Best practice in outsourcing ATM testing

The current economic environment is squeezing expenditure within the financial services sector and forcing a renewed focus on operational efficiencies, which is pushing outsourcing higher up the agenda. In the past, banks have had varying degrees of success with outsourcing projects and have faced numerous challenges in delivering the expected value.

A survey conducted by the Management Consultancy Association (MCA) and the British Bankers Association (BBA) found that 41% of financial services managers expect to increase outsourcing due to the credit crunch. ATM testing is one key area where this trend is increasingly evident, because of the cost savings which can result from outsourcing. As the complexity of ATM systems continues to increase, the headcount costs associated with manually testing ATM functionality have also been growing steadily. By outsourcing, banks can potentially make significant financial savings, if the project is defined and executed properly.

Past experience in outsourcing shows that it is essential for banks to have a clear understanding of the issues involved. For example, the MCA and BBA study found that only 24 per cent of financial services managers said they adequately understood the offshoring industry. This lack of understanding should be addressed or outsourcing to be implemented successfully.

While outsourcing can generate significant cost and efficiency gains, a number of points need to be considered in order for banks to get the process right. There is a tendency for banks to repeat past mistakes - for example it is often assumed that banks should outsource areas where they do not have expertise. In fact, the reverse is true. It is crucial that banks only outsource what they know, giving banks increased control over the process through effective internal management. There is a lack of much needed guidance on issues such as this, which may in part explain why outsourcing has generated mixed results in the past.

If you need any further information on best practice outsourcing see Level Four’s Guide here.

ATM fraud in the Middle East

The Middle East has been suffering a massive rise in ATM fraud over the past year. In 2006 alone, Dubai experienced US$700m (Dh2.57 billion) in losses because of credit fraud and in August 2008, the US Embassy were forced to warn citizens in the UAE that credit and debit card fraud had hit an unusually large number of its employees.

This is largely blamed on the continued use of magnetic stripe cards as opposed to Chip and PIN. Roll out in Europe has proven the effectiveness of EMV compliant cards, for example, when introduction in the UK in 2004 card fraud declined by 25% within two years .

However EMV roll-out in the Middle East now looks to be on the agenda following the highly publicised case of fraud in the UAE Central Bank this year, where fraudulent transactions totalled over Dh 100 million (US $27.2 million).

With this development, banks now have the opportunity to reassure their customers that action against fraud is being taken to re-establish customer trust and to competitively differentiate by employing a strong approach to security.

Issa Keshek