Fintech Insights

Why Modern Reconciliation Solutions Are an Easy Pill to Swallow

May 16, 2017

Does your reconciliation solution look like it was built in the 1980s, all green screens and grey boxes? Has its original vendor disappeared without trace, with levels of automation not far behind? Are its inner workings a mystery to your staff? Does it only stretch to a few reconciliation types and leave the rest to Excel? Don’t worry, you’re not the only one experiencing the pain of a legacy reconciliation system.

Back in the day, your system may have been a state-of-the-art antidote to the daily agony of manual matching. Since then, however, the reconciliation landscape has changed dramatically. Waves of regulation, the introduction of faster payments and a huge increase in data quantity have all piled new pressure onto the reconciliation environment. Then, you have the rise of complex asset classes.

Struggling under the weight of these developments, legacy solutions are no longer fit for purpose and will deliver substandard levels of automation.

If that wasn’t enough, focus has expanded over the past two decades from individual, high-value reconciliations to include large volumes of lower-value transaction reconciliations. Legacy systems were not designed for use beyond their original remit, so your current solution may be unable to cope with the influx of more complex, high-volume reconciliation requirements. The result is increased operational risk, unnecessarily large, costly reconciliation teams and slow resolution times.

Then there are the headaches caused by the sheer age of the solution. Your version may no longer be supported by its provider, in-house experts often are long gone, while even the operating system it runs on comes from the last century. Additionally, poor-quality code from ageing software can open up security risks.

Yet still the legacy system clings on for dear life. Even in the world of investment banking, Accenture reports that jettisoning antiquated technology is a top challenge for banks, saying “legacy IT systems are also proving to be a lot harder to switch off than switch on.”

Much of the problem is down to perceptions of what replacing a system involves. Once, implementing a new reconciliation solution meant large upfront expenditure on licenses and infrastructure, a protracted period of configuring automation and lots of skilled individuals to manage the application on an ongoing basis. Modern technology has changed all of that.

Today, the implementation of automated reconciliation services can take days or hours, not months, as web-based solutions and cloud services make it increasingly unnecessary to install hardware in-house – or even staff the solution yourself. It’s also possible for a single solution to cover every type of reconciliation, no matter the complexity, from nostro and correspondent bank account reconciliations to financial close management and general ledger balancing.

In no time, you’ll gain higher levels of automated matching, fewer exceptions and faster resolution times. That will, in turn, reduce dependence on manual activity and improve service, minimize risk and simplify regulatory reporting. And the more automated your operations, the greater economies of scale you can enjoy, as costs won’t increase at anywhere near the same rate as the volumes you can handle.

It’s time to move on and seize an incredible opportunity to streamline your back office and enhance your operations. Ease the pain and embrace your future.