Aite Group Study Finds Rise of Next-Gen Reconciliation Technology

A benchmark study conducted by Aite Group found that issues such as manual processing, complex intersystem reconciliations, key person risk and rising costs are driving investment banks and asset managers to consider next generation reconciliation technology.

The study, which used Gresham Computing’s Clareti Transaction Control as a benchmark, highlighted challenges facing financial institutions. These include: slow onboarding of new reconciliations (60-day cycle in industry compared to 7-day cycle using CTC); high costs of maintaining multiple reconciliation platforms and workarounds; and a labor-intensive process a lot of staff—at one tier-one bank the process involves a team of 15 to 20 members.

“Reconciliations is finally having its moment in the spotlight,” said Virginie O’Shea, analyst at Aite Group. “In the next few years there will definitely be a tipping point towards migrating onto more user-friendly solutions. Many firms are currently reviewing existing and legacy systems due to increased business and regulatory pressures. It’s likely that there will be an industry shift to a more centralized model that can handle real-time and intraday processes.”

“Most vendor deployments of reconciliation solutions are specifically tailored for back-office cash flows and securities movements,” said Neil Vernon, CTO, Gresham Computing. “The needs of the middle office, processing much more complex instruments have largely been ignored and most middle offices reconcile using spreadsheets. These more complex instruments are now moving to central clearing with real-time T0 demands and traditional systems no longer fit the bill. The findings of the Aite Benchmark highlight that increasing volumes of data coupled with multiple systems and manual processes are hampering efforts for real-time reconciliations.”