The banking industry is pacing the shift towards real-time payments, but it is overlooking some practical tech considerations. The most noteworthy being the disjointed and unstructured links between the old legacy system and new SOA (service-oriented architecture) platforms.
Regrettably, all we can see in the marketplace are some financial companies, in their efforts to upgrade their tech, are ignoring some fundamental aspects that may affect their future. With SOA systems rapidly replacing the legacy core systems, businesses will quickly lose control while trying to swap transactions from one platform to the next.
The outdated legacy mainframe had software systems to monitor job schedules and have them run at specific times to produce posting files and balancing reports. As a result, it was easier for mainframe console operators to tell when a file was late, or a job was not completed.
SOA platforms, however, offer very little of such “control” between applications. Consequently, there are many cases missed deadlines, out-of-balance conditions and balancing errors due to disintegration between legacy mainframe systems and SOA platforms. In other words, the rapid advancement toward quick payments and real-time processing may cause a more disjointed system if the industry doesn’t change its approach.
To make matters worse, banking regulators are also checking the “settlement order,” so the challenge is not just to balance every application but the “bank settlement” as well, which SOA platforms are not well placed to deliver.
Specifically, banks have increasingly deserted their mainframe applications and job processes that enabled more control over their audit and financial position per the Federal Reserve’s regulations.
Applications employed in enterprise environments focus more on “balancing” their particular application offering little to no control during the handoff of vital customer info and transactions when leaving one application to another.
Still, financial organizations can counter this by leveraging platforms that offer real-time payment and processing functions across numerous channels within their environment. What’s more, we should have an accumulator structure that can support multiple entries. We should also have applications across several processing days in addition to the ability to automatically produce general-ledger settlement documents. Lastly, they should go for fully compliant audit and reporting applications to meet all regulatory requirements.
Balancing/settlement is becoming a bone of contention in the shift to real-time payment processing. Although balancing applications remains key to effective application-system functions, it stays less disturbing for enterprise bank settlement that they need to check their alert systems to avoid costly mistakes.
But finding this balance needs an enterprise-centric balancing and settlement system that gives financial institutions power to function more efficiently and profitably, and remain compliant with ever-changing federal audit laws.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using merchant funding solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.