IT PROJECT MANAGEMENT

Group Assignment 1
Session 4

Disusun Oleh
Group 4:

Bartholomeus Priandika - 2140033303

Muhamad Ramli – 2140053476
Pamungkas Setyo Wibowo – 2140053406
Yonathan Lesmana – 2140053444

MAGISTER TEKNIK INFORMATIKA

UNIVERSITAS BINA NUSANTARA
2021
 PERTANYAAN
Group Assignment 1
Session 4
Buatlah suatu dokumen Business case IT Project Management dengan topic proyek bebas
sesuai dengan keinginan anda (kalau bisa topic real yang anda alami di tempat anda bekerja).
Dalam document ini harus mencakup point-point sbb:

a. Title

b. Executive summary

c. Introduction

d. Assessment of existing systems

e. Problems and objectives

f. MOV (Measurable Organization value) of the project

g. Three alternatives solution

h. Analysis of all alternatives solution using cost and benefit analysis

i. Risks analysis of all alternatives

j. Assumptions

k. Recommendations

l. Funding plan

1
BUSINESS CASE

MOBILE EDC (m-EDC)

BANK XYZ
2021
1
1. REVISION HISTORY
Date Description Author Comments
26 Maret 2021 Initial version M. Ramli Create Template
27 Maret 2021 Version 1 Yonathan L Create Business Case
28 Maret 2021 Version 1.1 Pamungkas Adding time line and project
cost
29 Maret 2021 Version 1.2 M. Ramli Finishing document
09 April 2021 Version 1.3 Yonathan L Revision cost

2. BUSINESS CASE SIGN OFF

Prepared By:
Project Manager
Name [Email] [Telephone]

Signature Date

Reviewed By:
IT Project Office
Name [Email] [Telephone]

Signature Date

Approved By:
Project Sponsor
Name [Email] [Telephone]

Signature Date

2
3. GLOSSARY
The following terms appear in related documents and attachments:
ISTILAH
POS Point of Sales, is a system which allows the processing and recording
of transactions between a company and their consumers, at the time in
which goods and/or services are purchased.
MOV Measurable Organization Value, better known as the project goal
TCO Total Cost of Ownership, the total cost of acquiring, developing,
maintaining, and supporting the product or application system over its
useful life.
NVP Net present value (NPV), is the difference between the present value of
cash inflows and the present value of cash outflows over a period of
time.
ROI Return on Investment (ROI), is a performance measure used to evaluate
the efficiency or profitability of an investment or compare the efficiency
of a number of different investments.
EDC Electronic Data Capture (EDC) terminal, a machine used for accepting
payments at all retail outlets.
EMV EMV originally stood for "Europay, Mastercard, and Visa", a payment
method based upon a technical standard for smart payment cards and
for payment terminals and automated teller machines which can accept
them.
PCI DSS Payment Card Industry Data Security Standard, is an information
security standard for organizations that handle branded credit cards
from the major card schemes.

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4. TABLE OF CONTENTS

1. REVISION HISTORY................................................................................................................ 2
2. BUSINESS CASE SIGN OFF .................................................................................................... 2
3. GLOSSARY ............................................................................................................................... 3
4. TABLE OF CONTENTS ............................................................................................................ 4
5. EXECUTIVE SUMMARY ........................................................................................................ 5
6. INTRODUCTION ...................................................................................................................... 6
Background ................................................................................................................................. 6
Current Situation ......................................................................................................................... 6
Problem and Opportunity............................................................................................................ 7
Purpose ........................................................................................................................................ 9
MOV (Measurable Organizational Value).................................................................................. 9
Objective of Business Case ....................................................................................................... 10
7. ANALYSIS OF ALTERNATIVES .......................................................................................... 10
Alternative 1: Acquire an off-the-shelf Mobile EDC Solution (Purchase)............................... 11
Alternative 2: Use Mobile EDC Service with Leasing Model (Rent) ...................................... 14
Alternative 3: Keep Using The Traditional EDC ..................................................................... 16
Comparison of Alternative 1 & Alternative 2........................................................................... 17
8. RECOMMENDATION ............................................................................................................ 17
9. FUNDING PLAN ..................................................................................................................... 18
10. PROJECT DURATION .......................................................................................................... 18
11. REFERENCE.......................................................................................................................... 19
12. APPENDIX ............................................................................................................................. 20

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5. EXECUTIVE SUMMARY
One of the barriers to using EDC is the operational complexity. Since the the EMV kernel
is stored within the EDC terminal, this creates a lot of complexity. All these complexities
lead to high operating costs for the bank. Nowadays, merchants have used mobile devices
as Point-of-Sale (POS) which are used for buying and selling transactions in outlets. This
brings new opportunities for banks to implement merchant transactions using a mobile
device. Bank XYZ welcomes this opportunity by implementing a Mobile EDC (m-EDC)
service. Mobile EDC (m-EDC) is using centralized EMV processing, thus eliminates the
complexity of traditional EDC.

m-EDC also simplifies the experience on the merchant side and provides customers with a
new and modern experience that is potentially a profitable attraction for merchants. m-
EDC is expected to attract new merchants to cooperate and increase acquiring transactions
at for Bank XYZ. m-EDC can also reduce bank’s operational cost related to maintenance
and rollout of EDC terminals.

m-EDC project is expected to reduce operating cost of EDC by 45% per annum compared
to using traditional EDC terminal. Meanwhile, with the various features on offer, it is hoped
that the m-EDC will bring addition of 4,000 new merchants and additional income of USD
6.9 million from NII and transaction charges in 5 years. m-EDC will support Bank XYZ’s
strategy and goals in providing digital services for merchants in Indonesia.

Currently there are many vendors that provide mobile EDC solutions that can meet the
needs of Bank XYZ. Bank XYZ has the option to acquire an off-the-shelf mobile EDC
solution, use a leasing model or maintain the status quo by sticking to traditional EDC. The
recommendation is to purchase an off-the-shelf Mobile EDC solution because based on a
5-year calculation, it will provide more net profit for the bank and has a better ROI of
150%.

5
6. INTRODUCTION

Background
Technology gadget rapidly increase since a few years back. Mobile phones and tablets have
helped people to meet their needs, not only for communication. Nowadays, merchants have
used mobile devices as Point-of-Sale (POS) which are used for buying and selling
transactions in outlets. This phenomenon opens new opportunities for banks to implement
merchant transactions using a mobile device. At the same time, gadget technology can be
aligned properly as an alternative to reduce cost and maximize business investment.

Current Situation
An acquiring bank (also known simply as an acquirer) is a bank or financial institution that
processes credit or debit card payments on behalf of a merchant. Banks traditionally use
EDC to accept acquiring transactions. Electronic Data Capture (EDC) terminal is a
machine used for accepting payments at all retail outlets. Customer can pay through Debit
Card, Credit Card and QR code. EDC terminals have high prices and complex operations.
The reliability of EDC in transactions is also very lacking because it is often interrupted by
telephone line network problems.

Due to many banks in Indonesia that also offer acquiring services, Bank XYZ need to find
ways to provide better and reliable services as a competitive advantage to win the market.
There is potential market share of merchants who require high mobility and want to use
high end media gadget as a tool for transaction. Merchant Business and Transaction
Banking want to expand its service to reach the market share of merchants who want a high
mobility with high end media gadget and attract SME segment merchants. They also want
to introduce low-cost EDC terminal using Mobile EDC which support EMV based card.
By implement M-POS, will strengthen its offering to merchants with a variety of media
solutions payment using a credit card and or debit card.

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Problem and Opportunity
One of the challenges in using EDC is the operational complexity. In traditional EDC, the
EMV kernel is stored within the EDC terminal. So, whenever the card holder presents
his/her card to be charged, the processing is done using the local EMV kernel. The problem
with this approach, if for any reason the EDC is broken after the customer leaves, all data
would be loss. As the merchant would have no choise but to get the EDC terminal replaced.
If there is a power black out or problem with the telephone line, there will be no other mean
for the merchant to accept the card payments. If there is any change to the EMV
specification and requires an update to the kernel, bank need to go through the hassle of
manually upgrading each EDC terminal. All these complexities lead to high operating costs
for the bank.

Mobile EDC (m-EDC) is a new approach in accepting card payments by utilizing

smartphones or tablets as EDC terminals by adding a card reader to read the chip card or
magnetic stripe and perform EMV processing. Merchants can use Android and iOS devices
to accept payment transactions. One of the advantages of m-EDC is the use of centralized
EMV processing, which is unique as compared to traditional EDC terminal. The use of m-
EDC can reduce the invesment and operational costs required for EDC operations.

Figure 1 – Centralized EMV Processing

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m-EDC also simplifies the experience on the merchant side, by utilizing one device as POS
and EDC at the same time. It also provides customers with a new and modern experience
that is more comfortable. This is potentially a profitable attraction for merchants. m-EDC
is expected to attract new merchants to cooperate with the bank and increase acquiring
transactions. It allows financial institution to offer mobile sales force that values flexibility
and mobility, a green field market, previously not approachable and also merchants from
service industries that prioritize superior experiences for their customers. So, the targets
are insurance, hotels, cafes and restaurants, and SME merchants.

m-EDC can also reduce bank’s operational cost related to maintenance and rollout of EDC
terminals. Using m-EDC, banks can centrally perform EMV kernel updates and eliminate
the cost and hassle of manual updating. This benefit will increase in size as the number and
distribution of the bank's EDC network increases.

The capabilities required to be supported by m-EDC are Purchase, Void, Reversal, Tips,
Balance Inquiry, Refund, Card Verification & offline, Authorization (Auth Only), Adjust,
Installment and Poin Rewards. The solution must have settlement function and should be
able to process card using Dip and Swipe. The solution should provide device management
and provisioning feature, including to register and pairing between card reader and devices
securely. To ensure the security of transactions, the solution should guarantee the
application and devices security, no hacked or jailbreaked devices should be allowed to run
the m-EDC apps.

Apart from accepting payment securely, m-EDC should provide a unique merchant
management portal where merchants and financial institution can do the following:
• Review sales data categories by location and time.
• Geo-fencing technology – limit the usage of m-EDC by location (by country, by
state or even by provinces).
• Personalised advertisements in e-receipts.

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Purpose
The main purpose of using m-EDC is to reduce the investment and operational costs
required for EDC operations such as maintenance and rollout of EDC terminals. However,
with the usage of mobile technology application, turns out it give us more objective that
need to be resolve, which is:
1. Strengthen bank’s offering to merchants with a variety of media solutions payment
for credit card and debit card.
2. Increase bank profit.
3. Improve the traditional EDC terminal with mobile application.
4. Changing people's mindset from using traditional EDC to the mobile version (m-
EDC).

MOV (Measurable Organizational Value)

VISION
To become a leading digital bank in Indonesia.

MISSION
To provide universal banking services by utilizing digital technology to provide
services that improve the financial wellbeing of the Indonesian people.

Area of Impact The project will be successful if…

Operational Reduced operating costs by 45% per annum compared to traditional
EDC.
Strategic Addition of 4,000 new merchants within 5 years.
Financial Additional income of USD 6.9 million from NII and transaction charges
in 5 years.
NII = Net Interest Income

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 MOV: Reduce operation cost 45 % per annum compared to tradisional EDC and add 4,000
new mercants and USD 6.9 million incomes from NII and transaction charges in 5
years.

Through this technology-based service, Bank XYZ can increase market share by reaching
tech savvy merchants and positioning itself as a leader in providing digital services for
merchants so that it supports the bank's strategy and goals.

Objective of Business Case

This business case was created to obtain the necessary budget and support to implement
m-EDC at Bank XYZ.

7. ANALYSIS OF ALTERNATIVES
Assumption:
1. 2,200 transaction / merchant / year with 10% annual growth
2. Average ticket size = USD 10
3. MDR 1%
4. Current nationwide EDC Operational Cost = USD 1,280,307 per annum with 10% annual growth

Projected Volume Year 0 Year 1 Year 2 Year 3 Year 4 Total

Customer Base (merchant) 800 1,600 2,400 3,200 4,000
Avg. transaction / merchant / year 2,200 2,420 2,662 2,928 3,221
Total Number of Transaction 1,760,000 3,872,000 6,388,800 9,370,240 12,884,080 34,275,120
Total Transaction Amount USD 17,600,000 USD 38,720,000 USD 63,888,000 USD 93,702,400 USD 128,840,800 USD 342,751,200

Baseline Year 0 Year 1 Year 2 Year 3 Year 4 Total

EDC Operational Cost (Existing) USD 1,280,307 USD 1,408,338 USD 1,549,172 USD 1,704,089 USD 1,874,498 USD 7,816,405

Notes on benefit calculation:

• Transaction charges (MDR) is 1% from total projected transaction amount
• Cost reduction is 45% from current EDC Operational Cost

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Alternative 1: Acquire an off-the-shelf Mobile EDC Solution (Purchase)
Currently there are many vendors that provide mobile EDC solutions that can meet the
needs of Bank XYZ. This system can be purchased or acquired by the bank with a number
of initial investments so that the bank does not have to deal with operational expense which
continue to increase along with the increasing use of the mobile EDC system. This model
is very suitable if the bank has a high level of confidence in this business model because
the bank can enjoy maximum returns if the business can grow more than projected.

Cost and Benefit Analysis for Alternative 1

Discount Rate 8%
in USD

Project Cost Year 0 Year 1 Year 2 Year 3 Year 4 Total

Implementation Cost USD 23,250 USD - USD - USD - USD - USD 23,250
Software USD 1,422,035 USD - USD - USD - USD - USD 1,422,035
Hardware USD 217,136 USD 116,919 USD 116,919 USD 129,730 USD 129,730 USD 710,434
Contigency (10%) USD 166,242 USD - USD - USD - USD - USD 166,242
Total Project Cost USD 1,828,663 USD 116,919 USD 116,919 USD 129,730 USD 129,730 USD 2,321,961

Project Net Benefits Year 0 Year 1 Year 2 Year 3 Year 4 Total

Transaction Charges (MDR) USD 176,000 USD 387,200 USD 638,880 USD 937,024 USD 1,288,408 USD 3,427,512
Cost Reduction USD 576,138 USD 633,752 USD 697,127 USD 766,840 USD 843,524 USD 3,517,382
Total Project Net Benefits USD 752,138 USD 1,020,952 USD 1,336,007 USD 1,703,864 USD 2,131,932 USD 6,944,894

Financial Analysis Year 0 Year 1 Year 2 Year 3 Year 4 Total

Benefits USD 752,138 USD 1,020,952 USD 1,336,007 USD 1,703,864 USD 2,131,932 USD 6,944,894
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Benefits USD 752,138 USD 945,326 USD 1,145,411 USD 1,352,582 USD 1,567,034 USD 5,762,491

Costs USD 1,828,663 USD 116,919 USD 116,919 USD 129,730 USD 129,730 USD 2,321,961
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Costs USD 1,828,663 USD 108,258 USD 100,239 USD 102,984 USD 95,355 USD 2,235,500

Cash Flow -USD 1,076,525 USD 904,033 USD 1,219,088 USD 1,574,134 USD 2,002,202 USD 4,622,933
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Cash Flow -USD 1,076,525 USD 837,068 USD 1,045,172 USD 1,249,598 USD 1,471,678 USD 3,526,991

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Risk Analysis for Alternative 1

12
BANK XYZ Version: 4.1.0
PROJECT COST & BENEFIT ANALYSIS WORKSHEET

1 Project Name Mobile EDC (m-EDC)

2 Division / Department Budget Center Transaction Banking (0770072) & Merchant Business (0610319)

3 Proposed Budget Amount

One Time Cost* USD 1,828,663
Total Recurring Cost USD 493,298
Total Project Cost* USD 2,321,961

*inclusive of 10% contigency

Contigency USD 166,242

4 Project Commence Date 01 May 2021

5 Target Completion Date 31 October 2021

6 Benefit Commence Date 01 November 2021

7 Project Financial Metrics over the evaluation period is as follow:

Net Cash Flow USD 4,622,933

8% Discounting, Net Present Value USD 3,526,991
ROI 158%
Total Benefits / Gains USD 6,944,894
Total Costs USD 2,321,961
Project Risk Scoring 36
Medium

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Alternative 2: Use Mobile EDC Service with Leasing Model (Rent)
Bank also has the option to lease or rent mobile EDC systems from vendors offering this
scheme. These schemes usually offer a small upfront investment and the costs will increase
with use (pay-per-use). However, if the level of use is high, the total cost will be higher
than the one-time payment model. This model is suitable if the bank assesses that this
business prospect still needs to be studied further and has the risk of not reaching the
projected amount. By using a pay-per-use model, the risk of investment failure can be
avoided or reduced.

Assumptions
• System rent cost: USD 0.15 per transaction.

Cost and Benefit Analysis for Alternative 2

Rent Cost per transaction 0.15
Discount Rate 8%
in USD

Project Cost Year 0 Year 1 Year 2 Year 3 Year 4 Total

Implementation Cost USD 23,250 USD - USD - USD - USD - USD 23,250
System Rent Cost USD 264,000 USD 580,800 USD 958,320 USD 1,405,536 USD 1,932,612 USD 5,141,268
Contigency (10%) USD 28,725 USD - USD - USD - USD - USD 28,725
Total Project Cost USD 315,975 USD 580,800 USD 958,320 USD 1,405,536 USD 1,932,612 USD 5,193,243

Project Net Benefits Year 0 Year 1 Year 2 Year 3 Year 4 Total

Transaction Charges (MDR) USD 176,000 USD 387,200 USD 638,880 USD 937,024 USD 1,288,408 USD 3,427,512
Cost Reduction USD 576,138 USD 633,752 USD 697,127 USD 766,840 USD 843,524 USD 3,517,382
Total Project Net Benefits USD 752,138 USD 1,020,952 USD 1,336,007 USD 1,703,864 USD 2,131,932 USD 6,944,894

Financial Analysis Year 0 Year 1 Year 2 Year 3 Year 4 Total

Benefits USD 752,138 USD 1,020,952 USD 1,336,007 USD 1,703,864 USD 2,131,932 USD 6,944,894
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Benefits USD 752,138 USD 945,326 USD 1,145,411 USD 1,352,582 USD 1,567,034 USD 5,762,491

Costs USD 315,975 USD 580,800 USD 958,320 USD 1,405,536 USD 1,932,612 USD 5,193,243
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Costs USD 315,975 USD 537,778 USD 821,605 USD 1,115,760 USD 1,420,528 USD 4,211,645

Cash Flow USD 436,163 USD 440,152 USD 377,687 USD 298,328 USD 199,320 USD 1,751,651
Discount Factor 1 0.93 0.86 0.79 0.74
Discounted Cash Flow USD 436,163 USD 407,548 USD 323,806 USD 236,822 USD 146,506 USD 1,550,846

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Risk Analysis for Alternative 2

15
BANK XYZ Version: 4.1.0
PROJECT COST & BENEFIT ANALYSIS WORKSHEET

1 Project Name Mobile EDC (m-EDC)

2 Division / Department Budget Center Transaction Banking (0770072) & Merchant Business (0610319)

3 Proposed Budget Amount

One Time Cost* USD 315,975
Total Recurring Cost USD 4,877,268
Total Project Cost* USD 5,193,243

*inclusive of 10% contigency

Contigency USD 28,725

4 Project Commence Date 01 May 2021

5 Target Completion Date 31 October 2021

6 Benefit Commence Date 01 November 2021

7 Project Financial Metrics over the evaluation period is as follow:

Net Cash Flow USD 1,751,651

8% Discounting, Net Present Value USD 1,550,846
ROI 37%
Total Benefits / Gains USD 6,944,894
Total Costs USD 5,193,243
Project Risk Scoring 37
Medium

Alternative 3: Keep Using The Traditional EDC

One of the options is to maintain the status quo, by continuing to use traditional EDC in
acquiring services. This option limits opportunities to expand the business to merchants
requiring flexibility and mobility as well as SME merchants. This choice will also keep
operating costs high and will continue to increase as the business expands.

By choosing this option, Bank XYZ loses the opportunity to get a benefit of USD 6.9
million and the opportunity to position itself as a digital service provider for
merchants.

In this condition, the option not to do anything as stated in Alternative 3 is not

recommended because it eliminates Bank XYZ's opportunity to get additional profit
from the acquiring business and prevents Bank XYZ from achieving its objectives.

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Comparison of Alternative 1 & Alternative 2
Alternative 1 Alternative 2
Criterion Weight
Purchase Lease
Financial ROI 20% 10 2
NPV 20% 10 4
Strategic Alignment with strategic objectives 15% 7 7
Increased market share 15% 7 7
Project Cost 10% 6 0
Time to develop 5% 10 10
Risk * 5% 4 4
Customer Customer satisfaction 10% 10 10
Total Score 100% 8.4 5

* max Risk Score = 63

Notes: The option to build the system internally has been evaluated and considered not feasible
due to the complexity of the card payment system which must ensure compliance with EMV and
PCI DSS rules and requires special expertise.

8. RECOMMENDATION
Based on the comparisons given, the recommendation for Bank XYZ is Alternative 1 to
purchase an off-the-shelf Mobile EDC solution, with the following considerations:
• Although it requires a larger initial investment, based on a 5-year calculation using
the projected volume, Alternative 1 provides more net profit for the bank. This can
be seen from the better NPV USD 3,526,991.
• Alternative 1 has a better ROI of 158%.
• Both options have the same level of risk.
• The lease option does not accelerate project completion because it still requires
development for customization according to user requirements at Bank XYZ.

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9. FUNDING PLAN
This project cost will be shared between the Merchant Business group and Transaction
Banking group, with the share of 40% by Transaction Banking group and 60% by the
Merchant Business group. It is based on the thought that both groups will enjoy the
benefits of this project.

This project budget will be taken from the product and project development budget
allocations that have been allocated to the two groups for the 2021 financial year.

10. PROJECT DURATION

PROJECT MILESTONE Completion Date

Project Initiation May 2021

Project Planning May 2021

Project Execution Jun 2021

Integration and Testing Aug 2021

Live Date (Fully Roll-Out) 1 Sep 2021

Estimated Timeline
No Activity May 21 Jun 21 Jul 21 Aug 21 Sep 21
w w w w w w w w w w w w w w w w w w w w
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Project Initiation
1 User Requirement
Specification
2 Sign Off URS
Project Planning
1 Resource Planning
Internal Resource
Vendor Selection
2 Project Proposal
3 Fit and Gap Analysis
4 Quotation

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Project Execution
1 Functional
Specification Document
2 Design Specification
Document
3 Development
4 Internal Testing
5 Qualification
Integration & Testing
1 Socialization
2 Key User Selection
3 User Acceptance Test
(UAT)
4 UAT Result and
Qualification
Go Live

Legend
Estimated
Delayed
Stopper
Others

11. REFERENCE
Marchewka, J. T. (2003). Information technology project management: providing
measurable organizational value. Hoboken, NJ.

Schwalbe, K. (2019). Information Technology Project Management (9th ed.). Boston:

Cengage Learning.

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12. APPENDIX
Project Risk Scoring Guideli

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