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Straight through processing implementation : Some case studies
Competition is coming from new providers of Banking services. Electronic channels have created new entrants in the banking arena, including insurance companies, brokerages, retailers, technology providers, and other non-bank commercial companies.
Although Banks are also exploiting the low-cost electronic channels being tapped by non-banks, notably the Internet, banking companies remain burdened by the costs of maintaining branch networks and legacy systems. To compete, Banks must change and diversify into new fields of business, while at the same time, they are forced to enlarge the scope of services they support.
In order to keep a competitive edge and therefore to be in the position to answer new business opportunities, Banks have to ensure that their message processing capabilities remain very flexible and easily upgradable. Moreover, processing capabilities must remain secure, consistent and cost-effective.
The effect of implementing automated repair of messages for STP can be clearly measured through an analysis of the increase in the rate of automatically processable messages. When such an analysis is performed on payment traffic either within a Financial Institution, or by its correspondents, after the implementation of automated STP repair, significant levels of improvement are revealed. The consequences of this improvement are an increase in efficiency,
a money-saving due to a decrease in manual interventions, and a decrease in charges from Correspondents for manual processing.
Back-Charges to the
Return on Investment
Connection with Legacy Systems
The automated conversion of formats of messages exchanged on various external and internal networks is an absolute requirement. Software that can automatically perform format conversion between the format received from the ordering customer and the format necessary for onward processing is necessary. As described above, the possibility that the conversion is based on content provides financial institutions with greater flexibility.
Intelligent format conversion allows financial institutions greater flexibility in the formats that can be received from their customers and automatically processed by their own applications, the first step in End-to-End Automation. In most financial institutions, existing systems are designed to process messages or files, in particular, proprietary messages that comply to pre-defined formats and standard conventions. In most cases, formats and conventions are hard-coded or strictly codified in tables which implies that any functional modification remains expensive and insecure. By introducing content-based message processing to automatically convert, to validate, and to codify these messages within a secure, highly flexible and user-friendly system, financial institutions will reduce the percentage of messages that will require manual handling; they will reduce enormously the possibility of errors; and, moreover, they will decrease the development time that is usually required to implement a new functionality, a new message, or an updated format.
Some amount of intelligent processing is required to ensure the integrity of the message content. Many financial institutions are considering including the integrity checks at the level of the customer interface (at the customer's location or at the financial institution). These integrity checks would generally be limited to verifying the validity of codes and references in the message and the correctness of free-text references mentioned by the customer. This "minimum" check allows the financial institution to be pro-active - informing the customer during customer input or at the time of input into the financial institution's systems, if there is a problem in the information that would require manual intervention for processing and risk delaying the processing of the order.
Intelligent Processing Systems represent the most secure way to achieve the best STP rate within a financial institution. Numerous global changes are influencing Banks in the lead up to 2001. Technology is evolving at its rapid pace. "Technology is the business." Competitive pressures, consolidation, and sophistication of customer requirements are forcing Banks to manage costs more efficiently. The Internet is influencing the way that Banks, Corporates, and private customers live and work; global growth has brought strong industry growth. The multiplicity of external electronic networks and the format requirements of external service providers are key issues in the Bank's strategy to integrate IT and Business Strategies. To keep business competitive the STP issue for finanacial institutions is no more a need, rather nowadays an absolute necessity.
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