In an effort to provide real-time information and payments processing, banks are examining if legacy systems are standing in the way of true straight-through processing. But, the obstacles to providing information on accounts and processing payment transactions in real time may have little to do with legacy systems, analysts say.
In a session at the October Sibos conference in Atlanta, bankers discussed the possibility that excess data contained in legacy systems could be preventing the realization of real-time payment transactions and information. But Susan Feinberg, senior analyst, wholesale banking, at TowerGroup (Needham, Mass.) thinks differently. The lack of real-time or straight-through processing of transactions has more to do with banks not wanting to deliver more timely information, she tells BS&T.
"It's not the systems, it's the bankers," Feinberg asserts. "It is the attitude toward real-time information. The fact that there was a debate is amazing to me in this day and age because we are talking about payment transactions that increasingly are - or should be - processed in a straight-through manner. Those payment transactions and that information should be available to customers when they need it, on demand - not when the bank might want to provide it."
Importance of Real Time
During the Sibos session, global bankers agreed that real-time processing is more important now than ever before. The extension of the settlement day is one industrywide change that has increased consumer demand for real-time information, said Richard Pattinson, senior director, settlement strategy and systemic risk, Barclays Bank (London).
The Clearing House Interbank Payment System (CHIPS) extended the hours during which transactions can be settled globally. In May, CHIPS began processing transactions at 9 p.m. for payments valued the next business day.
"CHIPS and the Fed have extended hours so that transactions are being processed in hours that overlap with other geographical markets, and clearly the reason for that is because of the increasing" demand for real-time processing, TowerGroup's Feinberg says.
Not Now, Right Now!
The transactions need to be processed and available for customers who are waiting for funds when the customers want them - not when the bank is ready to provide the funds, according to Feinberg. "These transactions are increasingly processed by the most successful organizations in real time," Feinberg says. "They need to be processed in fractions of seconds, not every 10 minutes or half-hour. Customers have to make decisions about liquidity, credit and the delivery of goods and services - half an hour ago or this morning isn't good enough."
There is some truth to the notion that some legacy technologies do not support the final posting of transactions in real time, Feinberg concedes. But banks can - and should - invest in technologies that can streamline the transaction process and eliminate the excess data often found in legacy systems, she says.
Banks should not be intimidated by the information that is stored on legacy systems, and they should indeed make progress in processing, storing and transmitting data, according to Till Guldimann, vice chairman, SunGard. Guldimann warned attendees not to "get distracted by information simply because it's there."
If an organization outside the financial industry, like Federal Express, can allow customers to see every step of the delivery process, banks should provide the same service regarding payment transactions, TowerGroup's Feinberg says. "Banks that are doing their job should be able to provide that information to customers and not be afraid to show it," she says. "That view of how long it has taken for a transaction to get from one point to the next - if they aren't doing that, they may be embarrassed to show a customer how it really has gone through the system."