The economy declines, margins decrease and delinquencies rise, but it seems that “they” are constant. “They” are the IT/business challenges that stand between your current platform and efficient back office servicing, or your originations capabilities and your go-to-market strategy.

A historical view of the equipment finance market demonstrates a clear track record of companies that are always trying to catch up operationally to achieve that elusive goal of a first-class customer experience combined with first quartile efficiency metrics. Can it be done? Yes it can be done and it has. The formula seems to be one part operations strategy, three parts capital and six parts determination. The determination piece is especially critical as first or even second attempts often end in failure or results falling below expectations. But determination for leading companies is also that drive to understand that the competition is closing fast and continual improvement is critical to long-term success.

Most leading companies that have achieved that level of operational success acknowledge that they are not done. A few of them were willing to share the top IT/business challenges of first quartile companies.

Company #1: Leading Provider of Equipment Finance Services to the Agriculture Sector

Challenge: Success With Partners Drives Ever Increasing Integration Challenges

Doing a handful of transactions with a partner is one thing, but doing 1,000 transactions a year elevates the relationship to a different level. At that point you have become a critical part of the company’s go-to-market strategy and the need for partner integration exists at many levels.

Ease of use, platform accessibility, credit and document processing, back-end servicing requirements, partner compensation and ultimately a seamless and transparent customer experience are all challenges of growing this partnership model for this leading agriculture equipment finance company. And while this company has experienced strong growth since refocusing and building the infrastructure for its partner model two years ago, the longer-term opportunity is believed to be better than three times the current new business volume.

The core IT/business challenge of achieving this long-term growth revolves around the ability to enable flexibility, while maintaining a certain level of standardization in its product and service offering model. This is especially challenging in a company that has just completed a transformation from a high touch/high cost approach for its small-ticket business, to a much more simplified and efficient model. Senior management is pondering: “How can we enable the needs of the business model systematically and continue to grow new business and portfolio serviced metrics, while limiting growth in headcount?”

Some of the key elements to successfully meeting the challenge for this company are as follows:

Company #2: Leading Captive Equipment Finance Company

Challenge: Making the Entire Transaction Process Paperless

A paperless transaction from bid to book requires the cooperation and coordination of many parties, from the lessee to regulatory agencies to internal departments. Software providers offer an electronic solution, but the human element and embedded legacy processes can often undermine paperless initiatives. This company has partially tackled the issue by implementing an e-signature solution on the front end. Transaction documents are uploaded to a website where customers submit their electronic signature. However, internal departments such as accounting and audit require ancillary paper documents for processes such as funding or the pricing of the transaction. Ultimately, these documents are scanned and added to the lease document repository system as part of the electronic transaction file.

A potential solution is leveraging the full capabilities of the origination system to create the ancillary paper documents required by the internal departments. As a prerequisite, the company would have to ensure that all fields displayed on the documents are included in the database. It is likely many of those same fields are already resident in the system. A combination of the workflow engine, status codes, comments, change logs and the automated document generation tool will be used to replicate the paper documents and internal controls in an electronic format. The users that currently require paper documents and approve processes would need access to the origination system to perform the same tasks electronically. The workflow could invoke a “human stop” ahead of funding or booking whereby the transaction processing would come to a halt or loop backwards until the specific funding or booking requirements are met. Status code change logs provide an audit trail with user information along with date and time stamps. Updates to the status code will also trigger the workflow engine to continue to the next process in the transaction lifecycle.

A similar solution as described above was implemented at an international banking lender. While it did not implement a customer facing e-signature solution, it did transform all internal processes to be paperless. A short form application quickly gathers the required information to begin processing the transaction. As the potential customer changes from a suspect to a prospect, additional information is input into the front-end system. Credit underwriting is handled electronically. All regulatory document templates by country are included in the front-end system. The branch banker has the ability to print the loan documents onsite for a customer signature. Data is passed to funding and booking systems for processing and to the bank’s data warehouse for reporting purposes. This lender has embraced the concept of an electronic file, and as a result of a sustained transformation effort, has achieved a robust internal paperless solution.

Company #3:
Leading Independent, Full-Service Transportation Equipment Finance Provider

Challenge: Flexible Billing and Robust Invoice Presentment Options

This forward-looking, customer-centric equipment finance provider holds an annual customer focus group meeting to better understand the needs of its customers. At the top of the list for the past few years has been the need for flexible billing and robust invoice presentment options. To respond to this need, the company currently manages customer requirements offline, manually creating invoices that match individual requirements. Aside from being time consuming, this process delays billing and lacks industrial strength internal controls.

Customers have diverse billing requirements such as multiple bill-to locations for different charges as well as options for invoice presentment and remittance. For example, some customers require tax invoices to be sent to one location, maintenance charges to another while recurring rental charges need to be sent to a third location. Once the charges are assigned to each bill-to location, each customer location may have a preference for invoice presentment. One location may desire a paper invoice, while others require an EDI file for integration with their systems.

For the company to accomplish this, a billing profile can be utilized to manage customer requirements and preferences. A robust billing profile can maintain a customer’s requirements for everything from bill-to locations to invoice presentment options, all at the asset level. This approach allows for automatic invoice generation, greatly reducing the current manual process. Additionally, maintaining amounts billed with charge type attributes at the asset level enables detail revenue analysis for both customers and the equipment finance provider.

By implementing a solution, this company expects to realize the following benefits:

IT and the business are aligned on the preferred approach to the solution; 1.) try to outsource the function, 2.) look for a commercially available software package and 3.) develop a custom solution as a last resort.

Outsourcing the end-to-end invoicing process was not possible. While quality service providers exist for invoice presentment and payment, the creation of line items needed to be done in house. A quick scan of the commercially available software packages uncovered that most were designed for higher volume operations, and included much more functionality than the company needed. This equipment finance company only generates a few thousands invoices per month, and the available packages are designed to accommodate hundreds of thousands per month. As a result, the selection and implementation of some leading packages became too expensive.

The current direction is that the existing sales and asset management application will be further developed to fulfill the necessary billing requirements. While in the design process, the company will continue to look for opportunities to leverage existing systems and outsource parts of the process that do not deliver a competitive advantage.

Leading Equipment Finance Companies Still Face Challenges
Despite the economy and its impact on the industry, leading providers continue to address critical business-driven IT challenges. When capital investment is limited, solutions often mean counting on inputs from visionary business partners for utilizing existing software capabilities to the fullest, or looking at a longer horizon for building certain capabilities in modules.

However, one consistent theme from these leading companies is the concept of continual improvement, building momentum and recognizing that not so small wins along the way are all key to meeting the ultimate objectives.

Steven E. Byrnes is the leader of Capgemini’s North American Asset Finance practice. His professional experience includes more than 24 years of direct employment in, and consulting to, the asset finance industry. Byrnes uses his finance and operations background to assist companies with projects that range from business strategy development and organization assessment, through to the implementation of systems and processes required to execute those strategies. His work is entirely within the financial services community and he has provided services for more than 70 of the country’s largest finance companies.

Michael Donnary is a senior manager in Capgemini’s Asset Finance practice. Donnary is an industry specialist with a broad background in the selection and implementation of financial systems. His background in information technology, banking and equipment finance operations allows him to completely understand the complexities associated with service delivery. His 19 years of experience includes system selection, custom software development, system implementation, project management, data management strategies and industry best practice definition. He started his career in banking at Metropolitan Bank Group in Chicago. Before joining Capgemini is 2004, Donnary was a regular speaker at industry events and has been published in industry publications.

Kenneth Kelliher is a manager in Capgemini’s Asset Finance practice. Kelliher has 17 years broad-based experience in financial services, fulfilling diverse roles including software sales and implementations, technical consulting, leasing operations, and accounting. He has participated in a number of successful system implementations encompassing a wide variety of software packages.