Dive into the evolution of reconciliation, guided by insights from Dayle Scher, research principal at Celent. Embark on a transformative journey through the past, present and future of reconciliation.
THE EVOLUTION OF RECONCILIATION: PAST, PRESENT AND FUTURE
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In the past, the reconciliation process was primarily a manual and time-consuming task. While reconciliation activity is a key tool in mitigating operations risk and financial loss, it has historically been one of the most underappreciated areas of investment operations in terms of attracting investment, mainly due to being perceived as a “back-office” function.
It presents an opportunity for capital markets firms to identify and correct deep-rooted sources of accounting or system errors, such as incorrect reference data or unsynchronized internal applications.
THE PAST: A TRIP DOWN MEMORY LANE
In a challenging economic environment, reducing costs has become critical for increasing margins, resulting in greater scrutiny of manual or inefficient middle- and back-office operations in general, and reconciliations as a component.
Today, the reconciliation process has become more streamlined and efficient, despite the increased complexity of securities. Many firms now employ software that automates much of the process. Data feeds have replaced emails and faxes. Reconciliation has largely evolved from month-end spreadsheets to automated offerings, with a focus on software-as-a-service utilizing cloud technology.
THE PRESENT: ENTER AUTOMATION
New technology is continuously driving innovation in the reconciliation space. The steady adoption of cloud, artificial intelligence, machine learning and potentially distributed ledger technology will drive lower total cost of ownership. Intelligent automation will become more widely used in reconciliation solutions and will facilitate further improvements to efficiency.
Innovation in reconciliation is happening and will continue to develop as technology advances. Financial institutions will continue to automate, and solution providers should continue to revolutionize reconciliations and the industry.
THE FUTURE: WHERE ARE WE GOING?
Your reconciliation operations, covered
By transforming your reconciliation technology to today’s digital standard, FIS can make sure you adjust to the demands of tomorrow.
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Adoption of automated reconciliation solutions has been driven by margin pressures, the regulatory landscape and the emerging remote work environment.
WHAT LEADING FIRMS ARE DOING:
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RUN – streamline business operations and ensure efficiency.
CONNECT – build deeper, lastingrelationships with customers.
GROW – identify and leverage opportunities to generate revenue.
Match rates: Straight-through processing is contributing to match rates of 90% and above, replacing moderate rates of 50-60%
Technology: A single third-party software solution is replacing a patchwork of vendor offerings and in-house built applications
Operational approach: Centers of excellence are replacing fragmented processes
Exception handling: Escalation and execution management are fully automated, with processes clearly defined, replacing ad-hoc management
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Self-service by the business unit and configurable reports are key characteristics of today’s reconciliation solutions.
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Manually matching transaction details, verifying balances and identifying any discrepancies was a labor-intensive process that required significant effort, making it prone to errors.
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The Future
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Track the evolution of reconciliation to understand where we’ve been and where we’re going.
The Past
The Present
Monitoring: Automated daily reports with detailed status tracking are replacing limited reporting and indicators
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