A joint article by Jonathan Croft, Chief Information Officer, Société Générale Factoring and Kevin Day, CEO, LendScape
“Say you are an international, multi-jurisdictional financial institution or bank. Your goal is to replicate your successful financing model around the world, for the benefit of your customers, your staff and your shareholders. It sounds simple enough.”
However, the world is not that simple. Different cultures, languages, legal frameworks, currencies, time zones, infrastructures, software, processes, working days of the week… The list goes on. There are many hurdles to cross-border expansion, but this article focuses on the question of your chosen technology platform. Do you “go local” and follow the domestic market, or do you use a global solution that adapts to your chosen markets?
The experience we share in this article is based on Lendscape’s ability to develop a solution for Asset Based Finance that has been successfully deployed in 50 different countries, and Société Générale Factoring that has adopted this platform as its global solution for diverse receivables finance market offering.
What is the need? From Société Générale Factoring’s perspective, the need is to open new markets, manage cost and risk effectively – without the need for major IT investments – and, more importantly, with a high standard of best practice and excellence in the methods used to lend money against account receivables and payables.
LendScape met its need and has now been successfully deployed in nine countries for the Société Générale Factoring business line. But how did Lendscape develop a technology solution that met that challenging criteria? To begin with, let us eliminate the less elegant solution that might have been - to build a version of the platform for each country. A simple solution on paper, but a solution that immediately would have created multiple versions of the same core product and source-code base. Each “version” would then have followed its own diverse roadmap of product evolution. Any software improvement or mandated regulatory or compliance changes would have had to be replicated across each country-specific instance. A hugely costly approach, with plenty of opportunities for errors, process defects and non-compliance issues.
Creating a truly multi-national system involves a significant amount of upfront thinking and research. On a basic level, we have the language issue. Every textual item from screen literals, report text and error messages to lookup tables must be translatable. That is not just from English to another Latin-based language – it also has to cater for Russian, Chinese, Hebrew and Arabic. Languages that include both left-to-right and right-to-left presentation and data input. Dates and currency amounts also need to be shown according to local convention. For instance, is a period or a comma used as the decimal separator?
Getting an IT system to look local is step one. Next, we need to think about the commercial environmental differences. Postal addresses, for example; what format is the post code? Where in the address should it be positioned to ensure a letter gets to the right address? Regarding government or industry coding of companies; is there a VAT number, company registration number or sector coding system? Are there syntax or check digit validation rules? All these things need to be configurable to adapt to local requirements.
Then we need to consider how the system should integrate with local standards. Like a CHAPS payment file in the UK or a PAIN standard in Germany. The same basic data, but delivered in a standard country-specific format. This logic applies to incoming and outgoing payments, statutory reporting, etc.
To have a truly international system, all these configuration requirements need to coexist with the other 80% of common requirements. In other words, a single implementation of the system should support multiple countries, with all of their specific nuances. We need a multicurrency system to deal with the local currency and currencies of the collateral and funding facilities, anything from Japanese Yen with no decimal places to Tunisian Dinar with three decimal places. Every numeric possibility has to be considered. For instance, maximum invoice values; a single invoice worth a billion Vietnamese Dong (about €38K).
Finally, you have to address local business practice and process. What kind of services are provided? You have to cater for single invoice finance in Poland, in-house factoring in Germany, invoice discounting in the UK, confirming in Spain and Latin America, Asset-based lending in the US or classic recourse and non-recourse factoring in France. You must also consider any special practices such as guarantee funds and post-dated payments in France, collection fees and late payment interest in the Nordics or split VAT payments in Poland.
We’ve done the upfront thinking. But why go to the trouble of creating a system that handles all the complexity mentioned above?
If we take the Société Générale Factoring example, the relationship with Lendscape started in the early 90s, with Lendscape’s iFACTOR solution. Société Générale Factoring is international, with commercial operations in more than 30 countries. The team in Paris is the centre of excellence for the group, tasked to support the bank’s subsidiaries in other countries. Creating a truly multi-national system involves a significant amount of upfront thinking and research. www.hpdlendscape.com The bank is ambitious to expand to new markets and develop its receivables/payables finance offering to support its retail and wholesale customers.
The design criteria for Lendscape was set at the highest level of need and complexity. The multitude of international requirements were peeled away to get to the universal core requirements; the foundations of what the system is about, but including the basic internalisation concepts for languages and formats.
A configurable system design, built with APIs and interface mapping solutions, solved the requirements around different service offerings and local integration. These capabilities reduced the time required to implement the system with its agile and adaptable “open factoring” architecture.
Société Générale Factoring selected Lendscape as its international system of choice for receivables and payables finance. A global contract enables any subsidiary of the bank to adopt Lendscape under the group’s commercial terms and thus benefit from a single solution. The benefits from the bank’s perspective were: only one supplier – Lendscape – to deal with, common processes across the group, the ability to harmonise the subsidiaries, enforcement of group-wide polices, the aggregation of data for analysis purposes and the capability to expand into new countries quickly.
Société Générale Factoring has a flexible approach to the deployment of Lendscape. The team in Paris can host a subsidiary and effectively provide an intra-group software as a service. Alternatively, the subsidiary can have an on-premises, deployed solution or use Lendscape’s SaaS solution. This all depends on the scale and preferences of each entity. Using this approach, the bank has successfully deployed Lendscape in nine countries: France, Germany, Norway, Cameroon, Ivory Coast, Croatia, Egypt, Morocco and Romania.
9 countries of Société Générale’s Factoring business have deployed the Lendscape SaaS solution
Another advantage for Société Générale Factoring is that they have been able to set up an expert team in Paris to support the subsidiary operations and guide them in the best use of the system. This has been particularly important for new factoring operations where the local knowledge is at an early stage of development. The bank is also able to collaborate and share innovation across the group, spreading costs and ensuring that all subsidiaries benefit. Investment in digitalisation and streamlining allows the bank to create a target operating model that offers simplicity throughout the group and deliver real benefits to its customers.
A configurable system design, built with APIs and interface mapping solutions, solved the requirements around different service offerings and local integration. These capabilities reduced the time required to implement the system.
The creation of a truly international high volume IT system is challenging. The upfront investment is substantial, and it takes time and expertise to get all the pieces of the jigsaw assembled, ready for implementation. For multinational organisations like Société Générale Factoring business line, the major benefit of this approach is that technology is not a barrier to expansion, volume or international development. In fact, the technology becomes an enabler to allow the bank to seize expansion opportunities as and when they arise. Upfront thinking promotes long-term growth!