2612682_evolution of reconciliation

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

©2023 FIS FIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners. 2612682

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.

Adoption of automated reconciliation solutions has been driven by margin pressures, the regulatory landscape and the emerging remote work environment.

THOMAS

WHAT LEADING FIRMS ARE DOING:

Learn more

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

Self-service by the business unit and configurable reports are key characteristics of today’s reconciliation solutions.

Thomas continues his morning of calls and meetings, all the while staying in contact with his regional team leads and direct reports about the status of the Pharma’s immediate liquidity position. Because some payments take days to post with the various banks around the world, the treasury operations team needs to monitor payments across thousands of accounts at Pharma. So far today, more than 1,000 debit notifications have come into the treasury department via Trax. This information is translated to aggregated cash flows that are posted by the payment factory into the cash position worksheet of the treasury tool used by Thomas’ cash management team. This is essential for Thomas and his analysts to monitor and manage the company’s cash position at all times.

KEEPING AN EYE ON CORPORATE LIQUIDITY

Thomas begins the first of the day’s conference calls in preparation for the end of the fiscal quarter. At the same time, his treasury ops team is mandating all approved payments to counterparties throughout the globe, sending payments in a variety of methods to integrate with the systems and needs of Pharma’s various partners, brokers, and vendors. Payments are validated and routed to the appropriate banks through eBanking channels, like the SWIFT network, EBICS or even open banking APIs, where real-time communication with banks is crucial.

SENDING PAYMENTS VIA MULTIPLE PAYMENT TYPES

Real-time payments made immediately to banks equipped to receive immediate funding.

Cross-border payments delivered to partners and parties in other countries in accordance with applicable regulatory requirements.

ACH payments delivered in 1-3 business days to banks and financial institutions, including brokers, around the world.

ACH, Cross-Border, and Real-Time Payments:

Thomas and Pharma must keep a close eye on the company’s liquidity ratio and its overall solvency so that they can liquidate against their investments or initiate short-term borrowing to fund the accounts.

WHY IS REAL-TIME LIQUIDITY MONITORING SO IMPORTANT?

Thomas has wrapped up his day in the office and is on his way to the airport for a long flight to New York to meet with leadership in the North American region. In the taxi, Thomas’ treasury operations team manager, Leo, calls to tell him about an important incoming wire that was made by a customer. Trax picked up the transaction as soon as the bank sent the credit notification, and the treasury operations team was alerted that the money was available. Thanks to the Trax interface to Pharma’s general ledger (GL) system, the transaction was immediately posted in the business unit’s GL.

UNEXPECTED TRANSACTIONS POSTED TO GL AND SUSPICIOUS OUTGOING WIRES

Manually matching transaction details, verifying balances and identifying any discrepancies was a labor-intensive process that required significant effort, making it prone to errors.

Trax also alerted the team to two outgoing wires to pay invoices to a partner in Hong Kong. These were flagged as suspicious transactions because the bank account details of the beneficiary were different than the ones historically used for paying the Hong Kong partner. Therefore, Trax intercepted the payments and put them into a waiting queue for further investigation.

The Future

8:00 AM

11:30 AM

4:00 PM

Track the evolution of reconciliation to understand where we’ve been and where we’re going.

6:00 AM 8:00 AM 11:30 AM 4:00 PM

The Past

The Present

Get Support

Your experience is our top priority. We're here to help.

Need support

Jacksonville, Florida United States

Headquarters

getinfo@fisglobal.com

Email us

+1 877.776.3706

Call us

Keeping an Eye on Corporate Liquidity

Sending Payments Via Multiple Payment Types

Managing Payroll Before the Day Begins

Meet Thomas

Simplifying Global Corporate Payments

linkedin.com/company/fis

twitter.com/fisglobal

www.fisglobal.com

Unexpected Transactions Posted to GL and Suspicious Outgoing Wires

Monitoring: Automated daily reports with detailed status tracking are replacing limited reporting and indicators

linkedin.com/company/fis

twitter.com/fisglobal

www.fisglobal.com/contact-us