Abul Kashem Md. Shirin

The payment gateway is a fast, secure and transparent payment vehicle. It provides safeguard to the banks, service providers and customers against fraud, embezzlement, money laundering, theft and cheating. Establishing the payment gateway in Bangladesh is very important for us to take the technology in the banking sector much ahead and as such to give comfort and smartness to the valued customers.

As the issue of set-up of the payment gateway is very new for the country as a whole, many of us might think that the process is cumbersome and may cause to serious fraud, embezzlement, money laundering, theft and cheating. But that is not at all true.

On the other hand, a National Payment Gateway should be set up in such a way that maximum features are included in the system with right technology in right time.

A payment gateway is an essential part of an online payment system. It is necessary in order to process all of the following inter-bank on-line transactions (partially featured Payment Gateway may not provide the desired service level to the customers, merchants and commercial Banks):

A. Account-to-account transfer transactions or debit/credft card transactions on the web for on-line merchant payment against purchase of goods and services

This will integrate four parties for a payment request on the web:i)Customer (using internet browser); ii) Merchant web site (using merchant module and payment module of the payment gateway); iii) Payment gateway (in the Central Bank); and iv) Payment processor (bank, card processor etc.)



The customer selects the proper payment method from the list of pre-defined payment options (debit account, debit/credit card, ...etc.), inputs the account number or card number, PIN/CVV etc. and clicks the "Pay" or "Checkout" button on the merchant's Website.

The merchant's web host (which may include merchant module and payment module) sends the payment request of the customer to the Payment Gateway (which includes merchant authentication module).

Payment Gateway (authorisation module) will receive customer's payment request details and selects the proper destination to process the payment request and directs the request to the proper payment processor.

Payment Processor system handles the payment request and sends the payment response back to payment gateway to merchant module at Merchant's site. The customer then gets updated with the payment response result.

B. Inter-bank ATM/POS transacdons using debit/credit cards: This will integrate three parties for a payment request for the inter-bank ATM/POS transactions: i) Customer (using Debit/Credit Card); ii) Payment gateway (in the Central Bank); and iii) Processor (bank, card processor etc)

The customer makes transaction in the ATM / POS terminal of Bank-A using his debit/credit cards. The transaction is sent to the Processor of Bank-A. If the issuer of the card and the Processor is the same institution (Bank-A), the transaction is authorised by the Processor itself and the transaction is completed by sending the authorisation message to the ATM/POS terminal. If the issuer of the card and the Processor is different (but an institution in Bangladesh), the transaction is sent to the Payment Gateway.

Payment gateway (authorisation module) will receive customer's payment request details and selects the proper destination to process the payment request and directs the request to the proper Processor (Bank-B). The Processor system of Bank-B handles the payment request and sends the payment response back to payment gateway to the originating Processor (Bank-A) to the ATM/POS terminal. The transaction is completed here.

C. Inter-bank Internet or sms banking transactions for fund transfer (instant remittance) and utility bill payment: This will integrate three parties for a payment request for the inter-bank Internet or sms banking transactions: i)Customer (using Debit/Credit Card or sms/Internet banking password); ii)Payment gateway (in the Central Bank); and iii) Processor (bank).

The customer may like to transfer fund from his own account in Bank-A to another account in Bank-B through the Internettsms banking System of Bank-A using his password. The Customer may also like to pay utility bills from his own account in Bank-A using the Internet/sms banking System of Bank-A, whereas the utility company may maintain its account with Bank-B.

The customer makes such fund transfer/utility bill pay transaction in the Internettsms banking System of Bank-A. The transaction is sent to the Processor of Bank-A. If the source account (the account to be debited) and the destination account (account to be credited) belongs to the same Bank, the transaction is authorised by the Processor itself and the transaction is completed by sending the authorisation message to the Customer's computer / Mobile phone.

If the source account (the account to be debited) and the destination account (account to be credited) belong to different banks (but a bank in Bangladesh), the transaction is sent to the Payment Gateway.

The Payment gateway (authorisation module) will receive customer's payment request details and select the proper destination to process the payment request and direct the request to the proper Processor (the Processor of the Bank-B).

The Processor system of Bank-B handles the payment request and sends the payment response back to payment gateway to the originating Processor (Bank-A) to the Customer's computer / Mobile phone. The transaction is completed here.

Targeted beneficiaries:

- Bank customers for remittance of money and for making transactions in the ATM/POS terminals of any banks in Bangladesh;

l Merchants for selling goods and services on the web;

l Governmental Institutions for the purposes of payment for Taxes, Business Licenses, Traffic fines, etc.;

- Public and private companies: Bill payment for various services such as Electricity, Telephone, Mobile Phone, Water, Gas, ISP, etc.;

- Educational Services such as Tuition fee, training courses registration, etc.

Key benefits:

l Initiation of e-commerce in Bangladesh

l Both Account-2-Account Transfer, as well as Plastic Card Payment processing for the merchant payment against purchase of goods and services on the web

- A new payment approach, namely secured and well-trusted electronic payment, in addition to the traditional and already existing payment approaches such as: physical cheques and cash payment. Such transaction being recorded in many systems and easily identifiable by the regulatory bodies using a search technique, is more transparent and reliable. Realisation tax, vat etc., on the sale proceeds is genuine and ensured.

- A noticeable reduction in billing costs. The use of e-payment for paying for services can reduce the need for invoicing and lower the cost of accounts receivable administration.

l Assist both banks and merchants to gain market share and increase their revenues.

l Enhances customer satisfaction.

l Paying online enables funds to be deposited Real-time, thus, cutting the overhead and transcending all security issues associated with standard payment methods.

Technical Requirements: A Payment Gateway Software needs to be installed by the Bangladesh Bank, or with the approval of the Bangladesh Bank, by a consortium of banks, or by a public-private partnership body.

The station will require a sophisticated data center and disaster recovery site (DRS) all with redundant power supply (minimum 110 KVA generators and minimum 20 KVA on-line UPS), redundant cooling systems, networking devices (core router, core firewall, core switch, IDS, NMS etc), backbone communication links (Fiber, Radio Link, DDN, VSAT etc) so that any merchant/bank can connect to the payment gateway system via any media, servers capable to run 24-hours a day, 365 days a year (RISC-processor based), storage systems capable to hold huge data (8-16 TB) & replicate the data from data center to DRS in synchronised mode (without any loss of data in case of disaster) and a payment gateway software with the functionalities mentioned earlier and key features as given below:

i) Real time payment processing

ii) Capability to integrate with all kinds of merchant web site (any standard shopping cart catalog system or any Internet based website), core banking host (for account-to-account fimd transfer or payment through account transfer), switching software (for inter-bank debit card transaction), Credit Card Management System (for inter-bank credit card transaction), Internet-sms banking system (for inter-bank settlement of fund transfer, utility bill payment, tax/vat and tuition fee payment);

iii) Capable to integrate with the database of the central bank through it's core banking system or RTGS (Real time gross settlement system) or ACH (automated clearing house) for inter-bank real-time / batch settlement;

iv) Process transactions in two-three seconds;

v) Multiple security layers;

vi) Billing system for realisation of fees and charges on transactions basis or rental basis from the merchants, customers or banks;

vii) Comprehensive web-based inter-bank/merchant transaction management and reporting with database import/export;

viii) Accept https post from Merchant website or from any webhost;

ix) Secured with 128bit SSL encryption;

xi) In case of e-commerce, automated email confirmation to merchant and customer;

x) Payment processing status report to assist the customer with order processing; and

(xi) "Denied" reports for debit/credit cards or account-2-account transfer that were denied.

Conclusions : E-Commerce is a much talked issue for last ten years in Bangladesh. However, it is still in the infant stage. Many enthusiastic merchants started e-commerce activities in Bangladesh but due to lack of support from the banking industries to collect the "Payment" which is a vital component of the e-commerce life cycle, they virtually failed to keep the interest vibraqt.

Inter-bank fund transfer in Bangladesh is allowed only through clearing house which requires at least two working days to be settled the transaction. Due to absence of the inter-bank ATM/POS transactions, all such transactions are now happening through Visa / MasterCard networks for which the per transaction cost is very high (1.00 - 1.25 USD per transaction) and also a substantial amount of foreign currency need to be paid to the network authorities as 'network use' charge.

National Payment Gateway will also facilitate the customers to pay their utility bills through ATM, Internet banking or sms banking systems from anywhere anytime even from his office / residence at mid-night or holidays.

However, before implementing the National Payment Gateway, new policies, rules and regulations need to be enacted by the Bangladesh Bank (central bank). The task has nowbecome easier as the "Information and Communication Technology" act was already gazetted on October 08, 2006.

The writer SEVP and Head of IT, Dutch-Bangla Bank Limited