Visa Europe

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An open clearing and settlement platform that allows Visa Europe to create and implement vast numbers of complex business rules faster than ever before.

Visa Europe addressed the unique nature of the European market by building a new payment platform which houses tens of thousands of business rules governing payment clearing and settlement. An open business rules management system speeds time-to-market and gains cost efficiencies. The result is greater business agility and competitiveness for both Visa Europe and its 4,000-plus member institutions. Simulation capabilities are soon expected to allow business users to become more proactive, predicting and assessing the impact of changes to key business rule parameters.

Smarter banking: Leveraging insight to build better business rules

Instrumented: Live transaction and market data is collected from 36 markets and brought together in the high-performance Visa Europe Clearing and Settlement Service.
Interconnected: A business rule management system combines real-world information with business logic that enables rules to be tailored and bespoke to market and in some instances individual member institutions.
Intelligent: With deeper understanding of the potential impact of changes, Visa Europe will be able to address the needs of its members more effectively—creating true market differentiation.

The European marketplace is highly complex. Efforts to unify it from an economic and commercial standpoint have been under way for decades, yet to this day it is still comprised of many discrete markets, currencies and sets of regulations. One of the latest efforts to strengthen the market through unification, led by the European Union was the creation of the Single Euro Payment Area (SEPA) and ratified by European Union member states adopting the Payment Services Directive (PSD, 2007/64/EC).

The SEPA initiative created a common set of rules for payments in countries using the Euro, under which all electronic payments are considered domestic, even those that take place across national borders. The goal was to create greater efficiency and promote commerce.

A strategic response to these specific and unique European member institutions business drivers was required and, as a result, Visa Europe became a dedicated European payments provider and wholly independent organization from the global payments provider Visa Inc.

A complex landscape calls for a new approach
Growing Visa Europe in response to the nature of the European environment became a challenge while remaining part of the global Visa Inc organization and global set of demands for change. This made it difficult to make responsive changes to shifting regulations and market conditions. This is why the creation of a dedicated European organization was deemed a wise move.

The issue is one of complexity. Each time a Visa card is used anywhere in the world, an authorization takes place and a transaction is created between the issuer’s financial institution and that of the merchant. At the end of each day, all of those millions of transactions must be settled. Every transaction is run through a set of business rules that govern the fee charged, the exchange rate applied, and other validation parameters such as proper formatting. These rules must be changed periodically, for example to adjust fees in response to market conditions, add new members or accommodate new regulations.

Under the legacy Visa Inc. global payments platform, each of these business rules was effectively hard-coded into the system, making it very difficult to bring new rules to market. Implementing a single policy change could take up to 18 months from the time of initial request to go-live—and while any given parameter might not need to change very often, the sheer number of them means that there is always a change that needs to be made.

When extended across the 36 countries, multiple currencies and thousands of members served by Visa Europe, it’s easy to see the management challenge posed by this rules-based clearing and settlement process. “For the European market, there are literally tens of thousands of business rules to consider,” says Justin Snoxall, vice president and head of development services for Visa Europe. “It’s a uniquely convoluted landscape that can make doing business difficult. For example, with so much to consider and the limitations of the legacy system, introducing new products or services could take a long time. This hampered our efforts to enter new markets.”

Breaking the business rule logjam
Visa Europe’s answer to the management challenge was to chart its own course. The new organization used its independence to create a separate authorization platform and clearing and settlement platform that would integrate with the Visa Inc. global system while adding a high degree of flexibility and agility to the payments process.

Called the Visa Europe Clearing and Settlement Service (VECSS), the new platform uses IBM WebSphere® ILOG® JRules at its heart, markedly different from the older mainframe-based solution. The tens of thousands of business rules that govern its function are no longer hard-coded. They are stored as rules and gain further context from member institution business parameters stored in an IBM DB2® database, which allows them to be managed consistently and changed easily through a built-in business rules management system (BRMS). Rule changes now involve far less expenditure of staff time, resulting in savings in the maintenance costs associated with updates and reducing the total cost of ownership.

More significant, though, is the speed of change made possible by the new system. “The time it takes to change a business rule has gone from nine months to only three,” says Snoxall. “Within 13 months we’ve made 60 rule changes, while migrating members over to the new system at the same time. The BRMS actually has the potential to make changes within days and longer term even overnight, so should the business need arise for more rapid change, we’ll be ready,” Snoxall says. “It’s a whole new level of capability that’s a far cry from the legacy mainframe-based system.”

The scalable VECSS system is also much more efficient than the earlier clearing and settlement platform, which increases the quality of service to members. Since launch, it has been able process in excess of one billion transactions every six weeks. At peak times, VECSS is able to process over 8,000 transactions per second.

The efficient transaction handling and rule management offered by the system is very important in the context of Visa Europe’s unique business environment. The requirements of the member institutions are so widely varied that the organization is called upon to provide a high degree of customization. “Clearing and settlement follows a distinct set of processes from end to end, but not all payment transactions are processed in the same way,” Snoxall says. “We need to take into account specific conditions per region, contract type, customer—a whole host of variables.” The result is over 500 transaction types to deal with, which require 10,000 editing and validation rules, plus another 20,000 fee calculation rules. All of these must be managed effectively, which is made far simpler by the flexible solution.

The inside story: Getting there

“The way we approached the development of VECSS was not what one might expect because of the nature of our organization,” says Justin Snoxall. “We provide payment processing services to financial institutions, but Visa Europe is not a commercial service provider motivated by profit. Rather, it is a cooperative association devoted to serving the interests of our member financial institutions. Each of them has a say in what we do. So one of our major tasks was to gain their support for the VECSS project.”

An organization with such a large number of stakeholders might naturally chart a conservative course when implementing change, aiming to take the path of least resistance. “While we could have continued to use the global Visa Inc clearing and settlement platform, we saw the opportunity to create a far more capable solution and seized it,” Snoxall says. “I think our leadership showed great foresight in creating Visa Europe and empowering us to develop our own technology solution.”

To ensure internal support, transparency was essential. “Our members were kept informed of the project status and objectives, with care being taken to demonstrate the business value of the plan at all times,” Snoxall notes. “It’s a collaborative environment and we have strong relations with all of our members. As a result, the buy-in for the project was very smooth.”

The interaction with members played an important role in the way the project unfolded, Snoxall says. “We did encounter a few reservations about the ability of our organization to deliver on its own, so we looked for a partner who could be more than a systems integrator. We decided to go with a strong vendor who complemented our own capabilities, and the members gave us their full support.”

A new way to find the best answer
The flexibility made possible by VECSS has added considerably to the competitiveness of both Visa Europe and its members. New institutions can be added to the network much more quickly than ever before, and at less cost. New regulations are accommodated faster, and changes in status or the services provided to a given member are made with ease.

Enhancements are planned to leverage insight based on real-world data to determine the most suitable business rule for each situation. “The potential of the system is very exciting for our business users,” Snoxall says. “The ease of management is only the beginning. Once fully deployed, they will be able to run ‘what-if’ scenarios that test the effect of any given rule change before implementing it. The BRMS will provide guidance for adjustments to the rule parameters, to deliver the desired result. That should help us reliably set the appropriate fees to maximize both member profitability and service utilization, while ensuring that members in different markets are treated equitably.”

To make certain that the deployment would support the company’s goals, Visa Europe sought assistance from IBM Software Services for WebSphere. Using the proven ILOG Solution Implementation Standard deployment methodology, IBM applied its extensive WebSphere ILOG BRMS implementation experience to help ensure the solution’s success.

An engagement with IBM ILOG Professional Services across the architecture, design and construction phases helped to manage implementation risk and ensure that the significant performance requirements were achieved. “The IBM team played an important role in the success of the project,” says Snoxall. “Their expertise dovetailed with ours to create a far more robust solution.”

Achieving true business agility
The ultimate goal is to enable Visa Europe’s general business users to manage business rules directly, making all needed adjustments before releasing the rule to IT for quality assurance and deployment. Each rule, and the change management process, are designed to be easily accessible and understood by line-of-business employees. This will result in even greater business agility by further speeding time-to-market.

Making it possible for business users to manipulate the rules themselves has important implications for the alignment of business and IT objectives at Visa Europe. By handing much of the change management process over to business users, IT can step back and devote more resources to the organization’s future roadmap, such as the creation of innovative new services.

This potential to make business users a part of the picture is where the real power of the system lies, according to Snoxall. “What VECSS gives us is tools that can put key capabilities into the hands of users. They become an integral part of the process, rather than mere consumers of it. That’s a tremendously powerful concept, and a much more efficient, effective way to do business for both us and our members. The better the service they can provide to their customers, the more accepted Visa becomes—and that’s what’s going to help us fulfill our vision of Visa becoming ‘the world’s most trusted currency’.”

Business benefits:

• Allows customized rules to be brought to market much faster, typically three times faster than before, providing market differentiation through greater agility
• Reduces the cost of business rule maintenance, with savings of over 25% experienced to date
• Will enable the creation of the most appropriate business rules using “what if” scenarios based on real data
• Makes the rule management process directly accessible to business users, adding flexibility and responsiveness
• Offers massive scalability and high performance, with 30,000 business rules supporting over 500 transaction types in 36 diverse markets

Solution components:
Software

• IBM DB2®
• IBM WebSphere® Application Server
• IBM WebSphere ILOG® JRules
• IBM AIX

Services

• IBM Software Services for WebSphere

For more information

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