Part 1: The risks of manual reconciliation and the case for automation
This is part 1 of a summary of the “Ease of Automated Reconciliation” webinar held by Credrails In June 2023. Hosted by Munyaradzi Hoto, the expert panel included:
Credrails is an open banking platform that uses data to build products. The company is currently present in two markets, Kenya and Nigeria, with clients ranging from agency banking to neobanks. Automated reconciliation is one of their flagship products.
The case for automated reconciliation when it comes to business and growth in the African market
“Reconciliation is a core function of any business, especially those that have lots of transactions. As [Credrails], we’re looking to help automate this process because it’s usually extremely manual, involves a lot of people, and not knowing where your money is can basically spell death for a business. What generally happens is that people will push or either have problems with their reconciliation
that eventually moves onto their audit, or they’ll just not be able to reconcile in time, which ultimately affects customers who aren’t refunded on time.”
What are the core driving forces behind the increased need for automated reconciliation?
“Agency banking (offline banking), cash in/cash out networks, and the ultimate rise of financial inclusion has necessitated the rise of reconciliation and automated reconciliation, because of the sheer amount of transactions we’re seeing through these networks. Those transactions need to be reconciled, and customers need to know that money has hit the intended recipient or bills they want paid have indeed been paid. Customers want the best experience with these networks, which is getting their money back on time.”
Increased transactions, increased risks
“There’s increased transactions across the entire ecosystem now, so of course you have increased levels of fraud and attempted fraud, so there’s that need to have an automated system where you’re able to track and exactly capture those transactions. When you don’t have proper reconciliation in place, you’re giving rise to both internal and external [risks of] fraudulent attacks. There’s a real need for automated reconciliation going beyond the manual [process], Excel spreadsheets and manipulation of figures.”
“What we are is there are a lot of payment methods. So you will find a certain business is working with several providers, (mobile wallet, different bank payouts, payment gateways etc).
At any given time, a finance professional is required to reconcile all these providers to what they have on their platform. That, coupled with the fact that there are large volumes of transactions
as actual inclusion is happening, necessitates the need to have the reconciliation process automated. Otherwise, if it’s on Excel, there is the risk of human error or a team has to work overnight to be
able to catch up with tight deadlines. And again, it affects audit. At the end of it all, there is also the risk of financial loss, because if something is not caught in time, it too will result in real money loss.”
In the absence of automation, how are businesses coping with balancing the tension of meeting deadlines, fraud risks and the scaling of financial inclusion?
“It’s why we started the reconciliation product. A lot of people will tell you that they sell reconciliation, but it actually doesn't reconcile it. It doesn’t do your line by line, it doesn’t have a
lot of the features that [Credrails] has. Have you ever wondered why your bank closes early? Why is banking not generally 24/7? It's because they need to close the bank so they can reconcile the transactions for the day. So it's a very arduous process. It takes a lot of time. And there's an easier way to do it right. There's an easier way to do it for revenue assurances, for audit trails, for preventing fraud.”
“[Reconciliation] is an extremely painful process. You sit down behind the system and trying to prove your figures together, only to discover that here, we just had an attack. If some forms are
missing, you really want to drill down to understand exactly what has happened and where that has gone wrong. In the absence of automation, you have to use a lot of Excel formulas, a lot of
Excel programming to try to figure out what has gone wrong or where the attack has happened. Of course, if an automated process was in place, it’s expected. We would be able to catch red
flags, and even be able to put some things in place before any fraudulent attacks could have happened.”