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Reconciliation, Investigations and Exceptions Management Take Center Stage

Effective exceptions management and reconciliation can improve transaction speed, cut costs, reduce risk and improve customer satisfaction. But banks first must break down payments processing silos to gain visibility into the transaction life cycle.

Q: How can banks improve exceptions management, and how can this improve transaction processing?

Maggie Scarborough, Financial Insights: If you're not managing exceptions, then you're not managing payments. You should be looking at the exception levels on your transaction processing and work on reducing them by having visibility into the life cycle of the transaction to understand where those exceptions are occurring. In the past, there hasn't been a lot of visibility into siloed payments processes. In order to manage exceptions, you need to be able to look over a number of processes in transactions. Once you do that, you can understand what's going on with the flows and the capabilities of your processing, where bottlenecks are and where you really need to invest to improve transaction processing.

Richard Winston, Accenture: Document imaging has allowed banks to more effectively access key source documents to support exception handling on an accelerated basis. With the addition of early detection and integrated workflow management, exception transactions can be routed to a handling unit and addressed more proactively. Once exception management is supported by image and automation solutions, units responsible for handling them can be centralized and costs can be managed by moving the work to lower-cost labor markets or offshore in some cases. Business process management (BPM) solutions can further reduce the burden for common types of exceptions that can be resolved through automation.

Steve Manz, ProfitStars: A key transaction-processing event is the action of settling, which occurs when all parties agree to the details of the transaction. Automatically performing sophisticated matching against combinations of essential details allows for immediate settlement of transactions that are valid and identifies the reasons that the remaining transactions are exceptions. A system that automates the research into the break details and creates repair transactions increases both efficiency and accuracy, reduces cost, and improves customer satisfaction. In addition to significant staff reductions, [banks have] experienced decreased telephone inquiry time from an average of 10 minutes to three minutes [as a result of improved exceptions management].

Dan Sollis, Infogix: Exceptions add time, cost and risk to your typical banking transaction. If this activity can be reduced or, better yet, eliminated, transactions will happen in real time at much lower costs than today. The first goal should be to reduce the number of exceptions to the extent possible; the second should be to make sure that exceptions are resolved as quickly as possible. The combination of these two factors will allow banks to process transactions faster, at lower costs and with greater accuracy.

Q: How can banks move reconciliations out of the back office? What are the benefits of such an approach?

Scarborough, Financial Insights: Institutions that have taken a strategic approach to reconciliation are using it as an aid to process reengineering - connecting many disparate processes. I don't think the back-office part of reconciliation will ever go away, but attaching the electronic front end to it will allow customers to help correct the item. Notify them of exception, let them see it and give them the workflow to help them resolve it.

Manz, ProfitStars: Banks are implementing operational transformation strategies that create centers of excellence that deal with reconciliation and exception management issues across products, business lines and organizational silos. These approaches allow them to take a broader look at organizational risk, use the same people for multiple exception-management processes and reduce cost. Benefits include better customer service, reduced risk, reduced cost and the ability to handle much higher transaction volumes with fewer resources. And because they use a single technology platform, there are fewer vendors to manage, simplifying employee training.

Sollis, Infogix: I'm not convinced banks should be trying to move reconciliations out of the back office. They should definitely be trying to reduce and eliminate reconciliations, but it's important to remember why the back office was created in the first place. The back office allows a bank to create efficiencies through the adoption of best practices and specialization. Also, by applying specific processes for the resolution of different types of exceptions, the bank is better controlling its risk position. The focus should be on eliminating as many exceptions as possible and providing better technology solutions to the back office.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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