EXCLUSIVE: “Paying By Numbers” – Hugh Burden, AutoRek in ‘The Paytech Magazine’
With transaction processing happening at unprecedented speed and volume, quality data is the only way to complete the picture, says Hugh Burden of automated reconciliations provider AutoRek
THE PAYTECH MAGAZINE: Can you tell us more about yourself, your role at AutoRek and the company itself?
HUGH BURDEN: I head up the sales team at AutoRek and I’ve been with the company since 2015. I’ve worked across the financial services spectrum for the majority of my career – with banks, insurance companies, investment managers, and now payment companies. AutoRek services all those sectors, because what it provides is an end-to-end financial data management system. As the name suggests, it automates reconciliations, but it does all sorts of other great stuff with the data on the way, automating how it flows into our system, through APIs, open banking and various other sources. We can ingest any type of data, from any source.
We offer reconciliation and other accounting functionality, but we also have features and functionalities like automated postings and workflow. We’re also involved in a significant amount of financial reporting, dashboarding and, a really crucial one, regulatory reporting. The regulatory agenda is really, really crucial to payments going forward.
If you take just two current examples: in the US, they’re all working towards the Comprehensive Capital Analysis and Review (CCAR) where, for each individual account and extreme scenario, a stressed market value is calculated and compared to the margin requirement applied to the corresponding account. The difference between the greatest stressed market value and the margin requirement is the CCAR value for that account. In the UK and Europe, there is General Data Protection Regulation (GDPR).
They’re both very stringent, difficult regulations to consume, and be compliant with, and there are significant penalties for getting them wrong. So, first, you have to get on top of the regulatory agenda. But once you have done that, it puts you in an ideal position to master that customer data, and then utilise it for all sorts of opportunities.
TPM: The payments industry has been evolving at a very rapid pace over the past couple of years. What opportunities and challenges does that present?
HB: There is significant pessimism in the macroeconomic environment at the moment, being driven by all sorts of factors. But the payments industry has been able to rebound from the pandemic and become more important. It has deepened its impact on society. With that comes all sorts of data challenges. When we visit a client and they say ‘we have a reconciliation problem’ or ‘we have an accounting problem’, what they really mean is they have a data problem – they’re struggling to understand their data. They clearly need assistance and tooling to help them think through some of those processes. The other big opportunity we’re seeing out there at the moment is consolidation in the market. A number of organisations are coming together, creating a hot merger and acquisitions environment.
TPM: As you say, the pandemic had a massive impact on the payments industry: we saw a sharp rise in the volume of particularly small-value, real-time payments and an explosion in the number of payment channels offered by payment service providers. How have their internal systems coped with that?
HB: We still find large payment companies that are really reliant on Excel, or indeed some kind of self-built platform. Certainly, Excel presents a number of difficulties that we seek to resolve. First of all, it really struggles at high volumes. Secondly, Excel has a very poor auditability record because of the multiple access you can get on it. The third issue is around the limited level of automation you can achieve with Excel. AutoRek offers to bring all the functionality, features and flexibility you have with Excel together but with none of the concerns over volume, auditability or automation.
“Ultimately, when we visit a client and they say ‘we have a reconciliation problem’ or ‘we have an accounting problem’, what they really mean is they have a data problem. They’re struggling to understand their data”
It’s usually quite a straightforward operation when it comes to transforming organisations that have been pretty much dependent on Excel. We look at what the existing processes are, and carry out a scoping exercise, where we’ll look in detail at what they want their end target state to be, then design a platform that fits with that. We can bring a really quick and flexible solution to those organisations. In the absence of automation in something like real-time payments, organisations are faced with just building a fixed cost, effectively, with recruiting more and more people to process those payments manually. However, with automation, if they select the right partner, there are very few downsides.
TPM: Reconciling huge volumes of real-time domestic payments is one thing, but what challenges can organisations face when trying to reconcile their payments cross-border?
HB: Cross-border payments are a really, really hot topic because most organisations are now looking to deploy their platforms globally, which means, they’re going to have to deal with cross-border complexities. There are several major issues for them to consider. First is foreign exchange and with that comes two problems: the fluctuations, which are difficult to manage, and the liquidity risk – that question of how much cash they are going to hold in each currency, and what’s appropriate. The second major problem comes back to dealing with regulations. They might already be tooled up to deal with their own, domestic regulations, but they might not have considered regulations in other jurisdictions. |The third thing they have to consider is how their systems and platforms, which were designed for a domestic market, are going to interface with systems in those other jurisdictions. They really need to consider the effect that’ll have on their core platform. Ultimately, they need to contend with the whole payments ecosystem, including, increasingly, cross-border, and all of it moving at real-time speeds,
TPM: There has been an intense focus on providing shiny new tools and a great customer experience in recent years. But would you agree that, to a large extent, that’s just lipstick on a pig if organisations don’t invest in the hidden infrastructure that supports those front-end innovations?
HB: Most payment companies are actually technology companies by birth. They’ve spent a huge amount of money on the customer acquisition piece, but that’s sometimes been at the expense of investing in robust back- and middle-office systems that can handle the type of payments we’ve been talking about. I think back to seven years ago, when I first started working with AutoRek, dealing with the payment divisions of Tier 1 banks and large payment organisations. I think there was indeed a little bit of an obsession with the end-customer digital experience.
Real-time payments have driven the volume piece up so high, it’s a question now of how merchants and merchant acquirers are going to deal with such high volumes and still reflect that in a good customer experience. If they do invest in those back- and middle-office systems and are able to master their data, that will, ultimately, flow through to a nice, smooth customer experience.
What we’re absolutely seeing is that those organisations that have invested in those systems, are able to offer more innovation, more speed, more accuracy, and less service disruptions to the end customers
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