card Management The system used by businesses to manage the full administration and support associated with payment cards. A CMS System (CMS) will typically provide functionality to manage card product definition, application processes, production, and issuing, blocking, and managing transactions along with the card balances, if required. A CMS will be required for any FSP that wants to use either POS or ATMs with cards as the means of customer authentication. Channel The customer’s access point to a FSP, namely who or what the customer interacts with to access a financial service or product. Core Banking System The core system used by a FSP to manage all of its key business processes, including front- and back-office (CBS) components. Most CBSs provide CRM functionality, loan portfolio tracking, accounting, and reporting. For the purpose of this handbook we have used the term synonymously with Management Information System. Core Implementation A group of staff from the FSP charged with making the day-to-day decisions regarding the ADC project Group (CIG) implementation. This group will be involved in training, requirements analysis, and testing of the systems and typically form a group of ‘super users’ or champions of the system. Electronic banking The provision of banking products and services through electronic delivery channels. (e-banking) Enabling technology For the purpose of this handbook we refer to the enabling technology as the underlying technology platform used to drive an ADC. It includes the hardware devices, software systems, and the technological processes that enable the provision of financial products and services over ADCs. Europay, MasterCard, EMV stands for Europay, MasterCard, and Visa, a global standard for the inter-operation of integrated circuit cards and Visa (EMV) (IC cards or ‘chip cards’) and IC card-capable POS terminals and ATMs, for authenticating credit and debit card transactions (Wikipedia, 2014). E-wallets/e-money Short for ‘electronic money’, it is stored value held in virtual wallets or cards. Typically, the total value of e-money is mirrored in bank account(s), so that even if the provider of the e-wallet service were to fail, users could recover 100 percent of the value stored in their accounts. Bank deposits can earn interest, while e-money cannot. 94 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Extensible Markup A markup language that defines a set of rules for encoding documents in a format that is both human-readable Language (XML) and machine-readable. The design goals of XML emphasize simplicity, generality, and usability over the Internet. It is a textual data format with strong support via Unicode for different human languages. Although the design of XML focuses on documents, it is widely used for the representation of arbitrary data structures, for example in Web services. Extension services Field-based banking services often performed by FSP staff. This includes remote data capture, mini branches and branch on wheels. Feature phone A mobile handset that is more advanced than a basic handset by the fact that it contains embedded data transfer/ GPS capabilities. A feature phone can be used to connect to the Internet or to run mobile applications dependent on data connectivity. Unlike smartphones, feature phones have no in built security and limited peripherals and applications. Financial Service A provider of financial services including credit unions, banks, non-banking financial institutions, microfinance Providers (FSP) institutions, and mobile financial services providers. General Packet Radio A packet-data technology that allows GSM operators to launch wireless data services, such as e-mail and Internet Service (GPRS) access, via a SIM card. This is a 2G grade of wireless communication with maximum download speeds of 114kbps. Global Positioning A space-based satellite navigation system that provides location and time information in all weather conditions, System (GPS) anywhere on or near the Earth where there is an unobstructed line of sight to four or more GPS satellites. Global System for An open, digital cellular technology used for transmitting mobile voice and data services. It is the most common Mobile Communications standard for mobile communication, with over 90 percent market share. (GSM) Hardware Security A physical device used as part of the payment card issuing and authentication process. The HSM is connected to the Module (HSM) network hosting an ATM or POS, with the primary functionality of generating PIN numbers and in some cases storing encryption keys required to authenticate the PIN number provided. Hypertext Transfer An application protocol for distributed, collaborative, hypermedia information systems – it is the foundation of data Protocol (HTTP) communication for the World Wide Web. Hypertext is structured text that uses logical links (hyperlinks) between nodes containing text. Interactive Voice A technology that allows a computer to interact with humans through the use of voice and DTMF tones input Response (IVR) via keypad. IVR allows customers to interact with a company’s host system via a telephone keypad or by speech recognition. International Mobile A unique 15-digit serial number, assigned to every single mobile phone. It can normally be found on the back of the Equipment Identity phone, under the battery. IMEI consists of four groups of numbers. The first group identifies the type approval code, (IMEI) the second the manufacturer, the third the serial number, and the fourth group is a single digit (usually a zero). Internet banking An electronic payment system that enables customers to conduct financial transactions on a secure website operated by a FSP. iOS The operating system used with devices manufactured by Apple. J2ME app J2ME is a Java programing platform designed for building applications to run on mobile devices. It is commonly used to build mobile apps that need to run on devices with limited memory, display, and power capacity, such as feature phones. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 95 JavaScript Object An open standard format that uses human-readable text to transmit data objects consisting of attribute–value pairs. Notation (JSON) It is used primarily to transmit data between a server and Web application, as an alternative to XML. Kiosk A computer terminal featuring specialized hardware and software that provides access to information and applications for communication, commerce, entertainment, and education. Integration of technology allows kiosks to perform a wide range of functions, evolving into self-service kiosks. Know your customer Rules related to AML/CFT that compel providers to carry out procedures to identify a customer and that assess the (KYC) value of the information for detecting, monitoring, and reporting suspicious activities. Local Area Network/ LAN is a computer network covering a small geographic area, like a home, office, school, or group of buildings. Wide Area Network WAN is a computer network that covers a broad area (for example, any network whose communications links across (LAN/WAN) metropolitan, regional, or national boundaries over a long distance). Magstripe/ magnetic A type of plastic card which stores data about the customer on a machine-readable magnetic strip on the back of strip card the card. Magstripe cards have been used with ATMs and POS devices, although they are slowly being replaced by EMV/ chip and pin cards. Merchant A person or business that provides goods or services to a customer in exchange for payment. Microfinance Institution A financial institution specializing in banking services for low-income groups, small-scale businesses, or individuals. (MFI) Mobile banking The use of a mobile phone to access banking services and execute financial transactions. This covers both transactional and non-transactional services, such as viewing financial information on a bank customer’s mobile phone. Sometimes called ‘m-banking’. Mobile Financial A general term referring to the use of mobile technologies to access financial services. This includes mobile banking Services (MFS) and mobile money / m-wallets. Mobile Money A service in which the mobile phone is used to access financial services (GSMA, 2014). Mobile Network A company that has a government-issued license to provide telecommunications services through mobile devices. Operator (MNO) Mobile Point of Sale A mobile application designed to mimic the same functionality offered by a traditional physical POS device. mPOS (mPOS) applications typically interact with a card reader and/or printer to replicate the full functionality of the traditional POS device. Mobile wallet (m-wallet) An e-money account that is primarily accessed using a mobile phone that is held with the e-money issuer. It is typically linked to a unique mobile phone number. Native apps Mobile applications that are manually installed on the phone and run in almost the same way as a computer program installed on a PC. Native apps can be categorized by the operating systems running on the mobile phone, with the most common being Google (Android) and Apple (iOS), and Windows for smartphones and Java/J2ME apps for feature phones. Native applications can be developed to serve as a user interface for a variety of business uses, including mPOS, agent apps or field-based data capture apps. Native apps can operate in either online or offline mode, depending on the design of the application and the quality of the communications available. Near Field A method of contactless card payment (without a PIN), which uses short-range radio signals to exchange Communication (NFC) information between a card or mobile device and a terminal. 96 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Offline Offline means not connected to the Internet or network connection. Some programs or applications are configured to operate offline or have the option to work offline when the connection is lost so that data entry is not interrupted, meaning the software continues to function on the device and stores data locally. However, no data can be transmitted to or from the device on which it is operating until a connection is established. Offline data can be synchronized with an online or central database when connectivity is re-established or the device is tethered to transfer data. One Time Passwords A security protocol that works on the basis of one factor of authentication being generated only when needed, (OTP) namely at log in or transaction posting, and acts as a single use password or PIN. Over The Counter (OTC) Channels that require the customer to interact with a member of the FSP staff or a third-party representative to transact. Point of Sale (POS) Electronic device used to process card payments at the point at which a customer makes a payment to the merchant device/terminal in exchange for goods and services. The POS device is a hardware (fixed or mobile) device that runs software to facilitate the transaction. The hardware used may vary. Premium Rate Service An intermediary provider, licensed by the MNOs and usually the government, to offer bulk SMS, USSD, and short Provider (PRSP) code services. The regulation governing these businesses will vary from country to country, with some places allowing for only a direct relationship with the MNOs for these services. Where regulations for PRSP exist, a FSP will need to contract with these parties in order to access bulk SMS and/or USSD channels, although these services will still require a tripartite agreement between the FSP, MNO, and PRSP. For this handbook we have considered a PRSP as the same as an Aggregator. Request for Proposal A solicitation made by a company to initiate a bidding process to procure a commodity, service, or valuable asset (RFP) from potential vendors who are requested to submit business proposals. The RFP should provide all the information and requirements that a FSP has identified as necessary or desirable to assist vendors to prepare a suitable proposal for their services and products. Self Service Channel A channel that is available to customers without any other human interaction. Short Code Short codes (also known as short numbers) are special telephone numbers, significantly shorter than full telephone numbers, that can be used either to initiate a USSD session or to request a pull SMS. Short Codes are issued either by the communications authority, MNO or, where applicable, the PRSP. Short Message Peer-to- An open telecommunications industry standard protocol designed to provide a flexible data communication interface Peer (SMPP) for the transfer of short message data. It is used to process bulk SMS messaging. Short Message Service A ‘store and forward’ communication channel that involves the use of the telecom network and SMPP protocol to (SMS) send a limited amount of text from one phone to another, or one to many. SIM Application Toolkit A standard of the GSM system which enables the Subscriber Identity Module, or SIM, to initiate actions which can be (STK) used for various value-added services. Smart app An application software designed to run on smartphones, tablet computers and other mobile devices. Smart card A smart card, chip card, or integrated circuit card is any pocket-sized card with embedded integrated circuits. Smart cards can provide identification, authentication, data storage, and application processing via an embedded microchip. ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 97 Smartphone A mobile phone that has the processing capacity to perform many of the functions of a computer, typically having a relatively large screen and an operating system capable of running a complex set of applications, with Internet access. In addition to digital voice service, modern smartphones provide text messaging, e-mail, Web browsing, still and video cameras, an MP3 player, and video playback with embedded data transfer/GPS capabilities. Software as a Service SaaS is s software licensing delivery model in which software is licensed on a subscription basis and made accessible (SaaS) via the Internet as a hosted service, instead of installing and maintaining software. Transaction A security protocol that works on the basis of one factor of authentication being generated only when needed, Authentication Numbers namely at log in or transaction posting, and acts as a single-use password or PIN. The term is interchangeable with (TAN) One Time Passwords. Unstructured A protocol used by GSM mobile devices to communicate with the service provider’s computers/network. This Supplementary Service channel is supported by all GSM handsets, enabling an interactive session consisting of a two-way exchange of Data (USSD) messages based on a defined application menu. User Acceptance Testing The testing process that occurs at the end of a software development process whereby the actual software users test (UAT) the software to make sure it can handle the required tasks in real-world scenarios, according to specifications. In this context, the ADC system would be tested to confirm it meets the agreed specifications and requirements of the FSP. Virtual Private Network A private data network that makes use of the public telecommunication infrastructure, maintaining privacy through (VPN) the use of a tunnelling protocol and security procedures. It enables a computer to send and receive data across shared or public networks as if it is directly connected to the private network, while benefiting from the functionality, security, and management policies of the private network. Web API A set of HTTP request messages that have defined structured response messages. These messages can be written in various languages such as XML or JSON format. Web app A software application that is created in a browser-supported programming language (such as the combination of JavaScript, HTML, and CSS) and runs in a Web browser relying on the browser to render the application. Web apps function very much as a standard Internet website using a URL, but the size and features are designed to display and interact better on a mobile device than on a traditional website. Wi-Fi Local area wireless technology that allows an electronic device to exchange data or connect to the Internet using radio waves. 98 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY Reference documents Basel Committee on Banking Supervision (July 2003). Risk Management Principles for Electronic Banking. Bank for International Settlements Communications, Basel, Switzerland. www.bis.org/publ/bcbs98.pdf Global Technology Audit Guide ‘GTAG’, Fraud Prevention and Detection in an Automated World (December 2009) and Information Technology Controls (March 2005). The Institute of Internal Auditors Inc. (IIA), 247 Maitland Ave., Altamonte Springs, FL 32701-4201, United States of America. www.theiia.org/ CGAP Focus Note No 75. Bank Agent: Risk Management, Mitigation, and Supervision (December 2011). Kate Lauer, Denise Dias, and Michael Tarazi. www.cgap.org/publications/bank-agents-risk-management-mitigation-and-supervision Digital Financial Services Risk Assessment for Microfinance Institutions Pocket Guide (September 2014). The Digital Financial Services Working Group, Washington, D.C., United States of America. https://lextonblog.files.wordpress.com /2014/09/dfs_risk_guide_sept_2014_final.pdf Flaming, M, Mitha, A, Hanouch, M, Zetterli, P, and Bull, G (2014). Partnerships in Mobile Financial Services: Factors for Success. IFC: Washington, D.C., United States of America. http://www.mastercardfdn.org/wpcontent/uploads/Partnerships+in+Mobile+Financial+Services.pdf http://www.ifc.org/wps/wcm/connect/113c8880418993f38c15bf8d8e2dafd4/ Partnerships+in+Mobile+Financial+Services+PDF.pdf?MOD=AJPERES ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY 99 Geraldine O’Keeffe Geraldine is Chief Operating Officer and co-founder of Software Group, a company focused on providing delivery channel technology to the development finance sector. Geraldine has worked globally with financial service providers to consult, design, build and deploy technology solutions with the aim to improve efficiency, outreach and expand access to financial services. Previous experiences includes consulting for Arthur Anderson and CMP in London, IT manager for an MFI in Uganda, Director for an MIS vendor, and independent consultant. In the last 13 years, Geraldine has completed over 50 consultancy assignments and 30 successful software implementation projects. Geraldine has a Masters in Management and Information Systems from the University of Manchester and graduated with distinction. Charlene Bachman Charlene Bachman is a development finance professional working as the Business Development Manager for Software Group in Asia Pacific. With experience working with financial institutions across Latin America, Asia and the Pacific, Charlene promotes the use of delivery channels and technology solutions that aim to expand the reach of financial inclusion, increase operational efficiency and facilitate access to financial services. Prior to joining Software Group, Charlene worked in Global Investments at Accion International where she supported multiple impact investing funds targeting the MFI and Fintech sectors with a range of business development, investment analysis and portfolio management activities. Charlene holds dual bachelor degrees in Business Administration and International Studies from American University in Washington, DC. Omoneka Musa Oyier Omoneka is an Operations Officer in the IFC Financial Institutions Group Advisory Services team, and manages advisory projects for IFC clients looking to scale up mobile money and agent banking across Africa. Omoneka has a background in management consulting with experience providing technical assistance to banks, microfinance institutions, mobile financial services providers and policy makers. Omoneka has a Master’s Degree in International Relations and Economics from Johns Hopkins University’s School of Advanced International Studies (SAIS). 100 ALTERNATIVE DELIVERY CHANNELS AND TECHNOLOGY The Partnership for Financial inclusion The Partnership for Financial Inclusion is a $37.4 million joint initiative of IFC and The MasterCard Foundation to expand microfinance and advance mobile financial services in Sub-Saharan Africa. It brings together the intellectual and financial capital of the Foundation with IFC’s market knowledge, expertise and client base. The Partnership is also supported by the Bill & Melinda Gates Foundation and the Development Bank of Austria (OeEB, Oesterreichische Entwicklungsbank AG), and collaborates with knowledge partners such as the World Bank and the Consultative Group to Assist the Poor (CGAP). An important objective of the partnership is to contribute to the global community of practice on financial inclusion, and to share research and lessons learned. This publication is part of a series of reports published by the partnership. To find out more, please visit www.ifc.org/financialinclusionafrica Software Group Software Group is among the leading global vendors of delivery channels solutions for Microfinance Industry with experience in over 50 countries. They are helping their clients to address the financial inclusion challenge by providing a variety of innovative delivery channel solutions that helps expand outreach and improve efficiency. Learn more about Software Group’s products and services at www.softwaregroup-bg.com The MasterCard Foundation The MasterCard Foundation is an independent, global organization based in Toronto, Canada with over US$9 billion in assets. Through collaboration with partner organizations in 49 countries, it is creating opportunities for all people to learn and prosper. The Foundation’s programs promote financial inclusion and advance youth learning, mostly in Africa. Established in 2006 through the generosity of MasterCard Worldwide when it became a public company, the Foundation is a separate and independent entity. The policies, operations and funding decisions of the Foundation are determined by its own Board of Directors and President and CEO. For more information on the Foundation, please visit: www.mastercardfdn.org IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, we provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development. For more information, visit www.ifc.org. CONTACT DETAILS Anna Koblanck IFC, Sub-Saharan Africa akoblanck@ifc.org www.ifc.org/financialinclusionafrica