The reconciliations superstar: How current conditions shine a light on outdated technology

21 July 2020

Automation was once embraced wholeheartedly by reconciliation departments as companies leaped at the opportunity to integrate the latest efficiency driving technology – everyone was a reconciliations superstar, focused on bringing about change and improvement. However, in more recent times this has been replaced by a mood of complacency and stagnation, characterised by a preference to stick to what’s known. To get out of this rut we need to get out of our comfort zones and embrace change – because even during times of uncertainty, a better understanding of your data will always enable a better understanding of your business.

When high value, high volume reconciliation processes were first automated it was an exciting and brave new world. Manual tasks that previously required dozens of people were replaced with a new solution that could get through thousands of transactions in a fraction of the time taken for an army of clerks to tick back the same trades.

However, over the years, a culture of resistance to this change has taken hold in many recs departments and the appetite to ‘do more with less’ is diminished by a fear of disrupting day to day operations and breaking old systems that work for now. At the same time, the c-Suite has sometimes overlooked the vital role of reconciliations in keeping the firm running smoothly, only mandating change when poor performance or high costs are simply too big to ignore.

Where did it all go wrong?

Skipping forward to today, many organisations have addressed the shortcomings of their incumbent solutions with bespoke in-house procedures, or worse, manual processes, as their incumbent solutions lack the flexibility to cope with either the volume or complexity - or both - of current demands. Business as usual undoubtedly looks very different.

Whilst those within the industry are resistant to change, this does not mean that the industry stays still. Over time, complexity has increased, with transaction volumes skyrocketing, causing new technology to be introduced in response to these developments. This meant that systems had to be updated to keep up with the rapid changes in market conditions. However, this wasn’t as easy as the original ‘big bang’ approach taken to create automated processes, where everything was built from the ground up. Changes to a production environment often didn’t happen, as the time and cost of performing these updates was often prohibitive and heavily reliant on solution providers. Over time, the quality of results started to deteriorate.

Challenging complacency to adapt to the new normal

For many, an argument against change is that the labour-intensive implementation of their legacy solution took many months (or years) to get close to their expected results, and the appetite to repeat such a painful exercise is lacking.

Also, it’s comfortable to keep what you know, right? Wrong! Nothing is more uncomfortable than when your patchwork of fixes unravels, forcing errors to become more commonplace. Unless you can be absolutely data confident across the whole enterprise, then this is the reality you face.

We now have a sector that is rapidly changing, but there’s a lack of willingness to embrace this change. The consequence is piecemeal measures being put in place, rather than taking a leap and fully embracing new technology and the benefits it can bring. It is in the interest of both the c-Level and practitioners to challenge this risk-averse attitude and fix this situation. Regulations such as Mifid, Basel III and CAT have already placed a huge burden on these old, creaking solutions, and as regulatory oversight continues to increase, so will complex reconciliation volumes. This means wasting time and money by using valuable resources to work through issues that could be handled efficiently by technology.

Making the change

With the right fintech partner, you can create not only a solution for now, but also provide a robust long-term framework that is flexible and adaptable enough to react to whatever surprises the market throws at you.

At Gresham, we have been able to combine the attributes of a functionally rich, AI enabled product with the power of industrial strength processing capability that is able to achieve throughputs of many millions of complex transactions in seconds. By adopting a collaborative approach to customer engagement, we have provided customers with a genuine alternative to their complacency doldrums.

Let me give an example and it’s one that I am all too familiar with. One customer has been using its legacy incumbent solution to process millions of transactions. The results of this were better than using staff to perform these duties but were far from perfect. As many as 10 percent of transactions were still not being automatically processed and were treated as exceptions due to false negative responses being created.

Over time, many new requests for additional data integrity controls were being raised but were not implemented due to cost, complacency, lack of bandwidth, or the ever increasing complexity of the requirements that were mandated as part of additional regulatory oversight. Therefore, the number of controls in the ‘queue’ to be built continued to rise each month until it was quite apparent that they would never get to a point of being able to service all requests.

With a shrug of the shoulders, this situation became the norm until a very large loss occurred due to the slow turnaround of reconciliations or poor process oversight of the trading transactional lifecycle.

Gresham were asked to change this situation and to instil the bank’s staff with the confidence that they could overcome these challenges. We were able to implement a solution that not only improved upon the performance of the existing controls, but also increased the bank’s throughput of new controls from half a dozen to over 50 new recons every month through highly automated, rapid onboarding capabilities. Those same people who had resigned themselves to never being able to catch up with the ever-increasing demands of the business are now at the forefront of a new world where challenges are met head on.

Whatever the coming months hold, don’t let your complacency prevent you from becoming your organisation’s reconciliation superstar. To hear how you can do this quickly and effectively, contact our team
here.

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