Business challenge

To drive growth in international payment services, operational cost-effectiveness and regulatory compliance are vital for Borgun. How could it address new rules and requirements quickly and efficiently?

Transformation

Borgun deployed IBM Safer Payments—a scalable, cognitive fraud-prevention platform that helps reduce the cost, complexity and time needed to design and execute compliance strategies.

Results

Reduces

time and cost of compliance projects, helping Borgun adapt quickly to regulations

Increases

scalability to support ever-growing volumes of payment transactions

Delivers

real-time and batch monitoring to help Borgun protect payments and data

Business challenge story

Reacting fast to keep growth on track

Borgun offers a comprehensive range of electronic payment services across its issuing and acquiring businesses. In addition to maintaining at least a 50 percent share of its domestic market in Iceland, the organization aims to grow its customer base of small- and medium-sized merchants across Europe.

Steen Henriksen, Chief Risk Officer at Borgun, begins: “The payments industry is changing rapidly. To continue to pursue our growth goals, it’s vital that we stay in step with an evolving regulatory landscape—and meet the new demands cost-efficiently.”

In the past, Borgun used multiple systems to monitor and report on its acquiring business. To build reports for internal and external stakeholders, the company needed to manually extract, collate and analyze data in spreadsheets—a time-consuming process.

Andrea Þorláksdóttir, Director of Merchant Monitoring at Borgun, explains: “In some cases, we could use workarounds to gather the data we needed for reporting, such as using our business intelligence systems to calculate merchant fraud ratios. In other instances, it simply wasn’t possible. For example, we couldn’t drill down to the point-of-sale terminal identity of each transaction, which many of our card scheme partners now require.”

She continues: “As we continued to grow our international portfolio, we knew that our transaction volumes would eventually become too large for our existing monitoring tools. To provide a detailed and complete view of our operations—and the scalability to grow—we decided to look for a new platform.”

As our markets become more competitive, having a platform such as IBM Safer Payments is crucial to react quickly to meet the new challenges.

—Steen Henriksen, Chief Risk Officer, Borgun

Transformation story

Embracing real-time monitoring

To support its issuing and acquiring operations, Borgun selected IBM Safer Payments—a real-time fraud prevention platform.

Sigurður Jakobsson, IT Implementation Specialist and Project Manager for IBM Safer Payments, comments: “The selection process consisted of a thorough evaluation of a number of vendors, which we eventually narrowed down to two vendors. We felt that IBM Safer Payments set itself apart from the competition with superior reporting capabilities, which meant we could access much of the information we needed without deploying additional modules.”

Jakobsson adds: “We felt that rule creation was an area that IBM Safer Payments performed strongly, and we were very satisfied with the platform’s ability to cover both our acquiring and issuing businesses. On the acquiring side, we gain the ability to block suspicious authorizations in real time instead of learning of them after the fact. Once our issuing implementation is complete, we will also be able to use business rules there to instantly decline authorization requests if the system detects a high possibility of fraud.”

To reduce risk during the deployment process, Borgun adopted a phased approach, beginning with its acquiring business. By running IBM Safer Payments side-by-side with its legacy monitoring system, the company refined the accuracy of its profiles, rules and models before it moved the solution into production.

“We worked side-by-side with the IBM team throughout our deployment, and the collaboration has proven extremely valuable,” says Jakobsson. “Our phased implementation gave us the time we needed to build a strong working knowledge of IBM Safer Payments, which helped us hit the ground running when we went into production.”

He comments: “When we started the project, we had only intended to integrate the IBM platform with one source system, as others were in the process of being decommissioned. Timeline changes elsewhere in the business meant that some traffic had to stay on other systems longer than we anticipated—and to gain a complete view of our portfolio, we needed to integrate these platforms with IBM Safer Payments as well. IBM was extremely flexible in accommodating the increased scope, and we knew that we could always count on the IBM team to provide timely guidance and support when we needed it.”

Results story

Shrinking risk and supporting growth

With IBM Safer Payments driving its risk management and fraud monitoring processes, Borgun can respond to an increasingly stringent regulatory environment without sending its operational costs soaring.

“We are currently focused on implementing our card scheme partners’ new requirements,” explains Þorláksdóttir. “With a few tactical exceptions, we can capture much of the data we need from IBM Safer Payments—decreasing the need to swivel between multiple systems and create large, complex spreadsheets.”

In addition to supporting its reporting needs, the solution is helping to improve Borgun’s situational awareness. For example, the organization previously needed to calculate merchant chargeback ratios manually, which meant its risk reporting to the business could take longer than it needed to. IBM Safer Payments enables Borgun to adopt a proactive approach to monitoring and risk management—using automated alerts to bring potential chargeback risks to the attention of its management team for immediate investigation.

“Although many of our merchants probably aren’t aware of the precise kinds of monitoring we do, they all get the benefit of greater security,” Þorláksdóttir adds. “IBM Safer Payments also enables us to offer more customized services, which in turn allow us to deliver greater value. For example, a client recently asked us to permit card transactions from only an approved list of countries. Thanks to the IBM solution, we were quickly able to set up a custom rule to deliver on that request. This kind of flexibility will make it easier to win business from merchants in Europe, and could help differentiate our offering as new competitors appear.”

She continues: “The difference between our legacy monitoring tool and IBM Safer Payments is like night and day: our users find the new system so much easier to use. We can provision user accounts with granular access permissions, which enables us to support a wide range of use cases across the business in a secure way.” 

Jakobsson adds: “It is also very important to us that the platform is extremely stable—and our setup uses multiple nodes to ensure the level of system availability Borgun demands. IBM Safer Payments has provided dependable availability from day one.”

By reducing the cost, complexity and time needed to design and execute compliance strategies, Borgun can focus on enhancing security across its payments businesses.

Henriksen concludes: “We can now go beyond the minimum requirements of our regulators and implement internal best practices for fraud monitoring, which will shrink our risk exposure further still. As our markets become more competitive, having a platform such as IBM Safer Payments is crucial to react quickly to meet the new challenges.”

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About Borgun

Founded in 1980 and headquartered in Reykjavík, Iceland, Borgun was the country’s first issuer and acquirer of credit cards. Today, the company provides acquiring services to merchants and issuing processing services to issuers of credit and debit cards in Iceland and other countries across Europe.

Solution components

Take the next step

IBM is working with organizations across the financial services industry to use IBM Cloud, cognitive, big data, RegTech and blockchain technology to address their business challenges. Watson Financial Services merges the cognitive capabilities of Watson and the expertise of Promontory Financial Group to help risk and compliance professionals make better informed decisions to manage risk and compliance processes. These processes range from regulatory change management to specific compliance processes, such as anti-money laundering, know your customer, conduct surveillance and stress testing.

To learn more about IBM financial risk and regulatory compliance solutions, visit ibm.com/RegTech and follow us on Twitter @IBMFintech

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