The price is right - PRWebww1.prweb.com/prfiles/2012/06/01/9565781/ZKB Case... · billing at ZKB....
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© 2012 IBS Intelligence 1 www.ibsintelligence.com The price is right Pricing and billing are the two staples of any business. Zürcher Kantonalbank centralised both processes and is enjoying the benefits. Getting the price right and collecting fees in good time are basic necessities for any business. But in the complex world of banking, especially with an institution that spreads itself across multiple systems and sectors, these two apparently simple con- cepts can take on a life of their own and need to be managed more effectively. This at least is the view of Switzerland’s Zürcher Kantonalbank (ZKB), which has taken measures to see that both pricing and collections functions are optimised and has deployed a centralised and busi- ness-maintained solution that it claims has given it both flexibility and control. Founded in 1870, ZKB offers a mix of retail, commercial and investment banking, as well as investment management and private equity. This AAA-rated institution is also the largest of all the cantonal banks, with a staff list exceeding 4900 and total assets of more than CHF126 billion ($134.5 billion). Back in 2006, it embarked on a major systems review. As part of that process, it cast a critical eye over its de-centralised billing and pricing systems and processes. ZKB had, for example, been running differ- ential built-in pricing logic for each of its multiple product applications, but lack of system coherence meant it could not respond to an increasing customer expec- tation that true relationship-based pricing would be offered – an expectation that included the bundling of products across different product areas, something which could not be offered by ZKB under its old model. But, says the bank, the root of the problem – de-centralised technology – was also causing revenue leakage at the hands of unenforceable pricing commitments. In short, ZKB’s pricing and billing structure had to change. From a business perspective, the bank realised that there were a number of approaches that it needed to pull together to stay competitive. In addition to product bundling, the provision of differential pric- ing and the reduction of time-to-market for new pricing strategies (enabling the bank to respond quickly to market changes), were all in its sights, explains Johannes Staub, programme owner for pricing and billing at ZKB. Following a detailed analysis of its legacy pricing and billing systems, he says ZKB saw a need to implement a centralised solution that could integrate with all other existing legacy systems. If this could be achieved, support for various scenarios, including multi-currency coverage across all ZKB’s lines of business, would also fol- low. Delivering the technical means to enable a more sophisticated pricing and billing strategy would, says Staub, enable ZKB to quickly launch new, intelligently- priced products for targeted customer seg- ments, and drive new revenues from rela- IBS Journal April 2012 case study: zürcher kantonalbank tionship-based pricing. The intelligence that could be derived from a centralised system would, he adds, also enable faster revenue collection, so that fees collected on a half-yearly basis, for example, could be processed on a monthly basis instead. The decision in late 2007 to take this full-blooded approach to pricing and billing saw ZKB undertake a review of the available technology. But it kept its system options open by sending out an RFP to a number of potential providers and investigating the building of its own bespoke platform. Indeed, by the time the RFPs had been dispatched, Staub reports that ZKB had already finished its own prototype solution using the com- ponent-based miRevenue solution from Zafin Labs, a banking solutions vendor headquartered in Canada. ‘It was necessary to formulate a plan of how to centralise the pricing and billing service in a system which can interface and communicate with our three main IT building blocks.’ Kurt Mathieu, ZKB
Transcript of The price is right - PRWebww1.prweb.com/prfiles/2012/06/01/9565781/ZKB Case... · billing at ZKB....
© 2012 IBS Intelligence1 www.ibsintelligence.com
The price is right
Pricing and billing are the two staples of any business. Zürcher Kantonalbank centralisedboth processes and is enjoying the benefits.
Getting the price right and collecting feesin good time are basic necessities for anybusiness. But in the complex world ofbanking, especially with an institution thatspreads itself across multiple systems andsectors, these two apparently simple con-cepts can take on a life of their own andneed to be managed more effectively.
This at least is the view of Switzerland’sZürcher Kantonalbank (ZKB), which hastaken measures to see that both pricingand collections functions are optimisedand has deployed a centralised and busi-ness-maintained solution that it claims hasgiven it both flexibility and control.
Founded in 1870, ZKB offers a mix ofretail, commercial and investment banking,as well as investment management andprivate equity. This AAA-rated institution isalso the largest of all the cantonal banks,with a staff list exceeding 4900 and totalassets of more than CHF126 billion ($134.5billion).
Back in 2006, it embarked on a majorsystems review. As part of that process, itcast a critical eye over its de-centralisedbilling and pricing systems and processes.ZKB had, for example, been running differ-ential built-in pricing logic for each of itsmultiple product applications, but lack ofsystem coherence meant it could notrespond to an increasing customer expec-tation that true relationship-based pricingwould be offered – an expectation thatincluded the bundling of products acrossdifferent product areas, something whichcould not be offered by ZKB under its oldmodel.
But, says the bank, the root of theproblem – de-centralised technology – wasalso causing revenue leakage at the handsof unenforceable pricing commitments. Inshort, ZKB’s pricing and billing structurehad to change.
From a business perspective, the bankrealised that there were a number ofapproaches that it needed to pull togetherto stay competitive. In addition to productbundling, the provision of differential pric-
ing and the reduction of time-to-market fornew pricing strategies (enabling the bankto respond quickly to market changes),were all in its sights, explains JohannesStaub, programme owner for pricing andbilling at ZKB.
Following a detailed analysis of itslegacy pricing and billing systems, he saysZKB saw a need to implement a centralisedsolution that could integrate with all otherexisting legacy systems. If this could beachieved, support for various scenarios,including multi-currency coverage acrossall ZKB’s lines of business, would also fol-low.
Delivering the technical means toenable a more sophisticated pricing andbilling strategy would, says Staub, enableZKB to quickly launch new, intelligently-priced products for targeted customer seg-ments, and drive new revenues from rela-
IBS Journal April 2012
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tionship-based pricing. The intelligencethat could be derived from a centralisedsystem would, he adds, also enablefaster revenue collection, so that feescollected on a half-yearly basis, forexample, could be processed on amonthly basis instead.
The decision in late 2007 to take thisfull-blooded approach to pricing andbilling saw ZKB undertake a review ofthe available technology. But it kept itssystem options open by sending out anRFP to a number of potential providersand investigating the building of its ownbespoke platform. Indeed, by the timethe RFPs had been dispatched, Staubreports that ZKB had already finished itsown prototype solution using the com-ponent-based miRevenue solution fromZafin Labs, a banking solutions vendorheadquartered in Canada.
‘It was necessary to formulate a plan of how to centralise thepricing and billing service in a system which can interface and
communicate with our three main IT building blocks.’Kurt Mathieu, ZKB
© 2012 IBS Intelligence 2www.ibsintelligence.com
This two-pronged approach to sys-tem selection ultimately led ZKB to opt forthe ‘modern architecture’ and ‘solid infra-structural fit’ of Zafin’s miPricing andmiBilling modules. The solution, he says,‘is specially built for banks and so fulfillsall our security requirements’.
The contract was signed in February2008 and work started in March. As the
project kicked off, given the size, scale andscope of the initiative, a joint team wascreated to investigate the legacy environ-ment. Local provider, SwissConomy, wascalled in as the technical intermediarybetween bank and vendor, although insome cases ZKB had direct contact withZafin to expedite matters.
ZKB’s securities and high net-worthclient offerings were tackled first as partof the incremental roll-out.
Zafin’s developers, working alongsidean IT team from the bank, spent the firstsix months engaged in a design study forthe centralised architecture. It was, says
Kurt Mathieu, application owner for pric-ing and billing at ZKB, ‘necessary to formu-late a plan of how to centralise the pricingand billing service in a system which caninterface and communicate with our threemain IT building blocks’. This consisted of SAP One for accounts, Avaloq for securi-ties and Oracle Siebel for the customerrelationship front-end and around 14 dif-
ferent interfaces in total, including a newone linking front-line sales with ZKB’sproduct manufacturing environments.
There was a degree of complexity increating these interfaces, commentsMathieu. ‘We had some batch interfaceswhich had to be tested as well as some different online interfaces to create.’Thepricing functionality ‘came out of the box’, says Staub, but Zafin’s billing systemrequired a number of enhancements,notably around the creation of raw datafor reporting, and for booking functionali-ty. Some project requirements alsochanged during the development process
but, says Mathieu, ‘Zafin was ready to makethe amendments’.
Following system tests spanning somefour months and covering the full range ofinterfaces, a number of ‘small corrections’were required. These mostly concernedminor issues on the batch side. ‘The onlineinterfaces were fine from the beginning,’confirms Mathieu. The solution went live inMay 2009. Staub says that ZKB is now ‘moreflexible’ and has the opportunity to changeall pricing models that reside on miRev-enue ‘very quickly’, enabling it to react tomarket changes as they happen. The actualchanges, he adds, can normally be done bybusiness personnel, with no need for IT tobecome involved. ‘We can also build prod-uct bundles; we rolled out the first in June2011 for the youth sector, and the next wasdelivered by the end of that year.’The planhas been to introduce one new pricingmodel to the new platform at least everysix months.
Since going live, ZKB has enjoyed pric-ing and billing freedom, and is continuingto make progress. Indeed, as part of its rela-tionship-based pricing strategy, it is alsonow able to calculate profitability based ona per-transaction cost of services whichgives it a new level of insight.
Zafin continues to upgrade the miRev-enue platform with additional businessfunctionality and in November 2011, aspart of this programme, ZKB switched fromWebsphere to the open source JBoss appli-cation server. As for the miRevenue systemitself, says Mathieu, ‘we have not found anylimitations’. The control this gives ZKB overits pricing and billing functions is, he says,‘exactly what we expected’.
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IBS Journal April 2012
Publication: IBS Journal – global independent perspective on financial technology. Editor: Tanya Andreasyan.This article has been extracted from the IBS Journal April 2012, Issue 21.7
The IBS Journal is dedicated to the wholesale, retail and private back office banking systems and operationsmarket, and related topics.
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