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Well, all this could have prevented if

1) the bank had a proper set of procedures

2) the bank had a tool to oversee this

 

Oracle MDM (DRM) is such a tool. And it helps you to do more. It works with a working procedure to enforce Master Data integrity over systems.

Home » The Stacked Discount Case

EPM failure within a Dutch bank

Within a bank (which one of our consultants had worked for some time), they had a big beverages company as client. And that company took quite a few products (lending, cash transaction & asset management services, financial advice etc.). And also all these services and products were spread over several countries over several continents. All together we are talking about big numbers, and in fact it was one of the bank's top 10 best global clients.

Because of her size, the beverage company HQ negotiated hard for a stacked discount. Simply put, the more services they took and the higher the totalling numbers were, the more discount they get on the service fee. Which the bank didn't want to give, of course..... but in the end both agreed some were in the middle. Both management teams were happy, and of course the sales people were very happy. It was a great deal.

However, in the third year the client complained about the fee they had to pay. It was not discounted that much as hoped for and also the performance of several asset management mandates/services were very poor.

We are talking about big numbers…… So the client was very dissatisfied and therefore complained very hard. While the bank didn't want to lower the fee or even discuss it, as things were going according the contract. The bank had put a lot of attention into negotiations and the discount rules, and was actually quite offended by the client’s complaint.
To make it worse, some human stubbornness was added and quickly the atmosphere went bad. So bad that the client wanted to end some contracts and stop renewals.

After a little while, someone within the bank discovered something..... and that something was (you can say) a little administrative/procedural/system error....... You remember that the beverage company client had multiple contracts over multiple countries over multiple continents……

It turned out that there were bank branches in some countries using a different system notation for the client and the contracts. Because there were no Master Data rules and no central MDM system available enforcing the proper notation.
The reason was that the bank was organized into divisions (corporate banking, asset management, transactions etc.), and each division had other tools and had slightly other procedures…….
But therefore resulting that the total sum of service fee billed was broken down in several smaller parts and thus giving lesser discount according the automated discount rules………………
Although being a problem, it could actually be fixed easily by someone on HQ overseeing the total payments in Excel.…… but nobody had thought of it………… little awkward isn’t it?............

However, the story doesn’t end………..No !!!……...


While the bank analyst dug deeper, he discovered also that quite a number of sales guys were trying to outsmart the system, by entering contracts separately……..
Because the bonus system in the bank was stacked also, it became interesting to inflate the portfolio with more clients, more accounts and more contracts.
So each contract won, were put in the books directly as a new client, while it actually could come from an existing client. Even some annual contract renewals were booked as a new contract. This created the situation of having lots of clients with just one contract, instead of the situation of one client with lots of contracts…………..….

This exercise was very beneficial for the individual sales person, but very non-beneficial for the client. Especially when there is a stacked discount rate……………… Now that’s awkward……….

 

So you maybe could imagine how management had to deal with it. And how they had to go back and inform the client about this topic…………… I think someone couldn’t catch the sleep the night before……..

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