Deutsche Post Pension Service Business Division: 100 years of experience and state-of-the-art technologies
Deutsche Post, Germany's only universal provider of postal services is part of Deutsche Post DHL, the world's leading mail and logistics group. The Deutsche Post and DHL corporate brands offer a broad portfolio of logistics (DHL) and communications (Deutsche Post) services. The group provides its customers with both easy to use standardised products as well as innovative and tailored solutions ranging from dialogue marketing to industrial supply chains.
Deutsche Post Pension Service Business Division stands for efficient pension management - no longer just as a professional partner for statutory pension service providers, but in particular for those companies that offer their employees a company pension scheme. As specialists in the administration of the statutory pension fund, Deutsche Post Pension Service Business Division has many years of experience and uses high-capacity IT systems in the area of pension services covering all relevant processes from administration to the payment of pensions. The basis for making pension payments on time is efficient data management. Deutsche Post Pension Service Business Division handles more than 24 million records which are managed, archived, structured, documented, updated and evaluated. Besides inventory management and the payment of pensions, the Pension Service Business Division also offers other services including calculation of pensions, withholding and payment of taxes and social welfare contributions, adjusting payments to comply with rises under collective wage agreements or statutory regulations as well as the individual recalculation of payments as a result of changes in entitlement requirements.
Deutsche Post Pension Service Business Division disburses 25 million pension payments monthly on behalf of the public German retirement scheme to retirees residing in Germany and abroad. Today, 22.5 million of these payments are Credit Transfers (), the remainder of the volume will be migrated to shortly.
The Deutsche Post Pension Service Business Division project - questions and answers
Newsletter: Deutsche Post Pension Service Business Division already initiated migration to the Single Euro Payments Area () payment instruments for national payments in early 2009. How far have you progressed in converting pension payments to the schemes and standards?
Stefan Scheidgen: The Pension Service Business Division converted all customer account data to the Business Identifier Code (BIC) and the International Bank Account Number (IBAN) in 2009. In November 2009, the first pension payments were disbursed as SCTs. We made the decisive step in the transition to in April 2010, when approximately 1.6 million payments to retirees with an account at Postbank were executed for the first time as payments. This step served as our benchmark, which allowed the verification of all related concepts and processes. By June 2011, 20 million retirement payments were compliant and the migration project was essentially complete.
Newsletter: Which factors motivated you to start the migration project early?
Stefan Scheidgen: We were instructed to convert our payments to in 2009. The initiative was launched by political decision makers driven by the ambition to support through the migration of public sector payments. Ultimately, we got the requirement to advance to by Deutsche Rentenversicherung (federated German statutory pension agency). In addition to planning our own project management we were able to exchange views and discuss next steps regarding migration with other major public payers in the ' User Forum' of Bundesbank (central bank of the Federal Republic of Germany). In our experience, Bundesbank fully accomplished its public mission to support the establishment of the new European payment schemes in Germany.
Newsletter: Did your organisation also implement the ISO 20022 message standards?
Stefan Scheidgen: We are in discussions with our partner banks to move to the ISO 20022 cash management (CAMT) formats. We will also try to be the frontrunner in this respect.
Newsletter: Is implementation viewed as a stand-alone project or is it part of a review of processes and applications beyond payments?
Stefan Scheidgen: As part of the project we overhauled our entire payment systems landscape. We have been able to achieve a reduction in some lead times, thereby positively impacting the cash position of our customers. Switching off all of our four legacy payment systems and the improvements in payment lead times contributed to the business case.
Newsletter: Did your organisation opt to upgrade the existing IT architecture or to implement new IT applications and enterprise resource planning (ERP) systems?
Stefan Scheidgen: I have been lucky that the strategic IT planning of the Pension Service Business Division was wise enough to provide a flexible solution that proved to be an enabler for the project. For some legacy master data systems we - as part of the project deliverable - still operate using some converter functionality. Migration of those legacy master data systems is scheduled already. The last significant replacement is currently underway and will be delivered by the end of 2012.
Newsletter: Which major - including unforeseen - obstacles had to be overcome in the migration process?
Stefan Scheidgen: Correct customer account data is the precondition for timely and reliable disbursement of pension payments every month. We had national bank account numbers and bank identifiers for some 24 million accounts on file, which we had to convert to IBAN and BIC. The transition of customer account data worried us most, given that mistakes would have resulted in the inability to execute a pension payment. Obviously, the recipients of these payments can not be expected to tolerate any mistakes. We therefore managed the conversion of the account information in two steps: firstly, in the fall of 2009, all bank account related data was automatically converted and validated using tools developed by the German banking industry and recommended by Bundesbank, such as the 'IBAN-Service-Portal' and the ' Account Converter'. In a second step, we verified and tested the converted data with every bank and group of banks with whom we cooperate. In fact, prior to migration in the live environment, each future payment was run through multiple test phases. Thanks to the great performance of our migration team and the support of cooperating banks, we were able to ensure a very high level of quality (about 99.99 %) in the process of converting account data to IBAN and BIC.
Newsletter: What advice would you give to other businesses and public administrations yet to accomplish migration?
Stefan Scheidgen: In my view, the following two factors are crucial: firstly, I have always stressed that one should not wait to prepare the migration process until the European legislator defines a mandatory migration deadline. Instead, the process should be kicked off as soon as possible. To postpone the process to coincide with the main migration wave probably means that availability of external resources will be restricted. It also needs to be kept in mind that the migration project does not only impact the accounting and treasury departments, but the entire organisation and administration. Practically, all functions must be reviewed including, for example, adaptation of business stationary to state the IBAN and BIC of the organisation.
Newsletter: On 20 December 2011, negotiators on behalf of the European Parliament and the Council, representing European Union Member States, agreed that the forthcoming 'Regulation Establishing Technical Requirements for Credit Transfers and Direct Debits in Euro' (the Regulation) will define 1 February 2014 as the deadline in the euro area for compliance with this Regulation. This means that by this date, existing national euro credit transfer and direct debit schemes will have to be replaced by the payment schemes developed by the European Payments Council (). What advice would you give to businesses and public administrations which have not yet started the migration exercise however will have to manage the transition by the deadline established by the European legislator?
Stefan Scheidgen: If you are a small or medium-sized business: plan one or two weekends for your accounting staff to convert master data and ensure budget is available to manage amendments to the IT system. If you are a bigger company (more than 5,000 master data records and more than three IT systems): Run! This means you must act now.
Newsletter: Is it possible to quantify the investment necessary to implement the payment schemes and standards?
Stefan Scheidgen: The investment must cover major changes to business operations and IT systems. Business change is needed to review processes, change document templates (for example contracts, communication, and general terms and conditions), train people and so on. IT changes are needed to get master data and payment data streams ready - that is what everybody plans for. Other IT changes are required due to the implementation of migration tools, temporary converter solutions, changes related to mandate management and pre-notifications under the SDD Schemes and changes of interfaces in processes.
The scale of IT investment mainly depends on the existing systems landscape. The age of the systems and capabilities need to be considered. In our experience, even mainframe can be ready while occasionally applications with more up-to-date technology might need some shared converting support.
Change requirements for business processes also vary by industry and degree of automation. If you need to synchronise several external service providers, the picture could be very different than in an environment where you do not outsource. This huge regulatory change could also be an option to rethink and consolidate some of the investment requirements fully driven by regulatory changes. This avoids having to submit a unique selling proposition.
Newsletter: Upon first review following migration to , what are your conclusions? Which benefits could you realise with already or do you expect to materialise in the long term?
Stefan Scheidgen: There are several tangible benefits: as mentioned above, since mid 2010 we have accomplished execution times of just one business day for SCTs, which allows our contracting partners to save liquidity. In the process of migrating to , we consolidated the previous four payment systems into one. We plan to further automate our banking processes, based on the implementation of schemes and standards, which will result in even more efficiency.
Newsletter: In which instances have you identified room for improvement with regard to the processing of payments?
Stefan Scheidgen: The standard surely has to mature further before it will provide all the proven and tested tools which offer a level of comfort and certainty within the environment of the German legacy data format. As far as we know, there are no tools for mass payments available yet with the standard which would allow cancellation of payments or update of account information following bank mergers, for example. Based on the German data format, some German payment service providers established a process which proved to be very helpful with regard to the adaptation of account information following bank mergers. In the environment, however, only a few banks continue to support this particular process. We are therefore awaiting eagerly future bank mergers which will result in the need of banks to verify mass data.
Newsletter: Mr Scheidgen, thank you very much.
Stefan Scheidgen is Head of Cash Management and Accounting at Deutsche Post Pension Service Business Division.
The Website features a dedicated page 'SEPA Migration - Reports, Case Studies and Indicators'
Related articles in this issue:
SEPA Regulation: European Legislator Mandates Migration to SEPA by 1 February 2014 in the Euro Area and Transfers the Responsibility for SEPA Scheme Management to the European Commission. EPC Chair comments on the new regulatory reality governing the integration of the euro payments market
EPC Scheme Change Management 2012 (and Beyond) - Call to Stakeholders: Stay Engaged and Prepare for Impact of SEPA Regulation. Suggestions for changes to SCT and SDD must reach the EPC by end February 2012
Related articles in previous issues:
Newsletter articles published in the section 'SEPA Case Studies': Learn from the migration experience of early movers in the business and public sectors!
SEPA Direct Debit for Billers: the SDD Core Scheme Timelines. EPC Newsletter series provides support for billers preparing migration to the SDD Schemes ( Newsletter, Issue 12, October 2011)
SEPA Direct Debit for Billers: the Creditor Identifier (Go Get It!) ( Newsletter, Issue 11, July 2011)
SEPA Direct Debit for Billers: The SDD Mandate ( Newsletter, Issue 10, April 2011)
Facing Up to the IT Challenge. Choosing the right IT strategy for SEPA compliance ( Newsletter, Issue 8, October 2010)
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