The Automated Teller Machines

The Automated narrator MachinesAutomated Teller Machines ( coin machines) constitute divulge clear uped prominence as a deli rattling tot tout ensembleyey for lingoing proceedings in India. Banks have been deploying airs to cast up their r each(prenominal)(prenominal). As at the end of December 2007 as per the rbi circular, the number of automatic teller machines deployed in India was 32,342. More people be wish a shot moving towards employ the automated teller machines ( automatic teller machine) for their riming involve. According to a hatful by Banknet India, 95% people go forthright prefer this modern thoroughf atomic number 18 to traditional mode of banking. Almost 60% people pulmonary tuberculosis an standard pressure at least once a week. Increased automated teller machine rule is in like manner servicinged by the fact that customers have now the flexibility of apply ambiances of other(a) banks, as most of the banks atomic number 18 wagere r of major interbank meshings like National Financial Switch (NFS), Mitr, BANCS, Cashtree and Cashnet. The interbank networks have brought together notes machines of several banks so that consumers would gain price of admission to any of the participating banks capital dispensers. Banks find it cheaper to pay membership fees to these networks as against setting up additional units in expensive-to-deploy areas. ATMs are now seen to be much than mere capital dispensing machines. Customers use ATMs to re energize their erratic phone pre-paid connections, pay their utility bills, however mutual fund transactions make them at par with flexibility given in internet banking except more proficient. Of the value-added work tallyd at ATMs, bill-payment is the most utilize service, fol baseborned by prepaid mobile talk- fourth dimension recharges. However, still nearly one third of the respondents do non use any value added services at ATMs.The ATM market in India is not yet satu stepd. Though the concentration of ATMs is great in metros, the convey is increasing for other cities and plane rural areas. ATMs per cardinal people approximately is 33 units is very low. Experts forecast that the growth rate (CAGR) is expected to grow 18 percent up by 2013. Banks deprivation into a self service model offer have long saving potential for banks and whitethorn similarly increase the convenience for the customers. avocation is a representative trend taking into neb the growth in the number of ATMs in three of the largest Indian banksATM fork uping mountain concatenation net profit ActivitiesFollowing are the major activities carried out as part of the ATM cater chain or in supporting the ATM services of a bankMaintenance ActivitiesSiteTelecommunication strikingCash RefillingATM MonitoringHandling Customer Complaints expiation of Cash And Interbank TransactionsFollowing is a sample ATM Supply chain networkBank Head OfficeATM VendorsOut w riterd agentBank Branch 1Bank Branch 2ATMAs stern be seen from the network above, the major participants in the ATM supply chain network areATM VendorsIf the bank ATM and the related IT infrastructure is outsourced then the ATM infrastructure is operated and maintained by the ATM vendors for a fees. It adds the advantages of appeal efficiency and scalability for the banksOutsourced legal maneuver agentsThey are the ones who supply neighboring(a) payment to the ATMs. They either have a Vault Cash account where the vendors themselves maintain some cash balance or they have an Overdraft accountancy with the Bank itself, which gets debited after each adjournal and credited after the situate at the ATM.Bank BranchesThese are the Bank growes in-charge of the heterogeneous ATMs in a particular areaBank Head OfficeThis is the main baron branch of a bank in a particular urban center or districtATM supply chain IT infrastructureATM Infrastructure Information flowDelivery Chann el CoordinatorSwitch interlockingOutsourced Delivery AgentsCard routiners ServerATMInformation flow for cash withdrawal and for Credit CardsInformation flow for cash replacingMIS InfoATMIt interfaces with the bruise network to exchange cash withdrawal, cash replenishment and credit card cultivationOutsourced Delivery AgentsThey receive discipline from the delivery descent coordinators to replenish the ATM cashDelivery channel coordinatorThey receive cash replenishment and MIS info from the switching network. in that respect is forever more than one ATM beneath each Delivery channel coordinator to take advantage of the economies of scale. Also, the channel ordination ordure be either manually deald or automated.Switch NetworkThe switch server authenticates the user, as well as exchanges cash replenishment related information with the individual(a) ATMsCard Issuers ServerThe banks host server interacts with the switch network to draw card withdrawal and credit card info rmation dapple at the same authenticating the credit card transaction from the Card Issuers ServerDelivery ChannelsDelivery channels are spiritualist for information contagious disease or cash transmission in a banking context. They are as well as known as touch-points, which deliver service to the end-user in his convenience. The primary medium of touch-point was the brick-mortal form of banking. However as time passed, and information technology proliferated banks were cap open to extend the touch-points to dissimilar other forms much(prenominal)(prenominal) asAutomated Teller Machines (ATM)Point of Sale (POS)Mobile BankingInternet BankingThe delivery channel foot was started by private banks foreign banks after the 1991 reforms when umpteen banks were allowed to carry out trading operations in India.Advantages of Delivery ChannelsDeliver channels return the following benefits to usersEasy access247 availability aegis,Reduced transaction beOptions of access per conven ienceAcceptance ImplementationOld generation banks with belittled or marginal frames have acceptance guinea pigs with the disruptive technologies of internet. The acceptance discommode also comes with many of the old generation customers who believe in losing the individualised touch of banking.Implementation issues center around the following primevalization of dataMultiple technologies for divers(prenominal) arrangement of ruless earnest issues (Customer end/Banking end)Multiple interface for different channelsSynchronization of information crossways channels bills dispersalBanks need to maintain a certain(prenominal) level of cash in crop to service its daily withdrawals. There is an entire supply-chain in gift which helps in ensuring the same. Below is a diagram of how coin travels from the press to the various banksATMPresses/MintsPublicPress-linked offices bullion Chest offices (Banks)An overview of the supply-chain of BanksThe presses and mints where notes a nd coins are printed are under the rbi. The money from the mints and presses is moved daily to the 19 press-linked offices. These are sent to the near zonal up-to-dateness-chest banks, essentially Banks which store current called as Chest offices. There are in all 4279 chests and 4040 coin depots.Functions of the Chest officeFulfills the emergency of peoples fundsWithdrawal and acceptance of unfit notesPayments to GovernmentsOperates with minimum balance at all propagation individually day the records are maintained for the issue/acceptance of currency. It also has to maintain the asset-liability position in cash management. money in CirculationJust as a manufacturing supply chain deals with crossing varieties also known as SKUs, the currency supply chain also has its SKUs through various denominations. The shift towards mellower denominations was observed since the wide-usage of ATMs.Various travel were also taken to phase out Rs .5/- notes and replacing with coins for man y such low denominationsSourcerun batted in Docs, Currency Management, Section VIII, Dt. 27/08/2009Clean-Note insuranceTo stop the life of currency notes, rbi issued a directive to all bank offices to cease the stapling of notes and instead band them and the alter notes be government issueed to RBI. merely devalued stapled notes were still lying with banks.IT systems were used to create a Currency Verification Processing (CVP) system. This categorized notes into Fit, Unfit, Reject and Suspect categories. A Citizens read was also issued providing guidelines on how to identify soiled notes and steps to be taken to return to RBI. However due to implementation issues unploughed the proportion of soiled notes in circulation from 15.9 million pieces (2002-03) to 10.9 million (2008-09).Logistics Distribution ChallengesEach bank broadly speaking arranges for personal logistics service with police protection. gage vans are used for short-distances and study for longer distances. The limit and size of the area poses a signifi dopet riddle in meeting need for currency at various pockets in India. Following are some of the issues faced in distributionSecurity availability of railway wagonsPolitical boundaries that inefficiently defining legal power of Issue offices which lead to suboptimal logistic servicesMoving currency across touch-points an object lesson that is avoidable is generally carried outPrivate protection is not adequate and police cant be dedicated for this exerciseVarious breathing distribution systems of milk-cooperatives, post-offices, coin-dispenser in any casels and a directive to issue bulk users with a certain proportion of coins was made.Supply ChallengesWith 4 printing presses, supply after 1999 was not a problem, but the pace of notes replacement made quality of notes deteriorate. Since the notes that were returned came uncategorized there were inefficiencies in understanding the outflow of currency from system. In order to develop capacities to free-up vault space in banks various measures like shredding systems in all offices were setup.Demand-forecasting among banksBanks carry out demand-forecasting using statistical depth psychology using long-term historical demands to calculate forecasts. These aim to serve the following needsIncremental needs As and when money is needed by RBI, the presses supplyReplacement needs Money is needed to replace specific notes, which are soiled or disfiguredReserve needs Emergency unavoidablenesss to sue reserve compulsions by banksTechnology in Currency OperationsWith such a vast network of banks, the Reserve Bank established integrate Computerized Currency Operations and Management Systems (ICCOMS) which helped in error-free reportage and accounting of chest-level transactions.Security in distribution and ATMSecurity is increasingly becoming more significant in network surroundings with the emergence of the internetworking technology. The internetworking tec hnology can act as or provide the communication channels across networks so that machines in different networks can talk to each other. exclusively such charitable of technologies like ATM is exposed to all configurations of attacks in such an complaisant environment. nearly of the network technologies, without integrating with credentials mechanism originally, are organism redesigned to provide some credential services.ATMs attempts to be secure by care the customers personal identification number (PIN) and other information safe by using encryption software such as Triple diethylstilbesterol (Data Encryption Standard)Threats to ATM networksLike other such networks, ATM networks suffer a lot of scourges like eavesdropping, spoofing, service denial, VC theft and traffic analysis and so forth And VC stealing and traffic analysis guide only in ATM networks.EavesdroppingEavesdropping refers to the threat that the attacker connects or lights-out into the transmission media a nd gain an unauthorized access to the data. It is one of the most popular attacks to the network.Service DenialATM technology is a connection-oriented technique managed by a set of signals. By sending some anti-signals frequently, the attacker can disturb the communication between user A and user B to a great extent which can disable the Quality of Service(QoS) in ATM. Combining this technique with other tricks like eavesdropping, the attacker can even completely block one user from another.Stealing of VCsIf two switches in an ATM network compromise, the attacker can even steal a VC from another user. Some argue that possibility of compromising of the switches is quite low but that is true only if the ATM network is owned by one organization. entirely this is not the case today since in ATM internetworking, in which case cells travel through different ATM networks, it becomes very easy for two switches to compromise.Traffic AnalysisIts a kind of threat in which a hacker can get in formation by collecting and analyzing the information (not the factual content of communication) like the timing, volume and about the parties communicating through a Virtual Circuit. Encryption effects only the content and not the timing and volume of the communication. So gaining access to even these can reveal a great deal of information to an attacker. more often than not this attack doesnt happen but can happen when ATM is used in a highly stringent and securitised environment.Major requirements/functions of an ATM credentials systemUser identicalness Verification The system should have the celerity to establish and verify the individualism of all the users and players in an ATM network.Controlled inlet and Authorization The system should get a line that any player without authority to gain access to some information or resources should not be able to access it.Protection of Confidentiality every(prenominal) data that is stored or used in communication should be kept c lassified.Protection of Data Integrity see regarding the integrity of the stored communicated data should be given by the Security system. vehement Accountability The system should ensure that No entity is able to deny the obligation of its any of the actions or efforts carried out by her.Activities Logging The security system should support the capability to recuperate information about security activities in the Network Elements with the possibility of canvass this information to individuals or entities.Alarm reporting Provision of generation of horrify notifications regarding certain selective events related to security. analyze Provision of analysing of data logged into the system in case of any security violation so that mandatory measures can be used and checks can be installed.Security recovery Provisions of recovery from successful or seek security violations.Security Management Proper management of the security services required as a part of above requirements.Suppl iers of cash main source Central bankThe most alpha requirement of an ATM is one major motive behind the technology i.e. making money easily procurable to the customers. Traditionally there have been a number of suppliers of cash commencement from unorganised money geters in the bygone to the modern banks today.A bank is a financial intermediary that accepts deposits and gives loans to customers using those deposits. Can be moneymaking(prenominal) or retail banking or the money can be pass on either directly to the customer or also through the use of markets.Banking channelsApart from their branches, bank offers many different channels to access their banking and other services. Among these, few channels help the customers in carrying out transactions without the involvement of accredited cash. These are E- Mail, Telephone, withdraw banking, Mobile and Video banking etc. In addition to all these channels, banks provide a source of real cash called ATM through a machine tha t dispenses cash and sometimes takes deposits without the need for a human representative from bank side.Major source of money Central BankA central bank is a banking institution with an exclusive privilege to confer to its regimen. It behaves both as a normal commercial bank wherein it charges avocation on the loans made to borrowers, majorly the government of the country the bank exists for and also as a lender of conk out resort wherein it lends to the banks when situation is not too good or as a part of the statutory requirements. But Central bank has a monopoly on creating the currency of that nation and it is the kind of bank that can lend money to other banks in times of need. It is the major source of money in a market and acts as the regulator of money supply too.Security in Distribution on and ATMSecurity is increasingly becoming more significant in network environment with the emergence of the internetworking technology. The internetworking technology can act as or pr ovide the communication channels across networks so that machines in different networks can talk to each other. But such kind of technologies like ATM is exposed to all kinds of attacks in such an accessible environment. Most of the network technologies, without integrating with security mechanism originally, are being redesigned to provide some security services.ATMs attempts to be secure by keeping the customers personal identification number (PIN) and other information safe by using encryption software such as Triple DES (Data Encryption Standard)Major requirements/functions of an ATM security systemUser Identity Verification The system should have the facility to establish and verify the identity of all the users and players in an ATM network.Controlled Access and Authorization The system should ensure that any player without authority to gain access to some information or resources should not be able to access it.Protection of Confidentiality Every data that is stored or used i n communication should be kept classified.Protection of Data Integrity Guarantee regarding the integrity of the stored communicated data should be given by the Security system.Strong Accountability The system should ensure that No entity is able to deny the responsibility of its any of the actions or efforts carried out by her.Activities Logging The security system should support the capability to retrieve information about security activities in the Network Elements with the possibility of tracing this information to individuals or entities.Alarm reporting Provision of generation of alarm notifications regarding certain selective events related to security.Audit Provision of analysing of data logged into the system in case of any security violation so that required measures can be used and checks can be installed.Security Recovery Provisions of recovery from successful or attempted security violations.Security Management Proper management of the security services required as a par t of above requirements.Suppliers of cash main source Central bankThe most important requirement of an ATM is one major motive behind the technology i.e. making money easily easy to the customers. Traditionally there have been a number of suppliers of cash starting from unorganised money lenders in the past to the modern banks today.A bank is a financial intermediary that accepts deposits and gives loans to customers using those deposits. Can be commercial or retail banking or the money can be lend either directly to the customer or also through the use of markets.Banking channelsApart from their branches, bank offers many different channels to access their banking and other services. Among these, few channels help the customers in carrying out transactions without the involvement of real cash. These are E- Mail, Telephone, Call banking, Mobile and Video banking etc. In addition to all these channels, banks provide a source of real cash called ATM through a machine that dispenses cash and sometimes takes deposits without the need for a human representative from bank side.Major source of money Central BankA central bank is a banking institution with an exclusive privilege to lend to its government. It behaves both as a normal commercial bank wherein it charges interest on the loans made to borrowers, majorly the government of the country the bank exists for and also as a lender of last resort wherein it lends to the banks when situation is not too good or as a part of the statutory requirements. But Central bank has a monopoly on creating the currency of that nation and it is the kind of bank that can lend money to other banks in times of need. It is the major source of money in a market and acts as the regulator of money supply too.nation and it is the kind of bank that can lend money to other banks in times of need. It is the major source of money in a market and acts as the regulator of money supply too.Demand Projections for ATMsMost ATMs are connected to international bank networks, enabling people to withdraw and deposit money from machines not belonging to the bank or country where they have their account. Serving the ATMs network is a costly task it takes employees time to supervise the network and make decisions about cash management and it involves high operating be (financial, transport, handling, insurance etc.). As interest rate rises and great operating efficiencies become paramount. Some banks typically maintain as more as 40% more cash at their ATMs than whats needed, even though many experts consider cash excess of 15% to 20% to be sufficient. Cash related be represent about 35-60 % of the overall costs of running an ATM. Through currency management optimisation, banks can avoid go into the trap of maintaining too much cash and begin to profit by mobilizing idle cash. Effective currency management and control starts with an automated settlement that uses advanced algorithms to accurately predict currency supply a nd demand, allowing banks to forecast demand and pro-actively manage currency throughout their network. Transportation and servicing cost increase can be substantial for banks. To achieve the lowest cost of distribution establish on accurate supply and demand forecasting and optimization procedures is critical for a bank to lower its operational expenses and improve the return on its cash assets.What is expected of a forecast model of the ATM network is that it simulates historical demand by using data from actual cash-in transactions and cash-out transactions. The historical demand model is overlaid with additional factors, such as paydays, holidays, and seasonal demand in a specific area. Analytical models are aligned with the experience of resources that have intimate knowledge of the banks daily operations and are used to determine the optimum cash amount for each ATM by calculating the transport and money upload costs against interest rates. Cash drawings are subject to trend s and generally follow weekly, periodical and annual cycles. An appropriate model for a bank and its branches or ATMs should opine optimal amount of stocked money plus efficiently manage and control day-to-day cash handling, dose with reducing of currency transportation and servicing costs. The system should be flexible enough to allow the bank to reforecast future demand, perform WHAT IF analyses, and optimize the network as the cash distribution environment evolves.Cash demand forecast for every ATM is based on linear regression models with seasonality coefficients. The development of such models is relatively complicate and differs for various ATM. Therefore preparation of forecasting models for whole ATM network is difficult task for owners of machines. The parameters of forecasting models are determined in the system implementation stage and are held constant during the operation phase. However, business environment changes continually in real world and, therefore, the mod el parameters must be also adapted to the changing environment.A recent paper on the optimization techniques proposes the use of artificial neural networks combined with breathing what-if analysis tools and simulation modelling procedures. This advanced method will handle the drawbacks of fair regression models but will be more accurate in projecting the demand. Off-late a few advanced software packages developed by traditional financial network giants like Visa are also available that provide powerful cash management facility. Publicly available data regarding these software packages suggest that they also use multi-regression models for prediction purposes.Network optimization models for cash distribution to various ATMs are also important to reduce the costs across the supply chain. In the first instance, it can be very valuable to coordinate cash uploading and service procedures while visiting the ATM network. Coordinated route planning for maintenance of various ATMs could al so reduce the ATM networks management costs significantly.Issues in Currency IdentificationCounterfeit currency notes is one of the biggest problems that are currently plaguing the cash distribution network. A lot of people suffer from this while withdrawing cash from an ATM when they inadvertently receive a fake note in a bundle of proper bills. It is difficult to prove accountability in case of such an incident and fix blame. Of the 48,963 million pieces of currency in circulation in 2009 398,111 pieces were found to be shape. RBI has come with a set of recommendations to be implemented across the distribution network that forms the supply chain of cash distribution to check falsify, maintain quality of notes in circulation, fortify of security systems and procedures and fixing accountability in case of human error. These recommendations are as given below (A) Measures for facilitating detection of forge notes and maintaining quality of notes in circulation(i) Note Sorting Mac hines (NSMs) / Desktop Sorters whitethorn be installed in all bank branches in a phased manner for early detection of contrive notes.(ii) Banks whitethorn ensure the quality of the notes fed in ATMs. They whitethorn carriage periodic canvas of the agents used for outsourcing this activity viz. the CIT companies. Banks may switch over to the cassette swap system for feeding the ATMs. New ATMs installed may be provided with in strengthened note detectors. Over a period existing ATMs may also be required to have in built note detectors.(iii) Performance parameters of NSMs may be standardized by RBI to ensure that all NSMs installed adhere to the laid down standards for detection of counterfeit notes.(iv) RBI may ensure that the plan for withdrawal of notes of old series is implemented strictly as formulated and that the newborn series of banknotes with more robust security features be introduced as early as possible. RBI may also facilitate R and D efforts for development of ne w security features.(v) Where any person inadvertently in possession of counterfeit notes upto five (5) pieces tenders the same at a bank counter, the requirement of register FIR may be done away with. A unbiased report may be filed with the branch which in turn may include this in the Counterfeit Currency Report (CCR) to FIU-IND / RBI.(vi) RBI may review the system of incentives and disincentives for detection and disclosure of counterfeit notes while assisting the enforcement agencies in dealing appropriately with those involved in making and distribution of counterfeit notes.(B) Measures relating to cash holding and distribution(vii) RBI may stipulate suitable cash holding limits for all currency chests beyond which the cash should necessarily be moved to a chest with larger limits or to RBI.(viii) Each RBI office may undertake a review of the requirement of currency chests in their jurisdiction based on the volume and spirit of transactions, accessibility of the chest and ot her factors including security so as to contract the number of chests and upgrade the facilities thereat for better security and efficiency.(ix) To tap advantages arising out of economies of scale, play down overnight cash risks at bank branches and to benefit from sophisticated logistics techniques banks may be encouraged to establish Currency Processing Centres, which should be permitted to charge other banks for processing services.(x) As NSMs have to be installed at all branches for sorting notes before dispensation, banks will have to make necessary investments. The cost of such investments will need to be recovered from the bulk tenderers of cash. Banks may put in place a transparent policy for such charges of cash handling/processing with the approval of their respective boards as already advised by RBI vide its DBOD directive DIR.BC.86 / 13.10.00 dated September 7, 1999.(xi) RBI may take initiatives in promoting use of cards and electronic mode of payment.(C) Measures for strengthening security systems and procedures(xii) RBI may explore enlisting the services of a specialized and dedicated force / other approved agencies to provide security at chests and for movement of treasure.(xiii) RBI may explore upgradation of the security systems in currency chests and RBI vaults incorporating electronic bio-metric access, electronic locking of bins, and supervision through Closed Circuit Television (CCTVs). Networking of CCTVs at chests within the jurisdiction of a controlling office of the bank may be explored for better surveillance.(xiv) Tamper-proof shrink wrapping of soiled notes with bar coding of details of the branch remitting them may be introduced.(xv) A system of quarterly security audit of currency chest branches by controlling offices may be introduced. spatiotemporal guideline / format may be prepared by RBI /IBA.(xvi) A system of risk based inspection of currency chests may be introduced by banks / RBI taking into account various parameters for evaluating the extent of risk.(xvii) Banks may draw up a contingency plan / misadventure management plan in consultation with local police.(xviii) RBI may explore the possibility of introducing a defacing system of self inking / marking of banknotes in transit or in chests, which would automatically trigger-in if there is an attack / attempted robbery/ theft etc.(D) HR Measures(xix) Banks may modify their transfer pricing policy or equivalent policy so as to pass on the benefit on account of having a currency chest to the branch where the chest is maintained.(xx) Rotation of staff posted at currency chests may be ensured to prevent vested interest and entrenched non alliance of laid down systems and procedures.(xxi) Where deviations and irregularities are found, controlling offices may take immediate punitive action after fixing accountability.(xxii) Bank may dispense recognition to currency handling operations as a cranky and skilled activity and provide necessary incentiv es and training.A. Dis