NamITech assists Capitec to reach the underbanked

MasterCard and Capitec have announced the launch of a pilot project for a new, EMV compliant pre-authorised banking product, Mastercard Pre-Authorised (MPA), aimed predominantly at banking the previously underbanked sector of the population.

The solution makes use of EMV chip card technology, with NamITech providing an initial order of 6 000 smart cards.

As part of the project NamITech provided project management and consulting services. "The assistance from MasterCard was invaluable," says Chris Steyn, Director of NamITech`s Banking Solutions division.

"It has been very rewarding working closely with MasterCard and Capitec on this project. In our opinion, the MPA solution is an innovative and unique element in a national strategy to reach the underbanked."

In addition to the supply of the plastic cards, NamITech embedded the chips containing the MPA application code onto the card, and also provided data preparation and personalisation services. Data preparation involves preparing application specific personalisation data for the MPA application and also generates unique keys and digital certificates for each card, while personalisation includes the loading of chip application data, keys and certificates as well as the traditional encoding and indent print functions.

A significant challenge in many markets today is to convert unbanked people into active bank customers and payment cardholders. The MPA solution, initially available on a Maestro-branded debit card, is designed to address these challenges and open new markets and new segments for MasterCard member banks.

According to Pierre Kotze, EMV executive at NamITech, MPA enables low-risk, PIN-based debit payment transactions from a pre-funded account in a predominantly offline, fully EMV-compliant environment.

MPA requires that the card issuer set aside a pre-authorised amount to be spent offline. This amount will be replicated on the card, and the on-card risk management parameters will ensure this amount will not be exceeded or used to fund other non-MPA card transactions.

Kotze explains that part of the risk management parameters are based both on the value of the transaction and the cumulative amount already spent on the card. Only transactions expressed in the card`s application currency can be authorised offline; all other transactions will be driven online for authorisation by the card issuer.

When this happens, because the card`s offline balance was insufficient to cover the transaction value, the card issuer has the option to decline the transaction (due, for example, to `insufficient funds`) or to transfer more funds from the cardholder`s main account to the MPA account. The issuer`s response to the card then includes the instructions to adjust the card`s offline balance to reflect the new balance.

Implementing an MPA solution will not require the card user to undertake increased levels of financial risk compared to transactions authorised online. Furthermore, MPA does not allow customers to run into an overdraft situation.

Cardholders may also be able to initiate a `top-up` of the pre-authorised amount stored on the card on specially equipped terminals, such as issuer kiosks, ATMs and other issuer-designated terminals. These terminals could also allow cardholders to view their latest balance or details of the last 10 transactions.

Steyn confirms that MPA will allow issuers to attract new cardholders from the currently unbanked sector of the population or those with a poor credit status. This product also offers acquiring banks the opportunity to expand into new market categories such as mass transport, pension payments, etc, using offline terminals.