System Expansion Increases Securitization Capacity by $11 Billion
One of the world's largest travel and financial services providers, with operations in 130 countries, asked Syntel to help expand its asset-backed securities business. The business is based on the client's charge card receivables, which are sold to third-party trusts that sell securities, backed by the receivables, to outside investors. It is a AAA-rated funding vehicle.
Syntel had been involved in the securitization process of the receivables of several of the client's charge card products and provided production support for the business. Over the years, the company had taken up many initiatives to reengineer the application. Responding to the client's request, Syntel began a major rearchitecture project to enable the addition of new portfolios to the existing securitization process and to provide the client with an adaptive system architecture.
Shortly after Syntel initiated the project, the SEC released the final version of Regulation AB. This regulation mandated additional disclosures, reports and compliance requirements for issuers of asset-backed securities. Syntel would need to include the requirements in the redesigned system, as the existing system could not meet them.
With 95 percent of charge card receivables already securitized, the client's primary objective was to identify new portfolios for securitization. However, the existing system was unable to accommodate new products.
Apart from its limited capabilities, the system was also inflexible and cumbersome. Making small changes took large amounts of time and effort. Maintenance of the system diverted resources from the production of month-end reports and the delivery of processed data to the client.
Syntel's challenge was to design a new system that could handle multiple portfolios, require minimal maintenance, be flexible enough to generate the reports and timely month-end closings that the business demanded, comply with Sarbanes-Oxley and SEC requirements, and contain the records of all the client's securitization activities.
Syntel took leadership of the project. To help the client meet its objectives, Syntel initiated the concept of reengineering the client's entire securitization business process. The company evaluated alternatives and recommended the appropriate architecture roadmap for the reengineering initiative.
To better manage the large and complex project, Syntel divided it into three phases. The first phase would bring the system into compliance with the client's new adaptive architecture standards by implementing a Point of Arrival (POA) system in place of the old Point of Departure (POD) system. This would enable the securitization of a new charge card portfolio and overcome constraints in the existing system while adding functionality and flexibility. The second phase would migrate charge data to the new system, and provide various corporate and SEC Regulation AB reports. And the third phase would complete the migration of the lending data of new portfolios.
Syntel delivered the rearchitected system on time and with zero defects. In the first phase, Syntel replaced the previous VSAM system with a DB2 solution. Subsequent phases include ETL processing, usage of an enterprise reporting tool and the decommissioning of the existing POD system.
At present, Syntel has end-to-end ownership of this client's asset-backed securitization business. Beginning with a team of three, Syntel's staff grew to 60 in three-and-one-half years as the client entrusted Syntel with more responsibilities. During this time, Syntel built a deep subject-matter expertise by rotating resources between the onsite and offshore groups, improving knowledge transition.
The new system fully meets the client's requirement for critical month-end processing, providing accurate and reliable data. Its scalability enables the client to venture into new areas of revenue, such as the securitization of international and non-charge card assets. The client can now securitize a portfolio of $11 billion in new charge card receivables.
Data processing speeds are now 1.7 times faster than before and the system processes 1 million accounts in 48 minutes. Technology lead-time for securitization has been reduced from an average of two months for existing portfolios to two days for a new portfolio.
The reduced lead-time helped the client reach an important goal. As the Senior Vice President of the client's Treasury department commented, without Syntel's work, "issuing from our new charge card trust on the timeline we committed to our rating agencies would have been extremely difficult, if not impossible."
In addition, the new system proved highly adaptable. The effort required to support the launch of new products decreased 88 percent from the old system. Reliability is extremely high.
Syntel delivered a higher ROI to the client by performing 70 percent of its tasks offshore and achieving zero defects. Its performance earned it a prestigious vendor recognition award from the client.
The client's Senior Vice President of Technology noted that the result of the client and Syntel teams' hard work linked directly to an important goal of the company. "It is becoming so routine that every one expects perfect delivery every time from this team - and you do it every time," he said.
Mainframe batch environment: COBOL, DB2, IMS DB, VSAM, Easytrieve and others. Reporting Tool: COGNOS.