Reconciliation

Future of Automation in Banking with Smart Reconciliation

fsstsprod — Mon, 08 May 2023 09:44:37 +0000

Future of Automation in Banking with Smart Reconciliation fsstsprod Mon, 05/08/2023 - 15:14

Reconciliation is a crucial control function in financial services that aims to mitigate operational risk that can lead to fraud, fines, or even the failure of a whole firm. While automation was introduced to parts of the system in the early 2000s, innovation in this area has stalled, leaving operations reliant on manual processes and spreadsheets. With the advancements in technology, it is essential to explore how firms can streamline their reconciliation function and update their systems to improve automation, efficiency, and data quality. Different stages of reconciliation maturity can help financial institutions benchmark their reconciliation best practices and identify necessary steps to achieve the best possible usage model of automatic error detection and correction, and the elimination of inter-system reconciliation.

Why is Reconciliation So Hard?

Despite the extensive digital transformation of financial institutions, many find reconciliation to be a challenging task. In most organizations, multiple point solutions are used for specific reconciliation tasks, resulting in a patchwork of disparate processes stitched together via spreadsheets, manual work, or home-made applications. This process is highly inefficient, lacks consolidation, and every task is prone to errors and fragmentation.

Some reasons why reconciliation is still challenging are:

A lack of standardization: In financial services, there are often no strict data standards, requiring bespoke reconciliation processes or expensive data normalization.
Increasing complexity: More complex products require more information, which current systems may not be able to handle. This challenge is further compounded by regulatory reporting and associated reconciliations required.
Poor data quality: Missing fields, inconsistent coding schemes, and unavailability of common keys make automation difficult when using current solutions.
Data inconsistency and lineage issues: Data passing through the organization can cause errors and inconsistencies, introducing a variety of systems, processes, and reconciliation techniques across the business.

However, with the right tools and outlook, firms can overcome these problems and automate and optimize their entire reconciliation function. This can be achieved by consolidating processes, eliminating manual and point solutions, and enabling practitioners to analyze and drive additional value from their data. Once all data is normalized onto one system, machine learning technology can be used to optimize every step of the process. With enough training data, machine learning can spot errors, outliers, and poor data quality, reducing the number of reconciliations required and making inter-system reconciliations unnecessary.

Stages of Reconciliation Automation Maturity

Manual: Reconciliation carried out manually on spreadsheet or other similar applications. They pose a high risk due to human error and also make it difficult to audit.
Hybrid: Systems are in place for different data types and other reconciliation out of the system is done manually. This reduces the labour, but since the processes are disparate has high chances of duplication.
Automated: Where reconciliations are consolidated onto one or more automated systems and teams are responsible only to onboard data and investigation of exception handling. This model reduces risk and optimizes efficiency.
Intelligent: A central system that collects and reconciles all data types, monitors and controls data quality and consolidates them throughout the data lifecycle. This provides a model that uses ML and AI models on reconciliation data, keeps improving itself and involves minimal human intervention.

Machine Learning - Does it Live up to the Hype?

Machine learning is a technology that has replaced blockchain at the top of the hype curve in terms of revolutionizing financial services. The majority of vendors in the reconciliation space are shouting about it, and it’s easy to see why. Machine learning can predict correct configurations for matching and data normalization, parse unstructured data, predict root causes of breaks, and cluster related exceptions. However, it is essential to keep in mind that machine learning is only as good as the data it’s trained on. Without access to a large and varied set of training data, the benefits will be limited. This is especially crucial when considering machine learning deployed on an installed system versus a cloud-based system. In the installed version, the system can only learn from local data, while the cloud version can train on a much wider set. Imagine using a traffic app on your phone. The cloud-based version can give you information based on a huge range of anonymized data, whereas the installed version only has access to data in your local area. In addition, machine learning is as good as its training models and the data being used. As reconciliation is a mission-critical function, keeping a human in the loop becomes important. Vendors delivering these solutions need to be careful how to carefully model reconciliation matches and declines as it will impact the recommendations given in the future.

FSS Smart Recon - The Tool of Choice for Modern Day Reconciliation

The future of automation in banking lies in smart reconciliation. FSS Smart Recon is built on new-age data platforms and microservices based cloud native architecture to provide your financial institution with a next-gen reconciliation solution that automates and simplifies multi-party data reconciliation and reduces manual efforts by up to 70%. Learn more about FSS Smart Recon here.

FSS Smart Recon: What's New

fsssiteadmin — Tue, 05 Oct 2021 10:12:24 +0000

FSS Smart Recon: What's New fsssiteadmin Tue, 10/05/2021 - 15:42

Financial institutions contend with two major problems during transaction reconciliation and settlement–

Global increase in transaction volumes, primarily due to an increasing affinity by consumers towards digital payments.
Multiple data formats as transaction data originates from multiple channels - ATM, PoS, online banking, mobile banking, smart devices.

For many institutions, the process of reconciling transactions is time consuming and prone to inaccuracies as they are reliant on either manual or semi-automated processes. FSS Smart Recon simplifies and automates the reconciliation process with a Zero Touch model, which in turn helps FIs save significant time and costs.

Over the last few months, FSS has enhanced its Smart Recon platform to onboard new reconciliation types, optimize reconciliation cycles and improve efficiency of the Recon systems. The critical upgrades made recently include:

NETC for FASTag Reconciliation

NPCI developed the National Electronic Toll Collection (NETC) program to meet India’s electronic toll requirements. NETC FASTag is an interoperable, nationwide toll payment solution that uses RFID. FSS Smart Recon has been enhanced to support end-to-end reconciliation of FASTag transactions for banks.

NEFT and RTGS Reconciliation

FSS Smart Recon reconciles inbound and outbound NEFT and RTGS transactions by collating data from Core Banking System (CBS), Structured Financial Messaging System (SFMS), and National Electronics Funds Transfer (NEFT) and Real-time Gross Settlement (RTGS) systems. The system reads this data, auto-matches transactions and performs reconciliation.

ATM Cash Tally

ATM Cash Tally compares ATM cash balance entries from Cash Balancing Report (CBR), Electronic Journal, Switch files, and Host (ATM General Ledger) to ensure the records are in sync. FSS Smart Recon has pre-configured reconciliation rules to tally the dispense, load, deposit and closing balance of ATM terminals and identify cash excess and shortages.

In the Cash Tally process, the system performs three reconciliations based on which operations team can view the cash status for ATM terminals.

Load Tally – Reconciles cash balance in the ATM Terminal with the ATM General Ledger balance.
Dispense Tally – Reconciles cash dispense on each terminal between two cash loads.
Closing Balance Tally – Carry-forwards the adjustment entries, after which a Tally report is generated.

The process aids in identification of cash excess and shortages.

Excess and Shortage Tracking

Operation teams can correlate these excess/shortage entries with adjustment entries. If the records match, the entries are knocked-off and moved to the reconciled table.

Tally Report

ATM Cash Tally reports helps operation teams gain insights into the Cash Tally process. The reports can be generated for any periodicity.

Cash Tally Report – View tallied transactions information on every terminal.
Untally Report – View untallied transactions information on every terminal.
Adjustment Report – View per terminal transaction adjustments.
Summary Report – Provides a summary of tally, untally and adjustment transactions for an ATM terminal.
Cash Management Record (CMR) Report – Provides a summary report for all vendors against CMR submitted by them.
EJ Error Knock-off Report - View exception records based on the transaction dispute responses in EJ.
Cash Tally Parking Report - View transaction records moved to the reconciled table.

AI/ML based Settlement Framework

Smart Recon relies on a pre-configured rule-based framework for transaction settlement between multiple entities. In event of a change made by the Interchange, new component entries in the settlement file can go unnoticed, resulting in a mismatch in the total settlement amount. The AI-based Settlement processes helps detect new entries in the file received from the interchanges and notifies it to the operation user via the portal. The operations user can then configure the new component prior to the start of the settlement process, ensuring quick close of financial accounts. This helps in reduction in settlement time by up to 80 percent.

Universal Data Wizard

The Switch and the Host files received for reconciling transactions are vendor-specific and proprietary in nature. For every new implementation Smart Recon needs to configure the following processes:

Reconciliation Rules
Extraction Rules
Reconciliation Reports
Extraction Reports

This is a time-consuming process that prolongs reconciliation cycles. The Universal Data Wizard alleviates this by optimizing set-up time. It contains a superset of data for multiple Switch and Host file formats based on which its processes are preconfigured in the system. For any new implementation, it simply extracts the relevant data and automatically maps it to its corresponding superset, optimizing time to onboard new reconciliation types. All mapped fields can then be viewed on the Smart Recon GUI.

AWS Cloud Deployment

FSS Smart Recon has been deployed on the AWS cloud, improving the economics of ownership. It significantly reduces the time to implement, brings in the convenience of easy upgradation and maintenance as well as provides scalability to accommodate increased workloads. FSS Smart Recon is also available on the Microsoft and Oracle cloud.

APIs to Improve Operational Efficiency

FSS Smart Recon deploys standard APIs to interface with bank’s internal systems. Some of the recent APIs developed for Smart Recon which connect with the reconciliation platform are –

Consumer Data Fetch API - Operation teams need to enter several customer details – Account Number, Credit/Debit card details during the reconciliation and adjustment process. Consumer Data Fetch API automates the manual process of feeding data by connecting CBS with Smart Recon which auto-fills these details.

Instant Dispute Management API - The Instant Dispute Management API helps Issuers, Acquirers, and Interchanges to interface with FSS Smart Recon. Users can view, search, and monitor status of transaction disputes at a single web location. Issuers for instance can raise and check the status of chargeback requests. Acquirers likewise can verify the transaction details and settle the dispute instantly.

User Role Mapping API - User Role Mapping API helps define system user roles and privileges.

Notifications and Alerts

FSS Smart Recon supports a rule-based notifications and alerts module for almost all reconciliation processes – auto-match, exceptions, and disputes. Operating teams can use pre-built templates or customize alerts in line with their business requirements.

Use Case

Banks need to comply with regulator timelines on dispute closure and manage them within a specific Turn Around Time (TAT). For instance, according to the Reserve Bank of India’s circular on Harmonization of TAT, Indian banks need to pay a daily penalty of INR 100 to the customer if the amount is debited from the payer account but not credited to the payee account, or if the transaction is not reversed within a specific TAT. This TAT is as low as –

T+1 day for card-to-card transfers, Immediate Payment Service (IMPS), prepaid instruments, National Automated Clearing House (NACH),
T+5 days for ATM withdrawals and PoS transactions.

Notifications and alerts with built-in escalation flows ensure teams comply with the guidelines by pinpointing delays in the resolution process.

EDB Postgres Migration

FSS Smart Recon supports the EDB Postgres Database, lowering total cost of application and ownership for banks.

Multilingual Error Messages for Enhanced User Experience

FSS Smart Recon GUI is now made more user-friendly with multilingual translation for its exception and error messages.

To schedule a demonstration, write to products@fsstech.com.

FSS Launches Next Gen Recon With Machine Learning and Cloud Support

admin — Mon, 07 Sep 2020 06:11:36 +0000

FSS Launches Next Gen Recon With Machine Learning and Cloud Support admin Mon, 09/07/2020 - 11:41

Chennai (India), 7th September 2020: FSS (Financial Software and Systems) a global payment products provider and processor, has introduced critical increments to its market-leading Smart Recon platform. The new system will leverage ML and automate manually intensive processes and improve the speed, accuracy, and the reliability of the payment reconciliation process.

FSS Smart Recon provides an end-to-end, automated solution for reconciliation management across payment workflows, with built in support for complex, multi-source, multi-file many-to-many reconciliation scenarios. The notable enhancements include:

Machine learning-based settlement process for improved speed and accuracy.
Universal Data Wizard and enhancements to General Ledger Tally for improved time to market
Cloud-enablement for improved scale and cost efficiency

Collectively the enhancements provide a 40% improvement in time to market for greenfield implementations, a sizable 30% improvement in reconciliation time cycles, and an overall 25% reduction in direct costs as compared to partially automated processes.

Speaking on the developments, Krishnan Srinivasan, Global Chief Revenue Officer FSS, stated: “FSS is a leader in the payment reconciliation space, with 25+ deployments globally. Our Smart Recon solution has been deployed by Tier One banks, neo banks, MNOs and merchant aggregators. Across segments and markets, we are seeing a significant demand for modernisation of back-office operations. Customers are increasingly pivoting away from in-house payment reconciliation systems with semi-automated processes towards service-based contracts backed by new-age technology platforms.”

Speaking on the new increments, Sathish N, Dy CPO, FSS stated: “Payment reconciliations have become exceedingly complex and simplicity and speed is crucial for banks and financial institutions in the wake of an ever-increasing influx of transaction data. With our continuous innovation-led model and investment on right technology like Machine learning, AI and cloud computing, banks and financial institutions will benefit from flexible and scalable processes and improved speed and accuracy of reconciliation.”

FSS Smart Recon deploys advanced unsupervised Machine Learning (ML), algorithms for settlement accelerating the reconciliation cycle by dynamically identifying potential discrepancies at source. Algorithm-based settlement processes allow new components to be detected within seconds, lowering process latency, and saving 80% time in performing resolution actions.

FSS Universal Data Wizard catapults time to market for new implementations by 40%. Across deployments, the initial process of configuring proprietary Core Banking and the Switch file formats is the lengthiest step in the implementation cycle. Data Wizard maintains a meta-repository of Switch and Host file formats for reuse across deployments, saving time and costs on implementation projects. To further optimize implementation cycle time, FSS Smart Recon has enhanced its critical General Ledger Tally process to support a generic framework for automation of closing balances between General Ledger and Core Banking systems.

FSS Smart Recon functionality can be accessed from the Oracle cloud providing greater deployment flexibility to customers. The availability via a cloud platform transforms the economics of ownership for financial institutions and neo-banks and customers wishing to migrate from legacy systems, in particular.

Deployed by globally leading banks and payment processors, FSS Smart Recon is a unified system for reconciling digital payments and incorporates data import, transformation and enrichment, data matching, exception management and timely reporting and analytics. The solution supports a wide diversity of payment classes – ATM Recon, Online Commerce, Wallets, Instant Payments (IMPS and UPI), NEFT, RTGS and QR Code Payments -- with built-in flexibility to rapidly onboard new payment channels and scheme-based payments.

About FSS
Financial Software and Systems (FSS) is a leader in payments technology and transaction processing. The company offers an integrated portfolio of software products, hosted payment services and software solutions built over 29+ years of experience. FSS, end-to-end payments products suite, powers retail delivery channels including ATM, POS, Internet and Mobile as well as critical back-end functions including cards management, reconciliation, settlement, merchant management and device monitoring. Headquartered in Chennai, India, FSS services leading global banks, financial institutions, processors, central regulators and governments across North America, UK, Europe, Middle East, Africa, and APAC and has 2,500 experts on-board.For more information visit www.fsstech.com

Media Contact
In Europe: Louise Herbert /louiseherbert@fsstech.com / +32 476 81 13 92
Other Regions: Rajalekshme.R /rajalekshmer@fss.co.in/ +91 9500088290