Introduction to Pricing Grids
The Rate Cards/Pricing Grids feature defines interest and fee pricing with complex pricing criteria for the financial products to,
- Manage interest rate as fixed or variable rate based on index plus margin and allow periodic revision of rates.
- Manage fees, margin/rate tiers based on the term of the agreement, amount, LVR (Loan-to-Value Ratio), asset class/type, balances, customer ratings, and so on.
- Define various pricing mechanisms such as relationship, regional/location based.
It allows the user to setup various pricing models for financial products like, Asset Finance, Lending, Deposits, Accounts. The pricing can be determined based on combination of customer data, product association, and/or transaction data.
- Customer data includes risk rating, customer relationship, segmentation, location (ST.ORGANISATION.CODE), financial ratios.
- Product association includes LVR, agreement term and amount, asset class/type, and asset usage for asset-based finances.
- Transaction data includes prepay-penalty based on remaining term, upfront fees based of term and amount, and so on.
The interest rate can be defined with term and location such as Region/Division/State/Branch as shown below.
|
Term |
South (Region) |
Mid-Atlantic (Division) |
New York (State) |
Boston (Branch) |
|---|---|---|---|---|
|
0 – 12M |
0.75% |
1.75% |
2.75% |
3.75% |
|
12M – 24M |
0.8% |
1.8% |
2.8% |
3.8% |
|
24M – 36M |
0.90% |
1.90% |
2.90% |
3.90% |
|
36M – 60M |
0.92% |
1.92% |
2.92% |
3.92% |
|
Above 60M |
0.95% |
1.95% |
2.95% |
3.95% |
Interest and Charges property classes are enhanced to support Pricing Grids product line based pricing for interest and charges as described below.
|
Interest Rates |
Charges/Commissions |
|---|---|
|
|
|
|
Product Line Attributes
The PRICING.GRIDS product line supports the following line attributes,
- Optional Currency - Supports optional currency-specific product conditions.
- No Arrangements - Arrangements cannot be created.
- Version Enabled - Supports versioning, that is, system maintains the version for each proof and publish of the product.
Product Configuration
This section describes the configuration of Pricing Grids products.
Property Class
The Pricing Grid property class is a mandatory property class in the PRICING.GRIDS product line. Only one Pricing Grid property can be defined in a Pricing Grids product. Read Pricing Grid for more information on Pricing Grid property class and attributes.
Below are some sample model grids.
Property Type
The user must set Property Type for Interest and Charge properties as 'Pricing Grid Index Enabled'.
Financial Products
Pricing grids product line is “No Arrangements” type product line, meaning system does not allow to create any arrangements for the products under this product line. Instead, products created under this product lines can be linked with financial product lines such as,
- Asset Finance
- Lending
- Deposits
- Facility
- Accounts
When pricing grid products are linked as pricing index in the financial products, the system determines the applicable interest and/or charge based on linked pricing grid product’s definition.
The system provides the flexibility to users by allowing them to tailor the adoption of the pricing grids functionality. The users can choose to continue using the current pricing setup for the specific Interest/Charge property in certain financial products and opt to use the pricing grids index for the same Interest/Charge property in certain products without creating new Interest/Charge property.
The Property Type and Pg Property attributes allow banks to configure the products to meet the business needs in selective products.
- Property Type can be defined at property level for both interest and charge properties.
- Pg Property is updated during financial product publishing.
- For Interest property, when User Rate Type value is defined in product condition (AA.PRD.DES.INTEREST), the system updates Pg Property in AA.PRODUCT with property ID.
- For a Charge property, if Property Type is 'Pricing Grid Index Enabled', the system updates Pg Property in AA.PRODUCT with property ID.
To enable the Pricing Grid functionality, banks must set the Property Type as 'Pricing Grid Index Enabled' and ensure that the corresponding property ID is populated in Pg Property in AA.PRODUCT during product publishing.
When the AS.INTEREST interest property is enabled with Property Type as 'Pricing Grid Index Enabled'.
- In financial product A, the Interest property’s (AS.INTEREST) and product condition (AA.PRD.DES.INTEREST) can be defined without User Rate Type, applying the existing pricing model. In this case, Pg Property remains blank.
- In financial product B, the Interest property’s (AS.INTEREST) and product condition (AA.PRD.DES.INTEREST) can be defined with User Rate Type enabling the use of Pricing Grid products as an index. In this case, Pg Property is updated with AS.INTEREST value.
Inline Data Conversion for Interest Property
When Pricing Grid functionality is enabled during the creation of a new arrangement, the system automatically populates the user fields with values from the product condition and allows the user to modify these values.
When modifying existing arrangements (using Rate Change activities) created before implementing the new Pricing Grid functionality, the system performs an inline conversion by copying the values from the existing standard fields into user fields. The system allows the user to further edit the details in the user fields. When Pricing Grid functionality is not enabled, the system allows the user to enter values in both user and standard interest fields. The values entered in user fields take precedence over those in standard fields.
Product Builder
Read Introduction to Product Builder for more information on product construction and configuration process.
Illustrating Model Parameters
Pricing Grid Product
The Pricing Grids product condition is defined with the criteria (data elements like finance amount, term, asset class/type, location, LVR) and the targets components (target elements like fixed rate, margin rate, charge amount, charge percentage).
Read Data and Target Elements for more information on data and target elements.
Property Type
To use the Pricing Grid product as index in the Interest and Charge condition of a financial product, Property Type of Interest and Charge properties of the financial product must be set as Pricing Grid Index Enabled. Otherwise, the Pricing Grids functionality cannot be used in the financial products.
Illustrating Model Products
The below model products are reference products for the user to use, amend, or refer to create new Pricing Grids products.
| Product ID | Product Feature / Attribute |
|---|---|
| PG101 (Asset Type based Rate Grid) | This grid is based on asset type to define the fixed interest rate. |
| PG102 (Term & Amount based Rate Grid) | This grid is based on term and amount to define the fixed interest rate. |
| PG201 (Asset Type based Margin Grid) | This grid is based on asset type define the margin rate. |
| PG202 (Term & Amount based Margin Grid) | This grid is based on amount and term to define the margin rate. |
| PG203 (Customer Risk Rating - Margin Grid) | This grid is based on customer internal rating and amount to define customer risk margin along with operator. |
| PG204 (Loan-To-Value Ratio - Margin Grid) | This grid is based on LVR (Loan to value Ratio) to define the margin rate. |
| PG301 (Finance Term & Amount - Fee Grid) | This grid is based on term and amount to define the charge amount. |
| PG302 (Vehicle Excess Use Fee Grid) | This grid is a routine-based pricing grid product to define charge amount based on amortized term. |
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