August 23, 2022

How Auto Reconciliation Helps Banks Counter Frauds

As technology advancements continue to drive convenient banking avenues, there is an increasing threat of fraud. Fraud is considered to be an inevitable cost of business. These are elements...

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As technology advancements continue to drive convenient banking avenues, there is an increasing threat of fraud. Fraud is considered to be an inevitable cost of business. These are elements that banks can’t stop, but only hope to reduce. Thus there’s a need for Auto Reconciliation.

According to IiAS, India’s domestic banking sector reported a total of 12,553 fraud cases worth Rs 18,170 crore in fiscal 2016-17. Fraudsters are not only using sophisticated methods to hack into accounts but have also been able to enter the banking system as insiders.

Some level of preparedness is required from banks, although it is nearly impossible to guarantee complete protection against unknown threats. This can go a long way in countering fraud threats. Along with adopting pre-emptive techniques, banks need to strengthen their audit quality. Plugging process gaps and streamlining the checks and balances can be acquired by this.

It is a fact that reconciliation methods have been in place to identify unusual or suspicious banking activities. Whether it be money transfer data, loan transactions, teller cash exports, ATM transactions data, etc. The reconciliation processes help establish the accuracy of data between the balance sheet and the bank statement.

However, massive transaction volumes, process complexities, multiple data sources, and evolving regulatory requirements have led to cumbersome reconciliation processes. Most financial institutions still use manual reconciliation processes which are often expensive, time-consuming, error-prone, and unproductive.

There is a need for organizations to realize the potential of automating reconciliation. There are a number of financial institutions that by adopting auto reconciliation methods are not only benefiting from faster identification of transactions, quicker highlighting of exceptions, and real-time identification of variations and miscalculations in data.

With increasing technology adoption and penetration of devices by banks the number of data sources has grown rapidly. It wouldn’t be wrong to say auto reconciliation is an absolute need. It is so as to get a consolidated view of data.

Blending strong authentication processes and analytics software, automated reconciliation can greatly reduce exposure to fraud. Furthermore, it offers an added layer of protection. However, it also allows accurate detection of fraud by tracing every transaction to its source through the financial lifecycle. Whether it is from data ingestion through matching, exception management, reconciliation, certification, and sign-off.

For example, Ascent Business’ reconciliation engine of banking software enables a single reconciliation job execution through the distribution of load across various cluster nodes, thus ensuring optimal utilization of the system resources. It is easily scalable to increased transaction volume and user base without re-deploying and extending the solution.

The platform has the ability to bring significant operational efficiency and risk management to a diverse range of activities. What matters more is having a solution with the right understanding of cash flow matching, exceptions, and investigation cases.

Advantages of Automated Bank Reconciliation

Data tracking: Automating reconciliation helps make data traceable, trackable, and transparent, helping banks to check any suspicious activity in real time.

Eradication of errors: By eliminating manual monitoring and comparison of data between systems and applications, the technology reduces the potential risk of discrepancies. By automatically generating real-time email and SMS notifications, it provides another level of security. Automation can reduce the risk of error by as much as 50 percent, according to an analysis by Fiserv.

Better utilization of skilled employees: Reducing the number of resources placed on manual bank reconciliation procedures through automated reconciliation processes reduces running costs and eradicates associated errors to enable one to focus on investigating exceptions quickly and efficiently.


Manual reconciliation processes often fail to provide the history of the audit trail, which shows how the balance sheet was created. This forces management to certify the data without verification solely to comply with regulations. Automated processes help in bringing transparency about the numbers and build confidence in audited numbers.

Improved operational cost: By auto reconciliation, according to Fiserv, financial institutions see efficiency improvements of up to 80 percent. Further lowered operational costs as well.

It’s evident that with increasing data, manual reconciliation is only going to increase the risk of errors. However, that leads to irreversible consequences. Automating reconciliation seems to be the most natural next step if banks want to exercise greater control. Unquestionably, it ensures accuracy and reduces the chances of costs attributed to damage control in case of errors in reconciliation.


  • Frauds cost Rs 18,170 crore to the banking sector in FY17: Report
  • Top reasons to automate accounting reconciliation — Fiserv
  • Prevention of fraud through internal controls || How to reduce exposure to financial risk