iPSL is a joint venture between Unisys, Barclays, Lloyds TSB and HSBC that was created in 2000. It manages the cheque processing operations for multiple financial institutions from shared service centres, which enables cost efficiencies through scale and truncation, and provides the platform for differentiated products and services. iPSL inherited multiple systems from its customer banks and many processes were slow and manual. This made it hard to track and examine historical entries, and led to huge physical storage requirements.
Done.
To enhance its operations, iPSL is implementing a single common technology platform. This is based on Microsoft SQL Server 2000 running on Unisys ES7000 servers with application components and Web services built around the core system using the Microsoft .NET Framework. This will help it to reduce costs and position the company to grow its business in other areas of payments and paper processing.
Situation
Cheque processing is an intensive and expensive activity for banks, but it is a critical part of the financial infrastructure. In the UK, retail banks are faced with a declining volume of cheque transactions, which drives up the unit cost of processing. At the same time, they need to focus on differentiating themselves from the competition as customers are increasingly choosy about their financial service providers.
In 2000, Lloyds TSB, Barclays and Unisys decided to launch a new company, Intelligent Processing Solutions (iPSL), to enable banks to deal with these challenges. HSBC took a share in the company in 2001, and more banks, such as HBOS and National Australia Group, have become customers. Today, iPSL processes 76 per cent of all UK cheques, with a daily value of around £5 billion, and continues to improve efficiency by consolidating the multiple operating sites and processing solutions inherited from its customer banks.
John Little, Director of Retail Services, Barclays Bank, says the need for iPSL was born out of the declining cheque volumes in the UK of about four per cent per year and the need for banks to re-invest in technology. “We asked ourselves: ‘Do we want to be in this business? What are our alternatives? And could we be more creative with the asset of our clearing centre?’ The deal came about because we identified a need to achieve scale and new technology,” he says.
For the new iPSL organisation, the biggest challenge was to simultaneously rationalize the different people, technologies and processes inherited from its members and customers, and from them form a single iPSL business entity. John Smith, CEO, iPSL says, “To accomplish this, we’re implementing a change programme to help create a highly effective operating model.”
A key element of this change programme includes implementing a single common technology platform that both enhances iPSL operations and is compatible with its customers’ systems. This massive undertaking includes 120 separate projects, such as implementing new cheque clearing platforms, creating new remittance processing software and developing a new image archiving system. All projects are targeted for completion by 2005.
Solution
One of the driving principles when we formed iPSL was that it would be powered by best-of-breed technology.
John Smith
CEO
iPSL
Despite its position as a major iPSL stakeholder, Unisys wasn’t granted the work automatically. “One of the driving principles when we formed iPSL was that it would be powered by best-of-breed technology,” says Smith. Unisys was selected as iPSL’s IT partner due to its winning combination of strong outsourcing transition and project management capabilities, robust business transformation and systems integration expertise, and wealth of knowledge in the financial services arena. To deliver on iPSL requirements, Unisys identified the need to update its in-house development strategy and also provide new database technology for the Payments Information Engine (PIE) that would sit at the heart of iPSL’s new single technology platform.
PIE is a component of the Unisys Enterprise Payments Blueprint, a solution that is part of the Unisys 3D Blueprinting family. 3D Blueprinting is an innovative approach to understanding the cause/effect relationships between business strategy, operations, and the IT systems that support them, helping to reduce the risks associated with implementing new technologies and processes. The Enterprise Payments blueprint looks beyond cheques in isolation to consider banks’ payment operations more holistically—understanding the migration from paper to electronic and the resulting change management.
In mid-2002, a decision was made to use Microsoft SQL Server 2000 and standardise all development on the Microsoft .NET Framework. David Johnson, Chief Technical Architect, Unisys Payments Practice, says SQL Server was selected because Unisys was convinced it could easily provide the performance, scalability and flexibility it required. “We were also impressed with its ease of integration and XML capabilities, which were crucial for this type of solution,” says Johnson. Through many mission-critical implementations on ES7000 servers, Unisys has developed substantial expertise in scaling-up Microsoft solutions. In addition, Unisys partnership with Microsoft ensures that ES7000 servers provide an optimised platform to support SQL Server 2000 database environments.
PIE was developed by the Unisys research and development team as a base product, a core schema structure and set of components. This is provided to Unisys operations around the world, which are responsible for fleshing out the product by adding other application components, XML schemas and access services to meet the requirements of a particular implementation. “We made the decision to do all this development using the Microsoft .NET Framework, Microsoft Visual Studio .NET 2003 and C# because they would give us the best productivity and performance of any environment or language, and greatly improve the maintainability of the code,” says Johnson.
PIE is going live across all iPSL customers in a phased roll-out between May 2004 and the beginning of 2005. When completed, the solution will handle the processing of between 13 and 24 million pieces of paper a day, which results in the input of between 28 and 60 million records. The combined size of the SQL Server instances installed across all banks will be around 100TB, but the total offline, nearline and online storage for iPSL data and cheque images totals around half a petabyte. This is run on 12 Unisys ES7000 servers. PIE is a data store where information is archived for a long period of time, but at the same time, the solution is crucial to the day-to-day operation of iPSL, as all this information must be made readily available to other systems within iPSL and its customer banks.
“iPSL manages the banks' own data and owns the infrastructure in which the data is stored. But we also need to provide a method for the banks to access that data,” says Johnson. “We looked at various solutions and all iPSL customers wanted us to provide a Web service that they could integrate with the new thin-client solutions they have in their internal operations, and also integrate access to data for the Web interfaces that their corporate clients might be using.” This interface, known as PIA Access, is based on SOAP and enables banks to query and update the data in PIE. It is just one of the many application components that have been built using the Microsoft .NET Framework.
Benefits
More Efficient Access to Information
Many larger corporate customers require the return of all payments from their banks. This can be in the form of physical cheques, or CDs of all the images. This is done so the customer can ensure it has approved the payment of any particular cheque. A lot of manual effort is required within iPSL to collate all the cheques belonging to a particular account out of all the millions that are processed in a night. Today, they have to be pulled by hand and either scanned onto a CD or sent off in an envelope.
“The first step we're going to offer is automatic generation of CDs so there is no need for manual retrieval. The next step is for the banks to use Web services to access information internally and also enable their corporate customers to access PIE,” says Johnson.
Improved Quality and Reliability
Under normal circumstances, improving quality, accuracy, and timeliness are substantial challenges. Doing these things while consolidating multiple operating environments and processes might seem virtually impossible. But under the watchful eye of the UK's Association of Payments and Clearing Services (APACS), iPSL has improved the quality and timeliness of its services, compared with when each bank managed these functions individually.
"Since our customers have outsourced their cheque processing to us, their expectations on quality and reliability have increased," says Smith. "They have raised the bar and we have delivered." And this quality and reliability will increase further as PIE is rolled out to all iPSL customers.
Removing Unnecessary Steps
In the UK, there are two key processes for cheques, out-clearing and in-clearing. If you take a Lloyds cheque and pay it into a Barclays account at a Barclays branch, that cheque will go to Barclays' out-clearing operation tonight. Tomorrow that piece of paper will go to the in-clearing operation at Lloyds.
Today iPSL handles the in-clearing and out-clearing for all its customers across different systems. The intention is to remove the in-clearing operation for these banks. “Where we capture and process a lot of bits of paper twice, we want to only do it once,” says Smith. “So once it goes through the out-clearing stage it is simply passed along electronically within iPSL. In this way, PIE will come to replace a huge amount of paper processing and this is where iPSL will generate huge cost savings.”
Risk Reduction and Delivering Cost Savings
The main driver behind the creation of iPSL was to push down the cost of processing cheques by consolidating the processing within one institution and using technology such as PIE to process the payments with far fewer people than are required at the individual banks. In its contracts with customers and member banks iPSL guarantees to reduce processing costs by a significant percentage over the next few years. PIE, based on Microsoft technology, helps deliver this. It can handle the volume from all iPSL member banks today and the ability of SQL Server and the Web components to quickly scale out horizontally means the company can respond quickly to any future demands.
Operational costs are also being reduced through the consolidation of sites and the multiple systems within each bank. When iPSL began its consolidation programme there were 13 operational centres. Now there are nine and the objective is to get to six, including disaster recovery facilities. Refreshing the technology by introducing the common ES7000 server-based, scalable platform at the heart of all operations means that iPSL can get rid of a lot of older systems that it inherited from the banks. Many of these were out-of-date and unsupported by vendors, and by removing them from the infrastructure, iPSL is also reducing the operational risk of the organisation.
Expanded Processing Opportunities
PIE will not only enable iPSL to achieve cheaper and more efficient cheque processing, but will also provide further business opportunities in the future. PIE isn't designed only for holding data on cheques. It is a general purpose engine for payments. It has been designed to handle European documents, for example, which are much more complex than those in the UK. It is being used to support ING and ABN AMRO, for example, in the Netherlands where payment types other than cheques are very common.
“In the UK, the use of cheques is declining,” says Smith. “While iPSL is committed to making improvements in the way cheques are processed in the industry, we also offer our customers other outsourced services, including remittance and lockbox services, research and adjustment, and other image services. We are also interested in exploring opportunities for other types of electronic and paper processing. Technology such as PIE will play a key part in future development in this area.”
