Flight, Travel and the Infrastructure that supports the industry

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Flight, Travel and the Infrastructure that
supports the industry
Michael Malan Managing Director Compuscan CRB Ltd
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How many frequent travellers are here today?
?
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In order to travel the ticket is the key, or is
it ?

• What does it mean to you ?

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Flight started with a dream
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And today it has moved to another dimension
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Someone to fix.........towers to build
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Luggage to deliver
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An entire industry just to make knobs, dials and
buttons
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Runways are needed to land planes safely
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And always new horizons to follow
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What conference are we in again ?
?
Be honest who checked the programme while I was
talking and thought what is this idiot going on
about ?
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Underpinning the travel sector is card payment
technology
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Thats not actually the message
The message is simple A ticket alone does not
get you to your destination To fly, to travel,
to reach your destination safely An entire
infrastructure of solutions needs to work
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Now that you understand, take a seat, buckle up
and enjoy
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Identification Solutions supporting the
establishment of a national credit bureau project
in Uganda, East Africa
Michael Malan Managing Director Compuscan CRB Ltd
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About Compuscan

• Established in 1994 to provide credit risk
  solutions to credit granting and financial
  businesses that take risk decisions
• Grown form a local regional credit bureau to
  having operations in nine African Countries
• Regulated in every market in which we operate by
  central banks, credit regulators, ministries of
  finance and similar bodies or structures
• We have in excess of 42 million consumer records
  on our respective databases
• We update and load 34 million repayment account
  profile behaviours on loan agreements daily,
  weekly and monthly to our files
• We make the information available to lenders
  through simple technologies to make better risk
  decisions

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About Compuscan

• Our software solutions extend from
• building and maintaining credit bureaus
• mass data collection, storage and management
• automated credit approval decision systems
  suggesting terms of business or alternate
  products for cross and up sell strategies
• loan origination tools to simplify initial
  approval processes
• Full software solutions for loan management
  purposes
• Our clients in our markets that we operate in
• We service a branch network of over 4800 branches
• Wide spread of Commercial Banks, Microfinance
  Institutions, NGOs, public and private companies
• Pleased to acknowledge UBA and ECOBANK as clients
  since their move to Uganda

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About Compuscan

• Credit Skills Training
• Certified with National Qualification Authority
  in South Africa to provide banking and credit
  related specialist training interventions
• Offer tailored custom training in all African
  countries, applicable to that countrys legal
  framework
• Key Development Projects
• Focus on SMME - SMME Credit bureau
  establishment for South Africa (Building Sector
  as phase 1) - IFC
• First credit scoring solution for Micro Lenders
  in South Africa - IFC
• Training Grants for skills development of SA MFI
  sector - IFC
• Research Grant awarded to explore alternative
  data sources for credit risk and behaviour
  profiling and prediction
• Finmark Trust and Political and Economic Research
  Council (PERC)
• Set up and establishment of credit bureau in
  Uganda
• World Bank, KfW, GTZ, SIDA
• Set up and establishment of credit bureau in
  Rwanda
• USAID

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Defining what we do in simple terms
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The banking environment in Uganda is heating up

• 28 Institutions licensed by Bank of Uganda split
  into three classes or tiers
• Tier 1 Commercial Bank - 22
• Tier 2 Credit Institution - 3
• Tier 3 Micro Finance Deposit Taking Institution
  - 3
• Bank of Uganda has only recently (Nov 2008)
  allowed new banks to get licenses
• License applications had been frozen to
  consolidate the market after three bank failures
  in 1999.
• In the last 7 Months competition has become
  fierce
• 2 acquisitions from other country banks, 1
  failed acquisition
• 7 new Commercial Bank licenses awarded
• 4 new players, 1 existing, 2 from acquisition
  (above)
• 1 new Credit Institution (Tier 2) license awarded
• 3 licenses (Tier 1) are pending

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Compuscan in Uganda

• Compuscan has been exclusively appointed by the
  central Bank of Uganda to set up, establish and
  maintain a private credit bureau
• It has been made a regulatory requirement that
  all banks MUST
• Supply loan application data
• Supply loan performance data
• Perform a credit search at the point of a
  facility review or a new loan agreement
• All banks must issue a Financial Card to their
  borrowers to enable proper identification on the
  credit bureau

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The problem in banking circles

• NO ID NUMBER - Uganda like many developing and
  more formal economies in Africa does not make
  use of a national ID number
• Different ID types - At lending time banks will
  use a range of forms of identity to try and
  positively identify their customers that is very
  much open to abuse, and given that this is all
  that is available it is used
• Tax numbers
• Employee Numbers
• Passport number
• Drivers permit
• Letter from a friend and a local village
  certificate
• Passport photographs
• Extent of the ID problem is measured by the size
  of your book - This system of blind lending (i.e.
  not actually knowing your customer) is not
  foolproof and the more debtors there are
  (borrowing customers) the bigger the size of the
  problem. It applies equally in any market

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The problem in banking circles

• Have you lent to him/her before ? Did you
  previously suffer a loss? The problem manifests
  when banks do not actually know if they have lent
  to the same person previously, suffered losses
  before or worse still if they have open current
  loans in place with the same customers and are
  likely to incur losses going forward
• No way to determine borrowing population Since
  there is no clear way to identify duplicate
  customers it is impossible to determine exact
  counts of borrowers
• Impacts to the bank in terms of
• Customer management
• Lending strategies
• Loss provisioning
• Recoveries and write offs
• Impacts to the Central Bank
• Understanding real large single borrower
  concentration risk issues

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The problem for Compuscan

• Linking all data to one record - When building
  credit bureaus, and storing data it is VERY
  IMPORTANT to ensure that all records are linked
  ACCURATELY
• A case in point
• UBA has a customer called Ladi Ndedge
• Loan Amount 52 300
• Secured with shares
• ID on file is a passport
• Number is AS761987
• Arrears value 37 000
• Status LEGAL RECOVERY

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The case continued

• Ladi has a second loan at ECOBANK
• Loan Amount 350 000 Naira
• Secured with insurance policy
• ID on file is a DRIVERS PERMIT
• Number is 79081765A
• Arrears value NIL
• Status CURRENT AND WITHIN TERMS
• Ladi applies for a new loan at ECOBANK
• HE appears to be a good customer
• The bureau cannot match his USD UBA loan
• He gets the new loan and almost immediately
  defaults on both loans
• One unique number (and a good bureau) should have
  prevented this loss from happening

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Its not just an interesting Case study It has
relevance to banks in Nigeria

• Guidelines for the establishment, licensing and
  operation of Credit Bureaus (published by
  Central Bank of Nigeria)

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Related to Uganda

• IMPACT OF DELAYED NATIONAL ID SYSTEM - It is
  widely acknowledged that a national ID system
  will delay the roll out of the credit bureau
  initiative
• FINANCIAL IDENTITY CREATION - Compuscan is
  responsible for the creation of a Financial
  Sector Identification system
• All borrowers must get a biometric based identity
  card
• THE EFFORT IS ACHIEVED BY THE BRANCHES All
  branches have the Compuscan software and hardware
  set up and are responsible for enrolment and
  registration of all details
• 448 registration outlets
• CARD DELIVERY Cards are delivered back in 48
  hours to ALL Bank Head offices and they then
  follow individual back to branch distribution
  processes (different by institution)

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The process of card creation and delivery to
borrower
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Verification of the borrower
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The solution

• Compuscan has ,merged the already well known uses
  of a range of technologies to deliver an identity
  solution in Uganda. We use
• Biometric Scanner Technologies
• Digital Photography (Web cameras)
• Smart Card Technologies
• Card and Card Reader solutions

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During Enrolment

• Financial IDs are created for
• Individuals
• Companies
• Authorised Agents representing companies

• 10 digits are registered
• 4 images of each digit are taken

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Borrowers that are already on file

• The solution has been developed to work
• on-line with direct lookups to the fingerprint
  database
• Off-line and enrolments get submitted in batch
• The reasoning behind is this is to overcome
  internet speed issues in the country for some
  branches
• Bandwidth is expensive and applications can be
  submitted overnight to maximise efficiencies
• Prior to card and especially FCS NUMBER creation
  a lookup is done to determine of the borrowers
  prints are already on file
• A borrower on file enrolment error message is
  sent to the branch and the fraudulent or
  suspicious application can be rejected

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Verification of Enrolment

• Once a borrower has been successfully registered
  two things happen
• A card is produced
• The data collected at enrolment stage is used to
  update teh credit bureau
• The card is used for future verifications
• ONE DIGIT VERIFICATION - At verification stage
  only one fingerprint is required, that is
  randomly determined by the software at each
  verification interval

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Initial obstacles to acceptance by banks

• A significant amount of resistance was
  experienced during the early stages of the
  project
• High reluctance to enrol all 10 fingerprints (4
  times)
• High reluctance to capture all registration
  information
• The Financial Card System (FCS) is intended to be
  an identification system foremost that is used in
  the financial sector it was paramount that
  accuracy was established
• Quality should never be compromised when dealing
  with the identity of an individual
• Incorrectly identifying a persons
  characteristics can have serious and significant
  counter desired results to the envisaged benefits
  that the FCS should bring

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Research stacked up, Key facts supporting ten
digits

• Deloitte and National Physics Laboratory, UK,
  2006
• Different biometric systems have different
  approaches some use multiple images, some use
  one image
• Reducing search complexity by classifying images
• Research Paper, Michigan State University
• Images need to be of high quality and should be
  classified by the most minutia possible for
  indexing and faster searching
• US Visitor Programme research Paper, 2005
• By using ten fingers (and no additional staff)
  match ratio for terrorists could improve from
  0.526 (with two fingers) to 0.949
• US Visitor Programme Announcement, January 2008
• By end 2008 all US border posts and airports will
  be verifying using biometrics by taking down ten
  fingers four times over

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More images introduces higher quality

• Reasons to ensure quality in ID systems
• The rights of an individual borrower regarding
  possible error reporting from the credit bureau
  if Identification is incorrectly established
• Dignity of a borrower in terms of having the ID
  card and then being able to proudly use it
• Reduction of impersonation fraud / identity theft
  / multiple borrowings that have been previously
  undeclared
• Speed of future verifications will be
  significantly improved if accuracy levels are
  focused on at enrolment stage

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Images as they get scanned, creating a fifth
element
Scan Image 1 (8 Minutia points)
Scan Image 2 (6 Minutia points)
Scan Image 4 (6 minutia points)
Scan Image 3 (6 minutia points)
Generalised Image (Image 5) has 11 distinct
minutia points making the card based matching
likelihood higher for future everyday
verifications
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Card creation and verification after enrolment

• The name, ID number and image information is
  securely written to a smart card (Myfare). The
  chip is not used for any other purpose.
• The card is then activated by one of the same
  images that created it
• It is then used thereafter for verification by
  the bank at every physical touch point with the
  customer
• The card is presented to the same device that is
  used for creation, and is read by the FCS
  software application, and with a new image
  (digit) the person is able to be verified

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Real Challenges experienced by the banks

• Data Supply
• Banks have to supply data to the credit bureau in
  a predefined format
• One of the requirements is that the banks MUST
  supply the FCS number
• Traditionally the field has not been on any
  systems and significant development has had to
  take place on all banking systems to store the
  information
• Data Collection
• All bank application forms have had to change to
  incorporate this new number (and other fields for
  the credit bureau project)
• Not yet embraced as a Know your Customer (KYC)
  solution
• Banks now have two forms of ID policy that must
  be followed

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Real Challenges experienced by the banks

• Policies and Training
• Customer identification policy has had to be
  expanded, some institutions are still battling
  with this
• Staff training is ongoing to change mind sets
  that the card should be an acceptable form of
  identity
• Technical and Networking
• Hardware and software
• Configurations and Installations required major
  IT interventions in many cases approval from
  home country offices
• Permissions to install external software,
  software tests by some
• IT staff could not attend every installation
  session, admin rights created after a while for
  Compuscan staff
• USB flash drive permissions had to be allowed
• General internet access required for 3rd party
  license key activations
• Networking
• Connectivity and firewall permissions to support
  a new on-line solution

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Public Awareness and overall sensitization

• Bank of Uganda has been very good at ensuring
  significant press and media coverage
• In excess of 500 events, activities and press
  articles have taken place
• workshops, radio talk shows, press articles,
  television appearances, upcountry gatherings,
  presentations to members of parliament,
  influential community leaders and the like
• Borrower workshops and events have been held to
  generally talk about
• The credit bureau project and its impact to the
  new way of lending
• The financial card identification system and its
  relevance and purpose

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In summary

• Much like the analogy of the Wright brothers and
  their dream
• And the ticket and the airline industry solutions
  that go with it
• Using the simple components of
• Biometric identification tools
• Web cameras
• Smart cards
• And some clever search, indexing and matching
  software
• We have been able to deliver a world first
  solution where we create identity numbers for
  establishing credit bureaus in developing
  economies
• Banks have had to undergo significant changes in
  the way that they identify customers, gather
  information, and store information to use it, for
  the better
• Without the support of the central bank and the
  legislation realising this project may not have
  been possible

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The road ahead in Uganda and other countries

• In Uganda the project is now well underway
• 100 of all branches have the equipment installed
• 60 of the branch users have been trained,
  ongoing right now
• 5 of projected borrowers have already received
  their cards
• Estimate by March 2010 that all new and existing
  borrowers will have verifiable financial sector
  specific Identification cards in Uganda
• From here
• The identification solution is transportable to
  other countries
• Lack of Identification need no longer be a
  barrier to the establishment of a risk free
  credit granting environment in Africa and other
  developing economies in other continents
• Everyone can have a unique identity, everyone can
  reduce risk

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And finally..... thank you, the idiot has
finished
Any Questions ?