By Steve Webster, acting CEO of The Webcom Group
In a still depressed economic climate, it is not only business at large but the banking sector that has to work very hard to meet the increasing demands of the customers’ it serves. Critical to the success of any bank is its ability to provide services in a quick and effective manner, fortified by a technology backbone that mitigates human error and improves general turnaround times.
Unfortunately the above is a massive challenge and not easily attainable as the banking industry still struggles with disjointed, multiple systems – some banks have as many as 32 retail and 25 credit based systems respectively. These individual systems might not even run on the same platform let alone feature standardised software and hardware in each department.
The above is without a doubt counter-productive and begs the question: how do you process applications, queries and the like accurately and efficiently while aligning your operations with industry regulations such as Sarbanes Oxley and Basel II?
Straight-through Processing (STP) offers a solution as it provides automated, end-to-end processing of transactions – from inception to settlement. It streamlines legacy systems and back office applications – offering a solution from A to Z within the organisational technology infrastructure that promises to save money and importantly improves the entire customer experience.
What is STP?
STP is by no means a new concept, however, the technology has matured through the years – like the fax machine and the cell phone; a new concept takes a while to become popular.
In essence it’s a mechanism that automates end-to-end processing; it offers a single system that controls all elements of a financial transaction which is referred to as the Front, Middle, Back Office and General Ledger.
In layman’s, it electronically captures and processes transactions in one pass, from the point of first ‘deal’ to final settlement. Also, it reduces the reliance on manual processes and automates it – speeding the approval process whilst reducing human error.
The real benefits
As mentioned, STP has been around since early 2000. It is a maturing technology that is evolving to meet the ever-changing needs of the banking industry and other financial services such as such as trade, asset management and brokerage.
And the case studies speak volumes. In fact a local banking and financial services institution stated – following the completion of a comprehensive STP implementation – it stood to gain an additional R800 million worth of business due to the faster application process due to STP’s speedy turnaround, automation capabilities and centralised and accurate features and benefits.
STPs benefits are unquestionable – banking institutions can expect:
. A centralised system that offers easy access to customer information in real-time; . Minimised manual data input and hand calculations and associated errors; . No going back to customers again and again to validate information; . Elimination of data duplication; . Built in workflows to automate credit application management process; . Leverage existing risk models based on leading industry practices; . Utilisation of existing, internal risk models; . Capture of relevant information to ensure compliance with legislative requirements locally such as FICA (Financial Intelligence Centre Act) and NCA (National Credit Act); and . Electronic submission of reports.
. Automatic updating of production systems . A central and unique data repository . Accelerated applications, decisions and referral conclusions . Instantaneous sanctioning (if desired – most banks prefer to have a human element involved) . Improved customer service (e.g. Facility to allow customer view of where in the process the application is, accelerated approval, etc.) . Single Repository based reporting and regulatory compliance (SARBOX, Basel
These benefits are a mouthful and for good reason – STP is a real solution to banking institution’s disparate information qualms and importantly greatly improves the overall customer experience.
Finding the right STP solution
A successful STP solution is one that scales easily to an enterprise’s own integration needs and projects and offers support for key standards such as SWIFT and XML. And often it is the companies that have been providing the STP for a number of years – and have the track – record – that really understand the importance of a less-than-hazardous integration process.
An effective STP is not limited to the wealthiest, largest banking institutions but should really cater for those organisations that don’t necessarily have the funds to do a forklift implementation.
A scalable, cost-effective integration solution can maximise institutions’
existing investments while providing the benefits that come with integrating an STP solution. Also, banking institutions should opt for a solution that increases the accessibility and usability of all data within the organisation.
Importantly, ensure that your STP partner offers the three pillars of STP:
data accuracy; quick and efficient execution of processes; and risk mitigation. Again, a mature player will be able to provide you the case studies that will demonstrate you’re on the right track.
In this age of economic challenge and general recession, a good system should pay for itself in a short period of time. STP achieves this goal
. Improved customer service
. Exponentially increased number of applications . Shorter application life cycle . Minimisation of manual involvement and human capture errors . Reduced infrastructure (singular HW, SW, OS, licences) . Reduced application support . Centralised infrastructure . Single Repository
There is no doubt that STP is a technology that will continue to be very relevant and has the potential to revolutionise the way banking institutions operate today.