Banking Boulders & Demonetisation: Why 18% of India’s ATMs Are Down

Because an American banking software provider cancelled the licence to its Indian “provider of services”

• • • • •

Here’s why India’s ATMs are running closed.

It’s because a US company –ACI Worldwide, a 41-year-old NASDAQ-traded payment systems company headquartered in Naples, Florida, which specialises in electronic transaction software, providing retail and wholesale banking products as well as retailer-focused software and hardware solutions – has withdrawn its software-as-a-service (SaaS) licence, made out in 2001, to an Indian private company.

The Indian company, Chennai-based Financial Software & Systems Private Limited (FSS), services more than 40,000 ATMs of 22 leading public and private banks across India.

There are 220,000 ATMs in India – so ACI Worldwide’s licence cancellation has effectively rendered 18.19% of ATMs nationwide inoperable.

Banking boulders.

* * * * *

On Friday, 11 November 2016, ACI Worldwide ran a public notice in newspapers through its Mumbai-based general manager for the Middle East, Africa and South Asia, announcing that it had terminated its agreement with FSS with effect from 1 November 2016, and prohibited Indian banks from using its the FSSNet platform.

(ACI Worldwide offers testing, onsite technical support and 24/7 global helpdesk support. FSSNeT offers payment processing services across all delivery channels including ATMs, Point-of-Sale [POS] terminals, Internet and mobile with authorisation by the banks. ACI also provides services such as card management, merchant management, internet payment gateway, mobile banking and mobile payment, reconciliation and settlement, financial inclusion, and value-added services and ATM management services on a pay-per-use model, including ATM-leasing and site management.)

The ACI Worldwide notice said: “Since the breaches of the agreement were not cured by FSS, the agreement has been terminated with effect from September 01, 2016.”

The notice said that ACI Worldwide had issued a notice to the FSS on 2 August 2016 to fulfil its obligations to stop data-leaks by 1 September 2016, failing which the agreement would go belly-up come 1 November 2016. On 1 September 2016, the FSS denied breaching the agreement.

* * * * *

The FSS and ACI Worldwide have been having a series of running battles. The excrementum putidum hit the fan in 2013, when the FSS took ACI Worldwide Solutions Private Limited, ACI Worldwide Incorporated, Florida, USA, and ACI Worldwide (Asia) Pvt Ltd, Singapore, to the Competition Commission of India (CCI) for breach of agreement – under Section 19(1)(a) of the Competition Act, 2002 – and on ACI’s BASE24 software – which runs about 77% of ATMs and about 80% of POS terminals in India – and of denying “existing players like the [FSS]” of “market access to the downstream market”.

On 13 January 2015, however, the CCI disposed of the FSS’s plea, declaring that “no contravention of … the (Competition) Act is made out against ACI in the present matter … As the dominance of ACI [of competitive forces in the dominant market] has not been established, the issue of abuse of dominant position does not arise.”

The FSS-ACI relationship goes back to 1991, when FSS became a reseller of ACI’s BASE24 software in India. In 1998, the FSS became a distributor and service provider for BASE24 software in India through various International Distribution Agreements (IDAs). Disputes between the two began in 2007-08. On 16 June 2008, ACI proposed a new arrangement, terminating the distribution agreements with the FSS, assigning the licence agreements to ACI India, and demoting the FSS to the role of “provider of services in respect of BASE24 software to ACI Banks in India”.

And, then, everything went to hell and gone.

* * * * *

The question is:

Did Prime Minister Narendra Modi know that almost 1/5th of India’s ATMs were inoperable on the day he rolled out his precipitate demonetisation juggernaut?

Yes. He did.

Since behind-the-scenes, last-minute negotiations with ACI Worldwide tanked, the RBI was forced to announce on the night of Tuesday, 8 November 2016 that the “recalibration” of ATMs would take a while. It also led Union Finance Minister Arun Jaitley to deflect the crisis and misinform the public on Saturday, 12 November 2016, saying:

“ATMs could not have been calibrated [before the announcement] because of secrecy issue. Thousands of people are involved in recalibration exercise (and) secrecy could not have been maintained. Recalibration takes at least 2-3 weeks.”

The “secrecy issue” – that ridiculous excuse – is one thing, recalibration another. More to the point, major banks in India are trying to wheedle other global banking software-as-a-service (SaaS) providers to rush in with their bailouts.

But nobody’s biting – primarily because of the ACI Worldwide experience in India.

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