A key component of a financial product's success is how smoothly and accurately a bank can fulfill customer-facing transactions. Institutions like Charter One and the Suncorp Group have found centralizing and automating reconciliations can go a long way toward making life easier for customers and bank employees, while improving risk management and compliance.
"Banks are centralizing lots of customer service stuff, which gives you the economies of scale, and a better, more consistent process as well," says Christine Pratt, research director for Financial Insights. "That improves customer retention."
In the case of Charter One, the bank's deploying a piece of software from Optinfo called nBalance and Exception Management to centralize account reconciliations in its branch network. When the rollout is complete, the institution will replace its current model of having a recon employee in each branch with a centralized operation. The result will be the ability to reconcile for all 655 branches with a staff of just 12 employees, allowing the institution's ability to redeploy staff - not to mention the benefits of improvements in the reconciliation process, which allow it to improve its product delivery and customer interaction. A Charter One spokesperson said the software is scheduled for a pilot to commence this month, and as such would not comment further.
Steve Manz, president of Optinfo - which was acquired last year by Jack Henry - says account reconciliations are just the tip of the iceberg in terms of automating processing. "There are teller cash, securities, mutual funds, capital markets, payments, etc." Manz says. Manz says that if data exists anywhere in the enterprise in electronic form, it's possible to remove manual labor from the processing of that data.
Pratt says that the more manual labor that's removed from processing and other back office operations, the more accurate, smooth and cost effective transactions will be for consumers and the bank. "Anytime you don't have to put people in the middle, you get a better process," she says.
By way of example, Pratt compares the potential benefits of Charter One's account reconciliation moves to the positive effect that electronic contracting has had on auto finance. The growth of e-contracting has allowed auto financiers to electronically pass contracts back and forth quickly until all sides agree on terms and document accuracy. That automation reduces the need for a back shop of dozens of employees who spend time moving back and forth between auto dealerships and the lender. "So an [auto finance firm] is able to reduce the back office from 50 people to eight or 10, and they're able to fund auto loans faster," Pratt says. "You have a happy customer, reduced operations costs and you've got a clear process."
Reducing the use of spreadsheets in reconciliations also has ramifications for risk management and compliance. The Suncorp Group, for example, has deployed CheckFree's Accurate NXG Operational Risk Management product in an attempt to improve the institution's reconciliation and exception management processes. It's a move the Australian institution says could reduce operational risk across its insurance, banking and wealth management businesses.
Suncorp will use CheckFree's product to automate workflows and upgrade management reporting. The institution will be able integrate its disparate systems onto one central solution, fully automating thousands of accounts and track exceptions more efficiently. In the coming months, the institution plans to form a single automated platform that will cover all interfaces to the general ledger, for the review, control and preparation of reconciliations and for clearing exception items for daily and monthly reconciliation processes. It will also accommodate data feeds in different formats and time periods so that the solution can cover all reconciliations in the future. "We had a situation where we had some automated processes on our large banking accounts, but the great majority of our work was manual or semi-manual," says Maree McMahon, manager of accounting operations, accounting and tax at Suncorp, who says the product has dramatically improved workflow. "We were downloading spreadsheets and performing reconciliations manually, and then we had to deal with exceptions and that's fairly time consuming."
Optinfo's Manz says centralizing an institution's operations risk group can streamline the way compliance and other risks are dealt with across business silos. That can aid in managing the documentation that's required by the current spate of regulations. "Just as you can automate a business process, you can automate the business rules behind Sarbanes-Oxley strategy," he says. "The expense of the people involved in order to comply with these regs is the next big opportunity to reduce expenses by automating."
