VIDEO | According to a benchmark by advisory firm Firebrand Research, the average amount of time it takes to onboard a simple reconciliation is 17 days. For more complex reconciliations, the time taken goes up to 54 days. Clearly, there’s a lot of room for improvement in the sector. At the PostTrade 360° Nordic 2024 conference, the fireside chat titled “How firms are reimagining reconciliations to boost data controls” attempted to dissect how progress can be made.

Citing moving off spreadsheets as the “number one” challenge in reconciliations, Virginie O’Shea, founder and CEO of Firebrand Research asked, “How do we finally get people to kick the Excel habit?”

Peter Webb, senior director – head of product management at Broadridge shared his belief that the reason reconciliations are still being done in Excel is because “it’s a quick and easy tool to learn”.

“Everybody knows how to use Excel,” he pointed out. “Often, the IT teams and teams responsible for building reconciliations have huge backlogs. We hear stories of it taking nine months to onboard a new reconciliation, even if it’s a simple one. That’s kind of unacceptable for the reconciliation owner. They want something to be up and running quickly, so what do they do? They resort to what they know – they resort to Excel.”

Watch the session video here!

When logged in, pick up your free access pass for this Nordic conference if you haven’t. Then browse back to this page, and the video will show up in this box.
(Don’t have an account here yet? Register here. This is separate from the event platforms where you may have been signed up as a delegate.)
Login

Going hybrid

He shared that Broadridge has introduced a hybrid reconciliation capability for its clients. The system diffrentiates between complex reconciliations and simple ones. The former might include reconciliations with “multiple moving parts or multiple data sources that need to be brought together”, those with “a complex exception flow”, and the ones that are “complex by their very nature”. These reconciliations would be in the system’s complex tool handled by Broadridge’s team.

For simple reconciliations, users get a lot more control in a “rapid onboarding” that puts “the power of being able to build that reconciliation into the hands of the problem owner”. The system is “controlled, audited, and easy to use”.

Webb compared this hybrid capability to a hybrid car. “You’ve got your petrol engine and your electric engine. You as a driver don’t necessarily know or care which engine is doing what at any particular point in time. You just want to get to your destination.” The user interface for both types of reconciliations look the same, with the same exception and workflow capabilities. According to him, such self-services are a popular request among Broadridge’s clients recently, with users wanting to “do more with the technology that they have got”.

The role of AI

Another big thing in the reconciliation space is artificial intelligence (AI). Webb shared that it has become common to see a section on the subject in the requests for proposal Broadridge receives.

Webb believes that within reconciliations, AI excels in three areas: exception management, onboarding, and data management.

Exception management is “the part of the reconciliation that takes time” and “the bit that costs money”. AI lends itself particularly well to this area as exceptions might change over time and need remodelling. Broadridge’s allocate capability looks at the data and historical allocations to decide where to put an exception.

“You won’t necessarily be able to get rid of the human element in that exception flow, but if you can get that exception to the right person or the right department as quickly as possible, it’s a good thing.”

In onboarding, AI can “help with the data analysis and with working out the patterns in the data so that you can create the right reconciliations in the first place”. For those working with large volumes of reconciliations, this is especially useful.

Finally, in data management, AI can be used simply to get data into the system. Webb pointed out that the sector still works with a lot of unstructured data, commonly in PDF format. AI can speed up the proess of understanding this data and finding relevant information within them.

Not a surefire solution

Despite its potential, AI capabilities are not limitless. “One area that I think AI should not encroach into too much is in the match rules themselves,” said Webb. “You can use AI to help build match rules to spot patterns and work out how the data best fits together – that’s the data analysis phase – but you don’t want to rely on AI to actually run those match rules.” He explained that running reconciliations require consistency and repeatability, which AI doesn’t lend itself well to.

Speakers:
Virginie O’Shea, Founder and CEO, Firebrand Research
Peter Webb, Senior Director – Head of Product Management, Broadridge

• The consolidated PostTrade 360° Nordic conference, in Stockholm on 4–5 September 2024, came to host 1,200+ delegates and featured 70 sessions.
• Log in and watch the sessions – for free! Links in the grey video boxes on each article will guide you intuitively. Yet, if you still want watch the 2-minute intro to our video offer, click here.
• Our coverage relating to the event is indexed here.
• By the way … are we connected on LinkedIn already? Follow us here.