Embrace change, take risks, and disrupt yourself

Hosted by top 5 banking and fintech influencer, Jim Marous, Banking Transformed highlights the challenges facing the banking industry. Featuring some of the top minds in business, this podcast explores how financial institutions can prepare for the future of banking.

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Ways Technology Can Positively Impact Costs, Efficiency and Reporting

As new players continue to expand market share with data and customer-centric business models, incumbent banks face an urgent need to modernize systems to remain competitive in the payments landscape.

By investing in emerging digital technologies, banks can address evolving customer preferences, mitigate risk, and achieve regulatory compliance.

My guest on the Banking Transformed podcast is Nick Botha, Business Development Manager at AutoRek. He discusses the importance of an end-to-end platform designed reduce costs, improve efficiency, and streamline your reporting processes.

This episode of Banking Transformed is sponsored by AutoRek

AutoRek is a trusted vendor of data management solutions by the world’s largest financial institutions with extensive experience across banking and payments. The end-to-end payments reconciliation platform’ is designed to overcome the most difficult challenges for managing reconciliations, data management and reporting. AutoRek combines cutting edge technology, first class implementation and subject matter expertise to deliver custom solutions that save our clients both time and money.

For more information visit autorek.com

https://www.autorek.com/en-us/solutions/reconciliations/

Jim Marous:
Hello, and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, Founder and CEO of the Digital Banking Report and co-publisher of The Financial Brand. As new players continue to expand market share with data and customer centric, business models, incumbent financial institutions face an urgent need to modernize their back office systems to remain competitive in the payments and reconciliation space. By investing in emerging digital technologies, financial institutions can address evolving customer preferences, mitigate risk, and achieve greater efficiencies and regulatory compliance. My guest in the Banking Transformed Podcast is Nick Botha, Business Development Manager at AutoRek.

Jim Marous:
He discusses the importance of a clean end-to-end payment solution. That's designed to overcome the most difficult challenges for managing reconciliation, data management and reporting. While automating data flow has been a priority for financial institutions for years now. Most financial institutions still have an inability to really automate their systems the way they need to be done now, with advanced technology that really helps you avoid the risk of error, helps you avoid regulatory breaches and helps you avoid the inefficiencies and processes that really cause problems behind the scenes. So Nick, before we start a discussion, can you tell me a little bit about AutoRek and the services you provide financial institutions?

Nick Botha:
Yeah, excellent. Thanks Jim. Thanks for having me. Absolutely, so AutoRek, we are financial controls platform. Our platform specifically helps financial institutions focused on couple activities around their data management processes, automating reconciliations, and helping with a lot of the reporting elements that sort of middle and back office functions are looking to achieve within the business. Both from a management reporting perspective and audit reporting perspective, as well as a regulatory reporting perspective. So, there's a couple elements to that. And hopefully during this discussion, we can get into the detail of a couple of those.

Jim Marous:
So organizations of all sizes are really focusing on trying to modernize their back office systems that are very outdated in many ways. Also, we've covered in this podcast often, that back office systems really are the biggest impact on what the front facing technology and experience is. But why is it exponentially more important to have a modernized system in payments and reconciliation?

Nick Botha:
Yeah, very good question. So this is probably coming from a couple of the clients that I've spoken with over the last 18 to 24 months, specifically post-COVID times. Manual reconciliations is no longer really fit for purpose to be honest with you, especially for organizations that could be identified as large enterprise organizations or even scaling up businesses. I would think that maybe some startups could get away with manual spreadsheets, but if you ask any scaling up business or large enterprise that they find, we're working around manual spreadsheets, a huge headache. Having to deal with things like macros and reliance on key personnel in the space to manage those macros in those spreadsheets. No audits, audit has become a huge thing around the reconciliation piece and having no real time audit or MI around the data that sits within those spreadsheets becomes quite difficult. So these are some of the key points that our clients are bringing to the forefront.

Jim Marous:
So not every organization has the same approach to operational processes and back office processes. How do you define success in this space? Where can you take firm from where they are to where they need to be and where do they need to be today?

Nick Botha:
Yeah, so I think what we need to speak about here is really that reconciliations is no longer really, maybe in, time's gone by a reconciliation is taking a transaction on one end and matching it to a transaction on the other page. Now, there's a number of different elements where onboarding platforms such as AutoRek, would be able to assist. And that there's a number of elements, including data. I mentioned it in my introduction, really around data management processes that lead into the reconciliation. There's a lot of hard manual work that goes into preparing data that can be set up for the reconciliation so that the reconciliations perform as expected. The reconciliations and the break management processes and workflows that would have to be present in this process to be successful.

Nick Botha:
And then again, in my introduction, I mentioned the reporting elements. It's usually important to be reporting to both internal and external stakeholders and having accurate representation of where your reconciliations are and how they've been performing over the past few weeks, months, years, etc. Success is a seamless flow between all those elements, as opposed to just focusing on the matching piece in the reconciliation process.

Jim Marous:
It's interesting because a lot of times we find firms that end up thinking that the automating of what we're legacy processes is the right way to go when really, you really have to rethink processes in their entirety to be able to modernize the process. You can't just turn a switch and automate every step of the way, you really have to rethink them at the same time. When we look at automation and reconciliation, what role does AI machine learning and APIs play?

Nick Botha:
Very good question. We're seeing a huge move towards that near real time view of where your reconciliations are seating. So the API element is a big piece for us, the integration piece, taking the headache away from our clients in having to manually upload and download data and files from different sources and formats. And as these businesses are scaling they're, of course, onboarding new partners and PSPs and banks, which increases the amount of time that it takes to get the information into their core system. So APIs is definitely one machine learning, of course, machine learning and AI are all sort of buzzwords that keep coming up. We do like to caution some of the people that we speak with around AI specifically, because there's a huge element of control needed within these processes.

Nick Botha:
And sometimes AI can't guarantee that element of control, you would have the full elements of control that you need. So AI is a tricky one, but machine learning, definitely this is something that we can onboard new technologies into our platforms to learn about data, present our clients with information around that data or suggestions around their data or better ways to do things, but definitely caution around implementing complete AI solutions where essentially the computer's taking over. So, I mean, that's a great point to mention. I would definitely say that ML and APIs are a huge topic at the moment.

Jim Marous:
So as organizations are out there trying to modernize their system and look at a lot of different firms, yourself, your competitors, things like that, how do financial institutions select a system for both handling payments and reconciliations? What do they rank as being the most important? What are things that organizations should look at as they're trying to find a good partner to modernize their systems?

Nick Botha:
I would say that the first one, especially in this sector is being able to handle scale. As I mentioned, these are organizations that are either tier one institutions, large enterprise institutions, or scale ups trying to achieve large profit margins. And to do that, the scale is an important aspect. So making sure that the partner that you're onboarding in this space is able to be equipped for handling not your immediate volumes, but your projected volumes in the next two to three years. Integration is a huge piece, we're finding more and more technology teams being involved in the conversation to make sure that the integration piece between not only their core systems and in our case, AutoRek.

Nick Botha:
But also the number of the different partners and institutions that they work with internally and externally, their integration piece is a huge consideration. There'll always be that element of price, how things can be priced. I think what we're finding is being flexible in your pricing structures for the different size organizations is something that we pride ourselves on. And we've seen a huge interest in that. And then on the technology itself, making sure that it's covering or ticking all their boxes. It's one place for all the processes that sit around that reconciliation piece. And these are some of the key considerations that our clients are facing.

Jim Marous:
You know what's interesting? We interview a lot of firms that provide very specialized services on this podcast. In many cases, the services provided somewhat overlap with their core providers, or at least say they provide. What is the difference between what you provide a financial institution and maybe what a core systems provider says that they provide? Because in most cases, as you well know, there's people out there that say they can do it all. Why would an organization decide to work with a firm like AutoRek that really provides a very specialized solution? Obviously, it's going to cost in addition to what their core system is. Why should an institution decide to do it this way, as opposed to just going along with what they currently have?

Nick Botha:
This is always something that we're engaged with our clients on working with our clients on finding that ROI for them. I think the companies that have onboarded the solution really, they're looking for something comprehensive. They're looking for something that's really going to reduce the manual effort that's going on in the organizations, these solutions that are in-house built or may look at some of the services that we offer. It's a small element of what we are looking to do. And when you have large scale businesses, that small element becomes quite difficult to use. You're looking for a purpose-built solution that's covering end-to-end. As I mentioned, you could have ERP systems or any other internal systems that may look at that transaction matching process, that can take one transaction and look at it on the other. But in an AutoRek world or in any other reconciliation providers world, it's really been comprehensive.

Nick Botha:
It's looking at how can we reduce time in the data management processes? How can we help improve their matching rates? How can we reduce the amount of personnel and time that those personnel spent on laborious tasks? Rather than, focusing their time and energy on more investigation type tasks and adding value to the bottom line, as opposed to just slaving away. So it's really providing that end to end comprehensiveness transparency in your data, real time view of where your reconciliations are. I think we're in a world now, where reconciliation has to be considered the final piece in the entire process of your business. It's no longer something that you just do to make the orders this happy. It's really there to add value to your organization, to add across the business, not just to the middle and back office, but also to the front end. And when it comes to audit time, reducing the time and money spent on those, if you have something that's comprehensive in place. If you don't, you're still going to be spending a lot of time and money on some of those tasks that sit around the transaction matching piece.

Jim Marous:
So since, you mentioned the audit process, in organizations today, how prepared do you think organizations are to really handle the detailed audit scrutiny that the compliance issues that are in place? Where are organizations now, when you go in to see them, how far behind the curve are they in many cases?

Nick Botha:
I don't think many of our clients speak to us and tell us how far behind they are in the audit processes. But what-

Jim Marous:
The fact is I called you, is one thing though.

Nick Botha:
Yeah, exactly. But where we do get some information on this is when we are dealing with some of the consultants here that we work with. We work really closely with these organizations just to see where the market is, how they're doing. And a lot of the time, there's a huge request from these auditors and these consultancies to get something like this involved, just because they find that dealing with their spreadsheets and not having comprehensive order attached to things like transactions or users within their internal systems. And who's doing what, there's no real audit trail or audit history behind much. And again, I think that's something that AutoRek prides ourself on in terms of everything that happens within our solution is audited end to end.

Nick Botha:
And when it comes to audit time, the auditors are very happy because they have one place and everything's sort of stored and there. So I can't answer your question in terms of our specific clients and where they are and when they're coming to us. But definitely, I think there's a huge value proposition in terms of the audit piece, which a platform like AutoRek can provide these organizations.

Jim Marous:
So essentially in all the research that we do for the digital bank report and the conversation we have on the Banking Transformed Podcast, we find that financial institutions often know what needs to be done, but don't necessarily move forward. As you go out and visit financial institutions and try to sell these services of AutoRek, what usually, if you're to categorize something, what usually holds financial firms back from actually taking the action needed, actually moving forward with an automated solution such as yours?

Nick Botha:
The best way for me to answer that question is actually to answer how organizations that we work with that move very quickly with these things, with what they have in place. And that's backing from the right people internally from senior management, C-suite personnel, understanding the requirements and the USPs that something like this can bring to your organization. So there is an element of learning that needs to take place before getting down the road with these organizations. So the better job that we do through for leadership, the better. So organizations that are in a place where they understand the value of something like this, they tend to move a bit quicker.

Nick Botha:
But budget is always the one, it's something that they need. They always say they need it, but ensuring that the right level of budgets available at the right time, especially considering where the market is and where the market's been over the last sort of 24 months, it's been quite tough. But I would say probably in the last six months, we sort of seeing organizations leaning towards bulking up their middle and back office, making sure that things are aligned for a huge growth phase over the next sort of 18 to 24 months ahead. So I definitely think we'll see a sort of turn from what's been happening in the last 24 months.

Jim Marous:
I'm going to do a little of a pivot here and talk a little bit about cryptocurrencies. They've obviously gained some traction. There's a lot of leveraging on both the cryptocurrencies as well as blockchain. How does this change the requirements for reconciliation payment automation?

Nick Botha:
Yeah, it's interesting, you mentioned crypto there because in many cases, crypto actually increases the complexities around the reconciliation process. Blockchain, the decentralized public ledger that these cryptocurrencies sit on. Yes, there's an element of how that automates the transaction matching process. But as I mentioned, these organizations are, especially that are built on blockchain. These are tech businesses that are running financial services. They're looking to scale up, they're looking to grow. And in that process, there's a number of different external and internal parties that you're working with and the reconciliation between all these different sources of truth if you will, actually becomes quite complex.

Nick Botha:
And I've dealt with a couple organizations that are built on blockchain and it's taking them days, not hours to reconcile simple internal to external reconciliations. Just because the complexities that sit around crypto and getting the data from blockchain against what sits in your bank or your PSPs or whoever you working with. So in many ways, I think while the transaction matching process does get automated on the blockchain, crypto and your scaling businesses actually increase the requirement for something like a full financial controls platform. And you have to remember there's different elements, there's an operations team, or there's a reconciliation team within these businesses. But there's other elements, there's finance, there's treasury all with reconciliation requirements. So I wouldn't say that it sort of takes away the need for a complete robust reconciliation tool.

Jim Marous:
You talked about scale a couple times there and there's obviously a massive scale changing in the marketplace, rides of non cash payments continue to skyrocket, payments overall are skyrocketing. Can reconciliation tools cope with this added volume? And you mentioned the other thing was speed. So how do we deal with the requirements of both speed and scale when we're talking about such complex transactions?

Nick Botha:
Great question again, Jim. It's important to make sure that the organization that you're working with in this from a reconciliation perspective, it's aligned with the size of your business. There are a lot of tools that will maybe be suited to the smaller startup organizations, which can help you at that level, but may not be suited for something that's more of a scale up or an enterprise type organization doing billions and millions of transactions on a daily basis. What that means is that the organization that you work with has either worked with these type of organizations before, has a good brand name in the market, they have good references. The infrastructure that the platform resides on can support these, not just the large scale, but also there's that other things to consider, like being able to deploy in certain geographies due to the ongoing changes in regulations and data laws. Just really, making sure that the organization that you're working with is suited to the scale of your business.

Nick Botha:
I think that's a huge element to consider. And then, this functionality that you have to also consider. Does the tool have the functionality built in the solution out of the box that's going to accommodate for your continuously ongoing changes that your see in your business? We brought up the concept of audits, but also permissions. If you're a large organization, making sure that there's the functionality to make sure that you can have permission controls across the large deployment that you'll be doing, workflows, that type of thing. And obviously, like I mentioned, that complete audit history. So there's a number of considerations for these companies, but definitely, I think it would be aligning the type of company you're working with against the sizing business.

Jim Marous:
Well, also in the US, we have the move towards faster payments. So we really have to find partners that are going to be ready to deliver both the way that data is managed and also reconciled on a higher speed basis. You know, don't want a firm that you're partnering with, to be catching up to the process at the same time that they're trying to implement it. So how do you see faster payments impacting what you provide?

Nick Botha:
Yeah. Faster payments equals more scale and the need for more real time, as you mentioned there. With that comes a lot more complexity, more players, more third parties, very complex reconciliations because you're looking for that seamless flow between the different sources of data and the party that you're working with. There's no space for manual data management processes. You want to help, you want to make sure that the platform has the functionality to help streamline any break investigations that you're doing. So definitely the move towards faster payments is going to increase the scale. It's going to increase the complexity and in my experience. And we've just seen this in the UK with the share volume that these organizations are doing within faster payments, that the requirement for robust organization or platform should I say, that sits behind that process within the reconciliation space is key. So definitely a move to a more automated fashion is the way forward.

Jim Marous:
So it's interesting. I sometimes hate to ask this question because when I ask about what do you see as the biggest change is going to happen in the next three to five years? All we have to do is look back about two years and see that whatever anybody thought was thrown out of the window at that point. But if you're looking at the payment space, what do you see? And not even three to five years, let's just take three years. What do you see as the biggest change that are going to happen? The payment space that impacts what you're delivering to financial institutions?

Nick Botha:
The changes in data format, the changes in data regulations is going to be something to pay attention to. I mean, you mentioned crypto previously. We see a lot of businesses being built on blockchain and how that's going to affect the type of services and products that are out there currently. And making sure that in our space, that we're keeping up to date with the technologies available to us to help streamline those processes scale is, we've spoken extensively on this podcast about scale. I just see that continuing to grow post-COVID and new technologies. So I think it's an exciting three years ahead, but that comes with a bit of complexity for this middle and back office. So I would definitely, from my perspective where I see the successful organizations, they're setting it up for being able to launch new products, new services to their clients. But making sure that they're their middle and back office is set up for what's to come.

Jim Marous:
So you're a road warrior, you're a person that goes out there and sells to finance institutions. As, you're meet with financial institutions, what are the three major elements of what you provide financial institutions that you think sets AutoRek apart from what they're doing now and probably from what's available in the marketplace today?

Nick Botha:
Good question. So the first element is around your data. AutoRek doesn't expect data in any specific format and in these sort of retail banking, commercial banking and payments worlds, it's hugely important that we remain that way. If there's any new types of data formats that are on the horizon, which I know they are making, sure that we are accommodating for those. AutoRek is definitely one of the leaders in that space. The reconciliation piece, we've been around for a long time in the industry. We like a seasoned FinTech, if you will. And what we've done over time is that we've onboarded all our experience into one product, that any client that we bring on now gets to benefit us. That's both in our product, in the technology, but also in our services that we offer. We've been there, we've done that. And I think it's good to have an organization that understands the complexities around some of these processes and can steer you in the right direction.

Nick Botha:
And then really, the last piece is to have an end-to-end platform. I think I've already mentioned this already, but we're not focusing on one element of the reconciliation cycle. We are a financial control solution end-to-end, and that's from data in all the way to data out including, reporting, audit. So it's a one stop shop for all that sits around that sort of middle and back office and what we've spoken about today. So I would say those are probably the three key factors in considering AutoRek.

Jim Marous:
You know what, Nick? It's interesting because we interview a lot of firms and some of the key elements that people forget is that the best firms that are partnering with financials today, and you brought up the elements. Number one, you don't have to have perfect data. I think too many financial institutions say, "we like what you're going to do, but we want to wait until we fix our data shop." In many cases, this is one of the major elements that have taken place in that three to five years, is solution providers now more than ever can work with data, no matter how it's formatted. And that's a big deal because it means that you don't have to fix everything else up before you partner with somebody. Second, how easily can they integrate with systems that are in place already? And again, a really key element of the best solution providers say, it doesn't matter who you're using right now. We can integrate with what's in place, not just from a data standpoint, from a technology standpoint, so it's seamless.

Jim Marous:
And thirdly, the ability to look for a forward looking organization that really can say, we are already ahead of where the curve is and that we can keep you ahead of the curve. And it's so hard if you're building internally to focus on everything at once. And to work with specialty firms that really have their niche and have enough experience with other financial institutions that you're going to learn from AutoRek's experiences, as opposed to learning them from your own experiences. Nick, thank you so much for being on this show today. I really appreciate your time and I appreciate you sharing what AutoRek can do in the financial services industry, how you can move firms forward and have a future view. Thank you.

Nick Botha:
Amazing, Jim. Thank you very much. Thanks for having me.

Jim Marous:
Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoyed today's show, please give us a five star rating on your favorite podcast app. Also, be sure to catch my recent articles on the financial brand and the research we're doing for The Digital Banking Report. This has been a production of Evergreen Podcast. A special thank you to our producer, Leah Haslage, audio engineer, Sean Rule-Hoffman and video producer, Will Pritts. I'm your host, Jim Marous, until next time. Remember, new technology creates new opportunities to do a job that customers want done.

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