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Bank flexes ATM muscle.

BANK FLEXES ATM MUSCLE

Several years ago First Florida Bank streamlined its MAX ATM (automatic teller machine) network. Now it finds itself on the leading edge of an emerging business: point-of-sale (POS) electronic funds transfer (EFT) services.

For years, First Florida had used multiple IBM 3601 communications controllers to front-end an IBM 3090-based ATM network. It replaced them all with a fault-tolerant XA600 on-line transaction processor from Stratus Corp., Marlboro, Mass. This will enable the bank to add credit-card transaction authorization and processing to its in-house computer operations.

First Florida had no intention of getting into POS until a major customer, the Kash & Karry supermarket chain, asked the bank to help them develop and implement a pilot POS project at four Tampa-area stores. The computer First Florida had installed to help run its ATM network was only using 30% of its CPU. And the company that had supplied the ATM applications software--Shared Financial Systems, Dallas--had an application software module that would fit the need perfectly.

"We didn't have too much difficulty deciding to help Kash & Karry establish and operate its pilot POS project," says Sam Triplett, First Florida's vice president and manager of telecommunications.

POS Pilots

Four pilot stores went on-line early in 1988. Kash & Karry plans a second wave of 50 supermarkets in west-central Florida. Long-range plans call for the devices in almost all the chain's 117 supermarkets in the state.

Pilot-store POS customers like being able to pay for groceries and drugs with debit cards, says Bonnie Van Overbeke, Kash & Karry vice president of MIS operations: "It's an important convenience to them. Both we and the bank will benefit from reductions in check-handling requirements and costs as POS transaction volumes increase. We look forward to completing negotiations with First Florida regarding ongoing costs relating to the ongoing operation of an expanded POS EFT network.

"there are two keys to getting customers to use the bank debit cards to purchase groceries: education and system reliability. If customers can't count on that checkout POS authorization terminal to function every time they try to make a purchase using bank cards, they are not going to use the system," she says.

Florida's statewide Honor debit-card transaction switching network, based in Orlando, has 11 member banks. First Florida is the first to use this interface between its proprietary ATM network and the Honor "switch behind the switch" computer linking all member ATM networks.

Too Much Work

The IBM 3601 controllers the bank had used could each support only five loops with a maximum of two ATMs connected to each. As new ATMs expanded MAX, the bank had to install more 3601s.

At the time of the decision to install the Stratus XA600, First Florida had 24 such front-end switches.

"Having to maintain and monitor 24 controllers was a network-management problem," Triplett says. "Every time we wanted to make software changes in our ATM operations, we had to cut and install 24 floppy disks. With the 3601s, we couldn't utilize IBM's highly efficient SDLC communications protocol. The loop concept left us vulnerable to ATM overdrafts. If customers decided to withdraw the maximum daily allotment from different ATMs attached to different loops, we had no way of controlling it.

"The Stratus concept of full hardware redundancy gives us systems with 32 megabytes of fully duplexed memory. The combination of the two hardware and software systems was substantially less costly than alternatives."

Both the Stratus operating system and Shared Financial Systems' ATM application software were written in COBOL (the commonly used programming language).

"We wanted the ability to go in and modify our software, if necessary, using readily available COBOL programmers," Triplett says.

Four A Month

Since installing its new controller, First Florida has been adding ATMs to MAX at a rate of four a month. The fault tolerance of the switch has drawn new financial institutions to the network.

First Florida has about 175 ATMs linked to the switch over dedicated 4800-baud lines. Of these, about 35 are owned by other banks, S&Ls, and credit unions. As MAX belongs to the Honor debit-card network, bank customers holding cards issued by any of the other 10 members, as well as other banks that have joined the network, can use MAX ATMs. And, since Honor joined CIRRUS and other national debit-card transaction-authorization networks, customers of banks outside Florida are on-line.

All bank debit-card transactions from any ATM in First Florida's MAX ATM network are routed first to the bank's Stratus for authorization and customer identification, via personal identification numbers (PINs). Information coded into a magnetic strip on the back of each card is communicated to the Stratus computer, which switches the authorization request and PIN to the bank's IBM 3090 host or to the Honor network.

The 3090 maintains account information on its own customers as well as on customers of other banks for which it processes data. Transaction messages need go no further. If the card being used was issued by a non-MAX bank, the message is automatically switched to the Honor computer for further transmission to the host of the issuing bank.

Those initial authorization inquiries verify the customer account is active and the PIN accurate. The customer is asked to enter the type of transaction desired (usually cash withdrawal) and account affected thereby. The issuing bank's host verifies sufficient balance or a big enough preauthorized cash withdrawal limit to accommodate the move, and authorizes the ATM to cough up the bucks.

All involved computers remember the activity. Overnight electronic settlement is made between all computers of all banks involved, and customer accounts are debited for the withdrawn amount.

Swipe Cards

At POS terminals at the checkout counters of the four pilot Kash & Karry stores (and the 50 stores where POS terminals will be installed), the process is similar. Compact 4-by 6-inch authorization terminals are installed on the customer side of checkout counters near cash registers (at the end of each checkout aisle) and near registers in customer-service areas and pharmacy departments of some stores. A special inquiry-only terminal at the front of each store is for customers to check their account balances.

Unlike ATMs, however, the POS terminals make customers "swipe" cards through a slot at the back of the terminal, where the digitally coded magnetic stripe on the back of each card is "read" by a sensor. This done, the customer is asked by a one-line display to enter a PIN. Information on bank affiliation, account type, account number, and PIN zips to a controller in each store and from there to the Stratus switch for transmission to the First Florida mainframe or the Honor switch.

Just as in ATM transactions, the Honor computer sends account info to the issuing bank's host for debit-transaction approval.

Meanwhile, the checkout clerk is totaling the order. That amount is automatically displayed on the screen of the POS terminal. The customer can OK the amount or add a sum to be returned as cash. In either case, once the proper amount is displayed, the customer pushes "OK" and the transaction is done. Kash & Karry's account at First Florida is credited with the amount of the purchase, and the customer account at his or her bank is debited similarly.

In the year since the POS terminals debuted in the pilot Kash & Karry stores, total POS transaction volumes of all four grew to exceed 10,000 a month. Adding 50 more stores to the network should increase that by more than 100,000. The Stratus switch processes a million ATM transactions a month.

"Even with the addition of the 50, we will have plenty of capacity left to handle any other stores the chain may decide to convert to POS, as well as the planned growth of our ATM network," Triplett says.

First Florida plans to add charge-card authorizations to Stratus' workload this year. It now uploads available-credit balances to a computer at the operations center of National Data Corp. in Atlanta each night. NDC authorizes credit purchases by bank customers at retail stores and other sites next day, then sends a record of those transactions back to the First Florida host each night for use in updating customer records--for which it charges a substantial fee.

Soon, First Florida's credit-card transactions will be switched by the NDC computer directly to Stratus switch, which authorizes and records the transaction. "this will save us considerable money," Triplett says. "We're confident the added credit-card transaction volumes won't put any strain on the machine's processing capabilities. The system isn't all that complex. You install it, and it immediately starts running. And once it's running you don't have to worry about it. We've only had one minor hardware failure in the almost three years we have been operating the system. It used duplicate hardware to keep running while automatically calling the Stratus on-line service center to ship a replacement part. That part arrived a day later and was installed in seconds without interrupting operation of the switch."
COPYRIGHT 1990 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:First Florida Bank
Publication:Communications News
Date:May 1, 1990
Words:1494
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