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August 5, 2011

ATM software company milking bank accountholders


August 5, 2011

LAHORE: The company that provides software solution for automated teller machines (ATM) in Pakistan is allegedly making huge money from accountholders, thanks to it monopoly in the business, sources said.
Sources in the banking industry disclosed that the ATMs in Pakistan are run by a computer programme provided by TPS, a Pakistani company.
TPS has complete monopoly in this area of business and gives its software under proprietary license terms.
The News repeatedly attempted to get the viewpoint of TPS about the issue, but the representative of TPS Shahzad Shahid did not answer the queries sent to him.
He promised to reply, but after getting the queries, he did not answer either phone calls or emails.
All ATMs in Pakistan are connected by order of State Bank of Pakistan so that anyone can use any ATM of any bank to check their balance and take money out.
All proprietary means that the software is not compliant to ISO standards that are adopted globally by all the financial institutions.
Since the software is proprietary, banks and ATM switches like 1Link are not allowed to check, audit or see the software code or even touch the machines that this software is installed on.
TPS is stealing a huge amount of money on a daily basis from bank accountholders. How is this possible? Hundreds of thousands of ATM transactions are made every day. If a virus or special code takes out just one paisa for each transaction, the account holders obviously cannot suspect any wrongdoing. But the company manages to steal a huge amount of money in this way every day from bank accounts.
An official at Competition Commission of Pakistan (CCP) said that an application was received by CCP about monopoly of TPS and it was investigating it.
He further said that after initial investigation it was believed that it was a mega scam in the banking sector.
Sources further said that TPS bribed banks’ IT departments to install its software in banks and

avoid audit. Other problems faced by banks due to this monopoly is that when things go wrong they have to wait for long periods for TPS to fix them. It charges them for every change or support. These charges to the banks are passed on to the accountholders as different fees by banks.
They said banks do not have any relationship with TPS, but they still have to pay charges to TPS. The reason is that TPS claims that they own the software installed at 1LINK (the main ATM switch) for bill payment and each entity (any bank) who wants to get connected with 1LINK for bill payment, must pay a licence fee to TPS.
This “system” has been put in place by 1LINK’s initial founders and board and is still prevalent due to the extraordinary bribes paid by TPS to board members of 1LINK. State Bank officials have also been pat of this scheme, sources said.
TPS charges banks in US dollars, although it delivers services locally. This is in violation of SBP’s regulations which it foists on others, but very conveniently overlooks in this case.
The banks that use TPS’s proprietary software are compelled to pay the prices and fees that TPS charges. Due to this proprietary software, banks also do not have any option for comparison and have to pay very high maintenance charges, certification charges, customisation charges, development charges, project management charges, quality assurance testing charges and so on. Apart from these charges, they also give extensive timelines for doing small changes. For example for a two minutes job, TPS takes one month, several meetings and prolonged useless discussions with nil results. They can get away with this because of the closed proprietary format that no outsider can see and comment on.
A spokesman for the central bank said that TPS is the technology partner of many banks (both commercial and microfinance), telecom companies and 1-LINK Switch for e-banking solutions and services. Besides TPS, there are other companies like Euronet and Avanza who are providing similar solutions to banks in Pakistan.
SBP said it has not issued any directives or recommendations to any commercial, microfinance bank and ATM switch operator to obtain any specific application or solution from any specific service provider or software house.
SBP has, however, issued general regulatory guidelines for compliance by banks and development finance institutions while acquiring services under outsourcing arrangements.
The ownership of source code, enhancements and up-gradation of applications is based on the service or licence agreement signed by banks with the service providers. Being intellectual properties, all software products differ in terms of their design and structure. Financial software systems have standard interfaces, which follow a set of international recommendations that make them interact with one another. “To the best of our knowledge, TPS, Avanza and Euronet solutions are integrated with all major domestic as well as international systems in Pakistan and globally for offering e-banking services and this could only be possible by adhering to variety of international standards for messaging interchange,” SBP said. International networks follow globally accepted specifications for integration, it added. It, therefore, implies that the applications developed by TPS, Avanza and Euronet are compliant with global standards operational norms, said SBP. Periodically, a comprehensive on-site inspection of network switches and companies is conducted during which applications such as TPS are inspected and audited thoroughly in the light of industry norms, international operating standards and best practices with a broad security perspective. Possibilities as indicated of siphoning of money are speculative and not possible in the manner depicted in the complaint, said the SBP.
The SBP has not received any complaint from any bank of having been prohibited by a service provider such as TPS from obtaining solutions or applications from any other vendor in Pakistan or abroad. It is bank’s own decision to either use TPS or any other ATM controller.
It has to be understood that SBP does not interfere or prescribe a certain course of action to any bank on its business decisions or best technical solutions and resorts to placing certain limitations on banks only for preventing adverse impact on accountholders.
“The indicated possibilities of collusion hardly merit an answer as SBP prides itself in being the premier institution maintaining across the board transparency and highest standards of integrity in all areas of its operations,” said SBP.

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