E-Government in Oman

Issuer
Oman Arab Bank

System Description
Nationwide E-Government Payment System

Business Sectors
Retail, Government, Fleet Operators

Facts & Figures
Started in 2003 with 50 000 cards and 350 POS

Why Shift To Smart?

• To provide a technological foundation for a cashless society via EFT (electronic funds transfer) by offering a real cash substitution. Cash usage is projected to drop by 70% in the next seven years.
• To both complement and reduce the usage of international cards for local transactions in the Sultanate of Oman
• To reduce the total cost of ownership on transaction and operating cost (only the card-to-card technology could meet the requirements for an off- and online solution enabling frequent mass payments without having to reinvest in telecom infrastructure, wireless connectivity and online connection time)
• To have the ability to provide sophisticated loyalty schemes using state-of-the-art technology
• To implement a system that is easy to maintain, operate and administer and can be interfaced/integrated with existing back-end systems

The Need For An Adequate Payment Solution
Prior to the introduction of the smart card payment system the Omani government was receiving and collecting money via cash and cheques. The payment process was manual, time consuming, and required much paperwork, eg. one of Oman's ministries was collecting in excess of US$2.5 billion in notes and coins annually, and a further 500.000 cheques were being processed each year.Costs of cash and cheque management, in addition to the slow manual process, were very high. Challenges that had prevented a move to a cashless payment solution so far included the high cost of transactions and operation of traditional payment solutions. Another very important issue was to ensure confidentiality of sensitive payment and ID information which was a concern that could not be adequately addressed by the available schemes. The government needed a local, domestic payment system that would be managed, operated and processed from within the Sultanate. In addition, the retail payment segment had problems linked to cash collection, cheques and online authorization for card payments. Loyalty schemes were non-existent, and ATM transactions were costly. Most Omani residents, who were given credit cards, rushed to the nearest ATM and cashed their entire credit limit, possibly unaware of the fees and very high interest rates due to the cost of transactions. Eventually, a requirement developed for one product that included both debit and credit features, yet was flexible enough to allow all credit and debit parameters to be defined by the individual banks in the market.In a bold move of industry leadership, Oman Arab Bank (OAB), Oman's No 1 corporate bank, decided to address the difficult challenges the government and payment industry was facing by establishing the infrastructure for, and then providing the required e-Payment services to the Omani government for both the corporate and retail segments.

Procurement Phase
Amongst the considerations in its procurement phase, OAB was seeking a secure solution that would not only provide it with the possibility to have a closed loop government payment cycle, but to also use the same technology platform to provide full payment services both to the retail (B2C) industry (supermarkets, coffee shops, rastaurants, shops, hotels and etc.), and the corporate (B2B) industry. OAB required a local nationwide payment system.
OAB found most of what it required in addition to flexibility and a rapid time to market in BGS Smartcard Systems' DUET technology, a card-to-card-based preauthorized off-and on-line payment solution. OAB also requested additional customization and features to more closely fit its business requirements, all of which were provided by BGS Smartcard Systems AG. Once OAB had identified the solution, an agreement was formed with the Omani government to ensure a smooth transition to the e-Payment system. Within just a few years OAB has become the sole provider of e-payment services to the Omani government.

The Setup and lmplementation Phase
OAB now had the challenging task of transforming itself from the usual role of banking and financial services provider to the new role of a full Application Service Provider (ASP), offering the entire solution from A to Z as a service together with the Omani government. In order to effectively manage this process in the given time frame, OAB and the government utilized a multi-track strategy. The government issued a directive by which, within a given time frame, payments would no longer be accepted by cash or cheque; customers would have to shift to the smart card in order to process their payment transactions. OAB then set up mini branches inside some of the key ministries in order to directly support the transition phase with its own staff. Customers who try to pay with cash or cheque would be diverted to the mini OAB branch, where they would register for a smart card and preauthorize their new smart card with spending funds there and then. The payment transaction could then be completed using the smart card. During this process government staff were also trained to use the new technology. A 2nd track was to educate and train both the individual retail customers and the corporate customers at the bank branch where they picked up and preauthorized their smart cards. Yet a 3rd track developed for the more remote areas was to send bank specialists to the rural cities, who would then perform on-site training to bank branch and government staff, who in turn educated their customers on the usage of the smart card payment system. All operations, transaction management and processing would be managed by OAB & the government within the Sultanate of Oman, thus ensuring adherence to the strict confidentiality requirements. In early 2003 the Omani Government and OAB launched the 1st e-government smart card payment system in Oman. Smart cards that are enabled for the government will only work at designated government offices; they are not usable at any other retail or corporate outlets. Likewise, cards that are usable at the retail outlets are not useable at the government offices. The flexibility of the DUET technology platform enables Oman Arab Bank to make these and many other policy decisions themselves.

Present Status
The e-Government solution is running very profitably in all government ministries including airports and seaports, Royal Oman Police, Ministry of Finance, Ministry of Commerce and Industry, Ministry of Man Power (labour fees and renewals/income taxes), Muscat Municipality (all permits) et al.
The largest telecom and private enterprise in Oman (PTT) is also offering OAB payment facilities in all of its 40 branches for telephone and utility bill payments. OAB’s smartcard retail solutions incorporate 80% of the retail market in addition to offering its facilities on all British Petrol (BP) Oman outlets (recently converted to Oman Oil). On the same smartcard OAB has extended its service offerings to include loans and savings facilities.
As OAB and the government commence their fifth year of operations with the smart card solution, transaction volumes are reaching several hundred million Euros with hundreds of thousands of transactions being processed. The Application Service Provider Model designed by Oman Arab Bank is an outstanding is an outstanding model for banks and governments alike to follow.
Most recently Oman Arab Bank has enabled its entire ATM network to be smart-ready and to accept the DUET smartcard. BGS Smartcard Systems (the turnkey supplier of the entire OAB e-payment solution) has supplied Oman Arab Bank with 100,000 prepaid microprocessor cards and additionally developed an innovative pre-paid module for Oman Arab Bank and the Government of Oman. Consumers can now conveniently purchase the new prepaid Oman Arab Bank Smartcards at a value of 10 and 25 Omani Rials (equiv. to 20/50 EUR) at various retail outlets, thus saving them time and effort by not having to visit any bank branch. Even though the cards are designed to facilitate consumer payments at government outlets, Oman Arab Bank will also open its entire POS acceptance infrastructure to accept the prepaid cards as well.
Oman Arab Bank continues its pioneering role as the premier Application Service Provider of smartcard based financial services to the entire Sultanate of Oman. The enhancement of the solution of the latest ATM, prepaid card, and overdraft services emphasizes Oman Arab Bank’s leading role within the entire Middle East banking community.