Software over here versus over there
HPD Software T
his article addresses the differences between factoring and ABL software developed in America and software developed in Europe.
Summary
Cars, food, buildings, and most other things reflect the culture of their birth. The same is true of commercial finance software. The European and American commercial finance markets are close to the same size. However, Europe has a much broader mix of cultures, languages, laws, and customs. For purposes of this discussion think of the US commercial finance market as a large fairly homogeneous beast with one culture, one language, one set of basic laws, and effectively one set of business customs.
Let’s take a look at how commercial finance software reflects these assumptions.
Language
First, software developed for European commercial lenders mirrors the nature of the continent. Start with the most basic cultural trait – language. The better commercial finance applications written for the European market readily accommodate the challenge of multiple languages. These systems have user interfaces and reports that present data in the reader’s language. Some software lets the buyer choose a single language for all their users. The very best applications enable users to see the data in their own language. American software generally gives the buyer the option of seeing everything
14 November/December 2010
in English and only English. There has not been a need for multi-language capabilities.
Currency
Right after the language issues comes the European currency situation. Any significant European software has to include multi-currency capabilities. The software allows the lender to track collateral and loan balances in different
US-based factoring software may include better risk management capabilities
currencies. Quality software can put the foreign exchange exposure in the hands of either the lender or their client. Traditionally the vast majority of US finance operations dealt only in dollars. Their clients invoice and borrowed only in dollars. Life was good. When a multi- currency transaction occurred in the past, the lender’s operations people handled the transaction with manual processes, spreadsheets and other such cumbersome solutions.
Lending practices
Each European country has its own lending practices. The lending practices in the various countries evolved separately with minor, and sometimes not so minor, differences. One same example is the plethora of payment methods across the continent. Once again the major European software companies had to rise to the challenge with flexible tools that covered these differences.
Business Money
In the US lending practices are fairly common across the market. Obviously different lenders have their own style but the vast majority of transactions follow a few models. Therefore, US-based software has the luxury of simplicity. When it comes to risk management in the factoring realm the US-based software may have a leg-up on the European offerings. More factoring operations across Europe rely on credit insurance. Therefore, the risk is transferred to the insurance provider and the software often does not include significant risk management tools. The US factoring companies do not rely on credit insurance as regularly. There, the US-based factoring software may include better risk management capabilities.
Legal and reporting Further aggravating the European lenders is the wide variety of tax and legal reporting requirements. Each country has its own tax code and regulatory reporting requirements. Once again the software companies had to step in and provide comprehensive solutions. US lenders live in an environment dominated by the Uniform Commercial Code (UCC). They have to dance to the same band whether they operate on the east coast or the west coast or everywhere in between. Also, the publicly traded US-based finance companies all fall under one federal agency – the Security and Exchange Commission. So things again are much easier in the US from the software prospective. The advent of the Basel accords has brought common reporting requirements to both the US and European markets –
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