Access to real-time information – such as Nostro accounts – has become an increasingly hot topic within the banking community. Over the past couple of years, most of the discussion has centered around how it can work, who can supply it, who will use it and how it can address pressing business and operation issues like liquidity management, exceptions processing and risk management. But while there has been some notable successes and developments in solution delivery and customer implementation, until recently much of the talk has remained notional. Since last year, however, some dramatic developments have taken place.
No longer is the issue of real-time data mostly conceptual – it is actually HERE NOW. Institutions are supplying it, customers are using it live and software vendors are now able to offer workable solutions to support it and optimise its value throughout the bank. The critical dialogue has moved forward and is now paying real, tangible dividends in the operational environment. Between last year and this, many real-time information challenges have been overcome, not least of which is the addition of functional reconciliation and exception management support.
Adding real-time reconciliation and investigation capabilities to nostro data provides a combined value proposition, for as beneficial as real-time data is, the old adage applies that too much information can be as bad as not having enough. The downside of a real-time data stream is that there is a potential risk of drowning staff in a plethora of detailed information, much of which isn’t relevant. By linking this real-time data to reconciliation and investigation systems with exception management capabilities, all of the potential benefits of real-time nostro can be amplified – making all of this new information not only timely but extremely useful.
Reconciliation systems can provide a ‘snapshot’ of real-time status, providing a current view of a correspondent bank’s Nostro account balance and payment activity, presented in a relevant and meaningful way. This means that rather than having to rely as traditionally on predicted figures or views extrapolated from statements prepared for a prior value date, decision makers can see at a glance whether an account is under or over funded and whether there is any excess cash lying idle which could be put to better use elsewhere.
Reconciling Nostro data in real-time enables any transaction errors to be identified and addressed much sooner in the transaction cycle. Integrating current Nostro information into the bank’s existing enterprise reconciliation and investigation systems enables it to be matched against internal representations of the account to improve the overall financial transaction management process. Any exceptions arising at this level can then be addressed, tracked and if necessary escalated through existing channels. And the best part is that this type of real-time reconciliation solution can be added without having to overhaul all of the internal plumbing in the back office. Use of existing channels means the move to real time has minimal impact to downstream processes and people yet brings significant risk management benefits. Problems identified earlier can be fixed prior to the value date.
In addition to identifying errors early in the cycle, there are other benefits to Nostro data which has been reconciled in real-time. Liquidity management gets a major boost because reconciliation enables excess cash to be identified, swept up and re-invested prior to the day’s close. And because exact balances can be known at any time, banks no longer need to hold extra funds in each Nostro account to handle unforeseen contingencies – real-time information eliminates the unknown.
It was encouraging to see how many banks are signing up for real-time feeds and how many vendor solutions are now in place to leverage this data. The time for talk is over and the time for true accomplishment is here. The fact that this technology now exists – and some of the world’s major banks are now employing it – is a call to action for the rest of the banking community and to financial software vendors to get on board: The world is going real-time and there are huge business benefits to be gained by all.