authengin: A New Generation Financial Payment System for 21 st Century e- Banking and e- Commerce Technology that provides an opportunity to grow through new markets, new products and services and new revenue streams from a company that has proven itself with robust, reliable and highly available products
Executive Summary Over the past two decades, there has been a dramatic change in the way people all over the world pay for goods and services. Cash has been widely replaced by debit, credit and ATM cards as the number of payment options rises and the Internet becomes a shopping and banking tool of choice for many consumers. This shift in payment trends is creating tremendous opportunity for banks and merchants as they develop new revenue streams based on innovative card programs, issuing payment cards and accepting and servicing electronic payments. At the same time, much of the underlying technology of the new payment systems continue to be the monolithic legacy applications that pre- date e- banking and e- commerce. For example, many banks today simply present a modern- looking Web interface to customers while utilizing the same decades- old backend applications for transaction processing. This stop- gap measure was useful for a while, but today the legacy technology stands in the way of new business opportunities. The old technology is simply becoming too expensive and too inflexible to allow financial institutions and e- commerce merchants to seize emerging business opportunities and to enter new markets. Today there is an alternative software platform on which to build a robust financial payment system. Built for 21 st century business, authengin from M2 Systems Corporation is the future of e- banking, mobile banking and e- commerce. authengin was designed from the ground up specifically for FIs that issue domestic and international cards and acquire card transactions through merchants at retail locations, on the Web or from ATMs. authengin enables FIs to grow through the pursuit of new markets, the delivery of new card products and services, and the development of new revenue streams. For example, authengin gives a regional or community bank the ability to work with local employers to offer payroll services to the unbanked. The bank helps the employer set up pseudo checking accounts for employees who don t have standard checking accounts. The employer deposits payroll funds directly into these accounts and then issues Visa debit cards in lieu of paper- based payroll checks. The employees can access their cash as needed via ATMs and use the cards at a point of sale as they would use a typical debit card. The employer saves the expense of issuing paper checks, and the bank can generate new revenue based on servicing the payroll cards. In addition to convenience, authengin also is the most secure application for e- banking and e- commerce. The software is embedded with innovative technologies for fraud mitigation on both the issuing and acquiring side of the card business. For instance, M2 Systems patented Dynamic CVV technology generates a new CVV value for every card- not- present (CNP) transaction. One institution that has implemented this technology has already reduced its CNP fraud by 90%. 2
Based on open systems technologies and built for interoperability using industry standards, authengin is easy to deploy, maintain and extend. Organizations can customize and extend their payment system on their own in a matter of days with a robust yet friendly scripting language. This enables an organization to control its own business, rather than being controlled by the limitations of outdated software. And there are no transaction fees with authengin, vastly lowering the cost of ownership as compared to legacy applications such as ACI BASE24. The first production installation of authengin was in 2007. Today, M2 ENGIN based products are used to process more than 100 million transactions a day throughout the world. Companies like J. P. Morgan, Fiserv, Delta Air Lines, Alliance Data, Fiserv Inc., KPN, and Blue Cross/Blue Shield all trust their business to the power of M2. authengin AT- A- GLANCE BULLETS Low Cost of Ownership Support for all major networks (MASTERCARD, VISA, etc. ) Flexible Business rule authorization engine Fee Payment & Settlement functions Patent- pending SAFE (Secure Access For Ecommerce) Issuing AND Acquiring full service product sets Consumer, Merchant, Distributor and Back- Office and Web- based Portals Industry leading SMS mobile feature set NO ANNUAL renewals or transaction fees The world of e- banking and e- commerce is changing rapidly. The businesses that will succeed and prosper are the ones that can adapt their payment systems as quickly as market opportunities emerge. authengin is a single solution with multiple applications The volume of debit and credit cards continues to grow at a rapid rate fueled by consumer demand and the financial institutions that serve their needs. In order to deal with this growth, M2 developed the fully integrated transaction processing environment authengin. authengin was designed from the ground up specifically for financial institutions that issue domestic and international cards and acquire card transactions through merchants at retail locations, on the web or from ATM's. As a fully integrated electronic funds transfer processing and messaging system, authengin is ideally suited for the modern e- banking/e- commerce world. It is a software product used to acquire, authenticate, route, switch and authorize electronic transactions across multiple delivery channels. authengin is used by financial institutions that issue domestic and international cards and acquire card transactions through merchants at retail locations, on the Web or from ATMs. Primary interest in 3
authengin includes domestic and international financial institutions and payment processors that prefer to license software instead of investing to develop their own. authengin has evolved to become a secure, flexible and scalable processing system that is easy to implement with very robust management tools and real time transaction authorization and settlement functionality for credit and debit card transactions. authengin is a replacement system for legacy systems that are expensive to maintain, hardware- intensive platforms that processing companies have been forced to use for lack of a credible platform alternative. authengin was derived from the industry gold standard M2 ENGIN application so it was built by a company that knows high volume transaction processing. In addition to processing millions of Visa, MasterCard, JCB, Discover, STAR and other network transactions, authengin provides: Credit and debit card issuing capability E- wallet funcitonality PIN and signature based debit card processing Card management and authorization Card production and issuance Gateway services Loyalty programs Bill payment Loan programs The main functions of authengin include: Processing and switching Card and payment management Interoperability and message brokering Internet payment gateway Processing and switching Every time a consumer uses a credit or debit card, a number of systems are involved, including the merchant processor, the network, including Visa, MasterCard, Star or others or the ATM, the cardholder s bank, the merchant s bank, and the card issuer systems. With its processing and switching system, authengin provides the "electronic handshake" that seamlessly and rapidly connects these systems to complete the transaction. authengin provides transaction routing and authorization, host and interchange interfaces, ATM and POS terminal device driving, and network control. 4
A very attractive feature of authengin is that it supports a wide variety of data interchange protocols, including asynchronous, X.25, SNA, TCP/IP, MQ Series, and Web services. Processing and Switching Key Points: Ø authengin is an integrated EFT processing and switching application - ATM and POS 8583 device driving and transaction routing and authorization combined with device driver partnerships - E- commerce gateway including Internet and wireless Ø authengin contains 22 independent protocol adapters Ø New interfaces rolled out in days Message translation, routing and compounding functionality Ø Real time and batch routing, transformations Ø Root solution no value added processing, no database required Ø System is message agnostic and supports all definable message types Card and payment management This authorization system supports all aspects of a cardholder using the card and getting cash off of it, including: Issuing and acquiring payment processing business solution Pre- paid card and account self service Treasury management and money transfer Multi- currency Comprehensive e- payment transaction support Risk and fraud management authengin s unique fraud and risk management capabilities are especially strong and are featured in detail later in this document. Interoperability and message brokering authengin is built on top of the flexible and proven technology of M2 Systems Technologies s ENGIN, the global standard in message brokering technology. Since 1989, ENGIN has served as the framework for high volume, transaction- centric applications for industries such as financial services, healthcare and logistics. ENGIN is a fully integrated software package that provides a dynamic environment for distributed transaction processing. ENGIN has an internal database management scheme that supports 5
various message formats and business rules mapping, controls workflow and provides a secure administration interface. Like ENGIN, authengin is an open source platform built for interoperability and extensibility. This makes it possible to easily connect to existing systems and applications regardless of platform, including interbank networks and external interfaces such as Green Dot, Star, MasterCard, Visa and Maestro. The message brokering of authengin is table- driven and requires no programming. It is highly configurable and it supports high volume transaction processing. For example, there are customers with engines that are completing tens of thousands of transactions per second. AcqENGIN - Internet payment gateway product suite Built specifically for e- commerce and e- banking, authengin has a robust Internet payment gateway product suite, AcqENGIN. Merchants can simply plug in the Internet payment module to enable their ability to accept Web- based orders. The AcqENGIN payment gateway has support for multiple currencies and an advanced fraud detection system. There is a Web portal for merchant portfolio management, which allows the merchant to view his daily or hourly activities at a glance. The system also has a unique patented card integrated acquiring capability. A merchant can acquire a transaction off a credit card and load a debit card in one sweep. This capability is good in high- risk environments so the merchant doesn t have to pay the higher fees associated with these types of transactions. The system also supports e- wallet to merchant payment functions to reduce the cost of acquiring transactions from Visa and MasterCards. The authengin components Figure 1 shows the components of authengin for Acquiring as well as Issuing electronic payments. Each set of products Acquiring and Issuing includes robust tools and software suites that collectively provide an integrated, complete solution. For a description of each of these components, see Appendix. 6
authengin Figure 1: The application components of authengin 7
Advanced technology reduces fraud and mitigates risk Fraud and other forms of risk are inherent in the use of payment cards and in online transactions especially in CNP transactions that are a staple in e- commerce. Most financial institutions (FIs) are resigned to the notion that fraud cannot be completely eliminated; rather, an admirable goal is to reduce it to manageable levels. Incorporated into authengin are several advanced technologies that can greatly reduce the risk of financial loss through fraud or non- payment. authengin incorporates numerous techniques for identifying and preventing online fraud. State- of- the- art technology is used to define a customer s identity, location and account details in real- time. These specific procedures for verifying the identity of each customer are risk- based. The identity checks meet the requirements of all current U.S. and foreign regulations and exceed the U.S. Bank Secrecy Act/Anti- Money Laundering (AML) recommendations. The system determines the level of risk associated with each customer for acceptance, and whether further due diligence is necessary, by means of a rule- based formula. authengin is able to verify: The customer s Internet protocol (IP) location The customer identification OFAC (Office of Foreign Assets Control) Bank account (for check or ACH transactions) BIN check (for credit card use) Origin of merchant, type category code, geographical location Cardholder based limits and usage Validated real- time against a set of fraud parameters defined by the financial institution Consumer generated set of tools, such as our SAFE system Secure Access For E- commerce (SAFE) Our patent, Secure Access For E- commerce (SAFE), also known as Dynamic CVV. This technology is the security equivalent of issuing a new credit or debit card to a cardholder for each transaction he makes. The Dynamic CVV technology makes it possible for the cardholder to easily generate and confirm a unique CVV for every card transaction he undertakes. A thief who has stolen a card number will not know or be able to guess these dynamic codes because they are always changing, are transaction specific and have a short life span of just hours. 8
Example of SAFE technology: Figure 2: SAFE While authengin is especially strong in its anti- fraud technologies and measures, there are other key features that clearly differentiate it from other systems and can provide a real competitive advantage for the companies that deploy them. Here are a few examples. 9
Mobile Banking and Support using SMS Short Message Service (SMS) is part of a full banking application that provides extensive mobile support, readily available on any mobile phone or similar device that can send and receive text messages. A financial institution can send and receive text messages and email alerts to or from its customers to notify about account activity, to send validating codes (like the Dynamic CVV), and to accept instructions on actions to take on behalf of the customer, such as approving a transaction, or locking a card, preventing it from being used. A wide variety of alerts are available for a consumer to choose from in order to trigger a message. For example, low balance alerts, notification of all transactions, or individual transaction approval. All of these alerts can also be sent to customers via email. Mobile banking also provides another layer of multi- factor authentication. For example, when a cardholder registers his card to be used in conjunction with his phone, he now requires another token (the phone) to be used to authenticate transactions. One way in which this service can be used is to lock and unlock the card. For example, the cardholder can lock his card from use until he wants to use it then uses his phone to issue an unlock command in order to make an ATM withdrawal. Immediately after the transaction, the cardholder can lock his card again, and will receive a text message verifying the withdrawal and including a balance update. Therefore, even if the card is lost or stolen, it cannot be used without the registered phone. Another unique feature of authengin using this mobile banking technology allows cardholders within a network to instantly transfer money to each other using only their cell phones. If a cardholder picks up the tab for lunch, for example, her friend can instantly transfer $10 to her friends reloadable debit to cover her portion of the luncheon. Mobile banking is the future direction of the financial industry, and authengin is ready with complete capabilities today. 10
Figure 3: SMS Authorization rules engine authengin has an intelligent rules engine that incorporates all of the financial industry best practice rules. More importantly, a business analyst with the company that deploys authengin can use an easy script language to write the company s owned preferred rules to complement the industry rules. This gives the company the flexibility to manage its own risk levels. Unbanked support The unbanked or underbanked population in the Unites States alone is estimated to be 40 million consumers. authengin is the perfect solution to reach this demographic. Banks, credit unions and other financial institutions that want to serve this large market can issue payroll cards, loyalty cards, health savings accounts and other products to the unbanked as a new business line, and earn revenue from servicing these products. Suite of Web services authengin is built on state- of- the- art technology. Therefore, Web services are a key offering throughout the authengin components. For example, an acquirer can plug an authengin Internet payment gateway into its own website to rapidly deploy an e- commerce application. Also, there are Web portals for ISOs and merchants to view the activities and summaries of their respective accounts, 11
and Web portals for card sales partners to track their personal sales and revenue. With authengin, Web services are less expensive and quick to deploy and use. Global treasury management authengin is not currency- dependent. Accounts can be based in one monetary system and transactions can take place in another, and authengin will handle the foreign currency exchange as needed to complete the transaction. The product will also allow multiple accounts per cardholder to be supported so that the consumer can transact and manage accordingly. Deployment of authengin is flexible to meet business needs Part of the flexibility of the authengin payments solution is how it can be deployed. The software can be licensed and installed internally behind a financial institution s firewall, or the solution can be hosted in M2 Systems data center. Here s a look at each deployment model: Licensed to use in- house In this scenario, the financial institution purchases a license to run the software internally on its own datacenter. The license includes a maintenance contract for M2 to provide updates and enhancements to the software as needed. There are no transaction fees regardless of the number of transactions processed using authengin. This unique licensing model keeps the solution s overall cost of ownership low. M2 and its software engineering team can help to install the software, integrate it with existing systems, and train the internal staff that will be administering the applications. Training is available for business analysts who will use the authengin scripting language to write customized business rules for the authorization rules engine. This allows the FI to customize and extend the application according to business needs without intervention from M2. 12
Hosted white- label installation authengin Financial Management Software Overview An alternative deployment that provides a lower cost of entry is for the financial institution or merchant to license use of a fully branded version of the authengin software that is hosted in one of M2 s state- of- the- art datacenters. The customer- facing interface of the software is customized with the licensee s logo, product name, wording, etc. so that it appears to be wholly operated by the licensee. In this case, the license is based on a transaction or click fee. However, the licensee does not need to invest in the capital expenditures of the datacenter hardware and other costs. M2 personnel take care of all operations and maintenance of the application, including regular backups and business continuity planning. It s possible for a licensee to start with a hosted white- label deployment of authengin, and then later transition the application to the company s own datacenter. This allows the company to invest in the infrastructure technology over time when still enjoying the full benefits of the authengin solution at the outset. The hardware platform for mission critical performance and reliability authengin runs across the HP Integrity server series, with the mission- critical rules authorization engine hardened for the HP Integrity NonStop servers and HP Integrity BladeSystem sever blades. The HP Integrity systems family of servers is the world s most trusted mission- critical infrastructure. The Integrity platform provides a unique combination of mission critical availability, virtualization, and scalability. Storage for an authengin configuration may be optimized for internal or external disk arrays using a range of HP StorageWorks arrays. The recommended server and storage configurations depend on an installation s anticipated throughout and load requirements. M2 and HP have a business alliance focused on delivering a complete solution package that fits the real time financial services model. The companies have a 20+ year history of delivering solid message brokering solutions with the ENGIN software platform on the NonStop hardware platform. 13
Conclusion M2 Systems provides financial institutions and merchants with a comprehensive range of capabilities, including payment processing and switching, card and payment management, interoperability and message brokering, and acquiring. Unique embedded technology makes authengin the strongest solution in the industry for fraud mitigation. authengin s flexible deployment models and M2 Systems Corporation value- added services help to provide new business opportunities and enhance profitability for M2 customers. Find out how authengin can support your business growth. Visit us on the Web at www.m2- corp.com Better yet, give us a call and let s talk. You can reach the M2 Sales department in our Florida (USA) headquarters at 1+407-551- 1315. If you are an HP customer, contact your local HP sales representative. HP is an authorized integrator for the entire authengin solution. Talk to your HP representative about scheduling a Discovery Workshop. About M2 Systems Corporation M2 is a global technology leader in online transaction switching and processing, with an emphasis on integrated electronic funds transfer processing, switching systems and fraud prevention. The company has more than two decades of experience developing highly available, extremely flexible platforms that are now available to financial services companies worldwide. Learn more about us at www.m2- corp.com. M2 Systems Corporation 500 Winderley Place Suite 226 Maitland, Florida 32751 Tel: 407-551- 1300 Fax: 407-551- 1399 Email: mbesner@m2-corp.com (c) 2011 M2 Systems Corporation. All rights reserved. Any reproduction or redistribution of this information beyond your organization without the written consent of M2 is strictly prohibited. authengin and ENGIN are registered trademarks of M2. HP Integrity, HP Integrity NonStop, HP Integrity BladeSystem, and HP StorageWorks are registered trademarks of Hewlett- Packard Company. 14
Appendix: Descriptions of the authengin software components A shown in Figure 1 on Page 6, there are numerous software components within authengin that support a broad range of functions for electronic payment systems. This chart briefing describes each of those components. Component Switch handlers Description The interface to networks used to settle transactions Core Functions Acquiring API (aemqapi) The ENGIN message broker with data transformation, compounding and sophisticated routing technologies authengin repository The Oracle database where all account and transaction information is stored Rules based authorizer PIN management Smart cache Portfolio reporting suite Internet payment gateway Merchant reporting suite Risk management suite authengin acquirer admin suite Merchant management system The module that authorizes transactions based on industry best practices as well as custom business rules written by the licensee The module that manages security for customers PINs A memory module that stores card information for a short period of time when the card is being used frequently keeps the system from going to the repository for every transaction, speeding up transactions and optimizing performance of the repository A Web portal used by ISOs to view their merchants daily activities A plug- in module that a merchant puts on his website in order to take Web- based payments A Web portal used by merchants to view their own daily activities A module that permits the assignment of risk levels for specific merchants and ISOs The software module that enables configuration of the acquiring engine A card management product that allows a merchant to move money to cards 15
Issuing Component authengin issuer administration KYC/AMML suite Fee settlement reconciliation suite Risk management suite Real- time monitoring tools Merchant management System Bank management system Cardholder portal Description The software module that enables configuration of the issuing engine Know Your Customer and international Anti- Money Laundering services that help the Issuer establish and control levels of risk The module that tracks and calculates the expenses of using cards and who should be paid A module that permits the assignment of risk levels for specific cardholders A real- time dashboard view into the overall Issuing system A web- based portal that allows card program merchants to manage their card accounts A web- based portal that allows banks to manage their card portfolios A brandable consumer- facing portal that allows cardholders to monitor and take action on their accounts Note: Refer to Figure 1 to see the architecture of how these software components fit together. 16