15 years of SAP for banks

In the 1990s, Otto Johannsen worked at DG Diskontbank. His job was to develop financial products based on open trade receivables for the German market. He was fascinated by the idea that factoring could also be operated with SAP.

"I envisioned how this automation could be used to process accounts receivable master data and payment processes more quickly and securely, thereby better leveraging the business potential of factoring."

But more than a few thought the idea was crazy: the SAP application in the 1990s was purely corporate software - very large and very expensive.

This product in a medium-sized cooperative bank - that seemed completely absurd. Today, major banks, savings banks and factoring providers rely on his solution to implement one of the fastest-growing financial products - financing with open trade receivables.

Johannsen took the plunge into self-employment. The timing was good: SAP R/3, the first SAP product, was launched in 1992. Johannsen remembers:

"The system proved to be a mega-seller in the corporate environment. But SAP also wanted to conquer the midmarket."

That's when the former banker came up with his idea of introducing SAP to the financial sector. A development partnership was quickly agreed upon, and Johannsen founded his own company, Fidis - Financial Data and Information Services.

Johannsen was right: Competition in the factoring market has increased - enormously. It goes hand in hand with steady growth: When Fidis was founded 15 years ago, factoring was still in its infancy with a turnover of 24 billion euros.

In recent years, the financial solution has grown at annual rates of up to 40 percent. Today, sales are just under 200 billion. The decline in margins in particular is causing problems for providers.

"In classic in-house factoring, no fees are charged at all today"

says Johannsen.

"The business is financed solely on an interest basis. If you want to survive in the market, you have to keep your costs low and develop new products to acquire new target groups."

The advantage of ERP software: It offers enough flexibility to develop new service products. But Johannsen doesn't just have software, it also has the process know-how.

Just as he developed new financial products at DG Diskontbank back then, he does so today with leading factoring providers - supported by a powerful IT solution. And demand for factoring continues to rise - Johannsen is certain of that.

Because the economy needs fast money. Current developments such as Basel III and the high cost of long-term fixed interest rates have further supported the trend. Factoring is a suitable instrument for meeting this demand, provided it is operated properly.