B.A.Sc. Thesis Abstracts - Year 1993

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Pricing and Chargeback Policies for Internally Used IS Services at the Royal Bank

Mark D. R. Parsons


A cost-based pricing system is proposed as a viable alternative to the information service pricing system currently administered by the Computer and Network Services group (C&NS) of the Royal Bank of Canada. The proposed cost-based price consists of a flat rate formulated to recover fixed costs and a transaction fee formulated to recover variable costs. While the current C&NS pricing system is reflective of historical pricing decisions, which were typically based on clients' relative ability to pay, the proposed system is clearly reflective of the clients' actual resource consumption.

Two Royal Bank services, Personal Touch Banking (PTB) and Demand Deposit Accounting (DDA) were selected for study. A fixed-variable costing model was applied to the services' 1990-92 resource utilization records. Fixed costs comprised equipment, staffing, and premises expenses; variable costs consisted of datacommunications and supply expenses. Growth, inflation, and functionality estimates were applied to the costing data to produce prices for 1991-93.

The costing model suggests that the transaction fee that C&NS levies for PTB is consistent with actual resource costs. However, the study of DDA resource usage reveals that DDA costs declined over the 1990-92 period, while the corresponding C&NS transaction rates increased. The inclusion of a technological deflation factor in the pricing model produced cost-based prices which reflect the decline in DDA expense.

The following have been identified as potential benefits of cost-based pricing. Client cross-subsidization is minimized. Furthermore, proper cost allocation assists in the cost-benefit analysis of investments in information technology- Most importantly, a cost-based pricing system communicates resource utilization information to C&NS clients. Empowered by this knowledge, clients can modify their own consumption habits in such a way as to affect price reductions.


The Study of the commercial Paper Issuing Service at the Toronto Dominion Bank

Joseph R. DiZazzo and Malini R. Pandya

At the Toronto Dominion Bank, an automated data entry system known as NoteWriter is used to support the issuing of commercial paper and Bankers' Acceptances. The purpose of this study is to develop and evaluate various alternatives and enhancements to the NoteWriter system.

An analysis of the business and operating environment of the system resulted in the identification of the following considerations: cost, market trends, future market needs, compatibility, customer needs and internal user needs. In addition, technical research was conducted in order to determine the possible applications of modern computer technology ,, the NoteWriter system.

An evaluation of the information gathered resulted in the development of four possible alternatives for the future of the NoteWriter system:

  1. Do Nothing
  2. Make Limited Enhancements
  3. Redesign Back-Office (Internal Interface)
  4. Redesign Back and Front-Office (Customer Interface)

These alternatives were then assessed with respect to the individual decision criteria listed above using a decision matrix.

In the final analysis, it is recommended that the system remain unchanged due to the uncertain future of the business environment and the associated cost of system enhancements as compared to commercial paper revenues.