Recently, Kani spoke to the Payments Journal Podcast team about the current state of payments, specifically, the state of the back-office finance tasks that come with operating in the world of fast moving digital payments. Many Fintechs and Payment firms have realised the need to automate these business-critical tasks to avoid errors and satisfy the regulators – enabling them to focus on their core customer services, but many are still trying to run things manually in the hope that they’ll be able to manage as their volumes and complexities increase.
In this podcast Kani’s Marc McCarthy joins Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research to discuss the urgent need to modenize and automate the reconciliation and reporting process for companies working with payments.
Reconciliation and Payments automation
Listen to the podcast and read the full article from the Payments Journal below
Fintechs are celebrated for offering sleek payments solutions, yet they often cling to outdated manual processes for back-office tasks. The primary offender: Excel spreadsheets.
Because of the manual nature of data entry, relying on spreadsheets can have serious negative consequences, including costly mistakes. Manual processes also don’t scale up well to take advantage of the new wealth of data available.
Automation is the key to addressing these issues and ushering in an era of efficient reconciliations and reporting within the payments industry. Automated systems can process vast amounts of data and generate reports and dashboards in real time, thus reducing operational risk. By shifting the focus away from manual data manipulation, teams can dedicate more time to understanding and analyzing data and inspiring more informed business decisions.
In a recent Payments Journal podcast, Marc McCarthy, Chief Operating Officer at Kani Payments, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the benefits of automating back-office processes and how automation not only ensures data accuracy and compliance but also unlocks valuable insights and cost-saving opportunities.
The State of Reconciliations and Reporting
Payments reconciliation is a complex task in the payments industry, with the need to match countless transactions across various platforms and networks. The process is essential to ensuring the accuracy of financial records, complying with regulatory requirements, and detecting discrepancies or fraud.
Traditionally, companies have relied heavily on spreadsheets and internal systems to handle these tasks. However, the sheer volume and diversity of data—often coming from multiple sources—make manual reconciliation error-prone.
“Approximately 25% of spreadsheets globally contain errors,” McCarthy said. “From a management perspective, the accuracy of the data I receive as a C-suite member is crucial for making decisions that shape the company’s direction. My daily choices heavily rely on the reports I receive, so if I lack confidence in their accuracy, it distorts my understanding of the company’s path forward.”
Spreadsheets are the original backbone for many companies, and as a result, some organizations are reluctant to move away from them.
“It kind of works, so why fix it? We come across that sort of approach a lot,” McCarthy said. “My rebuttal to that would be: ‘Why do you think a process that you set up 30 years ago is fit for purpose today?’”
There’s also a perennial problem with legacy technologies: When they break, there’s no one left who knows how to fix them. “Trying to find the programmer who put this Excel sheet together is the same kind of challenge as finding a COBOL programmer to fix my legacy code,” Riley said. “It’s like speaking Latin or Greek. It’s archaic language, undocumented, and not a way to run a business, that’s for sure.
“A major U.S. network is being fined by the CFPB for inaccuracies in interchange processing over a seven-year period. When things go wrong, do you want to present outdated, untraceable Excel code to the lead regulator of the jurisdiction? Using an industrial-strength, proven system is a much better way to face off with a regulator in any region.”
Today, organizations are no longer equipped to fully lean on manual reconciliations, especially when they are handling a plethora of data.
“Digital payments are expected to reach nearly $15 trillion by 2027,” McCarthy said. “With the volume of payments that we’re going to see over the next decade or so, it’s just impossible to assume that a spreadsheet is the right way to go.”
Automating the Back Office
Many third-party companies, including Kani, help organizations automate their reconciliation and reporting. Although current systems are primarily rules-based, artificial intelligence and machine learning capabilities will soon become standard, drastically improving accuracy and efficiency in reconciliation.
For midsized financial institutions, the conversion process can take as little as a few weeks.
Reconciliation may sound like a one-time process, but according to McCarthy, it’s more than that. It takes data, validates it, and places it into a common data model, making information from various sources consistent.
“This allows us to view data from different sources like Visa, Mastercard, FIS, and others in the same way, making it easy to create reports and perform analytics,” McCarthy said.
Kani offers 35 different reports for different teams, including accounting, management, and compliance—all tailored to the teams’ needs. “The real value of Kani lies in its user-friendly interface, making it easy for users to find whatever information they need. We can send reports automatically by email, all within one platform,” McCarthy said. “If you were to replicate all these functionalities yourself, it would take a long time.”
Savings from Automation
For many business owners, the return on investment for automating back-office processes may not be clear. But that’s because the resources spent on maintaining and repurposing are greater than most think.
“In the UK, our surveys found that around 700,000 hours per week are spent on reconciliations. A medium-sized business typically spends about 3.6 hours on this task, which I think is very conservative,” McCarthy said.
“I recently spoke to a large bank about their Quarterly Card Scheme reporting, and they initially mentioned that only two or three people were involved. However, when we had our first meeting to discuss their requirements, a staggering 20 people showed up. This illustrates the hidden cost of these processes and the fact that there are far more people involved than we initially realize.”
Many companies feel that they should automate internal processes in-house. But according to McCarthy, this is a tedious and needlessly expensive process.
“If you attempt to build an in-house solution, it would take at least six months and require a minimum of three skilled engineers,” McCarthy said. “They would be developing something already available off the shelf from Kani that costs less than developing it in-house.”
The payments industry is undergoing a transformative shift toward automation and efficiency in reconciliation and reporting. Manual methods are increasingly obsolete, unable to keep up with the rapid growth in digital payments.
Working with a fintech reporting and reconciliation firm like Kani Payments can help businesses not only streamline their operations but also harness the power of data for better decision-making and forecasting.