March 2021

These tools will empower firms to fully automate reconciliation within 5 years

By Rewan Tremethick, Content Manager.

Reconciliation is changing. Firms recognise the opportunities afforded by new technology and are ready to seize them to overcome their data challenges.

Automation is a top priority, as it’s key for dealing with the scale and complexity of modern financial data. Use it to unlock the agility you need to thrive, even in extraordinary circumstances like those brought about by Covid-19.

Currently just 22% of firms can claim to have strong levels of automation for their reconciliations. But the appetite for change is high. According to our new survey with FTF, nearly 70% of firms expect to achieve full automation within five years.

Why are firms looking to automate now?

The world is producing data at an exponential rate. Last year IDC predicted that the world will create as much data in the next three years as it did in the previous 30. The challenge of managing that data is growing too. MIT Sloan predicts that firms globally may be losing up to 25% of revenue due to poor quality data.

The Covid-19 pandemic has added an additional challenge, as well as highlighting the importance of operational agility. The way teams access tools to manage data has changed thanks to the shift to homeworking.

Automation improving from low levels

Legacy technology that once helped financial institutions manage data is now standing in the way of progress. Tools built for a single purpose or data type aren’t able to handle the scale and complexity of modern formats. They have long development cycles and high onboarding costs whenever a change is needed.

Instead of enabling agility they are weighing down the reconciliation function. Firms are often forced to create manual controls to plug the gaps.

These manual controls are quick to implement and they often grow into mission critical functions due to the prohibitive cost of onboarding them onto legacy systems. But manual processes introduce the risk of human error. In fact, 28% of firms say that mistakes from manual systems are their biggest reconciliation problem.

So why do firms continue to follow this hybrid approach to reconciliation? Partly because it is easy, and partly because change has historically been too expensive. Over 64% of firms we surveyed said the cost of moving manual reconciliations onto new or existing systems was prohibitive.

However, the outlook for reconciliation is a hopeful one. 66% of firms rated solutions to automate outdated manual processes as a top area of investment in the coming years.

Firms are unlocking their data potential thanks to new tools

So what has changed? The answer is that technology has evolved.

For starters, reconciliation solutions no longer need to involve expensive hardware that consumes valuable IT resources. Software-as-a-service (SaaS) platforms have made it possible to harness the computational power and accessibility of the cloud.

Firms are able to unlock unrivalled scalability thanks to SaaS solutions. These also remove the need for expensive hardware and maintenance. This is welcome news, given that 81% of firms currently expect the cost of reconciliation to stagnate or even rise.

No-code, machine learning-enabled tools free teams from complex, repetitive tasks

The no-code revolution is a complete game changer. It empowers end users to shape their reconciliation solutions to meet their needs. Duco’s proprietary Natural Rule Language, for example, enables your data experts to use plain English to build controls themselves.

Setup times drop from weeks and months to just hours thanks to no-code functionality, whereas legacy technology requires a business requirement document, a development phase and a testing phase for each new reconciliation. Only around half of the firms we surveyed could onboard a new reconciliation in under 30 days. In fact, over a fifth said it takes three to six months.

Machine learning also plays a key role in data integrity. New reconciliation tools can train their machine learning engines on huge datasets thanks to the cloud. They learn from data and actions previously taken by users to predict and automate data management and exceptions handling.

For example, in the past 12 months, our machine learning engine Duco Alpha processed 58bn lines of data. This saved customers nearly 2,700 people hours by automating repetitive tasks.

Achieving strategic business goals with the help of new tech

It’s not surprising that firms are looking to new technology to overcome the traditional pain points associated with reconciliation.

Flexible data integrity tools do more than just help firms solve their existing data problems. They empower organisations to achieve their strategic goals. Operational data quality is the top focus for 30% of firms we surveyed. Another 29% are prioritising operational efficiency. New technology is giving them a way to achieve these aims, unlocking greater agility as a result.

Time to embrace the future of reconciliation

Reconciliation has reached an inflection point. There is a better way to manage your data and firms are ready to embrace it. The pain points brought about by manual processes or legacy technology are becoming a thing of the past. You can now look beyond solving problems and instead think about unlocking greater operational efficiency and agility.

To find out more, download our full report: How new technology is driving a fundamental rethink of reconciliation