Financial institutions are managing payments at a steadily increasing pace and across an ever-expanding field of touchpoints – debit, credit, ACH, check, cash, calls, online and mobile. And every penny that comes in or goes out must be tracked and reconciled.
That trend isn't changing as digital and real-time payments adoption continues to see high growth among consumers and businesses. And the digital payments environment likely will keep expanding as more people demand it and the U.S. payments system introduces real time to support it.
The 2020 Expectations & Experiences: Consumer Payments survey from Fiserv found 53 percent of banking consumers used mobile banking in the past 30 days, up from 47 percent the previous year. Using the same parameters, 26 percent used a digital wallet, up from 15 percent, and 69 percent paid at least one bill using direct debit (ACH), up from 52 percent.
All of that, combined, puts tremendous pressure on any institution's back office because all transactions must be reconciled. And now, with the continued rise of person-to-person (P2P) payments, reconciliations could become even harder to manage. According to Early Warning Services, LLC, the network operator of Zelle®, 519 million transactions were sent through the network during the first six months of 2020, a 63 percent increase in transaction volume over the prior year.
With that kind of volume, it's easy to miss, mistype or deliberately manipulate data in the reconciliation process, especially when many accounts are still reconciled with spreadsheets and highlighters. Often, separate departments reconcile their own accounts, making it difficult for the finance and accounting teams to verify the data and close the books each month. The higher the volume, the more those problems intensify.
The growth in payment methods, amounts and speed also creates the potential for increased fraud, particularly around real-time payments. A decade ago, transactions typically moved in batches, and payments took hours, if not days, to process, clear and settle. Now, when all the processing and network steps are considered, each must be completed within a second at most, including validation, accounting and fraud detection.
By automating reconciliation and certification, financial institutions can match transactions and pinpoint exceptions on a single platform.
Often, a technology solution is the answer to a technology-prompted problem. By automating reconciliation and certification, financial institutions can match transactions and pinpoint exceptions on a single platform. That can reduce reconciliation time by as much as 85 percent, errors by as much as 50 percent and write-offs by as much as 75 percent, according to users of automated reconciliation solutions.
Furthermore, an automated solution can quickly reconcile a large volume of transactions, 70 million per day or more, with a high match rate in the mid-90s.
Here's how it works:
An automated solution offers the added controls that can enable faster detection of exceptions and help identify fraudulent transactions. An effective automated solution can match at a transaction level, introduce automated workflow processes that minimize data manipulation, and provide a full audit trail for both internal and external analysis.
Financial institutions are evolving as people change how they bank. But that goes beyond customer-facing tools. Back-office financial processes also have to adapt. And as the volume of transactions grows, automated reconciliation can give financial institutions the flexibility and efficiency they need in their back offices to meet consumer expectations for speed, convenience and security.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.