27-06-2013, 03:11 PM
ATMs or Automated Teller Machines
[attachment=56113]
INTRODUCTION
ATMs or Automated Teller Machines, as the name indicates, are meant to provide the services that a Teller at a branch provides but on a 24 hour basis. An ATM could be called a robotic teller, which works all through the day and night. ATMs started out as cash withdrawal machines as that was the most important service customers required on a 24 hour basis and that too near their place of stay or work. ATMs helped to increase customer satisfaction by providing the convenience of cash withdrawal service at a large number of locations round the clock. The bank also benefited as the cost of installing and maintaining an ATM was much lower than that of a branch.
Gradually, the number and complexity of services provided through ATMs have increased and the advent of internet technology has enabled ATMs to be programmed to deliver almost any service including sanction of loans on line.
Security
When a customer gives an instruction to a branch by way of a cheque or letter, the authenticity of the instruction is validated by verifying the signature of the customer. To validate a transaction at an ATM, the customer is issued a four digit PIN (Personal Identification Number) which the customer has to key in after inserting his ATM card. The first PIN is sent to the customer by post and he has to change the PIN during the first transaction. The PIN he creates has to be remembered by the customer. In case three attempts are made with the wrong PIN, the PIN will be blocked. The customer can access the ATM after 24 hours, if he remembers the pin. If the customer has forgotten the pin, he has to get a new PIN from the bank to activate his ATM card. This is to ensure that a fraudster does not gain access to the account by trial and error.
As the PIN is equivalent to the customer’s signature, he is advised not to share it with anyone or even write it down somewhere so that no one can come to know of it. Since the customer alone is expected to have the card and know the PIN, banks do not generally; entertain any claim for unauthorised cash withdrawal using ATM cards. ATM frauds are invariably committed by close friends and family members who have access to the card and to whom the customer reveals the PIN by using the PIN in their presence. There have been cases of customers writing the PIN on the card itself. Customers are advised not to take anyone with them to the ATM or to write the PIN on the card or for that matter anywhere else.
Banks generally issue ATM cum Debit cards which can be used at merchant establishments (shops, hotels etc.) just like a credit card for making payments. The customer is required to sign on the reverse of such ATM cum Debit Card. This is to enable merchants to identify the customer. While there are POS (Point of Sale) terminals with facility to enter PINs, majority of POS terminals do not have the facility. The merchant has to verify the identity of the customer only by comparing his signature on the charge slip with the signature on the back of the ATM cum Debit Card.
To protect the customer against unauthorized withdrawals the maximum amount that can be withdrawn through ATMs in a day is usually limited to Rs. 25000. Banks do specify varying limits and HNIs (High Networth Individual customers) are permitted withdrawal of up to Rs. 50000. The limits may vary from bank to bank. Another purpose of limiting cash withdrawals is to ensure that the ATMs do not run out of cash fast. Usually cash is replenished in ATMs only once a day or once in two days as cash replenishment is a costly process.
The limit for use of ATM cards at merchant establishments is twice the ATM limit i.e., Rs. 50000 per day for regular customers and Rs.1 lakh for HNI customers.The merchant is required to ensure that the customer himself has presented the card by verifying his signature.
Technology
Simply stated, an ATM is a small computer with a cash dispensing mechanism attached to it and linked to a central computer called switch through phone lines or leased lines or V-sat. The switch is in turn connected to the Core Banking System (CBS) of the bank and also the HSM or Host Security Module. The HSM generates PINs for new accounts and also verifies the card number and PIN whenever the customer uses an ATM.
After inserting the card in the ATM the customer is required to enter the PIN and the transaction he wishes to complete, say cash withdrawal. The ATM will send the details to the switch which will send the card number and PIN to the HSM. On receiving confirmation from the HSM that the PIN tallies with the card number the switch will send a message to the core banking system to debit the customer’s account with the amount he wishes to withdraw. On receiving a message from the CBS that the customer’s account has been debited, the switch will send a message to the ATM to dispense cash. All these activities happen in a few seconds. In the case of cash and cheque deposit, no messages goes to the CBS as no entry is to be made in the account at the time of the transaction.
ATMs have two types of card verification mechanisms. The older type of mechanism takes the card into the ATM and ejects the card only after the transaction is over. In the newer ATMs the card has to be inserted into the slot and taken out quickly. The ATM reads the details on the magnetic stripe of the card while it is being inserted and taken out. In the new ATMs the chances of the customer forgetting the card in the ATM is remote as he has to necessarily take it out to start the transaction.
Operations
To be functional, ATMs need to be kept stocked with cash and its printer loaded with paper roll. This job is usually outsourced to cash replenishment agencies who charge a monthly fee per ATM. The frequency of cash replenishment (daily, once in two days or weekly etc) will be agreed upon between the bank and the agency on the basis of number of transactions and cash dispensation at each ATM. In case in the rare event of more than normal cash withdrawal from any ATM,additional cash replenishment will be done by the agency for which additional charges will be paid. The cash replenishment agencies also collect the cash and cheques deposited by customers in ATMs.
The second operational aspect is technical malfunction or stoppage. Maintenance agencies provide round the clock maintenance of ATMs and serious issues are taken care of by the manufacturers of the ATMs who also provide maintenance support.
To ensure that ATMs are functional round the clock the status of ATMs are monitored online at a central location normally called “help desk”. It is manned 24 hours and whenever an ATM “goes down” or stops for some reason the person at the help desk will be able to see it on his monitor. The reason for stoppage such as communication line down, cash outage, paper jam etc will also flash on his screen. He will immediately alert the concerned maintenance agency to rectify the problem. The security guards at ATM centres are also trained to call the help desk number and report stoppage of ATMs so that it is set right immediately. Banks try to ensure 99% uptime of their ATMs so that their customers are not inconvenienced.
Third Party Networks
In many countries, in addition to banks, service providers have been permitted to set up their own ATMs and offer their services to customers of all banks for a fee. There are many companies who set up and operate such ATM networks as their primary business. ATM networks owned and operated by entities other than banks are called Third Party Networks. Such networks are yet to be permitted in India by RBI.
VISA/Mastercard networks
VISA and Mastercard are international networks primarily for credit card operations. These networks can be used by member banks for ATM cum Debit Card transactions also. ATMs of banks which are members of the VISA or Mastercard organization are linked to the computer of these organization at various international centres such as Singapore or London. Hence a card issued by one bank can be used on an ATM of another bank. When a card issued by SBI is used to withdraw cash from an HDFC ATM, the switch of HDFC routes the message to the VISA/Mastercard system, which routes it to the switch of SBI, and the transaction gets completed. For providing this service Visa/Mastercard recover a charge called “Interchange” from the card issuing bank, in this case SBI, and shares part of it with the paying bank, in this case HDFC, for permitting their ATM to be used.
[attachment=56113]
INTRODUCTION
ATMs or Automated Teller Machines, as the name indicates, are meant to provide the services that a Teller at a branch provides but on a 24 hour basis. An ATM could be called a robotic teller, which works all through the day and night. ATMs started out as cash withdrawal machines as that was the most important service customers required on a 24 hour basis and that too near their place of stay or work. ATMs helped to increase customer satisfaction by providing the convenience of cash withdrawal service at a large number of locations round the clock. The bank also benefited as the cost of installing and maintaining an ATM was much lower than that of a branch.
Gradually, the number and complexity of services provided through ATMs have increased and the advent of internet technology has enabled ATMs to be programmed to deliver almost any service including sanction of loans on line.
Security
When a customer gives an instruction to a branch by way of a cheque or letter, the authenticity of the instruction is validated by verifying the signature of the customer. To validate a transaction at an ATM, the customer is issued a four digit PIN (Personal Identification Number) which the customer has to key in after inserting his ATM card. The first PIN is sent to the customer by post and he has to change the PIN during the first transaction. The PIN he creates has to be remembered by the customer. In case three attempts are made with the wrong PIN, the PIN will be blocked. The customer can access the ATM after 24 hours, if he remembers the pin. If the customer has forgotten the pin, he has to get a new PIN from the bank to activate his ATM card. This is to ensure that a fraudster does not gain access to the account by trial and error.
As the PIN is equivalent to the customer’s signature, he is advised not to share it with anyone or even write it down somewhere so that no one can come to know of it. Since the customer alone is expected to have the card and know the PIN, banks do not generally; entertain any claim for unauthorised cash withdrawal using ATM cards. ATM frauds are invariably committed by close friends and family members who have access to the card and to whom the customer reveals the PIN by using the PIN in their presence. There have been cases of customers writing the PIN on the card itself. Customers are advised not to take anyone with them to the ATM or to write the PIN on the card or for that matter anywhere else.
Banks generally issue ATM cum Debit cards which can be used at merchant establishments (shops, hotels etc.) just like a credit card for making payments. The customer is required to sign on the reverse of such ATM cum Debit Card. This is to enable merchants to identify the customer. While there are POS (Point of Sale) terminals with facility to enter PINs, majority of POS terminals do not have the facility. The merchant has to verify the identity of the customer only by comparing his signature on the charge slip with the signature on the back of the ATM cum Debit Card.
To protect the customer against unauthorized withdrawals the maximum amount that can be withdrawn through ATMs in a day is usually limited to Rs. 25000. Banks do specify varying limits and HNIs (High Networth Individual customers) are permitted withdrawal of up to Rs. 50000. The limits may vary from bank to bank. Another purpose of limiting cash withdrawals is to ensure that the ATMs do not run out of cash fast. Usually cash is replenished in ATMs only once a day or once in two days as cash replenishment is a costly process.
The limit for use of ATM cards at merchant establishments is twice the ATM limit i.e., Rs. 50000 per day for regular customers and Rs.1 lakh for HNI customers.The merchant is required to ensure that the customer himself has presented the card by verifying his signature.
Technology
Simply stated, an ATM is a small computer with a cash dispensing mechanism attached to it and linked to a central computer called switch through phone lines or leased lines or V-sat. The switch is in turn connected to the Core Banking System (CBS) of the bank and also the HSM or Host Security Module. The HSM generates PINs for new accounts and also verifies the card number and PIN whenever the customer uses an ATM.
After inserting the card in the ATM the customer is required to enter the PIN and the transaction he wishes to complete, say cash withdrawal. The ATM will send the details to the switch which will send the card number and PIN to the HSM. On receiving confirmation from the HSM that the PIN tallies with the card number the switch will send a message to the core banking system to debit the customer’s account with the amount he wishes to withdraw. On receiving a message from the CBS that the customer’s account has been debited, the switch will send a message to the ATM to dispense cash. All these activities happen in a few seconds. In the case of cash and cheque deposit, no messages goes to the CBS as no entry is to be made in the account at the time of the transaction.
ATMs have two types of card verification mechanisms. The older type of mechanism takes the card into the ATM and ejects the card only after the transaction is over. In the newer ATMs the card has to be inserted into the slot and taken out quickly. The ATM reads the details on the magnetic stripe of the card while it is being inserted and taken out. In the new ATMs the chances of the customer forgetting the card in the ATM is remote as he has to necessarily take it out to start the transaction.
Operations
To be functional, ATMs need to be kept stocked with cash and its printer loaded with paper roll. This job is usually outsourced to cash replenishment agencies who charge a monthly fee per ATM. The frequency of cash replenishment (daily, once in two days or weekly etc) will be agreed upon between the bank and the agency on the basis of number of transactions and cash dispensation at each ATM. In case in the rare event of more than normal cash withdrawal from any ATM,additional cash replenishment will be done by the agency for which additional charges will be paid. The cash replenishment agencies also collect the cash and cheques deposited by customers in ATMs.
The second operational aspect is technical malfunction or stoppage. Maintenance agencies provide round the clock maintenance of ATMs and serious issues are taken care of by the manufacturers of the ATMs who also provide maintenance support.
To ensure that ATMs are functional round the clock the status of ATMs are monitored online at a central location normally called “help desk”. It is manned 24 hours and whenever an ATM “goes down” or stops for some reason the person at the help desk will be able to see it on his monitor. The reason for stoppage such as communication line down, cash outage, paper jam etc will also flash on his screen. He will immediately alert the concerned maintenance agency to rectify the problem. The security guards at ATM centres are also trained to call the help desk number and report stoppage of ATMs so that it is set right immediately. Banks try to ensure 99% uptime of their ATMs so that their customers are not inconvenienced.
Third Party Networks
In many countries, in addition to banks, service providers have been permitted to set up their own ATMs and offer their services to customers of all banks for a fee. There are many companies who set up and operate such ATM networks as their primary business. ATM networks owned and operated by entities other than banks are called Third Party Networks. Such networks are yet to be permitted in India by RBI.
VISA/Mastercard networks
VISA and Mastercard are international networks primarily for credit card operations. These networks can be used by member banks for ATM cum Debit Card transactions also. ATMs of banks which are members of the VISA or Mastercard organization are linked to the computer of these organization at various international centres such as Singapore or London. Hence a card issued by one bank can be used on an ATM of another bank. When a card issued by SBI is used to withdraw cash from an HDFC ATM, the switch of HDFC routes the message to the VISA/Mastercard system, which routes it to the switch of SBI, and the transaction gets completed. For providing this service Visa/Mastercard recover a charge called “Interchange” from the card issuing bank, in this case SBI, and shares part of it with the paying bank, in this case HDFC, for permitting their ATM to be used.