IBM Payment Systems offers commercial clients a range of payment collection services designed to interface directly into clients’ billing systems. In order to deliver these services, IBM works with a network of partner banks which provide access to collection services and methods. In January 2007 IBM identified a gap in this network in the Nordic and Baltic region.
Lars Hauge Andersen
Senior Managing Consultant, Electronic Payment Collection Solutions
IBM Payment Systems is a hosted offering which delivers electronic payment and collection services to commercial clients worldwide.
IBM Payment Systems processes clients’ transactions and settles these transactions into the clients’ collection accounts. Once payment is received, the settlement data is fed into clients’ AR, ledger and treasury management systems and is reconciled against open postings for the collection items in question. “By converting to a purely electronic system, treasurers can realise a number of benefits,” comments Lars Hauge Andersen, Advisory Solution Architect at IBM. “For example, the fees for lockbox processing are five to ten times higher than fees for purely electronic payments.”
IBM also offers a managed business process service, whereby IBM monitors payment files and ensures that these items are reconciled, thereby taking over most of their clients’ day-to-day dealings with the banks.
One of IBM’s customers, a European car manufacturer, was looking for a payment solution to support its entry into a new market in the Nordic area. While the company had previously worked only with car dealers, it now wanted to sell maintenance contracts to individual car owners. However, the company’s existing system was only capable of supporting the car dealers’ transactions and was unable to manage open postings and transactions for the individual car owners.
The manufacturer approached IBM for a solution that would enable them to outsource the full collection process – including invoicing and accounts receivable – for the car owners. IBM put together a solution based on the IBM platform but as the manufacturer payments to be collected in the Nordics, IBM needed to find a bank that could support this.
IBM assessed several banks in the Nordic region and concluded that Danske Bank had the most centralised IT platform and the best skills in the region. Danske Bank was therefore selected to be IBM Payment Services’ banking partner in the Nordic region and to supply the system that would support IBM’s solution for the car manufacturer.
The chosen solution, Danske Bank’s Collection Service, is a web-based solution which receives and processes electronic invoices and collections. It allows IBM to process collections throughout the region using one IT platform. In conjunction with IBM Payment Systems’ solution, Collection Service enables the car manufacturer to receive direct debit payments, as well as payments made by more traditional methods, from all the individual car owners.
The car manufacturer benefits from lower cost of payments as well as low DSO (Days Sales Outstanding) in the fully outsourced solution. Data regarding the collections is also supplied in a manageable format. “The client does not need to think about the individual car owners – they just receive a monthly summarised report saying how much we’ve collected for them,” says Andersen.
The car manufacturer decided to use this solution and IBM is currently in the process of implementing it. As the solution is provided on a country by country basis, it is straightforward to integrate one country at a time. So far the system is in place in eight European countries, and it is due to be implemented in a further eight countries later in 2008. “What was really unique and good about the Danske Bank implementation was that we had one person who knew all the markets very well – we could get all our questions answered through this point of contact,” says Andersen. “On top of that, the fact that there was a single IT platform made the implementation very smooth.”
IBM is now looking at ways in which Danske Bank’s solution can be incorporated into IBM’s payment services in order to support other clients in the region.
Danske Bank Group is a leading provider of financial services in Northern Europe. The Group markets their solutions under the brand names of Danske Bank, Fokus Bank, Sampo Bank, National Irish Bank and Northern Bank.