Canadian financial institution Home Trust recently chose SAP for Banking over competing software from Open Solutions and Temenos because it was the only application that covered the company’s complete range of requirements, officials with the organization said.
“Other applications had mortgage processing, for example, but not general accounting functionality that could address the accounting side of the business,” said Martin Reid, Home Trust CEO. “You’d have to get different systems and tie them all together. We like the idea of having one system that could do everything but still have the flexibility if we wanted to take a third-party system and tie it in.”
He added that the project required Home Trust to heavily customize SAP for Banking to meet Canadian banking norms and regulations.
In July, the lender went live with SAP’s ERP banking software system to monitor its mortgages and financial products through its entire lifecycle. Home Trust currently has 45,000 mortgage customers and 130,000 deposit customers throughout Canada. When the time came to evaluate new banking software systems, the company wanted to find a system that was flexible enough to accommodate that kind of growth, Reid said.
Home Trust evaluated banking software systems from Glastonbury, Conn.-based Open Solutions Inc. and Geneva-based Temenos Group AG, but those vendors didn't make the cut, Reid said.
“We looked at a number of vendors and came to the conclusion that [SAP for Banking] was the most flexible and versatile product that would facilitate our growth," he explained. "As a company, we double in size every three to four years, and we’ve done that for about the last 20 years.”
SAP for Banking's "flexibility" made integrating with Filogix, a software application that Canada’s mortgage brokers use to manage accounts, a relatively simple process, Reid said.
“In our old system, we would get a print-off, and then we’d have to manually kind of key that in," he said. "[Today, we have a direct] interface to that mortgage broker system. The information comes in to us, we do all the adjudication through SAP, then all the servicing through the life of the mortgage, including collections, right up to the discharge of the mortgage.”
Challenges: Customizing SAP for Banking
One of the challenges that Home Trust had in setting up the system was adapting it to Canadian-specific financial regulations and practices, a process that began in the blueprinting phase of the project.
In Canada, for example, mortgages may have a 25-year maturation period, but they are up for renewal every five years, at which point the borrower can opt out and take the mortgage and switch to a different lender with a better rate. Also, Canadian mortgage borrowers cannot pay off their mortgages early without incurring some kind of financial penalty, unlike in the U.S.
All that meant configuring and customizing the system to meet unique market requirements. Or, as Reid put it: “We had to Canadianize it.”
Automating internal processes
The company said SAP for Banking helps it better meet the needs of its customers, which consist of both the mortgage lenders and individuals who invest with Home Trust. All of that in turn helps with the company’s bottom line, according to Home Trust.
For example, the company is now able to automate the internal mortgage approval process using SAP workflow processes. As a result, it takes less time for mortgage brokers and their clients to find out if mortgage applications have been approved.
“We’re very focused on turnaround time. [To get] that mortgage broker an answer fairly quickly, we need to go through an awful lot of due diligence in a fairly short period of time,” said Home Trust president Martin Reid. “SAP gives us that ability to do that even more quickly.”
On the deposit side of the business, Home Trust can create new financial products for its customers more easily than it could before. The financial institution is also planning on building a portal that will allow mortgage brokers to check on the status of all of their mortgages, whether they’re approved or not, and whether any additional information is needed.
“We’ll give the broker much better access to information and response time,” Reid said.