Reimagining Reconciliation:

Improving Automation with

Innovative Technology in

Financial Services

Wednesday 24th June 2020

Agenda

• Introduction – Andy Sehulster, ICC

• Arin Ray - Celent

• Marc McCarthy - AutoRek

• Q&A

Introduction

Marc McCarthy – Senior Vice President, International Sales, AutoRekWith 20 years’ experience in the financial services industry, Marc has spent most of his career consulting the

world’s largest financial institutions on operational and financial controls. Having joined AutoRek in 2016, he

is responsible for the company’s partnership program and the North American market as SVP for International

Sales.

Andy Sehulster – President, ICC Andy was named President of ICC in July 2015, after serving as Chief Operating Officer (COO) for the

previous three years. ICC specializes in maximizing the value of investment systems and data for institutional

investors, largely through improving automation. During his tenure with ICC, Andy has led the firm through a

period of rapid expansion, during which ICC more than tripled in size.

Arin Ray – Senior Analyst, CelentArin Ray is a Senior Analyst with Celent based in the firm's New York office with over a decade’s experience

in tracking business, regulatory, and technology trends in financial services. He has published extensively on

issues related to trading, clearing, settlement, transaction processing, reconciliation, operational risk, and

process automation. His advisory engagements have included developing technology strategy for financial

institutions, benchmarking, and market entry and expansion studies for financial institutions and technology

providers.

Arin Ray

Celent

REIMAGINING RECONCILIATION

IMPROVING AUTOMATION WITH INNOVATION

TECHNOLOGY IN FINANCIAL SERVICES

Arin RaySenior Analyst, Celentaray@celent.com

6© CELENT

DIGITALIZATION OF FINANCIAL SERVICES ACCELERATED BY COVID-19

Longer Term Trends

❑ Growing digitalization of financial serviceso Banking and payments; Trading and capital markets; Insurance; Retail commerce o Risk management and regulatory compliance

❑ Increasing speed, volume, and complexities of transactionso Demand for faster and real-time transaction processing; need to improve STP rateso Rapid cross border transfers and settlement

❑ Explosion in volumes and types of datao Fragmentation of data architecture, standards, file formatso Growing regulatory scrutiny on data management, reporting, and governance

Impact of COVID-19

❑ Major shifts in transactional patternso Move to online purchases and transactionso Volatility in transaction and trading volumes

❑ Operational disruption at financial institutionso Unavailability of resources; need to support remote worko Backlogs and operational bottlenecks

❑ Entering a new era of digital financial serviceso Short, medium, and long term impact of COVID-19 and its implications

7© CELENT

Technology

• Legacy systems

• Inefficient Data Management

• Lack of Innovation

Processes

• Distributed and siloed operations

• Lack of automation, STP

• Reliance on manual intervention

LegacyArchitecture

ManualProcessesLimited

Innovation

Hybrid Sourcing

Lackof STP

Sourcing

• In-house, offshoring, nearshoring, outsourcing

• Commoditization vs. differentiation

RECONCILIATION OPERATIONS SUFFER FROM LEGACY TECHNOLOGY AND MINDSET

8© CELENT

RECONCILIATION AUTOMATION LEVELS VARY GREATLY ACROSS THE INDUSTRY

Leaders Industry Average Laggards

Operational approach

Shared services, center of excellence

Disparate and fragmented reconciliation operations

No clearly defined reconciliation functions

Technology approach Single (or a few) third party software

Patchwork of 3rd party software, in-house built apps

No or limited automation techniques used

Match rate and STP High, 90% or above High in select areas, moderate overall (50-60%)

Low

Alerting and notification

Fully Automated Partially automated Manual

Exception handling Escalation and exception management process clearly defined

Exception management partly defined, partly ad-hoc

Exception handing not well defined and mostly ad-hoc

Monitoring Automated daily reports with detailed status tracking

Some reporting with limited indicators

Minimal reporting and status tracking

Reporting and documentation

Well documented and archived Documentation and archiving only in some areas with limited controls

Minimal documentation or archiving

9© CELENT

THE CLOUD MODEL HAS THE POTENTIAL TO MEET THE EVOLVING NEEDS IN RECONCILIATION

Elasticity and scalability, on-demand

APIs and microservices

Efficiency and Automation

Standardization and centralization

Shared resources, variable costing

Speed of Innovation

10© CELENT

End UsersIntermediariesCore cloud providers

SEVERAL CLOUD MODELS HAVE EMERGED WITH GROWING PREFERENCE FOR CLOUD BASED MANAGED

SERVICES

Financial institutions

Packaged software solutions

Cloud native solutions

Managed service solutions

Internal cloud for infrastructure, platform, proprietary apps

Cloud resource providers

11© CELENT

Artificial Intelligence

The science of training computers to perform tasks mimicking human reasoning.

▪ Can analyze large volumes and different types of data with greater speed and accuracy.

▪ Can be applied to solve narrow and well-defined computation intensive problems.

Machine Learning

A subset of AI that automatically learns and improves from experience without being explicitly programmed.

▪ Supervised ML applies learnings from the past to new data using labeled examples to predict future events.

▪ Unsupervised ML discovers hidden patterns, structures, and networks from unlabeled data.

Robotic Process Automation

Software that mimics human actions by automating simple and repetitive tasks across applications.

• Emphasis more on automating workflow and less on analytics.

• Easy to configure and implement, and limited technical expertise needed to run them.

INTELLIGENT AUTOMATION TECHNIQUES ARE POISED TO REVOLUTIONIZE DATA OPERATIONS

12© CELENT

AI Applications

▪ Data quality and integrity checks

▪ Map data fields

▪ Set up match rules

▪ Optimize existing match rules

▪ Find new match rules

▪ Automate break resolution process with RPA

▪ Root cause analysis and reasons for breaks

▪ Automatically suggest ways to resolve breaks

Set up new Reconciliation

Resolve BreaksImprove Match

RatesReconciliation

Process

INTELLIGENT AUTOMATION TOOLS CAN BE APPLIED ACROSS THE RECONCILIATION

PROCESS CHAIN

13© CELENT

Improving automation and STP will be imperative for cost and risk optimization. Advanced analytics will play a key role here.

Financial institutions seek to reduce costly and lengthy internal IT projects. The demand for self-servicing capabilities will grow as a result.

Lower cost of technology ownership, and flexible and agile operations will be needed to respond to continuous market and regulatory changes. Cloud and API technology will be needed to achieve them.

Financial institutions are increasingly retreating from investing in innovation in non-core functions. Innovation in reconciliation will be driven by technology vendors.

ADVANCED ANALYTICS, AGILE OPERATIONS, AND SELF-SERVICING CAPABILITIES WILL DRIVE THE

EVOLUTION OF RECONCILIATION

Marc McCarthy

AutoRek

Current status

EXCEL

LEGACY SYSTEMS

HYBRID APPROACH

LIMITED MI

DATA ANALYSIS

INACCURATE MATCHING

DATA ONBOARDING

Remaining pain points

MANUAL INVESTIGATIONS

RECON ONBOARDING

Technical enablers

RPA AI / ML NLP Cloud

Impact of automation

Legacy FINTECHS

Focus areas for the future

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

Focus area – cloud

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

SINGLE TENANCY

MULTI TENANCY

ACCESS ANYTIME ANYWHERE

Focus area – deployment

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

INSTANT RECONCILIATIONS

FASTER ROI

MORE AUTOMATED RECONCILIATIONS

Focus area – roi

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

REDUCE SET UP COSTS

FTE SAVINGS

MORE THAN RECONCILIATIONS

Focus area – usability

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

SIMPLIFICATION

MACHINE LEARNING

AI

Focus area – self sufficiency

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

INTERACTIVE

INTUITIVE

ANY DEVICE ANYWHERE

Focus area – analytics

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

REAL TIME MI

DATA POINTS

BUSINESS INTELLIGENCE

Focus area – wfh

Cloud Ready

Rapid Deployment

Cost Effective

Easy to Use

Self Sufficiency

2.0

Improved Insight

Remote Working

COLLABORATION

ONLINE

CENTRALIZED MI

Outcome

IncreaseThroughput

24x7

ReducedCost

Efficient

ReduceWorkload

Fast

EliminateErrors

Flawless

EmployeeEngagement

Focus

Q&A Session

Thank you for listening

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