Fintech Insights

What do Donald Trump, Robots and Same Day Payments Have in Common?

May 02, 2017

It’s no joke: faster payments, artificial intelligence (AI) and the new president are all causing a stir among U.S. banks – and together, creating a melting pot of opportunities. What’s more, these headline grabbers are not only fueling boardroom discussions, but also driving a back-office revolution across critical operational functions like reconciliation.

The introduction of the Same Day ACH framework has certainly stepped up pressure on banking operations, which already are struggling with increased competition, surging operational costs and new reporting responsibilities. But faster payments are driving innovation, too, encouraging banks to develop new revenue streams, such as receivables services for corporate customers, and to take further advantage of technological developments.

And what developments we’ve seen in the last five years. Concepts that would have once seemed futuristic are now becoming commonplace, as robotic automation and artificial intelligence make their mark on financial services.

Last but not least, there’s the “Trump effect.” Plans to simplify regulation and introduce business-friendlier policies could spell good news for corporate America and its banking community. They also coincide with enthusiastic levels of interbank acquisition, triggering both inorganic growth and new potential for economies of scale.

So, it’s an exciting time for U.S. banks – and above all, an era where more is possible for less – thanks to fintech. Cloud-based IT may not seem as revolutionary as robots, but the emergence of hosted and, more critically, fully managed services means that advanced, innovative technology platforms are no longer the preserve of multinational organizations. With more palatable cost and consumption structures than large-scale on-premise deployments, these new operating models can bring high levels of automation and more than a dash of AI to smaller banks with modest budgets.

Cloud services have the biggest impact on banking functions. Until now, those functions have lacked scalability, which inhibited growth, or been encumbered by manual processes, which increased risk and costs. A perfect example is the area of reconciliation, balancing and data validation, which has traditionally employed one of the highest proportion of full-time employees in the back office. Lack of automation remains a dominant challenge for more than one in five surveyed professionals in this area.1

From daily intersystem reconciliations to month-end general ledger reconciliations, you won’t be alone as a bank if you’re still heavily dependent on Excel for rudimentary matching. Your reconciliation environment is also likely to be fragmented across multiple departments, making it hard to determine – let alone manage – the rising costs of this approach.

Now is the time to act, and to reap the benefits of a growing economy and sophisticated technology. If businesses get the boost that President Trump has promised, there will be new demands on the front office to support bank customers. But the back office must also raise its game in the drive to become more competitive – by increasing efficiency, reducing costs and refocusing resources from low-value operational tasks to customer-facing services.

An automated, centralized approach to reconciliation will be key to making all of this happen. And while reconciliation solutions and services may not get to share the limelight with new presidents, payment systems and robots, they will play their own important role in times of radical change.

1 Aite Group, Reconciliation Centers of Excellence: An Assessment of Quality