CartaSí uses SAS®9 to forecast and contain financial charges

CartaSí is the most commonly used credit card in Italy, with 7.5 million cardholders, 1 million operations handled each day and transactions totalling more than €33 billion (US$42.9 billion) in 2004. Issued by more than 800 banks spread throughout the country, CartaSí is accepted throughout the world thanks to its connection with the international Visa and MasterCard networks. For the past two years CartaSí has also been the corporate name of the company that created the card in the 1980s, originally with the name Servizi Interbancari.

CartaSí works by paying "in cash" retailers who sell using this credit card and at the same time financing the credit cardholder until the charge is debited. Therefore the company must bear financial charges for up to 45 days for each credit card transaction, and a great deal can happen between purchases being made and the respective charge being debited to CartaSí cardholders, which takes place on the 15th day of the month following purchase.

Stefano Brasca, who is in charge of CartaSí's cash flow, explains: "It is very important for us to be able to estimate our current account deficit after the banks have paid retailers. Our company's highest costs are in fact the financial charges involved in financing the credit cardholder until their statement is issued." Hence it is strategically necessary for CartaSí to have a forecasting system specifically for calculating the company's indebtedness in the next 48 hours.

Developing the application
"A few years ago we realized that we needed an application that was capable of carrying out the necessary estimates," continues Brasca. "However, it was clear that the technological infrastructure that we had at our disposal was inadequate for the volume of data and statistical simulations involved. Thus two years ago we developed a first prototype using SAS. In view of the good results achieved, we suggested that the real thing be developed."

The main goal of developing the forecasting system was to determine, as accurately as possible, CartaSí's current account deficit in the next two days in order to try to reduce it to zero, allowing other technical forms of financing more in keeping with the market. Based on SAS®9 and the integrated software for forecasting, which form the application's analysis engine, the system was created and executed solely for use by the finance department. Other requirements emerged in the finance department during development that were not strictly linked with short-term forecasts, and in these cases, too, the solution developed was based on the SAS®9 platform. The project team was comprised of two SAS consultants, who were concerned mainly with statistical aspects and the SAS solution, and two CartaSí employees, who were in charge of integration with the company's information systems and developed the user front end.

In order to process data relating to payments made to retailers during the past year, the data is downloaded from each point of service (POS) terminal in preset shops to a terminals manager identified by the account-holding bank, and the log flow is then transferred to these terminals. This is the overall transactions flow from all of that bank's retailers and is the flow that reaches the platform and feeds the SAS system and the CartaSí Cashflow system.

Payments to retailers are made by more than 300 banks, using a dozen different procedures, and a specific statistical algorithm has been developed for each statistical series connected with the bank/payment procedure combination. So, to be able to manage forecasting efficiently, it is necessary to find the right algorithm for each series, and hence to have a large selection of candidate models from which to choose, as well as processes that automate the analysis and modeling phase. In just a few months a well-configured system was put into operation, and the results were seen immediately.

Achieving results
"The SAS system's database is updated daily based on the log flows that have arrived so that new data replaces old data every day, with a historical depth of up to one year," says Brasca. "Using the SAS solution, estimates of transactions that will occur in the next 48 hours are recalculated daily, and it is thus possible to forecast our indebtedness over the coming two days for the 300 accounts that we have with the banking system.

"The statistical simulations generated by this solution cover the days between the last definite movement that we received and the value date that we intend to optimize, and feed the company's Cashflow system, integrating data from the reliable information base coming from the accounts department." In this way, CartaSí is best able to manage "advanced funds," namely the figure that it must advance to retailers. In fact, CartaSí is seeing a reduction in its current account deficit, and this is reflected in the containment of financial charges, and thus in considerable savings.

Concludes Brasca: "We had predicted a saving of €400,000 per year based on the prototype developed in collaboration with SAS. It is still too early for final conclusions to be drawn, but much higher figures are suggested. Thanks to the support of the SAS consultants, who were extremely helpful, we quickly acquired a good degree of know-how relating to the SAS platform, and with their help we also improved the tools that we use to draw up the annual financial budget and to prepare quarterly estimates, which are more connected with long-term analysis. In both cases, the application was of enormous help to us in improving our estimates, and we have already come across improvements as regards the previous operating mode."

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