In a subtle expression of alarm, State Bank of Pakistan (SBP) has decided that it will monitor the recent agreement between National Database and Registration Authority (NADRA) and MasterCard. MasterCard is an online payment processing company and SBP will examine the agreement for the purpose of maintaining security of the national database.
The chief spokesman of the Central Bank, Abid Qamar stated:
“We are looking into this (agreement) and getting more information from the two parties about this arrangement”
Servers Outside Pakistan
NADRA has decided to partner up with MasterCard as it preferred a company that does not possess any servers inside Pakistan. This might be a good step but it also augmented the risks involved therein. NADRA might have done things outside the box as it did not take the necessary precautions before going for the deal with a company that has servers outside Pakistan.
MasterCard announced a strategic collaboration with Pakistan’s NADRA Technologies. This announcement was made on 18th January when MasterCard attended the World Economic Forum Annual Meeting in Davos, Switzerland.
The fact that the agreement was signed in Switzerland has also contributed to raising concerns as to why NADRA has been keeping quiet about the matter. It’s been one week since the agreement was signed and an official announcement from NADRA over the matter is still awaited.
Also Read: MasterCard now enabling NADRA’s CNICs with Automated Payment Functionality
MasterCard stated:
“The move will allow Pakistani citizens to carry out financial transactions and receive government disbursements by utilizing the unique 13-digit identification number of their identity card”
Transactions Through CNIC
Apart from this, it will also enable Pakistani citizens to carry out international transactions through their CNIC. It was revealed that the CNIC will not only help send and receive money internationally but it will also allow national transactions such as government-to-people and people-to-government payments (fees).
Requirement of Approval
On the contrary, NADRA doesn’t possess the authority to issue payment services and if it decides to step into this field, the approval of central bank would be required. This payment service falls under the Payment Service and Electronic Funds Transfer Act of 2007. In light of this issue, it was said that even though NADRA has signed the agreement, it has not contacted the central bank for approval which means that it cannot provide payment services until now.
This issue will be resolved through an arrangement which will include three organizations; NADRA, Faysal Bank, and MasterCard. It was said that NADRA has involved Faysal Bank in order to get knowledge about the requirements and terms and conditions of the SBP for the agreement. The involvement of a third party was not disclosed by MasterCard as it remained silent on the issue.
An SBP spokesman was asked about the involvement of Faysal Bank in the deal, to which he said:
“To encourage financial inclusion in the country, we shall welcome any arrangement in compliance with the legal and regulatory requirements for financial transactions”
Other than the approval of the central bank, NADRA has also not gained the required authorization from the Pakistan Remittance Initiative. Due to this, the idea of international transactions is not possible.
Risks Involved
Striking a deal with MasterCard will not be easy as there are many servers and processing centers of MasterCard in areas which do not have good relations with Pakistan. This might lead to privacy issues such as replication of data.
NADRA possesses data about almost every citizen of Pakistan and every month there is a humungous amount of attacks (almost 10,000) by hackers to crack the database. Thankfully, all these efforts have remained unsuccessful due to NADRA’s advanced security system.
As there were concerns about the safety of information, NADRA informed that MasterCard will have no access to the security database of NADRA. It will only send the essential information to MasterCard. For example, if there will be a transaction, the person will enter the receiver’s CNIC number in the NADRA portal and then this CNIC number along with the CNIC number of the sender will be sent to MasterCard for verification without any additional information.
In addition, NADRA will provide security and privacy solutions for both ends as MasterCard will receive information based on know your customer (KYC) requirements of the global bodies.
Russia also made the same deal with MasterCard in 2014 but the presence of MasterCard servers outside Russia raised security concerns due to which MasterCard had to shift its servers to Russia. The same security concerns may arise in Pakistan too as there is suspicion of data replication.
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