UK Bank Accounts

Disclaimer: Below is my understanding/ experience of various types of bank accounts available, and is not meant to "advise" you on any kind of investment.

Retail banking in the UK is a lot different from what I was used to in Pakistan. While I covered HSBC Passport account in one of my existing posts, HSBC Passport is a current account nevertheless and the charges are £8 per month. Now, if you are from Pakistan, you might have never heard of "paying" the bank to maintain your account. But it's the norm here in the UK. The more you are willing to pay, the better "type of account" you can get from the bank.

So, I started my hunt for a "savings" account and found that there are too many options!

As part of your HSBC Passport account, HSBC also opens up a Regular Saver account for you as well. Now, this is one of the best saving accounts out there (8% AER/ gross) but unfortunately, if you withdraw any amount from this account, it converts to a Flex Saver account (0.05% or 0.10% AER/ gross). Can you believe that somebody is paying a 0.05% interest which comes to 0.04% after the tax?!! What does it come to per month? 0.003%? So, you put in 1000 pounds and get mere 0.03 a month as interest.

But all is not bleak, there is something known as Cash ISA, and like other banks, HSBC has one to offer as well. If you are interested in saving money in the UK, it's unfortunate if you don't have a Cash ISA account. It's tax free savings but there is an upper limit on how much money you can put into that account; you can save upto £5,340 this tax year. HSBC offers a maximum interest rate of 2.75% on Cash ISA's. Here is a complete list of interest rates on various types of HSBC saving accounts.

Even better it to check Money Supermarket Savings accounts for an excellent comparison.

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Someone, perhaps Martin Lewis himself, left a link to Money Saving Expert which is kind a similar to Money Supermarket but a little more "engaging." The site has an excellent post describing Inflation Linked Savings in plain English.

Chip and PIN (aka EMV) Hacked by Omar Choudary

A recent letter by Ross J. Anderson to the banking industry has occupied the front pages of various hacker news sites. It so happened that in October 2010, Omar Salim Choudary published source code and hardware specs of SmartCard Detective---a mechanism to subvert Chip and PIN transaction; the term Chip and PIN is used for EMV in the UK.



While EMV is believed to be "the secure way of handling card based transactions," Omar managed to buy stuff with a card without knowing the cardholder's PIN at a local cafeteria as well as some retail stores. A French journalist rendered his card for the experiments and the news was broadcasted on a French TV Channel.

Since security by obscurity is the norm, when he published his work, the UK Cards Association wrote a letter to the Cambridge University to censor the student's work. Ross J. Anderson, in his response retaliated quite harshly [pdf]. The whole letter is worth reading; I am just quoting one paragraph:

Second, you seem to think that we might censor a student’s thesis, which is lawful and already in the public domain, simply because a powerful interest finds it inconvenient. This shows a deep misconception of what universities are and how we work. Cambridge is the University of Erasmus, of Newton, and of Darwin; censoring writings that offend the powerful is offensive to our deepest values. Thus even though the decision to put the thesis online was Omar’s, we have no choice but to back him. That would hold even if we did not agree with the material!

Omar's homepage not only gives specs of the hardware he used to subvert the PIN checking mechanism but gives GPL licensed source code for further research as well. He initially wanted to develop a device that sat between the card and the terminal to display what's going on in-between. He later realized that the device could be more general purpose. Threat Post provides human-readable details of what the device does:

To use the SCD, you insert a payment card into the card slot built into the board, and then you select the appropriate application on the LCD screen. Choudary built five separate apps into the SCD prototype, giving it the ability to store PINs, modify PINs, filter amounts and forward the commands from the terminal.

It seems that Cambridge University's security research group has a long history of fiddling with the banking domain. In Feb 2003, researchers of the same university published decimalization table attack on Hardware Security Modules (HSM) [pdf]---they managed to correctly guess a PIN in 15 to 24 guesses on average.

Omar S. Choudary is from Madrid, Spain, though his name suggests some South Asian origin. He is currently a PhD student at University of Cambridge.

Sending Money via Western Union from Pakistan

This is being written with a hope that an astray soul in search of the titled information will find this useful.

You may have seen Western Union sign-boards outside branches of various banks in Pakistan. In fact, it's not just banks, Pakistan Post also acts as a Western Union agent now. It's only when you have to send money abroad that you come to know that these particular agents (banks and the post offices) only provide one way service---you can receive money but you can't send from there.

So, how can I send money from Pakistan via Western Union?

So, a quick search on Western Union firstly hinted me that you can send money online if you have a Visa credit card! But this turned out to be true only for people sending money from some countries. Previously online credit card transactions were only allowed from the US, but now it's also possible from the UK, and perhaps a few other countries.

Thus, a quest for finding a Western Union office in Karachi from where you can send money abroad began.

Pakistan Currency Exchange in Karachi

There is one Pakistan Currency Exchange with a branch in Nursery, PECHS. The guy whom I interacted with at Nursery was surprisingly well mannered. I have used the service to send money to the UAE, and I would like to hear your views about this and other agents you might have used to send money via Western Union from Pakistan.

Having said that, let's talk about the more interesting part---the process to send money...

In order to set "standard" charges for money transfer, Pakistan Currency Exchange maintains everything in base currency. So, if you want to send UAE Dirhams abroad and you are carrying the exact amount in the destination currency, they will first "buy" it from you and then "sell" it to you again. Of course, this means that within a flash of a second you'll lose money :) It's better to take Pakistan Rupees with you and buy the destination currency right.

As an identity proof, it's better you take a photocopy of your CNIC with you---they can do it for you but I always prefer to have a copy done myself beforehand.


On a side note, do you know which countries are sending in the highest amount of remittances into Pakistan?

Reverse PIN on ATM's

Recently there has been surge on cash snatching on ATMs at gun point. Various videos have been circulating around in Karachi---most of the time the event happens when the ATM is placed inside an enclosure.

Concerned people have also started forwarding emails which say that you can save yourself in such a situation by entering your ATM PIN in reverse order; further claiming that doing so will alert the police before giving you the cash. If you discuss this with any IT person working in a local bank, he/she will definitely tell you that it's not true. There is no such thing as reverse PIN checking on bank's ATM controllers. Nor there is any built-in mechanism to alert the police.

A letter to the editor in Dawn surprised me that there is a patent on this idea! This is known as ATM Safety PIN!

Some Nice EMV Presentations

Banks in the UAE are rushing to implement EMV Acquiring on their ATMs, as the deadline of 31st December 2008 is fast approaching. The central bank of UAE has made available some very nice presentations on EMV, mainly delivered in June 2007 by ACI (the company behind Base24, widely acclaimed ATM switch).

By the way, UAE country switch is running OpeN/2 by S2 Systems, which has again been acquired by ACI.

EFT Jobs in Asia

If you are into the payment industry/ EFT solutions, and are interested in a job in an Asian country, Texel Global is worth giving a try. The vacancies posted on this site range from Presales Consultants to Application Development Managers, and the list of countries includes UAE, Australia, Saudi Arabia and Singapore. The domain/ tools in demand seem to be BASE 24, CTL and EMV.

Alternate Delivery Channel Vendors in Pakistan

Banking started with the concept of "branches" and a "head office." In a centralized database setting, all accounts and related information is stored in the head office. With good infrastructure in place, it's possible to provide some cool services like "online banking" where you can deposit a cheque in any branch to be credited to your account in a different branch. But there is a big restriction on this model, no matter how much you automate it: traditional banking closes at 4pm and a holiday is also observed.

Alternate delivery channels like Internet Banking and ATM (Automated Teller Machines---a term which should be obsolete by now) allow further touch points to the banks' customers, where banking services are available 24x7. These delivery channels are similar to "branches" in some sense, yet different because of non-human interaction and differences in authentication of the customer.

The first alternate delivery channel for a bank is usually ATM. Banks who are careful with their investment in IT commission the ATM channel in two phases:

1. Issuer
2. Acquirer

Being only an issuer means that the bank issues ATM cards (also called debit cards) to its customers which they have to use at other banks' ATMs. This requires the following products to be purchased by a bank:

• Card Printer
• Card Production Software (which not only produces cards but builds up a mapping of cards with accounts as well)
• A dot matrix printer to act as a PIN Mailer alongwith specialized stationary for the job
• A piece of software that is used to build connectivity between a country switch (such as 1Link or MNET) and the core banking system

The second phase for the bank is to buy ATMs and an ATM Controller and re-certify with the country switch as an acquirer (that is, allowing other banks' customer to use its ATMs).

Two (and perhaps the only two) vendors in this domain in Pakistan are Avanza Solutions and TPS, with their flagship products named Phoenix and Nimbus.

The next most common delivery channels are Internet Banking and IVR + Call Center. Again, both the companies mentioned above, provide indigenous products ("Prism" and "Ambit" for Internet Banking) as well as provide integration capabilities for third party solutions. However, there is an important difference: Avanza Solutions has two different products for "ATM controlling" and "integration" while TPS markets its ATM controller as a middleware as well. There are very few sites, if any, where TPS' Phoenix is running as an integration provider without acquiring any transactions.

There is good competition in IVR (Interactive Voice Response) market where 2B Technologies, ZRG (though not strictly a local vendor) and NCR compete with each other. Same goes for call center or a mobile banking solutions.

With the growing automation happening in the local banking industry, I find it impending that IT courses related to alternate delivery channels will soon be offered at the graduation level.

Core Banking Vendors in Middle East & Pakistan

Over the years, I have realized that you don't need to have a best of the bread product in order to succeed in a product + service oriented market. What's equally or (perhaps) more important is your local presence to provide efficient support to your customers. I'll write about this and my other professional experience in future posts.

I have been involved in some integration solutions for the banking industry in the Middle East and Pakistan in the last few years. I am providing a few links for the core banking solutions which are quiet famous in the mentioned region. You can follow a more comprehensive list here.

Flexcube by i-flex Solutions is one of the most famous core banking solutions. As of now, Oracle has acquired more than 80% of the company. Some of the banks which I know are running Flexcube include Abu Dhabi Commercial Bank (ADCB), Barclays UAE and Dubai Islamic Bank (Pakistan).

SYMBOLS by SunGard System Access is another major player. MCB (Muslim Commercial Bank) recently tried to shift to this system but I have heard that the migration project has failed; there are further rumors that MCB contacted LMKR to provide consultancy for this migration but it didn't work out as planned. These days, UBL (United Bank Limited) is working on a similar migration.

Equation by MiSys is another offering. Some of the banks that I know running this system include International Bank of Qatar (IBQ) and Ahli United Bank (Bahrain). MCB was previously using Equation (perhaps it still does). Locally, IBM is providing support for this core banking product (which runs on AS400 machines).

Lastly, another famous solution is TEMENOS T24 by TEMENOS. I have frequently heard of the product trainings being offered in Karachi though I don't have any personal integration experience with this one.

The local solutions in this domain include Banksmart from Codebase Technologies and PIBAS host by PIBAS. However, the local solutions have started to show off their age, and they are fast disappearing. Some small banks started with these solutions but they soon realize that the products and their support are not scalable enough to keep pace with the growth of the bank.

I'll write about Alternate Delivery Channels in a future post.