Core Banking Solution
The financial sector of Bangladesh is dominated by the banking system. Majority of banks are planning to introduce ICT for integration of banking services and new e-finance services
The banks providing automated or computerized banking services in Bangladesh are working basically in two approaches:
- Centralized Database System
In Centralized system all sorts of customer information as well as their transaction histories or ledgers are stored in the Central Server at the Head office Data Center. Branches having proper authorization procedures log on to this central server through remote networking media like Radio Link or VSAT and make business transactions as well as fetch reports of various kinds
- Distributed Database System
In distributed operations every branch has their own server at their premises. In need of on-line transaction one branch has to logon to the responding branch’s server and do the transaction.
Foreign Banking Software in Bangladesh
• Finacle
• Mysis
• i-flex
• Temenos
Local Banking Software in Bangladesh
• Florabank
• Bexibank
• PCbank
Branch LAN
LAN stands for Local Area Network, which is a collection of computers interconnected with each other in a small area. In a bank branch, most of the computers are interconnected with each other via network cables.
In a bank branch, most of the computers are interconnected with each other via network cables.
In Centralized Banking operation, to access the core banking software at the central server, the local LAN has to get connected with the LAN at the Head Office Data Center via remote connectivity media like Radio Link or VSAT.
Head Office LAN
Head Office LAN for branch banking network is also a small network where computers are interconnected with each other.
HO LAN holds the Central Server that hosts all sort of customer related information of all the branches along with the data of Head Office transactions.
HO LAN can hold a Router to route all the requests from the branches coming through different channels to the central server.
WAN Connectivity:
In a Centralized Database based core banking scenario the LANs of the branches are to be connected to the LAN at Head Office where the Central server is placed and that constitutes the Wide Area Network or WAN.
In today’s situation this Wide Area Network or WAN connectivity can be established through various media like Optical Fiber or Radio Link or VSAT or even via leased telephone lines.
WAN Connectivity
Dial-up analog:
• Dial-up analog connections operate over standard voice-grade telephone lines.
• The advantage of analog connections is that they are inexpensive. Each site requires a modem of similar speed and a standard dedicated phone line.
• Dial-up analog connections are best for small file transfers and low bandwidth applications such as e-mail.
ISDN:
• ISDN transmits voice and data simultaneously over a single digital channel.
• Because ISDN uses digital lines, noise and interference are eliminated and calls are set up almost instantaneously.
• ISDN is a good choice for high-speed dial-up connections between LANs.
Radio Link Data Connectivity:
• For frequent data transfers or higher bandwidth requirements, a Radio Link connection is the best choice.
• Radio Link is available in access rates from 56Kbps to 1.544Mbps
• It is used for critical high bandwidth applications.
• Connectivity over radio link provides a level of stability that is almost unsurpassed.
• Radio link connectivity is versatile enough to facilitate any sort of data connectivity.
• This makes it possible to provide both internet and intranet connectivity using the same set of equipment.
Fiber Optic
• A technology that uses glass (or plastic) threads (fibers) to transmit data. A fiber optic cable consists of a bundle of glass threads, each of which is capable of transmitting messages modulated onto light waves.
Advantages
• A technology that uses glass (or plastic) threads (fibers) to transmit data. A Fiber optic cables have a much greater bandwidth than metal cables. This means that they can carry more data.
• Fiber optic cables are less susceptible than metal cables to interference.
• Fiber optic cables are much thinner and lighter than metal wires.
• Data can be transmitted digitally (the natural form for computer data) rather than analogically.
• Cable consists of a bundle of glass threads, each of which is capable of transmitting messages modulated onto light waves.
V-SAT
Short for very small aperture terminal, an earthbound station used in satellite communications of data, voice and video signals,
• A VSAT consists of two parts, a transceiver that is placed outdoors in direct line of sight to the satellite and a device that is placed indoors to interface the transceiver with the end user’s communications device, such as a PC.
• The transceiver receives or sends a signal to a satellite transponder in the sky. The satellite sends and receives signals from a ground station computer that acts as a hub for the system.
• Each end user is interconnected with the hub station via the satellite, forming a star topology. The hub controls the entire operation of the network.
• For one end user to communicate with another, each transmission has to first go to the hub station that then retransmits it via the satellite to the other end user’s VSAT.
What is Business Continuity Planning?
Business continuity planning is the process whereby financial institutions ensure the maintenance or recovery of operations, including services to customers, when confronted with adverse events such as natural disasters, technological failures, human error, or terrorism.
Objectives of BCP
• The objectives of a business continuity plan (BCP) are to:
• Minimize financial loss to the institution;
• Continue to serve customers and financial market participants;
• Mitigate the negative effects disruptions can have on an institution’s strategic plans, reputation, operations, liquidity, credit quality, market position, and ability to remain in the competition
What is Disaster Recovery?
A disaster recovery, which is considered a vital component of Business Continuation Planning, is a response to a declared disaster or a regional disaster. It is the restoration or recovery of an entire Agent computer.
Disaster Recovery Plan
A disaster recovery plan describes how an organization is to deal with potential disasters. Just as a disaster is an event that makes the continuation of normal functions impossible, a disaster recovery plan consists of the precautions taken so that the effects of a disaster will be minimized, and the organization will be able to either maintain or quickly resume mission-critical functions.
Disaster Recovery Plan for Banks
Preparing a comprehensive plan for business continuity and disaster recovery is not a simple task, nevertheless the three main areas where a possible outage can occur are:
• Redundancy, detection and fail over within a single site Data Center
• Redundancy, detection and fail over of the Communication Links for WAN & MAN
• Complete site redundancy in geographically dispersed locations to tackle disasters like fire and earthquake
Electronic Fund Transfer (EFT)
Definition:
Electronic Fund Transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions.
EFTs are initiated through devices like cards or codes that let you, or those you authorize, access your account.
Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose
Components of EFT:
• Automated Teller Machines or 24-hour Tellers are electronic terminals that let you bank almost any time. To withdraw cash, make deposits, or transfer funds between accounts, you generally insert an ATM card and enter your PIN.
• Direct Deposit lets you authorize specific deposits, such as paychecks and Social Security checks, to your account on a regular basis. You also may pre-authorize direct withdrawals so that recurring bills, such as insurance premiums, mortgages, and utility bills, are paid automatically.
• Pay-by-Phone Systems let you call your financial institution with instructions to pay certain bills or to transfer funds between accounts. You must have an agreement with the institution to make such transfers.
• Personal Computer Banking lets you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically
• Point-of-Sale Transfers let you pay for purchases with a debit card, which also may be your ATM card. The process is similar to using a credit card, with some important exceptions.
• Electronic Check Conversion converts a paper check into an electronic payment at the point of sale or elsewhere. In a store, when you give your check to a store cashier, the check is processed through an electronic system that captures your banking information and the amount of the check. Once the check is processed, you’re asked to sign a receipt authorizing the merchant to present the check to your bank electronically and deposit the funds into the merchant’s account.
History of Credit Card
Money:
Money is anything that is commonly accepted by a group of people for the exchange of goods, services, or resources. Every country has its own system of coins and paper money. In the beginning, people bartered. Barter is the exchange of a good or service for another good or service, a fish for a bag of beans
Metal objects were introduced as money around 5000 B.C. By 700 BC, the Lydians became the first in the Western world to make coins. Countries were soon minting their own series of coins with specific values.
Paper Money
China was perhaps one of the oldest introducing paper back money , where the issue of paper money became common from about AD 960 onwards.
With the introduction of paper currency and non-precious coinage, commodity money evolved into representative money. This meant that what money itself was made of no longer had to be very valuable.
Plastic Money
Credit:
Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange – the forerunner of banknotes – was established in the 14th century. Debts were settled by one-third cash and two-thirds bill of exchange. Paper money followed only in the 17th century.
From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called “tallymen” because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments.
Credit Card:
• Credit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer.
• Today, every credit card carries an identifying number that speeds shopping transactions.
• In 1950, Diners Club and American Express launched their charge cards in the USA, the first “plastic money”.
• In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York.
• According to Encyclopedia Britannica, “the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers.”
• However, references to credit cards have been made as far back as 1890 in Europe that involved sales directly between the merchant offering the credit and credit card, and that merchant’s customer.
• Around 1938, different companies started accepting each other’s cards. Today, credit cards allow you to make purchases with countless third parties
Bank Credit Card
• The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York.
• In 1946, Biggins invented the “Charge-It” program between bank customers and local merchants.
• Merchants could deposit sales slips into the bank and the bank billed the customer who used the card.
• American Express issued their first credit card in 1958. Bank of America issued the Bank Americard (now Visa) bank credit card later in 1958.
Credit Card: How it Works
Shape of Credit Cards:
• Credit cards were not always been made of plastic. There had been credit tokens made from metal coins, metal plates, and celluloid, metal, fiber, paper, and now mostly plastic cards.
The Numbers in Credit Cards:
ANSI Standard X4.13-1983 is the system used by most credit-card systems. Here are what some of the numbers stand for:
The first digit in your credit-card number signifies the system:
• 3 – travel/entertainment cards 4 – Visa
• 5 – MasterCard
• 6 – Discover Card
The Numbers in Credit Cards:
The structure of the card number varies by system. For example, American Express card numbers start with 37; Carte Blanche and Diners Club with 38.
- American Express – Digits three and four are type and currency, digits five through 11 are the account number, digits 12 through 14 are the card number within the account and digit 15 is a check digit.
- Visa – Digits two through six are the bank number, digits seven through 12 or seven through 15 are the account number and digit 13 or 16 is a check digit.
- MasterCard – Digits two and three, two through four, two through five or two through six are the bank number (depending on whether digit two is a 1, 2, 3 or other). The digits after the bank number up through digit 15 are the account number, and digit 16 is a check digit.
Types of Credit Cards:
There are basically three types of credit cards:
· Bank cards: issued by banks (for example, Visa, MasterCard and Discover Card)
· Travel and entertainment (T&E) cards: such as American Express and Diners Club
· House cards: that are good only in one chain of stores (Sears is the biggest one of these in US, followed by the oil companies, phone companies and local department stores.) T&E cards and national house cards have the same terms and conditions .
Brands of Credit Cards
The most popular brand names in credit cards are:
- Master Card
- VISA
- American Express Card
- Diners Club Credit Card
MASTER CARD
History
- MasterCard® was founded in 1966 as the Interbank Card Association (ICA) in the United States.
- In 1969, “Master Charge” was purchased by the California Bank Association and in 1979, the MasterCard brand was introduced.
- Issuers began offering MasterCard in Canada 1973 and it is the beginning of international move of Master Card.
Role of Master Card
- Establish standards and procedures for the acceptance and settlement of member transactions on a global basis.
- Provide a global communications network for interchange – the electronic transfer of information and funds among its members;
- Develop marketing programs that build even greater awareness for the brand, thereby increasing business for its members; and
- Enhance and support the marketing activities and operational functions of its members in connection with MasterCard programs and services.
VISA
History
Bank of America issued BankAmericard in 1958, the card was an instant success.
In 1970, National BankAmericard Inc. (NBI) took over the charge of managing, promoting and developing of BankAmericard.
In 1974, IBANCO, a multinational member corporation, was founded in order to manage the international BankAmericard program.
in 1977 BankAmericard became the Visa card,
NBI became Visa U.S.A., and IBANCO became Visa International.
Features
- More than 1.3 billion Visa cards in circulation
- Accepted at more than 24 million merchant locations in more than 160 countries
- Cash access at more than one million ATMs
- More than $3 trillion in global card sales volume
- Largest processor of financial transactions in the world
- Capable of processing more than 6,200 transactions a second
- 6,000 employees worldwide
- 21,000 Member financial institutions
Automated Teller Machines:
ATM
An automatic teller machine or automated teller machine (ATM) is an electronic device which allows a bank’s customers to make cash withdrawals and check their account balances at any time without the need for a human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps.
- An automatic teller machine or automated teller machine (ATM) is an electronic device which allows a bank’s customers to make cash withdrawals and check their account balances at any time without the need for a human teller.
- Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps.
- These machines can now be found at most supermarkets, convenience stores and travel centers.
- How Do ATMs Work?
- An ATM is simply a data terminal with two input and four output devices.
- the ATM has to connect to, and communicate through, a host processor.
- ATMs connect to the host processor through a normal phone line or a leased line.
- The host processor may be owned by a bank or financial institution, or it may be owned by an independent service provider.
Parts of an ATM
- Card reader – The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder’s bank.
- Keypad – The keypad lets the cardholder tell the bank what kind of transaction is required (cash withdrawal, balance inquiry, etc.) and for what amount. Also, the bank requires the cardholder’s personal identification number (PIN) for verification.
An ATM has four output devices:
- Speaker – The speaker provides the cardholder with auditory feedback when a key is pressed.
- Display screen – The display screen prompts the cardholder through each step of the transaction process.
- Receipt printer – The receipt printer provides the cardholder with a paper receipt of the transaction.
- Cash dispenser – The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.
Point-of-Sale (POS)
- The physical machine that allows a merchant to swipe a credit card through to initiate a transaction, most common in retail environments.
- Point-of-Sale Transfers let one pay for purchases with a debit card, which also may be a ATM card.
- A debit card purchase transfers money – fairly quickly – from one’s bank account to the store’s account.
Network Security Policy
Purpose:
- The network security policy is intended to protect the integrity of Bank networks and to mitigate the risks and losses associated with security threats to Bank networks and network resources.
Goals:
- The goals of this network security policy are:
- Provide a reliable Bank network and Internet connection to conduct the Bank’s business.
- Provide only authorized access to institutional, research or personal data and information.
- Protect computer system and network integrity at the Bank.
Network Security
- Head Office, IT Division shall identify the appropriate network security level for Bank systems, in collaboration with branches, divisions and departments.
- Head Office, IT Division will investigate any unauthorized access of Bank computer systems.
- Head Office, IT Division will work with administrative departments when appropriate
- Systems on the network must have adequate security installed and maintained.
- If security problems are observed, it is the responsibility of all the Bank network users to report problems to the appropriate system administrators or Head Office, IT Division for investigation.
Monitoring and Auditing:
- Head Office, IT Division will maintain traffic logs of the firewall for security auditing purposes
- Head Office, IT Division reserves the right to monitor, access, retrieve, read and/or disclose data communications when there is reasonable cause to suspect a Bank policy violation, criminal activity, monitoring required by law or at management request.
- Head Office, IT Division may perform a security audit of any computer system attached to the Bank’s network with the permission of the IT In-charge/ Manager or his superior. Head Office, IT Division will provide a report after the audit is completed.
Software Installation Policy
Purpose:
- The purpose of this policy is to address all issues relevant to software installation and deployment on Bank’s computer systems.
Policy Statement:
Bank’s, IT Division is exclusively responsible for installing and supporting all software on all its branch, division and department computers. This responsibility set includes:
- Head Office Division and Department computers.
- Branch computers
Software Licensing:
- Bank should use only licensed software for its offices and must not use pirated copies of software.
Software requests:
As per the software installation policy of Bank, no user will install or attempt to install any software on their computers without having the prior permission from the Head Office, IT Division. In case of need of installation of any software a user is to request the Head Office, IT Division to install the software.
Backup Policy
Purpose:
The primary purpose for file backup is for disaster recovery of mission critical data due to either system failure or a catastrophic failure such as fire, quake etc.
Policy Statement:
The purpose of the systems and data backup is to provide a means to:
- restore the integrity of the computer systems in the event of a hardware/software failure or physical disaster, and
- provide a measure of protection against human error or the inadvertent deletion of important files.
Backup Period:
• Database Backups are performed approximately at the end of business day.
• The Bank also uses other servers for its corporate needs. Incremental data backups are performed approximately at the end of every week on these servers.
Backup Media:
• Tapes, Hard Disks, Portable External Hard Disks, DVDs, Data Storage Devices will be used for backup media.
• A set of (2×6 days)=12 (twelve) Data Cartridge tapes, each pair of which will contain daily backups for weekdays.
• Daily backups will also be copied to another PC as well as Backup Server for the Central Server.
Preservation Location:
• All backups will be stored at the Head Office IT Division for quick restoration in case of system failure.
• Besides, backup medias will also be stored in a secure, off-site location with a view to safeguard the data for disaster recovery.
• Proper environment controls, temperature, humidity and fire protection, shall be maintained at the storage location.
Preservation Life Time:
• The data backups of 6(six) working days will be stored in a set 12(twelve) tapes.
• Monthly data backups will be saved for 6 (six) months, at which time the media will be recycled or destroyed.
• Backups of every Half yearly and Yearly data will be preserved for good for archiving purpose.
Archiving Policy:
• Archives are normally made once a year or every 6 (six) months, usually at the end of June that is at the end of Half Yearly Process or December that is at the end of Year Ending Process.
• These historical data will be archived in tapes as well as in DVDs for future use.
Restoration:
• Periodic tests of the data back