Financial Information System - Chip and Pin Cards - Coursework Example

Table Of Contents Project Proposal 2 Aims 3 Cost Benefit Analysis 3 Project Initiation Document 6 Project 7 Team Organization 7 Objectives And Scope 8 Constraints 8 Stakeholders 8 Risk Analysis 9 Change report 9 Quality Criteria 10 Communication Plan 10 Report 11 Project Introduction 12 Organization, Customer, Cluster 12 Strategic Analysis 13 SWOT Analysis 13 Strengths 13 Weaknesses 14 Opportunities 14 Threats 15 PEST Analysis 15 Political 15 Economical 15 Social 15 Technological 16 Existing System Vs The New System 16 Market Analysis 16 Value Model (Porter Value Chain) 16 Information Architecture 17 Mobile Technologies 18 Mobile Network Operator 18 Works Cited 19 FIS Information System FIS Report Structure And Research On Chip And PIN Project Proposal Aims The benefits and advantages of the introduction of Chip and PIN cards are multifold. As compared to traditional swipe and signature system, the new Chip and PIN payment method is more secure and offers a safer way to carry out transaction using electronic means. The card companies have started shifting to the Chip and PIN as payment method after a through research of its consequences and potential benefits to its users, operating companies, banks and card agencies. The Chip and PIN system has not just made it safer and easier for the consumers to transact, but it has also resulted in a huge reduction in the rate of fraud and misuse of credit and debit cards. Like any new technology's introduction in the market, the Chip and PIN method has also faced resistance from the market and the consumers. The enhanced security and reduction of chances of fraud have started making the consumers accept it as the new means of transactions. The traditional swipe and signature is still in use for some period of time so as to make the changeover smooth and in the meantime the users can get used to the Chip and PIN system. Not just the consumers, the replacement of machines for the new system will also take some time and the nationwide and regional changeover can not be done in an instance. The parallel run of both the systems is planned to make the users aware of the Chip and PIN system before completely switching to the new system of payments. Cost Benefit Analysis The costs incurred in the implementation of the new system are incurred at various levels both within and outside the organization. The overall costs of changeover to the new system includes the costs of replacing the old card machines (designed for swipe and signature system) with the new Chip and PIN compatible machines at Point of Sale (POS) Terminals as well as cash machines, upgrading the backend system to handle the Chip and PIN system, securing the card centers to handle for the payments and training the staff for the new implementation and operations. The cost of issuance of new cards to the existing card holders also adds a good percentage to overall costs. The potential benefits the system is expected to offer are way more than the costs incurred. The enhanced level of security in the new system will build confidence among the card users. The security and reliability of the system will make it cheat proof and difficult to hack. The users will feel more secure transacting using their Chip and PIN cards than the traditional swipe and signature ones. The implementation in 2005 reduced the rate of fraud by 13% saving 65 million to the banks. In normal credit or debit cards, the signature of holder is present on the back of the card, whereas for the new ones, PIN will not be present anywhere on the card. This will make it more secure. Even if the card is lost, the chances of someone using it are rare. The card-locking feature on three unsuccessful attempts makes it more secure than a traditional card where the cardholder is only required to do signature on the receipt. The signatures are, most of the times, not even checked for correctness at the point of sale. The use of biometrics may provide a system even more secure than the Chip and PIN environment, but the costs of implementing biometric system at the shop-level and POS level increases the costs way more than the benefits it will reap. This has led us to the conclusion that the use of a Chip and PIN system as a secure way of making transactions and payments is economically a viable option as compared to other systems that are possible. The decision to change to Chip and PIN system from a swipe and signature system is a wise move to reduce the rate of fraud and misuse the industry is currently facing. The major tangible costs in this case will be the network and infrastructure costs comprising mainly of the cost of terminals and the network layout. As the network used will be the same, there will be terminal costs which the companies will have to bear. If it is a wireless chip and pin device, costs tend to be on the higher side. For restaurants and hospitality companies, they may have wireless ones as a better alternative for their needs. In that case cost of implementing it there will be higher than the implementations in other places. "The official line is that chip and PIN technology will help cut down on fraud, which card companies say costs them about 500m per year. The idea here is that PINs are harder to forge than signatures and that chip and PIN cards are more difficult to replicate than magnetic strip cards. It should be noted that the switchover will cost more than 1 billion, according to the card companies, so it does seem they're expecting to recoup quite a bit of money from reducing fraud" (Carr, S. (2006, February 7). So mind if I ask - why the change Message posted to http://management.silicon.com/itdirector/0,39024673,39122813,00.htm) Given a cost of 1 billion, the reduction in fraud is very small as compared to the costs. These are visible costs. There may also be hidden costs associated with the changeover which will also be present without them being visible. This way, the cost benefit analysis may come out to be unfavorable depending upon the number of POS terminals which will be replaced. If there are 40,000 machines and 850,000 terminals and 12 million cards that need to be replaced, the total cost of changeover will be higher than the 13% reduction in fraud recorded in 2005. Not just higher, it is exponentially higher, and thus will cover costs in the coming years.This way, it might be viable for companies to accept the fraud and save their investments into such huge technological changes. But doing it will pay back in the long run. FIS Information System FIS Report Structure And Research On Chip And PIN Project Initiation Document Project Description The project of implementing the Chip and PIN payment system for the card holders will use the new cards with a chip. The system will assign a PIN to each chip/card which can be easily changed by the card holder using the cash machines available everywhere. The user will be given a new card which will be Chip and PIN compatible. The user will have to remember the pin number in order to make any transactions using the Chip and PIN card. The new card will not require any signatures at any sales or transactions, but if the users want to continue with the old system of swipe and signatures, they may be allowed to do that for a certain amount of time when the systems will be run in parallel, after which the users may not expect to use the old system if they want to continue paying using the cards. The signature system may still be valid in a few POS terminals where the new machines are not yet placed or for those, as special cases, who have some sort of disability. The purpose of this major change in the setup and working of the card payment mechanism is to make the transactions and payments more secure and to give the users a greater degree of confidence in the card system. As a result of the increased assurance of safe transactions, the users will start making transactions using cards more than before. This will increase in the overall revenue of the banks and card companies. The other source of increase in profit will be the increased revenue as a result of reduction in the rate of fraud. The Chip and PIN system is expected to reduce fraud rate by a handsome percentage, decreasing the amount lost by the companies due to misuse of their outstanding cards. Team Organization The teams will have to be trained for the use of new system. This will require organization to bear the training costs in addition to the infrastructure upgrading costs. The POS terminal staff will also need to be trained to use the new technology. The users may also need to be trained for the new system. Different members of the project team will be given different tasks related to the implementation of the new Chip and PIN system. Various sub teams will be formed in order to make sure the things are being done on time and with the given level of accuracy. The team-based structure makes the reporting easier and provides a more controlled environment. Objectives And Scope The main objective of the new system is to provide a high level of security to the users without making the process complicated. The security in an easy to use fashion is the need of the hour. The implementation of Chip and PIN card payment system will focus on replacing the legacy system of swipe and signature. The project will initially focus on simply replacing the old system and providing all the features available previously, including the online transactions and payments over the phone. The online and phone transactions pose the major security threat to any system. The major area taken into consideration by this project will be the online and over-the-phone payments using the Chip and PIN system. The new system is designed in such a way so as to provide a secure online transfer of money. The users paying over the phone will be required to punch in the pin code using the telephone dial pad whereas over the internet, the users will be using the keyboard and an interface to use the cards and punch in the required details. The physical verification and confirmation will be made when the delivery is received using the wireless portable device given to the sales representatives. Constraints The project and implementation of Chip and PIN system does have constraints. The major shortfall and problem of this system is for those who are disabled. The disability to punch in the digits beats the purpose of PIN code. If the disabled people ask someone else to punch in their PIN for them, the confidentiality of the PIN will no more be there, making it a potential threat for the misuse of the card. Other than that, the PINs are hard to remember for some people. The use of signature is very convenient whereas remembering PIN, for each card a person holds, is difficult and cumbersome. For some people, the PIN system may become an obstruction to use. They may prefer the old system or pay cash as an alternative to payments through cards under the new system. Other constraints may arise in the other locations and countries where the old system is still being used. The uniformity of the system is not present; making the shortcomings of the old system beat the purpose of the new implementation. Stakeholders Major stake holders of the new system are the banks and organizations being affected by the new implementation. The card companies, banks, government regulatory authorities, insurance companies and the shareholders of related companies are the major segments that will be affected by the change. The card companies may have to incur an extra cost for making, issuing and distributing the new Chip and PIN compliant cards to the existing card holders. This adds to their cost in the short run, but the long-run costs are expected to be lower as the rate of fraud will reduce with the new system. The banks, for similar reasons, may have to incur an extra cost in the short run for the implementing the new system. The old system's data migration and conversion may add to their cost, reducing their profitability in the short run. The shareholders of these organizations may also be affected in the short run as their increased costs will reduce their profitability in the given year. But in the following years, the increased revenue due to safer transactions will satisfy and justify the higher initial cost. Insurance companies may have to revise their policies and systems according to the new system. They may have to reissue insurance packages to the existing users, based on the new criteria. This will add to their normal workload and costs. The government regulatory authorities may also be affected because of the modified taxation (if necessary). The shareholders of related companies and industries may have a short term affect in their incomes, but in the coming future, the system will be in their favor. Risk Analysis The major risk factor in the project is the acceptance by the card users. The risks are to be weighed against the benefits of the new system. The new system is to reduce the fraud rate in the credit and debit cards. The consumers may find it difficult to remember the PIN as compared to the signature, but a 4-digit PIN may be changed easily by the users themselves using any cash machine. This easy to use option makes it possible for the users to choose a PIN of their own choice which makes it easy for them to remember. Change report The change management is to be carried out in a planned manner. The new system will be given a parallel run along with the old system so that the users and POS staff can get used to the new system in the meantime. This will increase the user acceptance and reduce the resistance to change. As a result, the change can be implemented easily. The new system will provide an alternative mechanism to transact for those people who have any sort of disability. This will be done on request by the user. This is done in order to increase the new system's acceptance rate among the users in this category. Quality Criteria The project will be considered a success if the implementation completes in time and the expected level of rise in the security is achieved. Another major criterion for the quality and success of the project is the reduction in fraud and misuse of cards. User acceptance may also be considered an additional measure of the success of the project in any given area. Quality criteria may also be based on the number of transactions the system is capable of handling in a unit time (per second, for instance), the accuracy of the system, the downtime per year, fraud detection capabilities or the coverage area. Communication Plan The project will start by an initial implementation in the nearby area. The old machine replacement campaign will keep on expanding to cover the town in the next level, then the city, the country and then going beyond the country to regional level. The ultimate goal is to globally switch to this system. Required trainings and restructuring will be done as and when the operation is carried out in the given vicinity. FIS Information System FIS Report Structure And Research On Chip And PIN Report Project Introduction The Financial Information System with the new Chip and PIN system for payments through debit and credit cards is becoming popular due to its high degree of security and protection features. The easy to use interface and mechanism of the new system has made it a method of choice in the European market where is has been into practice for quite a few years. The first country to accept and implement the FIS with the Chip and PIN as payment mechanism was France. France implemented this in 1993, based on its own standards and conventions. Later, when the system was accepted by the users there, the other countries also started adopting their system, but with a standard implementation complying with the EMV (Europay-Mastercard-Visa). This has made it easy for the old users of cards to migrate to the new system without much of a hassle. France being a pioneer, did have a success in the implementation of this system; but due to better implementation standards in the UK implementation, France is also planning to change their system according to the UK standards to make their system EMV (Europay-Mastercard-Visa) compliant too. The rest of the European countries are also planning to adopt the UK system. The new Chip and PIN system has reduced the frauds in major areas but still in the internet and telephone transactions segment, the fraud rate is on the rise. The payments over the internet and telephone need to be secured so that this important loophole is overcome. The other technologies were also considered as potential candidates before the decision to implement the Chip and PIN system was made. The other technologies considered were based on the biometrics. The technologies may provide a more secure means of transacting than the Chip and PIN, but the costs of implementing and operating the machines using the biometrics is extremely high. The very high cost associated with these technologies makes them economically not viable. Organization, Customer, Cluster The new system will be as easy to use as the previous system, with a difference of user remembering the PIN code assigned. The PIN code will be a 4-digit number, which the user may choose of his/her own choice. This will make the things easier for the user. The customers are likely to increase with the new secure system of making transactions and payments. The usage of the new system has started in France in 1993, expanding to the UK and is planned to expand to other countries in Europe and then outside Europe too. In 2005, the banks invested huge sums of money to upgrade their old FIS systems to make them compliant with the new Chip and PIN cards and they have replaced 40,000 old cash machines with the new ones accepting the new cards. 850,000 Point of Sales (POS) terminals have been made to accept and process the new cards and the old customers were issues new Chip and PIN cards. In 2005, 12 million new cards were issued to customers. Even though, it was a big decision for the banks and card companies to switch to the new system; the potential benefits clearly outweighed the costs. The reduction in fraud by 13% in 2005 to save 65 million to banks was a major success for the new system. The trend of success is expected to improve further with the complete implementation in the country and then the region. Strategic Analysis SWOT Analysis Strengths Secure Reliable Safer Transactions Reduced Misuse of Stolen cards Double security system Difficult to duplicate Weaknesses Less support for phone and online transactions Difficult for disabled people No person-specific checks when transacting Require an entire new system network to work Opportunities Larger target market Expansion possibility New uses of card coming up More business Threats Threat of fraud is still there, though reduced Use of fake cards User non-acceptance Strengths The Chip and PIN system is highly secure and provides a unique way of ensuring a safer means of transacting money. The verification mechanism by the use of portable wireless machines makes it more reliable. With the requirement to produce the card and punch in the PIN in the wireless machine, the delivery team can be very sure of the genuineness of the customer. The customers can have more confidence in their cards with the new enhanced security mechanism provided to make the system foolproof and secure. The stolen card is not of much use for the person as it does not allow the cardholder to make any wrong PIN attempts after the third unsuccessful try. The double security mechanism makes it safer to carry and use. Even if the card is lost, the finder may not use it without the pin. So the cardholder can be sure that it won't be misused. The special unique chip is made in such a way that making a fraudulent card is not easy, giving it a good protection against fake cards. Weaknesses Even with the highly secure transaction environment, the new system does have shortfalls and does not provide an extended support for the online and telephone-based transactions. This may become the reason for reluctance to accept the Chip and PIN payment mechanism as the new system. The consumers and users have started using online payments more frequently than ever before. The lack of support in this growing field is a major drawback in the new system. The card in no way asks for any sort of person specific and natural evidence of being the real owner. The entire process of payment through the card is signature-free. The user is not even asked for any fingerprint and no photo is placed on the card for verification purposes. This way, any cardholder, knowing the pin can use the card without even being identified as a fake user. Even though the new system is suspected not to have a very good and secure online and over-phone payment features, but the companies have improved on it too. The use of telephone's dial pad for punching in the PIN number has helped companies to overcome the potential shortfall of the new technology. The original card has to be produced on delivery and verified using the wireless portable machine provided to the deliveryman. This has helped the companies to reduce the fraud in product deliveries and order fulfillments. The disabled people may have a hard time using the new system due to insecure way of punching PIN and / or forgetting the PIN. The system does provide provision and relaxation for such people where the bank or the card company may still allow them to continue using the signatures as before. Opportunities The card companies now have the opportunity to get more businesses for their card holders as the rate of fraud has declined with the introduction of these new Chip and PIN cards. The companies and the customers are more comfortable using the cards now than before. The increase in the trust in relationship between the customer and the supplier has strengthened the relationship and thus making it easy for the companies to expand on their businesses. Threats The replication and forging of new cards may also be seen in the near future, as a potential way to exploit the new system. The hackers and criminals must be devising some way to break into the new system and make illegal use of the cards. The major threat for the card companies is the lack of user acceptance for new technology. For this, the companies implemented this on a small scale and are now planning to expand and network across the countries after its initial success on small scale. PEST Analysis Political Government Regulations may require change Tax and Duty considerations Economical Recurring Periodic charges Interest and other normal fees and charges still there Social More convenient and easy to use Alliance of card companies with others Technological Runtime processing Immediate online updates Fast and quick processing Political The government rules and regulations regarding plastic money may need to be revised with the introduction of new system. The card companies and banks may look into expanding into other areas of businesses with the increased security in their systems. This will need to be incorporated by the government agencies and taken into consideration by tax collection agencies. Economical Due to inflation, the cards are expected to carry annual or periodic charges which the holder will have to bear. These will be the normal charges which are levied upon as in the current system. Social The easy and safe usage of the new cards will allow the users to use the cards more conveniently. The insurance companies may also form alliance with the card companies to promote their offerings and to target the right market segment. The youngsters are shifting towards the cards as a primary medium to meet their needs. This has open up a new market for the card distributors to work on. Technological The research and development in the relevant field and the increasing awareness and advancements in the field of information technology has made it possible for the card companies to incorporate and offer more and more features in a reliable manner. The card companies are now offering additional features and benefits to their customer and clients. This has improved the rate of adoption towards new technology and related products. Existing System Vs The New System The existing system made use of technology to provide convenient online transactions whereas the new system aims at providing a convenient payment mechanism with the highest standards of security across the region. Market Analysis The market has warmly welcomed the new system as the card users are already afraid of fraud and show reluctance in the use of cards for transacting larger sums. The new safe and secure payment mechanism will provide the card companies with increased revenues not only because of reduction in fraud, but also because of increase in the use of cards. The card companies and issuing organizations will enjoy the benefits of their investments in the long run. Value Model (Porter Value Chain) The card companies are doing value addition for their customers by assuring them the safety and reliability of their payments using the cards. The primary activity of the company is to handle the card transactions and to provide the card holders with an easy and convenient way to pay. To the card companies, the card suppliers, the machine suppliers, the service providers and the maintenance companies are the major suppliers. They work closely with the suppliers to provide greater value to the end users. The internal maintenance teams, credit card or debit card sections of the banks and card companies work to provide trouble free working round the clock. Every step adds value to the product. As a result the users enjoy the smooth and fast card transactions anytime anywhere. The support functions work to provide assistance and support to other functions. They do not form the core of the business, but their presence is necessary for smooth operations of other core business functions. Information Architecture The architecture of the card systems is made in such a way to as to give the high degree of security to make the confidential data secure and hack proof. The storage of data is in remote servers which are protected at both hardware and software level. The security is to ensure that the confidentiality of data is maintained and that no one taps into the data without the appropriate rights and privileges to do so. The information is stored in huge databases, combined and merged to form data warehouses. The storage of data is in encrypted form so that the data, if leaked, is of no use for the hacker. The storage is in high configuration servers for a faster processing and reliable storage. Mobile Technologies The card companies, collaborating with the cellular companies and mobile phone operators, are providing the extra facilities to their card users. The additional features provided include the easy transactions using the SMS, account maintenance using the SMS, instant updates using written text messages, the use of WAP to carry out transactions and other mobile specific features. Mobile Network Operator Many mobile network service providers provide the users with easy access to their online accounts through WAP (Wireless Access Protocol) and SMS banking features. These are offered in collaboration with the operating banks and card companies in the local market. All these facilities add value to the customer's experience and provide an easy way to communicate, transact and carry out commerce activities. Works Cited 1. http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html 2. http://management.silicon.com/itdirector/0,39024673,39122813,00.htm Read More