{"id":21491,"date":"2011-04-01T13:48:51","date_gmt":"2011-04-01T13:48:51","guid":{"rendered":"https:\/\/armbanks.am\/2011\/04\/01\/232674\/"},"modified":"2024-12-15T12:50:42","modified_gmt":"2024-12-15T12:50:42","slug":"armenian-card-arca-competes-with-famous-international-payment-systems","status":"publish","type":"post","link":"https:\/\/armbanks.am\/en\/2011\/04\/01\/21491\/","title":{"rendered":"Armenian Card (ArCa) competes with famous international payment systems"},"content":{"rendered":"

Exclusive interview with Ishkhan Mkhitaryan, Executive Director of Armenian\u00a0 Card (ArCa) payment system.<\/strong><\/p>\n

ARKA – Mr. Mkhitaryan, what is the ArCa payment system now, ten years after its inception?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> – Indeed, more than 10 years have passed since the inception of ArCa payment system. It was\u00a0 founded in March 2000 and the first transaction was carried out in May 2001. Over the past years this system has proved its right to existence and further development. Today almost all commercial banks in Armenia are in ArCa payment system with a different degree of involvement. Sixteen commercial banks, which are full members and shareholders are offered a full range of services. VTB Bank (Armenia) is a system\u00a0 acquirer and has the right to service ArCa cards within its own network. Areximbank-Gazprombank Group was granted the right earlier this year to issue ArCa cards in addition to their service within its network, having become also the issuer and acquirer bank of ArCa cards. And finally, Mellat Bank was\u00a0 granted the right to issue ArCa cards.<\/p>\n

ArCa\u2019s processing center is unique in a sense that both national system\u2019s cards and cards of virtually all major international payment systems- American Express, Visa, MasterCard- are served within\u00a0 the single processing system. In partnership with Ararat bank we are preparing to serve also Diners Club cards. Our company stands out by a wide range of used hardware supported by one processing. Today, thanks to the open approach of our company ATMs of three different manufacturers -Diebold, NCR, Wincor Nixdorf- are operational in the network. Another type of ATM\u00a0 is now in the process of certification. The system allows card holders to both withdraw money from their cards and receive it on their cards. It also offers foreign currency exchange operations. At sales and service points we have Cybernet, Hypercom, Ingenico, Verifone payment terminals\u00a0 and we began also to install Landi terminals.<\/p>\n

In any endeavor a certain period of time passes and then comes the time for reflection, review and analysis of the situation, approaches, accomplishments and potential errors. At a time when the system originated, all the banks were\u00a0 practically on the same footing. Card business was in infancy stage, and the task was to create a single unified national system of payments by cards. Banks and businesses were entering a completely new\u00a0 sphere which in 1998-99 looked like a science fiction. The population had virtually no idea about\u00a0 transactional bank accounts, not to mention their everyday use.<\/p>\n

Our system\u00a0 is an example of how the proposal has generated demand. However, as I have said, the situation was to be reviewed as leaders emerged at the local market of card business. The first four leading banks account now for 55% of all transactions via cards\u00a0 and for 57% of transactions in service networks.\u00a0 Regardless of the above-mentioned indicators, single tariffs were effective for all members of the system. This approach had obvious advantages in the first stage. However, at this stage of development, a need has arisen to shift from flat rates to differentiated rates, depending on the number of transactions. New tariffs came into force on March 1. Now, the turn is for\u00a0 changes in\u00a0 principles of corporate governance and formation of equity capital.<\/p>\n

Card business is a dynamic industry, and ArCa has always been faced with a challenge of providing business needs of banks and the improving level of services and security of card transactions. This is why we are working to improve and streamline business processes and economic relations with members of the system on the one hand, and to introduce modern technology on the other hand. In this sense we passed a lot of important decisions in 2010. Based on them we have revised the structure of the company to have established new units responsible for technology development and management of collaborative projects with participants of the system, as well as mew units responsible for monitoring and risk analysis.<\/p>\n

As I have said, we have revised the mechanism for settlement of transaction fees, and a new mechanism was launched from March 1, based on the principle of\u00a0 graduated scale: the larger the number of transactions\u00a0 the less the commission is. We have revised also some cost-sharing arrangements between banks and companies. In the near future we shall\u00a0 begin work on upgrading the hardware and software platform of the processing center and will continue to cooperate with the banks under their proposed projects and business ideas. On the other hand, we should offer our members new technological capabilities which they can use to develop and expand their business. All these changes are meant to make ArCa more attractive both from economic and\u00a0 technological view.<\/p>\n

ARKA – What was the year 2010 for ArCa? What projects have been implemented?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> – Regarding our achievements, I would like to focus on the most important of them. One\u00a0 was the receipt of the certificate of conformity with PCI DSS (Payment Card Industry Data Security Standard) at the beginning of the year. Compliance of our\u00a0 processing center with this standard indicates that the cardholder and card transactions data can not be available to an unauthorized party neither through payment transactions, nor through unauthorized access to databases.<\/p>\n

Another significant event in terms of expanding the range of our services was the launch of issuing and servicing\u00a0 American Express cards since November 2010 in partnership with ACBA-Credit Agricole Bank. We have commissioned an updated billing portal arca.am, designed to improve customer service in the Internet and have switched from the authentication mechanism during a transaction for chip cards with\u00a0 SDA (Static Data Authentication) to DDA (Dynamic Data Authentication), which increases the level of security. We closely cooperate with banks and other members\u00a0 of the system through various projects designed to expand the range of services to cardholders, as well as to increase the level of services.<\/p>\n

ARKA – What is the total number of active cards now,\u00a0 the number of\u00a0 service outlets, ATMs and POS-terminals in ArCa system?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> – As of March 1, 2011 some 600,000 cards were issued as part of the system. We have 686 ATMs operating in our system and about 3000 points at trade and service outlets. To date there are over 300 thousand active payment cards of ArCa system, nearly 170 thousand Visa cards and about 120 thousand cards of MasterCard system. The national cards recorded the best use indicator of 71% (the ratio of issued cards to cards in active use). For Visa, this figure is a little less – 60% and 48% for cards of MasterCard system. Based on these data we can say that ArCa cards compete on equal footing with the cards of\u00a0 well-known international payment systems. The number of card serving points is also on the rise. Thus, compared to the same period last year, the number of ATMs increased by 14.3%, the number of\u00a0 trade and service points grew by 36.2%, from 1,991 to 2,711. It is noteworthy that ATMs are being installed\u00a0 outside Yerevan as well.<\/p>\n

ARKA – What are the volume and proportion of non-cash transactions in the total volume of operations by plastic cards and whether specific mechanisms\u00a0 are being implemented to promote cashless card turnover in Armenia?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> –\u00a0 Unfortunately, so far the bulk of transactions by cards are cash withdrawals from ATMs. Although in the past decade the\u00a0 ratio of cash withdrawals and\u00a0 payments\u00a0 has changed, however, these amounts are still insufficient. The average number of cashless payment transactions among banks varies between 12-13% of all transactions by cards issued in the framework of our system, which make approximately 7% of the total volume of transactions.<\/p>\n

However, there are factors which could stimulate wider penetration of cards in the daily lives of the population. It depends on the knowledge of where and how you can pay by card, on trade and service companies\u2019 understanding\u00a0 that they need this service themselves, on card issuing banks which should teach their customers the habit of payments by card, not just to shoot the entire salary in cash. I would like to also commend the Central Bank and the government for their steps, particularly in the areas of legislation and tax administration, designed to promote and encourage non-cash payments. Work is underway also to transfer state payments and various fees and fines to\u00a0 the virtual field. After the successful introduction of cash registers at stores the question of\u00a0 real turnover amounts reflection has become secondary and this in turn should lead to a drop in the barriers for\u00a0 making a transactions through a bank account that will also lead to a definite increase in non-cash transactions. Much still remains to be done in this sense.<\/p>\n

ARKA – What are the rates on transactions in the Web-based environment?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> – Although the absolute numbers that characterize the Internet transactions are low, the number and volume of Internet transactions began to grow of late. Thus, as of March 1, compared with March last year, the number and volume of transactions rose by almost 75%. If we translate these data into numbers, we shall get\u00a0 33,426 transactions valued at 277.6 million drams by bank-issued cards. Payments via Internet\u00a0 is another rapidly developing area. Today the approach towards\u00a0 trade is changing. Earlier to buy something, we had to go to a store,\u00a0 today the purchase can be done sitting at home, via\u00a0 Internet. And even more – on the street, in transportation, and elsewhere through mobile phones. This area is just beginning to develop in our country. Buying tickets, making hotel reservations, renting cars are one of the most obvious areas of growth in Internet payments in Armenia, as well as payments for telecommunications and\u00a0 internet services, for cable TV, orders for goods and services,\u00a0 utilities, insurances, taxes. Anticipating future growth in online transactions our company is planning as part of the modernization plan to introduce a widely used new technologies in the field of Internet payments, in particular, the 3D Secure application for\u00a0 protection of\u00a0 virtual transactions. The essence of this technology is that it involves the issuing bank in the buying process. Use of\u00a0 3D Secure technology allows authentication of a cardholder when he or she makes a payment. When working by\u00a0 this technology vendor asks for details of a customer cardholder\u00a0 and then transmits information and the amount of payment to the payment system (VISA, MasterCard, etc.). That, in turn, transmits the information to the card issuer bank, which in turn provides information about additional verification in the form of address of the secure website of the issuing bank. Software for online store opens for a client this website in a new window web-browser. To authenticate a buyer a login and password are required, known only to the cardholder. A secure channel of communication is established between the customer and the issuing bank, unavailable neither to seller, nor to anyone else on the Internet. The issuing bank verifies the cardholder and gets his consent for the transaction. Only after this a transaction will be authorized, and information will be directed to merchant’s website.<\/p>\n

ARKA \u2013 Are there any other mechanisms to prevent online fraud?<\/strong><\/p>\n

Ish. Mkhitaryan<\/strong> – As strange as it sounds, the source of the vast majority of fraudulent transactions is cardholders\u2019 inattention. Lost, stolen cards, cards transferred to other persons without supervision, their use for questionable deals, the calculation of personal information in the Internet environment, for example, in response to a bait-letter – all this is a rich harvest for the scam. To gather information about\u00a0 cards,\u00a0 attackers use special equipment, ranging from elementary magnetic stripe reader to cameras and nozzles on the card reader at ATMs. But , if a cardholder is attentive, losses can be avoided.<\/p>\n

This does not mean that cardholders are the only persons responsible party. New technologies and services designed to enhance the safety of using payment cards are being designed and implemented, all meant to provide a higher security level. It is a gradual shifting to smart cards which ensures a higher security degree compared to magnetic stripes, the above-mentioned 3D Secure technology and various other intelligence systems to prevent fraudulent transactions. To date, we have started the issue of smart cards, both for ArCa and MasterCard and Visa systems\u2019 products. We have also installed\u00a0 FraudGuard\u00a0 system to track and record suspicious transactions. In the nearest future we plan to shift form\u00a0 monitoring of suspicious transactions to\u00a0 prevention.<\/p>\n

As part of an information accessibility, cardholders are informed via SMS-alert system about all transactions relating to their card accounts. Procedures are implemented on a regular basis\u00a0 ensuring the reliability, integrity and security of processes, in particular, the annual audit of compliance with PCI DSS (Payment Card Industry Data Security Standards) with the purpose of\u00a0 obtaining information about security assessment and vulnerability of the payment system.<\/p>\n

Currently, ArCa\u2019s processing center\u00a0 fully complies with\u00a0 the standards and requirements of PCI DSS. RAMP (Risk Assessment Management Program) \u2013 the program for management of the risk assessment of the MasterCard\u2019s processing\u00a0 company. This involves quarterly monitoring in the retail and service companies\u00a0 to identify risks and thus increase security measures by training the personnel\u00a0 and application of software limitations in order to minimize losses for illegal clearing transactions. -0-<\/p>\n

<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

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