EXCLUSIVE: "The Big Reckoning" - Nick Botha, AutoRek in 'The Paytech Magazine'

Regulators worldwide have been spooked by paytech failures. They’re watching how the UK FCA’s new regime for PSPs and EMIs plays out – and AutoRek stands ready to help

If competitive demands haven’t already forced payments businesses to automate their reconciliation processes, it’s likely the actions of a regulator will. When the UK’s Financial Conduct Authority launched CASS 15 for payments and e-money providers in May, it pulled them into the scope of its Client Assets Sourcebook regime, which ensures customer money is ringfenced and fully accounted for.

At a stroke, the era of safeguarding as a compliance ‘formality’ to be examined once a year was over. CASS 15 brought many payment service providers (PSPs) and electronic money institutions (EMIs) into line with banks, with more rigorous governance and record-keeping rules, and, crucially, the need to reconcile accounts every working day.

For AutoRek, which offers an end-to-end financial data control platform, tailor-made for regulations such as CASS 15, the update provides a huge opportunity.

“AutoRek has been geared up for CASS reporting for more than 10 years,” says the firm’s Vice President of Retail Banking and Payments, Nick Botha.

“Now the payments landscape has moved into the FCA handbook [since it absorbed the duties of the Payment Systems Regulator], it’s been quite a seamless transition for us. We have by far the best safeguarding and CASS 15 reporting solution.”

That leverages AutoRek’s long-standing strategic relationship with Microsoft Azure, on which its financial reconciliation and data management platform runs natively.

“Our solution works by automating data management, reconciliations, and Microsoft Power Business Intelligence and Management Intelligence, so data can be analysed. Each component part feeds the others,” says Botha.

High-profile failures

E-money providers and payments firms – which aren’t part of the Financial Services Compensation Scheme, which protects client assets – had been subject to less-stringent regulation to allow the sector to grow. But with growth achieved, market risk increased. The safeguarding reforms follow a string of failures by e-money and payments firms to properly segregate customer funds.

The 2019 collapse of UK-based multi-currency account provider Ipagoo was one high-profile case. When it entered administration due to a lack of working capital and subsequent FCA restrictions, it became clear that client cash had not been kept separate and could not be identified.

The implosion of German PSP Wirecard, following fraud that involved 1.9 billion of ghost euros in its accounts, was another wake-up call, prompting the FCA to intervene in Wirecard UK to protect client cash. In its CASS 15 policy paper, the FCA noted that the proportion of consumers using payments firm accounts had grown from one per cent in 2017 to 12 per cent in 2024. Meanwhile, a tenth of UK e-money users were using the accounts as their primary day-to-day transactional account. The FCA estimated that ‘payments institutions safeguarded £6billion in relevant funds on any given day in 2024’.

It added: “The growth in the number of consumers and amount of relevant funds held by payments firms means more of the UK population is likely to be exposed to harm if a firm fails and there is a shortfall in relevant funds or a delay in their return to consumers. For firms that became insolvent between Q1 2018 and Q2 2023, there was an average shortfall of 65 per cent in funds owed to clients (the difference between funds owed and funds safeguarded).”

With CASS 15 now in force, payments service providers and electronic money institutions must:

■ Reconcile customer funds at least once every business day

■ Segregate safeguarded funds from their own assets and hold them with an approved bank

■ Provide a monthly report for the FCA on how much and where safeguarded cash is held

■ Elevate safeguarding responsibility to boardroom level

■ Arrange annual independent audits of CASS 15 compliance

AutoRek says those rules will put severe pressure on businesses that still rely heavily on manual spreadsheet processes and legacy systems for reconciliation processes.

In an AutoRek survey of 250 senior finance managers, 69 per cent admitted that limited automation was a pressure point for them as payment levels increased. Also, fragmented data was a key problem for 80 per cent of respondents, with 34 per cent reporting ‘significant or severe disruption to reconciliation and monitoring’.

AutoRek’s report said: “Payments data remains distributed across formats, platforms and providers, making end-to-end visibility difficult and real-time controls elusive.”

However, one major positive for growing payments and e-money firms, says Botha, is that by modernising now to meet the FCA’s regulations, they will be ready for subsequent updates that follow elsewhere. He considers the FCA’s CASS regime to be ‘best in class’ and one that will be replicated by the EU and others. Canada’s own regime, enshrined by its Retail Payments Activities Act, already mirrors CASS and was introduced in September last year.

By basing its platform around the needs of CASS and the FCA’s principles, AutoRek believes only minor adaptations will be needed for providers operating in foreign territories such as these. It will reduce the need for bespoke designs and therefore reduce delivery timelines.

“We have a CASS 15-compliant safeguarding solution that is completely end-to-end and helps clients manage their data, plus internal and external reconciliation processes,” Botha says. “We’re now able to replicate that around the globe. We’re expecting to see new EU safeguarding regulations come into play next year, so we’re getting a lot of interest from the  EU payments firms already.

“Plus, we’re talking to people further afield, in Canada and Singapore, and we’re even seeing US organisations start to look at what best practice looks like when it comes to protecting client funds.”

Flowing from clean data

Botha believes firms must embrace straight-through processing to cope with increased data levels and modern reconciliation demands. To that end, AutoRek’s platform focusses on structuring data at the onboarding stage so subsequent reconciliation and analysis flows from a reliable source.

Data vital to a payments or e-money provider would include cashbook balances, cashbook transactions, bank balances across all accounts holding relevant funds, and client-specific balances, including seller wallet balances on digital accounts.

Botha says: “AutoRek is completely data agnostic – we can ingest data in any format from any source, which allows us to work with many different payments organisations and banks on different payment rails around the world. We can support them with real-time reconciliations because that is a requirement for the world that we live in today.

“Under CASS 15, firms need to demonstrate that safeguarding is embedded in their daily operations, not bolted on at month-end. That means they need automated data pipelines that are capable of onboarding and validating data across multiple sources in real time. Plus, they need exception monitoring that flags discrepancies immediately, and audit trails that capture every transaction decision automatically, not just retrospectively ahead of a regulatory review. Spreadsheet-driven reconciliation won’t keep pace.”

Providing solutions

One of AutoRek’s high-profile clients is ClearBank. Its legacy reconciliation tool, adopted in 2020 to meet soaring volumes of Faster Payments during the COVID pandemic, could not support cash reconciliation or balance substantiation. It also lacked the ability to manage approval or review processes. Peak transaction volume periods, such as month-ends and payroll weekends, pushed the system to breaking point, forcing staff to use a patchwork of tools and manual workarounds. Excel remained ClearBank’s default for multi-currency and EU reconciliations, while key processes around validation, sign-off and oversight existed outside of the reconciliation platform entirely.

The setup could not scale in line with ClearBank’s rapid growth, with the company seeing total payment volumes increase by 55 per cent in 2024 to 167 million transactions. The adoption of AutoRek’s platform allowed ClearBank to unify reconciliation across its five payment schemes and core Bank of England accounts. The ‘no code’ design of the interface also reduced workload for the bank’s IT staff and sped up delivery.

Continued development with partners, including Microsoft, is key to meeting the needs of sophisticated clients such as ClearBank, says Botha. He adds: “We’re working to ensure that we remain at the top end of the market when it comes to our technology.”

AutoRek ARIA, a specialised AI agent which supports reconciliation with reasoning, decision-making, and anomaly detection, is already available.

“I see AI increasingly becoming part of straight-through processing,” adds Botha. “We’ve put a lot of investment and time into making sure the software and the services that we offer reflect that.”