The Race to Real Time

May 21, 2021

As the global financial services industry accelerates towards real-time payments, incumbent banks must find a way to keep up. But making the move to real time is not easy, and many institutions face a steep climb to reach that summit.

Disruptive forces constantly redefine global banking and the ways that customers bank. Customers increasingly interact with their banking apps, and a majority would rank the ability for a bank to “allow me to do things for myself anywhere, anytime through digital channels” as very important. Digital isn’t a trend; it’s the way banking is and will be done.

Strictly speaking, real-time processing is not synonymous with digital, but the two are inextricably linked. As customers demand more, it seems inevitable that all banking services will need to be delivered this way. This requirement, combined with the other tangible benefits offered by a real-time next generation platform, makes for a compelling case and strong incentive for traditional banks to modernize and plan their move to real time.

For banks operating a traditional batch model, transactions are soft-posted as they’re accepted: The updates don’t impact account balances until batch processing takes place later. This can cause problems with customer satisfaction (because of delays) and issues with fraud detection and management. Real-time processing can help solve these problems while laying the foundation for long-term growth.

Real Benefits for Banks

Sooner rather than later, bank systems must be exposed to a growing open financial ecosystem that’s increasingly mobile and real-time. As banks strive to become more efficient and customer-centric, a real-time approach is needed, and the clock is ticking.

Benefits include:

Fend off the upstarts. Challenger banks typically begin with a blank slate and can build a bank around a real-time core. They are spared the challenge of multichannel integration and can offer customers a consistent real-time experience across all channels. Incumbents likewise need real-time platforms to stay ahead.

Improve funds access and awareness. Customers trust banks that give them ready access to their money, and real-time access to funds is becoming table stakes. Being able to view and access data in real time also means that everyone – from the customer using their mobile app to the bank’s tellers and customer service department – sees exactly the same up-to-the-moment information at the same time.

Boost Innovation. Customers expect banking services to be timely and delivered in context. Real-time platforms provide immediate, accurate data that can be used by real-time analytics to cross and upsell effectively based on the customer’s personal transactions and financial behavior. Forward-thinking banks will harness the power of real time to both boost innovation and exceed customer expectations.

Increase efficiency. By adopting real-time technology, banks can reduce their costs per account. How so? Real-time transaction posting means immediate decisioning of any exceptions, significantly reducing or even eliminating next-day or “Day Two” processing. Many manual processes can be automated and streamlined, and the newer technology frees banks from managing and synchronizing multiple databases, while also bolstering many aspects of recovery and business continuity.

Transform fraud management. Real-time processing offers tremendous improvements in fraud detection and management. When transactions are posted in real time, alerts and notifications also happen in real time. Fraudulent account activity can be spotted right away instead of being discovered later during overnight batch processing, a delay which could allow harmful transactions through.

Welcome new tech. Most incumbent banks have evolved along the lines of products and channels, and the bank’s IT structure was informed by this history. The bank of the future will not be product-driven but customer-driven. Artificial intelligence, machine learning, event streaming and advanced analytics will use real-time data to deliver bespoke services and advice where and when the customer wants them.

A Measured Approach to Real Time

Clearly there are substantial benefits of making the move to real time. But implementing real-time processing can be a daunting challenge because it touches almost every business process. The good news is that the move doesn’t need to be done all at once. This is a race that can be run in stages.

The shift can be gradual, starting with processes that make the most sense for the particular bank and expanding as the benefits become obvious and improvements progress. With a progressive migration, risk can be mitigated, and investments aligned with business benefits and success.

Download our white paper to understand more on why the journey is well worth the effort.

About the Author
Matthew K. Lessig, VP, business executive, Next-generation Banking
Matthew K. LessigVP, business executive, Next-generation Banking

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