In the payments industry, every reconciliation team deals with exceptions. The idea of a process where upstream data is flawless, matching is perfect and reports land without a single adjustment is appealing in theory. But it rarely survives contact with reality.
Our Reconciliation and Reporting Survey 2025 confirms this: of the 250 UK payments professionals we spoke to, not a single one said their company’s reconciliation process is error-free. Whether you’re an issuer, acquirer, processor or neobank, breaks are inevitable. The real test is how quickly and cleanly they’re resolved, and how well teams prevent them from escalating into bigger risks.
In this article, we’ll break down why exceptions occur, the operational risks they create and how to handle them with speed, accuracy and confidence.
What are exceptions?
An exception is simply a transaction that doesn’t match as expected during reconciliation. In practice, this means two records that should align (for example, a processor transaction and its corresponding settlement entry) don’t match on key fields such as amount, currency, date or identifier.
The break may be a genuine error, such as a duplicate transaction or missing credit, or a harmless variance caused by timing differences, formatting inconsistencies or incomplete data.
Exceptions require manual review to confirm their cause, and their volume and nature are a direct reflection of the health of upstream data quality, integration and matching logic.
Why do exceptions happen?
In payment reconciliation, exceptions occur because of underlying gaps in data quality, format consistency or the timing of information flows between different systems. Even minor issues in the following areas can quickly multiple across high-volume workflows.
Data quality gaps
The single biggest underlying cause of reconciliation breaks is poor or inconsistent data quality. When incoming transaction data contains missing fields, mismatched identifiers or incomplete metadata, matching logic struggles to tie records together.
Even when the originating and settlement systems are correct in isolation, small discrepancies in format or field population create false mismatches. These errors propagate downstream, requiring manual investigation to confirm whether they’re genuine exceptions or harmless variances.
Cross-currency mismatches
Roughly one-quarter of businesses say that matching cross-currency transactions is their greatest reconciliation challenge. Where a transaction is processed in one currency but settled in another, exchange rate differences and timing variances can block automatic reconciliation.
Without robust FX rate handling—including agreed rate sources, time-stamped application and tolerance settings—the reconciliation engine may flag a break even though the amounts are correct once converted. These mismatches are especially common for processors and acquirers operating across multiple regions.
Multi-channel data misalignment
Card transactions don’t all flow through a single channel. Issuers may reconcile across different card schemes, alternative payment methods or direct bank transfers, each with its own schema, naming conventions and reporting timelines. If data feeds aren’t normalised during ingestion, transaction identifiers may not line up, producing large exception queues despite the underlying transactions being correct.
Delayed or incomplete feeds
Even when data is accurate and formats align, reconciliation can’t succeed without the full dataset. Late-arriving processor files, delayed bank statements or missing settlement batches result in breaks simply because the counterpart record hasn’t yet landed. While these exceptions can be cleared later, they create noise in the queue and consume analyst time in re-checking once the data arrives.
How poor exception handling costs you
Left unmanaged, exceptions create a compound impact across operations, compliance and financial reporting.
Operational drag
Almost one-third (32%) of UK payments businesses rank exception handling among their most time-consuming reconciliation tasks. Every unresolved break extends the reconciliation cycle, holds up batch closure and ties analysts up in manual review instead of higher-value work. Over time, this erodes throughput capacity, making it harder to handle peak volumes without deadline pressure.
Compliance and reporting risk
Missed deadlines are endemic: 82% of survey respondents struggle to meet reporting timelines. Breaks caused by late or mismatched data may be temporary, but they can still block critical submissions to regulators, card schemes or internal stakeholders. For regulated firms, repeated reporting delays can prompt greater scrutiny of operational controls.
Financial discrepancies
Breaks can mask genuine problems like missing credits, duplicate transactions or misapplied fees. Some 35% of respondents in our survey cited financial discrepancies as the most serious operational impact of reconciliation errors. These discrepancies distort general ledger balances, cash flow reporting and—in extreme cases—result in incorrect settlement with partners.
Erosion of trust and growth potential
One in three respondents (34%) said reconciliation errors affect their ability to attract investment or pursue growth opportunities. Persistent exceptions signal weak financial controls to stakeholders, creating doubt over whether the business can scale reliably.
✅Automating for faster, cleaner resolutions
Automation can dramatically reduce the time and effort spent on exception handling, but only when it’s paired with the right upstream data practices. The first step is to minimise the volume of exceptions by maximising auto-match rates.
Every transaction that matches cleanly upstream is one less item requiring manual review. This means standardising file formats, enforcing validation rules at source and using data enrichment intelligently so match logic has the fullest possible context to work with.
For the exceptions that remain, automation needs to be configured with the specific capabilities that keep them moving smoothly through resolution. This includes:
- Real-time detection of exceptions as transactions flow in
- Automated categorisation and routing based on pre-defined rules
- Pre-populated resolution suggestions drawn from historic resolution patterns
- Integrated resolution workflows within the same platform where detection occurs
Taking control of exceptions means a two-pronged approach: maximise auto-match rates to reduce what enters the queue, then handle the rest without letting them distract you from high-value work.
From firefighting to proactive control
High-performing teams don’t just clear exceptions—they learn from them. Exception data, when tracked and analysed, reveals recurring fault lines in the reconciliation process.
Some of the most effective practices include:
- Root cause tracking: Tagging exceptions by cause and source system to prioritise structural fixes over repeated manual work
- Trend analysis: Monitoring patterns over time to anticipate spikes, such as seasonal peaks or new partner onboarding
- Deadline benchmarking: Using missed or met reporting deadlines as a performance indicator for upstream reconciliation health
- Feedback loops: Feeding resolution insights back into matching logic, file format standards and partner integrations
This shifts exception management from a reactive queue to a proactive control function that reduces both the frequency and severity of future breaks.
Redefining the win in reconciliation
Exceptions are inevitable in today’s high-volume, multi-format payments environment. The benchmark for reconciliation maturity isn’t zero breaks. It’s how they’re handled.
Managed well, exceptions are a diagnostic tool, revealing exactly where matching logic, data standardisation or system integration needs attention. The real opportunity lies in acting on those signals.
By combining strong data quality controls, high match rates, well-configured automation and a proactive approach to analysing exception trends, payments businesses can move from firefighting to continuous improvement—turning a persistent operational challenge into a genuine competitive advantage.
📊 Want to learn more?
Explore how Kani streamlines exception management in reconciliation, automating detection, resolution and root cause analysis so you can focus on what matters.
